The information in this preliminary
pricing supplement is not complete and may be changed. A registration statement relating to these securities has been filed with
the Securities and Exchange Commission. This preliminary pricing supplement and the accompanying product supplement, underlying
supplement, prospectus supplement and prospectus are not an offer to sell these securities, nor are they soliciting an offer to
buy these securities, in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER
23, 2015
|
Citigroup Inc. |
December-----,
2015
Medium-Term Senior
Notes, Series G
Pricing Supplement
No. 2015-CMTNG0764
Filed Pursuant
to Rule 424(b)(2)
Registration Statement
No. 333-192302 |
Buffer Securities Based on the Dow Jones Industrial
AverageTM Due December-----, 2020
Overview
| ▪ | The securities offered by this pricing supplement are unsecured senior debt securities issued by Citigroup Inc. Unlike conventional
debt securities, the securities do not pay interest and do not repay a fixed amount of principal at maturity. Instead, the securities
offer a payment at maturity that may be greater than, equal to or less than the stated principal amount, depending on the performance
of the Dow Jones Industrial AverageTM (the “underlying index”) from the initial index level to the final
index level. |
| ▪ | The securities offer leveraged exposure to the potential appreciation of the underlying index and a limited buffer against
the potential depreciation of the underlying index as described below. In exchange for those features, investors in the securities
must be willing to forgo any dividends that may be paid on the stocks that constitute the underlying index. In addition, investors
in the securities must be willing to accept downside exposure to any depreciation of the underlying index in excess of the 15.00%
buffer. If the underlying index depreciates by more than the buffer amount from the pricing date to the valuation date, you
will lose 1% of the stated principal amount of your securities for every 1% by which that depreciation exceeds the buffer amount. |
| ▪ | In order to obtain the modified exposure to the underlying index that the securities provide, investors must be willing to
accept (i) an investment that may have limited or no liquidity and (ii) the risk of not receiving any amount due under the securities
if we default on our obligations. All payments on the securities are subject to the credit risk of Citigroup Inc. |
KEY TERMS |
|
Underlying index: |
The Dow Jones Industrial AverageTM (ticker symbol: “INDU”) |
Aggregate stated principal amount: |
$ |
Stated principal amount: |
$1,000 per security |
Pricing date: |
December , 2015 (expected to be December 22, 2015) |
Issue date: |
December , 2015 (three business days after the pricing date) |
Valuation date: |
December , 2020 (expected to be December 22, 2020), subject to postponement if such date is not a scheduled trading day or if certain market disruption events occur |
Maturity date: |
December , 2020 (expected to be December 28, 2020) |
Payment at maturity: |
For each $1,000 stated principal amount security you hold at maturity:
▪ If
the final index level is greater than the initial index level:
$1,000 + the leveraged return amount
▪ If
the final index level is equal to or less than the initial index level by an amount equal to or less than
the buffer amount:
$1,000
▪ If
the final index level is less than the initial index level by an amount greater than the buffer amount:
($1,000 × the index performance factor) + $150.00
If the underlying index decreases from the initial index level
to the final index level by more than the buffer amount, your payment at maturity will be less, and possibly significantly less,
than the $1,000 stated principal amount per security. You should not invest in the securities unless you are willing and able to
bear the risk of losing a significant portion of your investment.
|
Initial index level: |
, the closing level of the underlying index on the pricing date |
Final index level: |
The closing level of the underlying index on the valuation date |
Index performance factor: |
The final index level divided by the initial index level |
Index percent increase: |
The final index level minus the initial index level, divided by the initial index level |
Leveraged return amount: |
$1,000 × the index percent increase × the leverage factor |
Leverage factor: |
100.00% to 110.00%. The actual leverage factor will be determined on the pricing date. |
Buffer amount: |
15.00% |
Listing: |
The securities will not be listed on any securities exchange |
CUSIP / ISIN: |
17298C4P0 / US17298C4P05 |
Underwriter: |
Citigroup Global Markets Inc. (“CGMI”), an affiliate of the issuer, acting as principal |
Underwriting fee and issue price: |
Issue price(1)(2) |
Underwriting fee(3) |
Proceeds to issuer |
Per security: |
$1,000.00 |
$30.00 |
$970.00 |
Total: |
$ |
$ |
$ |
(1) Citigroup Inc. currently expects that the estimated value
of the securities on the pricing date will be at least $910.00 per security, which will be less than the issue price. The estimated
value of the securities is based on CGMI’s proprietary pricing models and our internal funding rate. It is not an indication
of actual profit to CGMI or other of our affiliates, nor is it an indication of the price, if any, at which CGMI or any other person
may be willing to buy the securities from you at any time after issuance. See “Valuation of the Securities” in this
pricing supplement.
