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 AUGUST 26, 2016
|
Citigroup Global Markets Holdings Inc.
|
September
-----
,
2016
Medium-Term Senior
Notes, Series N
Pricing Supplement
No. 2016-USNCH0155
Filed Pursuant
to Rule 424(b)(2)
|
Registration Statement
Nos. 333-192302 and 333-192302-06
|
Market-Linked Notes Based on the S&P 500
®
Index Due April
-----
, 2024
Overview
|
▪
|
The notes offered by this pricing supplement are unsecured debt securities issued by Citigroup Global Markets Holdings Inc.
and guaranteed by Citigroup Inc. Unlike conventional debt securities, the notes do not pay interest. Instead, the notes offer the
potential for a positive return at maturity based on the performance of the S&P 500
®
Index (the “underlying
index”) from the initial index level to the final index level.
|
|
▪
|
The notes provide 1-to-1 exposure to the performance of the underlying index within a limited range of potential appreciation.
If the underlying index appreciates from the initial index level to the final index level, you will receive a positive return at
maturity equal to that appreciation, subject to the maximum return at maturity specified below. However, if the underlying index
remains the same or depreciates from the initial index level to the final index level, you will be repaid the stated principal
amount of your notes at maturity but will not receive any return on your investment. Even if the underlying index appreciates from
the initial index level to the final index level, so that you do receive a positive return at maturity, there is no assurance that
your total return at maturity on the notes will compensate you for the effects of inflation or be as great as the yield you could
have achieved on a conventional debt security of ours of comparable maturity.
|
|
▪
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Investors in the notes must be willing to forgo (i) any return on the notes in excess of the maximum return at maturity and
(ii) any dividends that may be paid on the stocks that constitute the underlying index during the 7.5-year term of the notes.
If
the underlying index does not appreciate from the pricing date to the valuation date, you will not receive any return on your investment
in the notes.
|
|
▪
|
In order to obtain the modified exposure to the underlying index that the notes provide, investors must be willing to accept
(i) an investment that may have limited or no liquidity and (ii) the risk of not receiving any amount due under the notes if we
and Citigroup Inc. default on our obligations.
All payments on the notes 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 notes are fully and unconditionally guaranteed by Citigroup Inc.
|
Underlying index:
|
The S&P 500
®
Index (ticker symbol: “SPX”)
|
Aggregate stated principal amount:
|
$
|
Stated principal amount:
|
$10.00 per note
|
Pricing date:
|
September , 2016 (expected to be September 30, 2016)
|
Issue date:
|
October , 2016 (three business days after the pricing date)
|
Valuation date:
|
March , 2024 (expected to be March 28, 2024), subject to postponement if such date is not a scheduled trading day or if certain market disruption events occur
|
Maturity date:
|
April , 2024 (expected to be April 3, 2024)
|
Payment at maturity:
|
For each note you hold at maturity, the $10.00 stated principal amount
plus
the note return amount, which will be either zero or positive
|
Note return amount:
|
▪
If the final index level is
greater than
the initial index level:
$10.00 × the index return, subject to the maximum return at maturity
▪
If the final index level is
less than or equal to
the initial index level:
$0
|
Initial index level:
|
, the closing level of the underlying index on the pricing date
|
Final index level:
|
The closing level of the underlying index on the valuation date
|
Index return:
|
The final index level
minus
the initial index level,
divided by
the initial index level
|
Maximum return at maturity:
|
The maximum return at maturity will be determined on the pricing date and will be at least $5.255 per note (52.55% of the stated principal amount). The payment at maturity per note will not exceed $10.00
plus
the maximum return at maturity.
|
Listing:
|
The notes will not be listed on any securities exchange
|
CUSIP / ISIN:
|
17324P784 / US17324P7841
|
Underwriter:
|
Citigroup Global Markets Inc. (“CGMI”), an affiliate of the issuer, acting as principal
|
Underwriting fee and issue price:
|
Issue price
(1)(2)
|
Underwriting fee
|
Proceeds to issuer
|
Per note:
|
$10.00
|
$0.30
(2)
|
$9.65
|
|
|
$0.05
(3)
|
|
Total:
|
$
|
$
|
$
|
(1)
Citigroup Global Markets Holdings Inc. currently expects that the estimated value of the notes on the pricing date will be at
least $9.100 per note, which will be less than the issue price. The estimated value of the notes 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 notes from you at any time
after issuance. See “Valuation of the Notes” in this pricing supplement.
