|
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.
SUBJECT TO COMPLETION, DATED MARCH 2,
2021
|
|
Citigroup Global Markets Holdings
Inc. |
March , 2021
Medium-Term Senior Notes, Series
N
Pricing Supplement No.
2021—USNCH6960
Filed Pursuant to Rule
424(b)(2)
Registration Statement Nos.
333-224495 and 333-
224495-03
|
Callable Fixed to Float CMS Spread Range Accrual Securities
Contingent on the Worst Performing of the Dow Jones Industrial
AverageTM, the EURO STOXX® Banks Index and
the S&P 500® Index Due March 19, 2041
|
§ |
Variable coupon.
The securities will pay interest at a fixed rate specified below
for two years following issuance. After the second year, contingent
interest will accrue on the securities during each accrual period
at a rate based on the CMS spread described below, but only
for each elapsed day during that accrual period on which the
accrual condition is satisfied. The accrual condition will be
satisfied on an elapsed day only if the closing level of
each underlying index on that day is greater than or equal
to its accrual barrier level. Accordingly, contingent interest
during each accrual period, if any, will depend on the CMS spread
and the level of each underlying index. The amount of interest
payable on the securities may be adversely affected by adverse
movements in any one of these variables, regardless
of the performance of the others. The securities may pay low or no
interest for extended periods of time or even throughout the entire
term after the second year. |
|
§ |
Call
right. We have the right to call the securities for mandatory
redemption on any coupon payment date beginning approximately one
year after the issue date. |
|
§ |
Contingent repayment
of principal at maturity. If we do not redeem the securities
prior to maturity, your payment at maturity will depend on the
closing level of the worst performing underlying index on
the final valuation date. If the closing level of the worst
performing underlying index on the final valuation date is greater
than or equal to its final barrier level, you will be repaid the
stated principal amount of your securities at maturity. However, if
the closing level of the worst performing underlying index on the
final valuation date is less than its final barrier level, you will
lose 1% of the stated principal amount of your securities for every
1% by which the worst performing underlying index has depreciated
from its initial index level. There is no minimum payment at
maturity. |
|
§ |
The
securities offered by this pricing supplement are unsecured debt
securities issued by Citigroup Global Markets Holdings Inc. and
guaranteed by Citigroup Inc. 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
and Citigroup Inc. default on our obligations. All payments on
the securities are subject to the credit risk of Citigroup Global
Markets Holdings Inc. and Citigroup Inc. |
|
KEY TERMS |
|
|
Issuer: |
Citigroup Global Markets Holdings
Inc., a wholly owned subsidiary of Citigroup Inc. |
|
Guarantee: |
All payments due on the
securities are fully and unconditionally guaranteed by Citigroup
Inc. |
|
Stated principal amount: |
$1,000 per security |
| Underlying
indices:
|
Underlying indices |
Initial index level* |
Accrual barrier level** |
Final barrier level*** |
| |
Dow Jones Industrial
AverageTM |
|
|
|
| |
EURO
STOXX® Banks Index |
|
|
|
| |
S&P
500® Index |
|
|
|
| |
* For each underlying index, its
closing level on the pricing date
** For each underlying index, 65% of
its initial index level
*** For each underlying index, 50% of
its initial index level
|
|
CMS spread: |
On any CMS spread determination date, the 30-year
constant maturity swap rate (“CMS30”) minus the 2-year
constant maturity swap rate (“CMS2”) on that day. See
“Information About the CMS Spread” in this pricing
supplement. |
|
CMS spread determination date: |
For any accrual period commencing on or after
March 19, 2023, the second U.S. government securities business day
prior to the first day of that accrual period |
|
Pricing date: |
March 17, 2021 |
|
Issue date: |
March 19, 2021 |
|
Final valuation date: |
March 14, 2041, subject to postponement if such
date is not a scheduled trading day or certain market disruption
events occur |
|
Maturity date: |
Unless earlier redeemed, March 19,
2041 |
|
Payment at maturity: |
Unless earlier redeemed, at maturity you will receive, for each
security you then hold (in addition to the final coupon payment, if
any):
· If the final index
level of the worst performing underlying index is greater than
or equal to its final barrier level: $1,000
· If the final index
level of the worst performing underlying index is less than
its final barrier level:
$1,000 + ($1,000 × the index return of the worst performing
underlying index)
If the final index level of the worst performing underlying
index is less than its final barrier level, you will have full
downside exposure to the negative index return of the worst
performing underlying index and will receive significantly less
than the stated principal amount of your securities at maturity.
You may lose a significant portion, and up to all, of your
investment.
|
|
Coupon payments: |
On
each coupon payment date occurring during the first two
years following issuance of the securities, the securities will
pay a fixed coupon of 10.50% per annum, regardless of the CMS
spread or the levels of the underlying indices.
On
each coupon payment date after the second year (beginning in
June 2023), you will receive a coupon payment at an annual rate
equal to the variable coupon rate for that coupon payment date. The
variable coupon rate for any coupon payment date after the second
year will be determined as follows:
|
|
relevant contingent rate per
annum × |
number of accrual days during the related accrual period
|
|
|
number of elapsed days during the
related accrual period |
|
Each coupon payment per security will be equal to (i) $1,000
multiplied by the applicable coupon rate per annum
divided by (ii) 4.
If the number of accrual days in a given accrual period is less
than the number of elapsed days in that accrual period, the
variable coupon rate for the related coupon payment date will be
less than the full relevant contingent rate, and if there are no
accrual days in a given accrual period, the variable coupon rate
for the related coupon payment date will be 0%.
|
|
Relevant contingent rate: |
The relevant contingent rate for any coupon payment date after the
second year following issuance of the securities means:
30.00 × the CMS spread (as of the CMS spread determination date for
the related accrual period), subject to a minimum relevant
contingent rate of 0.00% per annum and a maximum relevant
contingent rate of 11.25% per annum.
If the CMS spread for any CMS spread determination date is less
than or equal to 0.00%, the relevant contingent rate for that
accrual period will be 0.00% and you will not receive any coupon
payment on the related coupon payment date. The relevant contingent
rate will in no event exceed the maximum relevant contingent
rate.
|
|
Listing: |
The securities will not be listed on any
securities exchange |
|
Underwriter: |
Citigroup Global Markets Inc. (“CGMI”), an
affiliate of the issuer, acting as principal |
|
Underwriting fee and issue price: |
Issue
price(1) |
Underwriting
fee(2) |
Proceeds to
issuer |
|
Per
security: |
$1,000 |
$35 |
$965 |
|
Total: |
$ |
$ |
$ |
| |
|
|
|
|
(Key Terms continued on next page)
(1) Citigroup
Global Markets Holdings Inc. currently expects that the estimated
value of the securities on the pricing date will be at least
$850.00 per security, which will be less than the issue price. The
estimated value of the securities is based on CGMI’s proprietary
pricing models and our internal funding rate. It is not an
indication of actual profit to CGMI or other of our affiliates, nor
is it an indication of the price, if any, at which CGMI or any
other person may be willing to buy the securities from you at any
time after issuance. See “Valuation of the Securities” in this
pricing supplement.
(2) For more
information on the distribution of the securities, see
“Supplemental Plan of Distribution” in this pricing supplement. In
addition to the underwriting fee, CGMI and its affiliates may
profit from expected hedging activity related to this offering,
even if the value of the securities declines. See “Use of Proceeds
and Hedging” in the accompanying prospectus.
Investing in the securities involves risks not associated with
an investment in conventional debt securities. See “Summary Risk
Factors” beginning on page PS-8.
Neither the Securities and
Exchange Commission (the “SEC”) nor any state securities commission
has approved or disapproved of the securities or determined that
this pricing supplement and the accompanying product supplement,
underlying supplement, prospectus supplement and prospectus are
truthful or complete. Any representation to the contrary is a
criminal offense. You should read this pricing
supplement together with the accompanying product supplement,
underlying supplement, prospectus supplement and prospectus, which
can be accessed via the following hyperlinks:
Product Supplement No. IE-05-06 dated March 7,
2019 Underlying Supplement No. 9 dated October 30,
2020
Prospectus Supplement and Prospectus each dated May 14,
2018
The
securities are not bank deposits and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
governmental agency, nor are they obligations of, or guaranteed by,
a bank.
|
Citigroup Global Markets Holdings
Inc. |
| |
|
KEY
TERMS (CONTINUED) |
|
|
Coupon payment dates: |
The
19th day of each March, June,
September and December beginning on June 19, 2021, except
that the final coupon payment date will be the maturity date (or
the earlier date on which we redeem the securities, if
applicable) |
|
Accrual period: |
For each
coupon payment date after the second year following issuance of the
securities, the period from and including the immediately preceding
coupon payment date to but excluding such coupon payment
date |
|
Accrual day: |
An
elapsed day on which the accrual condition is satisfied |
|
Elapsed day: |
Calendar
day |
|
Accrual condition: |
The
accrual condition will be satisfied on an elapsed day if, and only
if, the closing level of each underlying index is greater
than or equal to its accrual barrier level on that elapsed day. For
purposes of determining whether the accrual condition is satisfied
on any elapsed day, if the closing level of any underlying index is
not available for any reason on that day (including weekends and
holidays), the closing level of such underlying index will be
assumed to be the same as on the immediately preceding elapsed day
(subject to the discussion in the section “Description of the
Securities—Terms Related to the Underlying Index—Discontinuance or
Material Modification of the Underlying Index” in the accompanying
product supplement). In addition, for all elapsed days from and
including the fourth-to-last day that is a scheduled trading day
for each underlying index in an accrual period to and including the
last elapsed day of that accrual period, the closing levels of the
underlying indices will not be observed and will be assumed to be
the same as on the elapsed day immediately preceding such
unobserved days. |
|
Worst performing underlying index: |
The
underlying index with the lowest index return |
|
Final index level: |
For each
underlying index, its closing level on the final valuation
date |
|
Index return: |
For
each underlying index, (i) its final index level minus its
initial index level, divided by (ii) its initial index
level |
|
Early redemption: |
We
have the right to redeem the securities, in whole and not in part,
on any coupon payment date on or after March 19, 2022 upon not less
than five business days’ notice for an amount in cash equal to 100%
of the stated principal amount of your securities plus the coupon
payment due on the date of redemption, if any. |
|
CUSIP / ISIN: |
17328YRF3/ US17328YRF33 |
Additional Information
General. The terms of the securities are set forth in the
accompanying product supplement, prospectus supplement and
prospectus, as supplemented by this pricing supplement. The
accompanying product supplement, prospectus supplement and
prospectus contain important disclosures that are not repeated in
this pricing supplement. For example, certain events may occur that
could affect the amount of any variable coupon payment you receive
and your payment at maturity. These events and their consequences
are described in the accompanying product supplement in the
sections “Description of the Securities—Terms Related to the
Underlying Index—Discontinuance or Material Modification of the
Underlying Index” and “Description of the Securities—Terms Related
to the Underlying Index—Consequences of a Market Disruption Event;
Postponement of the Final Valuation Date,” and not in this pricing
supplement. In addition, the accompanying underlying supplement
contains important disclosures regarding the underlying indices
that are not repeated in this pricing supplement. It is important
that you read the accompanying product supplement, underlying
supplement, prospectus supplement and prospectus together with this
pricing supplement before deciding whether to invest in the
securities. Certain terms used but not defined in this pricing
supplement are defined in the accompanying product supplement.
