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. |
Citigroup Inc. |
SUBJECT TO COMPLETION, DATED JULY 7, 2015 |
July , 2015
Medium-Term Senior
Notes, Series G
Pricing Supplement
No. 2015-CMTNG0613
Filed Pursuant
to Rule 424(b)(2)
Registration Statement
No. 333-192302 |
Geared Buffered Digital Securities Based on
the Worst Performing of the S&P 500® Index and the Russell 2000® Index Due September , 2018
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 or less than the stated principal amount,
depending on the performance of the worst performing of the S&P 500® Index and the Russell 2000®
Index from its initial index level to its final index level. |
| ▪ | The securities offer a contingent fixed return at maturity of 40%, which is payable if, and
only if, the final index level of the worst performing index is greater than or equal to 80% of its initial index level. If
the worst performing index depreciates by more than 20% from its initial index level to its final index level, you will realize
a loss rather than a positive return on your investment. Your loss in that case will reflect 3-times leveraged downside exposure
to the depreciation of the worst performing index to the extent that the depreciation exceeds 20%. If the worst performing
index depreciates by more than 20% from its initial index level to its final index level, you will lose 3% of your stated principal
amount for every 1% by which the depreciation exceeds 20%. As a result of this high degree of downside leverage, if the
worst performing index depreciates by 53.33% or more from its initial index level to its final index level, you will lose your
entire investment in the securities. |
| ▪ | Your return on the securities will depend solely on the performance of the worst performing
index. You will not benefit in any way from the performance of the better performing index. You may incur a significant loss on
your investment in the securities if either underlying index performs poorly, even if the other performs favorably. |
| ▪ | The securities are a highly risky investment and are not suitable for many investors. The securities
may be suitable only for sophisticated investors who understand the highly leveraged downside exposure that the securities provide
to the worst performing underlying index, and who can bear the risk of losing up to their entire investment in the securities. |
| ▪ | Investors in the securities must be willing to forgo dividends on the underlying indices and participation
in any appreciation of the worst performing index in excess of the contingent fixed return. Investors must also be willing to accept
an investment that may have limited or no liquidity and 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 indices: |
The S&P 500® Index (ticker symbol: “SPX”) and the Russell 2000® Index (ticker symbol: “RTY”) |
Aggregate stated principal amount: |
$ |
Stated principal amount: |
$1,000 per security |
Pricing date: |
July , 2015 (expected to be July 7, 2015) |
Issue date: |
July , 2015 (three business days after the pricing date) |
Valuation date: |
September , 2018 (expected to be September 25, 2018), subject to postponement if such date is not a scheduled trading day or if certain market disruption events occur with respect to either underlying index |
Maturity date: |
September , 2018 (expected to be September 28, 2018) |
Payment at maturity: |
For each $1,000 stated principal amount security you hold at maturity:
▪ If
the final index level of the worst performing index is greater than or equal to its buffer level:
$1,000 + the contingent fixed return amount
▪ If
the final index level of the worst performing index is less than its buffer level:
$1,000 + [$1,000 × 3.00 × (the index performance of the worst performing index + 20%)]
If the worst performing index depreciates by more than 20%
from its initial index level to its final index level, you will lose some, and may lose up to all, of your investment in the securities.
|
Initial index level: |
· S&P
500® Index: (its closing level on the pricing date)
· Russell
2000® Index: (its closing level on the pricing date)
|
Final index level: |
For each underlying index, its closing level on the valuation date |
Worst performing index: |
The underlying index with the lowest index performance |
Contingent fixed return amount: |
$400.00 per security (40.00% of the stated principal amount). You will receive the contingent fixed return amount only if the worst performing index does not depreciate by more than 20% from its initial index level. |
Index performance: |
For each underlying index, its final index level minus its initial index level, divided by its initial index level |
Buffer level: |
· S&P
500® Index: (80% of its initial index level)
· Russell
2000® Index: (80% of its initial index level) |
Listing: |
The securities will not be listed on any securities exchange |
CUSIP / ISIN: |
17298CED6
/ US17298CED65
|
Underwriter: |
Citigroup Global Markets Inc. (“CGMI”), an affiliate of the issuer, acting as principal |
Underwriting fee and issue price: |
Issue price(1) |
Underwriting fee(2) |
Proceeds to issuer |
Per security: |
$1,000.00 |
$13.00 |
$987.00 |
Total: |
$ |
$ |
$ |
(1) Citigroup Inc. currently expects that the estimated value
of the securities on the pricing date will be at least $940.00 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) 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-4.