(2) CGMI, an affiliate of Citigroup Global Markets Holdings
Inc. and the underwriter of the sale of the notes, is acting as principal and will receive an underwriting fee of $0.35 for each
$10.00 note sold in this offering. Certain selected dealers, including Morgan Stanley Wealth Management, and their financial advisors
will collectively receive from CGMI a fixed selling concession of $0.30 for each $10.00 note they sell. Additionally, it is possible
that CGMI and its affiliates may profit from expected hedging activity related to this offering, even if the value of the notes
declines. See “Use of Proceeds and Hedging” in the accompanying prospectus.
(3) Reflects a structuring fee payable to Morgan Stanley Wealth
Management by CGMI of $0.05 for each note.
Investing in the notes involves
risks not associated with an investment in conventional debt securities. See “Summary Risk Factors” beginning on page
PS-4.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of the notes or determined that this pricing supplement and the
accompanying product supplement, underlying supplement, prospectus supplement and prospectus is 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, each of which
can be accessed via the hyperlinks below:
Product Supplement No. EA-03-04 dated March 8, 2016
Underlying Supplement No. 4 dated March 8, 2016
Prospectus Supplement and Prospectus each dated March 7, 2016
The notes 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.
|
Market-Linked Notes Based on the S&P 500
®
Index Due April
-----
, 2024
|
|
Additional
Information
The terms of the notes 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 your payment at maturity. These events and their consequences are described in the accompanying
product supplement in the sections “Description of the Notes—Certain Additional Terms for Notes Linked to an Underlying
Index—Consequences of a Market Disruption Event; Postponement of a Valuation Date” and “—Discontinuance
or Material Modification of an Underlying Index,” and not in this pricing supplement. The accompanying underlying supplement
contains important disclosures regarding the underlying index 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 notes. Certain terms used but not defined in this pricing supplement
are defined in the accompanying product supplement.
Investment
Summary
The notes offer the potential for 100% participation in any positive
performance of the underlying index, subject to the maximum return at maturity. The notes provide investors:
|
▪
|
an opportunity to gain exposure to the underlying index;
|
|
▪
|
the repayment of principal at maturity;
|
|
▪
|
100% participation in any appreciation of the underlying index over the term of the notes, subject to the maximum return at
maturity; and
|
|
▪
|
no exposure to any depreciation of the underlying index if the notes are held to maturity.
|
At maturity, if the underlying index has depreciated or has not
appreciated at all, you will receive the stated principal amount of $10.00 per note, without any positive return on your investment.
All payments on the notes, including the repayment of principal at maturity, are subject to the credit risk of Citigroup Global
Markets Holdings Inc. and Citigroup Inc. Investors in the notes will not receive any dividends paid on the stocks that constitute
the underlying index over the term of the notes.
Maturity:
|
Approximately 7.5 years
|
Participation rate:
|
100%
|
Maximum return at maturity:
|
At least $5.255 (52.55% of the stated principal amount), to be determined on the pricing date.
|
Minimum payment at maturity:
|
$10.00
|
Interest:
|
None
|
Key Investment
Rationale
The notes offer investors exposure to the performance of the
underlying index and provide for the repayment of principal at maturity. They are for investors who are concerned about principal
risk but seek an equity index-based return, and who are willing to forgo dividends and any return in excess of the maximum return
at maturity in exchange for the repayment of principal at maturity if the underlying index depreciates.
