FWP 1 dfwp.htm OFFERING SUMMARY Offering Summary

 

Filed pursuant to Rule 433
Registration Nos. 333-132370 and 333-132370-01

 

Offering Summary

(Related to the Pricing Supplement No. 2007-MTNDD161,

Subject to Completion, Dated September 12, 2007)

 

Citigroup Funding Inc.

 

ANY PAYMENTS DUE FROM CITIGROUP FUNDING INC.

FULLY AND UNCONDITIONALLY GUARANTEED BY CITIGROUP INC.

 

LOGO

 

Principal-Protected Notes

 

Based Upon a Basket of Currencies

 

Due October 2009

 

Citigroup Funding Inc., the issuer, and Citigroup Inc., the guarantor, have filed a registration statement (including a prospectus and related prospectus supplement) with the Securities and Exchange Commission (“SEC”) for the offering to which this communication relates. Before you invest, you should read the prospectus and related prospectus supplement in that registration statement (File No. 333-132370) and the other documents Citigroup Funding and Citigroup Inc. have filed with the SEC for more complete information about Citigroup Funding, Citigroup Inc. and this offering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, you can request the prospectus and related prospectus supplement by calling toll-free 1-877-858-5407.

 

Investment Products   Not FDIC Insured   No Bank Guarantee

 

September 12, 2007   LOGO

Principal-Protected Notes

Based Upon a Basket of Currencies

Due October 2009

 

This offering summary represents a summary of the terms and conditions of the notes. We encourage you to read the preliminary pricing supplement and accompanying prospectus supplement and prospectus related to this offering.

 

How The Notes Work

 

Principal-Protected Notes Based upon a Basket of Currencies Due October 2009 (the “Notes”) are hybrid investments that combine characteristics of currency and fixed income instruments. Similar to a fixed income investment, these notes offer investors the safety of 100% principal protection at maturity. However, instead of paying periodic interest, the return on these Notes, if any, is paid at maturity and is based upon the Adjusted Basket Return Percentage. The Adjusted Basket Return Percentage will equal the sum of (x) 11% to 13% (to be determined on the Pricing Date) and (y) the average of the percentage change of the value of each of the Basket Currencies relative to the U.S. dollar over the term of the Notes. The basket of currencies is comprised of the Turkish lira, Hungarian forint, Icelandic krona, Indonesian rupiah and Norwegian krone (the “Basket Currencies”). This investment allows investors to participate in the growth potential of the value of the Basket Currencies relative to the U.S. dollar. The Notes do not offer current income, which means that you will not receive any periodic interest or other payments on the Notes prior to maturity.

 

The Notes are currency-linked securities issued by Citigroup Funding Inc. that have a maturity of approximately two years. At maturity, you will receive an amount in cash equal to the sum of your initial investment in the Notes plus an Adjusted Basket Return Amount, which may be positive or zero. The Adjusted Basket Return Amount will depend on the Adjusted Basket Return Percentage. The Adjusted Basket Return Percentage will equal the sum of (x) 11% to 13% (to be determined on the Pricing Date) and (y) the average percentage change of the value of

each of the Basket Currencies relative to the U.S. dollar, as measured by each relevant exchange rate, from the Pricing Date to the Valuation Date.

 

The performance of each of the Basket Currencies is measured by its exchange rate. Each exchange rate reflects the amount of the relevant Basket Currency that can be exchanged for one U.S. dollar. Thus, an increase in a Basket Currency’s exchange rate means that the value of that currency has decreased. For example, if the USD/TRY Exchange Rate has increased from 1.00 to 2.00, it means the value of one Turkish lira (as measured against the U.S. dollar) has decreased from US$1.00 to US$0.50. Conversely, a decrease in a Basket Currency’s exchange rate means that the value of that currency has increased. Increases in the values of the Basket Currencies relative to the U.S. dollar will lead to a higher return on your Notes, while decreases in the values of the Basket Currencies will lead to a lower return on your Notes.

 

The Adjusted Basket Return Amount will equal the product of (1) principal amount of Notes held at maturity and (2) the Adjusted Basket Return Percentage. Because the Notes are principal protected, the payment you receive at maturity will not be less than the amount of your initial investment in the Notes, even though the amount payable to you at maturity is dependent on the performance of the Basket Currencies relative to the U.S. dollar, as measured by each relevant exchange rate.