(2) The issue price for investors purchasing the securities in
fee-based advisory accounts will be $970.00 per security, assuming no custodial fee is charged by a selected dealer, and up to
$975.00 per security, assuming the maximum custodial fee is charged by a selected dealer. See “Supplemental Plan of Distribution”
in this pricing supplement.
(3) For more information on the distribution of the securities,
see “Supplemental Plan of Distribution” in this pricing supplement. In addition to the underwriting fee, CGMI and its
affiliates may profit from expected hedging activity related to this offering, even if the value of the securities declines. See
“Use of Proceeds and Hedging” in the accompanying prospectus.
Investing in the securities involves risks not associated
with an investment in conventional debt securities. See “Summary Risk Factors” beginning on page PS-3.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of the securities or determined that this pricing supplement and
the accompanying product supplement, underlying supplement, prospectus supplement and prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
You should read this pricing supplement
together with the accompanying product supplement, underlying supplement, prospectus supplement and prospectus, each of which can
be accessed via the hyperlinks below:
Product
Supplement No. EA-02-03 dated November 13, 2013 Underlying
Supplement No. 3 dated November 13, 2013
Prospectus
Supplement and Prospectus each dated November 13, 2013
The securities are not bank deposits and
are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations
of, or guaranteed by, a bank.
Citigroup Inc. |
Buffer Securities Based on the Dow Jones Industrial AverageTM Due December-----, 2020 |
|
Additional Information
The terms of the securities are set forth in the accompanying
product supplement, prospectus supplement and prospectus, as supplemented by this pricing supplement. The accompanying product
supplement, prospectus supplement and prospectus contain important disclosures that are not repeated in this pricing supplement.
For example, certain events may occur that could affect your payment at maturity. These events and their consequences are described
in the accompanying product supplement in the sections “Description of the Securities—Certain Additional Terms for
Securities Linked to an Underlying Index—Consequences of a Market Disruption Event; Postponement of a Valuation Date”
and “—Discontinuance or Material Modification of an Underlying Index,” and not in this pricing supplement. The
accompanying underlying supplement contains important disclosures regarding the underlying index that are not repeated in this
pricing supplement. It is important that you read the accompanying product supplement, underlying supplement, prospectus supplement
and prospectus together with this pricing supplement before deciding whether to invest in the securities. Certain terms used but
not defined in this pricing supplement are defined in the accompanying product supplement.
Hypothetical Examples
The diagram below illustrates your payment at maturity for a
range of hypothetical percentage changes from the initial index level to the final index level. The diagram and examples below
are based on a hypothetical leverage factor of 100.00%.
Investors in the securities will not receive any dividends
on the stocks that constitute the underlying index. The diagram and examples below do not show any effect of lost dividend yield
over the term of the securities. See “Summary Risk Factors—Investing in the securities is not equivalent to investing
in the underlying index or the stocks that constitute the underlying index” below.
Buffer Securities
Payment at Maturity Diagram |
|
n The Securities |
n The Underlying Index |
Citigroup Inc. |
Buffer Securities Based on the Dow Jones Industrial AverageTM Due December-----, 2020 |
|
Your actual payment at maturity per security will depend on the
actual leverage factor, which will be determined on the pricing date, the actual initial index level and the actual final index
level. The examples below are intended to illustrate how your payment at maturity will depend on whether the final index level
is greater than or less than the initial index level and by how much. The examples are based on a hypothetical initial index level
of 17,700.00.
Example 1—Upside Scenario. The hypothetical final
index level is 18,585.00 (an approximately 5.00% increase from the hypothetical initial index level), which is greater than
the hypothetical initial index level.
Payment at maturity per security = $1,000 + the leveraged return
amount
= $1,000 + ($1,000 × the index percent increase ×
the hypothetical leverage factor)
= $1,000 + ($1,000 × 5.00% × 100.00%)
= $1,000 + $50.00
= $1,050.00
Because the underlying index appreciated from the hypothetical
initial index level to the hypothetical final index level, your payment at maturity in this scenario would be equal to the $1,000
stated principal amount per security plus the leveraged return amount, or $1,050.00 per security.