Repayment of Principal:
|
The notes offer investors 1-to-1 upside exposure to any appreciation of the underlying index up to the maximum return at maturity, while providing for the repayment of principal in full at maturity.
|
Upside Scenario:
|
If the final index level is
greater than
the initial index level, the payment at maturity for each note will be equal to the $10.00 stated principal amount
plus
the note return amount, subject to the maximum return at maturity of at least $5.255 per note (at least 52.55% of the stated principal amount). For example, if the final index level is 3.00% greater than the initial index level, the notes will provide a total return of 3.00% at maturity.
|
Par Scenario:
|
If the final index level is
less than
the initial index level, the notes will pay only the stated principal amount of $10.00 at maturity.
|
Citigroup Global Markets Holdings Inc.
|
Market-Linked Notes Based on the S&P 500
®
Index Due April
-----
, 2024
|
|
Hypothetical
Examples
The diagram below illustrates your payment at maturity for a
range of hypothetical percentage changes from the initial index level to the final index level. The diagram and examples below
are based on a hypothetical maximum return at maturity of 52.55% per note, which is equivalent to a hypothetical maximum return
at maturity of 52.55%.
Investors in the notes will not receive any dividends on the
stocks that constitute the underlying index. The diagram and examples below do not show any effect of lost dividend yield over
the term of the notes.
See “Summary Risk Factors—Investing in the notes is not equivalent to investing in the underlying
index or the stocks that constitute the underlying index” below.
Market-Linked Notes
Payment at Maturity Diagram
|
|
n
The Securities
|
n
The Underlying Index
|
Your actual payment at maturity per note will depend on the actual
initial index level and the actual maximum return at maturity, which will be determined on the pricing date, and the actual final
index level. The examples below are intended to illustrate how your payment at maturity will depend on whether the final index
level is greater than or less than the initial index level and by how much. The examples are based on a hypothetical initial index
level of 2,175.00 and are for illustrative purposes only.
Example 1—Upside Scenario A.
The hypothetical final
index level is 2,392.50 (an approximately 10.00% increase from the hypothetical initial index level), which is
greater than
the hypothetical initial index level.
Payment at maturity per note = $10 + the note return amount
Citigroup Global Markets Holdings Inc.
|
Market-Linked Notes Based on the S&P 500
®
Index Due April
-----
, 2024
|
|
= $10 + ($10 × the index return), subject to the hypothetical
maximum return at maturity of $5.255
= $10 + ($10 × 10.00%), subject to the hypothetical maximum
return at maturity of $5.255
= $10 + $1.00, subject to the hypothetical maximum return at
maturity of $5.255
= $11.00
Because the underlying index appreciated by 10.00% from its hypothetical
initial index level to its hypothetical final index level and the note return amount of $1.00 results in a total return at maturity
of 10.00%, which is less than the hypothetical maximum return at maturity of 52.55%, your total return at maturity in this scenario
would be 10.00%.
Example 2—Upside Scenario B.
The hypothetical final
index level is 3,393.00 (an approximately 56.00% increase from the hypothetical initial index level), which is
greater than
the hypothetical initial index level.
Payment at maturity per note = $10 + the note return amount
= $10 + ($10 × the index return), subject to the hypothetical
maximum return at maturity of $5.255
= $10 + ($10 × 56.00%), subject to the hypothetical maximum
return at maturity of $5.255
= $10 + $5.60, subject to the hypothetical maximum return at
maturity of $5.255
= $15.255
Because the underlying index appreciated by 56.00% from its hypothetical
initial index level to its hypothetical final index level and the note return amount of $5.60 results in a total return at maturity
of 56.00%, which is greater than the hypothetical maximum return at maturity of 52.55%, your total return at maturity in this scenario
would equal the hypothetical maximum return at maturity of 52.55%. In this scenario, an investment in the notes would underperform
a hypothetical alternative investment providing 1-to-1 exposure to the appreciation of the underlying index without a maximum return
at maturity.
Example 3—Par Scenario.
