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 JUNE 25, 2014
|
June , 2014
Medium-Term Senior Notes, Series G
Pricing Supplement No. 2014-CMTNG0170
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-192302
|
▪
|
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, do not guarantee the repayment of principal at maturity and are subject to potential automatic early redemption on a semi-annual basis for the first two years of the term of the securities. Your return on the securities will depend on the worst performing of the shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index (each, an “underlying asset”).
|
▪
|
The securities provide for the repayment of principal plus a premium following the first interim valuation date on which the closing level of the worst performing underlying asset is greater than or equal to the applicable premium threshold level. However, if the closing level of the worst performing underlying asset is not greater than or equal to the applicable premium threshold level on any of the interim valuation dates, the securities will not be automatically redeemed at a premium and, instead, you will receive a payment at maturity that may be greater than, equal to or less than the stated principal amount, depending on the performance of the worst performing underlying asset from the pricing date to the final valuation date. If the securities are not automatically redeemed prior to maturity and the closing level of the worst performing underlying asset on the final valuation date is less than 75% of its starting level, you will lose at least 25%, and possibly significantly more, of your investment in the securities. Your return on the securities will depend solely on the performance of the worst performing underlying asset, and you will not benefit in any way from the performance of the better performing underlying asset.
|
▪
|
The securities are subject to the credit risk of Citigroup Inc. If we default on our obligations, you may not receive any amount owed to you under the securities.
|
Underlying assets:
|
Shares of the iShares® MSCI Emerging Markets ETF (ticker symbol: “EEM”) and the EURO STOXX 50® Index (ticker symbol: “SX5E”)
|
Aggregate stated principal amount:
|
$
|
Stated principal amount:
|
$1,000 per security
|
Pricing date:
|
June , 2014 (expected to be June 25, 2014)
|
Issue date:
|
June , 2014 (three business days after the pricing date)
|
Valuation dates:
|
Expected to be December 19, 2014, June 22, 2015, December 21, 2015, June 22, 2016 (each, an “interim valuation date”) and June 25, 2018 (the “final valuation date”), each subject to postponement if such date is not a scheduled trading day or certain market disruption events occur with respect to either underlying asset
|
Automatic early redemption:
|
If, on any interim valuation date, the closing level of the worst performing underlying asset is greater than or equal to the applicable premium threshold level, the securities will be automatically redeemed on the fifth business day following that interim valuation date for an amount in cash per security equal to $1,000 plus the premium applicable to that valuation date. If the securities are automatically redeemed following any interim valuation dates, they will cease to be outstanding and you will not be entitled to receive any other payment on the securities.
|
Premium:
|
The premium applicable to each interim valuation date will be the value indicated below. The premium may be significantly less than the appreciation of either underlying asset from the pricing date to the applicable interim valuation date.
|
·
|
December 19, 2014:
|
6.00% of the stated principal amount
|
|
·
|
June 22, 2015:
|
12.00% of the stated principal amount
|
|
·
|
December 21, 2015:
|
18.00% of the stated principal amount
|
|
·
|
June 22, 2016:
|
24.00% of the stated principal amount
|
Premium threshold level:
|
For each underlying asset on any interim valuation date, 100% of the applicable starting level
|
|||
Maturity date:
|
June , 2018 (expected to be June 28, 2018)
|
|||
Payment at maturity:
|
If the securities have not previously been redeemed, you will receive at maturity, for each $1,000 stated principal amount security you then hold, an amount in cash equal to:
§ If the closing level of the worst performing underlying asset on the final valuation date is greater than or equal to the applicable starting level: $1,000 + the return amount
§ If the closing level of the worst performing underlying asset on the final valuation date is less than the applicable starting level but greater than or equal to the applicable trigger level: $1,000
§ If the closing level of the worst performing underlying asset on the final valuation date is less than the applicable trigger level: $1,000 × the underlying asset performance factor of the worst performing underlying asset
If the securities are not automatically redeemed prior to maturity and the closing level of the worst performing underlying asset on the final valuation date is less than the applicable trigger level, your payment at maturity will be less, and possibly significantly less, than $750 per security. You should not invest in the securities unless you are willing and able to bear the risk of losing a significant portion of your investment.
