AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 2006
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<Table>
CITIGROUP FUNDING INC. DELAWARE 42-1658283
CITIGROUP INC. DELAWARE 52-1568099
SAFETY FIRST TRUST SERIES 2006-1 DELAWARE 42-6664144
SAFETY FIRST TRUST SERIES 2006-2 DELAWARE 42-6664145
SAFETY FIRST TRUST SERIES 2006-3 DELAWARE 42-6664146
SAFETY FIRST TRUST SERIES 2006-4 DELAWARE 42-6664147
SAFETY FIRST TRUST SERIES 2006-5 DELAWARE 42-6664148
SAFETY FIRST TRUST SERIES 2006-6 DELAWARE 42-6664149
SAFETY FIRST TRUST SERIES 2006-7 DELAWARE 42-6664150
SAFETY FIRST TRUST SERIES 2006-8 DELAWARE 42-6664151
SAFETY FIRST TRUST SERIES 2006-9 DELAWARE 42-6664152
SAFETY FIRST TRUST SERIES 2006-10 DELAWARE 42-6664153
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) (STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
</Table>
399 PARK AVENUE
NEW YORK, NEW YORK 10043
(212) 559-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
MICHAEL S. ZUCKERT, ESQ.
GENERAL COUNSEL, FINANCE AND CAPITAL MARKETS
CITIGROUP INC.
399 PARK AVENUE
NEW YORK, NEW YORK 10043
(212) 559-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPY TO:
JEFFREY D. KARPF, ESQ.
CLEARY GOTTLIEB STEEN & HAMILTON LLP
ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10006
(212) 225-2000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: At such time (from time to time) after the effective date of this
Registration Statement as agreed upon by Citigroup Funding Inc. and the
Underwriters in light of market conditions.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
If this Form is a registration statement pursuant to General Instruction
I.D. or a post-effective amendment thereto that shall become effective upon
filing with the Commission pursuant to Rule 462(e) under the Securities Act,
check the following box. [X]
------------------------
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities
pursuant to Rule 413(b) under the Securities Act, check the following box. [ ]
------------------------
(continued on the following page)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE REGISTERED/PROPOSED MAXIMUM OFFERING PRICE PER AMOUNT OF
SECURITIES TO BE REGISTERED UNIT/PROPOSED MAXIMUM AGGREGATE OFFERING PRICE(1)(2) REGISTRATION FEE(1)
- --------------------------------------------------------------------------------------------------------------------
Principal-Protected Trust
Certificates (the
"Certificates") of the
Trusts........................ $0
- --------------------------------------------------------------------------------------------------------------------
Guarantees of Citigroup Funding
Inc. with respect to the
Certificates of the
Trusts(3)..................... $0
- --------------------------------------------------------------------------------------------------------------------
Guarantees of Citigroup
Inc.(4)....................... $0
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</Table>
(1) An unspecified aggregate initial offering price and number or amount of the
securities of each identified class is being registered as may from time to
time be offered at unspecified prices. Separate consideration may or may not
be received for securities that are issuable on exercise, conversion or
exchange of other securities. In accordance with Rule 456(b) and Rule
457(r), the Registrants are deferring payment of all of the registration
fee. In connection with the securities offered hereby, the Registrants will
pay "pay-as-you-go registration fees" in accordance with Rule 456(b).
(2) Includes an indeterminate number of the Certificates and guarantees of the
Certificates by Citigroup Funding Inc. and Citigroup Inc. that may be
offered or sold by affiliates of the Registrants in market-making
transactions.
(3) Includes the rights of holders of the Certificates under any guarantees and
certain back-up undertakings, comprised of the obligations of Citigroup
Funding Inc. to provide certain indemnities in respect of, and pay and be
responsible for certain costs, expenses, debts and liabilities of, each
Trust (other than with respect to the Certificates) and such obligations of
Citigroup Funding Inc. as set forth in the amended and restated declaration
of trust of each Trust, in each case as further described in the
Registration Statement. No separate consideration will be received for any
guarantees or such back-up obligations.
(4) No separate consideration will be received for the Citigroup Inc.
guarantees.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE INFORMATION IN THIS PROSPECTUS AND PRICING SUPPLEMENT IS NOT COMPLETE AND
MAY BE CHANGED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS PROSPECTUS AND PRICING
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED , 2006
TRUST CERTIFICATES PROSPECTUS
MEDIUM-TERM NOTES, SERIES D PRICING SUPPLEMENT NO. 2006-MTNDD[ ], DATED
, 2006
INDEX WARRANTS, SERIES W-A PRICING SUPPLEMENT NO. 2006-[ ], DATED , 2006
SAFETY FIRST TRUST SERIES [2006-1]
PRINCIPAL-PROTECTED TRUST CERTIFICATES
BASED UPON THE S&P 500(R) INDEX
DUE ON
$10.00 PER CERTIFICATE
PAYMENTS DUE FROM SAFETY FIRST TRUST SERIES [2006-1]
GUARANTEED BY CITIGROUP FUNDING INC.
PAYMENTS DUE FROM CITIGROUP FUNDING INC.
GUARANTEED BY CITIGROUP INC.
- - We will not make any payments on the certificates prior to maturity.
- - The certificates will mature on , 2010. You will receive at maturity
for each certificate you hold an amount in cash equal to $10 plus a
supplemental distribution amount, which may be positive or zero.
- - The supplemental distribution amount will be based on the percentage change of
the S&P 500 Index during the term of the certificates. The supplemental
distribution amount for each certificate will equal the product of (a) $10,
(b) the percentage change in the S&P 500 Index and (c) the participation rate
(which is expected to be approximately 83%), provided that the supplemental
distribution amount will not be less than zero.
- - The certificates are preferred securities of Safety First Trust Series
[2006-1]. The assets of the trust will consist of Citigroup Funding's equity
index participation securities and equity index warrants.
- The equity index participation securities will mature on , 2010. At
maturity, each security will pay an amount equal to $10 plus a supplemental
return amount, which could be positive, zero or negative. If the S&P 500
Index increases, the supplemental return amount for each security will equal
the product of (a) $10, (b) the percentage increase in the index and (c) the
participation rate. If the S&P 500 Index decreases or does not change, the
supplemental return amount for each security will equal the product of (a)
$10 and (b) the percentage decrease in the index.
- The equity index warrants will be automatically exercised on ,
2010. If the S&P 500 Index increases or does not change, the warrants will
pay zero. If the S&P 500 Index decreases, the warrants will pay a positive
amount equal to the product of (a) $10 and (b) the percentage decrease in
the S&P 500 Index.
- - Exchange Right: You will have the right to exchange, at any time, each $10
principal amount of certificates you then hold for one equity index
participation security with a $10 face amount and one equity index warrant
with a $10 notional amount. The securities and warrants will be separately
transferable by you after you exercise your exchange right. If you choose to
exercise your exchange right and hold only the securities or only the
warrants, you will lose the benefit of principal protection at maturity.
- - We will apply to list the certificates on the American Stock Exchange under
the symbol " ."
INVESTING IN THE CERTIFICATES, SECURITIES OR WARRANTS INVOLVES A NUMBER OF
RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 10.
"STANDARD & POOR'S(R)," "STANDARD & POOR'S 500(R)," "S&P 500(R)" AND
"S&P(R)" ARE TRADEMARKS OF THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN
LICENSED FOR USE BY CITIGROUP FUNDING INC. NONE OF THE CERTIFICATES, THE
SECURITIES OR THE WARRANTS ARE SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD
& POOR'S OR THE MCGRAW-HILL COMPANIES, INC. STANDARD & POOR'S AND THE
MCGRAW-HILL COMPANIES, INC. MAKE NO REPRESENTATION REGARDING THE ADVISABILITY OF
INVESTING IN THE CERTIFICATES, THE SECURITIES OR THE WARRANTS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the certificates, the securities or
the warrants or determined that this prospectus and pricing supplement is
truthful or complete. Any representation to the contrary is a criminal offense.
<Table>
<Caption>
PER
CERTIFICATE TOTAL
----------- ----------
Public Offering Price....................................... $10.00* $
Underwriting Discount (to be paid by Citigroup Funding
Inc.)..................................................... $ $
Proceeds to Safety First Trust Series [2006-1].............. $ $
</Table>
- ---------------
* $ for the purchase of the equity index participation securities and
$ for the purchase of the equity index warrants.
Citigroup Global Market Inc. expects to deliver the certificates to
purchasers on or about , 2006.
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------
Investment Products Not FDIC Insured May Lose Value No Bank Guarantee
- --------------------------------------------------------------------------------------------------------
</Table>
CITIGROUP
, 2006
SUMMARY INFORMATION -- Q&A
This prospectus and pricing supplement, which we refer to as the offering
document, constitutes a prospectus relating to the Principal-Protected Trust
Certificates of Safety First Trust Series [2006-1], a medium-term note pricing
supplement relating to the equity index participation securities of Citigroup
Funding Inc. and an index warrant pricing supplement relating to the equity
index warrants of Citigroup Funding Inc. Citigroup Funding Inc. and Citigroup
Inc. have previously filed a registration statement (File Nos. 333-132370 &
333-132370-01) and prospectus supplements relating to the equity index
participation securities and the equity index warrants.
THE CERTIFICATES
WHAT IS SAFETY FIRST TRUST SERIES [2006-1]?
Safety First Trust Series [2006-1] is a Delaware statutory trust. Citigroup
Funding Inc. will own all of the common securities of the trust.
The trust will not engage in any activities except:
- issuing the certificates and the common securities, which we refer to as,
collectively, the trust securities,
- investing approximately % to % of the proceeds of the offering in
equity index participation securities linked to the S&P 500 Index issued
by Citigroup Funding, which we refer to as the securities,
- investing approximately % to % of the proceeds of the offering in
equity index warrants linked to the S&P 500 Index issued by Citigroup
Funding, which we refer to as the warrants, and
- activities incidental to the above.
The trust will not issue any securities except the trust securities, which
are limited to certificates and 100 common securities, each in
denominations of $10.
The trust will be managed by trustees elected by Citigroup Funding, as the
holder of the common securities. The holders of the certificates have no right
to elect or remove trustees. Citigroup Funding will pay all costs, expenses,
debts and liabilities of the trust, including fees and expenses related to the
offering of the certificates, but not including payments under the certificates.
The address and telephone number of the trust are:
Safety First Trust Series [2006-1]
c/o Citigroup Funding Inc.
399 Park Avenue
New York, NY 10043
(212) 559-1000
WHAT ARE THE CERTIFICATES?
The certificates are preferred undivided interests in the trust. The
certificates mature on , 2010, but will be subject to acceleration to
an earlier maturity date upon the occurrence of one of the acceleration events
described below. If an acceleration event occurs or Citigroup Funding or
Citigroup defaults on its guarantee, holders of the certificates will have a
preference over holders of the common securities for payments.
The certificates pay an amount at maturity that will depend on the amount
by which (i) the ending value, the closing value of the S&P 500 Index on the
third index business day before maturity, exceeds (ii) the starting value, the
closing value of the S&P 500 Index on the date on which the certificates are
priced for initial sale to the public (which we refer to as the pricing date),
expressed as a percentage. If the ending value is less than or equal to the
starting value, the payment you receive at maturity for each certificate you
hold will
2
equal $10, the amount of your original investment in the certificate. If the
ending value is greater than the starting value, the payment you receive at
maturity will be greater than the amount of your original investment in the
certificates. In that case, the appreciation on an investment in the
certificates is expected to be approximately 83% of the appreciation in the
value of the S&P 500 Index because of the participation rate, which is expected
to be approximately 83% (to be determined on the pricing date).
You will have the right to exchange each certificate for a pro rata portion
of the assets of the trust, which consist of the securities and the warrants. In
order to exercise your exchange right, you will need to follow the procedures
described in "Description of the Certificates -- Exchange Right" in this
offering document. If you choose to exercise your exchange right and hold only
the securities or only the warrants, you will lose the benefit of principal
protection at maturity.
WILL I RECEIVE ANY PERIODIC PAYMENTS ON THE CERTIFICATES?
You will not receive any periodic payments of interest on the certificates
or any other payments on the certificates until maturity. In addition, you will
not be entitled to receive dividend payments or other distributions, if any,
made on the stocks underlying the S&P 500 Index.
WHAT WILL I RECEIVE AT MATURITY OF THE CERTIFICATES?
The certificates will mature on , 2010. At maturity, you will
receive for each certificate you hold an amount in cash equal to the sum of $10
and a supplemental distribution amount, which may be positive or zero. The
amount payable to you at maturity is dependent upon the closing value of the S&P
500 Index on the valuation date, provided, however, that the payment you receive
at maturity will not be less than the amount of your original investment in the
certificates. The trust will make the maturity payment with respect to each
certificate out of the payments it receives from Citigroup Funding on the
securities and the warrants. The ability of the trust to make the maturity
payment is entirely dependent on the receipt by the trust of payments under the
securities and the warrants. You should refer to the section "Description of the
Certificates -- Payment at Maturity" in this offering document.
HOW WILL THE SUPPLEMENTAL DISTRIBUTION AMOUNT BE CALCULATED?
The supplemental distribution amount will be based on the amount by which
the ending value exceeds the starting value, expressed as a percentage, and on
the participation rate. The supplemental distribution amount will equal the
product of (a) $10, (b) the index return (defined below) and (c) the
participation rate, which is expected to be approximately 83% (to be determined
on the pricing date). The supplemental distribution amount will not be less than
zero.
The amount payable to you at maturity is dependent upon the performance of
the S&P 500 Index during the period after the pricing date up to and including
the valuation date. If the S&P 500 Index does not increase during this period,
the supplemental distribution amount will be zero and the payment at maturity
will equal your original investment in the certificates. If the S&P 500 Index
increases during this period, the supplemental distribution amount will be
positive and the payment at maturity will be greater than your original
investment in the certificates. However, as a result of the participation rate,
the certificates will provide less opportunity for appreciation than an
investment in an instrument directly linked to the S&P 500 Index.
For more specific information about the "supplemental distribution amount"
and the "index return," and for information on the effect of a market disruption
event on the determination of the supplemental distribution amount and the index
return, please see "Description of the Certificates -- Supplemental Distribution
Amount" in this offering document and "-- How Is the Index Return Defined?" in
this section.
3
HOW IS THE INDEX RETURN DEFINED?
The index return, which is presented in this offering document as a
percentage, will equal the following fraction:
Ending Value - Starting Value
-----------------------------
Starting Value
The starting value will be , the closing value of the S&P 500
Index on the pricing date.
The ending value will be the closing value of the S&P 500 Index on the
valuation date.
The pricing date means the date on which the certificates are priced for
initial sale to the public.
The valuation date will be the third index business day before the maturity
date.
ARE PAYMENTS ON THE CERTIFICATES GUARANTEED?
The ability of the trust to make the maturity payment on the certificates
is entirely dependent on the receipt by the trust of payments under the
securities and the warrants, the sole assets of the trust. Citigroup Funding has
fully and unconditionally guaranteed the trust's payment obligations under the
certificates so that, if for any reason the trust does not make payments to you
on the certificates, then Citigroup Funding will make the payments directly to
you to the extent that the trust has funds legally available. In addition,
Citigroup has fully and unconditionally guaranteed all payments by Citigroup
Funding to the same extent and in the same manner as Citigroup Funding has
guaranteed the trust's obligations under the certificates. We refer to Citigroup
Funding's and Citigroup's guarantees under the certificates as the certificate
guarantee. You should refer to the section "Description of the Certificate
Guarantee" in this offering document for more information about the Certificate
Guarantee. Citigroup has also fully and unconditionally guaranteed Citigroup
Funding's payment obligations under each of the securities and the warrants.
WHERE CAN I FIND EXAMPLES OF HYPOTHETICAL MATURITY PAYMENTS?
For a table setting forth hypothetical maturity payments, see "Description
of the Certificates -- Maturity Payment -- Hypothetical Examples" in this
offering document.
WHAT WILL I RECEIVE IF I EXERCISE MY EXCHANGE RIGHT?
If you exercise your exchange right, you will receive a pro rata portion of
the assets of the trust, which consist of the securities and the warrants. As a
result, you will receive for each $10 principal amount of certificates you then
hold one security with a $10 face amount and one warrant with a $10 notional
amount. If you hold the securities and warrants together until maturity, you
will receive the same maturity payment you would have received under the
certificates. However, if you choose to exercise your exchange right and hold
only the securities or only the warrants, you will lose the benefit of principal
protection at maturity. In this case, the payment you receive at maturity may be
different from the maturity payment on the certificates and could be
substantially less than the amount of your original investment in the
certificates. In order to exercise your exchange right, you will need to follow
the procedures described in "Description of the Certificates -- Exchange Right"
in this offering document.
WHAT HAPPENS IF I EXERCISE MY EXCHANGE RIGHT?
If you exercise your exchange right and hold only the securities or only
the warrants, you will lose the benefit of principal protection at maturity and
your investment will be subject to additional risks. For more information on
these additional risks, you should refer to "Risk Factors -- Risks Relating to
the Securities" and "-- Risks Relating to the Warrants."
If you do not exercise your exchange right, any gain that you recognize at
maturity or on other disposition of the certificates will be short-term capital
gain. You cannot recognize long-term capital gain from your investment in the
certificate unless you exercise your exchange right, then dispose of either the
securities or the warrants, and then hold the remaining instrument for more than
one year after that disposition. For example, if the S&P 500 Index increases in
value, you will recognize long-term capital gain only if you
4
exercise your exchange right, dispose of the warrants, and hold the securities
for more than one year after disposing of the warrants. As discussed above,
however, if you choose to exercise your exchange right and hold only the
securities or only the warrants, you will lose the benefit of principal
protection at maturity.
WHAT HAPPENS IF AN ACCELERATION EVENT OCCURS
If one of the acceleration events described below occurs, the trust will be
liquidated. You will receive for each certificate the accelerated maturity
payment. The accelerated maturity payment per certificate will be calculated in
the same manner as the maturity payment and as though the date on which the
acceleration event occurred were the maturity date.
You will receive payment before holders of the common securities if an
acceleration event occurs or Citigroup Funding or Citigroup defaults on any of
its obligations under its guarantee.
Any of the following will constitute an acceleration event:
- the occurrence of certain adverse tax consequences to the trust,
- the classification of the trust as an "investment company" under the
Investment Company Act, or
- the initiation of bankruptcy proceedings regarding Citigroup Funding or
Citigroup Inc.
WHAT ARE MY VOTING RIGHTS?
You will have limited voting rights with respect to the trust and will not
be entitled to vote to appoint, remove or replace, or increase or decrease the
number of, the trustees. These voting rights will be held exclusively by
Citigroup Funding, as the holder of the common securities. You will, however,
have the right to direct U.S. Bank National Association, as institutional
trustee of the trust and as holder of the securities and the warrants, to
exercise its rights as trustee, including exercising its rights in respect of
the securities and the warrants.
You will have no voting rights and no ownership interest in any stocks
underlying the S&P 500 Index.
WHO PUBLISHES THE S&P 500 INDEX AND WHAT DOES IT MEASURE?
Unless otherwise stated, all information on the S&P 500 Index provided in
this offering document is derived from Standard & Poor's, which we refer to as
S&P, or other publicly available sources. The S&P 500 Index is published by S&P
and is intended to provide an indication of the pattern of common stock price
movement. The calculation of the value of the S&P 500 Index (discussed below in
further detail) is based on the relative value of the aggregate market value of
the common stocks of 500 companies as of a particular time compared to the
aggregate average market value of the common stocks of 500 similar companies
during the base period of the years 1941 through 1943. As of June 30, 2006, the
common stocks of 424 of the 500 companies included in the S&P 500 Index were
listed on the New York Stock Exchange ("NYSE"). As of June 30, 2006, the
aggregate market value of the 500 companies included in the S&P 500 Index
represented approximately 73% of the market value of Standard & Poor's internal
database of over 6,956 equities. S&P chooses companies for inclusion in the S&P
500 Index with the aim of achieving a distribution by broad industry groupings
that approximates the distribution of these groupings in the common stock
composition of the NYSE, which S&P uses as an assumed model for the composition
of the total market. Relevant criteria employed by S&P include the viability of
the particular company, the extent to which that company represents the industry
group to which it is assigned, the extent to which the market price of that
company's common stock is generally responsive to changes in the affairs of the
respective industry and the market value and trading activity of the common
stock of that company.
Please note that an investment in the certificates does not entitle you to
any dividends or other distributions, voting rights or any other ownership
interest in respect of stocks of the companies included in the S&P 500 Index.
5
HOW HAS THE S&P 500 INDEX PERFORMED HISTORICALLY?
We have provided tables showing the closing values of the S&P 500 Index on
the last index business day of each month from January 2001 to June 2006, and on
the last index business day of December from 1947 through 2005, as well as a
graph showing the closing values of the S&P 500 Index on the last index business
day of December from 1947 through 2005. You can find these tables and the graph
in the section "Description of the S&P 500 Index -- Historical Data on the S&P
500 Index" in this offering document. We have provided this historical
information to help you evaluate the behavior of the S&P 500 Index in recent
years. However, the past performance is not necessarily indicative of how the
S&P 500 Index will perform in the future. You should also refer to the section
"Risk Factors -- Risks Generally Relating to the Certificates, Securities and
Warrants -- The Historical Performance of the S&P 500 Index Is Not an Indication
of the Future Performance of the Index" in this offering document.
WHAT ARE THE TAX CONSEQUENCES OF INVESTING IN THE CERTIFICATES?
For U.S. federal income tax purposes, the trust will be treated as a
grantor trust. Accordingly, you will be treated as owning a pro rata portion of
the assets of the trust and receiving income received by the trust in the manner
set forth below.
For U.S. federal income tax purposes, you and the trust agree to treat (i)
the security and the warrant as two separate financial instruments; (ii) each
security as a cash-settled variable prepaid forward contract with respect to the
S&P 500 Index under which at the time of issuance of the certificates, you pay
Citigroup Funding, with respect to the security, the issue price in
consideration for Citigroup Funding's obligation to deliver to you at maturity
of the security a cash amount equal to $10 plus a supplemental return amount
(which may be positive, zero, or negative) based upon the performance of the S&P
500 Index, in full satisfaction of its obligation under such forward contract;
and (iii) each warrant as a cash-settled put option with respect to the S&P 500
Index under which at the time of issuance of the certificates, with respect to
the warrant, you pay Citigroup Funding the option premium in consideration for
the right to sell to Citigroup Funding at expiration of the warrant, for a cash
amount equal to $10, a notional position in the S&P 500 Index with an initial
value of $10.
Under this characterization, if you are a U.S. taxable investor, your tax
treatment may differ significantly depending on whether you hold the
certificates or a security and a warrant separately. If you hold the
certificates and the "mixed straddle" election applies, you generally will
recognize short-term capital gain (if any) on maturity or disposition of the
certificates equal to the difference between the amount realized and your
adjusted tax basis in the certificates. If you exchange your certificates for
securities and warrants and dispose of one but not the other, you will have
long-term capital gain or loss at maturity or on disposition of the securities
or the warrants if you have held only the securities or only the warrants, as
the case may be, for more than one year after the disposition of the other
instrument. You should be aware, however, that if you hold only the securities
or only the warrants, you will lose the benefit of principal protection at
maturity. Under the straddle rules, if the "identified straddle" election
applies, losses realized on the disposition of the securities or the warrants,
as the case may be, may be required to be capitalized into the basis of any
warrants or securities, as applicable, that you retain.
No statutory, judicial or administrative authority addresses the
characterization of the certificates or instruments similar to the certificates
for U.S. federal income tax purposes. As a result, significant aspects of the
U.S. federal income tax consequences of an investment in the certificates are
not certain. Due to the absence of authority as to the proper characterization
of the certificates, no assurance can be given that the Internal Revenue Service
will accept, or that a court will uphold, the characterization and tax treatment
described above. Alternative treatment of the certificates could result in less
favorable U.S. federal income tax consequences to you, including a requirement
to accrue income on a current basis and to treat any gain as ordinary income.
You should refer to the section "Certain United States Federal Income Tax
Considerations" in this offering document for more information.
6
WILL THE CERTIFICATES BE LISTED ON A STOCK EXCHANGE?
We will apply to list the certificates on the American Stock Exchange under
the symbol " ." You should be aware that the listing of the certificates on
the American Stock Exchange will not necessarily ensure that a liquid trading
market will be available for the certificates.
CAN YOU TELL ME MORE ABOUT CITIGROUP AND CITIGROUP FUNDING?
Citigroup is a diversified global financial services holding company whose
businesses provide a broad range of financial services to consumer and corporate
customers. Citigroup Funding is a wholly-owned subsidiary of Citigroup whose
business activities consist primarily of providing funds to Citigroup and its
subsidiaries for general corporate purposes.
Citigroup's consolidated ratio of income to fixed charges and consolidated
ratio of income to combined fixed charges including preferred stock dividends
for the three months ended March 31, 2006, and each of the five most recent
fiscal years are as follows:
<Table>
<Caption>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------------
MARCH 31, 2006 2005 2004 2003 2002 2001
-------------- ----- ----- ----- ----- -----
Ratio of income to fixed charges (excluding
interest on deposits)..................... 1.92x 2.25x 2.65x 3.42x 2.52x 1.93x
Ratio of income to fixed charges (including
interest on deposits)..................... 1.58x 1.79x 2.01x 2.43x 1.90x 1.59x
Ratio of income to combined fixed charges
including preferred stock dividends
(excluding interest on deposits).......... 1.92x 2.24x 2.63x 3.39x 2.50x 1.92x
Ratio of income to combined fixed charges
including preferred stock dividends
(including interest on deposits).......... 1.58x 1.79x 2.00x 2.41x 1.89x 1.58x
</Table>
WHAT IS THE ROLE OF CITIGROUP FUNDING'S AND CITIGROUP'S AFFILIATE, CITIGROUP
GLOBAL MARKETS INC.?
Citigroup Funding's and Citigroup's affiliate, Citigroup Global Markets
Inc., is the underwriter for the offering and sale of the certificates and is
expected to receive compensation for activities and services provided in
connection with the offering. After the initial offering, Citigroup Global
Markets Inc. and/or other broker-dealer affiliates of Citigroup Funding intend
to buy and sell certificates to create a secondary market for holders of the
certificates, and may engage in other activities described below in the section
"Underwriting." However, neither Citigroup Global Markets Inc. nor any of these
affiliates will be obligated to engage in any market-making activities, or
continue them once it has started. Citigroup Global Markets Inc. will also act
as calculation agent for the certificates.
CAN YOU TELL ME MORE ABOUT THE EFFECT OF CITIGROUP FUNDING'S HEDGING ACTIVITY?
Citigroup Funding expects to hedge its obligations under the securities and
warrants held by the trust through it or one or more of its affiliates. This
hedging activity will likely involve trading in one or more of the stocks
underlying the S&P 500 Index or in other instruments, such as options, swaps or
futures, based upon the S&P 500 Index or the stocks underlying the S&P 500
Index. This hedging activity could affect the value of the S&P 500 Index, the
securities and the warrants and therefore the market value of the certificates.
The costs of maintaining or adjusting this hedging activity could also affect
the price at which Citigroup Funding's affiliate Citigroup Global Markets Inc.
may be willing to purchase your certificates in the secondary market. Moreover,
this hedging activity may result in Citigroup Funding or its affiliates
receiving a profit, even if the market value of the certificates declines. You
should refer to "Risk Factors -- Risks Generally Relating to the Certificates,
Securities and Warrants -- Citigroup Funding's Hedging Activity Could Result in
a Conflict of Interest," " -- The Price at Which You Will Be Able to Sell Your
Certificates Prior to Maturity Will Depend on a Number of Factors and May Be
Substantially Less Than the Amount You Originally Invest" and "Use of Proceeds
and Hedging" in this offering document.
7
DOES ERISA IMPOSE ANY LIMITATIONS ON PURCHASES OF THE CERTIFICATES?
Employee benefit plans and other entities the assets of which are subject
to the fiduciary responsibility provisions of the Employee Retirement Income
Security Act of 1974 or substantially similar federal, state or local laws
("ERISA-Type Plans") will not be permitted to purchase or hold the certificates.
Plans that are not ERISA-Type Plans, such as individual retirement accounts,
individual retirement annuities or Keogh plans, will be permitted to purchase or
hold the certificates, provided that each such plan shall by its purchase be
deemed to represent and warrant that none of Citigroup Global Markets Inc., its
affiliates or any employee thereof manages the plan or provides advice that
serves as a primary basis for the plan's decision to purchase, hold or dispose
of the certificates.
ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?
Yes, the certificates are subject to a number of risks. Please refer to the
section "Risk Factors" in this offering document.
THE SECURITIES AND THE WARRANTS
The sole assets of the trust are expected to be equity index participation
securities and equity index warrants, both linked to the S&P 500 Index. The
trust will purchase all of the securities and the warrants from Citigroup
Funding on the date the certificates are issued. Payments under the securities
and the warrants will fund the payments under the certificates at maturity. Any
payments due on each of the securities and the warrants are fully and
unconditionally guaranteed by Citigroup, which guarantees will rank equally with
all other unsecured and unsubordinated debt of Citigroup.
WHAT ARE THE EQUITY INDEX PARTICIPATION SECURITIES?