The hypothetical final index
level is 1,957.50 (an approximately 10.00% decrease from the hypothetical initial index level), which is
less than
the hypothetical
initial index level.
Payment at maturity per note = $10 + the note return amount
= $10 + $0
= $10.00
Because the underlying index depreciated from its hypothetical
initial index level to its hypothetical final index level, the payment at maturity per note would equal the $10.00 stated principal
amount per note.
Summary Risk
Factors
An investment in the notes is significantly riskier than an investment
in conventional debt securities. The notes are subject to all of the risks associated with an investment in our conventional debt
securities that are guaranteed by Citigroup Inc., including the risk that we and Citigroup Inc. may default on our obligations
under the notes, and are also subject to risks associated with the underlying index. Accordingly, the notes are suitable only for
investors who are capable of understanding the complexities and risks of the notes. You should consult your own financial, tax
and legal advisers as to the risks of an investment in the notes and the suitability of the notes in light of your particular circumstances.
The following is a summary of certain key risk factors for investors
in the notes. You should read this summary together with the more detailed description of risks relating to an investment in the
notes contained in the section “Risk Factors Relating to the Notes” 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.
|
▪
|
You may not receive any return on your investment in the notes.
You will receive a positive return on your investment
in the notes only if the underlying index appreciates from the initial index level to the final index level. If the final index
level is equal to or less than the initial index level, you will receive only the stated principal amount of $10.00 for each note
you hold at maturity. As the notes do not pay any interest, even if the underlying index appreciates from the initial index level
to the final index level, there is no assurance that your total return at maturity on the notes will be as great as could have
been achieved on conventional debt securities of ours of comparable maturity.
|
|
▪
|
The notes do not pay interest.
Unlike conventional debt securities, the notes do not pay interest or any other amounts
prior to maturity. You should not invest in the notes if you seek current income during the term of the notes.
|
Citigroup Global Markets Holdings Inc.
|
Market-Linked Notes Based on the S&P 500
®
Index Due April
-----
, 2024
|
|
|
▪
|
Your potential return on the notes is limited.
Your potential total return on the notes at maturity is limited to the
maximum return at maturity of at least 52.55%, which is equivalent to a maximum return at maturity of $5.255 per note. The actual
maximum return at maturity will be determined on the pricing date. Assuming a maximum return at maturity of 60.50%, any increase
in the final index level over the initial index level by more than 52.55% will not increase your return on the notes.
|
|
▪
|
Although the notes provide for the repayment of the stated principal amount at maturity, you may nevertheless suffer a loss
on your investment in real value terms if the underlying index declines or does not appreciate sufficiently from the initial index
level to the final index level.
This is because inflation may cause the real value of the stated principal amount to be less
at maturity than it is at the time you invest, and because an investment in the notes represents a forgone opportunity to invest
in an alternative asset that does generate a positive real return. This potential loss in real value terms is significant given
the 7.5-year term of the notes. You should carefully consider whether an investment that may not provide for any return on your
investment, or may provide a return that is lower than the return on alternative investments, is appropriate for you.
|
|
▪
|
Investing in the notes is not equivalent to investing in the underlying index or the stocks that constitute the underlying
index.
You will not have voting rights, rights to receive dividends or other distributions or any other rights with respect
to the stocks that constitute the underlying index. As of August 24, 2016, the average dividend yield of the underlying index was
approximately 2.12% per year. While it is impossible to know the future dividend yield of the underlying index, if this average
dividend yield were to remain constant for the term of the notes, you would be forgoing an aggregate yield of approximately 15.89%
(assuming no reinvestment of dividends) by investing in the notes instead of investing directly in the stocks that constitute the
underlying index or in another investment linked to the underlying index that provides for a pass-through of dividends. The payment
scenarios described in this pricing supplement do not show any effect of lost dividend yield over the term of the notes. If the
underlying index appreciates, or if it depreciates by up to the dividend yield, this lost dividend yield will cause the notes to
underperform an alternative investment providing for a pass-through of dividends and 1-to-1 exposure to the performance of the
underlying index.
|
|
▪
|
Your payment at maturity depends on the closing level of the underlying index on a single day.