|
|||
Starting level:
|
· iShares® MSCI Emerging Markets ETF: $ (its closing price on the pricing date)
· EURO STOXX 50® Index: (its closing level on the pricing date)
|
|||
Closing level:
|
For each underlying asset, its closing level or closing price, as applicable on any valuation date
|
|||
Trigger level:
|
· iShares® MSCI Emerging Markets ETF: $ (75% of its starting level)
· EURO STOXX 50® Index: (75% of its starting level)
|
|||
Underwriting fee and issue price:
|
Issue price(1)
|
Underwriting fee(2)
|
Proceeds to issuer
|
|
Per security:
|
$1,000.00
|
$31.00
|
$969.00
|
|
Total:
|
$
|
$
|
$
|
Citigroup Inc.
|
Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
|
KEY TERMS (continued)
|
|
Underlying asset performance factor:
|
For each underlying asset on any valuation date, the closing level of that underlying asset on that valuation date divided by the starting level of that underlying asset
|
Underlying asset percent increase:
|
For the worst performing underlying asset, its closing level minus its starting level, divided by its starting level.
|
Return amount:
|
$1,000 × underlying asset percent increase of the worst performing underlying asset
|
Worst performing underlying asset:
|
On any valuation date, the underlying asset with the lowest underlying asset performance factor determined on that valuation date
|
Listing:
|
The securities will not be listed on any securities exchange, may have limited or no liquidity and are designed to be held to maturity
|
CUSIP / ISIN:
|
1730T0T82 / US1730T0T821
|
Underwriter:
|
CGMI, an affiliate of the issuer, acting as principal
|
June 2014
|
PS-2
|
Citigroup Inc.
|
Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
|
Payment Upon Automatic Early Redemption, if Applicable, or at Maturity
|
If the first interim valuation date on which the closing level of the worst performing underlying asset is greater than or equal to the applicable premium threshold level is . . .
|
. . . then you will receive the following payment per security upon automatic early redemption:
|
December 19, 2014
|
$1,000 + applicable premium = $1,000 + $60.00 = $1,060.00
|
June 22, 2015
|
$1,000 + applicable premium = $1,000 + $120.00 = $1,120.00
|
December 21, 2015
|
$1,000 + applicable premium = $1,000 + $180.00 = $1,180.00
|
June 22, 2016
|
$1,000 + applicable premium = $1,000 + $240.00 = $1,240.00
|
June 2014
|
PS-3
|
Citigroup Inc.
|
Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
|
Underlying asset performance factor
|
||
of the iShares® MSCI Emerging Markets ETF
|
= closing level on final valuation date / starting level
|
|
= $42.00 / $40.00
|
||
= 1.05
|
||
Underlying asset performance factor
|
||
of the EURO STOXX 50® Index
|
= closing level on final valuation date / starting level
|
|
= 3,630.00 / 3,300.00
|
||
= 1.10
|
Payment at maturity per security
|
= $1,000 + the return amount
|
|
= $1,000 + ($1,000 × the underlying asset percent
|
||
increase of the worst performing underlying asset)
|
||
= $1,000 + ($1,000 × 5%)
|
||
= $1,000 + $50
|
||
= $1,050
|
Underlying asset performance factor of the iShares® MSCI Emerging Markets ETF
|
= closing level on final valuation date / starting level
|
|
= $34.00 / $40.00
|
||
= 0.85
|
||
Underlying asset performance factor
|
||
of the EURO STOXX 50® Index
|
= closing level on final valuation date / starting level
|
|
= 3,630.00 / 3,300.00
|
||
= 1.10
|
June 2014
|
PS-4
|
Citigroup Inc.
