Prospectus Filed Pursuant to Rule 424(b)(2) (424b2)
October 05 2015 - 1:13PM
Edgar (US Regulatory)
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 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 OCTOBER 5, 2015 |
Citigroup Inc. |
October----,
2015
Medium-Term
Senior Notes, Series G
Pricing
Supplement No. 2015-CMTNG0710
Filed
Pursuant to Rule 424(b)(2)
Registration
Statement No. 333-192302 |
Fixed to Floating Rate Notes Linked
to the 10-Year Constant Maturity Swap Rate Due October----,
2025
The notes will bear interest during each quarterly
interest period (i) during the first three years: at a fixed rate of 3.50% per annum and (ii) after the third year until maturity:
at a floating rate based on the 10-year Constant Maturity Swap Rate (“CMS10”) on the interest determination date for
that interest period, as described below, subject to the minimum interest rate of 0.00% per annum. CMS10 is one market-accepted
indicator of medium-to-longer term interest rates. The notes are designed for investors who seek fixed interest payments for the
first three years of the term of the notes and floating interest payments linked to CMS10 thereafter. The notes are senior unsecured
debt obligations of Citigroup Inc. All payments due on the notes are subject to the credit risk of Citigroup Inc.
KEY TERMS |
Issuer: |
Citigroup Inc. |
Aggregate stated principal amount: |
$ |
Stated principal amount: |
$1,000 per note |
Pricing date: |
October , 2015 (expected to be October 23, 2015) |
Issue date: |
October , 2015 (three business days after the pricing date) |
Maturity date: |
October , 2025 (expected to be October 28, 2025). If the maturity date is not a business day, then the payment required to be made on the maturity date will be made on the next succeeding business day with the same force and effect as if it had been made on the maturity date. No additional interest will accrue as a result of delayed payment. |
Payment at maturity: |
$1,000 per note plus accrued and unpaid interest |
Interest: |
· During
each interest period from and including the issue date to but excluding October----, 2018
(expected to be October 28, 2018), the notes will bear interest at a fixed rate of 3.50% per annum
· During
each interest period commencing on or after October----, 2018 (expected to be October 28,
2018), the notes will bear interest at a floating rate equal to CMS10, as determined on the interest determination date for that
interest period, subject to a minimum interest rate of 0.00% per annum.
The
amount of interest you receive on each interest payment date for each note you hold will be equal to (i) $1,000 times the
applicable interest rate per annum divided by (ii) 4.
After the first three years of the term of the notes,
interest payments will vary based on fluctuations in the CMS10, subject to the minimum interest rate specified above. After the
first three years, the notes may pay a below-market rate or no interest at all for an extended period of time, or even throughout
the entire remaining term. |
CMS10: |
On any interest determination date, the 10-year Constant Maturity Swap Rate, as published on Reuters page “ISDAFIX1” at 11:00 am (New York time) on that date of determination. See “General Information—Determination of CMS10” below for further information. |
Interest determination date: |
For any interest period commencing on or after October----, 2018 (expected to be October 28, 2018), the second business day prior to the first day of that interest period |
Interest period: |
Each three-month period from and including an interest payment date (or the issue date, in the case of the first interest period) to but excluding the next interest payment date |
Interest payment dates: |
Interest on the notes is payable quarterly on the ---- day of each January, April, July and October (expected to be the 28th day of each January, April, July and October), beginning on January----, 2016 (expected to be January 28, 2016) and ending on the maturity date. If any interest payment date is not a business day, then the payment required to be made on that interest payment date will be made on the next succeeding business day with the same force and effect as if it had been made on that interest payment date. No additional interest will accrue as a result of delayed payment. |
Day count convention: |
30/360 Unadjusted |
CUSIP / ISIN: |
17298C3F3 / US17298C3F32 |
Listing: |
The notes will not be listed on any securities exchange and accordingly, may have limited or no liquidity. You should not invest in the notes unless you are willing to hold them to maturity. |
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 note: |
$1,000 |
$10.00 |
$990.00 |
Total: |
$ |
$ |
$ |
(1) Citigroup Inc. currently expects
that the estimated value of the notes on the pricing date will be between $975.00 and $995.00 per note, which will be less than the
issue price. The estimated value of the notes 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 notes from you at any time after issuance. See “Valuation of the
Notes” in this pricing supplement.
