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Share Name | Share Symbol | Market | Type |
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Citigroup Inc | NYSE:C | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.01 | 0.02% | 61.55 | 62.15 | 61.41 | 61.53 | 11,048,880 | 01:00:00 |
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 MAY 1, 2015
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May , 2015
Medium-Term Senior Notes, Series G
Pricing Supplement No. 2015-CMTNG0528
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-192302
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▪
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The securities offer annual coupon payments at a rate that, for each annual coupon payment date, will depend on the performance of the Russell 2000® Index (the “underlying index”) over the preceding year. In general, the securities will pay a higher annual coupon rate if the underlying index has appreciated over that year and a lower annual coupon rate if the underlying index has depreciated over that year. In exchange for these annual coupon payments, investors in the securities must be willing to accept the risk of a loss of principal at maturity based on the performance of the underlying index from the initial index level, determined on the pricing date, to the final index level, determined on the final valuation date. The securities provide a 15.00% buffer against any depreciation of the underlying index from the initial index level to the final index level. However, if the underlying index depreciates by more than 15.00% from the initial index level to the final index level, you will lose 1% of the stated principal amount of your securities for every 1% by which that depreciation exceeds 15.00%. Although you will be exposed to downside risk with respect to the underlying index if the underlying index depreciates by more than 15.00%, you will not participate in any appreciation of the underlying index or receive any dividends paid on the stocks that constitute the underlying index.
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▪
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The securities are unsecured senior debt securities issued by Citigroup Inc. Investors in the securities 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 Russell 2000® Index (ticker symbol: “RTY”)
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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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May , 2015 (expected to be May 27, 2015)
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Issue date:
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May , 2015 (two business days after the pricing date)
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Coupon payment dates:
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Annually on the day of each May (expected to be the 29th day of each May), commencing May 2016, or if such day is not a business day, the immediately following business day, provided that, if the valuation date immediately preceding any coupon payment date is postponed, such coupon payment date will be postponed for the same number of business days and no additional interest will accrue as a result of such delayed payment. Notwithstanding the foregoing, the coupon payment date for the final valuation date will be the maturity date.
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Valuation dates:
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With respect to each coupon payment date, the fifth business day preceding such coupon payment date, and are expected to be May 23, 2016, May 22, 2017, May 21, 2018, May 21, 2019, May 21, 2020 and May 24, 2021 (the “final valuation date”), each subject to postponement if such date is not a scheduled trading day or if certain market disruption events occur.
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Annual observation period:
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The period commencing on and including the pricing date and ending on and including the first valuation date, and each subsequent period from and including a valuation date to and including the next succeeding valuation date. We refer to the pricing date together with the valuation dates as the “observation dates.”
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Maturity date:
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June , 2021 (expected to be June 1, 2021)
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Coupon:
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On each annual coupon payment date, the securities will pay a coupon at an annual rate determined as follows:
▪ If the applicable annual index return percentage is zero or positive: 5.00% to 5.50% (to be determined on the pricing date)
▪ If the applicable annual index return percentage is negative: 3.00%
If the annual index return percentage for any coupon payment date is negative (meaning that the closing level of the underlying index is lower at the end of the most recent annual observation period than it was at the beginning of that annual observation period), you will only receive the lower of the two possible annual interest rates specified above.
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Annual index return percentage:
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For any annual coupon payment date, the annual index return percentage is the percentage change from the closing level of the underlying index on the observation date occurring at the beginning of the most recently ended annual observation period to the closing level of the underlying index on the observation date occurring at the end of that annual observation period, calculated as follows: (i) final annual index level minus initial annual index level, divided by (ii) initial annual index level.
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Initial annual index level:
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For purposes of calculating the annual index return percentage, the closing level of the underlying index on the observation date occurring at the beginning of the relevant annual observation period
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Final annual index level:
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For purposes of calculating the annual index return percentage, the closing level of the underlying index on the observation date occurring at the end of the relevant annual observation period
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Payment at maturity:
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At maturity, for each security you then hold, you will receive the applicable annual coupon payment plus:
▪ If the final index level is greater than or equal to the buffer level: $1,000
▪ If the final index level is less than the buffer level: ($1,000 × the index performance factor) + $150.00
If the final index level is less than the buffer 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 closing level of the underlying index on the final valuation date
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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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Buffer level:
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, 85.00% of the initial index level
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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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17298CAM0 / US17298CAM01
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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)(4)
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Proceeds to issuer(4)
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Per security:
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$1,000.00
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$34.50
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$965.50
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Total:
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$
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$
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$
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Citigroup Inc.