Although the accompanying product supplement contemplates only a
single underlying index, the securities are linked to three
underlying indices. Each of the provisions in the accompanying
product supplement referring to the underlying index shall apply
separately to each of the underlying indices to which the
securities are linked.
Postponement of the final valuation date. If the scheduled
final valuation date is not a scheduled trading day for any
underlying index or if a market disruption event occurs with
respect to any underlying index on the scheduled final valuation
date, the final valuation date will be subject to postponement as
described in the accompanying product supplement in the section
“Description of the Securities—Terms Related to the Underlying
Index—Consequences of a Market Disruption Event; Postponement of
the Final Valuation Date.” If the scheduled final valuation date is
postponed, the closing level of each underlying index in respect of
the final valuation date will be determined based on (i) for any
underlying index for which the originally scheduled final valuation
date is a scheduled trading day and as to which a market disruption
event does not occur on the originally scheduled final valuation
date, the closing level of such underlying index on the originally
scheduled final valuation date and (ii) for any other underlying
index, the closing level of such underlying index on the final
valuation date as postponed (or, if earlier, the first scheduled
trading day for such underlying index following the originally
scheduled final valuation date on which a market disruption event
did not occur with respect to such underlying index).
Prospectus. The first sentence of “Description of Debt
Securities— Events of Default and Defaults” in the accompanying
prospectus shall be amended to read in its entirety as follows:
Events of default under the indenture are:
| |
• |
|
failure of Citigroup Global Markets
Holdings or Citigroup to pay required interest on any debt security
of such series for 30 days; |
| |
• |
|
failure of Citigroup Global Markets
Holdings or Citigroup to pay principal, other than a scheduled
installment payment to a sinking fund, on any debt security of such
series for 30 days; |
|
Citigroup Global Markets Holdings
Inc. |
| |
| |
• |
|
failure of Citigroup Global Markets
Holdings or Citigroup to make any required scheduled installment
payment to a sinking fund for 30 days on debt securities of such
series; |
| |
• |
|
failure of Citigroup Global Markets
Holdings to perform for 90 days after notice any other covenant in
the indenture applicable to it other than a covenant included in
the indenture solely for the benefit of a series of debt securities
other than such series; and |
| |
• |
|
certain events of bankruptcy or
insolvency of Citigroup Global Markets Holdings, whether voluntary
or not (Section 6.01). |
|
Citigroup Global Markets Holdings
Inc. |
| |
Hypothetical Examples
Variable Coupon
Payments
The sections below provide
examples of how the variable coupon payments on the securities will
be determined. The first section, “—Determining the Hypothetical
Relevant Contingent Rate,” provides a limited number of
hypothetical examples of how the relevant contingent rate for any
accrual period will be determined based on hypothetical CMS spread
values, as determined on the second U.S. government securities
business day prior to the beginning of the applicable accrual
period. The second section, “—Determining the Hypothetical Variable
Coupon Rates and Variable Coupon Payments,” provides a limited
number of hypothetical examples of how the coupon payments on the
securities will be determined based on a limited number of
hypothetical relevant contingent interest rates and a limited
number of hypothetical accrual days during a hypothetical accrual
period. The figures below have been rounded for ease of
analysis.
Determining the
Hypothetical Relevant Contingent Rate
The table below presents
examples of hypothetical relevant contingent rates based on various
hypothetical CMS spread values.
|
Example |
Hypothetical CMS Spread* |
Hypothetical Relevant Contingent Rate per
Annum** |
|
1 |
-1.00% |
0.00% |
|
2 |
-0.80% |
0.00% |
|
3 |
-0.60% |
0.00% |
|
4 |
-0.40% |
0.00% |
|
5 |
-0.20% |
0.00% |
|
6 |
0.00% |
0.00% |
|
7 |
0.10% |
3.00% |
|
8 |
0.20% |
6.00% |
|
9 |
0.30% |
9.00% |
|
10 |
0.40% |
11.25% |
|
11 |
0.50% |
11.25% |
|
12 |
0.60% |
11.25% |
|
13 |
0.80% |
11.25% |
|
14 |
1.00% |
11.25% |
|
15 |
1.20% |
11.25% |
|
16 |
1.40% |
11.25% |
|
17 |
1.60% |
11.25% |
|
18 |
1.80% |
11.25% |
|
19 |
2.00% |
11.25% |
|
20 |
2.20% |
11.25% |
|
21 |
2.40% |
11.25% |
|
22 |
2.60% |
11.25% |
_______________________________
*
Hypothetical CMS spread = (CMS30 – CMS2), where CMS30 and CMS2 are
determined on the second U.S. government securities business day
prior to the beginning of the applicable accrual period.
**
Hypothetical relevant contingent rate per annum for the accrual
period = 30.00 × hypothetical CMS spread, subject to a minimum of
0.00% and a maximum of 11.25% per annum.
Determining the Hypothetical Variable Coupon Rates and Variable
Coupon Payments
The tables below present
examples of the hypothetical variable coupon rate and hypothetical
variable coupon payments after the second year following issuance
of the securities based on the number of accrual days in a
particular accrual period and different assumptions about the CMS
spread. For illustrative purposes only, the tables assume an
accrual period that contains 90 elapsed days and that the
securities have not previously been redeemed. The actual coupon
payment for any coupon payment date after the second year will
depend on the actual number of accrual days and elapsed days during
the related accrual period and the actual CMS spread on the CMS
spread determination date for that accrual period. The variable
coupon rate for each accrual period will apply only to that accrual
period.
|
Citigroup Global Markets Holdings
Inc. |
| |
Assuming the CMS spread is
0.10% on the applicable CMS spread determination
date:
|
Hypothetical Number of Accrual Days in Accrual
Period* |
Hypothetical Relevant Contingent Rate per
Annum** |
Hypothetical Variable Coupon Rate per Annum*** |
Hypothetical Variable Coupon Payment per
Security**** |
|
0 |
3.000% |
0.000% |
$0.00 |
|
15 |
3.000% |
0.500% |
$1.25 |
|
30 |
3.000% |
1.000% |
$2.50 |
|
45 |
3.000% |
1.500% |
$3.75 |
|
60 |
3.000% |
2.000% |
$5.00 |
|
75 |
3.000% |
2.500% |
$6.25 |
|
90 |
3.000% |
3.000% |
$7.50 |
Assuming the CMS spread is
2.00% on the applicable CMS spread determination
date:
|
Hypothetical Number of Accrual Days in Accrual
Period* |
Hypothetical Relevant Contingent Rate per
Annum** |
Hypothetical Variable Coupon Rate per Annum*** |
Hypothetical Variable Coupon Payment per
Security**** |
|
0 |
11.25% |
0.000% |
$0.00 |
|
15 |
11.25% |
1.875% |
$4.69 |
|
30 |
11.25% |
3.750% |
$9.38 |
|
45 |
11.25% |
5.625% |
$14.06 |
|
60 |
11.25% |
7.500% |
$18.75 |
|
75 |
11.25% |
9.375% |
$23.44 |
|
90 |
11.25% |
11.250% |
$28.13 |
Assuming the CMS spread is
0.00% on the applicable CMS spread determination
date:
|
Hypothetical Number of Accrual Days in Accrual
Period* |
Hypothetical Relevant Contingent Rate per
Annum** |
Hypothetical Variable Coupon Rate per Annum*** |
Hypothetical Variable Coupon Payment per
Security**** |
|
0 |
0.00% |
0.000% |
$0.00 |
|
15 |
0.00% |
0.000% |
$0.00 |
|
30 |
0.00% |
0.000% |
$0.00 |
|
45 |
0.00% |
0.000% |
$0.00 |
|
60 |
0.00% |
0.000% |
$0.00 |
|
75 |
0.00% |
0.000% |
$0.00 |
|
90 |
0.00% |
0.000% |
$0.00 |
_______________________________
* An accrual
day is an elapsed day on which the accrual condition is satisfied
(i.e., on which the closing level of each underlying index is
greater than or equal to its accrual barrier level)
** The
hypothetical relevant contingent rate is equal to 30.00 × CMS
spread (as of the CMS spread determination date for the related
accrual period), subject to a minimum of 0.00% and a maximum of
11.25% per annum
*** The
hypothetical variable coupon rate per annum is equal to (i) the
hypothetical relevant contingent rate per annum multiplied
by (ii) (a) the hypothetical number of accrual days in the
related accrual period, divided by (b) 90
**** The
hypothetical variable coupon payment per security is equal to (i)
$1,000 multiplied by the hypothetical variable coupon rate
per annum, divided by (ii) 4
|
Citigroup Global Markets Holdings
Inc. |
| |
Payment at Maturity
The diagram below illustrates your payment at maturity for a range
of hypothetical index returns of the worst performing underlying
index (excluding the final coupon payment, if any, and assuming we
do not redeem the securities prior to maturity).
|
Callable Fixed to Float Range Accrual Securities
Payment at Maturity Diagram
|
 |
Your actual payment at maturity per security, excluding the final
coupon payment, if any, will depend on the actual initial index
level, the actual final barrier level and the actual final index
level of the worst performing underlying index. The examples below
are intended to illustrate how your payment at maturity will depend
on whether the final index level of the worst performing underlying
index is greater than or less than its final barrier level and, if
less, how much less. The examples are solely for illustrative
purposes, do not show all possible outcomes and are not a
prediction of what the actual payment at maturity on the securities
will be.
