• Citi Cards Plant-A-Tree Initiative

• Smith Barney Plant-A-Tree Initiative

Forests provide essential goods and services to both local and global communities and markets. As a financial institution with business relationships across the forestry sector and within many countries that are key producers of forest products, Citi is connected with, and committed to, the efforts to sustain healthy forest systems. We pay special attention to impacts on forests of high ecological value in our risk assessment process and promote sustainable forestry projects through the Citigroup Foundation and our businesses. We are also committed to addressing the financing of illegal logging, one of the biggest threats to forests, and have developed a policy and program to help address the issue.

Illegal logging is an increasing threat to critical forest ecosystems worldwide, as well as economies and human rights. Many forested countries are afflicted with corrupt loggers that cut timber without government knowledge or approval. This illegal activity destroys forests, harms forest-based communities, and deprives government treasuries of billions of dollars in tax revenue every year.

To ensure that we do our part to stem the financing of illegal logging and to enhance our internal capacity, Citi Markets and Banking ESRM Unit launched a Global Forestry & Finance program in 2007. With assistance from external experts and NGO partners, we developed a workshop series for our bankers and portfolio managers involved in the forestry sector. To launch the program, half-day workshops have been scheduled in Malaysia, Brazil, and New York in 2007 and will focus on implementation of our Citi-specific Sustainable Forestry Policy, including an overview of the certification process, when required, for various Forest Product Obligors. Each workshop also includes a field trip to a certified operation to demonstrate best practice and focus on lessons learned.

Citi also engages with government and industry in a dialogue on illegal logging, participates in policy forums, and supports organizations that advocate for forest law enforcement and policy reform.

Specific steps taken to address the issue include:

• In March 2006, Citi's Markets and Banking (CMB) division revised its Environmental and Social Risk Management (ESRM) Policy. This Policy update included refinement of CMB's approach to ensure sustainable commercial logging and primary processing of timber, which includes requirements for independent certification in certain operations and high-risk geographies. For more detailed information on this approach, please see our Sustainable Forestry Policy.



• CMB's ESRM Director has incorporated sustainable forestry and anti-illegal logging issues into global ESRM training sessions and provides bankers with additional guidance on implementation of the credit policy's provisions with respect to illegal logging.



• Citi senior management meets regularly with representatives from many organizations deeply involved in solving the illegal logging problem, such as the World Resources Institute's Global Forest Watch program, Forest Trends, the Rainforest Action Network, Rainforest Alliance, the Forest Stewardship Council, ProForest, the International Tropical Timber Organization, and the World Bank Group. These extended dialogues have resulted in a broader internal understanding of the issues involved and have helped us to develop and shape our policies.

Sustainable forestry is one of the core themes of the Citigroup Foundation's environmental grantmaking portfolio. In 2006, the Foundation funded eight projects promoting sustainable forestry projects. For more information on Citigroup Foundation grants in the environmental sector, please see our Partners webpage. In July 2006, Citi sponsored a meeting of the National Community Forestry Marketing Consortium, a group devoted to connecting sustainable, community-based forestry efforts with markets looking for responsibly produced forest products.

FOCUS: Ecologic Development Fundd

The Ecologic Development Fund (EDF) was awarded a grant by the Citigroup Foundation to continue its work in Honduras and Panama to produce community-based carbon offsets via the reforestation of a reserve. This project provides a new model through its combination of forest stewardship, climate change mitigation, and economic development. The project was also one of the first of its kind certified for carbon offsets under the Kyoto Protocol's Clean Development Mechanism (CDM). EDF's achievement was a milestone because the CDM had previously not awarded offsets to reforestation projects due to methodological concerns. The carbon offset revenues will fund the reforestation and stewardship efforts, as well as provide an economic engine to help address rural poverty in the area.