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Annual Reset Coupon Securities Based on the Russell 2000® Index Due June , 2021
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Initial index level:
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1,200 (the hypothetical closing level of the underlying index on the pricing date)
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Buffer level:
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1,020 (85.00% of the hypothetical initial index level)
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Coupon rate if relevant annual return percentage is zero or positive:
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5.00% per annum
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Hypothetical final index level
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Hypothetical percentage change from initial index level to final index level
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Hypothetical payment at maturity1 per security
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Hypothetical total return on the securities2 if the closing level of the underlying index is greater than or equal to the closing level of the underlying index on the prior valuation date on:
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All valuation dates
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4 valuation dates
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2 valuation dates
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1 valuation date
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No valuation date
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1,380.00
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15.00%
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$1,000.00
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30.00%
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26.00%
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22.00%
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20.00%
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18.00%
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1,200.00
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0.00%
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$1,000.00
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30.00%
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26.00%
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22.00%
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20.00%
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18.00%
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1,080.00
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-10.00%
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$1,000.00
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N/A
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26.00%
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22.00%
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20.00%
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18.00%
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1,020.00
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-15.00%
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$1,000.00
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N/A
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26.00%
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22.00%
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20.00%
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18.00%
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1,019.88
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-15.01%
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$999.90
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N/A
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25.99%
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21.99%
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19.99%
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17.99%
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900.00
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-25.00%
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$900.00
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N/A
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16.00%
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12.00%
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10.00%
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8.00%
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600.00
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-50.00%
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$650.00
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N/A
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-9.00%
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-13.00%
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-15.00%
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-17.00%
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300.00
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-75.00%
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$400.00
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N/A
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-34.00%
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-38.00%
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-40.00%
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-42.00%
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May 2015
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PS-2
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Citigroup Inc.
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Annual Reset Coupon Securities Based on the Russell 2000® Index Due June , 2021
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▪
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You may lose up to 85.00% of the stated principal amount. 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 buffer level, you will lose 1% of the stated principal amount of your securities for every 1% by which the final index level is less than the buffer level.
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▪
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The securities will not pay an annual coupon at the higher coupon rate stated on the cover of this pricing supplement unless the applicable annual index return percentage is zero or positive. The annual index return percentage for any annual coupon payment date will be zero or positive only if the closing level of the underlying index on the observation date occurring at the end of the most recent annual observation period is greater than or equal to the closing level of the underlying index on the observation date occurring at the beginning of that observation period. If the annual index return percentage for any annual coupon payment date is negative, meaning that the closing level of the underlying index is lower on the observation date occurring at the end of the most recent annual observation period than it was on the observation date occurring at the beginning of that annual observation period, the related annual coupon payment will be made at the lower coupon rate of 3.00% per annum. It is possible that you will receive only the lower coupon rate of 3.00% per annum on each annual coupon payment date over the entire term of the securities.
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▪
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Higher coupon rates are associated with greater risk. If each annual coupon payment is made at the higher coupon rate stated on the cover of this pricing supplement, the securities would produce a yield that is generally higher than the yield on our conventional debt securities of the same maturity. This higher potential yield is associated with greater levels of expected risk as of the pricing date for the securities, including the risk that you may receive only the lower coupon rate on one or more, or all, coupon payment dates and the risk that you may receive significantly less than the stated principal amount of your securities at maturity. The volatility of the underlying index is an important factor affecting this risk. Greater expected volatility of the underlying index as of the pricing date may result in a higher potential coupon rate, but it also represents a greater expected likelihood as of the pricing date that the closing level of the underlying index will decline over the term of the securities, such that you will not receive one or more, or any, coupon payments during the term of the securities at the higher coupon rate and that the closing level of the underlying index will be less than the buffer level on the final valuation date, such that you will not be repaid the stated principal amount of your securities at maturity.
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▪
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The securities offer downside exposure to the underlying index, but no upside exposure to the underlying index. You will not participate in any appreciation in the level of the underlying index over the term of the securities. Consequently, your return on the securities will be limited to the coupon payments you receive, and may be significantly less than the return on the underlying index over the term of the securities.
