|
The information in this
pricing supplement is not complete and may be changed. A registration statement relating to these securities has been filed with
the Securities and Exchange Commission. This pricing supplement and the accompanying product supplement, underlying supplement,
prospectus supplement and prospectus are not an offer to sell these securities, nor are they soliciting an offer to buy these
securities, in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION,
DATED SEPTEMBER 27, 2016
|
|
Citigroup Global Markets Holdings Inc.
|
September
-----
,
2016
Medium-Term Senior
Notes, Series N
Pricing Supplement
No. 2016-USNCH0183
Filed Pursuant
to Rule 424(b)(2)
|
|
Registration Statement Nos. 333-192302 and 333-192302-06
|
Contingent Buffered Digital Notes Based
on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
,
2017
Overview
|
|
▪
|
The securities offered by this pricing supplement are unsecured senior debt securities issued by Citigroup Global Markets Holdings
Inc. and guaranteed by Citigroup Inc. Unlike conventional debt securities, the securities do not pay interest and do not
repay a fixed amount of principal at maturity. Instead, the securities offer a payment at maturity that may be greater than
or less than the stated principal amount, depending on the performance of the shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF (the “underlying shares”) from the initial share price to the final
share price.
|
|
|
▪
|
The securities offer a fixed return at maturity so long as the underlying shares do not depreciate by more than 20.00% from
the initial share price to the final share price. In exchange for this feature, investors in the securities must be willing to
forgo (i) participation in any appreciation of the underlying shares beyond the fixed return, (ii) any dividends that may be paid
on the underlying shares and (iii) interest on the securities. In addition, investors in the securities must be willing to accept
full downside exposure to the underlying shares if the underlying shares depreciate by more than 20.00% from the initial share
price to the final share price.
If the underlying shares depreciate by more than 20.00% from the initial share price to the
final share price, you will lose 1% of the stated principal amount of your securities for every 1% by which the final share price
is less than the initial share price. There is no minimum payment at maturity.
|
|
|
▪
|
In order to obtain the modified exposure to the underlying shares that the securities provide, investors must be willing to
accept (i) an investment that may have limited or no liquidity and (ii) the risk of not receiving any amount due under the securities
if we and Citigroup Inc. default on our obligations.
All payments on the securities are subject to the credit risk of Citigroup
Global Markets Holdings Inc. and Citigroup Inc.
|
|
KEY TERMS
|
|
|
Issuer:
|
Citigroup Global Markets Holdings Inc., a wholly owned subsidiary of Citigroup Inc.
|
|
Guarantee:
|
All payments due on the securities are fully and unconditionally guaranteed by Citigroup Inc.
|
|
Underlying shares:
|
Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF (NYSE Arca symbol: “XOP”) (the “underlying share issuer” or “ETF”)
|
|
Aggregate stated principal amount:
|
$
|
|
Stated principal amount:
|
$1,000 per security
|
|
Pricing date:
|
September , 2016 (expected to be September 30, 2016)
|
|
Issue date:
|
October , 2016 (three business days after the pricing date)
|
|
Final valuation dates:
|
Expected to be October 9, 10, 11, 12 and 13, 2017, each subject to postponement if such date is not a scheduled trading day or if certain market disruption events occur
|
|
Maturity date:
|
October , 2017 (expected to be October 18, 2017), subject to postponement as described under “Additional Information” below
|
|
Payment at maturity:
|
For each $1,000 stated principal amount security you hold at
maturity, you will receive the following amount in U.S. dollars:
▪
If the final share price is
greater than or equal to
the barrier price: $1,000 + the fixed return amount
▪
If the final share price is
less than
the barrier price: $1,000 × share performance factor
If the final share price is less than the barrier
price, your payment at maturity will be less, and possibly significantly less, than $800 per security. You should not invest in
the securities unless you are willing and able to bear the risk of losing up to all of your investment.
|
|
Initial share price:
|
, the closing price of the underlying shares on the pricing date
|
|
Final share price:
|
The arithmetic average of the closing price of the underlying shares on each of the final valuation dates
|
|
Fixed return amount:
|
$155.50 per security (15.55% of the stated principal amount). You will receive the fixed return amount only if the final share price is greater than or equal to the barrier price.