(2) The issue price for investors
purchasing the notes in fee-based advisory accounts will be $990.00 per note, assuming no custodial fee is charged by a selected
dealer, and up to $995.00 per note, assuming the maximum custodial fee is charged by a selected dealer. See “General Information—Fees
and selling concessions” in this pricing supplement.
(3) CGMI, an affiliate of Citigroup
Inc. and the underwriter of the sale of the notes, is acting as principal and will receive an underwriting fee of $10.00 for each
$1,000 note sold in this offering (or up to $5.00 for each note sold to fee-based advisory accounts). Selected dealers not affiliated
with CGMI will receive a selling concession of $10.00 for each note they sell other than to 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 note they sell to fee-based advisory accounts. See “General Information—Fees and selling concessions”
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 notes declines. See “Use of Proceeds and Hedging” in the accompanying
prospectus.
Investing in the notes involves risks not associated with
an investment in conventional fixed-rate debt securities. See “Risk Factors” beginning on page PS-2.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of the notes or determined that this pricing supplement
and the accompanying prospectus supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal
offense.
It is important for you to
consider the information contained in this pricing supplement together with the information contained in the accompanying prospectus
supplement and prospectus, which may be accessed via the hyperlink below.
Prospectus Supplement and Prospectus each dated November 13, 2013
The notes
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. |
Fixed to Floating Rate Notes Linked to the 10-Year Constant Maturity Swap Rate Due October----, 2025 |
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Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the notes. You should read the risk factors below together with 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. We also urge you to consult your
investment, legal, tax, accounting and other advisers before you invest in the notes.
| § | After the first three years, the notes will pay interest at a floating rate that may be as low as 0.00% on one or more interest
payment dates. The rate at which the notes will bear interest during each quarterly interest period after the first three years
will depend on CMS10 on the interest determination date for that interest period. As a result, the interest payable on the notes
will vary with fluctuations in CMS10, subject to the minimum interest rate of 0.00% per annum. It is impossible to predict whether
CMS10 will rise or fall or the amount of interest payable on the notes. After the first three years, you may receive no interest
for extended periods of time or even throughout the remaining term of the notes. |
| § | An investment in the notes may be more risky than an investment in notes with a shorter term. The notes have a term
of ten years. By purchasing notes with a longer term, you will bear greater exposure to fluctuations in market interest rates than
if you purchased a note with a shorter term. In particular, if the level of CMS10 does not increase from its current level, you
may be holding a long-dated security that pays an interest rate that is less than that which would be payable on a conventional
fixed-rate, non-callable debt security of Citigroup Inc. of comparable maturity. In addition, if you tried to sell your notes at
such time, the value of your notes in any secondary market transaction would also be adversely affected. |
| § | The notes are subject to the credit risk of Citigroup Inc., and any actual or anticipated changes to its credit ratings
or credit spreads may adversely affect the value of the notes. You are subject to the credit risk of Citigroup Inc. If Citigroup
Inc. defaults on its obligations under the notes, your investment would be at risk and you could lose some or all of your investment.
As a result, the value of the notes will be affected by changes in the market’s view of Citigroup Inc.’s creditworthiness.
Any decline, or anticipated decline, in Citigroup Inc.’s credit ratings or increase, or anticipated increase, in the credit
spreads charged by the market for taking Citigroup Inc. credit risk is likely to adversely affect the value of the notes. |
| § | You will be entitled to receive the full principal amount of your notes, subject to the credit risk of Citigroup Inc., only
if you hold the notes to maturity. Because the value of the notes may fluctuate, if you are able to sell your notes in the
secondary market prior to maturity, you may receive less than the stated principal amount. |
| § | The notes will not be listed on a securities exchange and you may not be able to sell them prior to maturity. The notes
will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the notes. CGMI currently
intends to make a secondary market in relation to the notes and to provide an indicative bid price for the notes on a daily basis.
