Investment Products
|
Not FDIC Insured
|
May Lose Value
|
No Bank Guarantee
|
March 31, 2014
|
The information in this 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 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 MARCH 31, 2014
|
|
Citigroup Inc.
|
April , 2014
Medium-Term Senior Notes, Series G
Pricing Supplement No. 2014-CMTNG0102
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-192302
|
n
|
The notes offered by this pricing supplement are unsecured, senior debt securities issued by Citigroup Inc. Unlike conventional debt securities, the notes do not pay interest. Instead, the notes offer the potential for a positive return at maturity based on the average index return percentage of the MSCI EAFE® Index (the “underlying index”), measured as described below. If the average index return percentage is positive, you will receive a positive return at maturity equal to 90% to 100% of that average index return percentage (to be determined on the pricing date). However, if the average index return percentage is negative or zero, you will be repaid the stated principal amount of your notes at maturity but will not receive any return on your investment. Even if the average index return percentage is positive, so that you do receive a positive return at maturity, there is no assurance that your total return at maturity on the notes will compensate you for the effects of inflation or be as great as the yield you could have achieved on a conventional debt security of ours of comparable maturity.
|
n
|
The average index return percentage is the average of the percentage changes in the closing level of the underlying index from the pricing date to each of the quarterly valuation dates occurring over the term of the notes. You should understand that the return on the notes may be significantly lower than the actual return on the underlying index, as measured from the pricing date to the final valuation date, and that you will not receive any dividends paid on the stocks that constitute the underlying index over the term of the notes.
|
n
|
In order to obtain the exposure to the underlying index that the notes 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 notes if we default on our obligations.
|
Underlying index:
|
The MSCI EAFE® Index (ticker symbol: “MXEA”)
|
||||
Aggregate stated principal amount:
|
$
|
||||
Stated principal amount:
|
$1,000 per note
|
||||
Pricing date:
|
April , 2014 (expected to be April 25, 2014)
|
||||
Issue date:
|
April , 2014 (three business days after the pricing date)
|
||||
Valuation dates:
|
The day of each January, April, July and October (expected to be the 25th day of each January, April, July and October) during the term of the notes, each subject to postponement if such date is not a scheduled trading day or if certain market disruption events occur
|
||||
Maturity date:
|
October , 2019 (expected to be October 30, 2019)
|
||||
Payment at maturity:
|
For each note, the $1,000 stated principal amount per note plus the note return amount, which will be either zero or positive
|
||||
Note return amount:
|
• If the average index return percentage is greater than zero:
$1,000 × average index return percentage × upside participation rate
• If the average index return percentage is less than or equal to zero:
$0
|
||||
Average index return percentage:
|
The arithmetic average of the interim index return percentages, as measured on each of the valuation dates
|
||||
Interim index return percentage:
|
On each valuation date: (ending index level – initial index level) / initial index level
|
||||
Initial index level:
|
, the closing level of the underlying index on the pricing date
|
||||
Ending index level:
|
The closing level of the underlying index on the relevant valuation date
|
||||
Listing:
|
The notes will not be listed on any securities exchange
|
||||
Upside participation rate:
|
90% to 100%. The actual upside participation rate will be determined on the pricing date.
|
||||
CUSIP / ISIN:
|
1730T0M97 / US1730T0M974
|
||||
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 note:
|
$1,000
|
$30
|
$970
|
||
Total:
|
$
|
$
|
$
|
Citigroup Inc.
|
Market-Linked Notes Based on the MSCI EAFE® Index Due October , 2019
|
Payment at maturity per note
|
= $1,000 + the note return amount
|
April 2014
|
PS-2
|
Citigroup Inc.
|
Market-Linked Notes Based on the MSCI EAFE® Index Due October , 2019
|
Payment at maturity per note
|
= $1,000 + the note return amount
|
April 2014
|
PS-3
|
Citigroup Inc.
|
Market-Linked Notes Based on the MSCI EAFE® Index Due October , 2019
|
Payment at maturity per note
|
= $1,000 + the note return amount
|
Payment at maturity per note
|
= $1,000 + the note return amount
|
April 2014
|
PS-4
|
Citigroup Inc.
|
Market-Linked Notes Based on the MSCI EAFE® Index Due October , 2019
|
n
|
You may not receive any return on your investment in the notes. You will receive a positive return on your investment in the notes only if the average index return percentage is greater than zero. If the average index return percentage is equal to or less than zero, you will receive only the stated principal amount of $1,000 for each note you hold at maturity. As the notes do not pay any interest, even if the average index return percentage is greater than zero, there is no assurance that your total return at maturity on the notes will be as great as could have been achieved on conventional debt securities of ours of comparable maturity.
|
n
|
Although the notes provide for the repayment of the stated principal amount at maturity, you may nevertheless suffer a loss on your investment in real value terms if the average index return percentage is less than or not sufficiently greater than zero. This is because inflation may cause the real value of the stated principal amount to be less at maturity than it is at the time you invest, and because an investment in the notes represents a forgone opportunity to invest in an alternative asset that does generate a positive real return. This potential loss in real value terms is significant given the 5.5-year term of the notes. You should carefully consider whether an investment that may not provide for any return on your investment, or may provide a return that is lower than the return on alternative investments, is appropriate for you.