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 following hyperlinks: 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. |
Geared Buffered Digital Securities Based on the Worst Performing of the S&P 500® Index and the Russell 2000® Index Due September , 2018 |
|
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 each 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 of the worst performing index. Your
return on the securities will depend solely on the performance of the worst performing index. You will not benefit in any way from
the performance of the better performing index.
Investors in the securities will not receive any dividends
on the stocks that constitute either 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 either underlying index or the stocks that constitute either underlying index” below.
Geared Buffered Digital Securities
Payment at Maturity Diagram |
|
Citigroup Inc. |
Geared Buffered Digital Securities Based on the Worst Performing of the S&P 500® Index and the Russell 2000® Index Due September , 2018 |
|
Below are examples of hypothetical payments at maturity, assuming
various hypothetical index performances for the underlying indices. Your actual payment at maturity per security will depend on
the actual index performance of the worst performing index. The examples are based on the hypothetical initial index levels, buffer
levels and final index levels specified below.
Example 1—Upside Scenario A.
Underlying Index |
Hypothetical Initial Index Level |
Hypothetical Buffer Level |
Hypothetical Final Index Level |
Hypothetical Index Performance |
S&P 500® Index |
2,068.76 |
1,655.01 |
3,310.02 |
60% |
Russell 2000® Index |
1,246.96 |
997.57 |
1870.44 |
50% |
In this example, the Russell 2000® Index has the
lowest index performance and is, therefore, the worst performing index. Because the hypothetical final index level of the Russell
2000® Index is greater than its hypothetical buffer level, your payment at maturity in this example would equal
$1,000 plus the contingent fixed return amount of $400 per security, for a total payment at maturity of $1,400 per security.
In this example, the return on the securities is less than the index performance of the worst performing index and an investment
in the securities would underperform an alternative investment providing 1-to-1 exposure to the appreciation of the worst performing
index.
Example 2—Upside Scenario B.
Underlying Index |
Hypothetical Initial Index Level |
Hypothetical Buffer Level |
Hypothetical Final Index Level |
Hypothetical Index Performance |
S&P 500® Index |
2,068.76 |
1,655.01 |
1,758.45 |
–15% |
Russell 2000® Index |
1,246.96 |
997.57 |
1,122.26 |
–10% |
In this example, the S&P 500® Index has the
lowest index performance and is, therefore, the worst performing index. Because the hypothetical final index level of the S&P
500® Index is greater than its hypothetical buffer level, your payment at maturity in this example would equal $1,000
plus the contingent fixed return amount of $400 per security, for a total payment at maturity of $1,400 per security. In
this example, you would receive the contingent fixed return amount at maturity even though the worst performing index has depreciated
from its initial index level (but not by more than 20%).
Example 3—Downside Scenario A.
Underlying Index |
Hypothetical Initial Index Level |
Hypothetical Buffer Level |
Hypothetical Final Index Level |
Hypothetical Index Performance |
S&P 500® Index |
2,068.76 |
1,655.01 |
2,379.07 |
15% |
Russell 2000® Index |
1,246.96 |
997.57 |
872.87 |
–30% |
In this example, the Russell 2000® Index has the
lowest index performance and is, therefore, the worst performing index. Because the hypothetical final index level of the Russell
2000® Index is less than its hypothetical buffer level, your payment at maturity in this example would be calculated
as follows:
Payment at maturity per security = $1,000 + [$1,000 × 3.00
× (the index performance of the worst performing index + 20%)]
= $1,000 + [$1,000 × 3.00 × (–30% + 20%)]
= $1,000 + [$1,000 × 3.00 × –10%]
= $1,000 + [–$300]
= $1,000 - $300
= $700
In this example, because the worst performing index has depreciated
by more than 20% from its hypothetical initial index level to its hypothetical final index level, you would incur a loss on your
investment in the securities equal to 3 times the depreciation of the worst performing index to the extent that the depreciation
exceeds 20%. In this example, the worst performing index depreciated by 30%, which exceeds 20% by 10%, resulting in a loss at maturity
of 3 times 10%, for a total loss of 30%.
