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.
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Citigroup Inc.
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SUBJECT TO COMPLETION, DATED FEBRUARY 24, 2015
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February , 2015
Medium-Term Senior Notes, Series G
ricing Supplement No. 2015-CMTNG0392
Filed Pursuant to Rule 424(b)(2)Registration Statement No. 333-192302
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▪
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The securities offered by this pricing supplement are unsecured senior debt securities issued by Citigroup Inc. Unlike conventional debt securities, the securities do not pay interest and do not repay a fixed amount of principal at maturity. Instead, the securities offer a payment at maturity that may be greater than, equal to or less than the stated principal amount, depending on the performance of the EURO STOXX 50® Index (the “underlying index”) from the initial index level to the final index level.
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▪
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The securities offer leveraged exposure to a limited range of potential appreciation of the underlying index as described below. In exchange for this leveraged exposure, investors in the securities must be willing to forgo (i) any appreciation of the underlying index in excess of the maximum return at maturity specified below and (ii) any dividends that may be paid on the stocks that constitute the underlying index. In addition, investors in the securities must be willing to accept full downside exposure to any depreciation of the underlying index. If the final index level is less than the initial index level, you will lose 1% of the stated principal amount of your securities for every 1% of that decline. There is no minimum payment at maturity.
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▪
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In order to obtain the modified exposure to the underlying index that the securities provide, investors must be willing to accept (i) an investment that may have limited or no liquidity and (ii) the risk of not receiving any amount due under the securities if we default on our obligations. All payments on the securities are subject to the credit risk of Citigroup Inc.
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KEY TERMS
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Underlying index:
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The EURO STOXX 50® Index (ticker symbol: “SX5E”)
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Aggregate stated principal amount:
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$
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Stated principal amount:
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$1,000 per security
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Pricing date:
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February , 2015 (expected to be February 27, 2015)
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Issue date:
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March , 2015 (three business days after the pricing date)
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Final valuation dates:
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Expected to be March 7, 8, 9, 10 and 11, 2016, each subject to postponement if such date is not a scheduled trading day or if certain market disruption events occur
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Maturity date:
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March , 2016 (expected to be March 16, 2016), subject to postponement as described under “Additional Information” below
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Payment at maturity:
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For each $1,000 stated principal amount security you hold at maturity, you will receive the following amount in U.S. dollars:
▪ If the final index level is greater than the initial index level: $1,000 + leveraged return amount, subject to maximum return at maturity
▪ If the final index level is less than or equal to the initial index level: $1,000 × index performance factor
If the final index level is less than the initial index level, your payment at maturity will be less, and possibly significantly less, than the $1,000 stated principal amount per security. You should not invest in the securities unless you are willing and able to bear the risk of losing a significant portion of your investment.
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Initial index level:
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, the closing level of the underlying index on the pricing date
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Final index level:
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The arithmetic average of the closing level of the underlying index on each of the final valuation dates
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Index performance factor:
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The final index level divided by the initial index level
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Index percent increase:
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The final index level minus the initial index level, divided by the initial index level
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Leveraged return amount:
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$1,000 × the index percent increase × the leverage factor
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Leverage factor:
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300.00%
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Maximum return at maturity:
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$186.00 per security (18.60% of the stated principal amount). In no event will the payment at maturity per security exceed $1,000 plus the maximum return at maturity.
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Listing:
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The securities will not be listed on any securities exchange
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CUSIP / ISIN:
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1730T05H8 / US1730T05H83
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Underwriter:
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Citigroup Global Markets Inc. (“CGMI”), an affiliate of the issuer, acting as principal
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Underwriting fee and issue price:
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Issue price(1)(2)
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Underwriting fee(3)
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Proceeds to issuer(3)
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Per security:
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$1,000.00
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$10.00
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$990.00
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Total:
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$
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$
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$
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Citigroup Inc.
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Capped Return Enhanced Notes Based on the EURO STOXX 50® Index Due March , 2016
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Capped Return Enhanced Notes
Payment at Maturity Diagram
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n The Securities
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n The Underlying Index
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February 2015
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PS-2
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Citigroup Inc.
