The
information in this preliminary pricing supplement is not complete and may be changed. A registration statement relating to these
notes 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 notes, nor are they soliciting
an offer to buy these notes, in any state where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED OCTOBER 17, 2017
Pricing Supplement No.
2017—USNCH0780 to Product Supplement No. EA-02-06 dated April 7, 2017,
Underlying
Supplement No. 6 dated April 7, 2017, Prospectus Supplement and Prospectus each dated April 7, 2017
Filed Pursuant to Rule
424(b)(2)
Registration Statement
Nos. 333-216372 and 333-216372-01
Dated October
-----
,
2017
Citigroup
Global Markets Holdings Inc. $---- Airbag Autocallable Notes
|
|
Linked to the EURO STOXX 50
®
Index Due On or About October 20, 2022
All payments due on the notes
are fully and unconditionally guaranteed by Citigroup Inc.
The Airbag Autocallable Notes (the
“
notes
”) are unsecured, unsubordinated debt obligations of Citigroup Global Markets Holdings Inc. (the “
issuer
”),
guaranteed by Citigroup Inc. (the “
guarantor
”), linked to the performance of the EURO STOXX 50
®
Index (the “
underlying
”). If the closing level of the underlying is greater than or equal to the initial underlying
level on any valuation date, we will automatically call the notes and pay you a call price equal to the stated principal amount
per note plus a call return based on the call return rate. The call return increases the longer the notes are outstanding, as
described below, based on a fixed call return rate per annum. If by maturity the notes have not been called (including on the
final valuation date), the amount you receive at maturity will depend on the final underlying level. If the final underlying level
is less than the initial underlying level but greater than or equal to the downside threshold, we will repay the stated principal
amount of your notes at maturity. However, if the final underlying level is less than the downside threshold, you will receive
less than the stated principal amount of your notes, and possibly nothing, at maturity. In this case, you will be exposed to the
downside performance of the underlying beyond the threshold percentage at a rate greater than 1-for-1. Specifically, you will
be exposed to a decrease between 1.2195% to 1.2500% (to be determined on the trade date) in your initial investment for each 1%
decline in the underlying in excess of the threshold percentage from the trade date to the final valuation date, up to a 100%
loss of your investment.
Investing in the notes involves
significant risks. You may lose a substantial portion or all of your initial investment. You will not receive dividends or other
distributions paid on any stocks included in the underlying. The notes do not pay interest. The contingent repayment of the stated
principal amount applies only if you hold the notes to maturity. Any payment on the notes, including any repayment of the stated
principal amount, is subject to the creditworthiness of the issuer and the guarantor and is not, either directly or indirectly,
an obligation of any third party. If the issuer and the guarantor were to default on their payment obligations, you may not receive
any amounts owed to you under the notes and you could lose your entire investment.
Features
|
|
q
Call
Return
— We will automatically call the notes for a call price equal to the stated principal amount plus a call return
based on the call return rate if the closing level of the underlying is greater than or equal to the initial underlying level
on any valuation date. The call return increases the longer the notes are outstanding, based on a fixed call return rate per annum.
If the notes are not called, investors may have full downside market exposure to the underlying at maturity.
q
Downside
Exposure with Contingent Repayment of Principal at Maturity
— If by maturity the notes have not been called and the
final underlying level is less than the initial underlying level but greater than or equal to the downside threshold, we will
pay the stated principal amount of the notes at maturity. However, if by maturity the notes have not been called and the final
underlying level is less than the downside threshold, you will receive less than the stated principal amount of your notes, and
possibly nothing, at maturity. In this case, you will be exposed to the downside performance of the underlying beyond the threshold
percentage at a rate greater than 1-for-1. Specifically, you will be exposed to a decrease between 1.2195% to 1.2500% (to be determined
on the trade date) in your initial investment for r each 1% decline in the underlying in excess of the threshold percentage from
the trade date to the final valuation date, up to a 100% loss of your investment.
Any payment on the notes is subject to the
creditworthiness of the issuer and guarantor. If the issuer and the guarantor were to default on their obligations, you might
not receive any amounts owed to you under the notes and you could lose your entire investment.
|
|
|
Key Dates
1
|
Trade date
|
October
17, 2017
|
Settlement date
2
|
October 20, 2017
|
Valuation dates
3
|
Annually
(See page PS-5)
|
Final valuation date
3
|
October 17, 2022
|
Maturity date
|
October 20, 2022
|
|
|
1
Expected
2
See
“Supplemental Plan of Distribution” in this pricing supplement for additional information.
3
See
page PS-5 for additional details
|
NOTICE TO INVESTORS:
The
notes are significantly riskier than conventional debt INSTRUMENTS. THE ISSUER IS NOT NECESSARILY OBLIGATED TO REPAY THE STATED
PRINCIPAL AMOUNT OF THE NOTES AT MATURITY, AND the notes CAN have UP TO THE FULL downside MARKET risk OF the underlying. This
MARKET risk is in addition to the CREDIT risk INHERENT IN PURCHASING A DEBT OBLIGATION OF CITIGROUP GLOBAL MARKETS HOLDINGS INC.
THAT IS GUARANTEED BY CITIGROUP INC. You should not PURCHASE the notes if you do not understand or are not comfortable with
the significant risks INVOLVED in INVESTING IN the notes.
YOU SHOULD CAREFULLY CONSIDER
THE RISKS DESCRIBED UNDER ‘‘SUMMARY RISK FACTORS’’ BEGINNING ON PAGE PS-6 OF THIS PRICING SUPPLEMENT AND
UNDER ‘‘RISK FACTORS RELATING TO THE SECURITIES’’ BEGINNING ON PAGE EA-6 OF THE ACCOMPANYING PRODUCT SUPPLEMENT
BEFORE PURCHASING ANY NOTES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE
MARKET VALUE OF, AND THE RETURN ON, YOUR NOTES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL INVESTMENT IN THE NOTES. THE NOTES WILL
NOT BE LISTED ON ANY NOTES EXCHANGE AND MAY HAVE LIMITED OR NO LIQUIDITY.