The examples below are based on hypothetical initial index levels
of 100 and hypothetical final barrier levels of 50 and do not
reflect the actual initial index levels or final barrier levels.
For the actual initial index levels and final barrier levels, see
the cover page of this pricing supplement. We have used these
hypothetical levels, rather than the actual levels, to simplify the
calculations and aid understanding of how the securities work.
However, you should understand that the actual payment at maturity
on the securities will be calculated based on the actual initial
index levels and final barrier levels, and not these hypothetical
levels.
Example 1—Par Scenario A.
|
Underlying
Index |
Hypothetical
Initial Index Level |
Hypothetical
Final Barrier Level |
Hypothetical
Final Index Level |
Hypothetical
Index Return |
|
The
Dow Jones Industrial AverageTM |
100 |
50 |
150 |
50% |
|
EURO
STOXX® Banks Index |
100 |
50 |
110 |
10% |
|
S&P
500® Index |
100 |
50 |
120 |
20% |
|
Citigroup Global Markets Holdings
Inc. |
| |
In this example, the EURO STOXX® Banks Index is the
worst performing underlying index. Its hypothetical final index
level is 110 (a 10% increase from its hypothetical initial index
level), which is greater than its hypothetical final barrier
level.
Payment at maturity per security = $1,000 (excluding the final
coupon payment, if any)
Because the final index level of the worst performing underlying
index is greater than its final barrier level, you would be repaid
the stated principal amount of your securities in this example.
Even though each of the underlying indices have appreciated from
their respective initial index levels in this example, you would
not participate in the appreciation of any underlying index.
Example 2—Par Scenario B.
|
Underlying
Index |
Hypothetical
Initial Index Level |
Hypothetical
Final Barrier Level |
Hypothetical
Final Index Level |
Hypothetical
Index Return |
|
The
Dow Jones Industrial AverageTM |
100 |
50 |
90 |
-10% |
|
EURO
STOXX® Banks Index |
100 |
50 |
120 |
20% |
|
S&P
500® Index |
100 |
50 |
80 |
-20% |
In this example, the S&P 500® Index is the worst
performing underlying index. Its hypothetical final index level is
80 (a 20% decrease from its hypothetical initial index level),
which is greater than its hypothetical final barrier level.
Payment at maturity per security = $1,000 (excluding the final
coupon payment, if any)
Because the worst performing underlying index did not depreciate
from its hypothetical initial index level to its hypothetical final
index level by more than 50% (that is, it did not depreciate below
its hypothetical final barrier level), your payment at maturity in
this scenario would be equal to the $1,000 stated principal amount
per security (excluding the final coupon payment, if any).
Example 3—Downside Scenario.
|
Underlying
Index |
Hypothetical
Initial Index Level |
Hypothetical
Final Barrier Level |
Hypothetical
Final Index Level |
Hypothetical
Index Return |
|
The
Dow Jones Industrial AverageTM |
100 |
50 |
30 |
-70% |
|
EURO
STOXX® Banks Index |
100 |
50 |
80 |
-20% |
|
S&P
500® Index |
100 |
50 |
90 |
-10% |
In this example, the Dow Jones Industrial AverageTM is
the worst performing underlying index. Its hypothetical final index
level is 30 (a 70% decrease from its hypothetical initial index
level), which is less than its hypothetical final barrier level. As
a result, your payment at maturity (excluding the final coupon
payment, if any) would be calculated as follows:
Payment at maturity per security = $1,000 + ($1,000 × the index
return of the worst performing underlying index)
=
$1,000 + ($1,000 × -70%)
=
$1,000 + -$700
=
$300
Because the worst performing underlying index depreciated from its
hypothetical initial index level to its hypothetical final index
level by more than 50% (that is, it depreciated below its
hypothetical final barrier level), your payment at maturity in this
scenario would reflect 1-to-1 exposure to the negative performance
of the worst performing underlying index from its initial index
level to its final index level.
|
Citigroup Global Markets Holdings
Inc. |
| |
Summary Risk Factors
An investment in the securities is significantly riskier than an
investment in conventional debt securities. The securities are
subject to all of the risks associated with an investment in our
conventional debt securities (guaranteed by Citigroup Inc.),
including the risk that we and Citigroup Inc. may default on our
obligations under the securities, and are also subject to risks
associated with CMS30, CMS2 and each of the underlying indices.
Accordingly, the securities are suitable only for investors who are
capable of understanding the complexities and risks of the
securities. You should consult your own financial, tax and legal
advisors as to the risks of an investment in the securities and the
suitability of the securities in light of your particular
circumstances.
The following is a summary of certain key risk factors for
investors in the securities. You should read this summary together
with the more detailed description of risks relating to an
investment in the securities contained in the section “Risk Factors
Relating to the Securities” beginning on page EA-6 in the
accompanying product supplement. You should also carefully read the
risk factors included in the accompanying prospectus supplement and
in the documents incorporated by reference in the accompanying
prospectus, including Citigroup Inc.’s most recent Annual Report on
Form 10-K and any subsequent Quarterly Reports on Form 10-Q, which
describe risks relating to the business of Citigroup Inc. more
generally.
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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 worst performing underlying
index. If we do not redeem the securities prior to maturity, you
may receive significantly less than the stated principal amount of
the securities at maturity, but in no circumstance will you receive
more than the stated principal amount of the securities (excluding
the final coupon payment, if any). If the final index level of the
worst performing underlying index is less than its final barrier
level, you will lose 1% of the stated principal amount of the
securities for every 1% by which the final index level of the worst
performing underlying index is less than its 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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The barrier feature of the securities exposes you to
particular risks. If the final index level of the worst
performing underlying index is less than its final barrier level,
you will not be repaid the stated principal amount of your
securities at maturity and instead will lose 1% of the stated
principal amount of the securities for every 1% by which the final
index level of the worst performing underlying index is less than
its initial index level. Therefore, the securities offer no
protection at all if the worst performing underlying index
depreciates by more than 50% from its initial index level to its
final index level. As a result, you may lose your entire investment
in the securities. |
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The securities offer a variable coupon rate after the second
year following issuance, and you may not receive any coupon payment
on one or more coupon payment dates. Any variable coupon
payment you receive will be paid at a per annum rate equal to the
relevant contingent rate for the applicable coupon payment date
only if the accrual condition is satisfied on each
elapsed day during the related accrual period. The accrual
condition will be satisfied on any elapsed day only if the
closing level of each underlying index on that elapsed day
is greater than or equal to its respective accrual barrier level.
If, on any elapsed day during an accrual period, the accrual
condition is not satisfied, the applicable variable coupon payment
will be paid at a rate that is less, and possibly significantly
less, than the relevant contingent rate. If, on each elapsed day
during an accrual period, the accrual condition is not satisfied,
no variable coupon payment will be made on the related coupon
payment date. Accordingly, there can be no assurance that you will
receive a variable coupon payment on any coupon payment date or
that any variable coupon payment you do receive will be calculated
at the full relevant contingent rate. Furthermore, because the
relevant contingent rate is a floating rate determined by reference
to the CMS spread, the securities are subject to a contingency
associated with the CMS spread. The relevant contingent rate will
vary based on fluctuations in the CMS spread. If the CMS spread
narrows, the relevant contingent rate will be reduced. The relevant
contingent rate may be as low as zero for any coupon payment date.
If the relevant contingent rate is zero for any coupon payment
date, you will not receive any variable coupon payment on that
coupon payment date even if the accrual condition is satisfied on
each elapsed day in the related accrual period. Thus, the
securities are not a suitable investment for investors who require
regular fixed income payments. |
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The relevant contingent rate may decline, possibly to 0.00%, if
short-term interest rates rise. Although there is no single
factor that determines CMS spreads, CMS spreads have historically
tended to fall when short-term interest rates rise. Short-term
interest rates have historically been highly sensitive to the
monetary policy of the Federal Reserve Board. Accordingly, one
significant risk assumed by investors in the securities is that the
Federal Reserve Board may pursue a policy of raising short-term
interest rates, which, if historical patterns hold, would lead to a
decrease in the CMS spread. In that event, the relevant contingent
rate would be reduced, and may be 0.00%, and the floating rate
payable on the securities would also decline significantly,
possibly to 0.00%. It is important to understand, however, that
short-term interest rates are affected by many factors and may
increase even in the absence of a Federal Reserve Board policy to
increase short-term interest rates. Furthermore, it is important to
understand that the CMS spread may decrease even in the absence of
an increase in short-term interest rates because it, too, is
influenced by many complex factors. |
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The relevant contingent rate on the securities may be lower than
other market interest rates. The relevant contingent rate on
the securities will not necessarily move in line with general U.S.
market interest rates or even CMS rates and, in fact, may move
inversely with general U.S. market interest rates. For example, if
there is a general increase in CMS rates but shorter-term rates
rise more than longer-term rates, the CMS spread will decrease, as
will the relevant contingent rate. Accordingly, the securities are
not appropriate for investors who seek floating interest payments
based on general market interest rates. |
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The relevant contingent rate on the securities is subject to a
cap. As a result, the securities may pay interest at a lower
rate than an alternative instrument that is not so
capped. |
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The higher potential yield offered by the securities is
associated with greater risk than conventional debt securities.