Any indicative bid price for the notes 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 notes 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 notes
because it is likely that CGMI will be the only broker-dealer that is willing to buy your notes prior to maturity. Accordingly,
an investor must be prepared to hold the notes until maturity. |
| § | The estimated value of the notes 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 notes that are included in the issue price. These costs include (i) the selling concessions paid in connection
with the offering of the notes, (ii) hedging and other costs incurred by us and our affiliates in connection with the offering
of the notes 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 notes. These costs adversely affect the economic terms of the notes because,
if they were lower, the economic terms of the notes would be more favorable to you. The economic terms of the notes are also likely
to be adversely affected by the use of our internal funding rate, rather than our secondary market rate, to price the notes. See
“The estimated value of the notes would be lower if it were calculated based on our secondary market rate” below. |
| § | The estimated value of the notes 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 CMS10 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 notes. Moreover, the estimated value of the notes set forth on the cover page of this pricing supplement may
differ from the value that we or our affiliates may determine for the notes for other purposes, including for accounting purposes.
You should not invest in the notes because of the estimated value of the notes. Instead, you should be willing to hold the notes
to maturity irrespective of the initial estimated value. |
| § | The estimated value of the notes would be lower if it were calculated based on our secondary market rate. The estimated
value of the notes 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 notes. 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 |
Citigroup Inc. |
Fixed to Floating Rate Notes Linked to the 10-Year Constant Maturity Swap Rate Due October----, 2025 |
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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 notes, which are generally higher than the costs associated with conventional debt securities,
and our liquidity needs and preferences. Our internal funding rate is not the same as the rate at which interest is payable on
the notes.
| § | The estimated value of the notes is not an indication of the price, if any, at which CGMI or any other person may be willing
to buy the notes from you in the secondary market. Any such secondary market price will fluctuate over the term of the notes
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 notes 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 notes than if our internal funding rate were used. In addition,
any secondary market price for the notes will be reduced by a bid-ask spread, which may vary depending on the aggregate stated
principal amount of the notes 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 notes will be less than the issue price. |
| § | The value of the notes prior to maturity will fluctuate based on many unpredictable factors. The value of your notes
prior to maturity will fluctuate based on the level and volatility of CMS10, interest and yield rates in the market generally,
the time remaining to maturity of the notes and our creditworthiness, as reflected in our secondary market rate. You should understand
that the value of your notes 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 Notes” in this pricing supplement. |
| § | Our offering of the notes does not constitute a recommendation to invest in an instrument linked to CMS10. You should
not take our offering of the notes as an expression of our views about how CMS10 will perform in the future or as a recommendation
to invest in any instrument linked to CMS10, including the notes. As we are part of a global financial institution, our affiliates
may, and often do, have positions (including short positions), and may publish research or express opinions, that in each case
conflict with an investment in the notes. You should undertake an independent determination of whether an investment in the notes
is suitable for you in light of your specific investment objectives, risk tolerance and financial resources. |
| § | The way CMS10 is calculated may change in the future, which could adversely affect the value of the notes. The publisher
of CMS10 may change the method by which it calculates CMS10. Changes in the way CMS10 is calculated could reduce the level of CMS10,
which could reduce the amount of one or more interest payments to you and the value of your notes. |
| § | Hedging and other trading activities by our affiliates may affect the determination of CMS10. CMS rates are determined
based on tradable quotes for U.S. dollar fixed-for-floating interest rate swaps of the relevant maturities sourced from electronic
trading venues. Our affiliates may engage in trading activities on these electronic trading venues, in order to hedge our obligations
under the notes, as part of their general business activities or otherwise. These trading activities could affect the level of
CMS10 in a way that has a negative effect on the interest rate payable under the notes. They could also result in substantial returns
for our affiliates while the value of the notes declines. In engaging in these trading activities, our affiliates will have no
obligation to consider your interests as an investor in the notes. |
| § | The calculation agent, which is an affiliate of the issuer, will make determinations with respect to the notes. Citibank,
N.A., the calculation agent for the notes, is an affiliate of ours. As calculation agent, Citibank, N.A. will determine, among
other things, each CMS10 level and will calculate the related interest rate and payment to you on each interest payment date. Any
of these determinations or calculations made by Citibank, N.A. in its capacity as calculation agent, including with respect to
the calculation of the level of CMS10 in the event of the unavailability of the level of CMS10, may adversely affect the amount
of one or more interest payments to you. |
General Information |
Additional information: |
|
The description of the notes in this pricing supplement
supplements, and, to the extent inconsistent with, replaces the general terms of the notes set forth in the accompanying prospectus
supplement and prospectus. The accompanying prospectus supplement and prospectus contain important disclosures that are not repeated
in this pricing supplement.