We are offering Airbag Autocallable
Notes Linked to the EURO STOXX 50
®
Index. Any payment on the notes will be determined by the performance of the
underlying. The initial underlying level, downside gearing, downside threshold and threshold percentage will be determined on
the trade date. The notes are our unsecured, unsubordinated debt obligations, guaranteed by Citigroup Inc., and are offered for
a minimum investment of 100 notes at the issue price described below.
Underlying
|
Call Return Rate
|
Initial Underlying Level
|
Downside Gearing
|
Downside Threshold
|
Threshold Percentage
|
CUSIP/ISIN
|
EURO STOXX 50
®
Index (Ticker: SX5E)
|
11.00% per annum
|
|
Approximately 1.2195 to 1.2500
|
80% to 82% of the initial underlying level
|
18% to 20%
|
17325K362 / US17325K3620
|
See “Additional Terms
Specific to the Notes” in this pricing supplement. The notes will have the terms specified in the accompanying product supplement,
prospectus supplement and prospectus, as supplemented by this pricing supplement.
Neither the Securities and Exchange
Commission (the “
SEC
”) nor any state securities commission has approved or disapproved of the notes or passed
upon the accuracy or the adequacy of this pricing supplement or the accompanying product supplement, underlying supplement, prospectus
supplement and prospectus. Any representation to the contrary is a criminal offense. The notes are not bank deposits and are not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.
|
Issue Price
(1)
|
Underwriting Discount
(2)
|
Proceeds
to
Issuer
|
Per note
|
$10.00
|
$0.10
|
$9.90
|
Total
|
$
|
$
|
$
|
(1)
Citigroup Global Markets Holdings Inc. currently expects that the estimated value of the notes on the trade date will be at least
$9.400, which will be less than the issue price. The estimated value of the notes is based on proprietary pricing models of Citigroup
Global Markets Inc. (“
CGMI
”) 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)
The underwriting discount is $0.10 per security. CGMI, acting as principal, expects to purchase from Citigroup Global Markets
Holdings Inc., and Citigroup Global Markets Holdings Inc. expects to sell to CGMI, the aggregate stated principal amount of the
notes set forth above for $9.90 per note. UBS Financial Services Inc. (“
UBS
”), acting as principal, expects
to purchase from CGMI, and CGMI expects to sell to UBS, all of the notes for $9.90 per note. UBS will receive an underwriting
discount of $0.10 per note for each note it sells. UBS proposes to offer the notes to the public at a price of $10.00 per note.
For additional information on the distribution of the notes, see “Supplemental Plan of Distribution” in this pricing
supplement. In addition to the underwriting discount, 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.
Citigroup Global Markets Inc.
|
UBS Financial
Services Inc.
|
Additional Terms Specific to the Notes
|
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 and/or whether the notes are automatically called prior to
maturity. These events and their consequences are described in the accompanying product supplement in the sections “Description
of the Securities—Certain Additional Terms for Securities 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
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 you decide whether to invest in the
notes. Certain terms used but not defined in this pricing supplement are defined in the accompanying product supplement.
You may access the accompanying product supplement, underlying
supplement, prospectus supplement and prospectus on the SEC website at www.sec.gov as follows (or if such address has changed,
by reviewing our filings for April 7, 2017 on the SEC website):
|
¨
|
Product Supplement No. EA-02-06 dated April 7, 2017:
|
https://www.sec.gov/Archives/edgar/data/200245/000095010317003407/dp74979_424b2-par.htm
|
¨
|
Underlying Supplement No. 6 dated April 7, 2017:
|
https://www.sec.gov/Archives/edgar/data/200245/000095010317003405/dp74985_424b2-us6.htm
|
¨
|
Prospectus Supplement and Prospectus each dated April 7, 2017:
|
https://www.sec.gov/Archives/edgar/data/831001/000119312517116348/d370918d424b2.htm
You may revoke your offer to purchase the notes at any time prior
to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of, or reject
any offer to purchase, the notes on or prior to the trade date. The applicable agent will notify you in the event of any material
changes to the terms of the notes, and you will be asked to accept such changes in connection with your purchase of the notes.
You may also choose to reject such changes, in which case the applicable agent may reject your offer to purchase the notes. References
to “Citigroup Global Markets Holdings Inc.,” “Citigroup,” “we,” “our” and “us”
refer to Citigroup Global Markets Holdings Inc. and not to any of its subsidiaries. References to “Citigroup Inc.”
refer to Citigroup Inc. and not to any of its subsidiaries. In this pricing supplement, “notes” refers to the Airbag
Autocallable Notes Linked to the EURO STOXX 50
®
Index that are offered hereby, unless the context otherwise requires.
This pricing supplement, together with the documents listed
above, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written
materials including p?reliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample
structures, brochures or other educational materials of ours. The description in this pricing supplement of the particular terms
of the notes supplements, and, to the extent inconsistent with, replaces, the descriptions of the general terms and provisions
of the debt securities set forth in the accompanying product supplement, prospectus supplement and prospectus. You should carefully
consider, among other things, the matters set forth in “Summary Risk Factors” in this pricing supplement and “Risk
Factors Relating to the Securities” in the accompanying product supplement, as the notes involve risks not associated with
conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before deciding
to invest in the notes.
The suitability considerations identified below are not exhaustive.