The equity index participation securities linked to the S&P 500 Index, or
the securities, are a series of unsecured senior debt securities issued by
Citigroup Funding. Any payments due on the securities are fully and
unconditionally guaranteed by Citigroup. The securities will rank equally with
all other unsecured and unsubordinated debt of Citigroup Funding, and the
guarantee of any payments due under the securities will rank equally with all
other unsecured and unsubordinated debt of Citigroup. The securities mature on
, 2010, the maturity of the certificates. The securities will be
issued under an indenture among Citigroup Funding, Citigroup and JPMorgan Chase
Bank, N.A., as trustee.
Each security will have a face amount of $10 and initially will be issued
by Citigroup Funding at a price of $ . At maturity, each security will pay a
security payment equal to a sum of $10 and a supplemental return amount, which
could be positive, zero or negative.
The supplemental return amount will be calculated as follows:
- If the index return is positive or zero, the supplemental return amount
will equal the product of (a) $10, (b) the index return and (c) the
participation rate, which is expected to be approximately 83% (to be
determined on the pricing date)
- If the index return is negative, the supplemental return amount will
equal the product of (a) $10 and (b) the index return
As a result, if you choose to exercise your exchange right and hold only the
securities, you will lose the benefit of principal protection at maturity.
The supplemental return amount will be used only for the purpose of
determining the security payment and is different from the supplemental
distribution amount used in determining the maturity payment on the
certificates.
For more specific information about the "supplemental return amount" and
the "index return," and for information on the effect of a market disruption
event on the determination of the supplemental return amount and the index
return, please see "Description of the Equity Index Participation
Securities -- Supplemental Return Amount" and the definitions of index return
and market disruption event in "Description of the Certificates -- Supplemental
Distribution Amount" in this offering document.
8
WHAT ARE THE EQUITY INDEX WARRANTS?
The equity index warrants linked to the S&P 500 Index, or the warrants, are
a series of index warrants issued by Citigroup Funding. Any payments due on the
warrants are fully and unconditionally guaranteed by Citigroup. The warrants
will rank equally with all other unsecured and unsubordinated debt of Citigroup
Funding, and the guarantee of any payments due under the warrants will rank
equally with all other unsecured and unsubordinated debt of Citigroup. The
warrants will be issued under a warrant agreement among Citigroup Funding,
Citigroup and U.S. Bank National Association, as warrant agent.
Each warrant will have a notional amount of $10 and will be initially
issued by Citigroup Funding at a price of $ . The warrants will be
automatically exercised on , 2010, the maturity of the certificates,
and are not exercisable prior to that time. Upon exercise, each warrant will pay
a warrant payment equal to the product of (a) $10 and (b) the warrant index
return, provided that the warrant payment will not be less than zero. As a
result, if you choose to exercise your exchange right and hold only the
warrants, you will lose the benefit of principal protection at maturity.
The warrant index return, which is presented in this offering document as a
percentage, will equal the following fraction:
Starting Value - Ending Value
-----------------------------
Starting Value
The warrant index return will be used only for the purpose of determining the
warrant payment and is different from the index return used in determining the
maturity payment on the certificates and the security payment.
For more specific information about the "starting value" and the "ending
value," and for information about the effect of a market disruption event on the
determination of the index return, please see "Description of the Equity Index
Warrants -- Payment Upon Exercise of the Warrants" and the definition of market
disruption event in "Description of the Certificates -- Supplemental
Distribution Amount" in this offering document.
WILL THE SECURITIES OR THE WARRANTS BE LISTED ON A STOCK EXCHANGE?
Neither the securities nor the warrants will be listed on any exchange.
There is currently no secondary market for the securities or the warrants.
Citigroup Global Markets Inc. currently intends, but is not obligated, to make a
market in the securities or the warrants. Even if a secondary market does
develop, it may not be liquid and may not continue for the term of the
securities or the warrants.
IF I EXERCISE MY EXCHANGE RIGHTS, WILL I RECEIVE ANY PERIODIC PAYMENTS ON THE
SECURITIES OR THE WARRANTS?
You will not receive any periodic payments of interest or any other
payments on the securities or the warrants until maturity. In addition, you will
not be entitled to receive dividend payments or other distributions, if any,
made on the stocks underlying the S&P 500 Index.
9
RISK FACTORS
Because the terms of the certificates, the securities and the warrants
differ from those of conventional debt securities in that the payment at
maturity of the certificates and the securities, and upon exercise of the
warrants, will be based on the closing value of the S&P 500 Index on the third
index business day before the maturity date, an investment in the certificates,
the securities and the warrants entails significant risks not associated with
similar investments in conventional debt securities, including, among other
things, fluctuations in the value of the S&P 500 Index and other events that are
difficult to predict and beyond our control.
RISKS RELATING TO THE CERTIFICATES
If you choose to exercise your exchange right and hold only the securities
or only the warrants until maturity, you will be subject to separate risks
applicable to the securities or the warrants, as the case may be. You should
refer to "-- Risks Relating to the Securities" and "-- Risks Relating to the
Warrants" for a discussion of risks applicable to each of the securities and the
warrants. You should also refer to "--Risks Generally Relating to the
Certificates, Securities and Warrants" for a discussion of additional risks
generally applicable to the certificates, the securities and the warrants.
THE APPRECIATION OF YOUR INVESTMENT IN THE CERTIFICATES WILL BE LIMITED AND MAY
BE ZERO
The amount of the maturity payment will depend on the ending value, which
will be the closing value of the S&P 500 Index on the third index business day
before the maturity date. If the ending value is greater than the starting
value, your participation in the appreciation of the S&P 500 Index will be
limited to the participation rate, % of the index return. In addition, if the
ending value is equal to or less than the starting value, the payment you
receive at maturity will be limited to the amount of your initial investment in
the certificates, even if the closing value of the S&P 500 Index is greater than
the starting value at one or more times during the term of the certificates or
if the closing value of the S&P 500 Index at maturity exceeds the starting
value, but the closing value of the S&P 500 Index on the valuation date is equal
to or less than the starting value. Because of the possibility of limited or
zero appreciation of your initial investment, the certificates may provide less
opportunity for appreciation than an investment in a similar security that would
permit you to participate fully in the appreciation of the S&P 500 Index or an
investment in some or all of the stocks underlying the S&P 500 Index.
THE YIELD ON THE CERTIFICATES MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT
SECURITY OF COMPARABLE MATURITY
The certificates do not pay any interest. As a result, if the index return
is less than approximately %, the yield on the certificates will be less
than that which would be payable on a conventional fixed-rate, non-callable debt
security of Citigroup Funding of comparable maturity.
YOU WILL NOT RECEIVE ANY PERIODIC PAYMENTS ON THE CERTIFICATES
You will not receive any periodic payments of interest or any other
periodic payments on the certificates. In addition, you will not be entitled to
receive dividend payments or other distributions, if any, made on the stocks
underlying the S&P 500 Index.
YOUR RETURN ON THE CERTIFICATES WILL NOT REFLECT THE RETURN YOU WOULD REALIZE IF
YOU ACTUALLY OWNED THE STOCKS UNDERLYING THE S&P 500 INDEX
Your return on the certificates will not reflect the return you would
realize if you actually owned the stocks underlying the S&P 500 Index. S&P
calculates the S&P 500 Index by reference to the prices of the stocks underlying
the S&P 500 Index without taking into consideration the value of any dividends
paid on those stocks. As a result, the return on the certificates may be less
than the return you could have realized if the dividends paid on those stocks
were included in the calculation of the S&P 500 Index. In addition, as described
above your participation in the appreciation of the S&P 500 Index will be
limited to the participation rate of % of the index return.
10
THE TRADING PRICE OF THE CERTIFICATES MAY BE LESS THAN YOU WOULD OTHERWISE
EXPECT BECAUSE THE MATURITY OF THE CERTIFICATES CAN BE ACCELERATED
If an acceleration event occurs, the maturity of the certificates will be
accelerated and you will receive with respect to each certificate the
accelerated maturity payment. Because the amount that would be payable on the
accelerated maturity date is uncertain, since it would depend on when an
acceleration event occurs, the market value of the certificates may be less than
what you would otherwise expect based on the value of the S&P 500 Index and the
level of interest rates at a particular time.
YOU WILL HAVE LIMITED VOTING RIGHTS WITH RESPECT TO THE TRUST AND THE TRUSTEES
You will have limited voting rights with respect to the trust and will not
be entitled to vote to appoint, remove or replace, or increase or decrease the
number of, the trustees. These voting rights will be held exclusively by
Citigroup Funding, as the holder of the common securities of the trust. You
should refer to the section "Description of the Certificates -- Voting Rights"
in this offering document.
YOU MAY NOT BE ABLE TO SELL YOUR CERTIFICATES IF AN ACTIVE TRADING MARKET DOES
NOT DEVELOP
There is currently no secondary market for the certificates. Citigroup
Global Markets Inc. currently intends, but is not obligated, to make a market in
the certificates. Even if a secondary market does develop, it may not be liquid
any may not continue for the term of the certificates. If the secondary market
for the certificates is limited, there may be few buyers should you choose to
sell your certificates prior to maturity.
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE CERTIFICATES ARE
UNCERTAIN
No statutory, judicial or administrative authority addresses the
characterization of the certificates or instruments similar to the certificates
for U.S. federal income tax purposes. As a result, significant aspects of the
U.S. federal income tax consequences of an investment in the certificates are
not certain. No ruling is being requested from the Internal Revenue Service with
respect to the certificates and the Internal Revenue Service may not agree with
the treatment described under "Certain United States Federal Income Tax
Considerations" in this offering document. Alternative treatments of the
certificates could result in less favorable U.S. federal income tax consequences
to you, including a requirement to accrue income on a current basis and to treat
any gain as ordinary income. The tax rules applicable to the certificates are
complex and several aspects of tax treatment of the certificates may be affected
by certain tax elections that may apply. YOU SHOULD CONSULT YOUR OWN TAX
ADVISORS IN DETERMINING THE TAX CONSEQUENCES TO YOU OF PURCHASING, OWNING AND
DISPOSING OF THE CERTIFICATES, SECURITIES AND WARRANTS, INCLUDING THE
APPLICATION IN YOUR PARTICULAR CIRCUMSTANCES OF THE TAX CONSIDERATIONS DISCUSSED
IN THE SECTION "CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS" IN THIS
OFFERING DOCUMENT, AS WELL AS THE APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS,
THE APPLICABILITY OF AND ADVISABILITY OF MAKING CERTAIN TAX ELECTIONS, AND
POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
UNLESS A "MIXED STRADDLE" ELECTION APPLIES, YOU MAY BE REQUIRED TO RECOGNIZE
GAIN ON WARRANTS ANNUALLY, EVEN THOUGH YOU WILL NOT RECEIVE ANY CASH
DISTRIBUTIONS BEFORE MATURITY
Under the treatment of the assets of the trust that you and the trust will
agree to, if you are a U.S. taxable investor and you hold the securities and the
warrants together in the form of the certificates, you may be required to treat
the warrants as "section 1256 contracts." In that case, unless a mixed straddle
election applies with respect to the warrants, you would generally recognize
gain, if any, on the warrants annually as if you sold the warrants at the close
of the taxable year at fair market value, even though you will receive no
distributions until maturity. Any gain on the warrants generally will be 60%
long-term capital gain and 40% short-term capital gain. Making a "mixed
straddle" election would permit you to elect out of the annual gain recognition
regime that otherwise may apply to the warrants. The trust will make a mixed
straddle election on behalf of all holders of the certificates. It is unclear,
however, whether the election made by the trust on behalf of a holder will be
effective. You are urged to make a separate mixed straddle election by complying
with the
11
identification requirements described in the section "Certain United States
Federal Income Tax Considerations" and by filing IRS Form 6781 (attached to this
offering document as Exhibit B).
THE PAYMENTS YOU RECEIVE ON THE CERTIFICATES LIKELY WILL BE DELAYED OR REDUCED
IN THE EVENT OF A BANKRUPTCY OF CITIGROUP FUNDING OR CITIGROUP
Although the certificates are securities of the trust, the ability of the
trust to make payments under the certificates depends upon its receipt from
Citigroup Funding of the maturity payments or accelerated maturity payments
under the securities and the warrants. The ability of the trust to meet its
obligations under the certificates therefore depends on the ability of Citigroup
Funding to meet its obligations under the securities and the warrants, which, in
turn, depends on the solvency and creditworthiness of Citigroup Funding.
Although Citigroup has provided a full and unconditional guarantee of Citigroup
Funding's payment obligations under each of the securities and the warrants and,
in the event of a bankruptcy of Citigroup Funding, would be required to make any
payments due from Citigroup Funding under the securities or the warrants, there
can be no assurance of Citigroup's continued solvency. As such, in the event of
a bankruptcy of Citigroup Funding or Citigroup, any recovery by the holders of
certificates likely will be substantially delayed and may be less than each
holder's pro rata portion of the securities and the warrants.
RISKS RELATING TO THE SECURITIES
If you choose to exercise your exchange right and hold only the securities,
your investment in the securities may entail the specific risks discussed below.
You should also refer to "-- Risks Generally Relating to the Certificates,
Securities and Warrants" for a discussion of additional risks that generally may
be applicable to the certificates, securities and warrants.
YOUR INVESTMENT IN THE SECURITIES MAY RESULT IN A LOSS IF THE VALUE OF THE S&P
500 INDEX DECLINES
The amount payable at maturity of the securities will depend on the closing
value of the S&P 500 Index on the third index business day before maturity of
the certificates. As a result, the amount of your security payment may be less
than the initial issue price of the securities. If the ending value of the S&P
500 Index declines by approximately % (to be determined on the pricing date)
or more from the starting value, the security payment will be less than $ ,
the initial issue price of each security, and could be zero, in which case your
investment in the securities will result in a loss. This will be true even if
the value of the S&P 500 Index at any point during the term of the securities
exceeds the starting value of the S&P 500 Index.
THE APPRECIATION OF YOUR INVESTMENT IN THE SECURITIES WILL BE LIMITED
If the ending value of the S&P 500 Index is greater than the starting
value, your participation in the appreciation of the S&P 500 Index will be
limited to the participation rate, % of the index return. Because of the
possibility of limited appreciation of your initial investment, the securities
may provide less opportunity for appreciation than an investment in a similar
security that would permit you to participate fully in the appreciation of the
S&P 500 Index or an investment in some or all of the stocks underlying the S&P
500 Index.
YOU WILL PARTICIPATE FULLY IN ANY DEPRECIATION IN THE VALUE OF THE S&P 500 INDEX
If the ending value is greater than the starting value, your participation
in the appreciation of the S&P 500 Index will be limited to the participation
rate (which is expected to be approximately 83%; to be determined on the pricing
date) of the index return. However, because your participation in the
depreciation of the S&P 500 Index is not limited to the participation rate, if
the ending value is less than the starting value, you will participate fully in
the depreciation of the value of the S&P 500 Index.
12
THE YIELD ON THE SECURITIES MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT
SECURITY OF COMPARABLE MATURITY
The securities do not pay any interest. As a result, if the index return is
less than approximately %, the yield on the securities will be less than
that which would be payable on a conventional fixed-rate, noncallable debt
security of Citigroup Funding of comparable maturity.
YOU WILL NOT RECEIVE ANY PERIODIC PAYMENTS ON THE SECURITIES
You will not receive any periodic payments of interest or any other
periodic payments on the securities. In addition, you will not be entitled to
receive dividend payments or other distributions, if any, made on the stocks
underlying the S&P 500 Index.
YOUR RETURN ON THE SECURITIES WILL NOT REFLECT THE RETURN YOU WOULD REALIZE IF
YOU ACTUALLY OWNED THE STOCKS UNDERLYING THE S&P 500 INDEX
Your return on the securities will not reflect the return you would realize
if you actually owned the stocks underlying the S&P 500 Index. S&P calculates
the S&P 500 Index by reference to the prices of the stocks underlying the S&P
500 Index without taking into consideration the value of any dividends paid on
those stocks. As a result, the return on the securities may be less than the
return you could have realized if the dividends paid on those stocks were
included in the calculation of the S&P 500 Index. In addition, as described
above your participation in the appreciation of the S&P 500 Index will be
limited to the participation rate of % of the index return.
THE SECURITIES WILL NOT BE LISTED ON ANY EXCHANGE; YOU MAY NOT BE ABLE TO SELL
YOUR SECURITIES IF AN ACTIVE TRADING MARKET DOES NOT DEVELOP
The securities will not be listed on any exchange. There is currently no
secondary market for the securities. Citigroup Global Markets Inc. currently
intends, but is not obligated, to make a market in the securities. Even if a
secondary market does develop, it may not be liquid and may not continue for the
term of the securities. If the secondary market for the securities is limited,
there may be few buyers should you choose to sell your securities prior to
maturity and this may reduce the price you receive.
RISKS RELATING TO THE WARRANTS
If you choose to exercise your exchange right and hold only the warrants,
your investment in the warrants may entail the specific risks discussed below.
You should also refer to "-- Risks Generally Relating to the Certificates,
Securities and Warrants" for a discussion of additional risks that generally may
be applicable to the certificates, securities and warrants.
THE WARRANTS WILL EXPIRE WORTHLESS UNLESS THE VALUE OF THE S&P 500 INDEX
DECLINES
The amount payable upon exercise of the warrants will depend on the closing
value of the S&P 500 Index on the third index business day before maturity of
the certificates. If the ending value of the S&P 500 Index is greater than or
equal to the starting value, the warrant payment will be zero. If the ending
value of the S&P 500 Index does not decrease by approximately % (to be
determined on the pricing date) or more from the starting value, the warrant
payment will be less than $ , the initial issue price of each warrant, in
which case your investment in the warrants will result in a loss. This will be
true even if the value of the S&P 500 Index at any point during the term of the
warrants declines by approximately % or more from the starting value of the
S&P 500 Index.
THE WARRANTS ARE A RISKY INVESTMENT AND NOT SUITABLE FOR ALL INVESTORS
If you choose to exercise your exchange right and hold only the warrants,
the warrants will be a risky investment and not suitable for all investors.
Equity index warrants may change substantially in value, or lose all of their
value, with relatively small movements in the value of the underlying index.
Accordingly, equity
13
index warrants, such as the warrants offered by this offering document, involve
a high degree of risk and are not appropriate for every investor. Investors who
are considering investing in the warrants, or exchanging their certificates for
warrants, must be able to understand and bear the risk of a speculative
investment in the warrants, be experienced with respect to options and option
transactions and understand the risks of transactions in equity-indexed
instruments. Investors should reach an investment decision only after careful
consideration, with their advisors, of the suitability of the warrants in light
of their particular financial circumstances and the information set forth in
this offering document.
YOU MAY NOT EXERCISE THE WARRANTS UNTIL THEY ARE AUTOMATICALLY EXERCISED
The warrants will be automatically exercised on the maturity of the
certificates and are not exercisable prior to that date. Thus, even though the
value of the S&P 500 Index declines significantly from the starting value at any
point during the term of the warrants, you cannot exercise your warrants at that
point. Accordingly, the return on your investment in the warrants will depend
solely on the closing value of the S&P 500 Index on the third index business day
before maturity of the certificates.
YOU WILL NOT RECEIVE ANY PERIODIC PAYMENTS ON THE WARRANTS
You will not receive any periodic payments of interest or any other
periodic payments on the warrants. In addition, you will not be entitled to
receive dividend payments or other distributions, if any, made on the stocks
underlying the S&P 500 Index.
THE WARRANTS WILL NOT BE LISTED ON ANY EXCHANGE; YOU MAY NOT BE ABLE TO SELL
YOUR WARRANTS IF AN ACTIVE TRADING MARKET DOES NOT DEVELOP
The warrants will not be listed on any exchange. There is currently no
secondary market for the warrants. Citigroup Global Markets Inc. currently
intends, but is not obligated, to make a market in the warrants. Even if a
secondary market does develop, it may not be liquid and may not continue for the
term of the warrants. If the secondary market for the warrants is limited, there
may be few buyers should you choose to sell your warrants prior to maturity and
this may reduce the price you receive.
THE PRICE OF THE WARRANTS MAY EXCEED THAT OF SIMILAR OPTIONS
The initial issue price of the warrants may be in excess of the price that
a commercial user of options on the S&P 500 Index or the underlying stocks might
pay for a comparable option in a private transaction.
RISKS GENERALLY RELATING TO THE CERTIFICATES, SECURITIES AND WARRANTS
THE HISTORICAL PERFORMANCE OF THE S&P 500 INDEX IS NOT AN INDICATION OF THE
FUTURE PERFORMANCE OF THE S&P 500 INDEX
The historical performance of the S&P 500 Index, which is included in this
offering document, should not be taken as an indication of the future
performance of the S&P 500 Index during the term of the certificates, securities
and warrants. Changes in the value of the S&P 500 Index will affect the trading
price of the certificates, securities and warrants, but it is impossible to
predict whether the value of the S&P 500 Index will fall or rise.
THE PRICE AT WHICH YOU WILL BE ABLE TO SELL YOUR CERTIFICATES, SECURITIES AND
WARRANTS PRIOR TO MATURITY WILL DEPEND ON A NUMBER OF FACTORS AND MAY BE
SUBSTANTIALLY LESS THAN THE AMOUNT YOU ORIGINALLY INVEST
We believe that the value of your certificates, securities and warrants in
the secondary market will be affected by the supply of and demand for each of
them, the value of the S&P 500 Index and a number of other factors. Some of
these factors are interrelated in complex ways. As a result, the effect of any
one factor may be offset or magnified by the effect of another factor. The
following paragraphs describe what we expect to be the
14
impact on the market value of the certificates, securities and warrants of a
change in a specific factor, assuming all other conditions remain constant.
Value of the S&P 500 Index. We expect that the market value of the
certificates, securities and warrants will depend substantially on the
relationship between the starting value of the S&P 500 Index and the future
value of the S&P 500 Index. However, changes in the value of the S&P 500 Index
may not always be reflected, in full or in part, in the market value of the
certificates, securities and warrants. For example, if you choose to sell your
certificates or securities when the value of the S&P 500 Index exceeds its
starting value, you may receive substantially less than the amount that would be
payable at maturity based on that value because of expectations that the value
of the S&P 500 Index will continue to fluctuate between that time and the time
when the ending value of the S&P 500 Index is determined. In addition, if you
choose to sell your certificates or securities when the value of the S&P 500
Index is below its starting value, you may receive less than the amount you
originally invested in the certificates or securities. On the other hand, if you
choose to sell your warrants when the value of the S&P 500 Index exceeds its
starting value, you may receive less than the amount you originally invested in
the warrants.
Trading prices of the underlying stocks of the S&P 500 Index will be
influenced by both the complex and interrelated political, economic, financial
and other factors that can affect the capital markets generally and the equity
trading markets on which the underlying stocks are traded, and by various
circumstances that can influence the values of the underlying stocks in a
specific market segment or of a particular underlying stock. Citigroup Funding's
hedging activities in the underlying stocks of the S&P 500 Index, the issuance
of securities similar to the certificates, securities and warrants and other
trading activities by Citigroup Funding, its affiliates and other market
participants can also affect the price of the underlying stocks of the S&P 500
Index and the value of the S&P 500 Index.
Volatility of the S&P 500 Index. Volatility is the term used to describe
the size and frequency of market fluctuations. If the volatility of the S&P 500
Index changes during the term of the certificates, securities and warrants, the
market value of the certificates, securities and warrants may decrease.
Events Involving the Companies Comprising the S&P 500 Index. General
economic conditions and earnings results of the companies whose common stocks
comprise the S&P 500 Index and real or anticipated changes in those conditions
or results may affect the market value of the certificates, securities and
warrants. In addition, if the dividend yields on these stocks increase, we
expect that the market value of the certificates and securities may decrease
because the S&P 500 Index does not incorporate the value of dividend payments.
Conversely, if dividend yields on these stocks decrease, we expect that the
market value of the certificates and securities may increase. On the other hand,
we expect that the market value of the warrants may increase if dividend yields
on these stocks increase, and decrease if dividend yields on these stocks
decrease.
Interest Rates. We expect that the market value of the certificates,
securities and warrants will be affected by changes in U.S. interest rates. If
U.S. interest rates change during the term of the certificates, securities and
warrants, the market value of the certificates, securities and warrants may
decrease.
Time Premium or Discount. As a result of a "time premium or discount," the
certificates, securities and warrants may trade at a value above or below that
which would be expected based on the level of interest rates and the value of
the S&P 500 Index the longer the time remaining to maturity. A "time premium or
discount" results from expectations concerning the value of the S&P 500 Index
during the period prior to the maturity of the certificates, securities and
warrants. However, as the time remaining to maturity decreases, this time
premium or discount may diminish, increasing or decreasing the market value of
the certificates, securities and warrants.
Hedging Activities. Hedging activities related to the certificates,
securities and warrants by one or more of our affiliates will likely involve
trading in one or more of the stocks underlying the S&P 500 Index or in the
other instruments, such as options, swaps or futures, based upon the S&P 500
Index or the stocks underlying the S&P 500 Index. This hedging activity could
affect the value of the S&P 500 Index and therefore the market value of the
certificates, securities and warrants. It is possible that we or our affiliates
may profit from our hedging activity, even if the market value of the
certificates, securities and warrants declines. Profit or loss
15
from this hedging activity could affect the price at which Citigroup Funding's
affiliate Citigroup Global Markets Inc. may be willing to purchase your
certificates, securities and warrants in the secondary market.
Citigroup Funding and Citigroup's Credit Ratings, Financial Condition and
Results. Actual or anticipated changes in our credit ratings, financial
condition or results or those of Citigroup may affect the market value of the
certificates, securities and warrants.
We want you to understand that the impact of one of the factors specified
above, such as an increase in interest rates, may offset some or all of any
change in the market value of the certificates, securities and warrants
attributable to another factor, such as changes in the market value of the
certificates due to an increase in the value of the S&P 500 Index.
In general, assuming all relevant factors are held constant, we expect that
the effect on the market value of the certificates, securities and warrants of a
given change in most of the factors listed above will be less if it occurs later
in the term of the certificates, securities and warrants than if it occurs
earlier in the term of the certificates, securities and warrants.
A GAIN ON THE CERTIFICATES WILL BE TREATED AS SHORT-TERM CAPITAL GAIN AND ANY
LOSSES MAY BE REQUIRED TO BE CAPITALIZED OR DEFERRED UNDER THE STRADDLE RULES
Under the treatment of the assets of the trust that you and the trust will
agree to, if you are a U.S. taxable investor, any gain with respect to the
certificates (such as at maturity or on disposition) will be treated as
short-term capital gain, unless you take the steps described in the next
sentence below. You will have long-term capital gain or loss at maturity or on
disposition of the securities if you have exchanged your certificates for the
securities and warrants, disposed of the warrants, and have held the securities
for more than one year after the disposition of the warrants. However, if you
exchange your certificates for the securities and the warrants and dispose of
the warrants, any loss on a disposition of the warrants may not be deductible
currently. If the "identified straddle" election applies with respect to the
securities and the warrants, you will be required to add such loss to your basis
in the securities. If the identified straddle election does not apply, such loss
may be deferred and may not become deductible until you sell or otherwise
dispose of all of your securities. The trust will identify each security and
each warrant as positions comprising a separate identified straddle on behalf of
all holders of the certificates. It is unclear, however, whether the identified
straddle election made by the trust on behalf of a holder will be effective. You
are urged to make a separate identified straddle election by complying with the
identification requirements described in the section "Certain United States
Federal Income Tax Considerations" in this offering document.
THE MARKET VALUE OF THE CERTIFICATES, SECURITIES AND WARRANTS MAY BE AFFECTED BY
PURCHASES AND SALES OF THE STOCKS UNDERLYING THE S&P 500 INDEX OR DERIVATIVE
INSTRUMENTS RELATED TO THE S&P 500 INDEX BY AFFILIATES OF CITIGROUP FUNDING
Citigroup Funding's and Citigroup's affiliates, including Citigroup Global
Markets Inc., may from time to time buy or sell the underlying stocks of the S&P
500 Index or derivative instruments relating to the S&P 500 Index for their own
accounts in connection with their normal business practices or in connection
with hedging Citigroup Funding's obligations under the securities and warrants.
These transactions could affect the value of the underlying stocks of the S&P
500 Index and therefore the market value of the certificates, securities and
warrants.
CITIGROUP GLOBAL MARKETS INC., AN AFFILIATE OF CITIGROUP FUNDING AND CITIGROUP,
IS THE CALCULATION AGENT, WHICH COULD RESULT IN A CONFLICT OF INTEREST
Citigroup Global Markets Inc., which is acting as the calculation agent for
the certificates, securities and warrants, is an affiliate of the trust,
Citigroup Funding and Citigroup. As a result, Citigroup Global Markets Inc.'s
duties as calculation agent, including with respect to certain determinations
and judgments that the calculation agent must make in determining amounts due to
you, may conflict with its interest as an affiliate of Citigroup Funding and
Citigroup.