|
|
Share performance factor:
|
The final share price
divided by
the initial share price
|
|
Barrier price:
|
, 80.00% of the initial share price
|
|
Listing:
|
The securities will not be listed on any securities exchange
|
|
CUSIP / ISIN:
|
17324CB96 / US17324CB967
|
|
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
(3)
|
Proceeds to issuer
(3)
|
|
Per security:
|
$1,000.00
|
$10.00
|
$990.00
|
|
Total:
|
$
|
$
|
$
|
(1) Citigroup Global Markets Holdings Inc. currently expects
that the estimated value of the securities on the pricing date will be at least $931.00 per security, which will be less than
the issue price. The estimated value of the securities is based on CGMI’s proprietary pricing models and our internal funding
rate. It is not an indication of actual profit to CGMI or other of our affiliates, nor is it an indication of the price, if any,
at which CGMI or any other person may be willing to buy the securities from you at any time after issuance. See “Valuation
of the Securities” in this pricing supplement.
(2) The issue price for investors purchasing the securities
in fiduciary accounts is $990.00 per security.
(3) CGMI will receive an underwriting fee of up to $10.00 for
each security sold in this offering. J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A. will act as placement agents for
the securities and, from the underwriting fee to CGMI, will receive a placement fee of $10.00 for each security they sell in this
offering to accounts other than fiduciary accounts. CGMI and the placement agents will forgo an underwriting fee and placement
fee for sales to fiduciary accounts. The total underwriting fees and proceeds to issuer in the table above give effect to the
actual total underwriting fee. For more information on the distribution of the securities, see “Supplemental Plan of Distribution”
in this pricing supplement. In addition to the underwriting fee, CGMI and its affiliates may profit from expected hedging
activity related to this offering, even if the value of the securities declines. See “Use of Proceeds and Hedging”
in the accompanying prospectus.
Investing in the securities
involves risks not associated with an investment in conventional debt securities. See “Summary Risk Factors” beginning
on page PS-5.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of the securities or determined that this pricing supplement and
the accompanying product supplement, underlying supplement, prospectus supplement and prospectus 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-02-04 dated March 8, 2016
Underlying Supplement No. 4 dated March 8, 2016
Prospectus and Prospectus Supplement each dated March 7, 2016
The securities are not bank deposits and
are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations
of, or guaranteed by, a bank.
|
Citigroup Global Markets Holdings Inc.
|
|
Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
, 2017
|
|
|
Additional
Information
General.
The terms of the securities are set forth in
the accompanying product supplement, prospectus supplement and prospectus, as supplemented by this pricing supplement. The accompanying
product supplement, prospectus supplement and prospectus contain important disclosures that are not repeated in this pricing supplement.
For example, certain events may occur that could affect your payment at maturity, such as market disruption events and other events
affecting the underlying shares. 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 ETF Shares or Company Shares—Consequences
of a Market Disruption Event; Postponement of a Valuation Date”, “—Dilution and Reorganization Adjustments”
and “—Delisting, Liquidation or Termination of an Underlying ETF,” and not in this pricing supplement (except
as set forth in the next two paragraphs). The accompanying underlying supplement contains important disclosures relevant to the
S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
, which is the index that
the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF seeks to track, that are not repeated
in this pricing supplement. It is important that you read the accompanying product supplement, underlying supplement, prospectus
supplement and prospectus together with this pricing supplement before deciding whether to invest in the securities. Certain terms
used but not defined in this pricing supplement are defined in the accompanying product supplement.
Dilution and Reorganization Adjustments.
The initial share
price and the barrier price are each a “Relevant Price” for purposes of the section “Description of the Securities—Certain
Additional Terms for Securities Linked to ETF Shares or Company Shares—Dilution and Reorganization Adjustments” in
the accompanying product supplement. Accordingly, the initial share price and the barrier price are each subject to adjustment
upon the occurrence of any of the events described in that section.
Postponement of a Final Valuation Date; Postponement of the
Maturity Date.