 

These Notes are not a suitable investment for investors who require regular fixed income payments since no payments will be made prior to maturity. These Notes may be an


 

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appropriate investment for the following types of investors:

 

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Investors looking for exposure to currency-linked investments on a principal-protected basis but who are willing to forego current income.

 

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Investors expecting appreciation of the Basket Currencies relative to the U.S. dollar over the term of the Notes.

 

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Investors who seek to add a currency-linked investment to their portfolio for diversification purposes.

 

The Notes are a series of unsecured senior debt securities issued by Citigroup Funding. Any payments due on the Notes are fully and unconditionally guaranteed by Citigroup Inc., Citigroup Funding’s parent company. The Notes will rank equally with all other unsecured and unsubordinated debt of Citigroup Funding, and, as a result of the guarantee, any payments due under the Notes will rank equally with all other unsecured and unsubordinated debt of Citigroup Inc.

 

Capitalized terms used in this summary are defined in “Preliminary Terms” below.


 

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Preliminary Terms

 

Issuer:

    Citigroup Funding Inc.     

Security:

    Principal-Protected Notes Based Upon a Basket of Currencies Due October 2009

Guarantee:

    Any payments due on the Notes are fully and unconditionally guaranteed by Citigroup Inc., Citigroup Funding’s parent company

Rating of the Issuer’s Obligations:

    Aa1/AA (Moody’s/S&P) based upon the Citigroup Inc. guarantee

Principal Protection:

    100% if held to the Maturity Date

Pricing Date:

    October     , 2007

Issue Date:

    October     , 2007

Valuation Date:

    Five business days before the Maturity Date

Maturity Date:

    Approximately two years after the Issue Date

Interest:

    None

Issue Price:

    100% of the principal amount

Payment at Maturity:

    For each US$1,000 note, US$1,000 plus an Adjusted Basket Return Amount, which may be positive or zero.

Adjusted Basket Return Amount:

    US$1,000 x Adjusted Basket Return Percentage provided that the Adjusted Basket Return Amount will not be negative

Adjusted Basket Return Percentage:

    The sum of (x) 11% to 13% (to be determined on the Pricing Date) and
(y) the Weighted Currency Return for each of the Basket Currencies, expressed as a percentage

Weighted Currency Return:

   

Starting Exchange Rate – Ending Exchange Rate   x Allocation Percentage

Starting Exchange Rate

Allocation Percentage:

    20% for each of the Basket Currencies

Basket Currencies:

    The Turkish lira, Hungarian forint, Icelandic krona, Indonesian rupiah and Norwegian krone

Starting Exchange Rate:

    Each of the USD/TRY, USD/HUF, USD/ISK, USD/IDR and USD/NOK Exchange Rates on the Pricing Date

Ending Exchange Rate:

    Each of the USD/TRY, USD/HUF, USD/ISK, USD/IDR and USD/NOK Exchange Rates on the Valuation Date

USD/TRY Exchange Rate:

    The U.S. dollar/Turkish lira exchange rate in the global spot foreign exchange market, expressed as the amount of Turkish lira per one U.S. dollar. The USD/TRY Exchange Rate will be calculated by the Calculation Agent by dividing the EUR/TRY exchange rate by the EUR/USD exchange rate, each as reported by Bloomberg on Page “ECB3,” or any substitute page, at approximately 8:30 a.m. (London time) on any relevant date.

EUR/TRY Exchange Rate:

    The European Union euro/Turkish lira exchange rate in the global spot foreign exchange market, expressed as the amount of Turkish lira per one European Union euro, as reported by Bloomberg on Page “ECB3,” or any substitute page, at approximately 8:30 a.m. (London time) on any relevant date.

USD/HUF Exchange Rate:

    The U.S. dollar/Hungarian forint exchange rate in the global spot foreign exchange market, expressed as the amount of Hungarian forint per one U.S. dollar. The USD/HUF Exchange Rate will be calculated by the Calculation Agent by dividing the EUR/HUF exchange rate by the EUR/USD exchange rate, each as reported by Bloomberg on Page “ECB3,” or any substitute page, at approximately 8:30 a.m. (London time) on any relevant date.

EUR/HUF Exchange Rate:

    The European Union euro/Hungarian forint exchange rate in the global spot foreign exchange market, expressed as the amount of Hungarian forint per one European Union euro, as reported by Bloomberg on Page “ECB3,” or any substitute page, at approximately 8:30 a.m. (London time) on any relevant date.