Because your payment
at maturity depends on the closing level of the underlying index solely on the valuation date, you are subject to the risk that
the closing level of the underlying index on that day may be lower, and possibly significantly lower, than on one or more other
dates during the term of the notes. If you had invested in another instrument linked to the 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 underlying
index, you might have achieved better returns.
|
|
▪
|
The notes are subject to the credit risk of Citigroup Global Markets Holdings Inc. and Citigroup Inc.
If we default
on our obligations under the notes and Citigroup Inc. defaults on its guarantee obligations, you may not receive anything owed
to you under the notes.
|
|
▪
|
The notes will not be listed on any securities exchange and you may not be able to sell them prior to maturity.
The
notes will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the notes. CGMI
currently intends to make a secondary market in relation to the notes and to provide an indicative bid price for the notes on a
daily basis. Any indicative bid price for the notes provided by CGMI will be determined in CGMI’s sole discretion, taking
into account prevailing market conditions and other relevant factors, and will not be a representation by CGMI that the notes can
be sold at that price, or at all. CGMI may suspend or terminate making a market and providing indicative bid prices without notice,
at any time and for any reason. If CGMI suspends or terminates making a market, there may be no secondary market at all for the
notes because it is likely that CGMI will be the only broker-dealer that is willing to buy your notes prior to maturity. Accordingly,
an investor must be prepared to hold the notes until maturity.
|
|
▪
|
Sale of the notes prior to maturity may result in a loss of principal.
You will be entitled to receive at least the
full stated principal amount of your notes, subject to the credit risk of Citigroup Global Markets Holdings Inc. and Citigroup
Inc., only if you hold the notes to maturity. The value of the notes may fluctuate during the term of the notes, and if you are
able to sell your notes prior to maturity, you may receive less than the full stated principal amount of your notes.
|
|
▪
|
The estimated value of the notes on the pricing date, based on CGMI’s proprietary pricing models and our internal
funding rate, will be less than the issue price.
The difference is attributable to certain costs associated with selling, structuring
and hedging the notes that are included in the issue price. These costs include (i) the selling concessions and structuring fees
paid in connection with the offering of the notes, (ii) hedging and other costs incurred by us and our affiliates in connection
with the offering of the notes 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 notes. These costs adversely affect the economic terms of the
notes because, if they were lower, the economic terms of the notes would be more favorable to you. The economic terms of the notes
are also likely to be adversely affected by the use of our internal funding rate, rather than our secondary market rate, to price
the notes. See “The estimated value of the notes would be lower if it were calculated based on our secondary market rate”
below.
|
Citigroup Global Markets Holdings Inc.
|
Market-Linked Notes Based on the S&P 500
®
Index Due April
-----
, 2024
|
|
|
▪
|
The estimated value of the notes was determined for us by our affiliate using proprietary pricing models.
CGMI derived
the estimated value disclosed on the cover page of this pricing supplement from its proprietary pricing models. In doing so, it
may have made discretionary judgments about the inputs to its models, such as the volatility of the underlying index, dividend
yields on the stocks that constitute the underlying index and interest rates. CGMI’s views on these inputs may differ from
your or others’ views, and as an underwriter in this offering, CGMI’s interests may conflict with yours. Both the models
and the inputs to the models may prove to be wrong and therefore not an accurate reflection of the value of the notes. Moreover,
the estimated value of the notes set forth on the cover page of this pricing supplement may differ from the value that we or our
affiliates may determine for the notes for other purposes, including for accounting purposes. You should not invest in the notes
because of the estimated value of the notes. Instead, you should be willing to hold the notes to maturity irrespective of the initial
estimated value.
|
|
▪
|
The estimated value of the notes would be lower if it were calculated based on our secondary market rate.