Whether or not the notes are a suitable investment for you will depend on your individual circumstances, and you should reach an
investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the
suitability of an investment in the notes in light of your particular circumstances. You should also review “Summary Risk
Factors” beginning on page PS-6 of this pricing supplement, “The EURO STOXX 50
®
Index” beginning
on page PS-11 of this pricing supplement, “Risk Factors Relating to the Securities” beginning on page EA-6 of the accompanying
product supplement and “Equity Index Descriptions—The EURO STOXX 50
®
Index” beginning on page
23 of the accompanying underlying supplement.
The notes may be suitable for you if, among other considerations:
¨
You fully understand the risks inherent in an investment in the notes, including the risk of loss of your entire initial
investment.
¨
You
can tolerate a loss of all or a substantial portion of your initial investment and are willing to make an investment that is subject
to leveraged downside market exposure to any decline of the underlying in excess of the threshold percentage.
¨
You
understand and accept the risks associated with the underlying.
¨
You
believe the closing level of the underlying will be greater than or equal to the initial underlying level on one of the specified
valuation dates.
¨
You
can tolerate fluctuations in the value of the notes prior to maturity that may be similar to or exceed the downside fluctuations
in the level of the underlying.
¨
You
are willing to hold notes that will be called on the earliest valuation date on which the closing level of the underlying is greater
than or equal to the initial underlying level, and you are otherwise willing to hold such notes to maturity.
¨
You
are willing to make an investment whose positive return is limited to the call return, regardless of the potential appreciation
of the underlying, which could be significant.
¨
You
are willing to invest in the notes based on the call return rate indicated on the cover page of this pricing supplement.
¨
You would be willing to invest in the notes if the downside gearing and downside threshold were each set equal to the top
of the respective ranges indicated on the cover page hereof (the actual downside gearing and downside threshold will be set on
the trade date).
¨
You
would be willing to invest in the notes if the threshold percentage was set equal to the bottom of the range indicated on the
cover page hereof (the actual threshold percentage will be set on the trade date).
¨
You
are willing and able to hold the notes to maturity, and accept that there may be little or no secondary market for the notes and
that any secondary market will depend in large part on the price, if any, at which CGMI is willing to purchase the notes.
¨
You
do not seek current income from your investment and are willing to forgo dividends or any other distributions paid on the stocks
included in the underlying for the term of the notes.
¨
You
are willing to assume the credit risk of Citigroup Global Markets Holdings Inc. and Citigroup Inc. for all payments under the
notes, and understand that if Citigroup Global Markets Holdings Inc. and Citigroup Inc. default on their obligations, you might
not receive any amounts due to you, including any repayment of the stated principal amount.
|
|
The notes may
not
be suitable for you if,
among other considerations:
¨
You do not fully understand the risks inherent in an investment in the notes, including the risk of loss of your entire
initial investment.
¨
You
do not believe the closing level of the underlying will be greater than or equal to the initial underlying level on any one of
the specified valuation dates.
¨
You
believe the closing level of the underlying will be less than the downside threshold on the final valuation date, exposing you
to leveraged downside market exposure to any decline of the underlying in excess of the threshold percentage.
¨
You
require an investment designed to guarantee a full return of the stated principal amount at maturity.
¨
You
do not understand or accept the risks associated with the underlying.
¨
You
cannot tolerate the loss of all or a substantial portion of your initial investment, or you are not willing to make an investment
that is subject to leveraged downside market exposure to any decline of the underlying in excess of the threshold percentage.
¨
You
seek an investment that participates in the full appreciation of the underlying and whose positive return is not limited to the
call return.
¨
You
are unwilling to invest in the notes based on the call return rate indicated on the cover page of this pricing supplement.
¨
You
are unwilling to invest in the notes if the downside gearing and downside threshold were each set equal to the top of the respective
ranges indicated on the cover page hereof (the actual downside gearing and downside threshold will be set on the trade date).
¨
You
are unwilling to invest in the notes if the threshold percentage was set equal to the bottom of the range indicated on the cover
page hereof (the actual threshold percentage will be set on the trade date).
¨
You
are unable or unwilling to hold notes that will be called on the earliest valuation date on which the closing level of the underlying
is greater than or equal to the initial underlying level, or you are otherwise unable or unwilling to hold such notes to maturity.
¨
You
seek an investment for which there will be an active secondary market.
¨
You
seek current income from this investment or prefer to receive the dividends and any other distributions paid on the stocks included
in the underlying for the term of the notes.
¨
You
prefer the lower risk of conventional fixed income investments with comparable maturities and credit ratings.
¨
You
cannot tolerate fluctuations in the value of the notes prior to maturity that may be similar to or exceed the downside price fluctuations
of the underlying.
¨
You
are not willing to assume the credit risk of Citigroup Global Markets Holdings Inc. and Citigroup Inc. for all payments under
the notes, including any repayment of the stated principal amount.
|
Indicative Terms
|
Issuer
|
Citigroup Global Markets Holdings Inc.
|
Guarantee
|
All payments due on the notes are fully and unconditionally guaranteed by Citigroup Inc.
|
Issue price
|
100% of the stated principal amount per note
|
Stated principal amount per note
|
$10.00 per note
|
Term
|
5 years, unless called earlier
|
Trade date
1
|
October 17, 2017
|
Settlement date
1
|
October 20, 2017
|
Final valuation date
1,2
|
October 17, 2022
|
Maturity date
1
|
October 20, 2022
|
Underlying
|
EURO STOXX 50
®
Index (Ticker: SX5E)
|
Automatic call feature
|
The notes will be automatically
called if the closing level of the underlying is greater than or equal to the initial underlying level on any valuation
date.
If the notes are automatically
called, we will pay you on the applicable call settlement date a cash payment per $10.00 stated principal amount of each
note equal to the call price for the applicable valuation date.
|
Valuation dates
1, 2
|
October 19, 2018
October 17, 2019
October 19, 2020
October 18, 2021
October 17, 2022 (the “
final
valuation date
”).
|
Call settlement dates
|
Three (3) business days following the applicable valuation date, except that the call settlement
date for the final valuation date is the maturity date.
|
Call price
|
The call price will be
calculated based on the following formula:
$10.00
+ applicable call return
|
Call return/call return rate
|
The call return increases
the longer the notes are outstanding and will be based on a fixed call return rate of 11.00% per annum.