USD/ISK Exchange Rate:

    The U.S. dollar/Icelandic krona exchange rate in the global spot foreign exchange market, expressed as the amount of Icelandic krona per one U.S. dollar, as reported by the Central Bank of Iceland on web page “http://www.sedlabanki.is/?PageID=183” under the caption “Mid rate,” or on any substitute page, at approximately 11:00 a.m. (Reykjavik time) on any relevant date. The information on the Central Bank of Iceland’s website is not and is not intended to be part of this offering summary nor is it incorporated by reference into this offering summary.

 

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USD/IDR Exchange Rate:

    The U.S. dollar/Indonesian rupiah exchange rate in the global spot foreign exchange market, expressed as the amount of Indonesian rupiah per one U.S. dollar, as reported by Bloomberg on Page “NDFF,” or any substitute page, at 11:30 a.m. (Singapore time) on any relevant date.

USD/NOK Exchange Rate:

    The U.S. dollar/Norwegian krone exchange rate in the global spot foreign exchange market, expressed as the amount of Norwegian krone per one U.S. dollar. The USD/NOK Exchange Rate will be calculated by the Calculation Agent by dividing the EUR/NOK exchange rate by the EUR/USD exchange rate, each as reported by Bloomberg on Page “ECB3,” or any substitute page, at approximately 8:30 a.m. (London time) on any relevant date.

EUR/NOK Exchange Rate:

    The European Union euro/Norwegian krone exchange rate in the global spot foreign exchange market, expressed as the amount of Norwegian krone per one European Union euro, as reported by Bloomberg on Page “ECB3,” or any substitute page, at approximately 8:30 a.m. (London time) on any relevant date.

EUR/USD Exchange Rate:

    The European Union euro/U.S. dollar exchange rate in the global spot foreign exchange market, expressed as the amount of U.S. dollars per one European Union euro, as reported by Bloomberg on Page “ECB3,” or any substitute page, at approximately 8:30 a.m. (London time) on any relevant date.

Denominations:

    Minimum denominations and increments of US$1,000

Listing:

    None

Agent’s Discount:

    0.00%

Calculation Agent:

    Citigroup Financial Products Inc.

Business Day:

    Any day that (1) is not a Saturday, a Sunday or a day on which the securities exchanges or banking institutions or trust companies in the City of New York or in London, England are authorized or obligated by law or executive order to close and (2) is a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer System is open.

 

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Benefits of the Notes

 

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Return Potential

The Adjusted Basket Return Amount payable at maturity is based on the Adjusted Basket Return Percentage, enabling you to participate in the potential increase in the value of the Basket Currencies during the term of the Notes without directly investing in the Basket Currencies.

 

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Principal Protection

On the Maturity Date, we will pay you the principal amount of the Notes you then hold regardless of the performance of the Basket Currencies.

 

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Diversification

The Notes are based on the performance of the Basket Currencies and may allow you to diversify an existing portfolio mix of stocks, bonds, mutual funds and cash.

 

Key Risk Factors for the Notes

 

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The Adjusted Basket Return Amount May be Zero

If the Adjusted Basket Return Percentage is zero or negative, the payment you receive at maturity will be limited to the amount of your initial investment in the Notes. This will be true even if the value of each currency in the basket has increased relative to the U.S dollar at one or more times during the term of the Notes.

 

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Reference to a Basket of Currencies May Lower Your Return

Because the Adjusted Basket Return Percentage will be based on the sum of the Weighted Currency Return for each of the Basket Currencies, a significant increase in the value of one currency but not the other currencies relative to the U.S. dollar may be substantially or entirely offset by a decrease in the value of the other currencies in the basket relative to the U.S. dollar during the term of the Notes.

 

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No Periodic Payments

You will not receive any periodic payments of interest on the Notes.

 

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Potential for a Lower Comparable Yield

The Notes do not pay any interest. As a result, if the Adjusted Basket Return Percentage is less than        %, the effective

yield on your Notes will be less than that which would be payable on a conventional fixed-rate, non-callable debt security of Citigroup Funding of comparable maturity.