The estimated
value of the notes included in this pricing supplement is calculated based on our internal funding rate, which is the rate at which
we are willing to borrow funds through the issuance of the notes. Our internal funding rate is generally lower than our secondary
market rate, which is the rate that CGMI will use in determining the value of the notes for purposes of any purchases of the notes
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 notes, which are generally higher than the costs associated with conventional debt securities,
and our liquidity needs and preferences. Our internal funding rate is not an interest rate that we will pay to investors in the
notes, which do not bear interest.
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 notes, 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 notes prior to maturity.
|
|
▪
|
The estimated value of the notes is not an indication of the price, if any, at which CGMI or any other person may be willing
to buy the notes from you in the secondary market.
Any such secondary market price will fluctuate over the term of the notes
based on the market and other factors described in the next risk factor. Moreover, unlike the estimated value included in this
pricing supplement, any value of the notes determined for purposes of a secondary market transaction will be based on our secondary
market rate, which will likely result in a lower value for the notes than if our internal funding rate were used. In addition,
any secondary market price for the notes will be reduced by a bid-ask spread, which may vary depending on the aggregate stated
principal amount of the notes to be purchased in the secondary market transaction, and the expected cost of unwinding related hedging
transactions. As a result, it is likely that any secondary market price for the notes will be less than the issue price.
|
|
▪
|
The value of the notes prior to maturity will fluctuate based on many unpredictable factors.
The value of your notes
prior to maturity will fluctuate based on the level and volatility of the underlying index and a number of other factors, including
the price and volatility of the stocks that constitute the underlying index, the dividend yields on the stocks that constitute
the underlying index, interest rates generally, the time remaining to maturity and our and/or Citigroup Inc.’s creditworthiness,
as reflected in our secondary market rate. Changes in the level of the underlying index may not result in a comparable change in
the value of your notes. You should understand that the value of your notes at any time prior to maturity may be significantly
less than the issue price.
|
|
▪
|
Immediately following issuance, any secondary market bid price provided by CGMI, and the value that will be indicated on
any brokerage account statements prepared by CGMI or its affiliates, will reflect a temporary upward adjustment.
The amount
of this temporary upward adjustment will steadily decline to zero over the temporary adjustment period. See “Valuation of
the Notes” in this pricing supplement.
|
|
▪
|
Our offering of the notes does not constitute a recommendation of the underlying index.
The fact that we are offering
the notes does not mean that we believe that investing in an instrument linked to the underlying index is likely to achieve favorable
returns. In fact, as we are part of a global financial institution, our affiliates may have positions (including short positions)
in the stocks that constitute the underlying index or in instruments related to the underlying index or such stocks, and may publish
research or express opinions, that in each case are inconsistent with an investment linked to the underlying index. These and other
activities of our affiliates may affect the level of the underlying index in a way that has a negative impact on your interests
as a holder of the notes.
|
|
▪
|
The level of the underlying index may be adversely affected by our or our affiliates’ hedging and other trading activities.
We expect to hedge our obligations under the notes through CGMI or other of our affiliates, who may take positions directly in
the stocks that constitute the underlying index and other financial instruments related to the underlying index or such stocks
and may
|
Citigroup Global Markets Holdings Inc.
|
Market-Linked Notes Based on the S&P 500
®
Index Due April
-----
, 2024
|
|
adjust such positions during the
term of the notes. Our affiliates also trade the stocks that constitute the underlying index and other financial instruments related
to the underlying index or such stocks on a regular basis (taking long or short positions or both), for their accounts, for other
accounts under their management or to facilitate transactions on behalf of customers. These activities could affect the level of
the underlying index in a way that negatively affects the value of the notes. They could also result in substantial returns for
us or our affiliates while the value of the notes declines.
|
▪
|
We and our affiliates may have economic interests that are adverse to yours as a result of our affiliates’ business
activities.
Our affiliates may currently or from time to time engage in business with the issuers of the stocks that constitute
the underlying index, including extending loans to, making equity investments in or providing advisory services to such issuers.