16
CITIGROUP FUNDING'S HEDGING ACTIVITY COULD RESULT IN A CONFLICT OF INTEREST
Citigroup Funding expects to hedge its obligations under the securities and
warrants through it or one or more of its affiliates. This hedging activity will
likely involve trading in one or more of the stocks underlying the S&P 500 Index
or in other instruments, such as options, swaps or futures, based upon the S&P
500 Index or the stocks underlying the S&P 500 Index. This hedging activity may
present a conflict between your interest in the certificates, securities and
warrants and the interests Citigroup Funding and its affiliates have in
executing, maintaining and adjusting its hedge transactions because it could
affect the value of the S&P 500 Index and therefore the market value of the
certificates, securities and warrants. It could also be adverse to your interest
if it affects the price at which Citigroup Funding's affiliate Citigroup Global
Markets Inc. may be willing to purchase your certificates, securities and
warrants in the secondary market. Since hedging Citigroup Funding's obligation
under the securities and warrants involves risk and may be influenced by a
number of factors, it is possible that Citigroup Funding or its affiliates may
profit from its hedging activity, even if the market value of the certificates,
securities and warrants declines.
17
AVAILABLE INFORMATION
As required by the Securities Act of 1933, Safety First Trust Series
[2006-1] ("Trust [2006-1]"), Citigroup Funding and Citigroup filed a
registration statement relating to the Principal-Protected Trust Certificates
based upon the S&P 500(R) Index (the "Certificates") offered by this offering
document with the Securities and Exchange Commission, or SEC. This offering
document is a part of that registration statement, which includes additional
information. Citigroup Funding and Citigroup also have filed a registration
statement relating to the Equity Index Participation Securities linked to the
S&P 500(R) Index (the "Securities") and the Equity Index Warrants linked to the
S&P 500(R) Index (the "Warrants") offered by this offering document.
Citigroup files annual, quarterly and current reports and other information
with the SEC. Citigroup Funding and Trust [2006-1] currently do not file reports
and other information with the SEC. You may read and copy any document Citigroup
files at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. You can also request copies of the documents, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the Public
Reference Room. These SEC filings and reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC
are available to the public from the SEC's website at http://www.sec.gov.
Citigroup's SEC filings are also available on its website at
http://www.citigroup.com.
Separate financial statements of Trust [2006-1] have not been included in
this offering document. Citigroup does not believe that these financial
statements would be material to you because:
- Citigroup, an SEC reporting company, is the sole stockholder of Citigroup
Funding,
- Citigroup, through Citigroup Funding, indirectly owns all the voting
securities of Trust [2006-1],
- Trust [2006-1] has no independent operations,
- Citigroup Funding is the issuer of the Securities and the Warrants,
- Citigroup Funding has fully and unconditionally guaranteed Trust
[2006-1]'s obligations under the Certificates to the extent that Trust
[2006-1] has funds legally available to meet its obligations,
- Citigroup has fully and unconditionally guaranteed Citigroup Funding's
guarantee obligations to the same extent and in the same manner as
Citigroup Funding has guaranteed Trust [2006-1]'s obligations under the
Certificates (we refer to this guarantee, together with Citigroup
Funding's guarantee referred to in the immediately preceding bullet, as
the Certificate Guarantee), and
- Citigroup has fully and unconditionally guaranteed Citigroup Funding's
payment obligations under each of the Securities and the Warrants.
In its future filings under the Securities Exchange Act of 1934, a footnote
to Citigroup's annual financial statements will state:
- that the sole assets of Trust [2006-1] are the Securities and the
Warrants, and
- that the Certificate Guarantee, when taken together with Citigroup
Funding's obligations under the Securities and the Warrants, Citigroup's
guarantee of each of the Securities and the Warrants, the related
indenture, the related warrant agreement, the amended and restated
declaration of trust of Trust [2006-1] and Citigroup Funding's and
Citigroup's obligations to pay all fees and expenses of Trust [2006-1],
constitutes a full and unconditional guarantee by each of Citigroup
Funding and Citigroup of Trust [2006-1]'s obligations under the
Certificates.
The SEC allows Citigroup to "incorporate by reference" the information it
files with the SEC, which means that it can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this offering document. Information that
Citigroup files later with the SEC will automatically update information in this
offering document. In all cases, you should
18
rely on the later information over different information included in this
offering document. Citigroup incorporates by reference the documents listed
below:
(a) Annual Report on Form 10-K for the year ended December 31, 2005;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 2006;
(c) Current Reports on Form 8-K filed on January 13, 2006, January 27,
2006, January 31, 2006, February 14, 2006, February 27, 2006,
February 28, 2006, March 10, 2006, March 23, 2006, March 29, 2006,
March 30, 2006, March 31, 2006, April 4, 2006, April 13, 2006, April
25, 2006, April 26, 2006, April 27, 2006, April 28, 2006, May 12
2006, May 19, 2006, June 9, 2006, June 15, 2006, June 28, 2006, June
30, 2006, July 6, 2006, July 11, 2006 and July 17, 2006; and
(d) portions of the Current Report on Form 8-K filed on July 17, 2006
that were "filed" for purposes of the Securities Exchange Act of
1934.
In addition, all documents Citigroup files pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this offering document
and before the later of (1) the completion of the offering of the securities
described in this offering document and (2) the date the broker-dealer
subsidiaries or affiliates of Citigroup stop offering securities pursuant to
this offering document shall be incorporated by reference in this offering
document from the date of filing of such documents.
You may request a copy of these filings, at no cost, by writing or
telephoning Citigroup at the following address:
Citigroup Document Services
140 58th Street, Suite 8G
Brooklyn, NY 11220
(877) 936-2737 (toll free)
(718) 765-6514 (outside the U.S.)
You should rely only on the information provided in this offering document,
as well as the information incorporated by reference. None of Citigroup,
Citigroup Funding or Trust [2006-1] is making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information in this offering document or any documents incorporated by reference
is accurate as of any date other than the date on the front of the applicable
document.
19
CITIGROUP INC.
Citigroup is a diversified global financial services holding company whose
businesses provide a broad range of financial services to consumer and corporate
customers, with some 200 million customer accounts in over 100 countries.
Citigroup's activities are conducted through the Global Consumer Group,
Corporate and Investment Banking, Global Wealth Management and Alternative
Investments business segments. Citigroup's principal subsidiaries are Citibank,
N.A., Associates First Capital Corporation, Citigroup Global Markets Inc. and
Grupo Financiero Banamex, S.A. de C.V., each of which is a wholly-owned,
indirect subsidiary of Citigroup. Citigroup was incorporated in 1988 under the
laws of the State of Delaware as a corporation with perpetual duration.
Citigroup is a holding company and services its obligations primarily with
dividends and advances that it receives from subsidiaries. Citigroup's
subsidiaries that operate in the banking and securities businesses can only pay
dividends if they are in compliance with the applicable regulatory requirements
imposed on them by federal and state bank regulatory authorities and securities
regulators. Citigroup's subsidiaries may be party to credit agreements that also
may restrict their ability to pay dividends. Citigroup currently believes that
none of these regulatory or contractual restrictions on the ability of its
subsidiaries to pay dividends will affect Citigroup's ability to service its own
debt. Citigroup must also maintain the required capital levels of a bank holding
company before it may pay dividends on its stock. Each of Citigroup's major
operating subsidiaries finances its operations on a stand-alone basis consistent
with its capitalization and ratings.
Under the regulations of the Federal Reserve, a bank holding company is
expected to act as a source of financial strength for its subsidiary banks. As a
result of this regulatory policy, the Federal Reserve might require Citigroup to
commit resources to its subsidiary banks when doing so is not otherwise in the
interests of Citigroup or its shareholders or creditors.
The principal executive offices of Citigroup are located at 399 Park
Avenue, New York, New York 10043, and its telephone number is (212) 559-1000.
CITIGROUP FUNDING INC.
Citigroup Funding is a wholly-owned subsidiary of Citigroup, whose business
activities consist primarily of providing funds to Citigroup and its
subsidiaries for general corporate purposes. Citigroup Funding was incorporated
on January 14, 2005 under the laws of the State of Delaware as a corporation
with perpetual duration. The principal executive offices of Citigroup Funding
are located at 399 Park Avenue, New York, New York 10043, and its telephone
number is (212) 559-1000.
20
USE OF PROCEEDS AND HEDGING ACTIVITIES
Trust [2006-1] will use approximately % of the total proceeds from the
sale of the Certificates and the common securities to buy the Securities and the
Warrants. Citigroup Funding will use a portion of the net proceeds from the sale
of the Securities and the Warrants for general corporate purposes, which may
include:
- funding the business of Citigroup subsidiaries;
- funding investments in, or extensions of credit or capital contributions
to, Citigroup subsidiaries; and
- lengthening the average maturity of liabilities, which means that it
could reduce its short-term liabilities or refund maturing indebtedness.
Citigroup Funding expects to incur additional indebtedness in the future to
fund Citigroup's businesses. Citigroup Funding or one of more of its affiliates
may enter into a swap agreement in connection with the sale of the Certificates
and may earn additional income from that transaction.
Citigroup Funding or one or more of its affiliates may use all or some of
the remainder of the proceeds received from the sale of the Securities and the
Warrants for hedging activities related to Citigroup Funding's obligations under
the Securities and the Warrants. On or prior to the closing date of the
Certificates offering, Citigroup Funding, directly or through one or more of its
affiliates, will hedge its anticipated exposure under the Securities and the
Warrants by the purchase or sale of one or more of the stocks underlying the S&P
500 Index or in other instruments, such as options, swaps or futures, based upon
the S&P 500 Index or the stocks underlying the S&P 500 Index.
Citigroup Funding expects that it or one or more of its affiliates will
increase or decrease their initial hedging positions over time using techniques
which help evaluate the size of any hedge based upon a variety of factors
affecting the value of the S&P 500 Index. These factors may include the history
of price changes in the S&P 500 Index and the time remaining to maturity.
Citigroup Funding or one or more of its affiliates may take long or short
positions in the S&P 500 Index or options, swaps, futures contracts, forward
contracts, or other derivative or similar instruments related to the S&P 500
Index.
In addition, Citigroup Funding or one or more of its affiliates may
purchase or otherwise acquire a long or short position in the Certificates, the
Securities or the Warrants from time to time and may, in their sole discretion,
hold, resell, exercise, cancel or retire such Certificates, the Securities or
the Warrants. Citigroup Funding or one or more of its affiliates may also take
hedging positions in other types of appropriate financial instruments that may
become available in the future.
If Citigroup Funding or one or more affiliates has a long or short hedge
position in the S&P 500 Index or options, swaps, futures contracts, forward
contracts or other derivative or synthetic instruments related to the S&P 500
Index, Citigroup Funding or one or more of its affiliates may liquidate all or a
portion of its holdings at or about the time of the maturity of the
Certificates, the Securities and the Warrants. The aggregate amount and type of
such positions are likely to vary over time depending on future market
conditions and other factors. Since the hedging activities described in this
section involve risks and may be influenced by a number of factors, it is
possible that Citigroup Funding or one or more of its affiliates may receive a
profit from the hedging activities, even if the market value of the
Certificates, the Securities or the Warrants declines. Citigroup Funding is only
able to determine profits or losses from any of such positions when the position
is closed out and any offsetting position or positions are taken into account.
Citigroup Funding has no reason to believe that its hedging activity, as
well as those of its affiliates, will have a material impact on the price of
such options, swaps, futures contracts, forward contracts or other derivative or
similar instruments, or on the value of the S&P 500 Index. However, Citigroup
Funding cannot guarantee you that its hedging activities, as well as those of
its affiliates, will not affect such prices or value.
21
SAFETY FIRST TRUST SERIES [2006-1]
Safety First Trust Series [2006-1] ("Trust [2006-1]") is a statutory trust
formed under Delaware law pursuant to a declaration of trust executed by
Citigroup Funding, as sponsor, Citigroup and the trustees of Trust [2006-1] (as
described below), and the filing of a certificate of trust with the Secretary of
State of the State of Delaware. The declaration of trust will be amended and
restated in its entirety substantially in the form filed as an exhibit to the
registration statement relating to the Certificates of which this offering
document forms a part. The amended and restated declaration of trust will be
qualified as an indenture under the Trust Indenture Act of 1939. Upon issuance
of the Certificates, the purchasers thereof will own all of the Certificates.
Citigroup Funding will directly or indirectly acquire all of the common
securities of Trust [2006-1]. We refer to the Certificates and the common
securities as, collectively, the Trust Securities.
Trust [2006-1] will use all the proceeds derived from the issuance of the
Trust Securities to purchase the Securities and the Warrants and, accordingly,
the assets of Trust [2006-1] will consist solely of the Securities and the
Warrants. Of the total proceeds from the sale of the Trust Securities,
approximately % will be invested by Trust [2006-1] in the Securities and the
Warrants. Trust [2006-1] exists for the exclusive purposes of:
- issuing its Trust Securities representing undivided beneficial interests
in the assets of Trust [2006-1],
- investing the gross proceeds of its Trust Securities in the Securities
and the Warrants, and
- engaging only in activities incidental to the above.
Trust [2006-1]'s business and affairs are conducted by its trustees, each
appointed by Citigroup Funding as holder of the common securities. Pursuant to
the amended and restated declaration of trust, the initial number of trustees of
Trust [2006-1] will be five:
- U.S. Bank National Association, a national banking association that is
unaffiliated with Citigroup Funding and Citigroup, as the institutional
trustee,
- U.S. Bank Trust National Association, a national banking association with
its principal place of business in the State of Delaware, as the Delaware
trustee, and
- three officers of Citigroup Funding, as the individual trustees.
Citigroup Funding, as direct or indirect holder of all the common securities,
will have the right, subject to certain restrictions contained in the
declaration, to appoint, remove or replace any trustees and to increase or
decrease the number of trustees.
The institutional trustee will act as the sole indenture trustee under the
amended and restated declaration of trust for purposes of compliance with the
Trust Indenture Act until it is removed or replaced by the holder of the common
securities. The institutional trustee will hold title to the Securities and the
Warrants for the benefit of the holders of Trust [2006-1]'s Trust Securities
and, in its capacity as the holder, the institutional trustee will have the
power to exercise all rights, powers and privileges under the indenture and the
warrant agreement pursuant to which the Securities and the Warrants are issued.
In addition, the institutional trustee will maintain exclusive control of a
segregated non-interest bearing bank account to hold all payments made in
respect of the Securities and the Warrants for the benefit of the holders of
Trust [2006-1]'s Trust Securities. The institutional trustee will make payments
of distributions and payments on liquidation and otherwise to the holders of the
Trust Securities out of funds from the segregated bank account.
The individual trustees are authorized and directed to operate Trust
[2006-1] in such a way so that Trust [2006-1] will not be required to register
as an investment company under the Investment Company Act or be characterized as
other than a grantor trust for United States federal income tax purposes.
Citigroup Funding and the individual trustees are authorized to take any action,
not inconsistent with applicable law, the amended and restated declaration of
trust or the certificate of incorporation of Citigroup Funding, that each of
Citigroup Funding and the individual trustees in their discretion deem to be
necessary or desirable to achieve such end as long as the action does not
adversely affect the interests of the holders of the Certificates or vary the
terms thereof.
22
U.S. Bank National Association also will act as guarantee trustee under the
Certificate Guarantee and will hold the Certificate Guarantee for the benefit of
the holders of the Certificates.
JPMorgan Chase Bank, N.A. will act as trustee for the Securities under the
indenture for purposes of compliance with the provisions of the Trust Indenture
Act. U.S. Bank National Association will act as warrant agent under the warrant
agreement.
Citigroup, Citigroup Funding and certain of their affiliates have had and
may continue to have banking relationships with the trustees and the warrant
agent in the ordinary course of business.
The rights of the holders of the Certificates, including economic rights,
rights to information and voting rights, are set forth in the amended and
restated declaration of trust, the Delaware Statutory Trust Act and the Trust
Indenture Act. Holders of the Certificates have no preemptive rights.
The location of the principal executive office of Trust [2006-1] is c/o
Citigroup Funding Inc., 399 Park Avenue, New York, New York 10043 and its
telephone number is (212) 559-1000. Citigroup Funding will pay all fees and
expenses related to Trust [2006-1] and the offering of Trust [2006-1]'s Trust
Securities.
23
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the terms of the amended and
restated declaration of trust. The terms of the Certificates will include those
stated in the amended and restated declaration of trust and those made part of
the amended and restated declaration of trust by the Trust Indenture Act.
Pursuant to the amended and restated declaration of trust, every holder of the
Certificates will be deemed to have expressly assented and agreed to the terms
of, and will be bound by, the amended and restated declaration of trust. The
following is a summary of the terms and provisions of the Certificates. This
summary does not describe all of the terms and provisions of the amended and
restated declaration of trust and the Certificate Guarantee. You should read the
forms of these documents, which are filed as exhibits to the registration
statement of which this offering document forms a part.
GENERAL
The amended and restated declaration of trust authorizes the individual
trustees to issue the Trust Securities on behalf of Trust [2006-1]. The Trust
Securities represent undivided beneficial interests in the assets of Trust
[2006-1]. All of the common securities of Trust [2006-1] will be owned, directly
or indirectly, by Citigroup Funding. The common securities rank pari passu with
the Certificates and payments will be made on the common securities on a pro
rata basis with the Certificates, except that upon the occurrence of an
acceleration event, the rights of the holders of the common securities to
receive payments will be subordinated to the rights of the holders of the
Certificates. The amended and restated declaration does not permit the issuance
by Trust [2006-1] of any securities other than its Trust Securities or the
incurrence of any debt by Trust [2006-1]. Pursuant to the amended and restated
declaration of trust, the institutional trustee will hold title to the
Securities and the Warrants for the benefit of the holders of the Trust
Securities. The payment upon maturity of the Certificates out of money legally
available to Trust [2006-1] is fully and unconditionally guaranteed by Citigroup
Funding and Citigroup to the extent described under "Description of the
Certificate Guarantee." The Certificate Guarantee will be held by U.S. Bank
National Association, the guarantee trustee, for the benefit of the holders of
the Certificates. The Certificate Guarantee does not cover payment upon maturity
when Trust [2006-1] does not have sufficient legally available funds to make
this payment. In such event, the remedies of a holder of the Certificates are
to:
- vote to direct the institutional trustee to enforce the institutional
trustee's rights under the Securities and/or the Warrants,
- if the institutional trustee fails to enforce its rights against
Citigroup Funding or Citigroup, initiate a proceeding against Citigroup
Funding or Citigroup to enforce the institutional trustee's rights under
the Securities and/or the Warrants, or
- if the failure by Trust [2006-1] to make the distribution payment is
attributable to the failure of Citigroup Funding to pay amounts in
respect of the Securities and/or the Warrants, institute a proceeding
directly against Citigroup Funding or Citigroup for enforcement of
payment to such holder of the amounts owed on such holder's pro rata
interest in the Securities and the Warrants.
The aggregate number of Certificates to be issued will be , as
described in "Underwriting." The Certificates will be issued in fully registered
form. The Certificates will not be issued in bearer form. See "-- Book-Entry
Procedures and Settlement" below.
PAYMENT AT MATURITY
The Certificates will mature on , 2010, subject to
acceleration to the accelerated maturity date upon an acceleration event. See
"-- Acceleration of Maturity Date; Enforcement of Rights" below. On the maturity
date, holders of the Certificates will be entitled to receive for each
Certificate they hold, to the extent Trust [2006-1] has assets available, a
payment equal to the sum of $10 and a Supplemental Distribution Amount, which
may be positive or zero. The amount payable to you at maturity is dependent upon
the Ending Value of the S&P 500 Index on the Valuation Date, provided, however,
that the payment you receive at maturity will not be less than the amount of
your original investment in the Certificates.
24
SUPPLEMENTAL DISTRIBUTION AMOUNT
The Supplemental Distribution Amount will be based on the amount by which
the Ending Value exceeds the Starting Value, expressed as a percentage, and on
the Participation Rate. The Supplemental Distribution Amount will equal the
product of:
$10* Participation Rate* Index Return
, provided that the Supplemental Distribution Amount will not be less than zero.
The Participation Rate is expected to be approximately 83% (to be
determined on the Pricing Date).
The Index Return, which is presented in this offering document as a
percentage, will equal the following fraction:
Ending Value - Starting Value
---------------------------------
Starting Value
The "Starting Value" will be , the closing value of the S&P 500
Index on the Pricing Date.
The "Ending Value" will be the closing value of the S&P 500 Index on the
Valuation Date.
The "Pricing Date" means the date on which the Certificates are priced for
initial sale to the public.
The "Valuation Date" will be the third Index Business Day before the
maturity date.
If no closing value of the S&P 500 Index is available on any Index Business
Day because of a Market Disruption Event or otherwise, the value of the S&P 500
Index for that Index Business Day, unless deferred by the calculation agent as
described below, will be the arithmetic mean, as determined by the calculation
agent, of the value of the S&P 500 Index obtained from as many dealers in equity
securities (which may include Citigroup Global Markets Inc. or any of our other
affiliates), but not exceeding three such dealers, as will make such value
available to the calculation agent. The determination of the value of the S&P
500 Index by the calculation agent in the event of a Market Disruption Event may
be deferred by the calculation agent for up to five consecutive Index Business
Days on which a Market Disruption Event is occurring, but not past the Index
Business Day prior to maturity.
An "Index Business Day" means a day, as determined by the calculation
agent, on which the S&P 500 Index or any successor index is calculated and
published and on which securities comprising more than 80% of the value of the
S&P 500 Index on such day are capable of being traded on their relevant
exchanges or markets during the one-half hour before the determination of the
closing value of the S&P 500 Index. All determinations made by the calculation
agent will be at the sole discretion of the calculation agent and will be
conclusive for all purposes and binding on us, Citigroup and the beneficial
owners of the Certificates, absent manifest error.
A "Market Disruption Event" means, as determined by the calculation agent
in its sole discretion, the occurrence or existence of any suspension of or
limitation imposed on trading (by reason of movements in price exceeding limits
permitted by any relevant exchange or market or otherwise) of, or the
unavailability, through a recognized system of public dissemination of
transaction information, for a period longer than two hours, or during the
one-half hour period preceding the close of trading, on the applicable exchange
or market, of accurate price, volume or related information in respect of (a)
stocks which then comprise 20% or more of the value of the S&P 500 Index or any
successor index, (b) any options or futures contracts, or any options on such
futures contracts relating to the S&P 500 Index or any successor index, or (c)
any options or futures contracts relating to stocks which then comprise 20% or
more of the value of the S&P 500 Index or any successor index on any exchange or
market if, in each case, in the determination of the calculation agent, any such
suspension, limitation or unavailability is material. For the purpose of
determining whether a Market Disruption Event exists at any time, if trading in
a security included in the S&P 500 Index is materially suspended or materially
limited at that time, then the relevant percentage contribution of that security
to the value of the S&P 500 Index will be based on a comparison of the portion
of the value of the S&P 500 Index
25
attributable to that security relative to the overall value of the S&P 500
Index, in each case immediately before that suspension or limitation.
MATURITY PAYMENT -- HYPOTHETICAL EXAMPLES
The Index Return and, therefore, the Supplemental Distribution Amount, is
dependent on the Ending Value of the S&P 500 Index. Because the value of the S&P
500 Index may be subject to significant variations over the term of the
Certificates, it is not possible to present a chart or table illustrating a
complete range of possible payments at maturity. The examples of hypothetical
maturity payments set forth below are intended to illustrate the effect of
different Ending Values of the S&P 500 Index on the amount payable on the
Certificates at maturity. All of the hypothetical examples assume the following:
- Investment in Certificates: $10,
- Starting Value: 1285,
- Participation Rate: 83%,
- The Supplemental Distribution Amount cannot equal less than zero,
- Term of the Certificates: 4 years, and
- The Certificates are held to maturity and are not exchanged for the
Securities and the Warrants.
As demonstrated by the examples, if the Index Return is 0% or less, you will
receive an amount at maturity equal to $10.00 per Certificate, the amount of
your initial investment in the Certificates. If the Index Return is greater than
0%, you will receive an amount at maturity that is greater than your initial
investment in the Certificates.
<Table>
<Caption>
SUPPLEMENTAL TOTAL ANNUALIZED
DISTRIBUTION MATURITY RETURN ON THE RETURN ON THE
ENDING VALUE INDEX RETURN AMOUNT(1) PAYMENT(2) CERTIFICATES CERTIFICATES(3)
0 -100.00% $0.00 $10.00 0.00% 0.00%
643 -50.00% $0.00 $10.00 0.00% 0.00%
835 -35.00% $0.00 $10.00 0.00% 0.00%
900 -30.00% $0.00 $10.00 0.00% 0.00%
964 -25.00% $0.00 $10.00 0.00% 0.00%
1028 -20.00% $0.00 $10.00 0.00% 0.00%
1092 -15.00% $0.00 $10.00 0.00% 0.00%
1157 -10.00% $0.00 $10.00 0.00% 0.00%
1221 -5.00% $0.00 $10.00 0.00% 0.00%
1285 0.00% $0.00 $10.00 0.00% 0.00%
1317 2.50% $0.21 $10.21 2.08% 0.51%
1349 5.00% $0.42 $10.42 4.15% 1.02%
1381 7.50% $0.62 $10.62 6.23% 1.52%
1414 10.00% $0.83 $10.83 8.30% 2.01%
1446 12.50% $1.04 $11.04 10.38% 2.50%
1478 15.00% $1.25 $11.25 12.45% 2.98%
1510 17.50% $1.45 $11.45 14.53% 3.45%
1542 20.00% $1.66 $11.66 16.60% 3.91%
1574 22.50% $1.87 $11.87 18.68% 4.37%
1606 25.00% $2.08 $12.08 20.75% 4.83%
1671 30.00% $2.49 $12.49 24.90% 5.72%
1799 40.00% $3.32 $13.32 33.20% 7.43%
1928 50.00% $4.15 $14.15 41.50% 9.07%
</Table>
- ---------------
(1) Supplemental Distribution Amount = $10.00 X Index Return X Participation
Rate, provided that the Supplemental Distribution Amount will not be less
than zero
(2) Maturity payment = $10.00 + Supplemental Distribution Amount
(3) Compounded Annually
26
The examples are for purposes of illustration only. The actual maturity
payment will depend on the actual Supplemental Distribution Amount which, in
turn, will depend on the actual Starting Value, Ending Value and Participation
Rate. Historical closing values for the S&P 500 Index are included in this
offering document under "Description of the S&P 500(R) Index -- Historical Data
on the S&P 500 Index."
EXCHANGE RIGHT
Beginning on the date the Certificates are issued, you will have the right,
by completing the Official Notice of Exchange attached as Exhibit A to this
offering document and delivering that notice to the institutional trustee for
the Certificates no later than 11:00 a.m., New York City time, on any Business
Day, to exchange the Certificates you then hold for a pro rata portion of the
assets of Trust [2006-1], which consist of the Securities and the Warrants. If
you choose to exercise your exchange right, you will receive for each $10
principal amount of Certificates you then hold one Security with a $10 face
amount and one Warrant with a $10 notional amount. You will be able to exercise
your exchange right through and including the Business Day prior to the earlier
of:
- the Valuation Date; and
- if an acceleration event occurs as described under "-- Acceleration of
Maturity Date; Enforcement of Rights," the date of the occurrence of the
acceleration event.
If you do choose to exercise your exchange right and hold only the securities or
only the warrants, you will lose the benefit of principal protection at
maturity.
We will deliver the Securities and the Warrants to you three Business Days
after the date on which the institutional trustee receives a valid Official
Notice of Exchange (such date of receipt of a valid Official Notice of Exchange,
the Actual Exchange Date), as long as the institutional trustee has received
your Certificates on the Actual Exchange Date.
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which securities exchanges or banking institutions or trust companies in the
City of New York are authorized or obligated by law or executive order to close.
ACCELERATION OF MATURITY DATE; ENFORCEMENT OF RIGHTS
If at any time an acceleration event occurs, the individual trustees will
give written instructions to the institutional trustee to dissolve Trust
[2006-1] and, after satisfaction of creditors of Trust [2006-1], cause the
accelerated maturity payment with respect to each Certificate to be distributed
to the holders of the Certificates in liquidation of such holders' interests in
Trust [2006-1], as soon as practicable following the occurrence of the
acceleration event.
The accelerated maturity payment with respect to each Certificate will be
paid out of amounts received by Trust [2006-1] from Citigroup Funding in respect
of the Securities and the Warrants and will be equal to the sum of (A) the
initial principal amount of $10.00 per Certificate and (B) the Supplemental
Distribution Amount as of the accelerated maturity date. The amount of the
accelerated maturity payment which may be distributed to holders of the
Certificates upon a dissolution and liquidation of Trust [2006-1] is uncertain.
The accelerated maturity date will be the date of the occurrence of the
event or events constituting an acceleration event.
An acceleration event will occur upon the occurrence of (1) a "tax event",
(2) an "investment company event" or (3) a "bankruptcy event," each of which is
described below.
A tax event will occur if Citigroup Funding or Citigroup requests, receives
and delivers to the individual trustees an opinion of nationally recognized
independent tax counsel experienced in such matters indicating that:
(1) on or after the date of this offering document, one or more of the
following has occurred:
27
- an amendment to, change in or announced proposed change in the laws, or
any regulations thereunder, of the United States or any political
subdivision or taxing authority thereof or therein,
- a judicial decision interpreting, applying, or clarifying such laws or
regulations,
- an administrative pronouncement or action that represents an official
position, including a clarification of an official position, of the
governmental authority or regulatory body making such administrative
pronouncement or taking such action, or
- a threatened challenge asserted in connection with an audit of Citigroup
Funding, Citigroup or any subsidiaries of Citigroup or Trust [2006-1], or
a threatened challenge asserted in writing against any other taxpayer
that has raised capital through the issuance of securities that are
substantially similar to the Securities, the Warrants or the
Certificates; and
(2) there is more than an insubstantial risk that:
- Trust [2006-1] is, or will be, subject to United States federal income
tax with respect to income accrued or received on the Securities or the
Warrants, or
- Trust [2006-1] is, or will be, subject to more than a de minimis amount
of other taxes, duties or other governmental charges.