The notes are senior unsecured debt securities issued
by Citigroup Inc. under the senior debt indenture described in the accompanying prospectus supplement and prospectus. The notes
will constitute part of the senior debt of Citigroup Inc. and will rank equally with all other unsecured and unsubordinated debt
of Citigroup Inc. |
Business day: |
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Any day that is not a Saturday or Sunday and that, in New York City, is not a day on which banking institutions are authorized or obligated by law or executive order to close. |
Regular record date: |
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Interest will be payable on each interest payment date to the holders of record of the notes at the close of business on the business day immediately preceding the relevant interest payment date, except that the final interest payment will be made to the persons who hold the notes on the maturity date. |
Determination of CMS10: |
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CMS10 will equal the 10-year Constant Maturity Swap Rate, as
published on Reuters page
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Citigroup Inc. |
Fixed to Floating Rate Notes Linked to the 10-Year Constant Maturity Swap Rate Due October----, 2025 |
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“ISDAFIX1” (or any successor page as determined by
the calculation agent) at 11:00 am (New York time) on the applicable interest determination date. The 10-year Constant Maturity
Swap Rate measures the market fixed coupon rate that is to be paid in exchange for a floating three-month-LIBOR-based rate for
a term of 10 years. CMS10 is calculated by ICE Benchmark Administration Limited based on tradable quotes for U.S. dollar fixed-for-floating
interest rate swaps with a 10-year maturity that are sourced from electronic trading venues.
If a rate for CMS10 is not published on Reuters page
“ISDAFIX1” (or any successor page as determined by the calculation agent) on any interest determination date, then
the calculation agent will determine the applicable rate on the basis of the mid-market semi-annual swap rate quotations to the
calculation agent provided by five leading swap dealers in the New York City interbank market (the “reference banks”)
at approximately 11:00 am, New York time, on such day, and, for this purpose, the mid-market semi-annual swap rate means the mean
of the bid and offered rates for the semi-annual fixed leg, calculated on a 30/360 day count basis, of a fixed-for-floating U.S.
dollar interest rate swap transaction with a 10-year maturity, commencing on such day and in a representative amount with an acknowledged
dealer of good credit in the swap market, where the floating leg, calculated on an actual/360 day count basis, is equivalent to
U.S. dollar LIBOR with a designated maturity of three months. The calculation agent will request the principal New York City office
of each of the reference banks to provide a quotation of its rate. If at least three quotations are provided, the rate for that
day will be the arithmetic mean of the quotations, eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the lowest). If fewer than three quotations are provided
as requested, the applicable rate will be determined by the calculation agent in good faith and using its reasonable judgment. |
U.S. federal income tax considerations: |
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In the opinion of our counsel, Davis Polk & Wardwell LLP,
the notes should be treated as “variable rate debt instruments” that provide for a single fixed rate followed by a
qualified floating rate (“QFR”) for U.S. federal income tax purposes. Under the Treasury Regulations applicable to
variable rate debt instruments, the notes may be treated as issued with original issue discount (“OID”).