The securities offer coupon payments with the potential to result
in a higher yield than the yield on our conventional debt
securities of the |
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same maturity. You should understand that, in exchange for this
potentially higher yield, you will be exposed to significantly
greater risks than investors in our conventional debt securities
(guaranteed by Citigroup Inc.). These risks include the risk that
the variable coupon payments you receive, if any, will result in a
yield on the securities that is lower, and perhaps significantly
lower, than the yield on our conventional debt securities of the
same maturity that are guaranteed by Citigroup Inc., and the risk
that you will incur a significant loss on the securities at
maturity. The volatility of the CMS spread and each of the
underlying indices, and the correlation between the underlying
indices and between the CMS spread and each underlying index, are
important factors affecting this risk. Greater expected volatility
and/or lower expected correlation as of the pricing date may
contribute to the higher yield potential, but would also represent
a greater expected likelihood as of the pricing date that, after
the second year, you will receive low or no coupon payments on the
securities and that you would incur a significant loss on the
securities at maturity.
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The
securities are subject to risks associated with the CMS spread
and each of the underlying indices and may be negatively
affected by adverse movements in any one of these variables,
regardless of the performance of the others. The amount of any
variable coupon payments you receive will depend on the performance
of the CMS spread and each of the underlying indices. If the CMS
spread is low or zero,
causing the relevant contingent rate to be low or zero, the
securities will pay a low or no coupon even if the closing levels
of the underlying indices are consistently greater than their
respective accrual barrier levels. Conversely, even if the CMS
spread is high, causing the relevant contingent rate to be high,
the securities will pay no coupon if the closing level of any of
the underlying indices is consistently less than its respective
accrual barrier level. Moreover, if the closing level of any one of
the underlying indices is less than its respective accrual barrier
level, the accrual condition will not be satisfied, and no interest
will accrue on the securities, even if the closing levels of the
other underlying indices are significantly greater than their
accrual barrier levels. Accordingly, you will be subject to risks
associated with the CMS spread and each of the underlying indices,
and your return on the securities will depend significantly on the
relationship between such risks over the term of the securities. If
any one performs sufficiently poorly, you may receive low or no
variable coupon payments for an extended period of time, or even
throughout the entire period following the second year of the term
of the securities, even if the others perform favorably.
Furthermore, if the final index level of one underlying index is
less than its final barrier level, you will incur a significant
loss at maturity, even if the final index levels of the other
underlying indices are greater than their respective final barrier
levels. |
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The
variable coupon payments and the payment at maturity depend on
multiple variables, and you are therefore exposed to greater risks
of receiving no variable coupon payments after the second year, and
to a greater risk of loss at maturity, than if the securities were
linked to just one variable. The risk that you will receive no
variable coupon payment on one or more coupon payment dates after
the second year, and the risk that you will incur a significant
loss at maturity, is greater if you invest in the securities as
opposed to substantially similar securities that are linked to the
performance of just one variable. With multiple variables, it is
more likely that the securities will accrue low or no interest
during an accrual period, or that you will not be repaid the stated
principal amount of your securities at maturity, than if payments
on the securities were contingent on only one variable. |
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The
securities will be subject to risks associated with the CMS
spread. The relevant contingent rate for any coupon payment
date after the second year following issuance of the securities
will depend on the CMS spread as of the CMS spread determination
date for the related accrual period. |
The relevant contingent rate will not depend on the absolute level
of either CMS30 or CMS2, but rather on the relationship between
CMS30 and CMS2—specifically, whether CMS30 is greater than CMS2.
Many factors affect CMS30 and CMS2, such that future values of
CMS30 and CMS2 and their relationship are impossible to predict. If
the CMS spread for any CMS spread determination date is less than
or equal to 0.00%, the relevant contingent rate for that accrual
period will be 0.00% and you will not receive any coupon payment on
the related coupon payment date.
Although there is no single factor that determines the CMS spread,
the CMS spread has historically tended to fall when short-term
interest rates rise. As with CMS rates, short-term interest rates
are influenced by many complex factors, and it is impossible to
predict their future performance. However, historically short-term
interest rates have been highly sensitive to the monetary policy of
the Federal Reserve Board. Accordingly, one significant risk
assumed by investors in the securities is that the Federal Reserve
Board may pursue a policy of raising short-term interest rates,
which, if historical patterns hold, would lead to a decrease in the
CMS spread, possibly to a level that is below 0.00%. It is
important to understand that, although the policies of the Federal
Reserve Board have historically had a significant influence on
short-term interest rates, short-term interest rates are affected
by many factors and may increase even in the absence of a Federal
Reserve Board policy to increase short-term interest rates. For
example, short-term interest rates tend to rise when there is a
worsening of the perceived creditworthiness of the banks that
participate in the interest rate swap and London interbank markets
and when there is a worsening of general economic and credit
conditions. Furthermore, it is important to understand that the CMS
spread may decrease even in the absence of an increase in
short-term interest rates because it, too, is influenced by many
complex factors. Another circumstance when the CMS spread has
historically tended to fall and become negative is when the market
expects an economic recession. Accordingly, another significant
risk assumed by investors in the securities is that the market may
anticipate a recession or that there may be a recession.
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The securities may be called for mandatory redemption at our
option after the first year of their term, which limits your
ability to receive fixed coupon payments and variable coupon
payments if the CMS spread and the underlying indices perform
favorably. In determining whether to redeem the securities, we
will consider various factors, including then current market
interest rates and our expectations about payments we will be
required to make on the securities in the future. If we call the
securities for mandatory redemption, we will do so at a time that
is advantageous to us and without regard to your interests. We are
more likely to redeem the securities at a time when the CMS spread
and underlying indices are performing favorably from your
perspective and when we expect them to continue to do so.
Therefore, although the securities offer fixed coupon payments
during the first two years following issuance of the securities and
variable coupon payments after the second year following issuance
of the securities with the potential to result in a higher yield
than the yield on our conventional debt securities of the same
maturity, if the securities are paying |
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that higher yield and we
expect them to continue to do so, it is more likely that we would
redeem the securities. Accordingly, the redemption feature of the
securities is likely to limit the benefits you receive from the
fixed coupon payments and variable coupon payments. If we exercise
our redemption right prior to maturity, you may not be able to
reinvest your funds in another investment that provides a similar
yield with a similar level of risk. Alternatively, if the CMS
spread and/or an underlying index is performing unfavorably from
your perspective or when we expect it to do so in the future, we
are less likely to call the securities, so that you may continue to
hold securities paying below-market or no interest for an extended
period of time.
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The closing levels of the underlying indices will not be
observed on certain days and will be assumed to be the same as on
earlier days, which will cause certain days to have a greater
weight in determining the variable coupon rate. With respect to
an elapsed day on which the closing level of an underlying index is
not available, the closing level of such underlying index for that
day will be deemed to be the same as on the immediately preceding
elapsed day on which the level is available. In addition, for
purposes of determining whether the accrual condition is satisfied,
for all elapsed days from and including the fourth-to-last day that
is a scheduled trading day for each underlying index in an accrual
period to and including the last elapsed day of that accrual
period, the closing levels of the underlying indices will not be
observed and will be assumed to be the same as on the elapsed day
immediately preceding such unobserved days. The relative weighting
of the applicable preceding elapsed day will be magnified for
purposes of determining whether such elapsed day qualifies as an
accrual day. Under these circumstances, if the applicable preceding
elapsed day is not an accrual day, each successive day on which the
closing level of that underlying index is not observed will also
not qualify as an accrual day. As a result, to the extent that such
preceding elapsed day is not an accrual day, such preceding elapsed
day will have a greater weight in determining the number of accrual
days during an accrual period. This could adversely affect the
amount of any variable coupon payment. |
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The return on the securities will be limited. The return
on the securities will be limited to the sum of your coupon
payments, even if the closing level of an underlying index greatly
exceeds its initial index level at one or more times during the
term of the securities. The maximum possible return on the
securities after the second year is the maximum relevant contingent
rate indicated on the cover of this pricing supplement, which would
be achieved only if (i) the relevant contingent rate is the maximum
relevant contingent rate for each accrual period, (ii) the closing
level of each underlying index is greater than or equal to its
accrual barrier level on each elapsed day during the term of the
securities after the second year and (iii) the final index level of
the worst performing underlying index is greater than or equal to
its final barrier level. Although you will bear the downside risk
relating to the worst performing underlying index if the worst
performing underlying index depreciates below its final barrier
level on the final valuation date, you will not receive the
dividend yield on, or share in any appreciation of, any underlying
index over the term of the securities. |
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You may not be adequately compensated for assuming the
downside risks of the underlying indices. The fixed coupon
payments during the first two years following issuance of the
securities and the variable coupon payments you receive on the
securities, if any, after the second year are the compensation you
receive for assuming the downside risks of the underlying indices,
as well as all the other risks of the securities. That compensation
is effectively “at risk” and may, therefore, be less than you
currently anticipate. First, the actual yield you realize on the
securities could be lower than you anticipate because the coupon
payments after the second year are variable and you may not receive
any variable coupon payment after the second year. Second, the
fixed coupon payments during the first two years following issuance
of the securities and the variable coupon payments, if any, after
the second year are the compensation you receive not only for
assuming the downside risk of the underlying indices, but also for
all of the other risks of the securities, including interest rate
risk, the risk that we may call the securities and our and
Citigroup Inc.’s credit risk. If those other risks increase or are
otherwise greater than you currently anticipate, the coupon
payments may turn out to be inadequate to compensate you for all
the risks of the securities, including the downside risk of the
underlying indices. |
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Your payment at maturity depends on the closing level of the
worst performing underlying index on a single day. Because your
payment at maturity (assuming we do not redeem the securities prior
to maturity) depends on the closing level of the worst performing
underlying index solely on the final valuation date, you are
subject to the risk that the closing level of the worst performing
underlying index on that day may be lower, and possibly
significantly lower, than on one or more other dates during the
term of the securities. If you had invested in another instrument
linked to the worst performing underlying index that you could sell
for full value at a time selected by you, or if the payment at
maturity were based on an average of closing levels of the worst
performing underlying index, you might have achieved better
returns. |
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The securities are subject to the credit risk of Citigroup
Global Markets Holdings Inc. and Citigroup Inc. If we default
on our obligations under the securities and Citigroup Inc. defaults
on its guarantee obligations, you may not receive anything owed to
you under the securities. |
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The securities will not be listed on any 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 securities may be riskier than securities with a shorter
term. The securities have a relatively long term to maturity,
subject to our right to call the securities for mandatory
redemption prior to maturity. By purchasing securities with a
longer term, you are more exposed to fluctuations in market
interest rates and equity markets than if you purchased securities
with a shorter term. Specifically, |
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you will be negatively affected if the CMS spread decreases or if
the closing levels of the underlying indices fall below their
respective accrual barrier levels. If either (i) the CMS spread
decreases to a value that is equal to or less than 0.00% per annum
or (ii) the closing level of any of the underlying indices is less
than its accrual barrier level on each day during an entire accrual
period, you will be holding a long-dated security that does not pay
any coupon.