See “Call Returns/Call
Prices for the Offering of the Notes” on page PS-5.
|
Payment at maturity (per $10.00 stated principal amount of notes)
|
If the notes are not
called and the final underlying level is less than the initial underlying level but greater than or equal to the downside
threshold
, we will pay the stated principal amount of the notes at maturity.
If the notes are not
called and the final underlying level is less than the downside threshold on the final valuation date,
we will pay
you a cash payment on the maturity date that is less than your stated principal amount and may be zero, resulting in a
loss of approximately 1.2195% to 1.2500% (to be determined on the trade date) for each 1% decline in the underlying in
excess of the threshold percentage from the trade date to the final valuation date. Accordingly, the payment at maturity
per note would be calculated as follows:
$10.00
+ [$10.00 × downside gearing × (underlying return + threshold percentage)]
Accordingly, you
will lose approximately 1.2195% to 1.2500% (to be determined on the trade date) of the stated principal amount of the
notes for each 1% decline in the underlying in excess of the
|
|
|
____________________
1
Expected. In the event that we make any
changes to the expected trade date and settlement date, the valuation dates and maturity date may be changed to ensure that the
stated term of the notes remains the same.
2
Subject to postponement as described under “Description of the Securities—Certain Additional Terms for Securities
Linked to an Underlying Index—Consequences of a Market Disruption Event; Postponement of a Valuation Date” in the
accompanying product supplement.
|
|
threshold percentage from the trade date to the final valuation
date. You may lose all or a substantial portion of your stated principal amount at maturity, depending on how significantly
the underlying declines.
|
Underlying return
|
final underlying level – initial underlying level
initial underlying level
|
Downside gearing
|
1.2195 to 1.2500. The actual downside gearing will be determined on the trade date.
|
Downside threshold
|
80% to 82% of the initial underlying level. The actual downside threshold will be determined
on the trade date.
|
Threshold percentage
|
18% to 20%. The actual threshold percentage will be determined
on the trade date.
|
Initial underlying level
|
The closing level of the underlying on the trade date, as specified on the cover page of
this pricing supplement.
|
Final underlying level
|
The closing level of the underlying on the final valuation date.
|
INVESTING IN THE NOTES INVOLVES
SIGNIFICANT RISKS. YOU MAY LOSE A SUBSTANTIAL PORTION OR ALL OF YOUR INITIAL INVESTMENT. ANY PAYMENT ON THE NOTES IS SUBJECT TO
THE CREDITWORTHINESS OF THE ISSUER AND THE GUARANTOR. IF CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND CITIGROUP INC. WERE TO DEFAULT
ON THEIR OBLIGATIONS, YOU MIGHT NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE NOTES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
|
Investment Timeline
|
|
|
|
|
|
Trade
date
|
|
The closing level of the underlying (the initial underlying
level) is observed and the downside gearing, downside threshold and threshold percentage are set.
|
|
|
|
|
|
Annually,
beginning October 19, 2018 (including the final valuation date)
|
|
The notes will be automatically
called if the closing level of the underlying is greater than or equal to the initial underlying level on any valuation
date.
If the notes are automatically
called, we will pay the call price for the applicable valuation date, equal to the stated principal amount plus the applicable
call return.
After the notes are automatically
called, no further payments will be made on the notes.
|
|
|
|
|
|
Maturity
date
|
|
The final underlying level
is observed on the final valuation date.
If the notes are not called
and the final underlying level is less than the initial underlying level but greater than or equal to the downside threshold,
we will pay the stated principal amount of the notes at maturity.
If the notes are not called
and the final underlying level is less than the downside threshold on the final valuation date, we will pay you a cash
payment on the maturity date that is less than your stated principal amount and may be zero, resulting in a loss of approximately
1.2195% to 1.2500% (to be determined on the trade date) for each 1% decline in the underlying in excess of the threshold
percentage from the trade date to the final valuation date. Accordingly, the payment at maturity per Security would be
calculated as follows:
$10.00
+ [$10.00 × downside gearing × (underlying return + threshold percentage)]
|
Call
Returns/Call Prices for the Offering of the Notes
Valuation Date
|
Call
Return
(Per
$10 stated principal amount. Based on a call return rate of 11.00% per annum.)
|
Call Price
(Per $10 stated principal amount)
|
October 19, 2018
|
11.00% of the stated principal amount
|
$11.10
|
October 17, 2019
|
22.00% of the stated principal amount
|
$12.20
|
October 19, 2020
|
33.00% of the stated principal amount
|
$13.30
|
October 18, 2021
|
44.00% of the stated principal amount
|
$14.40
|
October 17, 2022 (the “
final valuation date
”)
|
55.00% of the stated principal amount
|
$15.50
|
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 (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. 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 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.
|
¨
|
You may lose some or all of your investment
— The notes differ from ordinary debt securities in that we will not
necessarily repay the full stated principal amount of your notes at maturity. Instead, your return on the notes is linked to the
performance of the underlying and, if the notes are not automatically called, will depend on whether, and the extent to which,
the final underlying level is less than the downside threshold. If the notes are not automatically called on any of the valuation
dates and the final underlying level is less than the downside threshold, you will be exposed on a leveraged basis to the decline
in the underlying from the trade date to the final valuation date. You should understand that any depreciation of the underlying
beyond the threshold amount will result in a loss of more than 1% of your initial investment for each 1% by which the depreciation
exceeds the threshold amount. There is no minimum payment at maturity on the notes, and you may lose up to all of your investment
in the notes.