In order to determine the amount of qualified stated interest
(“QSI”) and OID in respect of the notes, an equivalent fixed rate debt instrument must be constructed. The equivalent
fixed rate debt instrument is constructed in the following manner: (i) first, the initial fixed rate is converted to a QFR that
would preserve the fair market value of the notes, and (ii) second, each QFR (including the QFR determined under (i) above) is
converted to a fixed rate substitute (which will generally be the value of that QFR as of the issue date of the notes). The rules
described under “United States Federal Tax Considerations – Tax Consequences to U.S. Holders – Original Issue
Discount” in the accompanying prospectus supplement are then applied to the equivalent fixed rate debt instrument for purposes
of calculating the amount of OID on the notes. Under these rules, the notes will generally be treated as providing for QSI at a
rate equal to the lowest rate of interest in effect at any time under the equivalent fixed rate debt instrument, and any interest
in excess of that rate will generally be treated as part of the stated redemption price at maturity and, therefore, as giving rise
to OID. Based on the application of these rules to the notes, we will indicate in the final pricing supplement if the notes are
issued with OID.
QSI on the notes will generally be taxable to a U.S. Holder (as
defined in the accompanying prospectus supplement) as ordinary interest income at the time it accrues or is received in accordance
with the U.S. Holder’s method of tax accounting. If the notes are issued with OID, a U.S. Holder will be required to include
the OID in income for federal income tax purposes as it accrues, in accordance with a constant yield method based on a compounding
of interest. If the notes are not issued with OID, all stated interest on the notes will be treated as QSI and will be taxable
to a U.S. Holder as ordinary interest income at the time it accrues or is received in accordance with the U.S. Holder’s method
of tax accounting. If the amount of interest a U.S. Holder receives on the notes in a calendar year is greater than the interest
assumed to be paid or accrued under the equivalent fixed rate debt instrument, the excess is treated as additional QSI taxable
to the U.S. Holder as ordinary income. Otherwise, any difference will reduce the amount of QSI the U.S. Holder is treated as receiving
and will therefore reduce the amount of ordinary income the U.S. Holder is required to take into income.
Upon the sale or other taxable disposition of a note,
a U.S. Holder generally will recognize capital gain or loss equal to the difference between the amount realized on the disposition
(other than any amount attributable to accrued QSI, which will be treated as a payment of interest) and the |
Citigroup Inc. |
Fixed to Floating Rate Notes Linked to the 10-Year Constant Maturity Swap Rate Due October----, 2025 |
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U.S. Holder’s tax basis in the note. A U.S. Holder’s
tax basis in a note generally will equal the cost of the note to the U.S. Holder, increased by the amounts of OID (if any) previously
included in income by the U.S. Holder with respect to the note and reduced by any payments other than QSI received by the U.S.
Holder. Such gain or loss generally will be long-term capital gain or loss if the U.S. Holder has held the note for more than one
year at the time of disposition.
Subject to the discussion below, under current law Non-U.S. Holders
(as defined in the accompanying prospectus supplement) generally will not be subject to U.S. federal withholding or income tax
with respect to interest (or OID, if any) paid on and amounts received on the sale, exchange or retirement of the notes if they
comply with applicable certification requirements. Special rules apply to Non-U.S. Holders whose income on the notes is effectively
connected with the conduct of a U.S. trade or business or who are individuals present in the United States for 183 days or more
in a taxable year.
As discussed in the section of the accompanying prospectus supplement
entitled “United States Federal Tax Considerations,” withholding under legislation commonly referred to as “FATCA”
(if applicable) will generally apply to amounts treated as interest paid with respect to the notes and to the payment of gross
proceeds of a disposition (including a retirement) of the notes. However, under a recent Internal Revenue Service notice, withholding
under “FATCA” will apply to payments of gross proceeds (other than amounts 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 notes.
You should read the section entitled “United States
Federal Tax Considerations” in the accompanying prospectus 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 notes.
You should also consult your tax adviser regarding
all aspects of the U.S. federal tax consequences of an investment in the notes and any tax consequences arising under the laws
of any state, local or non-U.S. taxing jurisdiction. |
Fees and selling concessions: |
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CGMI, an affiliate of Citigroup Inc. and the underwriter of the
sale of the notes, is acting as principal and will receive an underwriting fee of $10.00 for each note sold in this offering (or
up to $5.00 for each note sold to fee-based advisory accounts). The actual underwriting fee will be equal to $10.00 for each note
sold by CGMI directly to the public and will otherwise be equal to the selling concession provided to selected dealers, as described
in this paragraph. CGMI will pay selected dealers not affiliated with CGMI a selling concession of $10.00 for each note 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 note they sell to fee-based advisory accounts.