An investment company event will occur if Citigroup Funding or Citigroup
requests, receives and delivers to the individual trustees an opinion of
nationally recognized independent legal counsel experienced in such matters
indicating that as a result of the occurrence on or after the date of this
offering document of a change in law or regulation or a change in interpretation
or application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, Trust [2006-1] is or will be considered an
investment company which is required to be registered under the Investment
Company Act of 1940.
A bankruptcy event will occur if either of the following takes place:
(1) the entry of a decree or order
- of relief in respect of Citigroup Funding and Citigroup by a court having
jurisdiction in the premises in an involuntary case under the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law,
- appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of Citigroup Funding and
Citigroup, or of any substantial part of the property of Citigroup
Funding and Citigroup, or
- ordering the winding up or liquidation of affairs of Citigroup Funding
and Citigroup, and, in each case, the continuance of any such decree or
order unstayed and in effect for a period of 90 consecutive days; or
(2) an action by Citigroup Funding and Citigroup to:
- commence a voluntary case under the federal bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law,
- consent to the entry of an order for relief in an involuntary case under
any such law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of Citigroup
Funding and Citigroup, or of any substantial part of the property of
Citigroup Funding and Citigroup,
- make an assignment for the benefit of their respective creditors,
- admit in writing their inability to pay their respective debts generally
as they become due, or
- take corporate action in furtherance of any of the foregoing.
28
On the date fixed for any payment of the accelerated maturity payment, the
Certificates and the common securities will no longer be deemed to be
outstanding and each Certificate and common security will be deemed to represent
the right to receive the accelerated maturity payment. If the accelerated
maturity payment can be paid only in part because Trust [2006-1] has
insufficient assets available to pay in full such amounts, then the amounts
payable directly by Trust [2006-1] in respect of the Certificates will be paid
on a pro rata basis. In addition, in the case of a default by Citigroup Funding
or Citigroup on their obligations under the Certificate Guarantee, the holders
of the Certificates will have a preference over the holders of the common
securities with respect to amounts owed on the Trust Securities.
The phrase pro rata means, with respect to any payment, distribution, or
treatment, proportionately to each holder of Trust Securities according to the
aggregate beneficial interests in the assets of Trust [2006-1] represented by
the Trust Securities held by the relevant holder in relation to the aggregate
beneficial interests in the assets of Trust [2006-1] represented by all Trust
Securities outstanding. If an acceleration event has occurred and is continuing,
any funds available to make a payment will be paid first to each holder of the
Certificates proportionately according to the aggregate beneficial interests in
the assets of Trust [2006-1] represented by the Certificates held by the
relevant holder relative to the aggregate beneficial interests in the assets of
Trust [2006-1] represented by all Certificates outstanding. Only after
satisfaction of all amounts owed to the holders of the Certificates will payment
be made to each holder of common securities proportionately according to the
aggregate beneficial interests in the assets of Trust [2006-1] represented by
the common securities held by the relevant holder relative to the aggregate
beneficial interests in the assets of Trust [2006-1] represented by all common
securities outstanding.
Subject to the institutional trustee obtaining a tax opinion as described
below, the holders of a majority of the outstanding Certificates have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the institutional trustee, or direct the exercise of any trust or
power conferred upon the institutional trustee under the amended and restated
declaration of trust. In the case of any action to be taken by the institutional
trustee as holder of the Securities and the Warrants, the institutional trustee
shall cast its votes as directed by each holder of outstanding Certificates with
respect to the proportionate number of Securities and Warrants represented by
such holder's Certificates. The institutional trustee will notify all holders of
Certificates of any notice of default received from the indenture trustee with
respect to the Securities. Except with respect to directing the time, method and
place of conducting a proceeding for a remedy available to the institutional
trustee, the institutional trustee, as holder of the Securities and the
Warrants, will not take any actions with respect to the Securities or the
Warrants or exercise any right to rescind or annul a declaration that the
accelerated maturity payment shall be due and payable unless it has obtained an
opinion of a nationally recognized independent tax counsel experienced in such
matters to the effect that as a result of such action, Trust [2006-1] will not
fail to be classified as a grantor trust for United States federal income tax
purposes.
If the institutional trustee fails to enforce its rights under the
Securities and the Warrants, any holder of Certificates can directly institute a
legal proceeding against Citigroup Funding to enforce the institutional
trustee's rights under the Securities and the Warrants, without first
instituting a legal proceeding against the institutional trustee or any other
person or entity. If Citigroup Funding fails to pay amounts owed on the
Securities or the Warrants on the date they are otherwise payable, then a holder
of Certificates may also directly institute a direct action in respect of the
amounts owed on the holder's pro rata interest in the Securities or the Warrants
on or after the due date specified in the Securities and the Warrants, without
first directing the institutional trustee to enforce the terms of the Securities
and the Warrants or instituting a legal proceeding directly against Citigroup
Funding to enforce the institutional trustee's rights under the Securities and
the Warrants. The holders of Certificates will not be able to exercise directly
any other remedy available to the holder of the Securities and the Warrants. In
connection with a direct action, Citigroup Funding will be subrogated to the
rights of a holder of Certificates under the declaration to the extent of any
payment made by Citigroup Funding to that holder of Certificates in such direct
action.
A waiver of an acceleration event under the indenture by the institutional
trustee at the direction of the holders of the Certificates will constitute a
waiver of the corresponding acceleration event under the amended and restated
declaration of trust.
29
Holders of Certificates may give any required approval or direction at a
separate meeting of holders of Certificates convened for this purpose, at a
meeting of holders of Trust Securities or by written consent. The individual
trustees will cause a notice of any meeting at which holders of Certificates are
entitled to vote, or of any matter upon which action by written consent of the
holders is to be taken, to be mailed to each holder of record of Certificates.
Each notice will include a statement setting forth the date of such meeting or
the date by which the action is to be taken, a description of any resolution
proposed for adoption at the meeting on which the holders are entitled to vote
or of such matter upon which written consent is sought and instructions for the
delivery of proxies or consents. No vote or consent of the holders of
Certificates will be required for Trust [2006-1] to cancel the Certificates in
accordance with the amended and restated declaration of trust. It is anticipated
that the only holder of Certificates issued in book-entry form will be Cede &
Co., as nominee of The Depository Trust Company, or DTC, and each beneficial
owner of Certificates will be permitted to exercise the rights of holders of
Certificates only indirectly through DTC and its participants.
Notwithstanding that holders of Certificates are entitled to vote or
consent under any of the circumstances described above, any of the Certificates
that are owned at that time by Citigroup Funding or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, Citigroup Funding, will not be entitled to vote or consent and
will, for purposes of such vote or consent, be treated as if they were not
outstanding.
PERIODIC DISTRIBUTIONS
We will not make any periodic payments of interest or any other payments on
the Certificates until maturity. You will not be entitled to receive dividend
payments or other distributions, if any, made on the stocks underlying the S&P
Index.
PAYMENT PROCEDURES
Payments on the Certificates will be payable to the holders of the
Certificates as they appear on the books and records of Trust [2006-1] at the
close of business on the relevant record dates. While the Certificates remain in
book-entry only form, the relevant record date for any maturity payment or
accelerated maturity payment with respect to the Certificates will be five
Business Days prior to the date on which Trust [2006-1] receives any security
payment or warrant payment or accelerated security payment or warrant payment,
as the case may be, under the Securities and the Warrants. The relevant record
date for the common securities will be the same record date as for the
Certificates.
If the Certificates will not continue to remain in book-entry only form,
the relevant record date will conform to the rules of any securities exchange on
which they are listed and, if none, will be 15 days before the relevant payment
date, which payment date will correspond to the date on which payments are made
in respect of, and in accordance with the terms of, the Securities and the
Warrants.
Payments on any Certificates that are not punctually made on the relevant
payment date, as a result of Citigroup Funding having failed to make the
security payment or warrant payment or the accelerated security payment or
warrant payment, as the case may be, under the Securities or the Warrants, will
cease to be payable to the persons in whose name the Certificates are registered
on the relevant record date. The defaulted payment on the Certificates will
instead be payable to the persons in whose name those Certificates are
registered on a special record date which will be the date on which Trust
[2006-1] actually receives the amount of the defaulted payment under the
Securities or the Warrants, as applicable.
If any date on which the maturity payment or accelerated maturity payment,
as the case may be, is payable on the Certificates is not a Business Day, then
the relevant payment will be made on the next succeeding day that is a Business
Day and without any interest or other payment in respect of any such delay, with
the same force and effect as if made on that date. If that Business Day is in
the next succeeding calendar year, the relevant payment will be made on the
immediately preceding Business Day, with the same force and effect as if made on
that date.
30
Payments in respect of the Certificates represented by global certificates
(as defined below under "-- Book-Entry Procedures and Settlement") will be made
to DTC, which will credit the relevant accounts at DTC on the relevant scheduled
payment date. In the case of Certificates in the form of certificated
securities, if any, payments will be made by check mailed to the holder's
address as it appears on the register.
VOTING RIGHTS
Except as described in this offering document under "-- Acceleration of
Maturity Date; Enforcement of Rights" and "Description of the Certificate
Guarantee -- Modifications of the Guarantee; Assignment," and except as provided
under the Delaware Statutory Trust Act, the Trust Indenture Act and as otherwise
required by law and the amended and restated declaration of trust, the holders
of the Certificates will have no voting rights.
In the event the consent of the institutional trustee, as the holder of the
Securities and the Warrants, is required under the indenture or the warrant
agreement, as applicable, with respect to any amendment, modification or
termination of the indenture or the warrant agreement, as applicable, the
institutional trustee will request the written direction of the holders of the
outstanding Trust Securities with respect to the amendment, modification or
termination and will vote with respect to the amendment, modification or
termination as directed by each Holder of outstanding Trust Securities with
respect to the proportionate number of Securities or Warrants represented by
such holder's Trust Securities. The institutional trustee will be under no
obligation to take any such action in accordance with the directions of the
holders of the Trust Securities unless the institutional trustee has obtained an
opinion of a nationally recognized independent tax counsel experienced in such
matters to the effect that for United States federal income tax purposes Trust
[2006-1] will not be classified as other than a grantor trust.
The procedures by which holders of the Certificates may exercise their
voting rights are described below under "-- Book-Entry Procedures and
Settlement."
Holders of the Certificates will have no rights to appoint or remove the
trustees, who may be appointed, removed or replaced solely by Citigroup Funding
as the indirect or direct holder of all of the common securities.
MODIFICATION OF THE AMENDED AND RESTATED DECLARATION OF TRUST
The amended and restated declaration of trust may be modified and amended
if approved by the individual trustees, and, in certain circumstances, the
institutional trustee and the Delaware trustee, provided that, if any proposed
amendment to the amended and restated declaration of trust provides for, or the
individual trustees otherwise propose to effect,
(1) any action that would adversely affect the powers, preferences or
special rights of the Trust Securities, whether by way of amendment to
the amended and restated declaration of trust or otherwise, or
(2) the dissolution, winding-up or termination of Trust [2006-1] other than
pursuant to the terms of the amended and restated declaration of trust,
then the holders of the Trust Securities, voting together as a single class,
will be entitled to vote on the amendment or proposal and the amendment or
proposal will not be effective except with the approval of the holders of at
least a majority of the Trust Securities affected thereby. If any amendment or
proposal referred to in (1) above would adversely affect only the Certificates
or only the common securities, then only holders of the affected class will be
entitled to vote on the amendment or proposal and the amendment or proposal will
not be effective except with the approval of a majority of that class of Trust
Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the amended and restated declaration of trust if the amendment or modification
would:
- cause Trust [2006-1] to fail to be classified as a grantor trust for
United States federal income tax purposes,
31
- reduce or otherwise adversely affect the powers of the institutional
trustee in contravention of the Trust Indenture Act, or
- cause Trust [2006-1] to be deemed an investment company which is required
to be registered under the Investment Company Act.
MERGER, CONSOLIDATION OR AMALGAMATION OF TRUST [2006-1]
Trust [2006-1] may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity, except as
described below. Trust [2006-1] may, with the consent of the individual trustees
and without the consent of the holders of the Trust Securities, the Delaware
trustee or the institutional trustee consolidate, amalgamate, merge with or
into, or be replaced by a trust organized as such under the laws of the United
States, any state thereof or the District of Columbia, provided that:
- the successor entity either (A) expressly assumes all of the obligations
of Trust [2006-1] under the Trust Securities or (B) substitutes for the
Trust Securities other successor securities having substantially the same
terms as the Trust Securities, so long as the successor securities rank
the same as the Trust Securities with respect to distributions and
payments upon liquidation, maturity and otherwise,
- Citigroup Funding expressly acknowledges a trustee of such successor
entity possessing the same powers and duties as the institutional trustee
in its capacity as the holder of the Securities and the Warrants,
- successor securities to the Certificates are listed, or any successor
securities to the Certificates will be listed upon notification of
issuance, on any national securities exchange or with any organization on
which the Certificates are then listed or quoted,
- the merger, consolidation, amalgamation or replacement does not cause the
Certificates, including any successor securities, to be downgraded by any
nationally recognized statistical rating organization,
- the merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities, including any successor securities, in any material respect,
other than with respect to any dilution of the holder's interest in the
new entity,
- the successor entity has a purpose identical to that of Trust [2006-1],
- prior to the merger, consolidation, amalgamation or replacement, Trust
[2006-1] has received an opinion of a nationally recognized independent
counsel to Trust [2006-1] experienced in such matters to the effect that:
(A) the merger, consolidation, amalgamation or replacement will not
adversely affect the rights, preferences and privileges of the
holders of the Trust Securities, including any successor securities,
in any material respect, other than with respect to any dilution of
the holders' interest in the new entity,
(B) following the merger, consolidation, amalgamation or replacement,
neither Trust [2006-1] nor such successor entity will be required to
register as an investment company under the Investment Company Act,
and
(C) following the merger, consolidation, amalgamation or replacement,
Trust [2006-1] or the successor entity will continue to be
classified as a grantor trust for U.S. federal income tax purposes,
- Citigroup Funding guarantees the obligations of the successor entity
under the successor securities at least to the extent provided by the
Certificate Guarantee, and
- Citigroup guarantees Citigroup Funding's obligations to the same extent
and in the same manner as Citigroup Funding guarantees the obligations of
the successor entity.
Notwithstanding the foregoing, Trust [2006-1] will not, without the consent
of holders of all of the Trust Securities, consolidate, amalgamate, merge with
or into, or be replaced by any other entity or permit any other
32
entity to consolidate, amalgamate, merge with or into, or replace it if, in the
opinion of a nationally recognized independent tax counsel experienced in such
matters, the consolidation, amalgamation, merger or replacement would cause
Trust [2006-1] or the successor entity to be classified as other than a grantor
trust for United States federal income tax purposes. In addition, so long as any
Certificates are outstanding and are not held entirely by Citigroup Funding,
Trust [2006-1] may not voluntarily liquidate, dissolve, wind-up or terminate
except as described above under "-- Acceleration of Maturity Date; Enforcement
of Rights."
BOOK-ENTRY PROCEDURES AND SETTLEMENT
The Depository Trust Company, or DTC, will act as securities depositary for
the Certificates. The Certificates will be issued only as fully-registered
securities registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global securities, representing the total aggregate number of
the Certificates, will be issued and will be deposited with DTC.
Following the issuance of a global security in registered form, DTC will
credit the accounts of its participants with the Certificates upon our
instructions. Only persons who hold directly or indirectly through financial
institutions that are participants in DTC can hold beneficial interests in the
global securities. Because the laws of some jurisdictions require certain types
of purchasers to take physical delivery of such securities in definitive form,
you may encounter difficulties in your ability to own, transfer or pledge
beneficial interests in a global security.
So long as DTC or its nominee is the registered owner of a global security,
we and the institutional trustee will treat DTC as the sole owner or holder of
the Certificates for purposes of the amended and restated declaration of trust.
Therefore, except as set forth below, you will not be entitled to have
Certificates registered in your name or to receive physical delivery of
certificates representing the Certificates. Accordingly, you will have to rely
on the procedures of DTC and the participant in DTC through whom you hold your
beneficial interest in order to exercise any rights of a holder under the
amended and restated declaration of trust. We understand that under existing
practices, DTC would act upon the instructions of a participant or authorize
that participant to take any action that a holder is entitled to take.
You may elect to hold interests in the global securities in the United
States through either DTC or outside the United States through Clearstream
Banking, societe anonyme ("Clearstream"), or Euroclear Bank, S.A./N.V. or its
successor, as operator of the Euroclear System ("Euroclear"), if you are a
participant of such system, or indirectly through organizations that are
participants in such systems. Interests held through Clearstream and Euroclear
will be recorded on DTC's books as being held by the U.S. depositary for each of
Clearstream and Euroclear, which U.S. depositaries will in turn hold interests
on behalf of their participants' customers' securities accounts.
As long as the Certificates are represented by the global securities, we
will pay the maturity payment or accelerated maturity payment, as the case may
be, on the Certificates to or as directed by DTC as the registered holder of the
global securities. Payments to DTC will be in immediately available funds by
wire transfer. DTC, Clearstream or Euroclear, as applicable, will credit the
relevant accounts of their participants on the applicable date. None of Trust
[2006-1], Citigroup Funding, Citigroup and the institutional trustee will be
responsible for making any payments to participants or customers of participants
or for maintaining any records relating to the holdings of participants and
their customers, and you will have to rely on the procedures of the depositary
and its participants.
We have been advised by DTC, Clearstream and Euroclear, respectively, as
follows:
DTC
DTC has advised us that it is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC holds securities deposited with it by its participants and
facilitates the settlement of transactions among its participants in such
securities through electronic computerized book-entry changes in accounts of the
33
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. Access to DTC's book-entry system
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
According to DTC, the foregoing information with respect to DTC has been
provided to the financial community for informational purposes only and is not
intended to serve as a representation, warranty or contract modification of any
kind.
Clearstream
Clearstream has advised us that it was incorporated as a limited liability
company under Luxembourg law. Clearstream is owned by Cedel International,
societe anonyme, and Deutsche Borse AG. The shareholders of these two entities
are banks, securities dealers and financial institutions. Clearstream holds
securities for its customers and facilitates the clearance and settlement of
securities transactions between Clearstream customers through electronic
book-entry changes in accounts of Clearstream customers, thus eliminating the
need for physical movement of certificates. Transactions may be settled by
Clearstream in many currencies, including United States dollars. Clearstream
provides to its customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities,
securities lending and borrowing. Clearstream also deals with domestic
securities markets in over 30 countries through established depository and
custodial relationships. Clearstream interfaces with domestic markets in a
number of countries. Clearstream has established an electronic bridge with
Euroclear Bank S.A./N.V., the operator of Euroclear, or the Euroclear operator,
to facilitate settlement of trades between Clearstream and Euroclear.
As a registered bank in Luxembourg, Clearstream is subject to regulation by
the Luxembourg Commission for the Supervision of the Financial Sector.
Clearstream customers are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies
and clearing corporations. In the United States, Clearstream customers are
limited to securities brokers and dealers and banks, and may include the
underwriters for the Certificates. Other institutions that maintain a custodial
relationship with a Clearstream customer may obtain indirect access to
Clearstream. Clearstream is an indirect participant in DTC.
Distributions with respect to the Certificates held beneficially through
Clearstream will be credited to cash accounts of Clearstream customers in
accordance with its rules and procedures, to the extent received by Clearstream.
Euroclear
Euroclear has advised us that it was created in 1968 to hold securities for
participants of Euroclear and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thus eliminating the need for physical movement of certificates and
risk from lack of simultaneous transfers of securities and cash. Transactions
may now be settled in many currencies, including United States dollars and
Japanese Yen. Euroclear provides various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described below.
Euroclear is operated by the Euroclear operator, under contract with
Euroclear plc, a U.K. corporation. The Euroclear operator conducts all
operations, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear operator, not Euroclear plc. Euroclear
plc establishes policy for Euroclear on behalf of Euroclear participants.
Euroclear participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include the underwriters for the Certificates. Indirect access to Euroclear is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear participant, either directly or indirectly.
Euroclear is an indirect participant in DTC.
34
The Euroclear operator is a Belgian bank. The Belgian Banking Commission
and the National Bank of Belgium regulate and examine the Euroclear operator.
The Terms and Conditions Governing Use of Euroclear and the related
Operating Procedures of the Euroclear System, or the Euroclear Terms and
Conditions, and applicable Belgian law govern securities clearance accounts and
cash accounts with the Euroclear operator. Specifically, these terms and
conditions govern:
- transfers of securities and cash within Euroclear;
- withdrawal of securities and cash from Euroclear; and
- receipt of payments with respect to securities in Euroclear.
All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear operator acts under the terms and conditions only on behalf of
Euroclear participants and has no record of or relationship with persons holding
securities through Euroclear participants.
Distributions with respect to the Certificates held beneficially through
Euroclear will be credited to the cash accounts of Euroclear participants in
accordance with the Euroclear Terms and Conditions, to the extent received by
the Euroclear operator.
Settlement
You will be required to make your initial payment for the Certificates in
immediately available funds. Secondary market trading between DTC participants
will occur in the ordinary way in accordance with DTC rules and will be settled
in immediately available funds using DTC's Same-Day Funds Settlement System.
Secondary market trading between Clearstream customers and/or Euroclear
participants will occur in the ordinary way in accordance with the applicable
rules and operating procedures of Clearstream and Euroclear and will be settled
using the procedures applicable to conventional eurobonds in immediately
available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
customers or Euroclear participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by U.S. depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (based on the applicable
European time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the U.S.
depositary to take action to effect final settlement on its behalf by delivering
or receiving the Certificates in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream customers and Euroclear participants may not deliver
instructions directly to their respective U.S. depositaries.
Because of time-zone differences, credits of the Certificates received in
Clearstream or Euroclear as a result of a transaction with a DTC participant
will be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any transactions
in such Certificates settled during such processing will be reported to the
relevant Clearstream customers or Euroclear participants on such business day.
Cash received in Clearstream or Euroclear as a result of sales of the
Certificates by or through a Clearstream customer or a Euroclear participant to
a DTC participant will be received with value on the DTC settlement date but
will be available in the relevant Clearstream or Euroclear cash account only as
of the business day following settlement in DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of the Certificates among
participants of DTC, Clearstream and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
35
Definitive Certificates
A beneficial owner of book-entry Certificates represented by a global
security may exchange the Certificates for definitive (paper) certificates
representing the Certificates only if:
- DTC is unwilling or unable to continue as depositary for such global
security and we are unable to find a qualified successor within 90 days;
- at any time DTC ceases to be a clearing agency registered under the
Securities Exchange Act of 1934, as amended; or
- the individual trustees, with the consent of Citigroup Funding and
Citigroup, decide to discontinue use of the system of book-entry
transfers through DTC or any successor depository.
If any of the events described above occurs, we will issue definitive
Certificates in certificated form in accordance with DTC's instructions.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The institutional trustee, prior to the occurrence of a default with
respect to the Trust Securities, and after the curing of all defaults that may
have occurred, undertakes to perform only the duties that are specifically set
forth in the amended and restated declaration of trust. If such a default occurs
and the institutional trustee has actual knowledge of it, the institutional
trustee will exercise the rights and powers vested in it by the amended and
restated declaration of trust and will use the same degree of care and skill in
the exercise of such rights and powers as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to those provisions, the
institutional trustee is under no obligation to exercise any of the rights or
powers vested in it by the amended and restated declaration of trust at the
request of any holder of the Certificates, unless offered reasonable security
and indemnity by the holder against the costs, expenses and liabilities which
the institutional trustee might incur thereby. Notwithstanding the foregoing,
the holders of the Certificates will not be required to offer the indemnity in
the event the holders, by exercising their voting rights, direct the
institutional trustee to take any action following an acceleration event.
PAYING AGENT AND CUSIP
In the event that the Certificates do not remain in book-entry only form,
the institutional trustee will act as paying agent for the Certificates and may
designate an additional or substitute paying agent at any time. In addition,
registration of transfers of the Certificates will be effected without charge by
or on behalf of Trust [2006-1], but upon payment, with the giving of such
indemnity as Trust [2006-1] or Citigroup Funding may require, in respect of any
tax or other government charges which may be imposed in relation to it.
The CUSIP number for the Certificates is .
CALCULATION AGENT
The calculation agent for the Certificates will be Citigroup Global Markets
Inc. All determinations made by the calculation agent will be at the sole
discretion of the calculation agent and will, in the absence of manifest error,
be conclusive for all purposes and binding on Trust [2006-1], Citigroup Funding,
Citigroup and the holders of the Certificates. Because the calculation agent is
an affiliate of Trust [2006-1], Citigroup Funding and Citigroup, potential
conflicts of interest may exist between the calculation agent and the holders of
the Certificates, including with respect to certain determinations and judgments
that the calculation agent must make in determining amounts due to the holders
of the Certificates. Citigroup Global Markets Inc. is obligated to carry out its
duties and functions as calculation agent in good faith and using its reasonable
judgment.
GOVERNING LAW
The amended and restated declaration of trust and the Certificates will be
governed by, and construed in accordance with, the internal laws of the State of
Delaware.
36
DESCRIPTION OF THE EQUITY INDEX PARTICIPATION SECURITIES
Citigroup Funding is also by this offering document offering its Equity
Index Participation Securities Linked to the S&P 500 Index Due , 2010 (the
"Securities"). The description in this offering document of the particular terms
of the Securities supplements, and to the extent inconsistent therewith
replaces, the descriptions of the general terms and provisions of the registered
securities set forth in the accompanying prospectus supplement and base
prospectus relating to the Securities.
GENERAL
The Equity Index Participation Securities Linked to the S&P 500 Index are a
series of debt securities issued by Citigroup Funding under the senior debt
indenture described in the accompanying prospectus supplement and base
prospectus relating to the Securities. Any payments due under the Securities are
fully and unconditionally guaranteed by Citigroup. The aggregate principal
amount of Securities issued will be $ ( Securities).
The Securities will mature on , 2010, the maturity of the
Certificates. The Securities will constitute part of the senior debt of
Citigroup Funding and will rank equally with all other unsecured and
unsubordinated debt of Citigroup Funding, and the guarantee of any payments due
under the Securities will rank equally with all other unsecured and
unsubordinated debt of Citigroup. The return of the principal amount of your
investment in the Securities at maturity is not guaranteed. The Securities will
be issued only in fully registered form and in denominations of $10 per Security
and integral multiples thereof. Trust [2006-1] will purchase all of the
Securities from Citigroup Funding on the date on which the Certificates are
issued, at a price of $ per Security.
The Securities pay an amount at maturity that will depend on the percentage
increase or decrease in the Ending Value of the S&P 500 Index from its Starting
Value. The Securities are not principal-protected. If the Ending Value of the
S&P 500 Index is less than its Starting Value, the payment at maturity will be
directly linked to the percentage decrease in the Ending Value of the index from
its Starting Value, in which event the Securities may pay less than the initial
issue price of $ . Thus, if you choose to exercise your exchange right and
hold only the Securities, you will lose the benefit of principal protection at
maturity. If the Ending Value of the S&P 500 Index is greater than its Starting
Value, the payment at maturity will be greater than the initial issue price. In
such case, the appreciation on an investment in the Securities is expected to be
approximately 83% of the appreciation in the value of the S&P 500 Index because
of the participation rate, which is expected to be approximately 83% (to be
determined on the Pricing Date).
You should refer to the accompanying prospectus supplement and base
prospectus relating to the Securities for a detailed summary of additional
provisions of the Securities and of the senior debt indenture under which the
Securities will be issued.
PERIODIC PAYMENTS
Citigroup Funding will not make any periodic payments of interest or any
other payments on the Securities until maturity. You will not be entitled to
receive dividend payments or other distributions, if any, made on the stocks
underlying the S&P 500 Index.
PAYMENT AT MATURITY OF THE SECURITIES
The Securities will mature on , 2010, the maturity of the
Certificates, subject to acceleration to the accelerated maturity date upon the
occurrence of an acceleration event. See "-- Acceleration of Maturity Date and
Events of Default" below. At maturity, each Security will pay a Security Payment
equal to the sum of $10 and the Supplemental Return Amount, which may be
positive, zero or negative.
SUPPLEMENTAL RETURN AMOUNT
The Supplemental Return Amount will be based on the Index Return of the S&P
500 Index. The Index Return, which is presented in this offering document as a
percentage, will equal the following fraction:
Ending Value - Starting Value
---------------------------------
Starting Value
37
How the Supplemental Return Amount will be calculated depends on whether
the Index Return is positive, zero or negative:
- IF THE INDEX RETURN IS POSITIVE, the Supplemental Return Amount will
equal the product of:
$10 * Participation Rate * Index Return
The Participation Rate is expected to be approximately 83% (to be
determined on the Pricing Date).
- IF THE INDEX RETURN IS ZERO, (in other words, if there is no change in
the value of the S&P 500 Index over the term of the Securities), the
Supplemental Return Amount will be zero and the payment at maturity on
each Security will be $10.