|
Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
|
Underlying asset performance factor
|
||
of the iShares® MSCI Emerging Markets ETF
|
= closing level on final valuation date / starting level
|
|
= $42.00 / $40.00
|
||
= 1.05
|
||
Underlying asset performance factor
|
||
of the EURO STOXX 50® Index
|
= closing level on final valuation date / starting level
|
|
= 1,650.00 / 3,300.00
|
||
= 0.5
|
Payment at maturity per security
|
= $1,000 × the underlying asset performance factor of the worst performing underlying asset
|
|
|
= $1,000 × 0.5
|
|
= $500
|
§
|
You may lose some or all of your investment. Unlike conventional debt securities, the securities do not guarantee repayment of the stated principal amount at maturity. If the securities are not automatically redeemed prior to maturity, your payment at maturity will depend on the performance of the worst performing underlying asset. If the closing level of the worst performing underlying asset on the final valuation date is less than the applicable trigger level, you will lose 1% of the stated principal amount of the securities for every 1% by which the worst performing underlying asset has declined from its starting level, regardless of the performance of the other underlying asset. There is no minimum payment at maturity on the securities, and you may lose your entire investment in the securities.
|
§
|
The trigger feature of the securities exposes you to particular risks. If the closing level of the worst performing underlying asset on the final valuation date is less than the applicable trigger level, you will lose 1% of the stated principal amount of the securities for every 1% by which the worst performing underlying asset has declined from its starting level. Although you will be repaid your stated principal amount at maturity if the worst performing underlying asset depreciates by 25% or less from its starting level, you will have full downside exposure to the worst performing underlying asset if it depreciates by more than 25%. As a result, you may lose your entire investment in the securities.
|
§
|
The securities do not pay interest. You should not invest in the securities if you seek current income during the term of the securities.
|
June 2014
|
PS-5
|
Citigroup Inc.
|
Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
|
§
|
Your potential return on the securities in connection with an early redemption is limited. If the securities are automatically redeemed, your potential return on the securities is limited to the applicable premium payable upon automatic early redemption, as described on the cover page of this pricing supplement. If the closing level of the worst performing underlying asset is greater than or equal to the premium threshold level on one of the interim valuation dates, you will be repaid the stated principal amount of your securities and will receive the fixed premium applicable to that valuation date, regardless of how significantly the closing level of the worst performing underlying asset on that interim valuation date may exceed the applicable premium threshold level. Accordingly, the premium may result in a return on the securities that is significantly less than the return you could have achieved on a direct investment in the underlying asset. In addition, the premium you receive upon any early redemption of the securities may be significantly less that the return you could have achieved if the securities had not been automatically redeemed and you had been able to receive the payment at maturity and participate in the appreciation, if any, of the worst performing underlying asset.
|
§
|
The securities are subject to the risks of both underlying assets and will be negatively affected if either performs poorly, even if the other performs well. You are subject to risks associated with both underlying assets. If either underlying asset performs poorly, you will be negatively affected, even if the other underlying asset performs well. The securities are not linked to a basket composed of the underlying assets, 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 assets is the worst performing underlying asset.
|
§
|
You will not benefit in any way from the performance of the better performing underlying asset. The return on the securities depends solely on the performance of the worst performing underlying asset, and you will not benefit in any way from the performance of the better performing underlying asset. The securities may underperform a similar investment in both of the underlying assets or a similar alternative investment linked to a basket composed of the underlying assets, since in either such case the performance of the better performing underlying asset would be blended with the performance of the worst performing underlying asset, resulting in a better return than the return of the worst performing underlying asset.
|
§
|
The term of the securities may be as short as six months. If the closing level of the worst performing underlying asset on any interim valuation date, including the interim valuation date expected to occur six months after the pricing date, is greater than or equal to the applicable premium threshold level, the securities will be automatically redeemed. The earlier the automatic redemption, the lower the premium you will receive.