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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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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 indices and the CMS
spread, the correlation among the underlying indices and the CMS
spread, dividend yields on the stocks that constitute the
underlying indices and interest rates. CGMI’s views on these inputs
may differ from your or others’ views, and as an underwriter in
this offering, CGMI’s interests may conflict with yours. Both the
models and the inputs to the models may prove to be wrong and
therefore not an accurate reflection of the value of the
securities. Moreover, the estimated value of the securities set
forth on the cover page of this pricing supplement may differ from
the value that we or our affiliates may determine for the
securities for other purposes, including for accounting purposes.
You should not invest in the securities because of the estimated
value of the securities. Instead, you should be willing to hold the
securities to maturity irrespective of the initial estimated
value. |
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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 our secondary market rate, which is the rate that CGMI
will use in determining the value of the securities for purposes of
any purchases of the securities from you in the secondary market.
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 the same as the
coupon that is payable on the securities. |
Because there is not an active market for traded instruments
referencing our outstanding debt obligations, CGMI determines our
secondary market rate based on the market price of traded
instruments referencing the debt obligations of Citigroup Inc., our
parent company and the guarantor of all payments due on the
securities, but subject to adjustments that CGMI makes in its sole
discretion. As a result, our secondary market rate is not a
market-determined measure of our creditworthiness, but rather
reflects the market’s perception of our parent company’s
creditworthiness as adjusted for discretionary factors such as
CGMI’s preferences with respect to purchasing the securities prior
to maturity.
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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. |
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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 indices and the CMS spread and a
number of other factors, including the dividend yields on the
stocks that constitute the underlying indices, expectations of
future values of the CMS spread, interest rates generally, the
positive or negative correlation among the CMS spread and the
underlying indices, the time remaining to maturity of the
securities and our and Citigroup Inc.’s creditworthiness, as
reflected in our secondary market rate. Changes in the levels of
the CMS spread and/or the underlying indices may not result in a
comparable change in the value of your securities. 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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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. |
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The relationship between CMS30 and CMS2 may be different
than the relationship between CMS rates of different
maturities. The relevant contingent rate may be lower than it
would be if it were based on a CMS rate with a longer maturity than
30 years or a shorter maturity than 2 years. |
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CMS30 and CMS2 will
be affected by a number of factors and may be highly volatile.
CMS30 and CMS2 are influenced by many factors,
including: |
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the
monetary policies of the Federal Reserve Board; |
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current
market expectations about future interest rates; |
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current
market expectations about inflation; |
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the
volatility of the foreign exchange markets; |
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the
availability of relevant hedging instruments; |
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the
perceived general creditworthiness of the banks that participate in
the interest rate swap market and the London interbank loan market;
and |
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general
credit and economic conditions in global markets, and particularly
in the United States. |
As a result of these factors, CMS30 and CMS2 may be highly
volatile. Because CMS30 and CMS2 are market rates and are
influenced by many factors, it is impossible to predict the future
values of CMS30 and CMS2.
The CMS spread will be influenced by a number of complex economic
factors, including those that affect CMS rates generally. However,
the CMS spread depends not on how the relevant economic factors
affect any one CMS rate or even CMS rates generally, but rather on
how those factors affect CMS rates of different maturities (i.e.,
CMS30 and CMS2) differently.
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The
manner in which CMS rates are calculated may change in the
future. The method by which CMS rates are calculated may change
in the future, as a result of governmental actions, actions by the
publisher of CMS rates or otherwise. We cannot predict whether the
method by which CMS rates are calculated will change or what the
impact of any such change might be. Any such change could affect
CMS rates in a way that has a significant adverse effect on the
securities. |
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The EURO STOXX® Banks Index is subject to risks
associated with non-U.S. markets. Investments linked to the
value of non-U.S. stocks 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
companies in some of these jurisdictions than about U.S. companies
that are subject to the reporting requirements of the SEC. Further,
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 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. Moreover, the economies in such countries may differ
favorably or unfavorably from the economy of the United States in
such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources and
self-sufficiency. |
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The performance of the EURO STOXX® Banks Index will
not be adjusted for changes in the exchange rate between the euro
and the U.S. dollar. The closing level of the EURO
STOXX® Banks Index is calculated 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® Banks 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® Banks
Index as measured for purposes of the securities will be less than
it would have been if it offered exposure to that appreciation in
addition to the change in the prices of the stocks included in the
EURO STOXX® Banks Index. |
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The EURO
STOXX® Banks Index is subject to concentrated risks
associated with the banking industry. All or substantially all
of the equity securities included in the EURO STOXX®
Banks Index are issued by companies whose primary line of business
is directly associated with the banking industry. As a result, the
value of the securities may be subject to greater volatility and be
more adversely affected by a single economic, political or
regulatory occurrence affecting this industry than a different
investment linked to securities of a more broadly diversified group
of issues. The performance of bank stocks may be affected by
extensive governmental regulation, which may limit both the amounts
and types of loans and other financial commitments they can make,
the interest rates and fees they can charge and the amount of
capital they must maintain. Profitability is largely dependent on
the availability and cost of capital funds and can fluctuate
significantly when interest rates change. Credit losses resulting
from financial difficulties of borrowers can negatively impact
banking companies. Banks may also be subject to severe price
competition. Competition among banking companies is high and
failure to maintain or increase market share may result in lost
market share. The factors could affect the banking industry and
could affect the value of the equity securities included in the
EURO STOXX® Banks Index during the term of the
securities, which may adversely affect the value of your
securities. |
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Our offering of the securities is not a recommendation of
the CMS spread or the underlying indices. The fact that we are
offering the securities does not mean that we believe that
investing in an instrument linked to the CMS spread and the
underlying |
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indices is likely to achieve favorable returns. In fact, as we are
part of a global financial institution, our affiliates may have
positions (including short positions) in the stocks that constitute
the underlying indices or in instruments related to the CMS spread
or the underlying indices or such stocks, and may publish research
or express opinions, that in each case are inconsistent with an
investment linked to the CMS spread and the underlying indices.
These and other activities of our affiliates may affect the CMS
spread or the levels of the underlying indices in a way that has a
negative impact on your interests as a holder of the
securities.
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Investing in the
securities is not equivalent to investing in any of the underlying
indices or the stocks that constitute any of the underlying
indices. You will not have voting rights, rights to receive
dividends or other distributions or any other rights with respect
to the stocks that constitute any of the underlying indices. You
will not participate in any appreciation of any of the underlying
indices over the term of the securities. |
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Adjustments to any
underlying index may affect the value of your securities. The
sponsors of the underlying indices may add, delete or substitute
the stocks that constitute the underlying indices or make other
methodological changes that could affect the levels of the
underlying indices. The sponsors of the underlying indices may
discontinue or suspend calculation or publication of the underlying
indices at any time without regard to your interests as a holder of
the securities. |
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Since August 2019,
CMS30 and CMS2 have not been published on a significant number of
scheduled publication days. If CMS30 or CMS2 is not published and
at least three reference bank quotations are not provided, the
relevant CMS rate will be determined by the calculation agent.
Since August 2019, ICE Benchmark Administration Limited has not
published CMS30 and CMS2 on a significant number of scheduled
publication days. For example, in March and April 2020, CMS30 and
CMS2 were not published on any of the scheduled publication days.