|
|
¨
|
The appreciation potential of the notes is limited
— Your potential total return on the notes at maturity or upon
earlier automatic call is limited to the call return, which will only be received if the notes are called. Because the call return
increases the longer the notes have been outstanding and because the notes could be called as early as one year after the settlement
date, you may not receive the call return associated with a later valuation date. You will not participate in any potential appreciation
of the underlying even though you may be subject to its full downside performance. As a result, the return on an investment in
the notes may be significantly less than the return on a hypothetical direct investment in the underlying.
|
|
¨
|
The repayment of principal is contingent, and you will have leveraged downside exposure to the underlying, in excess of
the threshold percentage, if the final underlying level is less than the downside threshold
— If the notes are not automatically
called on any of the valuation dates and, on the final valuation date, the closing level of the underlying is less than the initial
underlying level but greater than or equal to the downside threshold, you will receive your stated principal amount at maturity.
However, if the final underlying level is below the downside threshold, the contingent repayment of principal will not apply, and
you will be exposed on a leveraged basis to the decline in the underlying from the trade date to the final valuation date. As a
result, you may lose your entire investment in the notes. Further, this contingent repayment of principal applies only if you hold
the notes to maturity.
If you are able to sell the notes prior
to maturity, you may have to sell them for a loss even if the level of the underlying is greater than the downside threshold at
that time. See “The value of the notes prior to maturity will fluctuate based on many unpredictable factors” below.
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The notes do not pay interest
— Unlike conventional debt securities, the notes do not pay interest or any other
amounts prior to maturity or earlier automatic call. You should not invest in the notes if you seek current income during the term
of the notes.
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¨
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Investing in the notes is not equivalent to investing in the underlying or the stocks that constitute the underlying —
You will not have voting rights, rights to receive any dividends or other distributions or any other rights with respect to the
stocks that constitute the underlying. As of October 13, 2017, the average dividend yield of the underlying was approximately 3.28%
per year. While it is impossible to know the future dividend yield of the underlying, if this average dividend yield were to remain
constant for the term of the notes, you would be forgoing an aggregate yield of approximately 16.40% (assuming no reinvestment
of dividends) by investing in the notes instead of investing directly in the stocks that constitute the underlying or in another
investment linked to the underlying 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. You should understand that the underlying
is not a total return index, which means that it does not reflect dividends paid on the stocks included in the underlying. Therefore,
the return on your notes will not reflect any reinvestment of dividends.
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The probability that the underlying will fall below the downside threshold on the final valuation date will depend in part
on the volatility of the underlying —
“Volatility” refers to the frequency and magnitude of changes in the
level of the underlying. In general, the greater the volatility of the underlying, the greater the probability that the underlying
will experience a large decline over the term of the notes and fall below the downside threshold on the final valuation date. The
underlying has historically experienced significant volatility. As a result, there is a significant risk that the underlying will
fall below the downside threshold on the final valuation date and that you will incur a loss on your investment in the notes. The
terms of the notes are set, in part, based on expectations about the volatility of the underlying as of the trade date. If expectations
about the volatility of the underlying change over the term of the notes, the value of the notes may be adversely affected, and
if the actual volatility of the underlying proves to be greater than initially expected, the notes may prove to be riskier than
expected on the trade date.
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¨
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The notes are subject to the credit risk of Citigroup Global Markets Holdings Inc. and Citigroup Inc. —
Any payment
on the notes will be made by Citigroup Global Markets Holdings Inc. and is guaranteed by Citigroup Inc., and therefore is subject
to the credit
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risk of both 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 any payments that become due under the notes. As a result, the value of the notes prior to maturity
will be affected by changes in the market’s view of our and Citigroup Inc.’s creditworthiness. Any decline, or anticipated
decline, in either of our or Citigroup Inc.’s credit ratings or increase, or anticipated increase, in the credit spreads
charged by the market for taking either of our or Citigroup Inc.’s credit risk is likely to adversely affect the value of
the notes.
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¨
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The performance of the notes will depend on the closing level of the underlying solely on the valuation dates
—
The performance of the notes (including whether the notes are automatically called and, if they are not called, the amount of your
payment at maturity) will depend on the closing level of the underlying only on the valuation dates. You will not receive the stated
principal amount of your notes at maturity if the closing level of the underlying on the final valuation date is less than the
downside threshold, even if the closing level of the underlying is greater than the downside threshold on other days during the
term of the notes. Moreover, your notes will be automatically called prior to maturity if the closing level of the underlying is
greater than or equal to the initial underlying level on any valuation date, even if the closing level of the underlying is less
than the initial underlying level on other days during the term of the notes. Because the performance of the notes depends on the
closing level of the underlying on a small number of dates, the performance of the notes will be particularly sensitive to volatility
in the closing level of the underlying, particularly around the valuation dates. You should understand that the level of the underlying
has historically been highly volatile. See “The EURO STOXX 50
®
Index” in this pricing supplement.
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¨
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The notes may be automatically called prior to maturity
— On any valuation date occurring annually during the
term of the notes, the notes will be automatically called if the closing level of the underlying on that valuation date is greater
than or equal to the initial underlying level. Thus, the term of the notes may be limited to as short as one year. The earlier
the notes are automatically called, the lower the amount of the call return you will receive. If the notes are automatically called
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.
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¨
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The notes will not be listed on a 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.
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The estimated value of the notes on the trade 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 underwriting discount 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.
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¨
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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, dividend
yields on the stocks that constitute the underlying 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.
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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.
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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.
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¨
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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.