|
§
|
You will be subject to risks relating to the relationship between the underlying assets. It is preferable from your perspective for the underlying assets 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 assets will not exhibit this relationship. The less correlated the underlying assets, the more likely it is that one or the other of the underlying assets 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 assets to perform poorly; the performance of the underlying asset that is not the worst performing underlying asset is not relevant to your return on the securities at maturity or on an earlier automatic redemption date. It is impossible to predict what the relationship between the underlying assets will be over the term of the securities. One underlying asset represents large capitalization stocks in the Eurozone and the other represents international emerging markets. Accordingly, the underlying assets 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 asset or the stocks included in or held by either underlying asset. 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 asset. As of June 24, 2014, the average dividend yield of the iShares® MSCI Emerging Markets ETF was 1.64% per year, which, if this dividend yield remained constant for the term of the securities, would be equivalent to approximately 6.56% (assuming no reinvestment of dividends) over the term of the securities (assuming they are not automatically redeemed prior to maturity). As of June 24, 2014, the average dividend yield of the EURO STOXX 50® Index was 3.53% per year, which, if this dividend yield remained constant for the term of the securities, would be equivalent to approximately 14.12% (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 return on the securities depends on the closing levels of the underlying assets on only five days. Because your payment upon automatic early redemption, if applicable, or at maturity depends on the closing levels of the underlying assets solely on one of the five valuation dates, you are subject to the risk that the closing levels of the underlying assets on those days may be lower, and possibly significantly lower, than on one or more other dates during the term of the securities. If you had invested in another instrument linked to the underlying assets that you could sell for full value at a time selected by you, or if the return on the securities was based on an average of closing prices and closing levels of the underlying assets, 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 any amounts 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
|
June 2014
|
PS-6
|
Citigroup Inc.
|
Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
|
|
securities on a daily basis. Any indicative bid price for the securities provided by CGMI will be determined in CGMI’s sole discretion, taking into account prevailing market conditions and other relevant factors, and will not be a representation by CGMI that the securities can be sold at that price, or at all. CGMI may suspend or terminate making a market and providing indicative bid prices without notice, at any time and for any reason. If CGMI suspends or terminates making a market, there may be no secondary market at all for the securities because it is likely that CGMI will be the only broker-dealer that is willing to buy your securities prior to maturity. Accordingly, an investor must be prepared to hold the securities until maturity.
|
§
|
The estimated value of the securities on the pricing date, based on CGMI’s proprietary pricing models and our internal funding rate, will be less than the issue price. The difference is attributable to certain costs associated with selling, structuring and hedging the securities that are included in the issue price. These costs include (i) the selling concessions paid in connection with the offering of the securities, (ii) hedging and other costs incurred by us and our affiliates in connection with the offering of the securities and (iii) the expected profit (which may be more or less than actual profit) to CGMI or other of our affiliates in connection with hedging our obligations under the securities. These costs adversely affect the economic terms of the securities because, if they were lower, the economic terms of the securities would be more favorable to you. The economic terms of the securities are also likely to be adversely affected by the use of our internal funding rate, rather than our secondary market rate, to price the securities. See “The estimated value of the securities would be lower if it were calculated based on our secondary market rate” below.
|
§
|
The estimated value of the securities was determined for us by our affiliate using proprietary pricing models. CGMI derived the estimated value disclosed on the cover page of this pricing supplement from its proprietary pricing models. In doing so, it may have made discretionary judgments about the inputs to its models, such as the volatility of and correlation between the underlying assets, dividend yields on the stocks included in or held by, as applicable, the underlying assets 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 assets and a number of other factors, including the price and volatility of the stocks included in or held by, as applicable, the underlying assets, the correlation between the underlying assets, dividend yields on the stocks included in or held by, as applicable, the underlying assets, 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 are held by the iShares® MSCI Emerging Markets ETF trade, the correlation between those rates and the price of the shares of the iShares® MSCI Emerging Markets ETF, interest rates in the United States and in each of the markets of the stocks held by the iShares® MSCI Emerging Markets ETF, 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.
|
June 2014
|
PS-7
|
Citigroup Inc.
|
Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
|
§
|
The securities are linked to the EURO STOXX 50® Index and will be subject to risks associated with the Eurozone. The companies whose stocks constitute the EURO STOXX 50® Index are leading companies in the Eurozone. A number of countries in the Eurozone are undergoing a financial crisis affecting their economies, their ability to meet their sovereign financial obligations and their financial institutions. Countries in the Eurozone that are not currently experiencing a financial crisis may do so in the future as a result of developments in other Eurozone countries. The economic ramifications of this financial crisis, and its effects on the companies that make up the underlying index, are impossible to predict. This uncertainty may contribute to significant volatility in the underlying index, and adverse developments affecting the Eurozone may affect the underlying index in a way that adversely affects the value of and return on the securities. Furthermore, you should understand that there is generally less publicly available information about non-U.S. companies than about U.S. companies that are subject to the reporting requirements of the SEC, and non-U.S. companies are generally subject to accounting, auditing and financial reporting standards and requirements and securities trading rules that are different from those applicable to U.S. reporting companies.