- IF THE INDEX RETURN IS NEGATIVE, the Supplemental Return Amount will
equal the product of:
$10 * Index Return
In this case, the Supplemental Return Amount will be negative and the
Security Payment on each Security will be less than $10 and could be zero.
The "Starting Value" will be the closing value of the S&P 500 Index on the
Pricing Date.
The "Ending Value" will be the closing value of the S&P 500 Index on the
Valuation Date.
The "Pricing Date" means the date on which the Certificates are priced for
initial sale to the public.
The "Valuation Date" will be the third Index Business Day before the
maturity date of the Certificates.
If no closing value of the S&P 500 Index is available on any Index Business
Day because of a Market Disruption Event or otherwise, the value of the S&P 500
Index for that Index Business Day, unless deferred by the calculation agent as
described below, will be the arithmetic mean, as determined by the calculation
agent, of the value of the S&P 500 Index obtained from as many dealers in equity
securities (which may include Citigroup Global Markets Inc. or any of our other
affiliates), but not exceeding three such dealers, as will make such value
available to the calculation agent. The determination of the value of the S&P
500 Index by the calculation agent in the event of a Market Disruption Event may
be deferred by the calculation agent for up to five consecutive Index Business
Days on which a Market Disruption Event is occurring, but not past the Index
Business Day prior to maturity. You should refer to "Description of the
Certificates -- Supplemental Distribution Amount" in this offering document for
the definition of "Index Business Day" and "Market Disruption Event."
SECURITY PAYMENT -- HYPOTHETICAL EXAMPLES
The Index Return and, therefore, the Supplemental Return Amount, is
dependent on the Ending Value of the S&P 500 Index. Because the value of the S&P
500 Index may be subject to significant variations over the term of the
Securities, it is not possible to present a chart or table illustrating a
complete range of possible payments at maturity of the Securities. The examples
of hypothetical Security Payments set forth below are intended to illustrate the
effect of different Ending Values of the S&P 500 Index on the amount payable on
the Securities at maturity. All of the hypothetical examples assume the
following:
- Investment in Securities: $9.10,
- Starting Value: 1285,
- Participation Rate: 83%, and
- Term of the Securities: 4 years.
38
<Table>
<Caption>
SUPPLEMENTAL TOTAL ANNUALIZED
RETURN SECURITY RETURN ON THE RETURN ON THE
ENDING VALUE INDEX RETURN AMOUNT PAYMENT SECURITIES SECURITIES(1)
0 -100.00% -$10.00 $ 0.00 -100.00% -100.00%
643 -50.00% -$ 5.00 $ 5.00 -45.05% -13.90%
835 -35.00% -$ 3.50 $ 6.50 -28.57% -8.07%
900 -30.00% -$ 3.00 $ 7.00 -23.08% -6.35%
964 -25.00% -$ 2.50 $ 7.50 -17.58% -4.72%
1028 -20.00% -$ 2.00 $ 8.00 -12.09% -3.17%
1092 -15.00% -$ 1.50 $ 8.50 -6.59% -1.69%
1157 -10.00% -$ 1.00 $ 9.00 -1.10% -0.28%
1221 -5.00% -$ 0.50 $ 9.50 4.40% 1.08%
1285 0.00% $ 0.00 $10.00 9.89% 2.39%
1317 2.50% $ 0.21 $10.21 12.17% 2.91%
1349 5.00% $ 0.42 $10.42 14.45% 3.43%
1381 7.50% $ 0.62 $10.62 16.73% 3.94%
1414 10.00% $ 0.83 $10.83 19.01% 4.45%
1446 12.50% $ 1.04 $11.04 21.29% 4.94%
1478 15.00% $ 1.25 $11.25 23.57% 5.43%
1510 17.50% $ 1.45 $11.45 25.85% 5.92%
1542 20.00% $ 1.66 $11.66 28.13% 6.39%
1574 22.50% $ 1.87 $11.87 30.41% 6.86%
1606 25.00% $ 2.08 $12.08 32.69% 7.33%
1671 30.00% $ 2.49 $12.49 37.25% 8.24%
1799 40.00% $ 3.32 $13.32 46.37% 9.99%
1928 50.00% $ 4.15 $14.15 55.49% 11.67%
</Table>
- ---------------
(1) Compounded Annually
The examples are for purposes of illustration only. The actual Security
Payment will depend on the actual Supplemental Return Amount which, in turn,
will depend on the actual Starting Value, Ending Value and Participation Rate.
Historical closing values for the S&P 500 Index are included in this offering
document under "Description of the S&P 500(R) Index -- Historical Data on the
S&P 500 Index."
REDEMPTION AT THE OPTION OF THE HOLDER; DEFEASANCE
The Securities are not subject to redemption at the option of any holder
prior to maturity and are not subject to the defeasance provisions described in
the accompanying base prospectus under "Description of Debt
Securities -- Defeasance."
ACCELERATION OF MATURITY DATE AND EVENTS OF DEFAULT
If at any time an acceleration event occurs as described under "Description
of the Certificates -- Acceleration of Maturity Date; Enforcement of Right," the
maturity payment with respect to each Security will become immediately due and
payable, and Citigroup Funding will pay the accelerated Security Payment to the
holders of the Securities as soon as practicable following the occurrence of the
acceleration event (whether or not the Securities are declared due and payable).
In case an Event of Default (as defined in the accompanying base prospectus)
other than an acceleration event described under "Description of the
Certificates -- Acceleration of Maturity Date; Enforcement of Right" with
respect to any Security shall have occurred and be continuing, the indenture
trustee and the holders of the Securities may declare the Securities due and
payable as described in the accompanying base prospectus. The amount due and
payable upon any acceleration of the Securities will be determined by the
calculation agent and will equal, for each Security, the payment at maturity of
the Securities, calculated as though the maturity of the Securities were the
date of the occurrence of the acceleration event. See "-- Payment at Maturity of
the Securities" above. If a bankruptcy proceeding is commenced in respect of
Citigroup Funding or Citigroup, the beneficial owner of a Security will not be
permitted to make a claim for unmatured interest and, therefore, the claim of
the beneficial owner of a
39
Security against the entity that becomes subject to a bankruptcy proceeding will
be capped at the payment at maturity of the Securities, calculated as though the
maturity date of the Securities were the date of the commencement of the
proceeding.
In case of default in payment at maturity of the Securities, the Securities
will bear interest, payable upon demand of the beneficial owners of the
Securities in accordance with the terms of the Securities, from and after the
maturity date through the date when payment of the unpaid amount has been made
or duly provided for, at the rate of % per annum on the unpaid amount.
PAYING AGENT, TRUSTEE, CALCULATION AGENT AND CUSIP
Citibank, N.A. will serve as paying agent and registrar for the Securities
and will also hold the global security representing the Securities as custodian
for DTC. JPMorgan Chase Bank, N.A., as trustee under an indenture dated as of
June 1, 2005, will serve as indenture trustee for the Securities. Citigroup
Global Markets Inc. will serve as calculation agent. Please refer to
"Description of the Certificates -- Calculation Agent" for more information on
the calculation agent.
The CUSIP number for the Securities is .
DESCRIPTION OF THE EQUITY INDEX WARRANTS
Citigroup Funding is also by this offering document offering its Equity
Index Warrants Linked to the S&P 500 Index Due , 2010 (the "Warrants"). The
description in this offering document of the particular terms of the Warrants
supplements, and to the extent inconsistent therewith replaces, the descriptions
of the general terms and provisions of the registered securities set forth in
the accompanying prospectus supplement and base prospectus relating to the
Warrants.
GENERAL
The Equity Index Warrants Linked to the S&P 500 Index are a series of index
warrants issued by Citigroup Funding under a warrant agreement described in the
accompanying prospectus supplement and base prospectus relating to the Warrants.
Any payments due on the Warrants are fully and unconditionally guaranteed by
Citigroup. The aggregate offering price of the Warrants will be $
( Warrants). The Warrants will be automatically exercised on
, 2010, the maturity of the Certificates, and are not exercisable
prior to that time. The Warrants will rank equally with all other unsecured and
unsubordinated debt of Citigroup Funding, and the guarantee of any payments due
under the Warrants will rank equally with all other unsecured and unsubordinated
debt of Citigroup. Each Warrant will have a notional amount of $10 and Trust
[2006-1] will purchase all of the Warrants from Citigroup Funding on the date on
which the Certificates are issued, at a price of $ per Warrant.
Upon exercise, the Warrants pay an amount that will depend on the
percentage increase or decrease in the Ending Value of the S&P 500 Index from
its Starting Value. If the Ending Value of the S&P 500 Index is greater than or
equal to its Starting Value, the payments on the Warrants will be zero. If the
Ending Value of the S&P 500 Index is less than its Starting Value, the payment
on the Warrants will be inversely linked to the percentage decrease in the
Ending Value of the index from its Starting Value. As a result, if you choose to
exercise your exchange right and hold only the Warrants, you will lose the
benefit of principal protection at maturity.
You should refer to the accompanying prospectus supplement and base
prospectus relating to the Warrants for a detailed summary of additional
provisions of the Warrants and of the warrant agreement under which the Warrants
will be issued.
40
PERIODIC PAYMENTS
Citigroup Funding will not make any periodic payments of interest or any
other payments on the Warrants until the Warrants are automatically exercised at
maturity. You will not be entitled to receive dividend payments or other
distributions, if any, made on the stocks underlying the S&P 500 Index.
PAYMENT UPON EXERCISE OF THE WARRANTS
The Warrants will be automatically exercised on , 2010, the
maturity of the Certificates, and are not exercisable prior to that date,
subject to acceleration to an earlier exercise date upon the occurrence of an
acceleration event. See "-- Acceleration of Exercise Date" below. Upon exercise,
each Warrant will pay a Warrant Payment equal to the product of (a) $10 and (b)
the Warrant Index Return, provided that the Warrant Payment will not be less
than zero.
The Warrant Index Return, which is presented in this offering document as a
percentage, will equal the following fraction:
Starting Value - Ending Value
---------------------------------
Starting Value
The "Starting Value" will be the closing value of the S&P 500 Index on the
Pricing Date.
The "Ending Value" will be the closing value of the S&P 500 Index on the
Valuation Date.
The "Pricing Date" means the date on which the Certificates are priced for
initial sale to the public.
The "Valuation Date" will be the third Index Business Day before the
maturity date of the Certificates.
If no closing value of the S&P 500 Index is available on any Index Business
Day because of a Market Disruption Event or otherwise, the value of the S&P 500
Index for that Index Business Day, unless deferred by the calculation agent as
described below, will be the arithmetic mean, as determined by the calculation
agent, of the value of the S&P 500 Index obtained from as many dealers in equity
securities (which may include Citigroup Global Markets Inc. or any of our other
affiliates), but not exceeding three such dealers, as will make such value
available to the calculation agent. The determination of the value of the S&P
500 Index by the calculation agent in the event of a Market Disruption Event may
be deferred by the calculation agent for up to five consecutive Index Business
Days on which a Market Disruption Event is occurring, but not past the Index
Business Day prior to maturity. You should refer to "Description of the
Certificates -- Supplemental Distribution Amount" in this offering document for
the definition of "Index Business Day" and "Market Disruption Event."
WARRANT PAYMENT -- HYPOTHETICAL EXAMPLES
The Warrant Index Return and, therefore, the Warrant Payment, is dependent
on the Ending Value of the S&P 500 Index. Because the value of the S&P 500 Index
may be subject to significant variations over the term of the Warrants, it is
not possible to present a chart or table illustrating a complete range of
possible payments upon exercise of the Warrants. The examples of hypothetical
Warrant Payments set forth below are intended to illustrate the effect of
different Ending Values of the S&P 500 Index on the amount payable on the
Warrants upon exercise. All of the hypothetical examples assume the following:
- Investment in Warrants: $0.90,
- Starting Value: 1285,
- Term of the Warrants: 4 years, and
- The Warrant Payment cannot equal less than zero.
41
<Table>
<Caption>
TOTAL ANNUALIZED
WARRANT WARRANT RETURN ON THE RETURN ON THE
ENDING VALUE INDEX RETURN INDEX RETURN PAYMENT(1) WARRANTS WARRANTS(2)
0 -100.00% 100.00% $10.00 1011.11% 82.57%
643 -50.00% 50.00% $ 5.00 455.56% 53.53%
835 -35.00% 35.00% $ 3.50 288.89% 40.43%
900 -30.00% 30.00% $ 3.00 233.33% 35.12%
964 -25.00% 25.00% $ 2.50 177.78% 29.10%
1028 -20.00% 20.00% $ 2.00 122.22% 22.09%
1092 -15.00% 15.00% $ 1.50 66.67% 13.62%
1157 -10.00% 10.00% $ 1.00 11.11% 2.67%
1221 -5.00% 5.00% $ 0.50 -44.44% -13.67%
1285 0.00% 0.00% $ 0.00 -100.00% -100.00%
1317 2.50% -2.50% $ 0.00 -100.00% -100.00%
1349 5.00% -5.00% $ 0.00 -100.00% -100.00%
1381 7.50% -7.50% $ 0.00 -100.00% -100.00%
1414 10.00% -10.00% $ 0.00 -100.00% -100.00%
1446 12.50% -12.50% $ 0.00 -100.00% -100.00%
1478 15.00% -15.00% $ 0.00 -100.00% -100.00%
1510 17.50% -17.50% $ 0.00 -100.00% -100.00%
1542 20.00% -20.00% $ 0.00 -100.00% -100.00%
1574 22.50% -22.50% $ 0.00 -100.00% -100.00%
1606 25.00% -25.00% $ 0.00 -100.00% -100.00%
1671 30.00% -30.00% $ 0.00 -100.00% -100.00%
1799 40.00% -40.00% $ 0.00 -100.00% -100.00%
1928 50.00% -50.00% $ 0.00 -100.00% -100.00%
</Table>
- ---------------
(1) Warrant Payment = $10.00 X Warrant Index Return, provided that the Warrant
Payment will not be less than zero.
(2) Compounded Annually
The examples are for purposes of illustration only. The actual Warrant
Payment will depend on the actual Starting Value and Ending Value. Historical
closing values for the S&P 500 Index are included in this offering document
under "Description of the S&P 500(R) Index -- Historical Data on the S&P 500
Index."
ACCELERATION OF EXERCISE DATE AND EVENTS OF DEFAULT
If at any time an acceleration event occurs as described under "Description
of the Certificates -- Acceleration of Maturity Date; Enforcement of Right," the
Warrants will be automatically exercised, and Citigroup Funding will pay the
accelerated Warrant Payment to the holders of the Warrants as soon as
practicable following the occurrence of the acceleration event. The amount due
and payable upon any acceleration of the Warrants will be determined by the
calculation agent and will equal, for each Warrant, the payment upon exercise of
the Warrants, calculated as though the exercise date of the Warrants were the
date of the occurrence of the acceleration event. See "-- Payment Upon Exercise
of the Warrants" above.
In case of default in payment upon exercise of the Warrants, the Warrants
will bear interest, payable upon demand of the beneficial owners of the Warrants
in accordance with the terms of the Warrants, from and after the exercise date
through the date when payment of the unpaid amount has been made or duly
provided for, at the rate of % per annum on the unpaid amount.
PAYING AGENT, TRUSTEE, CALCULATION AGENT AND CUSIP
U.S. Bank National Association will serve as paying agent and registrar for
the Warrants and will also hold the global security representing the Warrants as
custodian for DTC. U.S. Bank National Association, as warrant agent under a
warrant agreement dated as of , 2006, will serve as warrant agent for
the
42
Warrants. Citigroup Global Markets Inc. will serve as calculation agent. Please
refer to "Description of the Certificates -- Calculation Agent" for more
information on the calculation agent.
The CUSIP number for the Warrants is .
COVENANTS
Limitations on Liens. The warrant agreement provides that Citigroup will
not, and will not permit any subsidiary to, incur, issue, assume or guarantee
any indebtedness for borrowed money if such indebtedness is secured by a pledge
of, lien on, or security interest in any shares of Voting Stock (as defined
below) of any Significant Subsidiary (as defined below), whether such Voting
Stock is owned or later acquired, without effectively providing that the
Warrants and, at Citigroup's option, any other senior indebtedness ranking
equally and ratably with the Warrants, shall be secured equally and ratably with
such indebtedness. This limitation shall not apply to indebtedness secured by a
pledge of, lien on or security interest in any shares of Voting Stock of any
corporation at the time it becomes a Significant Subsidiary, including any
renewals or extensions of such secured indebtedness (Warrant Agreement, Section
8.04).
"Significant Subsidiary" means any Subsidiary (as defined below), including
its Subsidiaries:
- that has investments of and advances from Citigroup and its other
subsidiaries exceeding 10 percent of the total consolidated assets of
Citigroup and such other subsidiaries as of the end of the most recently
completed fiscal year;
- of which Citigroup's and its other subsidiaries' proportionate share of
total assets (after intercompany elimination) exceeds 10 percent of the
total consolidated assets of Citigroup and such other subsidiaries as of
the end of the most recently completed fiscal year; or
- of which Citigroup's and its other subsidiaries' equity in the income
from continuing operations exceeds 10 percent of such consolidated income
of Citigroup and such other subsidiaries for the most recently completed
fiscal year.
"Subsidiary" means any corporation of which securities entitled to elect at
least a majority of the corporation's directors shall at the time be owned,
directly or indirectly, by Citigroup, and/or one or more Subsidiaries, except
securities entitled to vote for directors only upon the happening of a
contingency.
"Voting Stock" means capital stock, the holders of which have general
voting power under ordinary circumstances to elect at least a majority of the
board of directors of a corporation, except capital stock that carries only the
right to vote conditioned on the happening of an event regardless of whether
such event shall have happened (Warrant Agreement, Sections 1.01 and 8.04).
Limitations on Mergers and Sales of Assets. The warrant agreement provides
that neither Citigroup Funding nor Citigroup will merge or consolidate with
another corporation or sell other than for cash or lease all or substantially
all their assets to another corporation, or purchase all or substantially all
the assets of another corporation unless:
- the successor corporation, if other than Citigroup Funding or Citigroup,
as applicable, expressly assumes by supplemental warrant agreement the
obligations of Citigroup Funding or Citigroup, as applicable, under the
warrant agreement; and
- immediately after the transaction, there would not be any default in the
performance of any covenant or condition of the warrant agreement
(Warrant Agreement, Sections 5.01 and 8.05).
Other than the restrictions described above, the warrant agreement do not
contain any covenants or provisions that would protect holders of the Warrants
in the event of a highly leveraged transaction.
MODIFICATION OF THE WARRANT AGREEMENT
The warrant agreement modifies the modification provisions of the form of
index warrant agreement described in the accompanying base prospectus as
follows: Citigroup, Citigroup Funding and the warrant agent may, with the
consent of the holders of not less than a majority of the then outstanding
Warrants, increase the amount to be paid to the holder upon exercise of a
Warrant.
43
DESCRIPTION OF THE CERTIFICATE GUARANTEE
Set forth below is a summary of information concerning the full and
unconditional guarantee, which we refer to as the Certificate Guarantee, that
will be executed and delivered by each of Citigroup Funding and Citigroup for
the benefit of the holders of the Certificates. The Certificate Guarantee will
be qualified as an indenture under the Trust Indenture Act. U.S. Bank National
Association will act as guarantee trustee under the Certificate Guarantee. The
terms of the Certificate Guarantee will be those set forth in the Certificate
Guarantee and those made part of the Certificate Guarantee by the Trust
Indenture Act. The summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference to,
the form of Certificate Guarantee, which is filed as an exhibit to the
registration statement of which this offering document forms a part, and the
Trust Indenture Act. The Certificate Guarantee will be held by the guarantee
trustee for the benefit of the holders of the Certificates.
You should refer to the accompanying prospectus supplements and base
prospectus for a discussion of the Citigroup guarantee relating to each of the
Securities and the Warrants.
GENERAL
Under the Certificate Guarantee, Citigroup Funding will fully and
unconditionally agree to pay in full to the holders of the Certificates, except
to the extent paid by Trust [2006-1], as and when due, regardless of any
defense, right of set off or counterclaim which Trust [2006-1] may have or
assert, the following payments:
- any maturity payment that is required to be made in respect of the
Certificates, to the extent Trust [2006-1] has funds legally available
for this payment,
- any accelerated maturity payment that is required to be made in respect
of the Certificates, to the extent Trust [2006-1] has funds legally
available for this payment, and
- any other remaining assets of Trust [2006-1] upon liquidation of Trust
[2006-1].
Citigroup Funding's obligation to make a guarantee payment may be satisfied
by direct payment of the required amounts by Citigroup Funding to the holders of
the Certificates or by causing Trust [2006-1] to pay such amounts to such
holders.
In addition, under the Certificate Guarantee, Citigroup will fully and
unconditionally guarantee Citigroup Funding's guarantee obligations to the same
extent as Citigroup Funding guarantees Trust [2006-1]'s payment obligations
under the Certificates. If for any reason Citigroup Funding does not make any
required guarantee payment when due, either by direct payment of the required
amounts to the holders of the Certificates or by causing Trust [2006-1] to pay
such amounts to such holders, Citigroup will cause such guarantee payment to be
made at the same address at which Citigroup Funding is obligated to make such
guarantee payment. The holders of the Certificates will be entitled to payment
under the Certificate Guarantee without taking any action whatsoever against
Trust [2006-1] or Citigroup Funding, as the case may be. Each of Citigroup
Funding's and Citigroup's obligations under its guarantee are unconditional,
irrespective of any (i) extension, amendment, modification or renewal of any
required payment; (ii) any waiver of any event of default, extension of time or
failure to enforce any required payment; or (iii) any extension, moratorium or
other relief granted to Trust [2006-1] or Citigroup Funding, as the case may be,
pursuant to any applicable law or statute.
The Certificate Guarantee will be a guarantee with respect to the
Certificates from the time of issuance of the Certificates but will not apply to
any maturity payment or accelerated maturity payment, or to payments upon the
dissolution, winding-up or termination of Trust [2006-1], except to the extent
Trust [2006-1] has funds legally available for these payments. If Citigroup
Funding or Citigroup does not pay the aggregate Security Payment or Warrant
Payment or the aggregate accelerated Security Payment or Warrant Payment, as the
case may be, to Trust [2006-1] upon maturity or exercise of the Securities or
Warrants, as applicable, including maturity or exercise as a result of the
occurrence of an acceleration event, Trust [2006-1] will not
44
have funds available to pay the maturity payment or accelerated maturity payment
to holders of the Certificates. The Certificate Guarantee, when taken together
with Citigroup Funding's obligations under the Securities and the Warrants,
Citigroup's guarantee of each of the Securities and the Warrants, the related
indenture, the related warrant agreement, the amended and restated declaration
of trust, and Citigroup Funding's and Citigroup's obligations to pay all fees,
costs, expenses, debts and liabilities of Trust [2006-1], other than with
respect to Trust Securities, will provide a full and unconditional guarantee by
each of Citigroup Funding and Citigroup of Trust [2006-1]'s obligations under
the Certificates.
MODIFICATIONS OF THE CERTIFICATE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of the Certificates, in which case no vote will be required, the
Certificate Guarantee may be amended only with the prior approval of the holders
of a majority of the outstanding Certificates. All guarantees and agreements
contained in the Certificate Guarantee will bind the successors, assignees,
receivers, trustees and representatives of Citigroup Funding and Citigroup and
shall inure to the benefit of the holders of the Certificates then outstanding.
CERTIFICATE GUARANTEE ENFORCEMENT EVENTS
An enforcement event under the Certificate Guarantee will occur upon the
failure of Citigroup Funding or Citigroup, as applicable, to perform any of
their respective payment or other obligations thereunder. The holders of a
majority of the Certificates have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the guarantee trustee
in respect of the Certificate Guarantee or to direct the exercise of any trust
or power conferred upon the guarantee trustee under the Certificate Guarantee.
If the guarantee trustee fails to enforce the guarantee trustee's rights under
the Certificate Guarantee, any holder of the Certificates may directly institute
a legal proceeding against Citigroup Funding or Citigroup, as applicable, to
enforce the guarantee trustee's rights under the Certificate Guarantee, without
first instituting a legal proceeding against Trust [2006-1], the guarantee
trustee or any other person or entity. A holder of the Certificates may also
directly institute a legal proceeding against Citigroup Funding or Citigroup, as
applicable, to enforce such holder's right to receive payment under the
Certificate Guarantee without first directing the guarantee trustee to enforce
the terms of the Certificate Guarantee or instituting a legal proceeding against
Trust [2006-1] or any other person or entity.
Citigroup Funding and Citigroup will be required to provide annually to the
guarantee trustee a statement as to the performance by Citigroup Funding and
Citigroup of certain of their obligations under the Certificate Guarantee and as
to any default in such performance.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, prior to the occurrence of a default with respect to
the Certificate Guarantee and after the curing of all defaults that may have
occurred, undertakes to perform only the duties that are specifically set forth
in the Certificate Guarantee. If any default occurs with respect to the
Certificate Guarantee that has not been cured or waived and the guarantee
trustee has actual knowledge of it, the guarantee trustee will exercise its
rights and powers under the Certificate Guarantee, and use the same degree of
care and skill in the exercise of such rights and powers as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to such
provision, the guarantee trustee is under no obligation to exercise any of the
powers vested in it by the Certificate Guarantee at the request of any holder of
the Certificates unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby.
TERMINATION OF THE CERTIFICATE GUARANTEE
The Certificate Guarantee will terminate as to the Certificates upon full
payment to the holders of the Certificates of
- the maturity payment,
- the accelerated maturity payment, or
- the amounts payable in accordance with the amended and restated
declaration of trust upon liquidation of Trust [2006-1].
45
The Certificate Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the Certificates must restore
payment of any sum paid under the Certificates or the Certificate Guarantee.
STATUS OF THE CERTIFICATE GUARANTEE
The Certificate Guarantee will constitute a guarantee of payment and not of
collection. The guaranteed party may institute a legal proceeding directly
against either Citigroup Funding or Citigroup to enforce its rights under the
Certificate Guarantee without first instituting a legal proceeding against any
other person or entity.
GOVERNING LAW
The Certificate Guarantee will be governed by, and construed in accordance
with, the internal laws of the State of New York.
DESCRIPTION OF THE S&P 500(R) INDEX
GENERAL
Unless otherwise stated, we have derived all information regarding the S&P
500 Index provided in this offering document, including its composition, method
of calculation and changes in components, from S&P, publicly available sources
and other sources we believe to be reliable. Such information reflects the
policies of, and is subject to change by, S&P. S&P is under no obligation to
continue to publish, and may discontinue or suspend the publication of, the S&P
500 Index at any time. We do not assume any responsibility for the accuracy or
completeness of any information relating to the S&P 500 Index.
As of June 30, 2006, the common stocks of 424 of the 500 companies included
in the S&P 500 Index were listed on the NYSE. As of June 30, 2006, the aggregate
market value of the 500 companies included in the S&P 500 Index represented
approximately 73% of the market value of S&P's internal database of over 6,956
equities. S&P chooses companies for inclusion in the S&P 500 Index with the aim
of achieving a distribution by broad industry groupings that approximates the
distribution of these groupings in the common stock population of the NYSE,
which S&P uses as an assumed model for the composition of the total market.
Relevant criteria employed by S&P include the viability of the particular
company, the extent to which that company represents the industry group to which
it is assigned, the extent to which the market price of that company's common
stock is generally responsive to changes in the affairs of the respective
industry and the market value and trading activity of the common stock of that
company.
As of June 30, 2006, the 500 companies included in the S&P 500 Index were
divided into 10 Global Industry Classification Sectors. The Global Industry
Classification Sectors included (with the number of companies currently included
in such sectors indicated in parentheses): Consumer Discretionary (86), Consumer
Staples (39), Energy (30), Financials (87), Health Care (56), Industrials (53),
Information Technology (79), Materials (30), Telecommunication Services (9) and
Utilities (31). S&P may from time to time, in its sole discretion, add companies
to, or delete companies from, the S&P 500 Index to achieve the objectives stated
above.
THE S&P 500 INDEX DOES NOT REFLECT THE PAYMENT OF DIVIDENDS ON THE STOCKS
UNDERLYING IT AND THEREFORE THE INDEX RETURN ON THE CERTIFICATES OR THE
SECURITIES WILL NOT PRODUCE THE SAME RETURN YOU WOULD RECEIVE IF YOU WERE TO
PURCHASE SUCH UNDERLYING STOCKS AND HOLD THEM UNTIL THE MATURITY DATE.
COMPUTATION OF THE S&P 500 INDEX
On March 21, 2005, S&P began to calculate the S&P 500 Index based on a half
float-adjusted formula, and on September 16, 2005 the S&P 500 Index was fully
float adjusted. S&P's criteria for selecting stocks for the S&P 500 Index will
not be changed by the shift to float adjustment. However, the adjustment affects
each company's weight in the S&P 500 Index (i.e., its market value).
46
Under float adjustment, the share counts used in calculating the S&P 500
Index will reflect only those shares that are available to investors and not all
of a company's outstanding shares. S&P defines three groups of shareholders
whose holdings are subject to float adjustment:
- holdings by other publicly traded corporations, venture capital firms,
private equity firms, strategic partners, or leveraged buyout groups;
- holdings by government entities, including all levels of government in
the United States or foreign countries; and
- holdings by current or former officers and directors of the company,
founders of the company, or family trusts of officers, directors, or
founders, as well as holdings of trusts, foundations, pension funds,
employee stock ownership plans, or other investment vehicles associated
with and controlled by the company.