Citigroup Inc. |
Geared Buffered Digital Securities Based on the Worst Performing of the S&P 500® Index and the Russell 2000® Index Due September , 2018 |
|
Example 4—Downside Scenario B.
Underlying Index |
Hypothetical Initial Index Level |
Hypothetical Buffer Level |
Hypothetical Final Index Level |
Hypothetical Index Performance |
S&P 500® Index |
2,068.76 |
1,655.01 |
965.43 |
–53.33% |
Russell 2000® Index |
1,246.96 |
997.57 |
1,309.31 |
5% |
In this example, the S&P 500® Index has the
lowest index performance and is, therefore, the worst performing index. Because the hypothetical final index level of the S&P
500® Index is less than its hypothetical buffer level, your payment at maturity in this example would be calculated
as follows:
Payment at maturity per security = $1,000 + [$1,000 × 3.00
× (the index performance of the worst performing index + 20%)]
= $1,000 + [$1,000 × 3.00 × (–53.33% + 20%)]
= $1,000 + [$1,000 × 3.00 × –33.33%]
= $1,000 + [–$1,000]
= $1,000 - $1,000
= $0
In this example, because the worst performing index has depreciated
by 53.33% from its hypothetical initial index level to its hypothetical final index level, you would lose your entire investment
in the securities.
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 each 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.
| ▪ | The securities are highly risky, and you may lose up to your entire 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 worst performing index. If the worst performing index depreciates by more than 20% from its initial index level to its final
index level, you will incur a loss on your investment in the securities. Your loss in that case will reflect 3-times leveraged
downside exposure to the depreciation of the worst performing index to the extent that the depreciation exceeds 20%. If the
worst performing index depreciates by more than 20% from its initial index level to its final index level, you will lose 3% of
your stated principal amount for every 1% by which the depreciation exceeds 20%. As a result of this high degree of downside
leverage, if the worst performing index depreciates by 53.33% or more from its initial index level to its final index level, you
will lose your entire investment in the securities. You should not invest in the securities unless you understand the risks
inherent in the highly leveraged downside exposure that the securities provide and you can bear the risk of losing up to your entire
investment. |
| ▪ | 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. |
| ▪ | Your potential return on the securities is limited. Your potential total return on the securities at maturity is limited
to the contingent fixed return of 40.00%, which is equivalent to $400.00 per security. If the worst performing index appreciates
by more than the fixed return, the securities will underperform an alternative investment providing 1-to-1 exposure to the appreciation
of the worst performing index without a fixed return. |
| ▪ | The securities are subject to the risks of both underlying indices and will be negatively affected if either performs poorly,
even if the other performs well. You are subject to risks associated with both underlying indices. If either underlying index
performs poorly, you will be negatively affected, even if the other underlying index performs well. The securities are not linked
to a |
Citigroup Inc. |
Geared Buffered Digital Securities Based on the Worst Performing of the S&P 500® Index and the Russell 2000® Index Due September , 2018 |
|
basket composed of the underlying indices, where the better performance of one could ameliorate the poor performance of the
other. Instead, you are subject to the full risks of whichever of the underlying indices is the worst performing index.