|
§
|
The performance of the EURO STOXX 50® Index will not be adjusted for changes in the exchange rate between the Euro and the U.S. dollar. The EURO STOXX 50® Index is composed of stocks traded in Euro, the value of which may be subject to a high degree of fluctuation relative to the U.S. dollar. However, the performance of the EURO STOXX 50® Index and the value of your securities will not be adjusted for exchange rate fluctuations. If the Euro appreciates relative to the U.S. dollar over the term of the securities, the performance of the EURO STOXX 50® Index as measured for purposes of the securities will be less than it would be if it offered exposure to that appreciation in addition to the change in the Euro price of the underlying stocks.
|
§
|
Investing in the securities exposes investors to risks associated with emerging markets equity securities. The stocks composing the iShares® MSCI Emerging Markets ETF and that are generally tracked by the iShares® MSCI Emerging Markets ETF have been issued by companies in various emerging markets. 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 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. Countries with emerging markets may have relatively unstable governments, present the risks of nationalization of businesses, have restrictions on foreign ownership and prohibitions on the repatriation of assets and have less protection of property rights than more developed countries. The economies of countries with emerging markets may be based on only a few industries, be highly vulnerable to changes in local or global trade conditions and suffer from extreme and volatile debt burdens or inflation rates. Local securities markets may trade a small number of securities and be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult or impossible at times. Moreover, the economies in such countries may differ favorably or unfavorably from the economy in the United States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
|
§
|
Fluctuations in exchange rates will affect the price of the iShares® MSCI Emerging Markets ETF. Because the iShares® MSCI Emerging Markets ETF invests in stocks that are traded in non-U.S. currencies, while the net asset values of the iShares® MSCI Emerging Markets ETF is based on the U.S. dollar value of those stocks, holders of the securities will be exposed to currency exchange rate risk with respect to each of the currencies in which those stocks trade. If the U.S. dollar generally strengthens against the currencies in which those stocks trade, the price the iShares® MSCI Emerging Markets ETF will be adversely affected for that reason alone and the payment at maturity on the securities may be reduced.
|
§
|
Changes that affect the underlying assets may affect the value of your securities. The sponsor of the EURO STOXX 50® Index or of the index underlying the iShares® MSCI Emerging Markets ETF may add, delete or substitute the stocks that constitute those indexes or make other methodological changes that could affect the levels of those indexes. In addition, the investment adviser to the iShares® MSCI Emerging Markets ETF may change the manner in which the iShares® MSCI Emerging Markets ETF operates or its investment objectives at any time. We are not affiliated with any such index sponsor or investment advisor and, accordingly, we have no control over any changes any such index sponsor or investment adviser may make. Such changes could be made at any time and could adversely affect the performance of the underlying assets and the value of and your payment at maturity on the securities.
|
June 2014
|
PS-8
|
Citigroup Inc.
|
Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
|
§
|
Even if the issuer of the iShares® MSCI Emerging Markets ETF pays a dividend that it identifies as special or extraordinary, no adjustment will be required under the securities for that dividend unless it meets the criteria specified in the accompanying product supplement. In general, an adjustment will not be made under the terms of the securities for any cash dividend paid on shares of the iShares® MSCI Emerging Markets ETF unless the amount of the dividend per share, together with any other dividends paid in the same quarter, exceeds the dividend paid per share in the most recent quarter by an amount equal to at least 10% of the closing price of the shares of the iShares® MSCI Emerging Markets ETF on the date of declaration of the dividend. Any dividend will reduce the closing price of the shares of the iShares® MSCI Emerging Markets ETF by the amount of the dividend per share. If the issuer of the iShares® MSCI Emerging Markets ETF pays any dividend for which an adjustment is not made under the terms of the securities, holders of the securities will be adversely affected. See “Description of the Securities—Certain Additional Terms for Securities Linked to ETF Shares or Company Shares—Dilution and Reorganization Adjustments—Certain Extraordinary Cash Dividends” in the accompanying product supplement.