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▪
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The performance of the securities will depend on the closing level of the underlying index solely on the relevant valuation dates, which makes the securities particularly sensitive to the volatility of the underlying index. The rate at which coupon payments will be made for any given year will depend on the closing level of the underlying index solely on the applicable annual valuation date, regardless of the closing level of the underlying index on other days during the term of the securities. Your payment at maturity will depend solely on the closing level of the underlying index on the final valuation date, and not on any other day during the term of the securities. Because the performance of the securities depends on the closing level of the underlying index on a limited number of dates, the securities will be particularly sensitive to volatility in the closing level of the underlying index. You should understand that the underlying index has historically been highly volatile.
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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
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May 2015
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PS-3
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Citigroup Inc.
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Annual Reset Coupon Securities Based on the Russell 2000® Index Due June , 2021
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▪
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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 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.
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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 preliminary 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 preliminary 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 preliminary 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 preliminary 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 preliminary 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.
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▪
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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 index, interest rates generally, the time remaining to maturity and our creditworthiness, as reflected in our secondary market rate. You should understand that the value of your securities at any time prior to maturity may be significantly less than the issue price.
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▪
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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 preliminary pricing supplement.
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▪
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The securities will be subject to risks associated with small capitalization stocks. The stocks that constitute the underlying index are issued by companies with relatively small market capitalization. The stock prices of smaller companies may be more
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May 2015
|
PS-4
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Citigroup Inc.
|
Annual Reset Coupon Securities Based on the Russell 2000® Index Due June , 2021
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▪
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Our offering of the securities does not constitute a recommendation of the underlying index. The fact that we are offering the securities does not mean that we believe that investing in an instrument linked to the underlying 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 securities.
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▪
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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 and may adjust such positions during the term of the securities. 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 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 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.
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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 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.
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▪
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Adjustments to the underlying index may affect the value of your securities. Russell Investment Group (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.
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▪
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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 described herein. If the IRS were successful in asserting an alternative treatment for the securities, the tax consequences of 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. While it is not clear whether the securities would be viewed as similar to the typical prepaid forward contract described in the notice, 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 is subject to withholding tax, possibly with retroactive effect.
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May 2015
|
PS-5
|
Citigroup Inc.
|
Annual Reset Coupon Securities Based on the Russell 2000® Index Due June , 2021
|
Russell 2000® Index – Historical Closing Levels
January 4, 2010 to April 29, 2015
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May 2015
|
PS-6
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Citigroup Inc.
|
Annual Reset Coupon Securities Based on the Russell 2000® Index Due June , 2021
|
·
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a financial institution;
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·
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a dealer or trader subject to a mark-to-market method of tax accounting with respect to the securities;
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·
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a person holding the securities as part of a “straddle” or conversion transaction or one who enters into a “constructive sale” with respect to a security;
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·
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a U.S. Holder (as defined below) whose functional currency is not the U.S. dollar;
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·
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an entity classified as a partnership for U.S. federal income tax purposes;
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·
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a “regulated investment company”;
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·
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a tax-exempt entity, including an “individual retirement account” or “Roth IRA”; or
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·
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a person subject to the alternative minimum tax.
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·
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a portion of each coupon payment made with respect to a security will be attributable to interest on the Deposit; and
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·
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the remainder will represent option premium attributable to your grant of the Put Option (with respect to each coupon payment received and, collectively, all coupon payments received, “Put Premium”).
|
May 2015
|
PS-7
|
Citigroup Inc.
|
Annual Reset Coupon Securities Based on the Russell 2000® Index Due June , 2021
|
·
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a citizen or individual resident of the United States;
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·
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a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia; or
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·
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an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
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May 2015
|
PS-8
|
Citigroup Inc.
|
Annual Reset Coupon Securities Based on the Russell 2000® Index Due June , 2021
|
·
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an individual who is classified as a nonresident alien;
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·
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a foreign corporation; or
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·
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a foreign trust or estate.
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May 2015
|
PS-9
|
Citigroup Inc.
|
Annual Reset Coupon Securities Based on the Russell 2000® Index Due June , 2021
|
May 2015
|
PS-10
|
Citigroup Inc.
|
Annual Reset Coupon Securities Based on the Russell 2000® Index Due June , 2021
|
May 2015
|
PS-11
|
1 Year Citigroup Chart |
1 Month Citigroup Chart |
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