However, treasury stock, stock options, restricted shares, equity
participation units, warrants, preferred stock, convertible stock, and rights
are not part of the float. In cases where holdings in a group exceed 10% of the
outstanding shares of a company, the holdings of that group will be excluded
from the float-adjusted count of shares to be used in the S&P 500 Index
calculation. Mutual funds, investment advisory firms, pension funds, or
foundations not associated with the company and investment funds in insurance
companies, shares of a United States company traded in Canada as "exchangeable
shares," shares that trust beneficiaries may buy or sell without difficulty or
significant additional expense beyond typical brokerage fees, and, if a company
has multiple classes of stock outstanding, shares in an unlisted or non-traded
class if such shares are convertible by shareholders without undue delay and
cost, are also part of the float.
For each stock, an investable weight factor ("IWF") is calculated by
dividing the available float shares, defined as the total shares outstanding
less shares held in one or more of the three groups listed above where the group
holdings exceed 10% of the outstanding shares, by the total shares outstanding.
The float-adjusted index will then be calculated by dividing the sum of the IWF
multiplied by both the price and the total shares outstanding for each stock by
the index divisor. For companies with multiple classes of stock, S&P will
calculate the weighted average IWF for each stock using the proportion of the
total company market capitalization of each share class as weights.
The S&P 500 Index is calculated using a base-weighted aggregate
methodology: the level of the S&P 500 Index reflects the total market value of
all 500 S&P 500 component stocks relative to the S&P 50 Index's base period of
1941-43 (the "base period").
An indexed number is used to represent the results of this calculation in
order to make the value easier to work with and track over time.
The actual total market value of the S&P 500 component stocks during the
base period has been set equal to an indexed value of 10. This is often
indicated by the notation 1941-43=10. In practice, the daily calculation of the
S&P 500 Index is computed by dividing the total market value of the S&P 500
component stocks by a number called the index divisor. By itself, the index
divisor is an arbitrary number. However, in the context of the calculation of
the S&P 500 Index, it is the only link to the original base period level of the
S&P 500 Index. The index divisor keeps the S&P 500 Index comparable over time
and is the manipulation point for all adjustments to the S&P 500 Index ("index
maintenance").
Index maintenance includes monitoring and completing the adjustments for
company additions and deletions, share changes, stock splits, stock dividends,
and stock price adjustments due to company restructurings or spinoffs.
To prevent the level of the S&P 500 Index from changing due to corporate
actions, all corporate actions which affect the total market value of the S&P
500 Index require an index divisor adjustment. By adjusting the index divisor
for the change in total market value, the level of the S&P 500 Index remains
constant. This helps maintain the level of the S&P 500 Index as an accurate
barometer of stock market performance and ensures that the movement of the S&P
500 Index does not reflect the corporate actions of individual companies in the
47
S&P 500 Index. All index divisor adjustments are made after the close of
trading. Some corporate actions, such as stock splits and stock dividends,
require simple changes in the common shares outstanding and the stock prices of
the companies in the S&P 500 Index and do not require index divisor adjustments.
The table below summarizes the types of index maintenance adjustments and
indicates whether or not an index divisor adjustment is required.
<Table>
<Caption>
DIVISOR
ADJUSTMENT
TYPE OF CORPORATE ACTION ADJUSTMENT FACTOR REQUIRED
- ------------------------ ----------------- ----------
Stock split (e.g., 2-for-1) Shares outstanding multiplied by 2; No
Stock price divided by 2
Share issuance (i.e., change is Shares outstanding plus newly issued Yes
greater than or equal to 5%) shares
Share repurchase (i.e., change is Shares outstanding minus repurchased Yes
greater than or equal to 5%) shares
Special cash dividends Share price minus special dividend Yes
Company change Add new company market value minus Yes
old company market value
Rights offering Price of parent company minus Yes
(Price of rights)
-----------------
(Right ratio)
Spinoffs Price of parent company minus Yes
(Price of spinoff co.)
----------------------
(Share exchange ratio)
</Table>
Stock splits and stock dividends do not affect the index divisor of the S&P
500 Index, because following a split or dividend both the stock price and number
of shares outstanding are adjusted by S&P so that there is no change in the
market value of the S&P 500 component stock. All stock split and dividend
adjustments are made after the close of trading on the day before the ex-date.
Each of the corporate events exemplified in the table requiring an
adjustment to the index divisor has the effect of altering the market value of
the S&P 500 component stock and consequently of altering the aggregate market
value of the S&P 500 component stocks (the "Post-Event Aggregate Market Value").
In order that the level of the S&P 500 Index (the "Pre-Event Index Value") not
be affected by the altered market value (whether increase or decrease) of the
affected S&P 500 component stock, a new index divisor ("New Divisor") is derived
as follows:
<Table>
Pre-Event Index Value
Post-Event Aggregate Market Value = --------------------
New Divisor
</Table>
<Table>
Post-Event Aggregate Market Value
New Divisor = ---------------------------------
Pre-Event Index Value
</Table>
A large part of the index maintenance process involves tracking the changes
in the number of shares outstanding of each of the S&P 500 Index companies. Four
times a year, on a Friday close to the end of each calendar quarter, the share
totals of companies in the S&P 500 Index are updated as required by any changes
in the number of shares outstanding. After the totals are updated, the index
divisor is adjusted to compensate for the net change in the total market value
of the S&P 500 Index. In addition, any changes over 5% in the current common
shares outstanding for the index companies are carefully reviewed on a weekly
basis, and when appropriate, an immediate adjustment is made to the index
divisor.
DISCONTINUANCE OF THE S&P 500 INDEX
If S&P discontinues publication of the S&P 500 Index or if it or another
entity publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the S&P 500
48
Index, then the value of the S&P 500 Index will be determined by reference to
the value of that index, which we refer to as a "successor index."
Upon any selection by the calculation agent of a successor index, the
calculation agent will cause notice to be furnished to us and the institutional
trustee, who will provide notice of the selection of the successor index to the
registered holders of the Certificates, the Securities and the Warrants.
If S&P discontinues publication of the S&P 500 Index and a successor index
is not selected by the calculation agent or is no longer published on the date
of determination of the value of the S&P 500 Index, the value to be substituted
for the S&P 500 Index for that date will be a value computed by the calculation
agent for that date in accordance with the procedures last used to calculate the
S&P 500 Index prior to any such discontinuance.
If S&P discontinues publication of the S&P 500 Index prior to the
determination of the Supplemental Distribution Amount and the calculation agent
determines that no successor index is available at that time, then on each Index
Business Day until the earlier to occur of (a) the determination of the
Supplemental Distribution Amount and (b) a determination by the calculation
agent that a successor index is available, the calculation agent will determine
the value that is to be used in determining the value of the S&P 500 Index as
described in the preceding paragraph. The calculation agent will cause notice of
daily closing values to be published not less often than once each month in The
Wall Street Journal (or another newspaper of general circulation).
Notwithstanding these alternative arrangements, discontinuance of the
publication of the S&P 500 Index may adversely affect trading in the
Certificates, the Securities and the Warrants.
If a successor index is selected or the calculation agent calculates a
value as a substitute for the S&P 500 Index as described above, the successor
index or value will be substituted for the S&P 500 Index for all purposes,
including for purposes of determining whether an Index Business Day or Market
Disruption Event occurs. Notwithstanding these alternative arrangements,
discontinuance of the publication of the S&P 500 Index may adversely affect the
value of the Certificates, the Securities and the Warrants.
All determinations made by the calculation agent will be at the sole
discretion of the calculation agent and will be conclusive for all purposes and
binding on Trust [2006-1], Citigroup Funding, Citigroup and the beneficial
owners of the Certificates, the Securities and the Warrants, absent manifest
error.
ALTERATION OF METHOD OF CALCULATION
If at any time the method of calculating the S&P 500 Index or any successor
index is changed in any material respect, or if the S&P 500 Index or any
successor index is in any other way modified so that the value of the S&P 500
Index or the successor index does not, in the opinion of the calculation agent,
fairly represent the value of that index had the changes or modifications not
been made, then, from and after that time, the calculation agent will, at the
close of business in New York, New York, make those adjustments as, in the good
faith judgment of the calculation agent, may be necessary in order to arrive at
a calculation of a value of a stock index comparable to the S&P 500 Index or the
successor index as if the changes or modifications had not been made, and
calculate the value of the index with reference to the S&P 500 Index or the
successor index. Accordingly, if the method of calculating the S&P 500 Index or
any successor index is modified so that the value of the S&P 500 Index or the
successor index is a fraction or a multiple of what it would have been if it had
not been modified, then the calculation agent will adjust that index in order to
arrive at a value of the index as if it had not been modified.
49
HISTORICAL DATA ON THE S&P 500 INDEX
MONTH-END CLOSING VALUES
The following table sets forth the closing value of the S&P 500 Index on
the last Index Business Day of each month in the period from January 2001
through June 2006. These historical data on the S&P 500 Index are not
necessarily indicative of the future performance of the S&P 500 Index or what
the market value of the Certificates, the Securities and the Warrants may be.
Any historical upward or downward trend in the value of the S&P 500 Index during
any period set forth below is not an indication that the S&P 500 Index is more
or less likely to increase or decrease at any time during the term of the
Certificates, the Securities and the Warrants.
<Table>
<Caption>
2001 2002 2003 2004 2005 2006
------- ------- ------- ------- ------- -------
January..................... 1366.01 1130.20 855.70 1131.13 1181.27 1280.08
February.................... 1239.94 1106.73 841.15 1144.94 1203.60 1280.66
March....................... 1160.33 1147.39 848.18 1126.21 1180.59 1294.82
April....................... 1249.46 1076.92 916.92 1107.30 1156.85 1310.61
May......................... 1255.82 1067.14 963.59 1120.68 1191.50 1270.08
June........................ 1224.42 989.82 974.50 1140.84 1191.33 1270.20
July........................ 1211.23 911.62 990.31 1101.72 1234.18
August...................... 1133.58 916.07 1008.01 1104.24 1220.33
September................... 1040.94 815.02 995.97 1114.58 1228.81
October..................... 1059.78 885.76 1050.71 1130.20 1207.01
November.................... 1139.45 936.31 1058.70 1173.82 1249.48
December.................... 1148.08 879.82 1111.92 1211.92 1248.29
</Table>
The closing value of the S&P 500 Index on July 18, 2006 was 1236.86.
YEAR-END CLOSING VALUES
The following table sets forth the closing values of the S&P 500 Index on
the last Index Business Day of each December from 1947 through 2005, as
published by S&P. The historical performance of the S&P 500 Index should not be
taken as an indication of future performance, and no assurance can be given that
the value of the S&P 500 Index will not decline (or increase insufficiently) and
thereby reduce or eliminate the Maturity Payment on the Certificates.
<Table>
<Caption>
YEAR END YEAR END YEAR END YEAR END
CLOSING CLOSING CLOSING CLOSING
YEAR VALUE YEAR VALUE YEAR VALUE YEAR VALUE
- ---- -------- ---- -------- ---- -------- ---- --------
1947 15.30 1962 63.10 1977 95.10 1992 435.71
1948 15.20 1963 75.02 1978 96.11 1993 466.45
1949 16.79 1964 84.75 1979 107.94 1994 459.27
1950 20.43 1965 92.43 1980 135.76 1995 615.93
1951 23.77 1966 80.33 1981 122.55 1996 740.74
1952 26.57 1967 96.47 1982 140.64 1997 970.43
1953 24.81 1968 103.86 1983 164.93 1998 1229.23
1954 35.98 1969 92.06 1984 167.24 1999 1469.25
1955 45.48 1970 92.15 1985 211.28 2000 1320.28
1956 46.67 1971 102.09 1986 242.17 2001 1148.08
1957 39.99 1972 118.05 1987 247.08 2002 879.82
1958 55.21 1973 97.55 1988 277.72 2003 1111.92
1959 59.89 1974 68.56 1989 353.40 2004 1211.92
1960 58.11 1975 90.19 1990 330.22 2005 1248.29
1961 71.55 1976 107.46 1991 417.09
</Table>
50
The following graph illustrates the historical performance of the S&P 500
Index based on the closing values thereof on the last Index Business Day of each
December from 1947 through 2005. Past movements of the S&P 500 Index are not
necessarily indicative of future S&P 500 Index values.
[GRAPH]
LICENSE AGREEMENT
S&P and Citigroup have entered into a non-exclusive license agreement
providing for the license to Citigroup and its subsidiaries, including Citigroup
Funding, in exchange for a fee, of the right to use indices owned and published
by S&P in connection with certain securities, including the Certificates, the
Securities and the Warrants.
The license agreement between S&P and Citigroup provides that the following
language must be stated in this offering document.
The Certificates, the Securities and the Warrants are not sponsored,
endorsed, sold or promoted by S&P. S&P makes no representation or warranty,
express or implied, to the holders of the Certificates, the Securities and the
Warrants or any member of the public regarding the advisability of investing in
securities generally or in the Certificates, the Securities and the Warrants
particularly or the ability of the S&P 500 Index to track general stock market
performance. S&P's only relationship to Trust [2006-1] and Citigroup Funding
(other than transactions entered into in the ordinary course of business) is the
licensing of certain servicemarks and trade names of S&P and of the S&P 500
Index which is determined, composed and calculated by S&P without regard to
Trust [2006-1], Citigroup Funding or the Certificates, the Securities and the
Warrants. S&P has no obligation to take the needs of Trust [2006-1], Citigroup
Funding or the holders of the Certificates, the Securities and the Warrants into
consideration in determining, composing or calculating the S&P 500 Index. S&P is
not responsible for and has not participated in the determination of the timing
of the sale of the Certificates, the Securities and the Warrants, prices at
which the Certificates, the Securities and the Warrants are initially to be
sold, or quantities of the Certificates, the Securities and the Warrants to be
issued or in the determination or calculation of the equation by which the
Certificates, the Securities and the Warrants are to be converted into cash. S&P
has no obligation or liability in connection with the administration, marketing
or trading of the Certificates, the Securities and the Warrants.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY TRUST [2006-1],
51
CITIGROUP FUNDING, CITIGROUP, HOLDERS OF THE CERTIFICATES, SECURITIES OR
WARRANTS OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY
DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
All disclosures contained in this offering document regarding the S&P 500
Index, including its makeup, method of calculation and changes in its
components, are derived from publicly available information prepared by S&P.
None of Trust [2006-1], Citigroup Funding, Citigroup, Citigroup Global Markets
Inc., the trustees or the warrant agent assumes any responsibility for the
accuracy or completeness of such information.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the principal U.S. federal income
tax considerations that may be relevant to the purchase, ownership and
disposition of the Certificates. Unless otherwise specifically indicated, this
summary addresses the tax consequences only to a person that is (i) an
individual citizen or resident of the United States, (ii) a corporation
organized in or under the laws of the United States or any state thereof or the
District of Columbia or (iii) otherwise subject to United States federal income
taxation on a net income basis in respect of the Certificates (a "U.S. Holder").
All references to "holders" (including U.S. Holders) in this section are to
beneficial owners of the Certificates. This summary does not purport to be a
comprehensive description of all of the tax considerations that may be relevant
to a decision to purchase the Certificates by any particular investor, including
tax considerations that arise from rules of general application to all taxpayers
or to certain classes of taxpayers or that are generally assumed to be known by
investors. This summary also does not address the tax consequences to (i)
persons that may be subject to special treatment under United States federal
income tax law, such as banks, insurance companies, thrift institutions,
regulated investment companies, real estate investment trusts, tax-exempt
organizations, traders in securities that elect to mark to market and dealers in
securities or currencies, (ii) persons that will hold the Certificates as part
of a position in a "straddle," "hedge," "conversion transaction," "synthetic
security" or other integrated investment, who hold other stocks or securities
reflecting positions in the S&P 500 Index or investment portfolios that include
shares of any of the companies included in the S&P 500 Index, or who acquire
Certificates within 30 days of selling such positions or shares, (iii) persons
whose functional currency is not the United States dollar, (iv) persons that do
not hold the Certificates as capital assets or (v) persons that did not purchase
the Certificates in the initial offering.
This summary is based on United States federal income tax laws,
regulations, rulings and decisions in effect as of the date of this offering
document, all of which are subject to change at any time (possibly with
retroactive effect). As the law is technical and complex, the discussion below
necessarily represents only a general summary. Moreover, the effect of any
applicable state, local or foreign tax laws is not discussed.
The discussion below contains certain statements regarding the advisability
of certain tax elections. These statements are of a general nature and are not
addressed to any taxpayer's particular circumstances. A PROSPECTIVE INVESTOR IN
THE CERTIFICATES SHOULD CONSULT ITS OWN TAX ADVISORS IN DETERMINING THE TAX
CONSEQUENCES OF AN INVESTMENT IN THE CERTIFICATES, INCLUDING THE APPLICATION OF
STATE, LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
52
TAX STATUS OF TRUST [2006-1]
Trust [2006-1] will be treated as a grantor trust owned solely by the
present and future holders of Certificates for U.S. federal income tax purposes,
and accordingly, income received by Trust [2006-1] will be treated as income of
the holders of the Certificates in the manner set forth below.
CHARACTERIZATION OF TRUST ASSETS
There are no regulations, published rulings or judicial decisions
addressing the characterization for U.S. federal income tax purposes of the
Securities and the Warrants. Pursuant to the amended and restated declaration of
trust of Trust [2006-1], every holder of the Certificates, Trust [2006-1] and
Citigroup Funding agrees to characterize and treat for U.S. federal income tax
purposes, in the absence of an administrative determination or judicial ruling
to the contrary, (i) the Security and the Warrant as two separate financial
instruments; (ii) each Security as a cash-settled variable prepaid forward
contract with respect to the S&P 500 Index under which at the time of issuance
of the Certificates, you pay Citigroup Funding, with respect to the Security,
the amount set forth on the cover page of this offering document as the offering
price for the Security (the "issue price") in consideration for Citigroup
Funding's obligation to deliver to you at maturity of the Security a cash amount
equal to $10 plus a supplemental return amount (which may be positive, zero, or
negative) based upon the performance of the S&P 500 Index, in full satisfaction
of its obligation under such forward contract; and (iii) each Warrant as a
cash-settled put option with respect to the S&P 500 Index under which at the
time of issuance of the Certificates, with respect to the Warrant, you pay
Citigroup Funding the amount set forth on the cover page of this offering
document as the offering price for the Warrant (the "option premium") in
consideration for the right to sell to Citigroup Funding at expiration of the
Warrant, for a cash amount equal to $10, a notional position in the S&P 500
Index with an initial value of $10.
Trust [2006-1] and Citigroup Funding will report to you and to the Internal
Revenue Service ("IRS") the payments under the Securities and the Warrants
according to this agreed-to characterization and treatment. Unless explicitly
stated otherwise, based on the agreement above and certain representations made
by Citigroup Funding with respect to the Securities and the Warrants, the
remainder of this section "Certain United States Federal Income Tax
Considerations" assumes that you will be treated as the owner of your pro rata
portion of two separate financial instruments consisting of the Security and the
Warrant, rather than as the owner of a single financial instrument. Prospective
investors in the Certificates should be aware, however, that no ruling is being
requested from the IRS with respect to the Securities and the Warrants and the
IRS might take a different view as to the proper characterization of the
Securities or of the Warrants and of the U.S. federal income tax consequences to
a holder thereof. As discussed below, alternative treatments of the Certificates
could result in less favorable U.S. federal income tax consequences to you,
including a requirement to accrue income on a current basis and to treat any
gain as ordinary income.
TAX BASIS IN THE SECURITIES AND THE WARRANTS
In order to determine your tax basis in the Securities and the Warrants,
you should allocate the purchase price paid for your Certificates between your
pro rata portion of the Securities and the Warrants, in proportion to the fair
market values thereof. Your initial tax basis in a Security generally will equal
the issue price of , and your initial tax basis in a Warrant will
equal the option premium of .
OVERVIEW
Your tax treatment may differ significantly depending on whether you hold a
Security and a Warrant together as a Certificate or whether you exchange your
Certificate for your pro rata portion of the assets of Trust [2006-1] and hold a
Security or Warrant separately, without holding the other. In addition, your tax
treatment will depend on the application of the straddle rules described in more
detail under "-- Taxation of Certificates -- Straddle Rules." Unless specified
otherwise, the discussion below assumes that the straddle rules will apply to
the Securities and the Warrants throughout the term of the Certificates.
Furthermore, your
53
tax treatment may depend on certain elections discussed in more detail below. In
particular, it is important that you consider making the "mixed straddle"
election described under "-- Taxation of Certificates -- Mixed Straddle
Election." Otherwise, you may be required to recognize gain on the Warrants, if
any, on an annual basis. Unless otherwise specified, the discussion below
assumes that the mixed straddle election and the identified straddle election
described in more detail under "-- Taxation of Certificates -- Straddle Rules --
Treatment of Losses; Identified Straddle Election," below, will apply.
As discussed in more detail below, in general the tax treatment of your
investment in the Securities and the Warrants will be as follows:
Any gain you realize with respect to the Certificates (such as at maturity or
upon sale) will be short-term capital gain, unless you take the steps
described in the next italicized paragraph below.
- If you hold Certificates at maturity or if you sell all of your
Certificates prior to maturity, you will recognize net capital gain or
loss at maturity or upon sale, as applicable, equal to the difference
between the amount of cash received and the amount you paid for the
Certificates. Your capital gain or loss will be short-term gain or loss
regardless of how long you have held the Certificates.
You will recognize long-term capital gain, if any, only if you exchange
Certificates for a pro rata portion of the Warrants and Securities and dispose
of either the Warrants or the Securities and continue to hold the other for
more than one year. You should be aware, however, that if you hold only the
Securities or only the Warrants, you will lose the benefit of principal
protection at maturity.
- If you dispose of the Warrants and continue to hold the Securities, you
will recognize short-term capital gain on the disposition of the Warrants
if the amount realized exceeds the option premium. You will have capital
gain or loss on the subsequent sale or other taxable disposition of the
Securities, which will be long-term gain or loss only if you continue to
hold the Securities for more than one year after your disposition of the
Warrants.
- If you dispose of the Securities and continue to hold the Warrants, you
will recognize short-term capital gain on disposition of the Securities
if the amount realized exceeds the issue price. You will have capital
gain or loss on the subsequent sale or other taxable disposition of the
Warrants, which will be long-term gain or loss only if you continue to
hold the Warrants for more than one year after your disposition of the
Securities.
TAXATION OF CERTIFICATES
In General
Except where otherwise stated, the discussion below assumes that the mixed
straddle election described under "-- Taxation of Certificates -- Mixed Straddle
Election" will apply. Under that assumption, you will not be required to accrue
income or to take into account any gain or loss with respect to the Certificates
until maturity or disposition of the Certificates.
Maturity, Sale, Exchange or Other Taxable Disposition of Certificates
The maturity, sale or exchange of the Certificates will be treated as a
taxable disposition of the Securities and of the Warrants. Accordingly, if you
dispose of all of your Certificates, you generally will recognize net capital
gain or loss equal to the difference between the amount realized and the amount
you paid for the Certificates. As described below under "-- Taxation of
Certificates -- Straddle Rules -- Holding Period," your capital gain or loss
will be short-term gain or loss regardless of how long you have held the
Certificates at the time of maturity or disposition. For discussion of the
treatment of a partial sale or other taxable disposition of Certificates, see
below under "-- Taxation of Certificates -- Straddle Rules -- Treatment of
Losses; Identified Straddle Election."
54
Straddle Rules
In General. As described above, the maturity, sale or exchange of all or
part of your Certificates will be treated as a taxable disposition of the
Securities and Warrants relating to those Certificates. In that event, you may
realize gain on the Securities and a loss on the Warrants, or vice versa. As
described below, special U.S. federal income tax "straddle" rules apply when
taxpayers realize gains and losses from offsetting positions in actively traded
personal property.
A Security and a Warrant will constitute a straddle at the issuance of the
Certificates, because your risk of loss from holding the Security is
substantially diminished at that time by your ownership of the Warrant. The
remainder of this section "Certain United States Federal Income Tax
Considerations" assumes that the Securities and the Warrants will be subject to
the straddle rules throughout the term of the Certificates. As a result, special
loss, holding period rules, and expense capitalization rules will apply to the
Securities and the Warrants, as described immediately below. You should consult
your own tax advisors if you own any other stocks or securities reflecting
positions in the S&P 500 Index or investment portfolios that include shares of
any of the companies included in the S&P 500 Index.
Treatment of Losses; Identified Straddle Election. Under the general
straddle rules, you would be permitted to take into account a loss recognized on
a position in the straddle only to the extent the loss exceeds any unrecognized
gain at the end of a taxable year with respect to any offsetting position in the
straddle (which could be the Certificates, Securities or Warrants) retained by
you. As a result, if you sold, exchanged or otherwise disposed of a part, but
not all of your Certificates, you might be required to pay tax on taxable gain
in excess of your economic gain on the Certificates that you sold.
This general loss deferral rule will not apply, however, if each Security
and each Warrant is identified as positions comprising a separate "identified
straddle" (an "identified straddle" election), in the manner described in more
detail below. Under the identified straddle election, if you realize a loss on
the disposition of a Warrant held as part of an identified straddle and a gain
on the Security held as part of the same identified straddle (or vice versa),
the loss on the first instrument will be added to the basis of the second
instrument. As a result, upon a disposition of your Certificates, your net
capital gain or loss from that disposition will be equal to the difference
between the amount realized and the amount you paid for the sold Certificates.
In order to make an "identified straddle" election, the positions in the
straddle must be clearly identified on the taxpayer's records as an identified
straddle before the close of the day on which the straddle is acquired, subject
to regulations. Trust [2006-1] will make an identified straddle election on
behalf of all holders of the Certificates by identifying on its records each
Security and each Warrant as a separate identified straddle before the close of
the day on which the Securities and Warrants are acquired. It is unclear,
however, whether the identified straddle election made by Trust [2006-1] on
behalf of a holder will be effective. Therefore, it is generally advisable that
you also identify each Security and each Warrant as a separate identified
straddle in your records no later than the close of the day on which you acquire
the Certificates.
To make the election, you must identify the Securities and the Warrants as
an "identified straddle" in your records no later than the close of the day on
which you acquire the Certificates. The identified straddle election in its
current form is new and certain aspects of its application are uncertain,
including the manner in which an identified straddle election may be made. An
identification statement is included in this offering document immediately
following this section "Certain United States Federal Income Tax
Considerations." The identification statement may be sufficient to comply with
the requirements for making an identified straddle election, if you keep the
identification statement as part of your books and records. In addition, the
broker through which you purchased your Certificates may provide a trade
confirmation that identifies each Security and each Warrant as a separate
identified straddle for purposes of the straddle rules and that provides that
you agree to treat your positions in the Securities and the Warrants
accordingly. In any case, you should keep the trade confirmation together with
the identification statement as part of your books and records. You should
consult your own tax advisors in determining how the identified straddle rules
may apply to you. Except where otherwise stated, the remainder of this section
"Certain United States Federal Income Tax Considerations" assumes that an
identified straddle election will apply.
55
Holding Period. Your holding period in any position that is part of a
straddle (for example, the Securities) does not begin until after the date on
which you dispose of all positions that offset that position (for example, the
Warrants). Therefore, you will recognize short-term capital gain or loss on
maturity or disposition of the Certificates regardless of how long you have held
the Certificates.
Capitalization of Expenses. You are required to capitalize any otherwise
deductible interest or carrying charges incurred with respect to any position in
a straddle by increasing your tax basis in the position, rather than deducting
such amounts. The remainder of this section "Certain United States Federal
Income Tax Considerations" assumes that you will not have any interest or
carrying charges with respect to your Certificates.
Special Rules Applicable to Warrants
The Warrants may be subject to special rules applicable to "section 1256
contracts" that are described below if the Warrants are treated as "listed
options." If the Warrants are not treated as section 1256 contracts, you will
not be required to take into account any gain or loss with respect to the
Warrants until maturity or disposition of the Certificates or of the Warrants.
For purposes of the section 1256 rules, a "listed option" is defined as any
option "which is traded on (or subject to the rules of) a qualified board or
exchange." The Warrants will not be listed on a qualified board or exchange, but
the Certificates will be listed on the AMEX. No authority addresses the question
of whether the Warrants will be considered subject to the rules of a qualified
board or exchange under these circumstances. Accordingly, it is possible that
the Warrants may be treated as "listed options" and therefore as "section 1256
contracts." In that case, you would be subject to special timing and holding
period rules, absent the "mixed straddle" election described below.
Under the rules applicable to section 1256 contracts, each Warrant that is
part of a Certificate held by you at the close of your taxable year is deemed to
be sold at the Warrant's fair market value (the "mark-to-market rule"). You
would recognize gain, if any, under the mark-to-market rule equal to the
difference between the Warrant's fair market value and your basis in the
Warrant, which is equal to the option premium you paid to purchase the Warrant,
adjusted for any gain or loss that you took into account in prior years under
the mark-to-market rule. Any losses realized under the mark-to-market rule would
be subject to deferral, however, under the straddle rules described above. Any
gain or loss from the deemed mark-to-market sale would be required to be taken
into account as 60% long-term capital gain or loss and 40% short-term capital
gain or loss (the "60/40 rule"), regardless of your holding period for the
Certificate. Similarly, any gain or loss realized on disposition of the
Certificate or possibly on exchange of a Certificate for your pro rata share of
the Securities and the Warrants would be subject to the 60/40 rule to the extent
such gain or loss were allocable to the Warrant.