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Capped Return Enhanced Notes Based on the EURO STOXX 50® Index Due March , 2016
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Hypothetical Final Index Level
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Hypothetical Underlying Index Return(1)
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Hypothetical Payment at Maturity per Security
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Hypothetical Total Return on Securities at Maturity(2)
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7,000.00
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100.00%
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$1,186.00
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18.60%
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6,650.00
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90.00%
|
$1,186.00
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18.60%
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6,300.00
|
80.00%
|
$1,186.00
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18.60%
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5,950.00
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70.00%
|
$1,186.00
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18.60%
|
5,600.00
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60.00%
|
$1,186.00
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18.60%
|
5,250.00
|
50.00%
|
$1,186.00
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18.60%
|
4,900.00
|
40.00%
|
$1,186.00
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18.60%
|
4,550.00
|
30.00%
|
$1,186.00
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18.60%
|
4,200.00
|
20.00%
|
$1,186.00
|
18.60%
|
3,850.00
|
10.00%
|
$1,186.00
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18.60%
|
3,717.00
|
6.20%
|
$1,186.00
|
18.60%
|
3,675.00
|
5.00%
|
$1,150.00
|
15.00%
|
3,535.00
|
1.00%
|
$1,030.00
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3.00%
|
3,500.00
|
0.00%
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$1,000.00
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0.00%
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3,150.00
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-10.00%
|
$900.00
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-10.00%
|
2,800.00
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-20.00%
|
$800.00
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-20.00%
|
2,450.00
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-30.00%
|
$700.00
|
-30.00%
|
2,100.00
|
-40.00%
|
$600.00
|
-40.00%
|
1,750.00
|
-50.00%
|
$500.00
|
-50.00%
|
1,400.00
|
-60.00%
|
$400.00
|
-60.00%
|
1,050.00
|
-70.00%
|
$300.00
|
-70.00%
|
700.00
|
-80.00%
|
$200.00
|
-80.00%
|
350.00
|
-90.00%
|
$100.00
|
-90.00%
|
0.00
|
-100.00%
|
$0.00
|
-100.00%
|
February 2015
|
PS-3
|
Citigroup Inc.
|
Capped Return Enhanced Notes Based on the EURO STOXX 50® Index Due March , 2016
|
▪
|
You may lose some or all of your investment. Unlike conventional debt securities, the securities do not repay a fixed amount of principal at maturity. Instead, your payment at maturity will depend on the performance of the underlying index. If the final index level is less than the initial index level, you will lose 1% of the stated principal amount of the securities for every 1% by which the final index level is less than the initial index level. There is no minimum payment at maturity on the securities, and you may lose up to all of your investment.
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▪
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Your potential return on the securities is limited. Your potential total return on the securities at maturity is limited to the maximum return at maturity. If the underlying index appreciates by more than the maximum return at maturity, the securities will underperform an alternative investment providing 1-to-1 exposure to the appreciation of the underlying index without a maximum return.
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▪
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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.
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▪
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Investing in the securities is not equivalent to investing in the underlying index or the stocks that constitute the underlying index. You will not have voting rights, rights to receive dividends or other distributions or any other rights with respect to the stocks that constitute the underlying index. As of February 23, 2015, the average dividend yield of the underlying index was approximately 3.32% per year. While it is impossible to know the future dividend yield of the underlying index, if this average dividend yield were to remain constant for the term of the securities, you would be forgoing an aggregate yield of approximately 3.32% (assuming no reinvestment of dividends) by investing in the securities instead of investing directly in the stocks that constitute the underlying index or in another investment linked to the underlying index that provides for a pass-through of dividends. The payment scenarios described in this pricing supplement do not show any effect of lost dividend yield over the term of the securities.
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▪
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The payment at maturity on the securities is based on the arithmetic average of the closing level of the underlying index on the five final valuation dates. As a result, you are subject to the risk that the closing level of the underlying index on those five final valuation dates will result in a less favorable return than you would have received had the final index level been based on the closing level on other days during the term of the securities. If you had invested in another instrument linked to the underlying
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February 2015
|
PS-4
|
Citigroup Inc.
|
Capped Return Enhanced Notes Based on the EURO STOXX 50® Index Due March , 2016
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▪
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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.
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▪
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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.
|
▪
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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 placement fees 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.
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▪
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The estimated value of the securities was determined for us by our affiliate using proprietary pricing models. CGMI derived the estimated value disclosed on the cover page of this pricing supplement from its proprietary pricing models. In doing so, it may have made discretionary judgments about the inputs to its models, such as the volatility of the underlying index, dividend yields on the stocks that constitute the underlying index and interest rates. CGMI’s views on these inputs may differ from your or others’ views, and as an underwriter in this offering, CGMI’s interests may conflict with yours. Both the models and the inputs to the models may prove to be wrong and therefore not an accurate reflection of the value of the securities. Moreover, the estimated value of the securities set forth on the cover page of this pricing supplement may differ from the value that we or our affiliates may determine for the securities for other purposes, including for accounting purposes. You should not invest in the securities because of the estimated value of the securities. Instead, you should be willing to hold the securities to maturity irrespective of the initial estimated value.
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▪
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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.