 

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Secondary Market May Not Be Liquid

The Notes will not be listed on any exchange. There is currently no secondary market for the Notes. Citigroup Global Markets Inc. and/or other of Citigroup Funding’s affiliated dealers currently intend, but are not obligated, to make a market in the Notes. Even if a secondary market does develop, it may not be liquid and may not continue for the term of the Notes.

 

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Resale Value of the Notes May Be Lower Than Your Initial Investment

Due to, among other things, changes in the value of the Basket Currencies, interest rates and Citigroup Funding and Citigroup Inc.’s perceived creditworthiness, the Notes may trade at prices below their initial issue price. You could receive substantially less than the amount of your investment if you sell your Notes prior to maturity.

 

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Tax Treatment of the Notes

Because the Notes are contingent payment debt obligations of Citigroup Funding, you will be required to include original issue discount (“OID”) for U.S. federal income tax purposes in gross income on a constant yield basis over the term of the Notes, even though you will receive no payments on the Notes prior to maturity.

 

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Citigroup Inc. Credit Risk

The Notes are subject to the credit risk of Citigroup Inc., Citigroup Funding’s parent company and the guarantor of any payments due on the Notes.

 

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Fees and Conflicts

Citigroup Financial Products and its affiliates involved in this offering are expected to receive compensation for activities and services provided in connection with the Notes. Further, Citigroup Funding expects to hedge its obligations under the Notes through the trading of the relevant currencies or other instruments, such as options, swaps or futures, based upon the Basket Currencies by one or more of its affiliates. Each of Citigroup Funding’s or its affiliates’ hedging activities and Citigroup Financial Products’ role as the Calculation Agent for the Notes may result in a conflict of interest.


 

5

The Basket Currencies and Exchange Rates

 

General

 

The Basket Currencies are the Turkish lira, Hungarian forint, Icelandic krona, Indonesian rupiah and Norwegian krone (together, the “Basket Currencies”). Exchange rates are used to measure the performance of each of the Basket Currencies.

 

The exchange rates are foreign exchange spot rates that measure the relative values of two currencies, the U.S. dollar and the Turkish lira in the case of the USD/TRY Exchange Rate; the U.S. dollar and the Hungarian forint in the case of the USD/HUF Exchange Rate; the U.S. dollar and the Icelandic krona in the case of the USD/ISK Exchange Rate; the U.S. dollar and the Indonesian rupiah in the case of the USD/IDR Exchange Rate and the U.S. dollar and the Norwegian krone in the case of the USD/NOK Exchange Rate. Each exchange rate is expressed as an amount of the relevant Basket Currency that can be exchanged for one U.S. dollar. Thus, an increase in a Basket Currency’s exchange rate means that the value of that currency has decreased. For example, if the USD/TRY Exchange Rate has increased from 1.00 to 2.00, it means the value of one Turkish lira (as measured against one U.S. dollar) has decreased from US$1.00 to US$0.50. Conversely, a decrease in a Basket Currency’s exchange rate means that the value of that currency has increased.

 

The Turkish lira is the official currency of the Republic of Turkey.

 

The Hungarian forint is the official currency of the Republic of Hungary.

 

The Icelandic krona is the official currency of the Republic of Iceland.

 

The Indonesian rupiah is the official currency of the Republic of Indonesia.

 

The Norwegian krone is the official currency of the Kingdom of Norway.

 

We have obtained all information in this offering summary relating to the Turkish lira, Hungarian forint, Icelandic krona, Indonesian rupiah and Norwegian krone from public sources, without independent verification. Currently the relevant exchange rates are published in The Wall Street Journal and other financial publications of general circulation. However, for purposes of calculating amounts due to holders of the Notes, the value of each Basket Currency will be determined as described in “Preliminary Terms” above.

 

Historical Data on the Exchange Rates

 

The following table sets forth, for each of the quarterly periods indicated, the high and low values of each relevant exchange rate, as reported by Bloomberg or the Central Bank of Iceland, as applicable. The historical data on the relevant exchange rate are not indicative of the future performance of the Basket Currencies or what the value of the Notes may be. Any historical upward or downward trend in any of the relevant exchange rate during any period set forth below is not an indication that the value of the Basket Currencies is more or less likely to increase or decrease at any time over the term of the Notes.