Mixed Straddle Election
As discussed above under "-- Taxation of Certificates -- Special Rules
Applicable to Warrants," the Warrants may be treated as section 1256 contracts.
The Securities will not be treated as section 1256 contracts. A mixed straddle
is any "straddle" in which at least one, but not all, of the positions, is a
section 1256 contract. Accordingly, holding the Certificates may constitute a
"mixed straddle" under the rules governing section 1256 contracts. If you hold a
Certificate, generally it will be advisable for you to make a "mixed straddle"
election with respect to the Certificate. If you make this election, the
mark-to-market rule would not apply to the Warrants even if they were treated as
listed options and subject to the section 1256 rules. Accordingly, you will not
be required to take into account any gain or loss with respect to the Warrants
until they mature or you dispose of either the Warrants or the Securities.
In order to make a "mixed straddle" election, the positions in the straddle
must be clearly identified on the taxpayer's records as a mixed straddle before
the close of the day on which the straddle is acquired. In addition, the
taxpayer must file IRS Form 6781. Trust [2006-1] will make a "mixed straddle"
election on behalf of all holders of the Certificates by identifying on its
records the Securities and the Warrants as a mixed straddle before the close of
the day on which the Securities and Warrants are acquired, and by filing IRS
56
form 6781. It is unclear, however, whether the election made by Trust [2006-1]
on behalf of a holder will be effective. Therefore, it is generally advisable
that you also make a "mixed straddle" election.
To make the election, you must check Box A on IRS Form 6781 (a copy of
which is attached to this offering document as Exhibit B and also is available
on the IRS website at http://www.irs.gov) and attach the Form to your tax return
for the year in which you acquire the Certificates. You must also identify the
Securities and the Warrants as a straddle in your records no later than the
close of the day on which you acquire the Certificates. The rules do not address
specifically how to satisfy the identification requirements of the mixed
straddle election. An identification statement is included in this offering
document immediately following this section "Certain United States Federal
Income Tax Considerations." The identification statement may be sufficient to
comply with mixed straddle election requirements, if you keep the identification
statement as part of your books and records. In addition, the broker through
which you purchased your Certificates may provide a trade confirmation that
identifies each Security and each Warrant as a mixed straddle for purposes of
the section 1256 rules and that provides that you agree to treat your positions
in the Securities and the Warrants accordingly. In any case, you should keep the
trade confirmation together with the identification statement as part of your
books and records. Except where otherwise stated, the remainder of this section
"Certain United States Federal Income Tax Considerations" assumes that a mixed
straddle election will apply.
You will not be able to make the mixed straddle election with respect to
the Securities and the Warrants after the first year that you hold your
Certificates. The mixed straddle election applies to the taxable year for which
the election is made and all future taxable years, and may not be revoked
without the consent of the IRS. You should consult your own tax advisors in
determining whether to make a mixed straddle election in light of your
particular tax circumstances and how to comply with the identification
requirements of such election.
EXCHANGE OF CERTIFICATES FOR A PRO RATA PORTION OF SECURITIES AND WARRANTS
In General
If you exchange the Certificates for a pro rata portion of the Securities
and Warrants, you generally will not recognize gain or loss on the exchange.
You will not be required to accrue income or to take into account any gain
or loss with respect to the Securities until maturity or disposition of the
Securities.
The Warrants will not be listed on an exchange and therefore will not be
subject to the section 1256 rules. See discussion above under "-- Taxation of
Certificates -- Special Rules Applicable to Warrants." Accordingly, you also
will not be required to accrue income or to take into account any gain or loss
with respect to the Warrants until maturity or disposition of the Warrants.
Disposition of Securities or Warrants
If you hold the Securities and Warrants to maturity, or dispose of
Securities and Warrants that have been identified as part of an identified
straddle at the same time, you generally will be taxed as described under
"-- Taxation of Certificates -- Maturity, Sale, Exchange or Other Taxable
Disposition of Certificates." As described therein, any gain or loss that you
recognize would be short-term capital gain or loss.
If you dispose of a Warrant and continue to hold the Security identified as
part of the same identified straddle, you will realize capital gain or loss
equal to the difference between the amount realized on disposition of the
Warrant and the option premium you paid for the Warrant. Gain, if any, will be
taxable in the year of disposition, and will be treated as short-term capital
gain. Loss, if any, will be capitalized into the basis of the Security and will
not be deductible until you sell or otherwise dispose of the Security. On later
disposition of the Security, including on maturity of the Security, you will
recognize capital gain or loss equal to the difference between the amount
realized on disposition and your adjusted basis for the Security, which will
equal the issue price of the Security plus any loss from the Warrant that was
capitalized as described in the previous sentence. Gain or loss from disposition
of the Security will be long-term gain or loss if you have held
57
the Security for more than one year after disposing of the Warrant, and
otherwise will be short-term gain or loss. The deductibility of capital losses
is subject to limitations.
If you dispose of a Security and continue to hold the Warrant identified as
part of the same identified straddle, you will realize capital gain or loss
equal to the difference between the amount realized on disposition of the
Security and the issue price for the Security. Gain, if any, will be taxable in
the year of disposition, and will be treated as short-term capital gain. Loss,
if any, will be capitalized into the basis of the Warrant and will not be
deductible until you sell or otherwise dispose of the Warrant. On later
disposition of the Warrant, including on maturity of the Warrant, you will
recognize capital gain or loss equal to the difference between the amount
realized on disposition and your adjusted basis for the Warrant, which will
equal the option premium you paid for the Warrant plus any loss from the
Security that was capitalized as described in the previous sentence. Gain or
loss from disposition of the Warrant will be long-term gain or loss if you have
held the Warrant for more than one year after disposing of the Security, and
otherwise will be short-term gain or loss.
You should be aware that if you dispose of either the Security or the
Warrant and hold only the Security or only the Warrant, you will lose the
benefit of principal protection at maturity.
POSSIBLE ALTERNATIVE CHARACTERIZATION
Due to the absence of authority as to the proper characterization of the
Securities and Warrants, no assurance can be given that the IRS will accept, or
that a court will uphold, the characterization and tax treatment described
above. In particular, however, because you will be entitled to cash in an amount
equal to or greater than the purchase price paid for the Securities and the
Warrants if you hold the Certificates until maturity, the IRS could seek to
analyze the federal income tax treatment of a Security and a Warrant as a single
four-year debt instrument subject to Treasury regulations governing contingent
payment debt instruments (the "Contingent Payment Regulations").
The Contingent Payment Regulations are complex. Very generally, if they
applied to the Securities and the Warrants, you would be required to accrue
original issue discount every year at a "comparable yield" for Citigroup
Funding, determined at the time of issuance of the Certificates. This original
issue discount would be includible as ordinary interest income in your gross
income over the term of the Certificates, although you will receive no payments
on the Certificates before maturity. In addition, any gain realized on the sale,
exchange or redemption of the Certificates would be treated as ordinary income.
Any loss realized on such sale, exchange or redemption would be treated as an
ordinary loss to the extent of your original issue discount inclusions with
respect to the Certificates. Any loss realized in excess of such amount
generally would be treated as a capital loss.
The Contingent Payment Regulations apply only to debt instruments.
Investors in Certificates have an unrestricted legal right to exchange their
Certificates for a pro rata portion of the Warrants and Securities and to
dispose of one separately from the other. Moreover, investors who wish to obtain
long-term capital gain treatment on maturity or disposition of the Securities
will have an economic incentive to exchange their Certificates for a pro rata
portion of the Warrants and Securities and dispose of the Warrants more than one
year prior to maturity of Securities. Accordingly, Citigroup Funding believes
that the Securities and the Warrants underlying the Certificates should be
treated not as a single debt instrument, but as two separate financial
instruments, as described above. No assurance can be provided that the IRS will
agree with this position.
TAX SHELTER REPORTING RULES
Treasury regulations require that a taxpayer report to the IRS transactions
in which the taxpayer has sustained losses equal to or in excess of certain
thresholds. This requirement is subject to a number of exceptions intended to
eliminate many ordinary course transactions where taxpayers cannot manipulate
the timing of losses. However, because you will hold the Securities and the
Warrants in the form of a certificate in a trust and because the Securities and
the Warrants constitute a straddle, the exceptions will not apply to losses on
your investment in the Certificates or losses from the Securities or the
Warrants. Accordingly, you generally will be required to report to the IRS any
loss arising from your investment in the Certificates that
58
equals or exceeds the loss threshold amount applicable to you. The loss
threshold amounts are, in general, $2 million in any taxable year for an
individual, partnership, S corporation, estate or trust, and $10 million in any
taxable year for a corporation or a partnership with solely corporate investors.
If you realize a loss from your investment in Certificates in more than one
year, you may be required to combine those losses for reporting purposes,
although the loss threshold amounts generally will be higher. You should consult
your own tax advisors in determining whether the tax shelter reporting
requirements apply to your transactions in the Securities and the Warrants and
how to comply with such requirements.
TRUST INFORMATION REPORTING
The IRS and Treasury recently issued regulations providing information
reporting rules for widely held fixed investment trusts. These rules will apply
to Trust [2006-1] beginning on January 1, 2007 and generally will require more
extensive reporting of trust items to the IRS and investors on IRS Forms 1099s
and in accompanying statements, including separate identification of trust
income and expense items.
NON-UNITED STATES PERSONS
If you are a holder of the Certificates that is not a U.S. Holder, any gain
realized upon the sale, maturity, exchange or other taxable disposition of the
Certificates, the Securities, or the Warrants generally will not be subject to
U.S. income and withholding tax, provided that:
(i) you do not own, actually or constructively, 10% or more of the
total combined voting power of all classes of the Citigroup Funding's stock
entitled to vote, and are not a controlled foreign corporation related,
directly or indirectly, to Citigroup Funding through stock ownership;
(ii) you, as the beneficial owner of the Certificate certify on IRS
Form W-8BEN (or successor form), under penalties of perjury, that you are
not a U.S. person and provide your name and address or otherwise satisfy
applicable documentation requirements; and
(iii) if you are an individual, you are not present in the United
States for 183 days or more in the taxable year that contains the day of
the disposition or if the gain is not attributable to a fixed place of
business maintained by you in the United States.
Prospective investors that are not U.S. Holders should consult their own
tax advisors in determining the tax consequences to them of an investment in the
Certificates, including the application of U.S. federal, state, local, foreign
or other tax laws, and the possible effects of changes in federal or other tax
laws.
Estate Tax
If you are an individual who will be subject to U.S. federal estate tax
only with respect to U.S. situs property (generally an individual who at death
is neither a citizen nor a domiciliary of the United States) or an entity the
property of which is potentially includible in such an individual's gross estate
for U.S. federal estate tax purposes (for example, a trust funded by such an
individual and with respect to which the individual has retained certain
interests or powers), you should note that, absent an applicable treaty benefit,
the Certificates, the Securities or the Warrants may be treated as U.S. situs
property for U.S. federal estate tax purposes. You are urged to consult your own
tax advisors regarding the U.S. federal estate tax consequences of investing in
the Certificates.
INFORMATION REPORTING AND BACKUP WITHHOLDING
If you are a U.S. Holder, you may be subject to information reporting and
to backup withholding on certain amounts paid to you unless you (i) are a
corporation or come within certain other exempt categories and demonstrate this
fact, or (ii) provide a correct taxpayer identification number, certify as to no
loss of exemption from backup withholding and otherwise comply with applicable
requirements of the backup withholding rules. The amount of any backup
withholding will be allowed as a credit against your federal income tax
liability and may entitle you to a refund, provided that the required
information is furnished to the IRS. If you are not a U.S. person, you generally
will not be subject to backup withholding and information reporting with respect
to the Certificates if you have provided Citigroup Funding with a properly
completed IRS Form W-8BEN described above and we do not have actual knowledge or
reason to know that you are a U.S. person.
59
IDENTIFICATION OF POSITIONS FORMING A STRADDLE FOR PURPOSES OF
SECTIONS 1256(D) AND 1092(A)(2) OF THE INTERNAL REVENUE CODE.
(Keep with your trade confirmation)
Pursuant to Internal Revenue Code Sections 1092 and 1256, I hereby identify
each Security and each Warrant purchased as part of Citigroup Funding Inc.
Safety First Principal-Protected Trust Certificates Based Upon the S&P 500 Index
(the "Certificates") as positions comprising a separate identified straddle
within the meaning of Section 1092(a)(2) and, if a Warrant otherwise would
constitute a "Section 1256 contract", as positions comprising a mixed straddle
within the meaning of Section 1256(d). This identification incorporates by
reference the description of the Securities and the Warrants set forth in the
prospectus dated [ ] for the Certificates under the headings "Description of
the Equity Index Participation Securities" and "Description of the Equity Index
Warrants." The Securities and the Warrants were acquired on the date shown on
the trade confirmation attached hereto.
60
UNDERWRITING
The terms and conditions stated in the terms agreement dated the date of
this offering document, which incorporates by reference the underwriting
agreement basic provisions dated July 19, 2006, govern the sale and purchase of
the Certificates. The terms agreement and the underwriting agreement basic
provisions are referred to together as the underwriting agreement. Citigroup
Global Markets Inc., as underwriter, has agreed to purchase from Trust [2006-1],
and Trust [2006-1] has agreed to sell to Citigroup Global Markets Inc.,
Certificates.
The underwriting agreement provides that the obligation of Citigroup Global
Markets Inc. to purchase the Certificates included in this offering is subject
to approval of certain legal matters by counsel and to other conditions.
Citigroup Global Markets Inc. is obligated to purchase all of the Certificates
if it purchases any Certificates.
Citigroup Global Markets Inc. proposes to offer some of the Certificates
directly to the public at the public offering price set forth on the cover page
of this offering document and some of the Certificates to certain dealers at the
public offering price less a concession not in excess of $ per
Certificate. Citigroup Global Markets Inc. may allow, and such dealers may
reallow, a concession not in excess of $ per Certificate on sales to certain
other dealers. Sales may also be made through Citicorp Investment Services and
Citicorp Financial Services Corp., broker-dealers affiliated with Citigroup
Global Markets Inc., acting as agents. Citicorp Investment Services and Citicorp
Financial Services Corp. will receive as remuneration a portion of the
underwriting discount set forth on the cover of this offering document equal to
$ per Certificate for the Certificates they sell. If all of the
Certificates are not sold at the initial offering price, Citigroup Global
Markets Inc. may change the public offering price and the other selling terms.
The underwriting agreement provides that Trust [2006-1], Citigroup Funding
and Citigroup will indemnify Citigroup Global Markets Inc. against certain
liabilities, including liabilities under the Securities Act of 1933, and will
make certain contributions in respect thereof, or will contribute to payments
that Citigroup Global Markets Inc. may be required to make in respect of any of
those liabilities and will reimburse Citigroup Global Markets Inc. for certain
legal and other expenses.
Prior to this offering, there has been no public market for the
Certificates. Consequently, the initial public offering price for the
Certificates was determined by negotiations among Trust [2006-1] and Citigroup
Global Markets Inc. There can be no assurance, however, that the prices at which
the Certificates will sell in the public market after this offering will not be
lower than the price at which they are sold by Citigroup Global Markets Inc. or
that an active trading market in the Certificates will develop and continue
after this offering.
Citigroup Funding and Trust [2006-1] will apply to list the Certificates on
the American Stock Exchange under the symbol " ."
In view of the fact that the proceeds of the sale of the Certificates
ultimately will be used by Trust [2006-1] to purchase the Securities and the
Warrants, the underwriting agreement provides that Citigroup Funding will pay to
Citigroup Global Markets Inc. an underwriting discount of $ per
Certificate for the account of Citigroup Global Markets Inc.
In connection with the offering, Citigroup Global Markets Inc., as the
underwriter, may purchase and sell the Certificates, the Securities, the
Warrants and the stocks underlying the S&P 500 Index in the open market. These
transactions may include covering transactions and stabilizing transactions.
Covering transactions involve purchases of the Certificates, the Securities or
the Warrants in the open market after the distribution has been completed to
cover short positions. Stabilizing transactions consist of certain bids or
purchases of the Certificates, the Securities, the Warrants or the stocks
underlying the S&P 500 Index made for the purpose of preventing or slowing a
decline in the market price of the Certificates, the Securities, the Warrants or
the stocks underlying the S&P 500 Index while the offering is in progress.
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the Certificates, the Securities or the Warrants.
They may also cause the price of the Certificates, the Securities or the
Warrants to be higher than the price that otherwise would exist in the open
market in the absence of these
61
transactions. Citigroup Global Markets Inc. may conduct these transactions in
the over-the-counter market or otherwise. If Citigroup Global Markets Inc.
commences any of these transactions, it may discontinue them at any time.
In order to hedge its obligations under the Securities and the Warrants,
Citigroup Funding expects to enter into one or more swaps or other derivatives
transactions with one or more of its affiliates. See "Use of Proceeds and
Hedging Activities," "Risk Factors -- Risks Generally Relating to the
Certificates, Securities and Warrants -- The Market Value of the Certificates
May Be Affected by Purchases and Sales of the Stocks Underlying the S&P 500
Index or Derivative Instruments Related to the S&P 500 Index by Affiliates of
Citigroup Funding" and "-- Citigroup Funding's Hedging Activity Could Result in
a Conflict of Interest" in this offering document.
We estimate that our total expenses for this offering will be $ .
Citigroup Global Markets Inc. is an affiliate of Citigroup Funding.
Accordingly, the offering will conform with the requirements set forth in Rule
2810 of the Conduct Rules of the National Association of Securities Dealers,
Inc. regarding direct participation programs. Citigroup Global Markets Inc. may
not confirm sales to any discretionary account without the prior specific
written approval of a customer.
This offering document may also be used by Citigroup Funding's
broker-dealer affiliates in connection with offers and sales of the
Certificates, the Securities and the Warrants (subject to obtaining any
necessary approval of the American Stock Exchange for any of these offers and
sales) in market-making transactions at negotiated prices related to prevailing
market prices at the time of sale. Any of these affiliates may act as principal
or agent in these transactions. None of these affiliates is obligated to make a
market in the Certificates, the Securities and the Warrants and any may
discontinue any market-making at any time without notice, at its sole
discretion.
Citigroup Funding and Citigroup have agreed to indemnify Citigroup Global
Markets Inc. against certain liabilities under the Securities Act of 1933, or to
contribute to payments Citigroup Global Markets Inc. may be required to make
because of any of those liabilities.
62
ERISA MATTERS
Each purchaser of the Certificates, the Securities, the Warrants or any
interest therein will be deemed to have represented and warranted on each day
from and including the date of its purchase or other acquisition of the
Certificates, the Securities or the Warrants through and including the date of
disposition of such Certificates, Securities or Warrants that (a) it is not (i)
an employee benefit plan subject to the fiduciary responsibility provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (ii)
an entity with respect to which part or all of its assets constitute assets of
any such employee benefit plan by reason of 29 C.F.R 2510.3-101 or otherwise, or
(iii) a government or other plan subject to federal, state or local law
substantially similar to the fiduciary responsibility provisions of ERISA ((i),
(ii) and (iii) collectively, "ERISA-Type Plans"); and (b) if it is a plan
described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended, that is not an ERISA-Type Plan (for example, individual retirement
accounts, individual retirement annuities or Keogh plans), none of Citigroup
Global Markets, Inc., its affiliates or any employee thereof manages the plan or
provides advice that serves as a primary basis for the plan's decision to
purchase, hold or dispose of the Certificates, the Securities or the Warrants.
The disclosure in this section replaces the disclosure contained in the section
"ERISA Matters" in the accompanying prospectus supplements relating to the
Securities and the Warrants.
LEGAL MATTERS
The validity of the Certificates and certain matters relating thereto will
be passed upon for Trust [2006-1] by Dorsey & Whitney LLP, as special Delaware
counsel. Certain legal matters will be passed upon for the underwriter by Cleary
Gottlieb Steen & Hamilton LLP, New York, New York. Cleary Gottlieb Steen &
Hamilton LLP has also acted as special tax counsel to Citigroup Funding and
Citigroup in connection with the Certificates and Citigroup's guarantee. Cleary
Gottlieb Steen & Hamilton LLP has from time to time acted as counsel for
Citigroup and certain of its subsidiaries, including Citigroup Funding, and may
do so in the future.
EXPERTS
The consolidated financial statements of Citigroup as of December 31, 2005
and 2004, and for each of the years in the three-year period ended December 31,
2005, and management's assessment of the effectiveness of internal control over
financial reporting as of December 31, 2005, have been incorporated by reference
herein in reliance upon the reports of KPMG LLP, independent registered public
accounting firm, incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing. The report of KPMG LLP refers
to changes, in 2005, in Citigroup's method of accounting for conditional asset
retirement obligations associated with operating leases, and in 2003, in
Citigroup's methods of accounting for variable interest entities and stock-based
compensation.
63
EXHIBIT A
OFFICIAL NOTICE OF EXCHANGE
DATED:
U.S. Bank National Association, as
Institutional Trustee
100 Wall Street, 16th Floor
New York, NY 10005
Attention: Rachel Muehlbauer, Specialized Finance
Phone: (651) 495-3511
Fax: (651) 495-8158
Ladies and Gentlemen:
The undersigned holder of the Principal-Protected Trust Certificates Based
Upon the S&P 500(R) Index Due 2010 (the "Certificates") hereby irrevocably
elects to exercise with respect to the principal amount of the Certificates
indicated below, as of the date hereof (or, if this notice is received after
11:00 a.m. on any Business Day by the Institutional Trustee, as of the next
Business Day), provided that such day is prior to the earlier of (i) ,
2010 and (ii) in the event of acceleration of the maturity date, the Accelerated
Maturity Date, the holder's exchange right as described in the Prospectus dated
, 2006 relating to the Certificates (the "Prospectus"). Capitalized
terms not defined herein have the meanings given to such terms in the
Prospectus.
Please date and acknowledge receipt of this notice in the place provided
below on the date of receipt, and fax a copy to the fax number indicated,
whereupon Safety First Trust Series [2006-1] (the "Trust") shall cause the
Institutional Trustee, U.S. Bank National Association, to deliver the required
amount of the Securities and the Warrants three Business Days after the Actual
Exchange Date in accordance with the delivery instructions set forth below, as
long as the Institutional Trustee has received delivery on the Actual Exchange
Date of the Certificates being exchanged.
Very truly yours,
[Name of Holder]
By:
------------------------------------
[Title]
[Fax No.]
$
--------------------------------------
Principal Amount of Certificates being
Exchanged [must be $10 or integral
multiple thereof]
Ex.A
Delivery Instructions
for the Securities and the Warrants:
- --------------------------------------
- --------------------------------------
- --------------------------------------
Receipt of the above Official Notice
of Exchange is hereby acknowledged:
U.S. Bank National Association, as
Institutional Trustee
By: U.S. Bank National Association, as
Institutional Trustee.
By:
----------------------------------
Name:
Title:
Date and Time of Acknowledgement:
-------
Ex.A-2
Exhibit B
Form 6781 OMB No. 1545-0644
-----------------
2005
Department of the Treasury Attachment
Internal Revenue Service Sequence No. 82
GAINS AND LOSSES FROM SECTION 1256
CONTRACTS AND STRADDLES
> ATTACH TO YOUR TAX RETURN.
- --------------------------------------------------------------------------------
Name(s) shown on tax return IDENTIFYING NUMBER
- --------------------------------------------------------------------------------
Check all applicable boxes (see instructions).
A [ ] Mixed straddle election
B [ ] Straddle-by-straddle identification election
C [ ] Mixed straddle account election
D [ ] Net section 1256 contracts loss election
- --------------------------------------------------------------------------------
PART I SECTION 1256 CONTRACTS MARKED TO MARKET
- --------------------------------------------------------------------------------
(A) Identification of account (B) (LOSS) (C) GAIN
- --------------------------------------------------------------------------------- ---------- ---------
1 __________________________________________________________________________ __________ _________
________________________________________________________________________________ __________ _________
________________________________________________________________________________ __________ _________
2 Add the amounts on line 1 in columns (b) and (c) ..............................2(_______) _________
3 Net gain or (loss). Combine line 2, columns (b) and (c) ......................................3 _______
4 Form 1099-B adjustments. See instructions and attach schedule ................................4 _______
5 Combine lines 3 and 4 ........................................................................5 _______
NOTE: If line 5 shows a net gain, skip line 6 and enter the gain on line
7. Partnerships and S corporations, see instructions.
6 If you have a net section 1256 contracts loss and checked box D above,
enter the amount of loss to be carried back. Enter the loss as a positive
number .......................................................................................6 _______
7 Combine lines 5 and 6 ........................................................................7 _______
8 SHORT-TERM CAPITAL GAIN OR (LOSS). Multiply line 7 by 40% (.40). Enter
here and include on the appropriate line of Schedule D (see instructions) ....................8 _______
9 LONG-TERM CAPITAL GAIN OR (LOSS). Multiply line 7 by 60% (.60). Enter here
and include on the appropriate line of Schedule D (see instructions) .........................9 _______
- --------------------------------------------------------------------------------
PART II GAINS AND LOSSES FROM STRADDLES.
Attach a separate schedule listing each straddle and its components.
- --------------------------------------------------------------------------------
SECTION A--LOSSES FROM STRADDLES
- --------------------------------------------------------------------------------
(F) LOSS.
If column (e)
(E) Cost or is more than (G) (H) RECOGNIZED LOSS.
(B) Date other basis (d), enter Unrecognized If column (f) is
entered (C) Date plus difference. gain on more than (g), enter
into or closed out (D) Gross expense of Otherwise, offsetting difference.
(A) Description of property acquired or sold sales price sale enter -0- positions Otherwise, enter -0-
- --------------------------------- -------- ---------- ----------- ----------- ------------- ------------ --------------------
10 ___________________________ ________ __________ ___________ ___________ _____________ ____________ ____________________
_________________________________ ________ __________ ___________ ___________ _____________ ____________ ____________________
11A Enter the short-term portion of losses from line 10, column (h), here and
include on the appropriate line of Schedule D (see instructions) ....................................11A (__________________)
B Enter the long-term portion of losses from line 10, column (h), here and
include on the appropriate line of Schedule D (see instructions) ....................................11B (__________________)
- --------------------------------------------------------------------------------
SECTION B--GAINS FROM STRADDLES
- --------------------------------------------------------------------------------
(B) Date (F) GAIN. If column
entered (C) Date (E) Cost or other (d) is more than (e),
into or closed out (D) Gross basis plus enter difference.
(A) Description of property acquired or sold sales price expense of sale Otherwise, enter -0-
- --------------------------------- -------- ---------- ----------- ----------------- ---------------------
12 ___________________________ ________ __________ ___________ _________________ _____________________
_________________________________ ________ __________ ___________ _________________ _____________________
13A Enter the short-term portion of gains from line 12,
column (f), here and include on the appropriate line
of Schedule D (see instructions) .............................................13A _____________________
B Enter the long-term portion of gains from line 12,
column (f), here and include on the appropriate
line of Schedule D (see instructions) ........................................13B _____________________
- --------------------------------------------------------------------------------
PART III UNRECOGNIZED GAINS FROM POSITIONS HELD ON LAST DAY OF TAX YEAR.
Memo Entry Only (see instructions)
- --------------------------------------------------------------------------------
(E) UNRECOGNIZED GAIN.
If column (c) is more
(B) Date (C) Fair market value on last (D) Cost or other basis than (d), enter difference.
(A) Description of property acquired business day of tax year as adjusted Otherwise, enter -0-
- --------------------------------- -------- ----------------------------- ----------------------- ---------------------------
14 ___________________________ ________ _____________________________ _______________________ ___________________________
_________________________________ ________ _____________________________ _______________________ ___________________________
_________________________________ ________ _____________________________ _______________________ ___________________________
FOR PAPERWORK REDUCTION ACT NOTICE, SEE PAGE 4.
Cat. No. 13715G Form 6781 (2005)
Ex. B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You should rely only on the information contained or incorporated by
reference in this prospectus and pricing supplement and accompanying prospectus
supplements and base prospectus. We have not authorized anyone to provide you
with different information. We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information contained or incorporated by reference in this prospectus and
pricing supplement is accurate as of any date other than the date on the cover
of this prospectus and pricing supplement.