It is possible that such non-publication may continue and that the
frequency of non-publication may increase. If, with respect to any
CMS spread determination date during the term of the securities,
CMS30 or CMS2 is not published and at least three reference bank
quotations are not provided as further described under “Information
About the CMS Spread” in this pricing supplement, the relevant CMS
rate will be determined by the calculation agent in good faith and
in a commercially reasonable manner. As a result, any such increase
in the frequency of non-publication may increase the likelihood
that CMS30 or CMS2 for one or more CMS spread determination dates
will be so determined by the calculation agent. See also “—The
calculation agent, which is an affiliate of ours, will make
important determinations with respect to the
securities.” |
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Uncertainty about
the future of LIBOR may affect CMS rates in a way that adversely
affects the return on and the value of the securities. A
CMS rate is a market rate for the fixed leg of a fixed-for-floating
interest rate swap, where the floating leg is based on 3-month U.S.
dollar LIBOR. As a result, CMS rates are significantly
influenced by 3-month U.S. dollar LIBOR and expectations about
future levels of 3-month U.S. dollar LIBOR. On July 27, 2017,
the Chief Executive of the U.K. Financial Conduct Authority (the
“FCA”), which regulates LIBOR, announced that the FCA intends to
stop persuading or compelling banks to submit rates for the
calculation of LIBOR to the LIBOR administrator. The announcement
indicates that the continuation of LIBOR on the current basis
cannot and will not be guaranteed after 2021. It is impossible to
predict whether and to what extent banks will continue to provide
LIBOR submissions to the administrator of LIBOR, whether LIBOR
rates will cease to be published or supported before or after 2021
or whether any additional reforms to LIBOR may be enacted in the
United Kingdom or elsewhere. It is also impossible to predict
the impact of any LIBOR-related developments on the method of
calculation or the values of CMS rates. At this time, no
consensus exists as to what rate or rates may become accepted
alternatives to LIBOR, including for purposes of the interest rate
swaps underlying CMS rates, and it is impossible to predict the
effect of any such alternatives on the value of securities, such as
the securities, that are linked to CMS rates. Any changes to
3-month U.S. dollar LIBOR or the calculation of CMS rates, and any
uncertainty at what these changes may be, may affect CMS rates in a
way that adversely affects your return on and value of the
securities. |
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CMS
rates and the levels of the underlying indices may be adversely
affected by our or our affiliates’ hedging and other trading
activities. We expect to hedge our obligations under the
securities through CGMI or other of our affiliates, who may take
positions directly in the interest rate swaps that are used to
determine CMS rates and/or in stocks that constitute the underlying
indices and other financial instruments related to such interest
rate swaps, the underlying indices or such stocks and may adjust
such positions during the term of the securities. Our affiliates
also trade the interest rate swaps that are used to determine CMS
rates and the stocks that constitute the underlying indices and
other financial instruments related to such interest rate swaps,
the underlying indices 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 CMS rates and/or
the levels of the underlying indices in a way that negatively
affects the value of the securities. They could also result in
substantial returns for us or our affiliates while the value of the
securities declines. |
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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
indices, including extending loans to, making equity investments in
or providing advisory services to such issuers. In the course of
this business, we or our affiliates may acquire non-public
information about such issuers, which we will not disclose to you.
Moreover, if any of our affiliates is or becomes a creditor of any
such issuer, they may exercise any remedies against such issuer
that are available to them without regard to your
interests. |
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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 an underlying index or a CMS rate, CGMI, as
calculation agent, will be required to make discretionary judgments
that could significantly affect your return on the securities. Any
of these determinations made by Citibank, N.A. in its capacity as
calculation agent may adversely affect any variable interest
payment owed to you under the securities or the amount paid to you
at maturity. |
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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 |
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“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 described in “United
States Federal Tax Considerations” below. 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. Moreover,
future legislation, Treasury regulations or IRS guidance could
adversely affect the U.S. federal tax treatment of the securities,
possibly retroactively.
Non-U.S. investors should
note that persons having withholding responsibility in respect of
the securities may withhold on any coupon payment paid to a
non-U.S. investor, generally at a rate of 30%. To the extent that
we have withholding responsibility in respect of the securities, we
intend to so withhold.
You should read carefully the
discussion under “United States Federal Tax Considerations” and
“Risk Factors Relating to the Securities” in the accompanying
product supplement and “United States Federal Tax Considerations”
in this pricing supplement. You should also consult your tax
adviser regarding the U.S. federal tax consequences of an
investment in the securities, as well as tax consequences arising
under the laws of any state, local or non-U.S. taxing
jurisdiction.
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Information About the CMS Spread
The “CMS spread” on any day is equal to
the 30-year constant maturity swap rate (“CMS30”) minus the
2-year constant maturity swap rate (“CMS2”) on that day. We refer
to each of CMS30 and CMS2 as a “CMS rate”.
At any time, each CMS rate is a market
rate for the fixed leg of a conventional fixed-for-floating U.S.
dollar interest rate swap entered into at that time with the
relevant maturity (30 years for CMS30 and 2 years for CMS2). A
conventional fixed-for-floating U.S. dollar interest rate swap is
an agreement between two parties to exchange payment streams in
U.S. dollars over a given period of time, where one party pays a
fixed rate (the “fixed leg”) and the other party pays a floating
rate that is reset periodically based on 3-month U.S. dollar LIBOR
(the “floating leg”). For example, CMS30 at any given time is a
market rate for the fixed leg of a fixed-for-floating U.S. dollar
interest rate swap with a maturity of 30 years and a floating rate
reset periodically based on 3-month U.S. dollar LIBOR. 3-month U.S.
dollar LIBOR is a measure of the rate at which banks lend U.S.
dollars to each other for a period of 3 months in the London
interbank market.
The relevant contingent rate is based on
the CMS spread, on not on the absolute level of either CMS30 or
CMS2. The relevant contingent rate for any coupon payment date
after the second year following issuance of the securities will
depend on the CMS spread as of the CMS spread determination date
for the related accrual period. If the CMS spread for any CMS
spread determination date is less than or equal to 0.00%, the
relevant contingent rate for that accrual period will be 0.00% and
you will not receive any coupon payment on the related coupon
payment date.
The CMS spread is a measure of the
difference, or spread, between two CMS rates of different
maturities. The spread between two CMS rates of different
maturities may be affected by numerous complex economic factors. It
is not possible to predict whether the spread will be positive or
negative at any time in the future. Investors in the securities are
taking the risk that the spread between CMS30 and CMS2 will be zero
or negative, meaning that CMS30 is equal to or less than
CMS2.
Although there is no single factor that
determines CMS spreads, CMS spreads have historically tended to
fall when short-term interest rates rise. As with CMS rates,
short-term interest rates are influenced by many complex factors,
and it is impossible to predict their future performance. However,
historically short-term interest rates have been highly sensitive
to the monetary policy of the Federal Reserve Board. Accordingly,
one significant risk assumed by investors in the securities is that
the Federal Reserve Board may pursue a policy of raising short-term
interest rates, which, if historical patterns hold, would lead to a
decrease in the CMS spread, possibly to a level that is below
0.00%. It is important to understand that, although the policies of
the Federal Reserve Board have historically had a significant
influence on short-term interest rates, short-term interest rates
are affected by many factors and may increase even in the absence
of a Federal Reserve Board policy to increase short-term interest
rates. For example, short-term interest rates tend to rise when
there is a worsening of the perceived creditworthiness of the banks
that participate in the interest rate swap and London interbank
markets and when there is a worsening of general economic and
credit conditions. Furthermore, it is important to understand that
the CMS spread may decrease even in the absence of an increase in
short-term interest rates because it, too, is influenced by many
complex factors. Another circumstance when the CMS spread has
historically tended to fall and become negative is when the market
expects an economic recession. Accordingly, another significant
risk assumed by investors in the securities is that the market may
anticipate a recession or that there may be a recession.
Determination of a CMS Rate
A CMS rate of a given maturity on any date of determination is the
rate for U.S. dollar interest rate swaps with that maturity (i.e.,
30 years in the case of CMS30 and 2 years in the case of CMS2)
appearing on Reuters page “ICESWAP1” (or any successor page as
determined by the calculation agent) as of 11:00 a.m. (New York
City time) on that date of determination.
If, however, the applicable CMS rate is not published on Reuters
page “ICESWAP1” (or any successor page as determined by the
calculation agent) on any U.S. government securities business day
on which such CMS rate is required, then the calculation agent will
request mid-market semi-annual swap rate quotations from the
principal New York City office of five leading swap dealers in the
New York City interbank market (the “reference banks”) at
approximately 11:00 a.m., New York City time, on that day. For this
purpose, the mid-market semi-annual swap rate means the mean of the
bid and offered rates for the semi-annual fixed leg, calculated on
a 30/360 day count basis, of a fixed-for-floating U.S. dollar
interest rate swap transaction with the applicable maturity,
commencing on that day and in a representative amount with an
acknowledged dealer of good credit in the swap market, where the
floating leg, calculated on an actual/360 day count basis, is
equivalent to U.S. dollar LIBOR with a designated maturity of three
months. If at least three quotations are provided, the applicable
CMS rate for that day will be the arithmetic mean of the
quotations, eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest). If fewer than three
quotations are provided as requested, the applicable CMS rate will
be determined by the calculation agent in good faith and using its
reasonable judgment.
A “U.S. government securities business day” means any day that is
not a Saturday, a Sunday or a day on which The Securities Industry
and Financial Markets Association’s U.S. holiday schedule
recommends that the fixed income departments of its members be
closed for the entire day for purposes of trading in U.S.
government securities.
CMS rates are calculated by ICE Benchmark Administration Limited
based on tradable quotes for U.S. dollar fixed-for-floating
interest rate swaps with the applicable maturity that are sourced
from electronic trading venues.
Discontinuance of a CMS Rate
If the calculation and publication of a CMS rate is permanently
canceled, then the calculation agent may identify an alternative
rate that it determines, in its sole discretion, represents the
same or a substantially similar measure or benchmark as the
applicable CMS rate, and the calculation agent may deem that rate
(the “successor CMS rate”) to be the applicable CMS rate. Upon the
selection of any successor CMS rate by the calculation agent
pursuant to this paragraph, references in this pricing supplement
to the original CMS rate will no longer be deemed to refer to the
original CMS rate and will be deemed instead to refer to that
successor CMS rate for all purposes. In such event,
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the calculation agent will make such adjustments, if any, to any
value of the applicable CMS rate that is used for purposes of the
securities as it determines are appropriate in the circumstances.
Upon any selection by the calculation agent of a successor CMS
rate, the calculation agent will cause notice to be furnished to us
and the trustee.