If any scheduled final valuation date is not a scheduled trading day, that final valuation date will be postponed
to the next succeeding scheduled trading day. In addition, if a market disruption event occurs on any scheduled final valuation
date, the calculation agent may, but is not required to, postpone that final valuation date to the next succeeding scheduled trading
day on which a market disruption event does not occur. If any final valuation date is postponed so that it coincides with a subsequent
scheduled final valuation date, each such subsequent final valuation date will be postponed to the next succeeding scheduled trading
day (subject to further postponement as provided above if a market disruption event occurs on such succeeding scheduled trading
day). However, in no event will any scheduled final valuation date be postponed more than five scheduled trading days after that
originally scheduled final valuation date as a result of a market disruption event occurring on that scheduled final valuation
date or on an earlier scheduled final valuation date (in each case, as any such scheduled final valuation date may be postponed).
If the last final valuation date is postponed so that it falls less than three business days prior to the scheduled maturity date,
the maturity date will be postponed to the third business day after the last final valuation date as postponed. The provisions
in this paragraph supersede the related provisions in the accompanying product supplement to the extent the provisions in this
paragraph are inconsistent with those provisions. The terms “scheduled trading day” and “market disruption event”
are defined in the accompanying product supplement.
|
Citigroup Global Markets Holdings Inc.
|
|
Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
, 2017
|
|
|
Hypothetical
Examples
The diagram below illustrates your payment at maturity for a
range of hypothetical percentage changes from the initial share price to the final share price.
Investors in the securities will not receive any dividends
on the underlying shares or the stocks included in or held by the ETF. The diagram and examples below do not show any effect of
lost dividend yield over the term of the securities.
See “Summary Risk Factors—You will not have voting rights,
rights to receive any dividends or other distributions or any other rights with respect to the ETF” below.
Contingent Buffered Digital Notes
Payment at Maturity Diagram
|
|
|
n
The Securities
|
n
The Underlying Shares
|
The table and examples below illustrate various hypothetical
payments at maturity assuming a hypothetical initial share price of $36.00, a hypothetical barrier price of $28.80 and various
hypothetical final share prices. Your actual payment at maturity per security will depend on the actual initial share price, barrier
price and final share price and may differ substantially from the examples shown. It is impossible to predict whether you will
realize a gain or loss on your investment in the securities. Figures in the table and examples below have been rounded for ease
of analysis. The table and examples below are intended to illustrate how your payment at maturity will depend on whether the final
share price is greater than or less than the initial share price and by how much.
|
Citigroup Global Markets Holdings Inc.
|
|
Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
, 2017
|
|
|
|
Hypothetical Final Share Price
|
Hypothetical Underlying Share Return
(1)
|
Hypothetical Payment at Maturity per Security
|
Hypothetical Total Return on Securities at Maturity
(2)
|
|
$72.00
|
100.00%
|
$1,155.50
|
15.55%
|
|
$68.40
|
90.00%
|
$1,155.50
|
15.55%
|
|
$64.80
|
80.00%
|
$1,155.50
|
15.55%
|
|
$61.20
|
70.00%
|
$1,155.50
|
15.55%
|
|
$57.60
|
60.00%
|
$1,155.50
|
15.55%
|
|
$54.00
|
50.00%
|
$1,155.50
|
15.55%
|
|
$50.40
|
40.00%
|
$1,155.50
|
15.55%
|
|
$46.80
|
30.00%
|
$1,155.50
|
15.55%
|
|
$43.20
|
20.00%
|
$1,155.50
|
15.55%
|
|
$41.60
|
15.55%
|
$1,155.50
|
15.55%
|
|
$39.60
|
10.00%
|
$1,155.50
|
15.55%
|
|
$36.00
|
0.00%
|
$1,155.50
|
15.55%
|
|
$32.40
|
-10.00%
|
$1,155.50
|
15.55%
|
|
$30.60
|
-15.00%
|
$1,155.50
|
15.55%
|
|
$28.80
|
-20.00%
|
$1,155.50
|
15.55%
|
|
$28.79
|
-20.01%
|
$799.90
|
-20.01%
|
|
$25.20
|
-30.00%
|
$700.00
|
-30.00%
|
|
$21.60
|
-40.00%
|
$600.00
|
-40.00%
|
|
$18.00
|
-50.00%
|
$500.00
|
-50.00%
|
|
$14.40
|
-60.00%
|
$400.00
|
-60.00%
|
|
$10.80
|
-70.00%
|
$300.00
|
-70.00%
|
|
$7.20
|
-80.00%
|
$200.00
|
-80.00%
|
|
$3.60
|
-90.00%
|
$100.00
|
-90.00%
|
|
$0.00
|
-100.00%
|
$0.00
|
-100.00%
|
(1)
Hypothetical underlying share return = hypothetical
final share price
minus
hypothetical initial share price,
divided by
hypothetical initial share price
(2)
Hypothetical total return on securities at maturity
= hypothetical payment at maturity per security
minus
$1,000 stated principal amount per security,
divided by
$1,000
stated principal amount per security
Example 1—Upside Scenario A.