------------------------------
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
-----
PROSPECTUS AND PRICING SUPPLEMENT
Summary Information -- Q&A..................... 2
Risk Factors................................... 10
Available Information.......................... 18
Citigroup Inc. ................................ 20
Citigroup Funding Inc. ........................ 20
Use of Proceeds and Hedging Activities......... 21
Safety First Trust Series [2006-1]............. 22
Description of the Certificates................ 24
Description of the Equity Index Participation
Securities................................... 37
Description of the Equity Index Warrants....... 40
Description of the Certificate Guarantee....... 44
Description of the S&P 500(R) Index............ 46
Certain United States Federal Income Tax
Considerations............................... 52
Underwriting................................... 61
ERISA Matters.................................. 63
Legal Matters.................................. 63
Experts........................................ 63
Official Notice of Exchange.................... Ex. A
Form 6781...................................... Ex. B
MEDIUM-TERM NOTES PROSPECTUS SUPPLEMENT
Risk Factors................................... S-3
Important Currency Information................. S-6
Description of the Notes....................... S-7
Certain United States Federal Income Tax
Considerations............................... S-33
Plan of Distribution........................... S-40
ERISA Matters.................................. S-41
INDEX WARRANT PROSPECTUS SUPPLEMENT
Risk Factors................................... S-3
Important Currency Information................. S-6
Description of the Index Warrants.............. S-7
Certain United States Federal Income Tax
Considerations............................... S-14
Plan of Distribution........................... S-15
ERISA Matters.................................. S-16
PROSPECTUS
Prospectus Summary............................. 1
Ratio of Income to Fixed Charges and Ratio of
Income to Combined Fixed Charges Including
Preferred Stock Dividends.................... 4
Forward-Looking Statements..................... 6
Citigroup Inc. ................................ 6
Citigroup Funding Inc. ........................ 6
Use of Proceeds and Hedging.................... 7
European Monetary Union........................ 8
Description of Debt Securities................. 8
Description of Index Warrants.................. 21
Description of Debt Security and Index Warrant
Units........................................ 24
Limitations on Issuances in Bearer Form........ 25
Plan of Distribution........................... 26
ERISA Matters.................................. 29
Legal Matters.................................. 29
Experts........................................ 29
</Table>
SAFETY FIRST TRUST
SERIES [2006-1]
PRINCIPAL-PROTECTED TRUST CERTIFICATES
BASED UPON THE S&P 500(R) INDEX
DUE ON
$10.00 PER CERTIFICATE
PAYMENTS DUE FROM
SAFETY FIRST TRUST SERIES [2006-1]
GUARANTEED BY CITIGROUP FUNDING INC.
PAYMENTS DUE FROM
CITIGROUP FUNDING INC.
GUARANTEED BY CITIGROUP INC.
------------------------------
PROSPECTUS
, 2006
------------------------------
PRICING SUPPLEMENT
, 2006
(INCLUDING MEDIUM-TERM NOTES,
SERIES D PROSPECTUS SUPPLEMENT
DATED APRIL 13, 2006,
INDEX WARRANTS,
SERIES W-A PROSPECTUS SUPPLEMENT
DATED , 2006
AND PROSPECTUS
DATED MARCH 10, 2006)
(CITIGROUP LOGO)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable by the
Registrants in connection with the Securities being registered hereby. All of
the fees set forth below are estimates.
<Table>
Commission Registration Fee................................. $ *
Accounting Fees............................................. 80,000
Trustees' Fees and Expenses................................. 60,000
Printing and Engraving Fees................................. 300,000
NASD Fee.................................................... 75,500
Legal Fees and Expenses..................................... 300,000
Stock Exchange Listing Fees................................. 50,000
----------
Total............................................. $ 865,500
==========
</Table>
- ---------------
* Deferred in accordance with Rules 456(b) and 457(r) of the Securities Act of
1933, as amended.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
CITIGROUP
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware, or DGCL, empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interest of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
Subsection (d) of Section 145 of the DGCL provides that any indemnification
under subsections (a) and (b) of Section 145 (unless ordered by a court) shall
be made by the corporation only as authorized in the
II-1
specific case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because the
person has met the applicable standard of conduct set forth in subsections (a)
and (b) of Section 145. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by the majority vote of such directors, even though less
than a quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
Section 145 of the DGCL further provides that to the extent a present or
former director or officer of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith and that such expenses may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in Section 145 of the DGCL; that
any indemnification and advancement of expenses provided by, or granted pursuant
to, Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; that indemnification provided by, or granted
pursuant to, Section 145 shall, unless otherwise provided when authorized and
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such person's heirs,
executors and administrators; and empowers the corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liabilities under
Section 145. Section Four of Article IV of Citigroup's By-Laws provides that
Citigroup shall indemnify its directors and officers to the fullest extent
permitted by the DGCL.
Citigroup also provides liability insurance for its directors and officers
which provides for coverage against loss from claims made against directors and
officers in their capacity as such, including, subject to certain exceptions,
liabilities under the federal securities laws.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
Article Tenth of Citigroup's Restated Certificate of Incorporation limits the
liability of directors to the fullest extent permitted by Section 102(b)(7).
The directors and officers of Citigroup are covered by insurance policies
indemnifying them against certain liabilities, including certain liabilities
arising under the Securities Act, which might be incurred by them in such
capacities and against which they cannot be indemnified by Citigroup. Any
agents, dealers or underwriters who execute any underwriting or distribution
agreement relating to securities offered pursuant to this Registration Statement
will agree to indemnify Citigroup's directors and their officers who signed the
Registration Statement against certain liabilities that may arise under the
Securities Act with respect to information furnished to Citigroup by or on
behalf of such indemnifying party.
CITIGROUP FUNDING
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware, or DGCL, empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to
II-2
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
Subsection (d) of Section 145 of the DGCL provides that any indemnification
under subsections (a) and (b) of Section 145 (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer,
employee or agent is proper in the circumstances because the person has met the
applicable standard of conduct set forth in subsections (a) and (b) of Section
145. Such determination shall be made, with respect to a person who is a
director or officer at the time of such determination, (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors designated by
the majority vote of such directors, even though less than a quorum, or (3) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (4) by the stockholders.
Section 145 of the DGCL further provides that to the extent a present or
former director or officer of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith and that such expenses may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in Section 145 of the DGCL; that
any indemnification and advancement of expenses provided by, or granted pursuant
to, Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; that indemnification provided by, or granted
pursuant to, Section 145 shall, unless otherwise provided when authorized and
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such person's heirs,
executors and administrators; and empowers the corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person
II-3
in any such capacity, or arising out of such person's status as such, whether or
not the corporation would have the power to indemnify such person against such
liabilities under Section 145. Section One of Article VII of Citigroup Funding's
By-Laws provides that Citigroup Funding shall indemnify its directors and
officers to the fullest extent permitted by the DGCL.
Citigroup Funding also provides liability insurance for its directors and
officers which provides for coverage against loss from claims made against
directors and officers in their capacity as such, including, subject to certain
exceptions, liabilities under the federal securities laws.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
Article Seventh of Citigroup Funding's Certificate of Incorporation limits the
liability of directors to the fullest extent permitted by Section 102(b)(7).
The directors and officers of Citigroup Funding are covered by insurance
policies indemnifying them against certain liabilities, including certain
liabilities arising under the Securities Act, which might be incurred by them in
such capacities and against which they cannot be indemnified by Citigroup
Funding. Any agents, dealers or underwriters who execute any underwriting or
distribution agreement relating to securities offered pursuant to this
Registration Statement will agree to indemnify Citigroup Funding's directors and
their officers who signed the Registration Statement against certain liabilities
that may arise under the Securities Act with respect to information furnished to
Citigroup Funding by or on behalf of such indemnifying party.
THE SAFETY FIRST TRUSTS
The form of amended and restated declaration of trust for each of Safety
First Trust Series 2006-1, Safety First Trust Series 2006-2, Safety First Trust
Series 2006-3, Safety First Trust Series 2006-4, Safety First Trust Series
2006-5, Safety First Trust Series 2006-6, Safety First Trust Series 2006-7,
Safety First Trust Series 2006-8, Safety First Trust Series 2006-9 and Safety
First Trust Series 2006-10 (each a "Safety First Trust") provides that no
Institutional Trustee (as defined in each amended and restated declaration of
trust) or any of its affiliates, Delaware Trustee (as defined in each amended
and restated declaration of trust) or any of its affiliates, or officer,
director, shareholder, member, partner, employee, representative, custodian,
nominee or agent of the Institutional Trustee or the Delaware Trustee (each a
"Fiduciary Indemnified Person"), and no Regular Trustee (as defined in each
amended and restated declaration of trust), affiliate of any Regular Trustee, or
any officer, director, shareholder, member, partner, employee, representative or
agent of any Regular Trustee, or any employee or agent of such Safety First
Trust or its affiliates (each a "Company Indemnified Person") shall be liable,
responsible or accountable in damages or otherwise to such Safety First Trust,
any Affiliate (as defined in the amended and restated declaration of trust) of
such Safety First Trust or any holder of securities issued by such Safety First
Trust, or to any officer, director, shareholder, partner, member,
representative, employee or agent of such Safety First Trust or its Affiliates
for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Fiduciary Indemnified Person or Company Indemnified
Person in good faith on behalf of such Safety First Trust and in a manner such
Fiduciary Indemnified Person or Company Indemnified Person reasonably believed
to be within the scope of the authority conferred on such Fiduciary Indemnified
Person or Company Indemnified Person by such amended and restated declaration of
trust or by law, except that a Fiduciary Indemnified Person or Company
Indemnified Person shall be liable for any loss, damage, or claim incurred by
reason of such Fiduciary Indemnified Person's or Company Indemnified Person's
negligence or willful misconduct with respect to such acts or omissions. The
amended and restated declaration of trust of each Safety First Trust also
provides that, to the full extent permitted by law, Citigroup Funding Inc. (the
"Company") shall indemnify any Company Indemnified Person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in right of such Safety First Trust)
by reason of the fact that he is or was a Company Indemnified
II-4
Person against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of such
Safety First Trust, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The amended and
restated declaration of trust of each Safety First Trust also provides that to
the full extent permitted by law, the Company shall indemnify any Company
Indemnified Person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in right of such
Safety First Trust to procure a judgment in its favor by reason of the fact that
he is or was a Company Indemnified Person against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of such Safety
First Trust and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such Company Indemnified Person shall have
been adjudged to be liable to such Safety First Trust unless and only to the
extent that the Court of Chancery of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such Court of Chancery or such other court shall deem proper. The amended and
restated declaration of trust of each Safety First Trust further provides that
expenses (including attorneys' fees) incurred by a Company Indemnified Person in
defending a civil, criminal, administrative or investigative action, suit or
proceeding referred to in the immediately preceding two sentences shall be paid
by the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Company
Indemnified Person to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Company as authorized in the
amended and restated declaration of trust. The directors and officers of the
Company and the individual trustees are covered by insurance policies
indemnifying them against certain liabilities, including certain liabilities
arising under the Securities Act, which might be incurred by them in such
capacities and against which they cannot be indemnified by the Company or the
Safety First Trusts. Any agents, dealers or underwriters who execute any of the
agreements filed as Exhibit 1 to this Registration Statement will agree to
indemnify the Company's directors and their officers and the Safety First Trust
Trustees who signed the Registration Statement against certain liabilities that
may arise under the Securities Act with respect to information furnished to the
Company or any of the Safety First Trusts by or on behalf of such indemnifying
party.
For the undertaking with respect to indemnification, see Item 17 herein.
See the Underwriting Agreement Basic Provisions filed as Exhibit 1(a) for
certain indemnification provisions.
ITEM 16. EXHIBITS.
See the Exhibit Index, which follows the signature pages and is
incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any
II-5
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement;
provided, however, that paragraphs (i), (ii) and (iii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the Commission by
Citigroup Inc. pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this registration
statement, or is contained in a form of prospectus filed pursuant to Rule 424(b)
that is part of this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser:
(i) Each prospectus filed by a registrant pursuant to Rule
424(b)(3) shall be deemed to be part of this registration statement as
of the date the filed prospectus was deemed part of and included in this
registration statement; and
(ii) Each prospectus required to be filed pursuant to rule
424(b)(2), (b)(5) or (b)(7) as part of a registration statement in
reliance on Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (vii) or (x) for the purpose of providing the information
required by Section 10(a) of the Securities Act of 1933 shall be deemed
to be part of and included in this registration statement as of the
earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of securities in
the offering described in the prospectus. As provided in Rule 430B, for
liability purposes of the issuer and any person that is at that date an
underwriter, such date shall be deemed to be a new effective date of the
registration statement relating to the securities in the registration
statement to which the prospectus relates, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof. Provided, however, that no statement made in a
registration statement or prospectus that is part of this registration
statement or made in a document incorporated or deemed incorporated by
reference into this registration statement or prospectus that is part of
this registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or modify any
statement that was made in this registration statement or prospectus
that was part of this registration statement or made in any such
document immediately prior to such effective date.
(5) That, for the purpose of determining liability of the
Registrants under the Securities Act of 1933 to any purchaser in the
initial distribution of the securities, the Registrants undertake that
in a primary offering of securities of the Registrants pursuant to this
registration statement, regardless of the underwriting method used to
sell the securities to the purchaser, if the securities are offered or
sold to such purchaser by means of any of the following communications,
the Registrants will be sellers to the purchaser and will be considered
to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the Registrants
relating to the offering required to be filed pursuant to Rule 424;
II-6
(ii) Any free writing prospectus relating to the offering prepared
by or on behalf of the Registrants or used or referred to by the
Registrants;
(iii) The portion of any other free writing prospectus relating to
the offering containing material information about the Registrants or
their securities provided by or on behalf of the registrants; and
(iv) Any other communication that is an offer in the offering made
by the Registrants to the purchaser.
(6) That, for purposes of determining any liability under the
Securities Act of 1933 each filing of Citigroup Inc.'s annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(7) To file an application for the purpose of determining the
eligibility of the trustee to act under subsection (a) of Section 310 of
the Trust Indenture Act in accordance with the rules and regulations
prescribed by the Commission under Section 305(b)(2) of the Trust Indenture
Act.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of
expenses incurred or paid by a director, officer or controlling person of
the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Safety First Trust Series 2006-1 certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement, or amendment thereto, to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on July 19, 2006.
SAFETY FIRST TRUST SERIES 2006-1
By: /s/ SCOTT FREIDENRICH
------------------------------------
Name: Scott Freidenrich
Title: Regular Trustee
By: /s/ GEOFFREY S. RICHARDS
------------------------------------
Name: Geoffrey S. Richards
Title: Regular Trustee
By: /s/ CLIFF VERRON
------------------------------------
Name: Cliff Verron
Title: Regular Trustee
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Safety First Trust Series 2006-2 certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement, or amendment thereto, to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on July 19, 2006.
SAFETY FIRST TRUST SERIES 2006-2
By: /s/ SCOTT FREIDENRICH
------------------------------------
Name: Scott Freidenrich
Title: Regular Trustee
By: /s/ GEOFFREY S. RICHARDS
------------------------------------
Name: Geoffrey S. Richards
Title: Regular Trustee
By: /s/ CLIFF VERRON
------------------------------------
Name: Cliff Verron
Title: Regular Trustee
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Safety First Trust Series 2006-3 certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement, or amendment thereto, to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on July 19, 2006.
SAFETY FIRST TRUST SERIES 2006-3
By: /s/ SCOTT FREIDENRICH
------------------------------------
Name: Scott Freidenrich
Title: Regular Trustee
By: /s/ GEOFFREY S. RICHARDS
------------------------------------
Name: Geoffrey S. Richards
Title: Regular Trustee
By: /s/ CLIFF VERRON
------------------------------------
Name: Cliff Verron
Title: Regular Trustee
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Safety First Trust Series 2006-4 certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement, or amendment thereto, to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on July 19, 2006.
SAFETY FIRST TRUST SERIES 2006-4
By: /s/ SCOTT FREIDENRICH
------------------------------------
Name: Scott Freidenrich
Title: Regular Trustee
By: /s/ GEOFFREY S. RICHARDS
------------------------------------
Name: Geoffrey S. Richards
Title: Regular Trustee
By: /s/ CLIFF VERRON
------------------------------------
Name: Cliff Verron
Title: Regular Trustee
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Safety First Trust Series 2006-5 certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement, or amendment thereto, to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on July 19, 2006.
SAFETY FIRST TRUST SERIES 2006-5
By: /s/ SCOTT FREIDENRICH
------------------------------------
Name: Scott Freidenrich
Title: Regular Trustee
By: /s/ GEOFFREY S. RICHARDS
------------------------------------
Name: Geoffrey S. Richards
Title: Regular Trustee
By: /s/ CLIFF VERRON
------------------------------------
Name: Cliff Verron
Title: Regular Trustee
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Safety First Trust Series 2006-6 certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement, or amendment thereto, to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on July 19, 2006.
SAFETY FIRST TRUST SERIES 2006-6
By: /s/ SCOTT FREIDENRICH
------------------------------------
Name: Scott Freidenrich
Title: Regular Trustee
By: /s/ GEOFFREY S. RICHARDS
------------------------------------
Name: Geoffrey S. Richards
Title: Regular Trustee
By: /s/ CLIFF VERRON
------------------------------------
Name: Cliff Verron
Title: Regular Trustee
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Safety First Trust Series 2006-7 certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement, or amendment thereto, to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on July 19, 2006.
SAFETY FIRST TRUST SERIES 2006-7
By: /s/ SCOTT FREIDENRICH
------------------------------------
Name: Scott Freidenrich
Title: Regular Trustee
By: /s/ GEOFFREY S. RICHARDS
------------------------------------
Name: Geoffrey S. Richards
Title: Regular Trustee
By: /s/ CLIFF VERRON
------------------------------------
Name: Cliff Verron
Title: Regular Trustee
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Safety First Trust Series 2006-8 certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement, or amendment thereto, to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on July 19, 2006.
SAFETY FIRST TRUST SERIES 2006-8
By: /s/ SCOTT FREIDENRICH
------------------------------------
Name: Scott Freidenrich
Title: Regular Trustee
By: /s/ GEOFFREY S. RICHARDS
------------------------------------
Name: Geoffrey S. Richards
Title: Regular Trustee
By: /s/ CLIFF VERRON
------------------------------------
Name: Cliff Verron
Title: Regular Trustee
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Safety First Trust Series 2006-9 certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement, or amendment thereto, to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on July 19, 2006.
SAFETY FIRST TRUST SERIES 2006-9
By: /s/ SCOTT FREIDENRICH
------------------------------------
Name: Scott Freidenrich
Title: Regular Trustee
By: /s/ GEOFFREY S. RICHARDS
------------------------------------
Name: Geoffrey S. Richards
Title: Regular Trustee
By: /s/ CLIFF VERRON
------------------------------------
Name: Cliff Verron
Title: Regular Trustee
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Safety First Trust Series 2006-10 certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement, or amendment thereto, to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on July 19, 2006.
SAFETY FIRST TRUST SERIES 2006-10
By: /s/ SCOTT FREIDENRICH
------------------------------------
Name: Scott Freidenrich
Title: Regular Trustee
By: /s/ GEOFFREY S. RICHARDS
------------------------------------
Name: Geoffrey S. Richards
Title: Regular Trustee
By: /s/ CLIFF VERRON
------------------------------------
Name: Cliff Verron
Title: Regular Trustee
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Citigroup Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement, or amendment thereto, to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 19, 2006.
CITIGROUP INC.
By: /s/ SALLIE L. KRAWCHECK
------------------------------------
Sallie L. Krawcheck
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement, or amendment thereto, has been signed below by the
following persons in the capacities indicated on July 19, 2006.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ CHARLES PRINCE Chairman of the Board, Chief Executive
- -------------------------------------- Officer and Director
Charles Prince (Principal Executive Officer)
/s/ SALLIE L. KRAWCHECK Chief Financial Officer
- -------------------------------------- (Principal Financial Officer)
Sallie L. Krawcheck
/s/ JOHN C. GERSPACH Controller and Chief Accounting Officer
- -------------------------------------- (Principal Accounting Officer)
John C. Gerspach
* Director
- --------------------------------------
C. Michael Armstrong
* Director
- --------------------------------------
Alain J.P. Belda
* Director
- --------------------------------------
George David
* Director
- --------------------------------------
Kenneth T. Derr
* Director
- --------------------------------------
John M. Deutch
* Director
- --------------------------------------
Roberto Hernandez Ramirez
* Director
- --------------------------------------
Ann Dibble Jordan
* Director
- --------------------------------------
Klaus Kleinfeld
</Table>
II-18
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* Director
- --------------------------------------
Andrew N. Liveris
* Director
- --------------------------------------
Dudley C. Mecum
* Director
- --------------------------------------
Anne Mulcahy
* Director
- --------------------------------------
Richard D. Parsons
* Director
- --------------------------------------
Judith Rodin
* Director
- --------------------------------------
Robert E. Rubin
* Director
- --------------------------------------
Franklin A. Thomas
*By: /s/ SALLIE L. KRAWCHECK
------------------------------
Sallie L. Krawcheck
Attorney-in-Fact
</Table>
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Citigroup Funding Inc. certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement, or amendment thereto, to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 19, 2006.
CITIGROUP FUNDING INC.
By: /s/ ERIC L. WENTZEL
------------------------------------
Name: Eric L. Wentzel
Title: Executive Vice President and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement, or amendment thereto, has been signed below by the
following persons in the capacities indicated on July 19, 2006.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ ERIC L. WENTZEL Executive Vice President, Treasurer and Director
- -------------------------------------- (Principal Executive Officer)
Eric L. Wentzel
/s/ DAVID S. WINKLER Executive Vice President and Chief Financial
- -------------------------------------- Officer (Principal Financial Officer)
David S. Winkler
/s/ MICHAEL P. CONWAY Vice President and Controller
- -------------------------------------- (Principal Accounting Officer)
Michael P. Conway
* Director
- --------------------------------------
Scott Freidenrich
* Director
- --------------------------------------
James M. Garnett, Jr.
* Director
- --------------------------------------
John C. Gerspach
* Director
- --------------------------------------
Saul M. Rosen
*By: /s/ MICHAEL S. ZUCKERT
------------------------------
Michael S. Zuckert
Attorney-in-Fact
</Table>
II-20
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT NO.
- -----------
1(a) -- Underwriting Agreement Basic Provisions for the offering of
the Principal-Protected Trust Certificates being registered
under this Registration Statement.*
3(a) -- Certificate of Incorporation of Citigroup Funding Inc.
(incorporated by reference to Exhibit 4(a) to the
Registrants' Registration Statement on Form S-3 filed on
February 18, 2005 (Nos. 333-122925, 333-122925-01)).
3(b) -- By-Laws of Citigroup Funding Inc. (incorporated by reference
to Exhibit 4(b) to the Registrants' Registration Statement
on Form S-3 filed on February 18, 2005 (Nos. 333-122925,
333-122925-01)).
3(c) -- Restated Certificate of Incorporation of Citigroup Inc.
(incorporated by reference to Exhibit 4.01 to Citigroup's
Registration Statement on Form S-3 filed on December 15,
1998 (Nos. 333-68949 to 333-68949-08)).
3(d) -- Certificate of Designation of 5.321% Cumulative Preferred
Stock, Series YY, of Citigroup Inc. (incorporated by
reference to Exhibit 4.45 to Amendment No. 1 to Citigroup's
Registration Statement on Form S-3 filed on January 22, 1999
(Nos. 333-68949 to 333-68949-08)).
3(e) -- Certificate of Amendment to the Restated Certificate of
Incorporation of Citigroup Inc., dated April 18, 2000
(incorporated by reference to Exhibit 3.01.3 to Citigroup's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2000 (File No. 1-9924)).
3(f) -- Certificate of Amendment to the Restated Certificate of
Incorporation of Citigroup Inc., dated April 17, 2001
(incorporated by reference to Exhibit 3.01.4 to Citigroup's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2001 (File No. 1-9924)).
3(g) -- Certificate of Designation of 6.767% Cumulative Preferred
Stock, Series YYY, of Citigroup Inc. (incorporated by
reference to Exhibit 3.01.5 to Citigroup's Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, as
amended (File No. 1-9924)).
3(h) -- Certificate of Amendment to the Restated Certificate of
Incorporation of Citigroup Inc., dated April 18, 2006
(incorporated by reference to Exhibit 3.01.6 to Citigroup's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2006 (File No. 1-9924)).
3(i) -- By-Laws of Citigroup Inc., as amended effective January 19,
2005 (incorporated by reference to Exhibit 3.1 to
Citigroup's Current Report on Form 8-K filed on January 21,
2005).
3(j) -- Certificate of Trust of Safety First Trust Series 2006-1.*
3(k) -- Certificate of Trust of Safety First Trust Series 2006-2.*
3(l) -- Certificate of Trust of Safety First Trust Series 2006-3.*
3(m) -- Certificate of Trust of Safety First Trust Series 2006-4.*
3(n) -- Certificate of Trust of Safety First Trust Series 2006-5.*
3(o) -- Certificate of Trust of Safety First Trust Series 2006-6.*
3(p) -- Certificate of Trust of Safety First Trust Series 2006-7.*
3(q) -- Certificate of Trust of Safety First Trust Series 2006-8.*
3(r) -- Certificate of Trust of Safety First Trust Series 2006-9.*
3(s) -- Certificate of Trust of Safety First Trust Series 2006-10.*
4(a) -- Form of Amended and Restated Declaration of Trust.*
4(b) -- Form of the Trust Certificates Guarantee Agreement.*
4(c) -- Form of the Trust Certificates (included in Exhibit 4(a)).*
4(d) -- Form of Common Securities (included in Exhibit 4(a)).*
5(a) -- Opinion of Michael S. Zuckert, Esq. with respect to the
Certificate Guarantee.*
5(b) -- Opinion of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-1.*
</Table>
<Table>
<Caption>
EXHIBIT NO.
- -----------
5(c) -- Opinion of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-2.*
5(d) -- Opinion of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-3.*
5(e) -- Opinion of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-4.*
5(f) -- Opinion of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-5.*
5(g) -- Opinion of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-6.*
5(h) -- Opinion of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-7.*
5(i) -- Opinion of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-8.*
5(j) -- Opinion of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-9.*
5(k) -- Opinion of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-10.*
8 -- Opinion of Cleary Gottlieb Steen & Hamilton LLP as to
certain federal income tax matters.*
12(a) -- Calculation of Ratio of Income to Fixed Charges
(incorporated by reference to Exhibit 12.01 to Citigroup's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2006).
12(b) -- Calculation of Ratio of Income to Combined Fixed Charges
(including preferred stock dividends) (incorporated by
reference to Exhibit 12.02 to Citigroup's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2006).
23(a) -- Consent of KPMG LLP, Independent Registered Public
Accounting Firm.*
23(b) -- Consent of Michael S. Zuckert, Esq. (included in Exhibit
5(a)).
23(c) -- Consent of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-1 (included in Exhibit 5(b)).
23(d) -- Consent of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-2 (included in Exhibit 5(c)).
23(e) -- Consent of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-3 (included in Exhibit 5(d)).
23(f) -- Consent of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-4 (included in Exhibit 5(e)).
23(g) -- Consent of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-5 (included in Exhibit 5(f)).
23(h) -- Consent of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-6 (included in Exhibit 5(g)).
23(i) -- Consent of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-7 (included in Exhibit 5(h)).
23(j) -- Consent of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-8 (included in Exhibit 5(i)).
23(k) -- Consent of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-9 (included in Exhibit 5(j)).
23(l) -- Consent of Dorsey & Whitney LLP with respect to Safety First
Trust Series 2006-10 (included in Exhibit 5(k)).
23(m) -- Consent of Cleary Gottlieb Steen & Hamilton LLP (included in
Exhibit 8).
24(a) -- Powers of Attorney of certain Citigroup Inc. Directors.*
</Table>
<Table>
<Caption>
EXHIBIT NO.
- -----------
24(b) -- Powers of Attorney of certain Citigroup Funding Inc.
Directors.*
25(a) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the amended and restated declaration of trust of
Safety First Trust Series 2006-1.*
25(b) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
N.A., under the amended and restated declaration of trust of
Safety First Trust Series 2006-2.*
25(c) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the amended and restated declaration of trust of
Safety First Trust Series 2006-3.*
25(d) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the amended and restated declaration of trust of
Safety First Trust Series 2006-4.*
25(e) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the amended and restated declaration of trust of
Safety First Trust Series 2006-5.*
25(f) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the amended and restated declaration of trust of
Safety First Trust Series 2006-6.*
25(g) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the amended and restated declaration of trust of
Safety First Trust Series 2006-7.*
25(h) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the amended and restated declaration of trust of
Safety First Trust Series 2006-8.*
25(i) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the amended and restated declaration of trust of
Safety First Trust Series 2006-9.*
25(j) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the amended and restated declaration of trust of
Safety First Trust Series 2006-10.*
25(k) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the Principal Protected Trust Certificates Guarantee
Agreement with respect to Safety First Trust Series 2006-1.*
25(l) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the Principal Protected Trust Certificates Guarantee
Agreement with respect to Safety First Trust Series 2006-2.*
25(m) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the Principal Protected Trust Certificates Guarantee
Agreement with respect to Safety First Trust Series 2006-3.*
25(n) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the Principal Protected Trust Certificates Guarantee
Agreement with respect to Safety First Trust Series 2006-4.*
25(o) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the Principal Protected Trust Certificates Guarantee
Agreement with respect to Safety First Trust Series 2006-5.*
25(p) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the Principal Protected Trust Certificates Guarantee
Agreement with respect to Safety First Trust Series 2006-6.*
</Table>
<Table>
<Caption>
EXHIBIT NO.
- -----------
25(q) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the Principal Protected Trust Certificates Guarantee
Agreement with respect to Safety First Trust Series 2006-7.*
25(r) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the Principal Protected Trust Certificates Guarantee
Agreement with respect to Safety First Trust Series 2006-8.*
25(s) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the Principal Protected Trust Certificates Guarantee
Agreement with respect to Safety First Trust Series 2006-9.*
25(t) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
under the Principal Protected Trust Certificates Guarantee
Agreement with respect to Safety First Trust Series
2006-10.*
</Table>
- ---------------
* Filed herewith.