Example 2—Par Scenario. The hypothetical final index
level is 16,815.00 (an approximately 5.00% decrease from the hypothetical initial index level), which is less than the hypothetical
initial index level by an amount that is less than the buffer amount of 15.00%.
Payment at maturity per security = $1,000
Because the underlying index did not decrease from the hypothetical
initial index level to the hypothetical final index level by more than the 15.00% buffer amount, your payment at maturity in this
scenario would be equal to the $1,000 stated principal amount per security.
Example 3—Downside Scenario. The hypothetical final
index level is 5,310.00 (an approximately 70.00% decrease from the hypothetical initial index level), which is less than
the hypothetical initial index level by an amount that is more than the buffer amount of 15.00%.
Payment at maturity per security = ($1,000 × the index
performance factor) + $150.00
= ($1,000 × 30.00%) + $150.00
= $300.00 + $150.00
= $450.00
Because the underlying index decreased from the hypothetical
initial index level to the hypothetical final index level by more than the 15.00% buffer amount, your payment at maturity in this
scenario would reflect 1-to-1 exposure to the negative performance of the underlying index beyond the 15.00% buffer amount.
Summary Risk Factors
An investment in the securities is significantly riskier than
an investment in conventional debt securities. The securities are subject to all of the risks associated with an investment in
our conventional debt securities, including the risk that we may default on our obligations under the securities, and are also
subject to risks associated with the underlying index. Accordingly, the securities are suitable only for investors who are capable
of understanding the complexities and risks of the securities. You should consult your own financial, tax and legal advisers as
to the risks of an investment in the securities and the suitability of the securities in light of your particular circumstances.
The following is a summary of certain key risk factors for investors
in the securities. You should read this summary together with the more detailed description of risks relating to an investment
in the securities contained in the section “Risk Factors Relating to the Securities” beginning on page EA-6 in the
accompanying product supplement. You should also carefully read the risk factors included in the documents incorporated by reference
in the accompanying prospectus, including our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form
10-Q, which describe risks relating to our business more generally.
| ▪ | You may lose up to 85.00% of your investment. Unlike conventional debt securities, the securities do not repay a fixed
amount of principal at maturity. Instead, your payment at maturity will depend on the performance of the underlying index. If the
underlying index depreciates by more than the buffer amount, you will lose 1% of the stated principal amount of your securities
for every 1% by which that depreciation exceeds the buffer amount. |
| ▪ | The securities do not pay interest. Unlike conventional debt securities, the securities do not pay interest or any other
amounts prior to maturity. You should not invest in the securities if you seek current income during the term of the securities. |
Citigroup Inc. |
Buffer Securities Based on the Dow Jones Industrial AverageTM Due December-----, 2020 |
|
| ▪ | Investing in the securities is not equivalent to investing in the underlying index or the stocks that constitute the underlying
index. You will not have voting rights, rights to receive dividends or other distributions or any other rights with respect
to the stocks that constitute the underlying index. As of November 18, 2015, the average dividend yield of the underlying index
was approximately 2.44% per year. While it is impossible to know the future dividend yield of the underlying index, if this average
dividend yield were to remain constant for the term of the securities, you would be forgoing an aggregate yield of approximately
12.20% (assuming no reinvestment of dividends) by investing in the securities instead of investing directly in the stocks that
constitute the underlying index or in another investment linked to the underlying index that provides for a pass-through of dividends.
The payment scenarios described in this pricing supplement do not show any effect of lost dividend yield over the term of the securities. |
| ▪ | Your payment at maturity depends on the closing level of the underlying index on a single day. Because your payment
at maturity depends on the closing level of the underlying index solely on the valuation date, you are subject to the risk that
the closing level of the underlying index on that day may be lower, and possibly significantly lower, than on one or more other
dates during the term of the securities. If you had invested in another instrument linked to the underlying index that you could
sell for full value at a time selected by you, or if the payment at maturity were based on an average of closing levels of the
underlying index, you might have achieved better returns. |
| ▪ | The securities are subject to the credit risk of Citigroup Inc. If we default on our obligations under the securities,
you may not receive anything owed to you under the securities. |
| ▪ | The securities will not be listed on any securities exchange and you may not be able to sell them prior to maturity.
The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities.