 

    USD/TRY
Exchange Rate(1)
   USD/HUF
Exchange Rate
   USD/ISK
Exchange Rate
   USD/IDR
Exchange Rate
   USD/NOK
Exchange Rate
    High
   Low
   High
   Low
   High
   Low
   High
   Low
   High
   Low

2002

                                        

Quarter

                                        

First

   1.451   1.309   283.93   270.61   103.71   99.72   10,473   9,541   9.1391   8.7320

Second

   1.639   1.294   277.12   245.54   99.52   86.40   9,785   8,456   8.7600   7.4266

Third

   1.697   1.581   257.12   241.28   88.64   83.39   9,217   8,691   7.7418   7.2800

Fourth

   1.687   1.525   251.58   225.32   88.88   80.77   9,321   8,813   7.6106   6.9377

2003

                                        

Quarter

                                        

First

   1.763   1.596   233.09   221.53   81.22   75.68   9,126   8,828   7.4773   6.8288

Second

   1.698   1.414   233.32   206.55   79.11   71.43   8,906   8,136   7.3591   6.6045

Third

   1.441   1.353   238.60   218.81   82.78   76.07   8,673   8,165   7.6951   6.9995

Fourth

   1.523   1.365   228.74   207.84   76.91   71.16   8,583   8,365   7.2076   6.6128

 

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    USD/TRY
Exchange Rate(1)
   USD/HUF
Exchange Rate
   USD/ISK
Exchange Rate
   USD/IDR
Exchange Rate
   USD/NOK
Exchange Rate
    High
   Low
   High
   Low
   High
   Low
   High
   Low
   High
   Low

2004

                                        

Quarter

                                        

First

   1.398   1.315   214.26   203.90   72.33   67.29   8,648   8,318   7.1634   6.6414

Second

   1.556   1.307   217.29   202.39   74.51   70.89   9,472   8,578   6.9956   6.6450

Third

   1.532   1.429   208.75   199.38   72.71   70.37   9,390   8,821   7.0314   6.7079

Fourth

   1.511   1.344   201.48   180.36   71.46   61.19   9,369   8,950   6.7412   6.0460

2005

                                        

Quarter

                                        

First

   1.400   1.261   192.05   181.09   63.52   58.45   9,521   9,134   6.5982   6.0809

Second

   1.392   1.339   207.79   189.40   66.77   60.66   9,766   9,440   6.5987   6.2419

Third

   1.372   1.316   208.18   194.41   66.06   61.03   10,894   9,740   6.6995   6.2056

Fourth

   1.375   1.344   217.32   206.15   64.81   59.62   10,289   9,734   6.7945   6.4335

2006

                                        

Quarter

                                        

First

   1.362   1.303   222.53   202.33   73.47   60.89   9,757   9,009   6.8381   6.5325

Second

   1.707   1.316   226.04   203.44   77.92   69.78   9,523   8,724   6.5626   5.9888

Third

   1.590   1.440   223.63   209.32   75.72   68.82   9,248   9,038   6.6124   6.1311

Fourth

   1.515   1.415   217.50   190.79   72.01   67.45   9,228   9,005   6.7638   6.0875

2007

                                        

Quarter

                                        

First

   1.457   1.381   198.69   184.25   72.38   65.54   9,224   8,964   6.4727   6.0680

Second

   1.388   1.299   191.44   180.30   66.95   61.69   9,122   8,670   6.1171   5.9034

Third (through September 11)

   1.399   1.236   194.11   177.76   69.50   59.16   9,475   8,991   5.9940   5.6796
(1) In December 2003, the Grand National Assembly of Turkey passed a law to remove six zeroes from the denomination of the Turkish lira (replacing the previous lira at a rate of 1 new Turkish lira = 1,000,000 old Turkish lira). The change was effective on January 1, 2005. The data in this table and in the graph below have been adjusted to reflect this revaluation.

 

The USD/TRY Exchange Rate calculated by dividing the EUR/TRY exchange rate by the EUR/USD exchange rate, each as reported on Bloomberg page “ECB3” at approximately 8:30 a.m. (London time) on September 11, 2007 was 1.2869.

 

The USD/HUF Exchange Rate calculated by dividing the EUR/HUF exchange rate by the EUR/USD exchange rate, each as reported on Bloomberg page “ECB3” at approximately 8:30 a.m. (London time) on September 11, 2007 was 184.16.