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The value of the notes prior to maturity will fluctuate based on many unpredictable factors
— As described under
“Valuation of the Notes” below, the payout on the notes could be replicated by a hypothetical package of financial
instruments consisting of a fixed-income bond and one or more derivative instruments. As a result, the factors that influence the
values of fixed-income bonds and derivative instruments will also influence the terms of the notes at issuance and the value of
the notes prior to maturity. Accordingly, the value of your notes prior to maturity will fluctuate based on the level and volatility
of the underlying, dividend yields on the stocks that constitute the underlying, interest rates generally, the volatility of the
exchange rate between the U.S. dollar and the euro, the correlation between that exchange rate and the level of the underlying,
the time remaining to maturity and our and Citigroup Inc.’s creditworthiness, as reflected in our secondary market rate.
You should understand that the value of your notes at any time prior to maturity may be significantly less than the issue price.
The stated payout from the issuer, including the call return, only applies if you hold the notes to maturity or earlier automatic
call, as applicable.
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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 decline to zero over the temporary adjustment period. See “Valuation of the
Notes” in this pricing supplement.
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Our offering of the notes is not a recommendation of the underlying —
The
fact that we are offering the notes does not mean that we believe that investing in an instrument linked to the underlying 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 included in the underlying or in instruments related to the underlying or such stocks, and may publish
research or express opinions, that in each case are inconsistent with an investment linked to the underlying. These and other activities
of our affiliates may affect the level of the underlying in a way that has a negative impact on your interests as a holder of the
notes.
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The underlying is subject to risks associated with foreign equity securities —
Investments in securities linked
to the value of foreign equity securities involve risks associated with the securities markets in those countries, including risks
of volatility in those markets, governmental intervention in those markets and cross-shareholdings in companies in certain countries.
Also, there is generally less publicly available information about foreign companies than about U.S. companies that are subject
to the reporting requirements of the SEC, and foreign companies are 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 issued 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.
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The underlying performance will not be adjusted for changes in the exchange rate between the euro and the U.S. dollar —
The underlying is composed of stocks traded in euro, the value of which may be subject to a high degree of fluctuation relative
to the U.S. dollar. However, the performance of the underlying and the value of your notes will not be adjusted for exchange rate
fluctuations. If the euro appreciates relative to the U.S. dollar over the term of the notes, your return on the notes will underperform
an alternative investment that offers exposure to that appreciation in addition to the change in the level of the underlying.
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Our affiliates, or UBS or its affiliates, may publish research, express opinions or provide recommendations that are inconsistent
with investing in or holding the notes
— Any such research, opinions or recommendations could affect the level of the
underlying and the value of the notes. Our affiliates, and UBS and its affiliates, publish research from time to time on financial
markets and other matters that may influence the value of the notes, or express opinions or provide recommendations that may be
inconsistent with purchasing or holding the notes. Any research, opinions or recommendations expressed by our affiliates or by
UBS or its affiliates may not be consistent with each other and may be modified from time to time without notice. These and other
activities of our affiliates or UBS or its affiliates may adversely affect the level of the underlying and may have a negative
impact on your interests as a holder of the notes. Investors should make their own independent investigation of the merits of investing
in the notes and the underlying to which the notes are linked.
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Trading and other transactions by our affiliates, or by UBS or its affiliates, in the equity and equity derivative markets
may impair the value of the notes
— We expect to hedge our exposure under the notes through CGMI or other of our affiliates,
who will likely enter into equity and/or equity derivative transactions, such as over-the-counter options or exchange-traded instruments,
relating to the underlying or the stocks included in the underlying and may adjust such positions during the term of the notes.
It is possible that our affiliates could receive substantial returns from these hedging activities while the value of the notes
declines. Our affiliates and UBS and its affiliates may also engage in trading in instruments linked to the underlying on a regular
basis as part of their respective general broker-dealer and other businesses, for proprietary accounts, for other accounts under
management or to facilitate transactions for
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customers, including block transactions.
Such trading and hedging activities may affect the level of the underlying and reduce the return on your investment in the notes.
Our affiliates or UBS or its affiliates may also issue or underwrite other notes or financial or derivative instruments with returns
linked or related to the underlying. By introducing competing products into the marketplace in this manner, our affiliates or UBS
or its affiliates could adversely affect the value of the notes. Any of the foregoing activities described in this paragraph may
reflect trading strategies that differ from, or are in direct opposition to, investors’ trading and investment strategies
relating to the notes.
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Our affiliates, or UBS or its affiliates, may have economic interests that are adverse to yours as a result of their respective
business activities
— Our affiliates or UBS or its affiliates may currently or from time to time engage in business with
the issuers of the stocks included in the underlying, including extending loans to, making equity investments in or providing advisory
services to such issuers. In the course of this business, our affiliates or UBS or its affiliates may acquire non-public information
about those issuers, which they will not disclose to you. Moreover, if any of our affiliates or UBS or any of its affiliates is
or becomes a creditor of any such issuer, they may exercise any remedies against that 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 notes —
If certain events occur, such as market disruption events or the discontinuance of the underlying, CGMI, as calculation agent,
will be required to make discretionary judgments that could significantly affect what you receive at maturity. Such judgments could
include, among other things, any level required to be determined under the notes. In addition, if certain events occur, CGMI will
be required to make certain discretionary judgments that could significantly affect your payment at maturity. Such judgments could
include, among other things:
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determining whether a market disruption event has occurred;
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if a market disruption event occurs on any valuation date, determining whether to postpone any valuation date;
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determining the level of the underlying if the level of the underlying is not otherwise available or a market disruption event
has occurred; and
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selecting a successor underlying or performing an alternative calculation of the level of the underlying if the underlying
is discontinued or materially modified (see “Description of the Securities—Certain Additional Terms for Securities
Linked to an Underlying Index—Discontinuance or Material Modification of an Underlying Index” in the accompanying product
supplement).
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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.