In the course of this business, we or our affiliates may acquire non-public information about such issuers, which we will not disclose
to you. Moreover, if any of our affiliates is or becomes a creditor of any such issuer, they may exercise any remedies against
such issuer that are available to them without regard to your interests.
|
|
▪
|
The calculation agent, which is an affiliate of ours, will make important determinations with respect to the notes.
If certain events occur, such as market disruption events or the discontinuance of the underlying index, CGMI, as calculation agent,
will be required to make discretionary judgments that could significantly affect your payment at maturity. In making these judgments,
the calculation agent’s interests as an affiliate of ours could be adverse to your interests as a holder of the notes.
|
|
▪
|
Adjustments to the underlying index may affect the value of your notes.
S&P Dow Jones Indices LLC (the “underlying
index publisher”) may add, delete or substitute the stocks that constitute the underlying index or make other methodological
changes that could affect the level of the underlying index. The underlying index publisher may discontinue or suspend calculation
or publication of the underlying index at any time without regard to your interests as holders of the notes.
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Information
About the Underlying Index
The S&P 500
®
Index consists of 500 common
stocks 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. The S&P 500
®
Index is reported by Bloomberg L.P. under the
ticker symbol “SPX.”
“Standard & Poor’s,” “S&P”
and “S&P 500
®
” are trademarks of Standard & Poor’s Financial Services LLC and have been
licensed for use by Citigroup Inc. and its affiliates. For more information, see “Equity Index Descriptions—S&P
500
®
Index—License Agreement” in the accompanying underlying supplement. Please refer to the sections
“Risk Factors” and “Equity Index Descriptions—S&P 500
®
Index” in the accompanying
underlying supplement for important disclosures regarding the underlying index, including certain risks that are associated with
an investment linked to the underlying index.
Historical Information
The closing level of the underlying index on August 24, 2016
was 2,175.44.
The graph below shows the closing levels of the underlying index
for each day such level was available from January 3, 2011 to August 24, 2016. We obtained the closing levels from Bloomberg L.P.,
without independent verification. You should not take the historical levels of the underlying index as an indication of future
performance.
Citigroup Global Markets Holdings Inc.
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Market-Linked Notes Based on the S&P 500
®
Index Due April
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, 2024
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S&P 500
®
Index – Historical Closing Levels
January 3, 2011 to August 24, 2016
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United States
Federal Tax Considerations
In the opinion of our tax counsel, Davis Polk & Wardwell
LLP, based on current market conditions, the notes should be treated as “contingent payment debt instruments” for U.S.
federal income tax purposes, as described in the section of the accompanying product supplement called “United States Federal
Tax Considerations—Tax Consequences to U.S. Holders—Notes Treated as Contingent Payment Debt Instruments,” and
the remaining discussion is based on this treatment. If you are a U.S. Holder, you will be required to recognize interest income
during the term of the notes at the “comparable yield,” which generally is the yield at which we could issue a fixed-rate
debt instrument with terms similar to those of the notes, including the level of subordination, term, timing of payments and general
market conditions, but excluding any adjustments for the riskiness of the contingencies or the liquidity of the notes. We are required
to construct a “projected payment schedule” in respect of the notes representing a payment the amount and timing of
which would produce a yield to maturity on the notes equal to the comparable yield. Assuming you hold the notes until their maturity,
the amount of interest you include in income based on the comparable yield in the taxable year in which the notes mature will be
adjusted upward or downward to reflect the difference, if any, between the actual and projected payment on the notes at maturity
as determined under the projected payment schedule. However, special rules may apply if the payment at maturity on the notes is
treated as becoming fixed prior to maturity. See “United States Federal Tax Considerations—Tax Consequences to U.S.
Holders—Notes Treated as Contingent Payment Debt Instruments” in the accompanying product supplement for a more detailed
discussion of the special rules.