If the calculation and publication of a CMS rate is permanently
canceled and no successor CMS rate is chosen as described above,
then the calculation agent will calculate the value of the
applicable CMS rate on each subsequent date of determination in
good faith and using its reasonable judgment. Such value, as
calculated by the calculation agent, will be the relevant CMS rate
for all purposes.
Notwithstanding these alternative arrangements, the cancellation of
a CMS rate may adversely affect coupon payments on, and the value
of, the securities.
Historical Information
The rate for CMS30 at 11:00 a.m. (New York time) on February 26,
2021 was 1.935%. The rate for CMS2 at 11:00 a.m. (New York time) on
February 26, 2021 was 0.254%. As a result, the CMS spread on
February 26, 2021 was 1.681%.
The graph below shows the daily value of the CMS spread from
January 3, 2011 to February 26, 2021. For days on which CMS30 or
CMS2 was not published by Reuters, the graph repeats the CMS spread
from the last scheduled publication date on which both CMS30 and
CMS2 were published by Reuters. Since August 2019, CMS30 and CMS2
have not been published on a significant number of scheduled
publication days. We obtained the values below from Bloomberg L.P.,
without independent verification. You should not take the
historical values of the CMS spread as an indication of the future
values of the CMS spread during the term of the securities.
Historical CMS Spread (%)
January 3, 2011 to February 26, 2021 |
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Information About the Dow Jones
Industrial AverageTM
The Dow Jones Industrial AverageTM is a price-weighted
index rather than a market capitalization-weighted index. The Dow
Jones Industrial AverageTM consists of 30 common stocks
chosen as representative of the broad market of U.S. industry. It
is calculated and maintained by S&P Dow Jones Indices LLC.
Please refer to the section “Equity Index Descriptions—The Dow
Jones Industrial AverageTM” in the accompanying
underlying supplement for additional information.
We have derived all information regarding the Dow Jones Industrial
AverageTM from publicly available information and have
not independently verified any information regarding the Dow Jones
Industrial AverageTM. This pricing supplement relates
only to the securities and not to the Dow Jones Industrial
AverageTM. We make no representation as to the
performance of the Dow Jones Industrial AverageTM over
the term of the securities.
The securities represent obligations of Citigroup Global Markets
Holdings Inc. (guaranteed by Citigroup Inc.) only. The sponsor of
the Dow Jones Industrial AverageTM is not involved in
any way in this offering and has no obligation relating to the
securities or to holders of the securities.
Historical Information
The closing level of the Dow Jones Industrial AverageTM
on March 1, 2021 was 31,535.51.
The graph below shows the closing level of the Dow Jones Industrial
AverageTM for each day such level was available from
January 3, 2011 to March 1, 2021. We obtained the closing levels
from Bloomberg L.P., without independent verification. You should
not take the historical closing levels of the Dow Jones Industrial
AverageTM as an indication of future performance.
Dow Jones Industrial AverageTM — Historical Closing
Levels
January 3, 2011 to March 1, 2021 |
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Information About the EURO STOXX® Banks Index
The EURO STOXX®
Banks Index includes companies in the banks supersector within the
STOXX® Europe 600 Index, which tracks companies
providing a broad range of financial services, including retail
banking, loans and money transmissions. The STOXX Europe
600® Supersector indices contain the 600 largest stocks
traded on the major exchanges of 18 European countries. The EURO
STOXX® Banks Index is calculated and maintained by STOXX
Limited.
Please refer to the section
“Equity Index Descriptions—The EURO STOXX® Banks Index”
in the accompanying underlying supplement for additional
information.
We have derived all
information regarding the EURO STOXX® Banks Index from
publicly available information and have not independently verified
any information regarding the EURO STOXX® Banks Index.
This pricing supplement relates only to the securities and not to
the EURO STOXX® Banks Index. We make no representation
as to the performance of the EURO STOXX® Banks Index
over the term of the securities.
The securities represent
obligations of Citigroup Global Markets Holdings Inc. (guaranteed
by Citigroup Inc.) only. The sponsor of the EURO STOXX®
Banks Index is not involved in any way in this offering and has no
obligation relating to the securities or to holders of the
securities.
Historical
Information
The closing level of the EURO
STOXX® Banks Index on March 1, 2021 was
84.80.
The graph below shows the
closing level of the EURO STOXX® Banks Index for each
day such level was available from January 3, 2011 to March 1, 2021.
We obtained the closing levels from Bloomberg L.P., without
independent verification. You should not take the historical
closing levels of the EURO STOXX® Banks Index as an
indication of future performance.
EURO STOXX® Banks Index
— Historical Closing Levels
January 3, 2011 to March 1, 2021 |
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Information About the S&P 500® Index
The S&P 500® Index consists of the common stocks of
500 issuers selected to provide a performance benchmark for the
large capitalization segment of the U.S. equity markets. It is
calculated and maintained by S&P Dow Jones Indices LLC.
Please refer to the section “Equity Index Descriptions—The S&P
U.S. Indices” in the accompanying underlying supplement for
additional information.
We have derived all information regarding the S&P
500® Index from publicly available information and have
not independently verified any information regarding the S&P
500® Index. This pricing supplement relates only to the
securities and not to the S&P 500® Index. We make no
representation as to the performance of the S&P 500®
Index over the term of the securities.
The securities represent obligations of Citigroup Global Markets
Holdings Inc. (guaranteed by Citigroup Inc.) only. The sponsor of
the S&P 500® Index is not involved in any way in
this offering and has no obligation relating to the securities or
to holders of the securities.
Historical Information
The closing level of the S&P 500® Index on March 1,
2021 was 3,901.82.
The graph below shows the closing level of the S&P
500® Index for each day such level was available from
January 3, 2011 to March 1, 2021. We obtained the closing levels
from Bloomberg L.P., without independent verification. You should
not take the historical closing levels of the S&P
500® Index as an indication of future performance.
S&P 500® Index — Historical Closing Levels
January 3, 2011 to March 1, 2021 |
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United States Federal Tax Considerations
You should read carefully the discussion under “United States
Federal Tax Considerations” and “Risk Factors Relating to the
Securities” in the accompanying product supplement and “Summary
Risk Factors” in this pricing supplement.
Due to the lack of any controlling legal authority, there is
substantial uncertainty regarding the U.S. federal tax consequences
of an investment in the securities. In connection with any
information reporting requirements we may have in respect of the
securities under applicable law, we intend (in the absence of an
administrative determination or judicial ruling to the contrary) to
treat the securities for U.S. federal income tax purposes as
prepaid forward contracts with associated coupon payments that will
be treated as gross income to you at the time received or accrued
in accordance with your regular method of tax accounting. In the
opinion of our counsel, Davis Polk & Wardwell LLP, this
treatment of the securities is reasonable under current law;
however, our counsel has advised us that it is unable to conclude
affirmatively that this treatment is more likely than not to be
upheld, and that alternative treatments are possible. Moreover, our
counsel’s opinion is based on market conditions as of the date of
this preliminary pricing supplement and is subject to confirmation
on the pricing date.
Assuming this treatment of the securities is respected and subject
to the discussion in “United States Federal Tax Considerations” in
the accompanying product supplement, the following U.S. federal
income tax consequences should result under current law:
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Any
coupon payments on the securities should be taxable as ordinary
income to you at the time received or accrued in accordance with
your regular method of accounting for U.S. federal income tax
purposes. |
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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. For
this purpose, the amount realized does not include any coupon paid
on retirement and may not include sale proceeds attributable to an
accrued coupon, which may be treated as a coupon payment. Such gain
or loss should be long-term capital gain or loss if you held the
security for more than one year. |
We do not plan to request a
ruling from the IRS regarding the treatment of the securities. An
alternative characterization of the securities could materially and
adversely affect the tax consequences of ownership and disposition
of the securities, including the timing and character of income
recognized. In addition, the U.S. Treasury Department and the IRS
have requested comments on various issues regarding the U.S.
federal income tax treatment of “prepaid forward contracts” and
similar financial instruments and have indicated that such
transactions may be the subject of future regulations or other
guidance. Furthermore, members of Congress have proposed
legislative changes to the tax treatment of derivative contracts.
Any legislation, 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,
possibly with retroactive effect. You should consult your tax
adviser regarding possible alternative tax treatments of the
securities and potential changes in applicable law.
Withholding Tax on Non-U.S. Holders. Because significant
aspects of the tax treatment of the securities are uncertain,
persons having withholding responsibility in respect of the
securities may withhold on any coupon payment paid to Non-U.S.
Holders (as defined in the accompanying product supplement),
generally at a rate of 30%. To the extent that we have (or an
affiliate of ours has) withholding responsibility in respect of the
securities, we intend to so withhold. In order to claim an
exemption from, or a reduction in, the 30% withholding, you may
need to comply with certification requirements to establish that
you are not a U.S. person and are eligible for such an exemption or
reduction under an applicable tax treaty. You should consult your
tax adviser regarding the tax treatment of the securities,
including the possibility of obtaining a refund of any amounts
withheld and the certification requirement described above.
As discussed under “United
States Federal Tax Considerations—Tax Consequences to Non-U.S.
Holders” in the accompanying product supplement, Section 871(m) of
the Code and Treasury regulations promulgated thereunder (“Section
871(m)”) generally impose a 30% withholding tax on dividend
equivalents paid or deemed paid to Non-U.S. Holders with respect to
certain financial instruments linked to U.S. equities (“U.S.
Underlying Equities”) or indices that include U.S. Underlying
Equities. Section 871(m) generally applies to instruments that
substantially replicate the economic performance of one or more
U.S. Underlying Equities, as determined based on tests set forth in
the applicable Treasury regulations. However, the regulations, as
modified by an IRS notice, exempt financial instruments issued
prior to January 1, 2023 that do not have a “delta” of one. Based
on the terms of the securities and representations provided by us
as of the date of this preliminary pricing supplement, our counsel
is of the opinion that the securities should not be treated as
transactions that have a “delta” of one within the meaning of the
regulations with respect to any U.S. Underlying Equity and,
therefore, should not be subject to withholding tax under Section
871(m). However, the final determination regarding the treatment of
the securities under Section 871(m) will be made as of the pricing
date for the securities, and it is possible that the securities
will be subject to withholding tax under Section 871(m) based on
the circumstances as of that date.