 

The USD/ISK Exchange Rate appearing on the Central Bank of Iceland’s web page “http://www.sedlabanki.is/?PageID=183” at 11:00 a.m. (Reykjavik time) on September 11, 2007 was 65.14.

 

The USD/IDR Exchange Rate appearing on Bloomberg page “NDFF” at 11:30 a.m. (Singapore time) on September 11, 2007 was 9,439.

 

The USD/NOK Exchange Rate calculated by dividing the EUR/NOK exchange rate by the EUR/USD exchange rate, each as reported on Bloomberg page “ECB3” at approximately 8:30 a.m. (London time) on September 11, 2007 was 5.6796.

 

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Historical Graphs

 

The following graphs show the daily values of each of the USD/TRY, USD/HUF, USD/ISK, USD/IDR and USD/NOK Exchange Rates in the period from January 1, 2002 through September 11, 2007 using historical data obtained from Bloomberg or the Central Bank of Iceland, as applicable. Past movements of the relevant exchange rates are not indicative of future values of the Basket Currencies.

 

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Hypothetical Maturity Payment Examples

 

The examples below show the hypothetical maturity payments to be made on an investment of US$1,000 principal amount of Notes based on various Ending Exchange Rates of the Basket Currencies. The following examples of hypothetical maturity payment calculations are based on the following assumptions:

 

n Pricing Date: October 4, 2007

n Issue Date: October 10, 2007

n Principal amount: US$1,000 per Note

n Starting Exchange Rate of the USD/TRY Exchange Rate: 1.327

n Starting Exchange Rate of the USD/HUF Exchange Rate: 188.39

n Starting Exchange Rate of the USD/ISK Exchange Rate: 64.09

n Starting Exchange Rate of the USD/IDR Exchange Rate: 9,403

n Starting Exchange Rate of the USD/NOK Exchange Rate: 5.8164

n Adjusted Basket Return Percentage: sum of (x) 12% and (y) the sum of the Weighted Currency Return for each of the Basket Currencies, expressed as a percentage

n Allocation Percentage: 20% for each Basket Currency

n Maturity Date: October 10, 2009

n The Notes are purchased on the Issue Date and are held through the Maturity Date.


 

The following examples are for purposes of illustration only and would provide different results if different assumptions were applied. The actual maturity payment will depend on the actual Adjusted Basket Return Amount which, in turn, will depend on the actual Starting Exchange Rate and Ending Exchange Rate of each Basket Currency and the calculation formula for the Adjusted Basket Return Percentage.

 

Example

   Hypothetical Ending Exchange Rate
   Hypothetical Weighted Currency
Return(1)
   Hypothetical
Adjusted
Basket Return
Percentage(2)
   Hypothetical
Adjusted
Basket
Return
Amount(3)
   Hypothetical
Payment at
Maturity(4)
   Hypothetical
Per Annum
Return on the
Notes(5)
  USD/
TRY
   USD/
HUF
   USD/
ISK
   USD/
IDR
   USD/
NOK
   TRY
   HUF
   ISK
   IDR
   NOK
        

1

   1.691   201.93   78.55   9,952   6.4684   -5.49%   -1.44%   -4.51%   -1.17%   -2.24%   -2.85%   $ 0.00   $ 1,000.00   0.00%

2

   1.602   156.51   72.07   9,351   7.3127   -4.14%   3.38%   -2.49%   0.11%   -5.15%   3.715%   $ 37.15   $ 1,037.15   1.86%

3

   1.437   185.65   80.76   7,442   4.182   -1.66%   0.29%   -5.20%   4.17%   5.62%   15.22%   $ 152.22   $ 1,152.22   7.61%

4

   1.229   191.88   57.58   10,091   4.1126   1.48%   -0.37%   2.03%   -1.46%   5.86%   19.53%   $ 195.33   $ 1,195.33   9.77%

5

   0.952   131.91   49.46   9,066   6.6817   5.65%   6.00%   4.57%   0.72%   -2.98%   25.95%   $ 259.55   $ 1,259.55   12.98%
(1) Hypothetical Weighted Currency Return for each Basket Currency = [(Starting Exchange Rate – Ending Exchange Rate)/Starting Exchange Rate] x 20%
(2) Hypothetical Adjusted Basket Return Percentage = Sum of (x) 12% and (y) sum of the Weighted Currency Return for USD/TRY, USD/HUF, USD/ISK, USD/IDR and USD/NOK
(3) Hypothetical Adjusted Basket Return Amount = the greater of (US$1,000 x Adjusted Basket Return Percentage) and US$0.
(4) Hypothetical Payment at Maturity = US$1,000 + Adjusted Basket Return Amount
(5) Calculated on a simple interest basis

 

11

Certain U.S. Federal Income Tax Considerations

 

The following summarizes certain federal income tax considerations for initial U.S. investors that hold the Notes as capital assets.