|
n
|
The notes are designed for investors who are willing to forgo full upside exposure to the underlying index in certain market scenarios in order to avoid downside exposure to the underlying index. You should understand, in particular, that if the closing level of the underlying index is greater at or near maturity than it was, on average, on the quarterly valuation dates, the notes will underperform the actual return on the underlying index (unless the closing level of the underlying index is lower at or near maturity than it was on the pricing date). For example, if the closing level of the underlying index increases at a more or less steady rate over the term of the notes, the average index return percentage will be less than the percentage increase in the closing level of the underlying index from the pricing date to the final valuation date, and the notes will underperform the actual return on the underlying index. This underperformance will be especially significant if there is a significant increase in the closing level of the underlying index during the latter portion of the term of the notes. In addition, it is possible that you will not receive any return on the notes even if the closing level of the underlying index at or near maturity is significantly greater than it was on the pricing date. One scenario in which this may occur is when the closing level of the underlying index declines early in the term of the notes, remains below the initial index level for a significant period of time and then increases significantly later in the term of the notes. You should not invest in the notes unless you understand and are willing to accept the drawbacks associated with the averaging feature of the notes.
|
n
|
Investing in the notes 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 March 28, 2014, the average dividend yield of the underlying index was 3.23% 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 notes, you would be forgoing an aggregate yield of approximately 17.77% (assuming no reinvestment of dividends) by investing in the notes 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 notes.
|
The notes are subject to the credit risk of Citigroup Inc. If we default on our obligations under the notes, you may not receive anything owed to you under the notes.
|
n
|
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.
|
n
|
Sale of the notes prior to maturity may result in a loss of principal. You will be entitled to receive at least the full stated principal amount of your notes, subject to the credit risk of Citigroup Inc., only if you hold the notes to maturity. The value of the notes may fluctuate during the term of the notes, and if you are able to sell your notes prior to maturity, you may receive less than the full stated principal amount of your notes.
|
April 2014
|
PS-5
|
Citigroup Inc.
|
Market-Linked Notes Based on the MSCI EAFE® Index Due October , 2019
|
n
|
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 (1) the selling concessions paid in connection with the offering of the notes, (2) hedging and other costs incurred by us and our affiliates in connection with the offering of the notes and (3) 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.
|
n
|
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 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 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.
|
n
|
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 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 an interest rate that we will pay to investors in the notes, which do not bear interest.
|
n
|
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.
|
n
|
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 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,the exchange rate and the volatility of the exchange rate between the U.S. dollar and each of the currencies in which the stocks that constitute the underlying index trade, interest rates in the United States and in each of the markets of the stocks that constitute the underlying index, the time remaining to maturity 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.
|
n
|
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.
|
April 2014
|
PS-6
|
Citigroup Inc.
|
Market-Linked Notes Based on the MSCI EAFE® Index Due October , 2019
|
n
|
Our offering of the notes is not a recommendation of the underlying index. The fact that we are offering the notes 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, 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 notes.
|
n
|
The underlying index is subject to risks associated with investments in securities linked to the value of foreign equity securities. Investments in securities linked to the value of foreign equity securities involve risks associated with the securities markets in those countries, including risks of volatility in those markets, governmental intervention in those markets and cross-shareholdings in companies in certain countries. Also, there is generally less publicly available information about foreign companies than about U.S. companies that are subject to the reporting requirements of the SEC, and foreign companies are subject to accounting, auditing and financial reporting standards and requirements different from those applicable to U.S. reporting companies. The prices of securities issued in foreign markets may be affected by political, economic, financial and social factors in those countries, or global regions, including changes in government, economic and fiscal policies and currency exchange laws.
|
n
|
Fluctuations in exchange rates will affect the level of the underlying index. Because the stocks that constitute the underlying index are traded in foreign currencies and the level of the underlying index is based on the U.S. dollar value of the stocks that constitute the underlying index, holders of the notes will be exposed to currency exchange rate risk with respect to each of the currencies in which those stocks trade. Exchange rate movements for a particular currency are volatile and are the result of numerous factors specific to the relevant country, including the supply of, and the demand for, those foreign currencies, as well as government policy, intervention or actions, but are also influenced significantly from time to time by political or economic developments, and by macroeconomic factors and speculative actions related to each applicable region. If the U.S. dollar strengthens against the currencies in which those stocks trade, the level of the underlying index will be adversely affected for that reason alone and the payment at maturity on the securities may be reduced. Of particular importance to potential currency exchange risk are: governmental interventions; existing and expected rates of inflation; existing and expected interest rate levels; the balance of payments; and the extent of governmental surpluses or deficits in the applicable countries and the United States. All of these factors are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of the applicable countries and the United States. and other countries important to international trade and finance.
|
n
|
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 notes 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. 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 notes. They could also result in substantial returns for us or our affiliates while the value of the notes declines.
|
n
|
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.
|
n
|
The calculation agent, which is an affiliate of ours, will make important determinations with respect to the notes. 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 notes.
|
n
|
Adjustments to the underlying index may affect the value of your notes. MSCI Inc. (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 notes.
|
April 2014
|
PS-7
|
Citigroup Inc.
|
Market-Linked Notes Based on the MSCI EAFE® Index Due October , 2019
|
Information About the Underlying Index
|
MSCI EAFE® Index – Historical Closing Levels
January 2, 2009 to March 28, 2014
|
April 2014
|
PS-8
|
Citigroup Inc.
|
Market-Linked Notes Based on the MSCI EAFE® Index Due October , 2019
|
April 2014
|
PS-9
|
Citigroup Inc.
|
Market-Linked Notes Based on the MSCI EAFE® Index Due October , 2019
|
April 2014
|
PS-10
|