| ▪ | You will not benefit in any way from the performance of the better performing index. The return on the securities depends
solely on the performance of the worst performing index, and you will not benefit in any way from the performance of the better
performing index. The securities may underperform a similar investment in both of the underlying indices or a similar alternative
investment linked to a basket composed of the underlying indices, since in either such case the performance of the better performing
index would be blended with the performance of the worst performing index, resulting in a better return than the return of the
worst performing index. |
| ▪ | You will be subject to risks relating to the relationship between the underlying indices. It is preferable from your
perspective for the underlying indices to be correlated with each other, in the sense that they tend to increase or decrease at
similar times and by similar magnitudes. By investing in the securities, you assume the risk that the underlying indices will not
exhibit this relationship. The less correlated the underlying indices, the more likely it is that one or the other of the underlying
indices will perform poorly over the term of the securities. All that is necessary for the securities to perform poorly is for
one of the underlying indices to perform poorly; the performance of the underlying index that is not the worst performing index
is not relevant to your return on the securities at maturity. It is impossible to predict what the relationship between the underlying
indices will be over the term of the securities. One underlying index represents small capitalization stocks in the United States
and the other represents large capitalization stocks in the United States. Accordingly, the underlying indices represent markets
that differ in significant ways and, therefore, may not be correlated with each other. |
| ▪ | Investing in the securities is not equivalent to investing in either underlying index or the stocks that constitute either
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 either underlying index. As of July 6, 2015, the average dividend yield of the S&P 500®
Index was 2.05% per year, which, if this dividend yield remained constant for the term of the securities, would be equivalent to
approximately 6.59% (assuming no reinvestment of dividends) over the term of the securities (assuming they are not automatically redeemed
prior to maturity). As of July 6, 2015, the average dividend yield of the Russell 2000® Index was 1.42% per year,
which, if this dividend yield remained constant for the term of the securities, would be equivalent to approximately 4.57% (assuming
no reinvestment of dividends) over the term of the securities (assuming they are not automatically redeemed prior to maturity).
However, it is impossible to predict whether the dividend yield over the term of the securities will be higher, lower or the same
as the dividend yield or the average dividend yield over any period. |
| ▪ | Your payment at maturity depends on the closing levels of the underlying indices on a single day. Because your payment
at maturity depends on the closing levels of the underlying indices solely on the valuation date, you are subject to the risk that
the closing levels of the underlying indices 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 directly in the stocks that constitute the underlying indices or in
another instrument linked to the underlying indices 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 indices, 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 a 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 |
Citigroup Inc. |
Geared Buffered Digital Securities Based on the Worst Performing of the S&P 500® Index and the Russell 2000® Index Due September , 2018 |
|
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 and
correlation between the underlying indices, dividend yields on the stocks that constitute the underlying indices 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. |
| ▪ | 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 indices and a number of other factors,
including the price and volatility of the stocks that constitute the underlying indices, the correlation between the underlying
indices, dividend yields on the stocks that constitute the underlying indices, 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. |
| ▪ | The securities are linked to the Russell 2000® Index and will be subject to risks associated with small capitalization
stocks. The stocks that constitute the Russell 2000® Index are issued by companies with relatively small market
capitalization. The stock prices of smaller companies may be more volatile than stock prices of large capitalization companies.