CGMI currently intends to make a secondary market in relation to the securities and to provide an indicative bid price for the
securities on a daily basis. Any indicative bid price for the securities provided by CGMI will be determined in CGMI’s sole
discretion, taking into account prevailing market conditions and other relevant factors, and will not be a representation by CGMI
that the securities can be sold at that price, or at all. CGMI may suspend or terminate making a market and providing indicative
bid prices without notice, at any time and for any reason. If CGMI suspends or terminates making a market, there may be no secondary
market at all for the securities because it is likely that CGMI will be the only broker-dealer that is willing to buy your securities
prior to maturity. Accordingly, an investor must be prepared to hold the securities until maturity. |
| ▪ | The estimated value of the securities on the pricing date, based on CGMI’s proprietary pricing models and our internal
funding rate, will be less than the issue price. The difference is attributable to certain costs associated with selling, structuring
and hedging the securities that are included in the issue price. These costs include (i) the selling concessions paid in connection
with the offering of the securities, (ii) hedging and other costs incurred by us and our affiliates in connection with the offering
of the securities and (iii) the expected profit (which may be more or less than actual profit) to CGMI or other of our affiliates
in connection with hedging our obligations under the securities. These costs adversely affect the economic terms of the securities
because, if they were lower, the economic terms of the securities would be more favorable to you. The economic terms of the securities
are also likely to be adversely affected by the use of our internal funding rate, rather than our secondary market rate, to price
the securities. See “The estimated value of the securities would be lower if it were calculated based on our secondary market
rate” below. |
| ▪ | The estimated value of the securities was determined for us by our affiliate using proprietary pricing models. CGMI
derived the estimated value disclosed on the cover page of this pricing supplement from its proprietary pricing models. In doing
so, it may have made discretionary judgments about the inputs to its models, such as the volatility of the underlying index, dividend
yields on the stocks that constitute the underlying index and interest rates. CGMI’s views on these inputs may differ from
your or others’ views, and as an underwriter in this offering, CGMI’s interests may conflict with yours. Both the models
and the inputs to the models may prove to be wrong and therefore not an accurate reflection of the value of the securities. Moreover,
the estimated value of the securities set forth on the cover page of this pricing supplement may differ from the value that we
or our affiliates may determine for the securities for other purposes, including for accounting purposes. You should not invest
in the securities because of the estimated value of the securities. Instead, you should be willing to hold the securities to maturity
irrespective of the initial estimated value. |
| ▪ | The estimated value of the securities would be lower if it were calculated based on our secondary market rate. The estimated
value of the securities included in this pricing supplement is calculated based on our internal funding rate, which is the rate
at which we are willing to borrow funds through the issuance of the securities. Our internal funding rate is generally lower than
the market rate implied by traded instruments referencing our debt obligations in the secondary market for those debt obligations,
which we refer to as our secondary market rate. If the estimated value included in this pricing supplement were based on our secondary
market rate, rather than our internal funding rate, it would likely be lower. We determine our internal funding rate based on factors
such as the costs associated with the securities, which are generally higher than the costs associated with conventional debt securities,
and our liquidity needs and preferences. Our internal funding rate is not an interest rate that we will pay to investors in the
securities, which do not bear interest. |
Citigroup Inc. |
Buffer Securities Based on the Dow Jones Industrial AverageTM Due December-----, 2020 |
|
| ▪ | The estimated value of the securities is not an indication of the price, if any, at which CGMI or any other person may be
willing to buy the securities from you in the secondary market. Any such secondary market price will fluctuate over the term
of the securities based on the market and other factors described in the next risk factor. Moreover, unlike the estimated value
included in this pricing supplement, any value of the securities determined for purposes of a secondary market transaction will
be based on our secondary market rate, which will likely result in a lower value for the securities than if our internal funding
rate were used. In addition, any secondary market price for the securities will be reduced by a bid-ask spread, which may vary
depending on the aggregate stated principal amount of the securities to be purchased in the secondary market transaction, and the
expected cost of unwinding related hedging transactions. As a result, it is likely that any secondary market price for the securities
will be less than the issue price. |
| ▪ | The value of the securities prior to maturity will fluctuate based on many unpredictable factors. The value of your
securities prior to maturity will fluctuate based on the level and volatility of the underlying index and a number of other factors,
including the price and volatility of the stocks that constitute the underlying index, the dividend yields on the stocks that constitute
the underlying index, interest rates generally, the time remaining to maturity and our creditworthiness, as reflected in our secondary
market rate. You should understand that the value of your securities at any time prior to maturity may be significantly less than
the issue price. |
| ▪ | Immediately following issuance, any secondary market bid price provided by CGMI, and the value that will be indicated on
any brokerage account statements prepared by CGMI or its affiliates, will reflect a temporary upward adjustment. The amount
of this temporary upward adjustment will steadily decline to zero over the temporary adjustment period. See “Valuation of
the Securities” in this pricing supplement. |
| ▪ | Our offering of the securities does not constitute a recommendation of the underlying index. The fact that we are offering
the securities does not mean that we believe that investing in an instrument linked to the underlying index is likely to achieve
favorable returns. In fact, as we are part of a global financial institution, our affiliates may have positions (including short
positions) in the stocks that constitute the underlying index or in instruments related to the underlying index or such stocks
over the term of the securities and may publish research or express opinions, that in each case are inconsistent with an investment
linked to the underlying index. These and other activities of our affiliates may affect the level of the underlying index in a
way that has a negative impact on your interests as a holder of the securities. |
| ▪ | The level of the underlying index may be adversely affected by our or our affiliates’ hedging and other trading activities.