The hypothetical final
share price is $37.80 (an approximately 5.00% increase from the hypothetical initial share price), which is
greater than
the hypothetical barrier price.
Payment at maturity per security = $1,000 + the fixed return
amount
= $1,000 + $155.50
= $1,155.50
Because the underlying shares appreciated from the hypothetical
initial share price to the hypothetical final share price, your payment at maturity in this scenario would be equal to the $1,000
stated principal amount per security plus the fixed return amount, or $1,155.50 per security.
Example 2—Upside Scenario B.
The hypothetical final
share price is $54.00 (an approximately 50.00% increase from the hypothetical initial share price), which is
greater than
the hypothetical barrier price.
Payment at maturity per security = $1,000 + the fixed return
amount
= $1,000 + $155.50
= $1,155.50
Because the underlying shares appreciated from the hypothetical
initial share price to the hypothetical final share price, your payment at maturity in this scenario would be equal to the $1,000
stated principal amount per security plus the fixed return amount, or $1,155.50 per security. In this scenario, the fixed return
percentage is less than the appreciation of the underlying shares, and as a result an investment in the securities would underperform
a direct investment in the underlying shares.
Example 3—Upside Scenario C.
The hypothetical final
share price is $34.20 (an approximately 5.00% decrease from the hypothetical initial share price), which is
greater than
the hypothetical barrier price.
Payment at maturity per security = $1,000 + the fixed return
amount
= $1,000 + $155.50
|
Citigroup Global Markets Holdings Inc.
|
|
Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
, 2017
|
|
|
= $1,155.50
Because the underlying shares depreciated from the hypothetical
initial share price to the hypothetical final share price by less than 20.00%, your payment at maturity in this scenario would
be equal to the $1,000 stated principal amount per security plus the fixed return amount, or $1,155.50 per security.
Example 4—Downside Scenario.
The hypothetical final
share price is $10.80 (an approximately 70.00% decrease from the hypothetical initial share price), which is
less than
the
hypothetical barrier price.
Payment at maturity per security = $1,000 × the share performance
factor
= $1,000 × 30.00%
= $300.00
Because the underlying shares depreciated from the hypothetical
initial share price to the hypothetical final share price by more than 20.00%, your payment at maturity in this scenario would
reflect 1-to-1 exposure to the negative performance of the underlying shares.
Summary Risk
Factors
An investment in the securities is significantly riskier than
an investment in conventional debt securities. The securities are subject to all of the risks associated with an investment in
our conventional debt securities (guaranteed by Citigroup Inc.), including the risk that we and Citigroup Inc. may default on our
obligations under the securities, and are also subject to risks associated with the underlying shares. Accordingly, the securities
are suitable only for investors who are capable of understanding the complexities and risks of the securities. You should consult
your own financial, tax and legal advisers as to the risks of an investment in the securities and the suitability of the securities
in light of your particular circumstances.
The following is a summary of certain key risk factors for investors
in the securities. You should read this summary together with the more detailed description of risks relating to an investment
in the securities contained in the section “Risk Factors Relating to the Securities” beginning on page EA-6 in the
accompanying product supplement. You should also carefully read the risk factors included in the accompanying prospectus supplement
and in the documents incorporated by reference in the accompanying prospectus, including Citigroup Inc.’s most recent Annual
Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, which describe risks relating to the business of Citigroup
Inc. more generally.
|
|
▪
|
You may lose some or all of your investment.
Unlike conventional debt securities, the securities do not repay a fixed
amount of principal at maturity. Instead, your payment at maturity will depend on the performance of the underlying shares. If
the final share price is less than the barrier price, you will lose 1% of the stated principal amount of the securities for every
1% by which the final share price is less than the initial share price. There is no minimum payment at maturity on the securities,
and you may lose up to all of your investment.
|
|
|
▪
|
The barrier feature of the securities exposes you to particular risks.
