Dalton Utilities

1
Citigroups Municipal Finance Capabilities and
the US Municipal Bond Market
Jalisco 2003
2
Citigroups Commitment to U.S. Public Finance
Citigroup is the leader in municipal finance with
a long-term commitment to the industry. As the
industry leader, our expertise providing
financing solutions for subnational government is
widely recognized by issuers and investors.

• Headquarters in New York, with regional banking
  presence across the U.S.
• Core business focus.
• Growing business while many firms have exited the
  industry.
• Over 300 Municipal professionals.

Seattle
Boston
Chicago
New York
Sacramento
Pittsburgh
Philadelphia
San Francisco
Fresno
Paso Robles
Charlotte
Los Angeles
Atlanta
Dallas
Orlando
West Palm Beach
Tampa
Fort Lauderdale
Miami
Puerto Rico
3
3
National Institutional Distribution Capabilities
Nationwide network covers al important
institutional buyers of municipal bonds including
mutual funds, insurance companies, trust
departments, and investment advisors.
Regional Underwriting and Institutional Sales
Offices
10 Underwriting Offices
8 Institutional Sales Offices
Seattle
Portland
Minneapolis
Boston
New York
Philadelphia
Chicago
Omaha
Los Angeles
Atlanta
Dallas
Underwriting and Sales
Tampa
Underwriting Only
Sales Only

• Institutional sales force located throughout the
  Country
• Long standing relationship with major
  institutional buyers
• Financial Consultants average 15 years of
  municipal experience each
• 81 middle-market professionals cover over 3,000
  institutional investors
• Nationwide network of 25 institutional sales
  specialists and 39 traders
• Nationwide network of 50 taxable fixed income
  sales specialists

4
4
Extensive Retail Distribution System
Largest domestic sales force with approximately
500 offices staffed with over 12,000 financial
consultants.
18
3
(355)
(43)
1
Washington
4
(33)
VT
2
(35)
Maine
(28)
Montana
12
North Dakota
(216)
54
6
5
3
NH 4 (49)
Oregon
1
(114)
(111)
(1,683)
(37)
MA 11 (407)
15
(4)
3
Wisconsin
Minnesota
New York
Idaho
(324)
South Dakota
(19)
RI 2 (47)
Michigan
21
4
Wyoming
CT 9 (293)
2
3
(412)
(89)
13
NJ 20 (709)
(77)
Pennsylvania
(45)
7
Iowa
18
5
(326)
Nevada
Nebraska
DE 1(3)
(471)
(138)
7
2
Ohio
(80)
61
8
Indiana
Illinois
(47)
(154)
6
MD 5 (120)
Utah
(1,675)
2
2
(113)
West
Colorado
(180)
(40)
DC 2 (117)
California
(23)
Virginia
Virginia
Missouri
Kentucky
Kansas
12 (245)
7 (115)
North Carolina
9
5
4
Tennessee
(205)
2
(103)
7 (140)
(49)
Arizona
(37)
S. Carolina
Oklahoma
Arkansas
16
7
New Mexico
(441)
(117)
5
Georgia
Alabama
(39)
25
5
Mississippi
(635)
(99)
2
Texas
Louisiana
(24)
2
42
Alaska
(45)
(940)
Puerto Rico
Florida
3
(56)
Hawaii
1
(2)
Guam
Note First number indicates no. of offices
number in parenthesis indicates no. of financial
consultants.
5
5
National Market Leadership Year After Year
Salomon Smith Barney is the top ranked firm in
public finance. Through our top ranking
in both the negotiated and competitive market, we
have the bonds the institutions want.
6
6
National Market Leadership Year After Year
2002
1. Salomon Smith Barney 2. UBS
PaineWebber 3. Lehman Brothers 4. J P
Morgan 5. Merrill Lynch
51,491 42,949 25,994 25,165 25,034

2001
2000
1999
2000
1999
2001
1.
19,257
1.
19,257
Salomon Smith Barney
Salomon Smith Barney
1.
1.
Salomon Smith Barney
26,786
1.
Salomon Smith Barney
26,786
32,855
2.
UBS PaineWebber
17,076
2.
UBS PaineWebber
17,076
2.
UBS PaineWebber
26,977
2.
Merrill Lynch
18,758
2.
Merrill Lynch
18,758
3.
Merrill Lynch
14,533
3.
Merrill Lynch
14,533
3.
Merrill Lynch
17,020
3.
UBS PaineWebber
16,038
3.
UBS PaineWebber
16,038
4.
Goldman Sachs
10,908
4.
Goldman Sachs
10,908
4.
Goldman Sachs
16,811
4.
Goldman Sachs
12,073
4.
Goldman Sachs
12,073
5.
Lehman Brothers
9,158
5.
Lehman Brothers
9,158
5.
Lehman Brothers
15,140
5.
Lehman Brothers
9,138
5.
Lehman Brothers
9,138