 

All investors should refer to the preliminary pricing supplement related to this offering and the accompanying prospectus supplement and prospectus for additional information relating to U.S. federal income tax and should consult their tax advisors to determine the tax consequences particular to their situation.

 

Because the Notes are contingent payment debt obligations of Citigroup Funding, U.S. holders of the notes will be required to include original issue discount (“OID”) for U.S. federal income tax purposes in gross income on a constant yield basis over the term of the Notes. This tax OID (computed at an assumed comparable yield of         % compounded semiannually) will be includible in a U.S. holder’s gross income (as ordinary income) over the term of the Notes (although holders will receive no payments on the Notes prior to maturity), and generally will be reported to U.S. non-corporate holders on an IRS Form 1099. The assumed comparable yield is based on a rate at which Citigroup Funding would issue a similar debt obligation with no contingent payments. The amount of tax OID is based on an assumed amount payable at maturity. This assumed amount is neither a prediction nor guarantee of the actual yield of, or payment to be made in respect of, the Notes. If the amount the Notes pay at maturity is, in fact, less than this assumed amount, then a U.S. holder will have recognized taxable income in periods prior to maturity that exceeds that holder’s economic income from holding the Notes during such periods (with an offsetting ordinary loss). If a U.S. holder disposes of the Notes, the U.S. holder will be required to treat any gain recognized upon the disposition of the Notes as ordinary income (rather than capital gain).

 

In the case of a holder of the Notes that is not a U.S. person all payments made with respect to the Notes and any gain realized upon the sale or other disposition of the Notes should not be subject to U.S. income or withholding tax, provided that the holder complies with applicable certification requirements (including

in general the furnishing of an IRS form W-8 or substitute form) and such payments and gain are not effectively connected with a U.S. trade or business of such holder.

 

ERISA and IRA Purchase Considerations

 

Employee benefit plans subject to ERISA, entities the assets of which are deemed to constitute the assets of such plans, governmental or other plans subject to laws substantially similar to ERISA and retirement accounts (including Keogh, SEP and SIMPLE plans, individual retirement accounts and individual retirement annuities) are permitted to purchase the Notes as long as either (A)(1) no Citigroup Global Markets affiliate or employee is a fiduciary to such plan or retirement account that has or exercises any discretionary authority or control with respect to the assets of such plan or retirement account used to purchase the Notes or renders investment advice with respect to those assets and (2) such plan or retirement account is paying no more than adequate consideration for the Notes or (B) its acquisition and holding of the Notes is not prohibited by any such provisions or laws or is exempt from any such prohibition.

 

However, individual retirement accounts, individual retirement annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts, will not be permitted to purchase or hold the Notes if the account, plan or annuity is for the benefit of an employee of Citigroup Global Markets or a family member and the employee receives any compensation (such as, for example, an addition to bonus) based on the purchase of Notes by the account, plan or annuity.

 

You should refer to the section “ERISA Matters” in the preliminary pricing supplement related to this offering for more information.

 

Additional Considerations

 

If any of the relevant exchange rates are not available on Bloomberg page “ECB3,” “NDFF” or the Central Bank of Iceland web page “http://www.sedlabanki.is/?PageID=183”, as applicable, or any substitute page thereto, the Calculation Agent may determine the relevant


 

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exchange rate in accordance with the procedures set forth in the preliminary pricing supplement related to this offering. You should refer to the section “Description of the Notes – Adjusted Basket Return Amount” in the preliminary pricing supplement for more information.

 

Citigroup Global Markets is an affiliate of Citigroup Funding. Accordingly, the offering

will conform to the requirements set forth in Rule 2720 of the Conduct Rules of the National Association of Securities Dealers.

 

Client accounts over which Citigroup Inc. or its affiliates have investment discretion are NOT permitted to purchase the Notes, either directly or indirectly.


 

© 2007 Citigroup Global Markets Inc. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

 

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