If the final share price is less than the barrier
price, the fixed return at maturity will not apply and you will lose 1% of the stated principal amount of the securities for every
1% by which the final share price is less than the initial share price. Unlike securities with a non-contingent buffer feature,
the securities offer no protection at all if the underlying shares depreciate by more than 20.00% from the initial share price
to the final share price. As a result, you may lose your entire investment in the securities.
|
|
|
▪
|
Your potential return on the securities is limited.
Your potential total return on the securities at maturity is limited
to the fixed return at maturity of 15.55%. If the underlying shares appreciate by more than the fixed return at maturity, the securities
will underperform a direct investment in the underlying shares. Your return on the securities could underperform a direct investment
in the underlying shares even if the underlying shares appreciate by less than the fixed return at maturity because, unlike a direct
investment in the underlying shares, investors in the securities will not receive any dividends paid on the underlying shares over
the term of the securities.
|
|
|
▪
|
The securities do not pay interest.
Unlike conventional debt securities, the securities do not pay interest or any other
amounts prior to maturity. You should not invest in the securities if you seek current income during the term of the securities.
|
|
|
▪
|
You will not have voting rights, rights to receive any dividends or other distributions or any other rights with respect
to the ETF.
As of September 26, 2016, the trailing 12-month dividend yield of the underlying shares was approximately 1.06%.
While it is impossible to know the future dividend yield of the underlying shares, if this trailing 12-month dividend yield were
to remain constant for the term of the securities, you would be forgoing an aggregate yield of approximately 1.10% (assuming no
reinvestment of dividends) by investing in the securities instead of investing directly in the underlying shares or in another
investment linked to the underlying shares that provides for a pass-through of dividends. The payment scenarios described in this
pricing supplement do not show any effect of lost dividend yield over the term of the securities.
|
|
Citigroup Global Markets Holdings Inc.
|
|
Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
, 2017
|
|
|
|
|
▪
|
The payment at maturity on the securities is based on the arithmetic average of the closing price of the underlying shares
on the five final valuation dates.
As a result, you are subject to the risk that the closing price of the underlying shares
on those five final valuation dates will result in a less favorable return than you would have received had the final share price
been based on the closing price on other days during the term of the securities. If you had invested in another instrument linked
to the underlying shares that you could sell for full value at a time selected by you, you might have achieved better returns.
In addition, because the final share price is based on the average over the five final valuation dates, your return on the securities
may be less favorable than it would have been if it were based on the closing price of the underlying shares on only one of those
five final valuation dates.
|
|
|
▪
|
The securities are subject to the credit risk of Citigroup Global Markets Holdings Inc. and Citigroup Inc.
If we default
on our obligations under the securities and Citigroup Inc. defaults on its guarantee obligations, you may not receive anything
owed to you under the securities.
|
|
|
▪
|
The securities will not be listed on any securities exchange and you may not be able to sell them prior to maturity.
The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities.
CGMI currently intends to make a secondary market in relation to the securities and to provide an indicative bid price for the
securities on a daily basis. Any indicative bid price for the securities provided by CGMI will be determined in CGMI’s sole
discretion, taking into account prevailing market conditions and other relevant factors, and will not be a representation by CGMI
that the securities can be sold at that price, or at all. CGMI may suspend or terminate making a market and providing indicative
bid prices without notice, at any time and for any reason. If CGMI suspends or terminates making a market, there may be no secondary
market at all for the securities because it is likely that CGMI will be the only broker-dealer that is willing to buy your securities
prior to maturity. Accordingly, an investor must be prepared to hold the securities until maturity.
|
|
|
▪
|
The estimated value of the securities on the pricing date, based on CGMI’s proprietary pricing models and our internal
funding rate, will be less than the issue price.