1996
1998
1997
1998
1998
1998
1.
Salomon Smith Barney
23,110
1.
Salomon Smith Barney
23,110
1.
Salomon Smith Barney
18,855
1.
Salomon Smith Barney
18,855
1.
Salomon Smith Barney
30,542
1.
Salomon Smith Barney
30,542
2.
UBS PaineWebber
18,471
2.
UBS PaineWebber
18,471
2.
Goldman Sachs
18,606
2.
Goldman Sachs
18,606
2.
UBS PaineWebber
23,858
2.
UBS PaineWebber
23,858
3.
Merrill Lynch
16,510
3.
Merrill Lynch
16,510
3.
Merrill Lynch
16,094
3.
Merrill Lynch
16,094
3.
Goldman Sachs
18,571
3.
Goldman Sachs
18,571
4.
Goldman Sachs
13,145
4.
Goldman Sachs
13,145
4.
UBS PaineWebber
15,962
4.
UBS PaineWebber
15,962
4.
Merrill Lynch
18,236
4.
Merrill Lynch
18,236
5.
Lehman Brothers
12,720
5.
Lehman Brothers
12,720
5.
Lehman Brothers
12,536
5.
Lehman Brothers
12,536
5.
Bear Stearns
17,794
5.
Bear Stearns
17,794




Source Securities Data Company Full Credit to
Lead Manager, in millions
7
Salomon Smith Barney Products

• General Government Finance
• Salomon Smith Barney has long been a leader in
  public finance, serving municipal issuers since
  the firm's founding in 1873 .
• In 1997, 1998, 1999, 2000 and 2001, Salomon Smith
  Barney ranked as the Number One senior manager of
  all negotiated and competitive municipal bond
  issues nationwide. Moreover, Salomon Smith
  Barneys market dominance cuts across virtually
  all market segments in all regions of the
  country.
• Transportation
• Since 1990, Salomon Smith Barney has been the 1
  Transportation Senior Manager having managed
  approximately 27.8 billion of issues.
• Salomon Smith Barney has been the leading
  underwriter of U.S. airport revenue bonds since
  1986.
• Relevant airport firsts include the first airport
  revenue bond issue (Miami International Airport,
  June 1955), the first use of Public Facilities
  Charge revenues to secure bonds (Las
  Vegas-McCarran International Airport, March
  1990), and the largest airport revenue bond issue
  sold in the United States (Detroit Metropolitan
  Wayne County Airport, July 1998).
• Since 1996, Salomon Smith Barney has acted as
  senior or co-manager for more than 772.6 billion
  of port financings.
• Water and Sewer/ Utilities
• Since 1998, Salomon Smith Barney has been the
  number one ranked senior manager for negotiated,
  water and sewer transactions managing 95 water
  and sewer transactions totaling over 5.6 billion
  in par amount, and has managed 183 transactions
  with a par amount in excess of 7.9 billion.
• Salomon Smith Barney is one of the top public
  energy utility underwriter acting as underwriter
  on 247 bond offerings for over 29 billion since
  1996.

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8
Salomon Smith Barney Products

• Healthcare (Non-Profit Hospitals)
• Salomon Smith Barney has been the number one
  issuer in total senior managed negotiated and
  competitive Non-Profit Healthcare issuance since
  1996 in Non-Profit Healthcare.
• Professional Sports
• Since 1994, Salomon Smith Barney has managed 63
  Sports Facility financings totaling nearly 3.5
  billion, making Salomon Smith Barney the number
  one underwriter of such financings.
• Schools/Universities
• Salomon Smith Barney was the first investment
  bank to successfully complete a tax-exempt
  synthetic lease (Depaul University, 1998). Since
  that time we have completed over 500 million in
  tax-exempt synthetic leases.
• Salomon Smith Barney was also the first to
  accomplish a true sale tax-exempt sale lease back
  which achieved operating lease treatment (Depaul
  University, 1998)
• Convention Centers
• Since 1996, Salomon Smith Barney has managed 56
  such financings totaling in excess of 3.9
  billion, making Salomon Smith Barney the number
  one firm in sports and convention center
  financings.