We expect to hedge our obligations under the securities through CGMI or other of our affiliates, who may take positions directly
in the stocks that constitute the underlying index and other financial instruments related to the underlying index or such stocks
and may adjust such positions during the term of the securities. Our affiliates also trade the stocks that constitute the underlying
index and other financial instruments related to the underlying index or such stocks on a regular basis (taking long or short positions
or both), for their accounts, for other accounts under their management or to facilitate transactions on behalf of customers. These
activities could affect the level of the underlying index in a way that negatively affects the value of the securities. They could
also result in substantial returns for us or our affiliates while the value of the securities declines. |
| ▪ | We and our affiliates may have economic interests that are adverse to yours as a result of our affiliates’ business
activities. Our affiliates may currently or from time to time engage in business with the issuers of the stocks that constitute
the underlying index, including extending loans to, making equity investments in or providing advisory services to such issuers.
In the course of this business, we or our affiliates may acquire non-public information about such issuers, which we will not disclose
to you. Moreover, if any of our affiliates is or becomes a creditor of any such issuer, they may exercise any remedies against
such issuer that are available to them without regard to your interests. |
| ▪ | The calculation agent, which is an affiliate of ours, will make important determinations with respect to the securities.
If certain events occur, such as market disruption events or the discontinuance of the underlying index, CGMI, as calculation agent,
will be required to make discretionary judgments that could significantly affect your payment at maturity. In making these judgments,
the calculation agent’s interests as an affiliate of ours could be adverse to your interests as a holder of the securities. |
| ▪ | Adjustments to the underlying index may affect the value of your securities. S&P Dow Jones Indices LLC (the “underlying
index publisher”) may add, delete or substitute the stocks that constitute the underlying index or make other methodological
changes that could affect the level of the underlying index. The underlying index publisher may discontinue or suspend calculation
or publication of the underlying index at any time without regard to your interests as holders of the securities. |
| ▪ | The U.S. federal tax consequences of an investment in the securities are unclear. There is no direct legal authority
regarding the proper U.S. federal tax treatment of the securities, and we do not plan to request a ruling from the Internal Revenue
Service (the “IRS”). Consequently, significant aspects of the tax treatment of the securities are uncertain, and the
IRS or a court might not agree with the treatment of the securities as prepaid forward contracts. If the IRS were successful in
asserting an alternative treatment of the securities, the tax consequences of the ownership and disposition of the securities might
be materially and adversely affected. As described below under “United States Federal Tax Considerations,” in 2007,
the U.S. Treasury Department and the IRS released a notice requesting comments on various issues regarding the U.S. federal income
tax treatment of “prepaid |
Citigroup Inc. |
Buffer Securities Based on the Dow Jones Industrial AverageTM Due December-----, 2020 |
|
forward contracts” and similar
instruments. Any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely
affect the tax consequences of an investment in the securities, including the character and timing of income or loss and the degree,
if any, to which income realized by non-U.S. persons should be subject to withholding tax, possibly with retroactive effect. You
should read carefully the discussion under “United States Federal Tax Considerations” and “Risk Factors Relating
to the Securities” in the accompanying product supplement and “United States Federal Tax Considerations” in this
pricing supplement. You should also consult your tax adviser regarding the U.S. federal tax consequences of an investment in the
securities, as well as tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Information About the Underlying Index
The Dow Jones Industrial AverageTM is a price-weighted
index rather than a market capitalization-weighted index. The Dow Jones Industrial AverageTM consists of 30 common stocks
chosen as representative of the broad market of U.S. industry. It is calculated and maintained by S&P Dow Jones Indices LLC.