The difference is attributable to certain costs associated with selling, structuring
and hedging the securities that are included in the issue price. These costs include (i) the placement fees paid in connection
with the offering of the securities, (ii) hedging and other costs incurred by us and our affiliates in connection with the offering
of the securities and (iii) the expected profit (which may be more or less than actual profit) to CGMI or other of our affiliates
in connection with hedging our obligations under the securities. These costs adversely affect the economic terms of the securities
because, if they were lower, the economic terms of the securities would be more favorable to you. The economic terms of the securities
are also likely to be adversely affected by the use of our internal funding rate, rather than our secondary market rate, to price
the securities. See “The estimated value of the securities would be lower if it were calculated based on our secondary market
rate” below.
|
|
|
▪
|
The estimated value of the securities was determined for us by our affiliate using proprietary pricing models.
CGMI
derived the estimated value disclosed on the cover page of this pricing supplement from its proprietary pricing models. In doing
so, it may have made discretionary judgments about the inputs to its models, such as the volatility of the underlying shares, dividend
yields on the underlying shares and the stocks held by the ETF and interest rates. CGMI’s views on these inputs may differ
from your or others’ views, and as an underwriter in this offering, CGMI’s interests may conflict with yours. Both
the models and the inputs to the models may prove to be wrong and therefore not an accurate reflection of the value of the securities.
Moreover, the estimated value of the securities set forth on the cover page of this pricing supplement may differ from the value
that we or our affiliates may determine for the securities for other purposes, including for accounting purposes. You should not
invest in the securities because of the estimated value of the securities. Instead, you should be willing to hold the securities
to maturity irrespective of the initial estimated value.
|
|
|
▪
|
The estimated value of the securities would be lower if it were calculated based on our secondary market rate.
The estimated
value of the securities included in this pricing supplement is calculated based on our internal funding rate, which is the rate
at which we are willing to borrow funds through the issuance of the securities. Our internal funding rate is generally lower than
our secondary market rate, which is the rate that CGMI will use in determining the value of the securities for purposes of any
purchases of the securities from you in the secondary market. If the estimated value included in this pricing supplement were based
on our secondary market rate, rather than our internal funding rate, it would likely be lower. We determine our internal funding
rate based on factors such as the costs associated with the securities, which are generally higher than the costs associated with
conventional debt securities, and our liquidity needs and preferences. Our internal funding rate is not an interest rate that we
will pay to investors in the securities, 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 securities, but subject to adjustments that CGMI makes in its sole discretion. As a result, our secondary market rate
is not a market-determined measure of our creditworthiness, but rather reflects the market’s perception of our parent company’s
creditworthiness as adjusted for discretionary factors such as CGMI’s preferences with respect to purchasing the securities
prior to maturity.
|
|
▪
|
The estimated value of the securities is not an indication of the price, if any, at which CGMI or any other person may be
willing to buy the securities from you in the secondary market.
Any such secondary market price will fluctuate over the term
of
|
|
Citigroup Global Markets Holdings Inc.
|
|
Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
, 2017
|
|
|
the securities based on the market
and other factors described in the next risk factor. Moreover, unlike the estimated value included in this pricing supplement,
any value of the securities determined for purposes of a secondary market transaction will be based on our secondary market rate,
which will likely result in a lower value for the securities than if our internal funding rate were used. In addition, any secondary
market price for the securities will be reduced by a bid-ask spread, which may vary depending on the aggregate stated principal
amount of the securities to be purchased in the secondary market transaction, and the expected cost of unwinding related hedging
transactions. As a result, it is likely that any secondary market price for the securities will be less than the issue price.
|
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▪
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The value of the securities prior to maturity will fluctuate based on many unpredictable factors.
The value of your
securities prior to maturity will fluctuate based on the price and volatility of the underlying shares and a number of other factors,
including the price and volatility of the stocks held by the ETF, the dividend yields on the underlying shares and the stocks held
by the ETF, interest rates generally, the time remaining to maturity and our and Citigroup Inc.’s creditworthiness, as reflected
in our secondary market rate. Changes in the price of the underlying shares may not result in a comparable change in the value
of your securities. You should understand that the value of your securities at any time prior to maturity may be significantly
less than the issue price.
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▪
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Immediately following issuance, any secondary market bid price provided by CGMI, and the value that will be indicated on
any brokerage account statements prepared by CGMI or its affiliates, will reflect a temporary upward adjustment.
The amount
of this temporary upward adjustment will steadily decline to zero over the temporary adjustment period. See “Valuation of
the Securities” in this pricing supplement.
