Citigroup Global Capital Markets in $246 Million Equity-Linked Notes Offering

Cleary Gottlieb represented the underwriter, Citigroup Global Markets Inc., in Citigroup Global Markets Holdings’ $246 million offering of Enhanced Income Strategy Principal-Protected Notes Linked to the 2005-1 Dynamic Portfolio Index.  Cleary was also special tax counsel in this transaction.

The enhanced income strategy notes are principal-protected debt securities linked to the performance of the 2005-1 Dynamic Portfolio Index, which allocates notional investments between a notional portfolio pursuing a “buy-write” equity strategy and a notional bond portfolio.  The notional “buy-write portfolio” (the Income 10 Buy-Write Index portfolio) was initially established in February 2004 and will be reconstituted each February.  The Income 10 Buy-Write Index portfolio tracks the performance of a hypothetical investment strategy in which (a) the ten stocks (excluding Citigroup Inc. and real estate investment trusts) in the Dow Jones Industrial Average with the highest annualized dividend yields (the Income 10 Portfolio) are purchased and (b) notional call options relating to those stocks are written on a quarterly basis.  A buy-write strategy allows an investor to participate in equity appreciation that is capped by the strike prices of the notional call options while limiting downside exposure through premiums received when the options are written.  The strategy appeals to investors who believe that equity markets will remain flat or show only moderate growth during the term of the notes.