8
9
Salomon Smith Barney Products

• Tobacco Securitizations
• Salomon Smith Barney issued the first tobacco
  securitization in the amount of 709 million
  (TSASC, November, 1999).
• Short-term Financing
• Since January 1983, Salomon Smith Barney has
  managed 188 billion of short-term tax-exempt and
  taxable municipal financings, making us one of
  the leading underwriters, remarketing agents, and
  dealers of municipal short-term transactions.
• Salomon Smith Barney presently serves as the
  exclusive remarketing agent, dealer or lead
  broker-dealer for 1,029 variable rate financing
  programs that total almost 46 billion in
  principal amount outstanding.
• Rating Agency Advisory
• Salomon Smith Barney is a market leader
  introducing new municipal credits to the
  marketplace. The firm benefits for the experience
  of Rating Advisory Head, George Leung. Mr. Leung
  spent over 20 years at Moodys Investors Service
  and was the senior chairperson for Moodys Public
  Finance rating committee and rating policy
  committee. He was also responsible for Moodys
  legal analysis group and client relations.
• Research
• Institutional Investor Magazine ranked our head
  of research, George Friedlander, the number one
  municipal bond strategist for the year 2000.

9
10
US Municipal Bonds are a 1.5 Trillion Market

• The US market has over 80,000 state and local
  governments Moodys rates 18,000 sub-sovereign
  issues in the US vs. about 300 in the rest of the
  world

Municipal Bond Issuers by Type January through
December 2001 (in millions)
Municipal Bond Holders by Type (in billions)
240
186
116
255
106
91
64
572
City, Town, or Village
Local Authority
State Authority
District
Households
Money Market Funds
Mutual Funds
Property Casualty Co.
Direct Issuer
County/Parish
State
College or University
Commercial Banks
Trusts
Other
Close-end Funds
Co-op Utility
Indian Tribe
Source Securities Data Corporation, As of
December 19, 2001
Source http//www.bondmarkets.com/research/tsyhol
d2000.shtml
10
11
Municipal Bonds are a Major Source of Local
Government Capital Funding

• Grants-in-aid from federal government are also
  important municipal market also used to fund
  short-term cash flow needs of state and local
  governments.

Municipal Market Use of Proceeds January through
December2001 (in millions)
Source Securities Data Corporation, As of
December19 2001
11
12
The US Municipal Market is Primarily an
Investment Grade Market

• The appetite for sub-investment grade debt is
  concentrated among specialized funds and
  crossover buyers.

Underlying Rating Distribution for Long-term Debt
Issuances As of December 2001
A
Aa
Aaa
Baa
Ba
B
C
12
13
The Market has Become Increasingly Sophisticated

• General Obligation (GO) bonds are backed by the
  full faith and credit of the issuer pledging
  all available revenues towards debt repayment
• Revenue Bonds are limited obligations backed by
  specific taxes and revenues amortizing
  structures with final maturities up to 30 years
  are common

General Obligation vs. Revenue Bonds (1975)
General Obligations vs. Revenue Bonds (2000)
64,584
32
11,900
47
53
68
13,500
135,529
Revenue Bonds
General Obligations Bonds
Revenue Bonds
General Obligation Bonds
Source Bond Buyer 2001
Source Bond Buyer 2001
13
14
Security Structures Used in the U.S. Municipal
Bond Market

• General Obligation full faith and credit of
  the municipal enterprise
• Unlimited Ad Valorem Taxes taxes on real
  property are a prime source of funding for local
  governments and school districts
• Sales and Other Excise Taxes have been heavily
  used in recent years to support local
  transportation improvements
• Hotel Taxes / Rental Car Surcharges often used
  to support convention center and sports facility
  financings
• Motor Vehicle Taxes/Fees gasoline taxes,
  automobile licensing fees used for road
  improvements
• Municipal Enterprise Revenues airports,
  seaports, toll roads, public transit, electric
  power, water/sewer
• Federal/State Revenue Sharing constitutional or
  legislative apportionment of revenue collected at
  higher level of government like Ramo 28
  participaciones
• Grant Anticipation Notes Short-term borrowing
  repaid by federal/state grant commitments
• Mineral/Petroleum Royalties have been used by
  certain Argentine provinces to secure US bonds

15
15
Developing the Mexican State and Municipal Bond
Market

• How big an opportunity is represented by the
  Mexican sub-sovereign market?
• How is the market likely to develop?
• What are the remaining obstacles to full
  development of the market?
• Who are likely to be our principal competitors?
• What Banamex/Citigroup resources are needed to
  maximize the opportunity for our firm?
• How can U.S. Public Finance contribute to your
  efforts?

16
16
CASE STUDIES
17
Case StudyTobacco Settlement Securitizations
First firm to structure a tobacco
settlement revenue securitization Most Senior
Managed Transactions
709,280,000 TSASC, Inc. 294,500,000 Nassau
Asset Securitization Corp 103,500,000
Westchester Asset Settlement Corp 47,900,000
Niagara Tobacco Asset Securitization
Corp 397,000,000 The Childrens Trust Fund
28,400,000 Ulster Tobacco Asset Securitization
Corp 521,100,000 District of Columbia Tobacco
Settlement 25,500,000 Guam Economic Development
Corp