A determination that the
securities are not subject to Section 871(m) is not binding on the
IRS, and the IRS may disagree with this treatment. Moreover,
Section 871(m) is complex and its application may depend on your
particular circumstances, including your other transactions. You
should consult your tax adviser regarding the potential application
of Section 871(m) to the securities.
We will not be required to pay any additional amounts with respect
to amounts withheld.
You should read the section entitled “United States Federal Tax
Considerations” in the accompanying product supplement. The
preceding discussion, when read in combination with that section,
constitutes the full opinion of Davis Polk & Wardwell LLP
regarding the material U.S. federal tax consequences of owning and
disposing of the securities.
You should also consult your tax adviser regarding all aspects
of the U.S. federal income and estate tax consequences of an
investment in the securities and any tax consequences arising under
the laws of any state, local or non-U.S. taxing
jurisdiction.
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Supplemental Plan of Distribution
CGMI, an affiliate of
Citigroup Global Markets Holdings Inc. and the underwriter of the
sale of the securities, is acting as principal and will receive an
underwriting fee of $35 for each security sold in this offering.
From this underwriting fee, CGMI will pay selected dealers not
affiliated with CGMI a fixed selling concession of $35 for each
security they sell. For the avoidance of doubt, the fees and
selling concessions described in this pricing supplement will not
be rebated if the securities are redeemed prior to
maturity.
CGMI is an affiliate of ours. Accordingly, this offering will
conform with the requirements addressing conflicts of interest when
distributing the securities of an affiliate set forth in Rule 5121
of the Financial Industry Regulatory Authority. Client accounts
over which Citigroup Inc. or its subsidiaries have investment
discretion will not be permitted to purchase the securities, either
directly or indirectly, without the prior written consent of the
client.
See “Plan of Distribution; Conflicts of Interest” in the
accompanying product supplement and “Plan of Distribution” in each
of the accompanying prospectus supplement and prospectus for
additional information.
A
portion of the net proceeds from the sale of the securities will be
used to hedge our obligations under the securities. We expect to
hedge our obligations under the securities through CGMI or other of
our affiliates. CGMI or such other of our affiliates may profit
from this expected hedging activity even if the value of the
securities declines. This hedging activity could affect CMS30 or
CMS2 or the closing levels of the underlying indices and,
therefore, the value of and your return on the securities. For
additional information on the ways in which our counterparties may
hedge our obligations under the securities, see “Use of Proceeds
and Hedging” in the accompanying prospectus.
Valuation of the Securities
CGMI calculated the estimated value of the securities set forth on
the cover page of this pricing supplement based on proprietary
pricing models. CGMI’s proprietary pricing models generated an
estimated value for the securities by estimating the value of a
hypothetical package of financial instruments that would replicate
the payout on the securities, which consists of a fixed-income bond
(the “bond component”) and one or more derivative instruments
underlying the economic terms of the securities (the “derivative
component”). CGMI calculated the estimated value of the bond
component using a discount rate based on our internal funding rate.
CGMI calculated the estimated value of the derivative component
based on a proprietary derivative-pricing model, which generated a
theoretical price for the instruments that constitute the
derivative component based on various inputs, including the factors
described under “Summary Risk Factors—The value of the securities
prior to maturity will fluctuate based on many unpredictable
factors” in this pricing supplement, but not including our or
Citigroup Inc.’s creditworthiness. These inputs may be
market-observable or may be based on assumptions made by CGMI in
its discretionary judgment.
The estimated value of the securities is a function of the terms of
the securities and the inputs to CGMI’s proprietary pricing models.
As of the date of this preliminary pricing supplement, it is
uncertain what the estimated value of the securities will be on the
pricing date because it is uncertain what the values of the inputs
to CGMI’s proprietary pricing models will be on the pricing
date.
For a period of approximately six months following issuance of the
securities, the price, if any, at which CGMI would be willing to
buy the securities from investors, and the value that will be
indicated for the securities on any brokerage account statements
prepared by CGMI or its affiliates (which value CGMI may also
publish through one or more financial information vendors), will
reflect a temporary upward adjustment from the price or value that
would otherwise be determined. This temporary upward adjustment
represents a portion of the hedging profit expected to be realized
by CGMI or its affiliates over the term of the securities. The
amount of this temporary upward adjustment will decline to zero on
a straight-line basis over the six-month temporary adjustment
period. However, CGMI is not obligated to buy the securities from
investors at any time. See “Summary Risk Factors—The securities
will not be listed on any securities exchange and you may not be
able to sell them prior to maturity.”
Certain Selling Restrictions
Hong Kong Special Administrative Region
The contents of this pricing supplement and the accompanying
product supplement, underlying supplement, prospectus supplement
and prospectus have not been reviewed by any regulatory authority
in the Hong Kong Special Administrative Region of the People’s
Republic of China (“Hong Kong”). Investors are advised to exercise
caution in relation to the offer. If investors are in any doubt
about any of the contents of this pricing supplement and the
accompanying product supplement, underlying supplement, prospectus
supplement and prospectus, they should obtain independent
professional advice.
The securities have not been offered or sold and will not be
offered or sold in Hong Kong by means of any document, other
than
|
(i) |
to persons whose ordinary business is to buy or sell shares or
debentures (whether as principal or agent); or |
|
(ii) |
to “professional investors” as defined in the Securities and
Futures Ordinance (Cap. 571) of Hong Kong (the “Securities and
Futures Ordinance”) and any rules made under that Ordinance;
or |
|
(iii) |
in other circumstances which do not result in the document
being a “prospectus” as defined in the Companies Ordinance (Cap.
32) of Hong Kong or which do not constitute an offer to the public
within the meaning of that Ordinance; and |
|
Citigroup Global Markets Holdings
Inc. |
| |
There is no advertisement, invitation or document relating to the
securities which is directed at, or the contents of which are
likely to be accessed or read by, the public of Hong Kong (except
if permitted to do so under the securities laws of Hong Kong) other
than with respect to securities which are or are intended to be
disposed of only to persons outside Hong Kong or only to
“professional investors” as defined in the Securities and Futures
Ordinance and any rules made under that Ordinance.
Non-insured Product: These securities are not insured by any
governmental agency. These securities are not bank deposits and are
not covered by the Hong Kong Deposit Protection Scheme.
Singapore
This pricing supplement and the accompanying product supplement,
underlying supplement, prospectus supplement and prospectus have
not been registered as a prospectus with the Monetary Authority of
Singapore, and the securities will be offered pursuant to
exemptions under the Securities and Futures Act, Chapter 289 of
Singapore (the “Securities and Futures Act”). Accordingly, the
securities may not be offered or sold or made the subject of an
invitation for subscription or purchase nor may this pricing
supplement or any other document or material in connection with the
offer or sale or invitation for subscription or purchase of any
securities be circulated or distributed, whether directly or
indirectly, to any person in Singapore other than (a) to an
institutional investor pursuant to Section 274 of the Securities
and Futures Act, (b) to a relevant person under Section 275(1) of
the Securities and Futures Act or to any person pursuant to Section
275(1A) of the Securities and Futures Act and in accordance with
the conditions specified in Section 275 of the Securities and
Futures Act, or (c) otherwise pursuant to, and in accordance with
the conditions of, any other applicable provision of the Securities
and Futures Act. Where the securities are subscribed or purchased
under Section 275 of the Securities and Futures Act by a relevant
person which is:
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(a) |
a corporation (which is not an accredited investor (as defined
in Section 4A of the Securities and Futures Act)) the sole business
of which is to hold investments and the entire share capital of
which is owned by one or more individuals, each of whom is an
accredited investor; or |
|
(b) |
a trust (where the trustee is not an accredited investor) whose
sole purpose is to hold investments and each beneficiary is an
individual who is an accredited investor, securities (as defined in
Section 239(1) of the Securities and Futures Act) of that
corporation or the beneficiaries’ rights and interests (howsoever
described) in that trust shall not be transferable for 6 months
after that corporation or that trust has acquired the relevant
securities pursuant to an offer under Section 275 of the Securities
and Futures Act except: |
|
(i) |
to an institutional investor or to a relevant person defined in
Section 275(2) of the Securities and Futures Act or to any person
arising from an offer referred to in Section 275(1A) or Section
276(4)(i)(B) of the Securities and Futures Act; or |
|
(ii) |
where no consideration is or will be given for the transfer;
or |
|
(iii) |
where the transfer is by operation of law; or |
|
(iv) |
pursuant to Section 276(7) of the Securities and Futures Act;
or |
|
(v) |
as specified in Regulation 32 of the Securities and Futures
(Offers of Investments) (Shares and Debentures) Regulations 2005 of
Singapore. |
Any securities referred to herein may not be registered with any
regulator, regulatory body or similar organization or institution
in any jurisdiction.
The securities are Specified Investment Products (as defined in the
Notice on Recommendations on Investment Products and Notice on the
Sale of Investment Product issued by the Monetary Authority of
Singapore on 28 July 2011) that is neither listed nor quoted on a
securities market or a futures market.
Non-insured Product: These securities are not insured by any
governmental agency. These securities are not bank deposits. These
securities are not insured products subject to the provisions of
the Deposit Insurance and Policy Owners’ Protection Schemes Act
2011 of Singapore and are not eligible for deposit insurance
coverage under the Deposit Insurance Scheme.
Contact
Clients may contact their local brokerage representative.
Third-party distributors may contact Citi Structured Investment
Sales at (212) 723-7005.
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reserved. Citi and Citi and Arc Design are trademarks and service
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