Upon the sale, exchange or retirement of the notes prior to maturity,
you generally will recognize gain or loss equal to the difference between the proceeds received and your adjusted tax basis in
the notes. Your adjusted tax basis will equal your purchase price for the notes, increased by interest previously included in income
on the notes. Any gain generally will be treated as ordinary income, and any loss generally will be treated as ordinary loss to
the extent of prior interest inclusions on the note and as capital loss thereafter.
We have determined that the comparable yield for a note is a
rate of %, compounded semi-annually, and that the projected payment schedule with respect to a note
consists of a single payment of $ at maturity.
Neither the comparable yield nor the projected payment schedule
constitutes a representation by us regarding the actual amount that we will pay on the notes.
Subject to the discussions under “United States Federal
Tax Considerations—Tax Consequences to Non-U.S. Holders” and “—FATCA” in the accompanying product
supplement, if you are a Non-U.S. Holder (as defined in the accompanying product supplement) of the notes, under current law you
generally will not be subject to U.S. federal withholding or income tax in respect of any payment on or any amount received on
the sale, exchange or retirement of the notes, provided that (i) income in respect of the notes is not effectively
Citigroup Global Markets Holdings Inc.
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Market-Linked Notes Based on the S&P 500
®
Index Due April
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, 2024
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connected with your conduct of a trade or business in the United
States, and (ii) you comply with the applicable certification requirements. See “United States Federal Tax Considerations—Tax
Consequences to Non-U.S. Holders” in the accompanying product supplement for a more detailed discussion of the rules applicable
to Non-U.S. Holders of the notes.
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 notes.
You should also consult your tax adviser regarding all aspects
of the U.S. federal tax consequences of an investment in the notes and any tax consequences arising under the laws of any state,
local or non-U.S. taxing jurisdiction.
Supplemental
Plan of Distribution
CGMI, an affiliate of Citigroup Global Markets Holdings Inc.
and the underwriter of the sale of the notes, is acting as principal and will receive an underwriting fee of $0.35 for each $10.00
note sold in this offering. From this underwriting fee, CGMI will pay selected dealers not affiliated with CGMI, including Morgan
Stanley Wealth Management, and their financial advisers collectively a fixed selling concession of $0.30 for each $10.00 note they
sell. In addition, Morgan Stanley Wealth Management will receive a structuring fee of $0.05 for each note they sell.
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 notes, 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 notes will
be used to hedge our obligations under the notes. We expect to hedge our obligations under the notes 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 notes
declines. This hedging activity could affect the closing level of the underlying index and, therefore, the value of and your return
on the notes. For additional information on the ways in which our counterparties may hedge our obligations under the notes, see
“Use of Proceeds and Hedging” in the accompanying prospectus.
Valuation of
the Notes
CGMI calculated the estimated value of the notes 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 notes by estimating the value of a hypothetical package of financial instruments that would replicate
the payout on the notes, which consists of a fixed-income bond (the “bond component”) and one or more derivative instruments
underlying the economic terms of the notes (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 notes 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 notes is a function of the terms of
the notes 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 notes will be on the pricing date because certain terms of the notes have not yet
been fixed and 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 four months following issuance
of the notes, the price, if any, at which CGMI would be willing to buy the notes from investors, and the value that will be indicated
for the notes 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 notes. The amount of this temporary upward adjustment will decline to zero on a straight-line basis
over the four-month temporary adjustment period. However, CGMI is not obligated to buy the notes from investors at any time. See
“Summary Risk Factors — The notes will not be listed on any securities exchange and you may not be able to sell them
prior to maturity.”
Citigroup Global Markets Holdings Inc.
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Market-Linked Notes Based on the S&P 500
®
Index Due April
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, 2024
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Contact
Clients of Morgan Stanley Wealth Management may contact their
local Morgan Stanley branch office or the Morgan Stanley principal executive offices at 1585 Broadway, New York, New York 10036
(telephone number (212) 762-9666). All other clients may contact their local brokerage representative.
© 2016 Citigroup Global Markets Inc. All rights reserved.
Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout
the world.
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