|
§
|
An adjustment will not be made for all events that may have a dilutive effect on or otherwise adversely affect the market price of the iShares® MSCI Emerging Markets ETF. For example, we will not make any adjustment for ordinary dividends or extraordinary dividends that do not meet the criteria described above. Moreover, the adjustments we do make may not fully offset the dilutive or adverse effect of the particular event. Investors in the securities may be adversely affected by such an event in a circumstance in which a direct holder of the shares of the iShares® MSCI Emerging Markets ETF would not.
|
§
|
The securities may become linked to shares of an issuer other than the original issuer of the iShares® MSCI Emerging Markets ETF upon the occurrence of a reorganization event or upon the delisting of the shares of the iShares® MSCI Emerging Markets ETF. For example, if the issuer of the iShares® MSCI Emerging Markets ETF enters into a merger agreement that provides for holders of the shares of the iShares® MSCI Emerging Markets ETF to receive shares of another entity, the shares of such other entity will become the applicable underlying asset for all purposes of the securities upon consummation of the merger. Additionally, if the shares of the iShares® MSCI Emerging Markets ETF are delisted or the iShares® MSCI Emerging Markets ETF is otherwise terminated, the calculation agent may, in its sole discretion, select shares of another ETF to be the applicable underlying asset. See “Description of the Securities—Certain Additional Terms for Securities Linked to ETF Shares or Company Shares-Dilution and Reorganization Adjustments” and “—Delisting, Liquidation or Termination of an Underlying ETF” in the accompanying product supplement.
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§
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The iShares® MSCI Emerging Markets ETF may not completely track the performance of the MSCI Emerging Markets Index. The price of the shares of the iShares® MSCI Emerging Markets ETF will reflect transaction costs and fees of the iShares® MSCI Emerging Markets ETF that are not included in the calculation of the index that it seeks to track. In addition, the iShares® MSCI Emerging Markets ETF may not hold all of the stocks included in, and may hold securities and derivative instruments that are not included in, the MSCI Emerging Markets Index.
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§
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Changes made by the investment adviser to the iShares® MSCI Emerging Markets ETF or by the sponsor of the index underlying the iShares® MSCI Emerging Markets ETF may adversely affect the shares of the iShares® MSCI Emerging Markets ETF. We are not affiliated with the investment adviser to the iShares® MSCI Emerging Markets ETF or with the sponsor of the index underlying the iShares® MSCI Emerging Markets ETF. Accordingly, we have no control over any changes such investment adviser or sponsor may make to the iShares® MSCI Emerging Markets ETF or the index underlying the iShares® MSCI Emerging Markets ETF. Such changes could be made at any time and could adversely affect the performance of the shares of the iShares® MSCI Emerging Markets ETF.
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§
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Adjustments to the EURO STOXX 50® Index may affect the value of your securities. STOXX Limited, as publisher of the EURO STOXX 50® Index, may add, delete or substitute the stocks that constitute the EURO STOXX 50® Index or make other methodological changes that could affect the level of the EURO STOXX 50® Index. STOXX Limited may discontinue or suspend calculation or publication of the EURO STOXX 50® Index at any time without regard to your interests as holders of the securities.
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§
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Our offering of the securities is not a recommendation of either underlying asset. The fact that we are offering the securities does not mean that we believe that investing in an instrument linked to the underlying assets 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 EURO STOXX 50® Index or in instruments related to the iShares® MSCI Emerging Markets ETF or the stocks that constitute the iShares® MSCI Emerging Markets ETF, and may publish research or express opinions, that in each case are inconsistent with an investment linked to the underlying assets. These and other of our affiliates’ activities may adversely affect the level or price, as applicable, of the underlying assets in a way that has a negative impact on your interests as a holder of the securities.
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§
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The level or price of an underlying asset 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 included in the EURO STOXX 50® Index and in the shares of the iShares® MSCI Emerging Markets ETF and other financial instruments related to the underlying assets or the stocks included in or held by the underlying assets. Our affiliates also trade the stocks included in the EURO STOXX 50® Index and the shares of the iShares® MSCI Emerging Markets ETF and other related financial instruments 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 or price, as
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June 2014
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PS-9
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Citigroup Inc.
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Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
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applicable, of the underlying assets 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.
