The Citigroup Private Bank's five major investment views for 2006

Notes and media contacts

Five Key Investment Views for 2006

Receding Global Liquidity Driving a Widening in Credit Spreads
The past several years have been marked by abundant liquidity, the sources of which have largely been the United States Federal Reserve, American corporate balance-sheet repair, Asian central-bank purchases of US dollars and petrodollar profits.
A number of events should mark the end of the liquidity regime. The Federal Reserve's rate-tightening cycle should persist in 2006. The European Central Bank appears set on a similar path. China's removal of its currency's peg to the US dollar could see reduced demand for US Treasuries from Asian banks.
As tighter monetary conditions take root and banking lending becomes more restrictive, the stage is set for a possible re-pricing of credit risk and credit quality.

Strategy: Strategies specializing in long/short credit and distressed debt, as well as event-driven strategies in the European arena as corporate managers continue to take advantage of the lower cost of debt financing to pursue mergers-and-acquisitions and leveraged buyouts.

Commodity Prices, Particularly Energy Prices, to Remain High Due to Supply Constraints and Rising Demand
The rapid growth of developing economies such as China and India and their voracious appetite for raw materials, energy and other commodities to fuel that development are the catalysts for structurally higher commodity prices globally.

In the case of oil, for example, investment in logistics infrastructure and new extraction methods will take time to affect supply and delivery, keeping upward pressure on prices.

Sustained high oil prices should stimulate demand for alternative energy sources, and early adoption of alternative energy opportunities will likely prove highly profitable for talented and informed venture capital investors.

Strategy: Structured products such as commodity-linked notes, managed futures, funds focused on real assets, global infrastructure as well as technology associated with fossil fuel extraction or alternative energy development and delivery

Liberalization and Restructuring for the Japanese and European Economies

After more than a decade of stagnation, economic growth in the world's second largest economy has regained its footing. Further liberalization in the corporate sector should offer additional investment opportunities.

More crucially, Japan should benefit from a fundamental shift toward deregulation and reform. The once-belaboured process has gained steady momentum under Prime Minister Junichiro Koizumi.

The clean-up and shake-up of Japan's banking system has resulted in positive loan growth for two years and has fuelled asset reflation in the country. It is now a question of time before we see the end of deflation, after which Japan should revert to the more familiar growth patterns associated with the traditional economic cycle.

In Europe, regulatory changes and tax incentives in countries like Germany will similarly yield better investment opportunities.

Strategy: Merger-arbitrage and late-stage private equity funds with strong local knowledge and industry/sector expertise.

Global Demographic Changes Signal a Coming Shift Towards Income-Producing Investments
In Japan, Germany, the United States and a host of other countries, the average age is rising, giving rise to significant shifts in investment and spending patterns in these countries.

For example, as investors retire, they traditionally tend to scale back the level of investment risk that they would have accepted in their younger, wealth-generating years, often turning to yield-oriented investments to secure a more stable stream of cash flow, making high-quality, dividend-paying equity securities increasingly attractive.

Other investment opportunities include companies in sectors and industries positioned to benefit from the spending behaviour of this aging population, such as those in the financial sector, which benefit from the need for financial planning and insurance needs, and healthcare firms, due to an increased demand for pharmaceutical products.

Strategy: Companies with strong free cash flow and high potential dividend-growth rates, as well as healthcare and financial enterprises that provide retirement or pension services, along with those in the leisure and hospitality industries.

Cash-Rich Companies Continue With Mergers-and-Acquisitions Activity, Share Buybacks and Rising Dividend Payouts
Globally, corporate balance sheets have continued to swell in the years following the initial equity market downturn in 2000.

Against this backdrop, a new class of vocal and emboldened activist-shareholders is likely to prod companies in the United States and around the world to boost stock prices through methods such as share buybacks and raising dividend payouts.

Similarly, merger activity is likely to continue to be strong as companies seek ways to increase profitability, increase market share, and contain costs through the sharing of resources.

Strategy: Companies with "dividend power," (i.e. capable of generating significant free cash flow, with attractive dividend growth rates), yield-oriented long-only U.S. funds and event-driven managers as well as hybrid hedge funds or private equity products in the Leveraged Buyout space.

About The Citigroup Private Bank (Citibank N.A.):
The Citigroup Private Bank, one of the largest private banking businesses in the world, provides personalized wealth management services for clients through 126 offices in 90 cities in 37 countries. The Citigroup Private Bank offers unmatched global reach, coupled with a full range of portfolio management and investment advisory services, an array of structured lending and banking services, as well as expertise from the Global Corporate and Investment Bank. Citigroup Private Bankers act as financial architects, designing and coordinating insightful solutions for individual client needs, with an emphasis on personalized, confidential service. The Citigroup Private Bank provides services and products through various Citigroup affiliates. Not all services and products are available at all locations.

About Citigroup:
Citigroup (NYSE: C), the leading global financial services company, has some 200 million customer accounts and does business in more than 100 countries, providing consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, insurance, securities brokerage, and asset management. Major brand names under Citigroup's trademark red umbrella include Citibank, CitiFinancial, Primerica, Smith Barney, and Banamex.

For further information:

KARIM SEIFEDDINE
Head Public Affairs, Citigroup
Gulf, Levant & Pakistan
Dubai, UAE
Tel: +971 (4) 311 4392

JACK SUNG
Corporate Communications
Citigroup Global Wealth Management - Asia-Pacific & Middle East
Tel: +65 63284532
HP: +65 96679411