The Dow Jones Industrial AverageTM is reported by Bloomberg L.P. under the ticker symbol “INDU.”
“Dow Jones®,” “Dow Jones Indexes,”
and “Dow Jones Industrial AverageTM” are service marks of Dow Jones Trademark Holdings, LLC and have been
licensed to S&P Dow Jones Indices LLC and sublicensed for use for certain purposes by Citigroup Global Markets Inc. and its
affiliates. For more information regarding the license, see “Equity Index Descriptions— Dow Jones Industrial AverageTM
— License Agreement” in the accompanying underlying supplement.
Please refer to the section “Equity Index Descriptions—Dow
Jones Industrial AverageTM” in the accompanying underlying supplement for important disclosures regarding the
underlying index.
Historical Information
The closing level of the underlying index on November 18, 2015
was 17,737.16.
The graph below shows the closing levels of the underlying index
for each day such level was available from January 4, 2010 to November 18, 2015. We obtained the closing levels from Bloomberg
L.P., without independent verification. You should not take the historical levels of the underlying index as an indication of future
performance.
Dow Jones Industrial AverageTM – Historical Closing Levels
January 4, 2010 to November 18, 2015 |
|
Citigroup Inc. |
Buffer Securities Based on the Dow Jones Industrial AverageTM Due December-----, 2020 |
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United States Federal Tax Considerations
You should read carefully the discussion under “United
States Federal Tax Considerations” and “Risk Factors Relating to the Securities” in the accompanying product
supplement and “Summary Risk Factors” in this pricing supplement.
In the opinion of our counsel, Davis Polk & Wardwell LLP,
which is based on current market conditions, a security should be treated as a prepaid forward contract for U.S. federal income
tax purposes. By purchasing a security, you agree (in the absence of an administrative determination or judicial ruling to the
contrary) to this treatment. There is uncertainty regarding this treatment, and the IRS or a court might not agree with it.
Assuming this treatment of the securities is respected and subject
to the discussion in “United States Federal Tax Considerations” in the accompanying product supplement, the following
U.S. federal income tax consequences should result under current law:
| · | You should not recognize taxable income over the term of the securities prior to maturity, other than pursuant to a sale or
exchange. |
| · | Upon a sale or exchange of a security (including retirement at maturity), you should recognize capital gain or loss equal to
the difference between the amount realized and your tax basis in the security. Such gain or loss should be long-term capital gain
or loss if you held the security for more than one year. |
Subject to the discussion below, if you are a Non-U.S. Holder
(as defined in the accompanying product supplement) of the securities, you generally should not be subject to U.S. federal withholding
or income tax in respect of any amount paid to you with respect to the securities, provided that (i) income in respect of the securities
is not effectively connected with your conduct of a trade or business in the United States, and (ii) you comply with the applicable
certification requirements.
The U.S. Treasury Department recently finalized the regulations
referred to in “United States Federal Tax Considerations—Tax Consequences to Non-U.S. Holders—Possible Application
of Section 871(m) of the Code” in the accompanying product supplement, which require withholding on certain “dividend
equivalent” payments to non-U.S. persons. Based on the effective date in the final regulations, those regulations will not
apply to the securities assuming there is no significant modification to the securities’ terms that results in a deemed exchange
of the securities for U.S. federal income tax purposes.
As discussed in the section of the accompanying product supplement
entitled “United States Federal Tax Considerations,” withholding under legislation commonly referred to as “FATCA”
might (if the securities were recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the
securities and to the payment of gross proceeds of a disposition (including a retirement) of the securities. However, under a recent
IRS notice, withholding under “FATCA” will apply to payments of gross proceeds (other than any amount treated as interest)
only with respect to dispositions after December 31, 2018. You should consult your tax adviser regarding the potential application
of “FATCA” to the securities.
In 2007, the U.S. Treasury Department and the IRS released a
notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments.
The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment.
It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded
status of the instruments and the nature of the underlying property to which the instruments are linked; the degree, if any, to
which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether
these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate
to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While the notice requests comments
on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration
of these issues could materially and adversely affect the tax consequences of an investment in the securities, including the character
and timing of income or loss and the degree, if any, to which income realized by non-U.S. persons should be subject to withholding
tax, possibly with retroactive effect. If withholding tax applies to the securities, we will not be required to pay any additional
amounts with respect to amounts so withheld.