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▪
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Investing in the securities exposes investors to risks associated with investments in securities with a concentration in
the oil and gas exploration and production industry
. The stocks included in the index underlying the ETF and that are generally
tracked by the ETF are stocks of companies whose primary business is associated with the exploration and production of oil and
gas. As a result, the value of the securities may be subject to greater volatility and may be more adversely affected by a single
economic, political or regulatory occurrence affecting this industry than a different investment linked to securities of a more
broadly diversified group of issuers or issuers in a less volatile industry. The oil and gas industry is significantly affected
by a number of factors that influence worldwide economic conditions and oil prices, such as natural disasters, supply disruptions,
geopolitical events and other factors that may offset or magnify each other, including:
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employment levels and job
growth;
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▪
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worldwide and domestic supplies
of, and demand for, oil and gas;
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▪
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the cost of exploring for,
developing, producing, refining and marketing oil and gas;
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▪
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changes in weather patterns
and climatic changes;
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▪
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the ability of the members
of Organization of Petroleum Exporting Countries and other oil and gas producing nations
to agree to and maintain production levels;
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▪
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the price and availability
of alternative and competing fuels;
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▪
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domestic and foreign governmental
regulations and taxes;
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▪
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the worldwide military and
political environment, uncertainty or instability resulting from an escalation or additional
outbreak of armed hostilities or further acts of terrorism in the United States, or elsewhere;
and
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▪
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general economic conditions
worldwide.
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These
or other factors or the absence of such factors could cause a downturn in the oil and natural gas industries generally or regionally
and could cause the value of the underlying shares to decline during the term of the securities.
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▪
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Our offering of the securities does not constitute a recommendation of the underlying shares by CGMI or its affiliates or
by the placement agents or their affiliates.
The fact that we are offering the securities does not mean that we believe, or
that the placement agents or their affiliates believe, that investing in an instrument linked to the underlying shares is likely
to achieve favorable returns. In fact, as we and the placement agents are part of global financial institutions, our affiliates
and the placement agents and their affiliates may have positions (including short positions) in the underlying shares or the stocks
held by the ETF or in instruments related to the underlying shares or such stocks and may publish research or express opinions,
that in each case are inconsistent with an investment linked to the underlying shares. These and other activities of our affiliates
or the placement agents or their affiliates may affect the price of the underlying shares in a way that has a negative impact on
your interests as a holder of the securities.
|
|
Citigroup Global Markets Holdings Inc.
|
|
Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
, 2017
|
|
|
|
|
▪
|
The price and performance of the underlying shares may not completely track the performance of the ETF’s underlying
index or the net asset value per share of the ETF.
The ETF does not fully replicate the underlying index that it seeks to track
and may hold securities different from those included in its underlying index. In addition, the performance of the underlying shares
will reflect additional transaction costs and fees that are not included in the calculation of the ETF’s underlying index.
All of these factors may lead to a lack of correlation between the performance of the underlying shares and the ETF’s underlying
index. In addition, corporate actions with respect to the equity securities constituting the ETF’s underlying index or held
by the ETF (such as mergers and spin-offs) may impact the variance between the performances of the underlying shares and the ETF’s
underlying index. Finally, because the underlying shares are traded on NYSE Arca, Inc. and are subject to market supply and investor
demand, the market value of the underlying shares may differ from the net asset value per share of the ETF.
|
During periods of market volatility,
securities underlying the ETF may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of the ETF and the liquidity of the underlying shares may be adversely affected. This kind of market
volatility may also disrupt the ability of market participants to create and redeem shares of the ETF. Further, market volatility
may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell the underlying
shares. As a result, under these circumstances, the market value of the underlying shares may vary substantially from the net asset
value per share of the ETF. For all of the foregoing reasons, the performance of the underlying shares may not correlate with the
performance of the ETF’s underlying index and/or the net asset value per share of the ETF, which could materially and adversely
affect the value of the securities in the secondary market and/or reduce your payment at maturity.
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▪
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The price of the underlying shares may be adversely affected by our or our affiliates’ hedging and other trading activities.