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Adjustments to the underlying may affect the value of your notes —
STOXX Limited (the “underlying publisher”)
may add, delete or substitute the stocks that constitute the underlying or make other methodological changes that could affect
the level of the underlying. The underlying publisher may discontinue or suspend calculation or publication of the underlying at
any time without regard to your interests as holders of the notes.
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The U.S. federal tax consequences of an investment in the notes are unclear
— There is no direct legal authority
regarding the proper U.S. federal tax treatment of the notes, and we do not plan to request a ruling from the Internal Revenue
Service (the “IRS”). Consequently, significant aspects of the tax treatment of the notes are uncertain, and the IRS
or a court might not agree with the treatment of the notes as prepaid forward contracts. If the IRS were successful in asserting
an alternative treatment of the notes, the tax consequences of the ownership and disposition of the notes might be materially and
adversely affected. As described below under “United States Federal Tax Considerations,” in 2007, the U.S. Treasury
Department and the IRS released a notice requesting comments on various issues regarding the U.S. federal income tax treatment
of “prepaid forward contracts” and similar instruments. Any Treasury regulations or other guidance promulgated after
consideration of these issues could materially and adversely affect the tax consequences of an investment in the notes, including
the character and timing of income or loss and the degree, if any, to which income realized by non-U.S. persons should be subject
to withholding tax, possibly with retroactive effect.
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In addition, Section 871(m) of the
Internal Revenue Code of 1986, as amended (the “Code”), imposes a withholding tax of up to 30% on “dividend equivalents”
paid or deemed paid to non-U.S. investors in respect of certain financial instruments linked to U.S. equities. In light of IRS
regulations providing a general exemption for financial instruments issued in 2017 that do not have a “delta” of one,
as of the date of this preliminary pricing supplement the notes should not be subject to withholding under Section 871(m). However,
information about the application of Section 871(m) to the notes will be updated in the final pricing supplement. Moreover, the
IRS could challenge a conclusion that the notes should not be subject to withholding under Section 871(m). If withholding applies
to the notes, we will not be required to pay any additional amounts with respect to amounts withheld.
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 notes, as well as tax consequences arising
under the laws of any state, local or non-U.S. taxing jurisdiction.
Hypothetical terms only. Actual terms
may vary. See the cover page for actual offering terms.
The examples below illustrate the hypothetical payment upon automatic
call or at maturity for a $10.00 stated principal amount note with the following assumptions*:
Stated principal amount:
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$10.00
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Term:
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5 years (unless earlier called)
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Hypothetical initial underlying level:
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3,600.00
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Hypothetical downside gearing:
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1.2195
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Hypothetical downside threshold:
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2,952.00 (which is 82% of the hypothetical initial underlying level)
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Hypothetical threshold percentage:
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18%
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Call return rate:
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11.00% per annum
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Valuation dates:
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Valuation dates will occur annually as set forth on page PS-5 in this pricing supplement.
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*
The hypothetical initial underlying level, downside gearing,
downside threshold and threshold percentage may not represent the actual initial underlying level, downside gearing, downside threshold
and threshold percentage, respectively, applicable to the notes. The actual initial underlying level, downside gearing, downside
threshold and threshold percentage for the notes will be determined on the trade date.
Example 1 — Notes are Called on the First Valuation
Date
Closing level on first valuation date:
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3,800.00 (greater than or equal to initial underlying level, notes are called)
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Call price (per $10.00 stated principal amount):
|
$11.10
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Because the notes are called on the first valuation date, we
would pay you on the applicable call settlement date a total call price of $11.10 per $10.00 stated principal amount (a 11.00%
total return on the notes).
Example 2 — Notes are Called on the Final Valuation
Date; the Final Underlying Level is Greater Than the Initial Underlying Level
Closing level on first through fourth valuation dates:
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Various (all less than initial underlying level, notes NOT called)
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Closing level on final valuation date:
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3,750.00 (greater than the initial underlying level, notes called)
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Payment at maturity (per $10.00 stated principal amount):
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$10.00 + call return
$10.00 + $5.50
$15.50
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Because the final underlying level is greater than the initial
underlying level on the final valuation date, the notes are called and we would pay you at maturity a total of $15.50 (the $10.00
stated principal amount
plus
the call return of 55.00%).
Example 3 — Notes are NOT Called on the Final Valuation
Date; the Final Underlying Level is Greater Than the Downside Threshold but Less Than the Initial Underlying Level
Closing level on first through fourth valuation dates:
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Various (all less than initial underlying level, notes NOT called)
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Closing level on final valuation date:
|
3,100.00 (greater than the downside threshold but less than the initial underlying level, notes NOT called)
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Payment at maturity (per $10.00 stated principal amount):
|
$10.00
|
Because the final underlying level is greater than the downside
threshold but less than the initial underlying level on the final valuation date, the notes are not called and we would pay you
at maturity a total of $10.00 per $10.00 stated principal amount (0.00% total return).
Example 4 — Notes are NOT Called and the Final Underlying
Level is Less Than the Downside Threshold on the Final Valuation Date
Closing level on first through fourth valuation dates:
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Various (all less than initial underlying level, notes NOT called)
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Closing level on final valuation date:
|
1,080.00 (less than initial underlying level and downside threshold, notes NOT called)
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Payment at maturity (per $10.00 stated principal amount):
|
$10.00 + [$10.00 × downside gearing × (underlying
return + threshold percentage)]
$10.00 + [$10.00 × 1.2195 × (–70.00%
+ 18.00%)]
$10.00 - $6.34
$3.66
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Because the notes are not called and the final underlying level
is less than the downside threshold on the final valuation date, you will lose approximately 1.2195% of the stated principal amount
of the notes for every 1% that the underlying declines by more than the threshold percentage from the trade date to the final valuation
date. Therefore, we would pay you at maturity a total of $3.66 per $10.00 stated principal amount (a 63.40% loss on the notes).