You should read the section entitled “United States
Federal Tax Considerations” in the accompanying product supplement. The preceding discussion, when read in combination with
that section, constitutes the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences
of owning and disposing of the securities.
You should also consult your tax adviser regarding all aspects
of the U.S. federal income and estate tax consequences of an investment in the securities and any tax consequences arising under
the laws of any state, local or non-U.S. taxing jurisdiction.
Supplemental Plan of Distribution
CGMI, an affiliate of Citigroup Inc. and the underwriter of the
sale of the securities, is acting as principal and will receive an underwriting fee of $30.00 for each $1,000 security sold in
this offering (or up to $5.00 per security in the case of sales to fee-based advisory accounts). From this underwriting fee, CGMI
will pay selected dealers not affiliated with CGMI a fixed selling concession of $30.00 for
Citigroup Inc. |
Buffer Securities Based on the Dow Jones Industrial AverageTM Due December-----, 2020 |
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each $1,000 security they sell to accounts other than fee-based
advisory accounts. CGMI will pay selected dealers not affiliated with CGMI, which may include dealers acting as custodians,
a variable selling concession of up to $5.00 for each $1,000 security they sell to fee-based advisory accounts. Certain broker-dealers
affiliated with CGMI, including Citi International Financial Services, Citigroup Global Markets Singapore Pte. Ltd. and Citigroup
Global Markets Asia Limited, will receive a fixed selling concession, and financial advisers employed by such affiliated broker-dealers
will receive a fixed selling concession, of $30.00 for each $1,000 security they sell. CGMI will pay the registered representatives
of CGMI a fixed selling concession of $30.00 for each $1,000 security they sell.
CGMI is an affiliate of ours. Accordingly, this offering will
conform with the requirements addressing conflicts of interest when distributing the securities of an affiliate set forth in Rule
5121 of the Financial Industry Regulatory Authority. Client accounts over which Citigroup Inc. or its subsidiaries have investment
discretion will not be permitted to purchase the securities, either directly or indirectly, without the prior written consent of
the client.
See “Plan of Distribution; Conflicts of Interest”
in the accompanying product supplement and “Plan of Distribution” in each of the accompanying prospectus supplement
and prospectus for additional information.
A portion of the net proceeds from the sale of the securities
will be used to hedge our obligations under the securities. We expect to hedge our obligations under the securities through CGMI
or other of our affiliates. CGMI or such other of our affiliates may profit from this expected hedging activity even if the value
of the securities declines. This hedging activity could affect the closing level of the underlying index and, therefore, the value
of and your return on the securities. For additional information on the ways in which our counterparties may hedge our obligations
under the securities, see “Use of Proceeds and Hedging” in the accompanying prospectus.
Valuation of the Securities
CGMI calculated the estimated value of the securities set forth
on the cover page of this pricing supplement based on proprietary pricing models. CGMI’s proprietary pricing models generated
an estimated value for the securities by estimating the value of a hypothetical package of financial instruments that would replicate
the payout on the securities, which consists of a fixed-income bond (the “bond component”) and one or more derivative
instruments underlying the economic terms of the securities (the “derivative component”). CGMI calculated the estimated
value of the bond component using a discount rate based on our internal funding rate. CGMI calculated the estimated value of the
derivative component based on a proprietary derivative-pricing model, which generated a theoretical price for the instruments that
constitute the derivative component based on various inputs, including the factors described under “Summary Risk Factors—The
value of the securities prior to maturity will fluctuate based on many unpredictable factors” in this pricing supplement,
but not including our creditworthiness. These inputs may be market-observable or may be based on assumptions made by CGMI in its
discretionary judgment.
The estimated value of the securities is a function of the terms
of the securities and the inputs to CGMI’s proprietary pricing models. As of the date of this preliminary pricing supplement,
it is uncertain what the estimated value of the securities will be on the pricing date because certain terms of the securities
have not yet been fixed and because it is uncertain what the values of the inputs to CGMI’s proprietary pricing models will
be on the pricing date.