These companies tend to be less well-established than large market capitalization companies. Small capitalization companies may
be less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Small capitalization
companies are less likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor that limits
downward stock price pressure under adverse market conditions. |
| ▪ | Our offering of the securities does not constitute a recommendation of either 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 indices 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 indices or in instruments related to the underlying indices or the
stocks that constitute the underlying indices, and may publish research or express opinions, that in each case are inconsistent
with an investment linked to the underlying indices. These and other activities of our affiliates may affect the levels of the
underlying indices in a way that has a negative impact on your interests as a holder of the securities. |
Citigroup Inc. |
Geared Buffered Digital Securities Based on the Worst Performing of the S&P 500® Index and the Russell 2000® Index Due September , 2018 |
|
| ▪ | The levels of the underlying indices 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 indices or in instruments related to the underlying indices and may adjust
such positions during the term of the securities. Our affiliates also trade the stocks that constitute the underlying indices and
other financial instruments related to the underlying indices 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 levels of the underlying indices 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 indices, 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 either underlying index, CGMI, as calculation
agent, will be required to make discretionary judgments that could significantly affect your return on the securities. 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 either underlying index may affect the value of your securities. S&P Dow Jones Indices LLC, as publisher
of the S&P 500® Index, or Russell Investment Group, as publisher of the Russell 2000® Index,
may add, delete or substitute the stocks that constitute either underlying index or make other methodological changes that could
affect the level of either underlying |
| | index. S&P Dow Jones Indices LLC or Russell Investment Group may discontinue or suspend calculation or publication of either
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 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. |
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Information
About the S&P 500® Index
The S&P 500® Index consists of 500 common
stocks selected to provide a performance benchmark for the large capitalization segment of the U.S. equity markets. It is calculated
and maintained by S&P Dow Jones Indices LLC. The S&P 500® Index is reported by Bloomberg L.P. under the
ticker symbol “SPX.”
“Standard & Poor’s,” “S&P”
and “S&P 500®” are trademarks of Standard & Poor’s Financial Services LLC and have been
licensed for use by Citigroup Inc. and its affiliates. For more information, see “Equity Index Descriptions—S&P
500® Index—License Agreement” in the accompanying underlying supplement. Please refer to the sections
“Risk Factors” and “Equity Index Descriptions—S&P 500® Index” in the accompanying
underlying supplement for important disclosures regarding the S&P 500® Index, including certain risks that are
associated with an investment linked to the S&P 500® Index.
Historical Information
The closing level of the S&P 500® Index on
July 6, 2015 was 2,068.76.
The graph below shows the closing levels of the S&P 500®
Index for each day such level was available from January 4, 2010 to July 6, 2015. We obtained the closing levels from Bloomberg
L.P., without independent verification. You should not take the historical levels of the S&P 500® Index as an
indication of future performance.
S&P 500® Index – Historical Closing Levels
January 4, 2010 to July 6, 2015 |
|
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Information About the Russell 2000®
Index
The Russell 2000® Index is designed to track the
performance of the small capitalization segment of the U.S. equity market. All stocks included in the Russell 2000®
Index are traded on a major U.S. exchange. It is calculated and maintained by Russell Investments, a subsidiary of Russell Investment
Group. The Russell 2000® Index is reported by Bloomberg L.P. under the ticker symbol “RTY.”
“Russell 2000® Index” is a trademark
of Russell Investments and has been licensed for use by Citigroup Inc. and its affiliates. For more information, see “Equity
Index Descriptions—Russell Indices—License with Russell” in the accompanying underlying supplement. Please refer
to the sections “Risk Factors” and “Equity Index Descriptions—Russell 2000® Index”
in the accompanying underlying supplement for important disclosures regarding the Russell 2000® Index, including
certain risks that are associated with an investment linked to the Russell 2000® Index.
Historical Information
The closing level of
the Russell 2000® Index on July 6, 2015 was 1,246.959.
The graph below shows
the closing level of the Russell 2000® Index for each day such level was available from January 4, 2010 to July
6, 2015. We obtained the closing levels from Bloomberg L.P., without independent verification. You should not take the historical
levels of the Russell 2000® Index as an indication of future performance.
Russell 2000® Index – Historical Closing Levels
January 4, 2010 to July 6, 2015 |
|
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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. |
Under current law, 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.
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 $13.00 for each $1,000 security sold in
this offering. From this underwriting fee, CGMI will pay selected dealers a fixed selling concession as described in this paragraph.
CGMI will pay selected dealers not affiliated with CGMI a fixed selling concession of $13.00 for each $1,000 security they sell.
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 $13.00 for each $1,000 security they sell. CGMI will
pay the registered representatives of CGMI a fixed selling concession of $13.00 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.
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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 indices 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 preliminary 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 preliminary 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 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 three 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 three-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 a securities exchange and
you may not be able to sell them prior to maturity.”
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
the world.
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