The
EURO STOXX 50
®
Index
The EURO STOXX 50
®
Index is composed of 50 component
stocks of market sector leaders from within the 19 EURO STOXX
®
Supersector Indices, which represent the Eurozone
portion of the STOXX Europe 600
®
Supersector Indices. The STOXX Europe 600
®
Supersector Indices contain
the 600 largest stocks traded on the major exchanges of 18 European countries. It is calculated and maintained by STOXX Limited.
The underlying is reported by Bloomberg L.P. under the ticker symbol “SX5E.”
The “EURO STOXX 50
®
Index” is a trademark
of STOXX Limited and has been licensed for use by Citigroup Inc. and its affiliates. For more information, see “Equity Index
Descriptions—EURO STOXX 50
®
Index—License Agreement” in the accompanying underlying supplement.
Please refer to the sections “Risk Factors” and “Equity
Index Descriptions—EURO STOXX 50
®
Index” in the accompanying underlying supplement for important disclosures
regarding the underlying, including information concerning its composition and calculation and certain risks that are associated
with an investment linked to the underlying.
The graph below illustrates the performance of the underlying
from January 2, 2008 to October 13, 2017. The closing level of the underlying on October 13, 2017 was 3,604.55. We obtained the
closing levels of the underlying from Bloomberg, and we have not participated in the preparation of or verified such information.
The historical closing levels of the underlying should not be taken as an indication of future performance and no assurance can
be given as to the final underlying level or any future closing level of the underlying. We cannot give you assurance that the
performance of the underlying will result in a positive return on your initial investment and you could lose a significant portion
or all of the stated principal amount at maturity.
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.
In the opinion of our counsel, Davis Polk & Wardwell LLP,
which is based on current market conditions, a note should be treated as a prepaid forward contract for U.S. federal income tax
purposes. By purchasing a note, you agree (in the absence of an administrative determination or judicial ruling to the contrary)
to this treatment. There is uncertainty regarding this treatment, and the IRS or a court might not agree with it.
Assuming this treatment of the notes 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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You should not recognize taxable income over the term of the notes prior to maturity, other than pursuant to a sale or exchange.
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·
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Upon a sale or exchange of a note (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 note. Such gain or loss should be long-term capital gain or loss
if you held the note for more than one year.
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Subject to the discussions below under “Possible Withholding
Under Section 871(m) of the Code” and in “United States Federal Tax Considerations” in the accompanying product
supplement, if you are a Non-U.S. Holder (as defined in the accompanying product supplement) of the notes, you generally should
not be subject to U.S. federal withholding or income tax in respect of any amount paid to you with respect to the notes, provided
that (i) income in respect of the notes is not effectively connected with your conduct of a trade or business in the United States,
and (ii) you comply with the applicable certification requirements.
In 2007, the U.S. Treasury Department and the IRS released a
notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments.
The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment.
It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded
status of the instruments and the nature of the underlying property to which the instruments are linked; the degree, if any, to
which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether
these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate
to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While the notice requests comments
on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration
of these issues could materially and adversely affect the tax consequences of an investment in the notes, including the character
and timing of income or loss and the degree, if any, to which income realized by non-U.S. persons should be subject to withholding
tax, possibly with retroactive effect.
Possible Withholding Under Section 871(m) of the Code.
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 (a “Specified Security”). However,
the regulations exempt financial instruments issued in 2017 that do not have a “delta” of one. Based on the terms of
the notes and representations provided by us, our counsel is of the opinion that the notes 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 Specified Securities subject to withholding tax under Section 871(m).
A determination that the notes 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. For example, if you enter into other transactions relating to a U.S. Underlying Equity,
you could be subject to withholding tax or income tax liability under Section 871(m) even if the notes are not Specified Securities
subject to Section 871(m) as a general matter. You should consult your tax adviser regarding the potential application of Section
871(m) to the notes.
This information is indicative and will be updated in the final
pricing supplement or may otherwise be updated by us in writing from time to time. Non-U.S. Holders should be warned that Section
871(m) may apply to the notes based on circumstances as of the pricing date for the notes and, therefore, it is possible that the
notes will be subject to withholding tax under Section 871(m).
If withholding tax applies to the notes, 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 notes.
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 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 lead agent for the sale of the notes, will receive an underwriting discount of $0.10 for each note sold in this offering.
UBS, as agent for sales of the notes, expects to purchase from CGMI, and CGMI expects to sell to UBS, all of the notes sold in
this offering for $9.90 per note. UBS proposes to offer the notes to the public at a price of $10.00 per note. UBS will receive
an underwriting discount of $0.10 per note for each note it sells to the public. The underwriting discount will be received by
UBS and its financial advisors collectively. If all of the notes are not sold at the initial offering price, CGMI may change the
public offering price and other selling terms.
CGMI is an affiliate of ours. Accordingly, this offering will
conform with the requirements addressing conflicts of interest when distributing the notes 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.
Secondary market sales of securities typically settle two business
days after the date on which the parties agree to the sale. Because the settlement date for the notes is more than two business
days after the trade date, investors who wish to sell the notes at any time prior to the second business day preceding the settlement
date will be required to specify an alternative settlement date for the secondary market sale to prevent a failed settlement. Investors
should consult their own investment advisors in this regard.
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 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. It is expected that CGMI or such other affiliates may profit from such expected hedging activity even if the value
of the notes declines. This hedging activity could affect the closing level of the underlying 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 trade 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 trade
date.
During a temporary adjustment period immediately 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 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 over the temporary adjustment period.
CGMI currently expects that the temporary adjustment period will be approximately 3 months, but the actual length of the temporary
adjustment period may be shortened due to various factors, such as the volume of secondary market purchases of the notes and other
factors that cannot be predicted. 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 a notes exchange and you may not be able to sell them prior to maturity.”
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