Additionally, it is possible that CGMI and its affiliates
may profit from expected hedging activity related to this offering, even if the value of the notes declines. You should refer
to “Risk Factors” above and the section “Use of Proceeds and Hedging” in the accompanying prospectus. |
Supplemental information regarding plan of distribution; conflicts of interest: |
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The terms and conditions set forth in the Global Selling Agency
Agreement dated November 13, 2013 among Citigroup Inc. and the agents named therein, including CGMI, govern the sale and purchase
of the notes.
The notes will not be listed on any securities exchange.
In order to hedge its obligations under the notes, Citigroup
Inc. expects to enter into one or more swaps or other derivatives transactions with one or more of its affiliates. You should refer
to the sections “Risk Factors—The estimated value of the notes on the pricing date, based on CGMI’s proprietary
pricing models and our internal funding rate, will be less than the issue price,” and the section “Use of Proceeds
and Hedging” in the accompanying prospectus.
CGMI is an affiliate of Citigroup Inc. Accordingly,
the offering of the notes will conform with the requirements addressing conflicts of interest when distributing the securities
of an affiliate set forth in Rule 5121 of the Conduct Rules of the Financial Industry Regulatory Authority, Inc. Client accounts
over which Citigroup Inc., its subsidiaries or affiliates of its subsidiaries have investment discretion are not permitted to
purchase the notes, either directly or indirectly, without |
Citigroup Inc. |
Fixed to Floating Rate Notes Linked to the 10-Year Constant Maturity Swap Rate Due October----, 2025 |
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the prior written consent of the client. See “Plan of Distribution” in the accompanying prospectus supplement for more information. |
Calculation agent: |
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Citibank, N.A., an affiliate of Citigroup Inc., will serve as calculation agent for the notes. All determinations made by the calculation agent will be at the sole discretion of the calculation agent and will, in the absence of manifest error, be conclusive for all purposes and binding on Citigroup Inc. and the holders of the notes. Citibank, N.A. is obligated to carry out its duties and functions as calculation agent in good faith and using its reasonable judgment. |
Historical Information on CMS10
The following graph shows the published daily rate for CMS10
in the period from January 3, 2005 through October 2, 2015. The historical CMS10 should not be taken as an indication of the future
performance of CMS10. Any historical upward or downward trend in CMS10 during any period set forth below is not an indication that
CMS10 is more or less likely to increase or decrease at any time during the term of the notes. The rate for CMS10 on October 2,
2015, was 1.925% per annum.
Historical CMS10
January 3, 2005
to October 2, 2015 |
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Valuation of the Notes
CGMI calculated the estimated value of the notes 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 notes by estimating the value of a hypothetical package of financial instruments that would replicate
the payout on the notes, which consists of a fixed-income bond (the “bond component”) and one or more derivative instruments
underlying the economic terms of the notes (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 “Risk Factors—The value of
the notes 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 notes is a function of the terms of
the notes and the inputs to CGMI’s proprietary pricing models. The range for the estimated value of the notes set forth on
the cover page of this preliminary pricing supplement reflects uncertainty on the date of this preliminary pricing supplement about
the inputs to CGMI’s proprietary pricing models on the pricing date.
For a period of approximately six months following issuance of
the notes, the price, if any, at which CGMI would be willing to buy the notes from investors, and the value that will be indicated
for the notes on any brokerage account statements prepared by CGMI or its
Citigroup Inc. |
Fixed to Floating Rate Notes Linked to the 10-Year Constant Maturity Swap Rate Due October----, 2025 |
|
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 notes. The amount of this temporary upward adjustment will decline to zero on a straight-line basis
over the six-month temporary adjustment period. However, CGMI is not obligated to buy the notes from investors at any time. See
“Risk Factors—The notes will not be listed on a securities exchange and you may not be able to sell them prior to maturity.”
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