For a period of approximately four months following issuance
of the securities, the price, if any, at which CGMI would be willing to buy the securities from investors, and the value that will
be indicated for the securities on any brokerage account statements prepared by CGMI or its affiliates (which value CGMI may also
publish through one or more financial information vendors), will reflect a temporary upward adjustment from the price or value
that would otherwise be determined. This temporary upward adjustment represents a portion of the hedging profit expected to be
realized by CGMI or its affiliates over the term of the securities. The amount of this temporary upward adjustment will decline
to zero on a straight-line basis over the four-month temporary adjustment period. However, CGMI is not obligated to buy the securities
from investors at any time. See “Summary Risk Factors—The securities will not be listed on any securities exchange
and you may not be able to sell them prior to maturity.”
Certain Selling Restrictions
Hong Kong Special
Administrative Region
The contents of this pricing supplement
and the accompanying product supplement, underlying supplement, prospectus supplement and prospectus have not been reviewed by
any regulatory authority in the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”).
Investors are advised to exercise caution in relation to the offer. If investors are in any doubt about any of the contents of
this pricing supplement and the accompanying product supplement, underlying supplement, prospectus supplement and prospectus,
they should obtain independent professional advice.
The securities have not been offered
or sold and will not be offered or sold in Hong Kong by means of any document, other than
(i) |
to persons whose ordinary business is to buy or sell
shares or debentures (whether as principal or agent); or |
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(ii) |
to “professional investors” as defined in the Securities
and Futures Ordinance (Cap. 571) of Hong Kong (the “Securities and Futures Ordinance”) and any rules made under
that Ordinance; or |
Citigroup Inc. |
Buffer Securities Based on the Dow Jones Industrial AverageTM Due December-----, 2020 |
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(iii) |
in other circumstances which do not result in the document
being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an
offer to the public within the meaning of that Ordinance; and |
There is no advertisement, invitation
or document relating to the securities which is directed at, or the contents of which are likely to be accessed or read by, the
public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to securities
which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors”
as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Singapore
This pricing supplement and the
accompanying product supplement, underlying supplement, prospectus supplement and prospectus have not been registered as a prospectus
with the Monetary Authority of Singapore, and the securities will be offered pursuant to exemptions under the Securities and Futures
Act, Chapter 289 of Singapore (the “Securities and Futures Act”). Accordingly, the securities may not be offered or
sold or made the subject of an invitation for subscription or purchase nor may this pricing supplement or any other document or
material in connection with the offer or sale or invitation for subscription or purchase of any securities be circulated or distributed,
whether directly or indirectly, to any person in Singapore other than (a) to an institutional investor pursuant to Section 274
of the Securities and Futures Act, (b) to a relevant person under Section 275(1) of the Securities and Futures Act or to any person
pursuant to Section 275(1A) of the Securities and Futures Act and in accordance with the conditions specified in Section 275 of
the Securities and Futures Act, or (c) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision
of the Securities and Futures Act. Where the securities are subscribed or purchased under Section 275 of the Securities and Futures
Act by a relevant person which is:
(a) |
a corporation (which is not an accredited investor (as
defined in Section 4A of the Securities and Futures Act)) the sole business of which is to hold investments and the entire
share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
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(b) |
a trust (where the trustee is not an accredited investor) whose sole
purpose is to hold investments and each beneficiary is an individual who is an accredited investor, securities (as defined
in Section 239(1) of the Securities and Futures Act) of that corporation or the beneficiaries' rights and interests (howsoever
described) in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the relevant
securities pursuant to an offer under Section 275 of the Securities and Futures Act except: |
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(i) |
to an institutional investor or to a relevant person defined in
Section 275(2) of the Securities and Futures Act or to any person arising from an offer referred to in Section 275(1A) or
Section 276(4)(i)(B) of the Securities and Futures Act; or |
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(ii) |
where no consideration is or will be given for the transfer; or |
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(iii) |
where the transfer is by operation of law; or |
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(iv) |
pursuant to Section 276(7) of the Securities and Futures Act;
or |
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(v) |
as specified in Regulation 32 of the Securities and Futures (Offers
of Investments) (Shares and Debentures) Regulations 2005 of Singapore. |
Any securities referred to herein
may not be registered with any regulator, regulatory body or similar organization or institution in any jurisdiction.
The securities are Specified Investment
Products (as defined in the Notice on Recommendations on Investment Products and Notice on the Sale of Investment Product issued
by the Monetary Authority of Singapore on 28 July 2011) that is neither listed nor quoted on a securities market or a futures
market.
Contact
Clients may contact their local brokerage representative. Third-party
distributors may contact Citi Structured Investment Sales at (212) 723-7005.
© 2015 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
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