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▪
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The estimated value of the securities is not an indication of the price, if any, at which CGMI or any other person may be willing to buy the securities from you in the secondary market. Any such secondary market price will fluctuate over the term of the securities based on the market and other factors described in the next risk factor. Moreover, unlike the estimated value included in this pricing supplement, any value of the securities determined for purposes of a secondary market transaction will be based on our secondary market rate, which will likely result in a lower value for the securities than if our internal funding rate were used. In addition, any secondary market price for the securities will be reduced by a bid-ask spread, which may vary depending on the aggregate stated principal amount of the securities to be purchased in the secondary market transaction, and the expected cost of unwinding related hedging transactions. As a result, it is likely that any secondary market price for the securities will be less than the issue price.
|
▪
|
The value of the securities prior to maturity will fluctuate based on many unpredictable factors. The value of your securities prior to maturity will fluctuate based on the level and volatility of the underlying index and a number of other factors, including the price and volatility of the stocks that constitute the underlying index, the dividend yields on the stocks that constitute the underlying
|
February 2015
|
PS-5
|
Citigroup Inc.
|
Capped Return Enhanced Notes Based on the EURO STOXX 50® Index Due March , 2016
|
▪
|
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 underlying index is subject to risks associated with the Eurozone. The companies whose stocks constitute the underlying 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 underlying index performance will not be adjusted for changes in the exchange rate between the Euro and the U.S. dollar. The underlying 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 underlying 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, your return on the securities will underperform an alternative investment that offers exposure to that appreciation in addition to the change in the level of the underlying index.
|
▪
|
Our offering of the securities does not constitute a recommendation of the underlying index by CGMI or its affiliates or by the placement agents or their affiliates. The fact that we are offering the securities does not mean that we believe, or that the placement agents or their affiliates believe, that investing in an instrument linked to the underlying index is likely to achieve favorable returns. In fact, as we and the placement agents are part of global financial institutions, our affiliates and the placement agents and their 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 or the placement agents or their affiliates may affect the level of the underlying index in a way that has a negative impact on your interests as a holder of the securities.
|
▪
|
The level of the underlying index may be adversely affected by our or our affiliates’ hedging and other trading activities. We expect to hedge our obligations under the securities through CGMI or other of our affiliates, who may take positions directly in the stocks that constitute the underlying index and other financial instruments related to the underlying index or such stocks. Our affiliates and the placement agents and their affiliates also trade the stocks that constitute the underlying index and other financial instruments related to the underlying index or such stocks on a regular basis (taking long or short positions or both), for their accounts, for other accounts under their management or to facilitate transactions on behalf of customers. These activities could affect the level of the underlying index in a way that negatively affects the value of the securities. They could also result in substantial returns for us or our affiliates or the placement agents or their affiliates while the value of the securities declines.
|
▪
|
We and our affiliates or the placement agents or their affiliates may have economic interests that are adverse to yours as a result of our affiliates’ or their business activities. Our affiliates or the placement agents or their 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 or the placement agents or their affiliates may acquire non-public information about such issuers, which we and they will not disclose to you. Moreover, if any of our affiliates or the placement agents or their affiliates is or becomes a creditor of any such issuer, they may exercise any remedies against such issuer that are available to them without regard to your interests.
|
▪
|
The calculation agent, which is an affiliate of ours, will make important determinations with respect to the securities. If certain events occur, such as market disruption events or the discontinuance of the underlying index, CGMI, as calculation agent, will be required to make discretionary judgments that could significantly affect your payment at maturity. In making these judgments, the calculation agent’s interests as an affiliate of ours could be adverse to your interests as a holder of the securities.
|
February 2015
|
PS-6
|
Citigroup Inc.
|
Capped Return Enhanced Notes Based on the EURO STOXX 50® Index Due March , 2016
|
▪
|
Adjustments to the underlying index may affect the value of your securities. STOXX Limited (the “underlying index publisher”) may add, delete or substitute the stocks that constitute the underlying index or make other methodological changes that could affect the level of the underlying index. The underlying index publisher may discontinue or suspend calculation or publication of the underlying index at any time without regard to your interests as holders of the securities.
|
▪
|
The U.S. federal tax consequences of an investment in the securities are unclear. There is no direct legal authority regarding the proper U.S. federal tax treatment of the securities, and we do not plan to request a ruling from the Internal Revenue Service (the “IRS”). Consequently, significant aspects of the tax treatment of the securities are uncertain, and the IRS or a court might not agree with the treatment of the securities as prepaid forward contracts. If the IRS were successful in asserting an alternative treatment of the securities, the tax consequences of the ownership and disposition of the securities might be materially and adversely affected. As described below under “United States Federal Tax Considerations,” in 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on various issues regarding the U.S. federal income tax treatment of “prepaid 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.
|
EURO STOXX 50® Index– Historical Closing Levels
January 4, 2010 to February 23, 2015
|
February 2015
|
PS-7
|
Citigroup Inc.
|
Capped Return Enhanced Notes Based on the EURO STOXX 50® Index Due March , 2016
|
|
·
|
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.
|
February 2015
|
PS-8
|
Citigroup Inc.
|
Capped Return Enhanced Notes Based on the EURO STOXX 50® Index Due March , 2016
|
February 2015
|
PS-9
|