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§
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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 companies included in or held by the underlying assets or with the iShares® MSCI Emerging Markets ETF, including extending loans to, making equity investments in or providing advisory services to such companies or the iShares® MSCI Emerging Markets ETF. In the course of this business, we or our affiliates may acquire non-public information which we will not disclose to you. Moreover, if any of our affiliates is or becomes a creditor of any such company, they may exercise any remedies against such company that are available to them without regard to your interests.
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§
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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, the discontinuance of the EURO STOXX 50® Index or events with respect to the iShares® MSCI Emerging Markets ETF that may require a dilution adjustment or the delisting of the iShares® MSCI Emerging Markets ETF, CGMI, as calculation agent, will be required to make discretionary judgments that could significantly affect your payment at maturity. In making these judgments, the calculation agent’s interests as an affiliate of ours could be adverse to your interests as a holder of the securities.
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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. Even if the treatment of the securities as prepaid forward contracts is respected, a security may be treated as a “constructive ownership transaction,” with consequences described below under “United States Federal Tax Considerations.” In addition, 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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June 2014
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PS-10
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Citigroup Inc.
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Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
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iShares® MSCI Emerging Markets ETF – Historical Closing Levels
January 2, 2009 to June 24, 2014
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June 2014
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PS-11
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Citigroup Inc.
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Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
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iShares® MSCI Emerging Markets ETF
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High
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Low
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Dividends
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2009
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|||
First Quarter
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$27.09
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$19.94
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$0.00000
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Second Quarter
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$34.64
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$25.65
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$0.24728
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Third Quarter
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$39.29
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$30.75
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$0.00000
|
Fourth Quarter
|
$42.07
|
$37.56
|
$0.32289
|
2010
|
|||
First Quarter
|
$43.22
|
$36.83
|
$0.01201
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Second Quarter
|
$43.98
|
$36.16
|
$0.26160
|
Third Quarter
|
$44.77
|
$37.59
|
$0.00000
|
Fourth Quarter
|
$48.58
|
$44.77
|
$0.35942
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2011
|
|||
First Quarter
|
$48.69
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$44.63
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$0.02512
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Second Quarter
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$50.21
|
$45.50
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$0.46092
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Third Quarter
|
$48.46
|
$34.95
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$0.00000
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Fourth Quarter
|
$42.80
|
$34.36
|
$0.34696
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2012
|
|||
First Quarter
|
$44.76
|
$38.23
|
$0.00000
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Second Quarter
|
$43.54
|
$36.68
|
$0.46836
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Third Quarter
|
$42.37
|
$37.42
|
$0.00000
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Fourth Quarter
|
$44.35
|
$40.14
|
$0.26233
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2013
|
|||
First Quarter
|
$45.20
|
$41.80
|
$0.01423
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Second Quarter
|
$44.23
|
$36.63
|
$0.00000
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Third Quarter
|
$43.29
|
$37.34
|
$0.49260
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Fourth Quarter
|
$43.66
|
$40.44
|
$0.36578
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2014
|
|||
First Quarter
|
$40.99
|
$37.09
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$0.00000
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Second Quarter (through June 24, 2014)
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$43.95
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$40.82
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$0.34063
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June 2014
|
PS-12
|
Citigroup Inc.
|
Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
|
EURO STOXX 50® Index – Historical Closing Levels
January 2, 2009 to June 24, 2014
|
June 2014
|
PS-13
|
Citigroup Inc.
|
Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
|
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·
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You should not recognize taxable income over the term of the securities prior to maturity, other than pursuant to a sale or exchange.
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·
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Upon a sale or exchange of the securities (including early redemption or retirement at maturity), you should recognize gain or loss equal to the difference between the amount realized and your tax basis in the securities. Subject to the discussion below concerning the potential application of the “constructive ownership” rules under Section 1260 of the Internal Revenue Code of 1986, as amended (the “Code”), any gain or loss recognized upon a sale or exchange of the securities should be long-term capital gain or loss if you held the securities for more than one year.
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June 2014
|
PS-14
|
Citigroup Inc.
|
Autocallable Securities Based Upon the Worst Performing of the Shares of the iShares® MSCI Emerging Markets ETF and the EURO STOXX 50® Index Due June , 2018
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June 2014
|
PS-15
|