We expect to hedge our obligations under the securities through CGMI or other of our affiliates, who may take positions directly
in the underlying shares or the stocks held by the ETF and other financial instruments related to the underlying shares or such
stocks and may adjust such positions over the term of the securities. Our affiliates and the placement agents and their affiliates
also trade the underlying shares or the stocks held by the ETF and other financial instruments related to the underlying shares
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 price of the underlying shares
in a way that negatively affects the value of the securities. They could also result in substantial returns for us or our affiliates
or the placement agents or their affiliates while the value of the securities declines.
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▪
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We and our affiliates or the placement agents or their affiliates may have economic interests that are adverse to yours
as a result of our affiliates’ or their business activities.
Our affiliates or the placement agents or their affiliates
may currently or from time to time engage in business with the underlying share issuer or the issuers of the stocks held by the
ETF, including extending loans to, making equity investments in or providing advisory services to such issuers. In the course of
this business, we or our affiliates or the placement agents or their affiliates may acquire non-public information about such issuers,
which we and they will not disclose to you. Moreover, if any of our affiliates or the placement agents or their affiliates is or
becomes a creditor of any such issuer, they may exercise any remedies against any such issuer that are available to them without
regard to your interests.
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▪
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Even if the underlying share issuer pays a dividend that it identifies as special or extraordinary, no adjustment will be
required under the securities for that dividend unless it meets the criteria specified in the accompanying product supplement.
In general, an adjustment will not be made under the terms of the securities for any cash dividend paid on the underlying shares
unless the amount of the dividend per underlying share, together with any other dividends paid in the same fiscal quarter, exceeds
the dividend paid per underlying share in the most recent fiscal quarter by an amount equal to at least 10% of the closing price
of the underlying shares on the date of declaration of the dividend. Any dividend will reduce the closing price of the underlying
shares by the amount of the dividend per underlying share. If the underlying share issuer pays any dividend for which an adjustment
is not made under the terms of the securities, holders of the securities will be adversely affected. See “Description of
the Securities—Certain Additional Terms for Securities Linked to ETF Shares or Company Shares—Dilution and Reorganization
Adjustments—Certain Extraordinary Cash Dividends” in the accompanying product supplement.
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▪
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The securities will not be adjusted for all events that could affect the price of the underlying shares.
For example,
we will not make any adjustment for ordinary dividends or extraordinary dividends that do not meet the criteria described above.
Moreover, the adjustments we do make may not fully offset the dilutive or adverse effect of the particular event. Investors in
the securities may be adversely affected by such an event in a circumstance in which a direct holder of the underlying shares would
not.
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▪
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The securities may become linked to shares of an issuer other than the original underlying share issuer upon the occurrence
of a reorganization event or upon the delisting of the underlying shares.
For example, if the underlying share issuer enters
into a merger agreement that provides for holders of the underlying shares to receive shares of another entity, the shares of such
other entity will become the underlying shares for all purposes of the securities upon consummation of the merger. Additionally,
if the underlying shares are delisted or the ETF is otherwise terminated, the calculation agent may, in its sole discretion, select
shares of another ETF to be the underlying shares. See “Description of the Securities—Certain Additional Terms
|
|
Citigroup Global Markets Holdings Inc.
|
|
Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
, 2017
|
|
|
for Securities Linked to ETF Shares
or Company Shares—Dilution and Reorganization Adjustments” and “—Delisting, Liquidation or Termination
of an Underlying ETF” in the accompanying product supplement.
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▪
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The calculation agent, which is an affiliate of ours, will make important determinations with respect to the securities.
If certain events occur, such as market disruption events, events with respect to the underlying share issuer that may require
a dilution adjustment or the delisting of the underlying shares, CGMI, as calculation agent, will be required to make discretionary
judgments that could significantly affect your payment at maturity. In making these judgments, the calculation agent’s interests
as an affiliate of ours could be adverse to your interests as a holder of the securities.
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▪
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Changes made by the investment adviser to the underlying share issuer or by the sponsor of the index underlying the ETF
may adversely affect the underlying shares.
We are not affiliated with the investment adviser to the underlying share issuer
or with the sponsor of the index underlying the ETF. Accordingly, we have no control over any changes such investment adviser or
sponsor may make to the underlying share issuer or the index underlying the ETF. Such changes could be made at any time and could
adversely affect the performance of the underlying shares.
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▪
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The U.S. federal tax consequences of an investment in the securities are unclear.
There is no direct legal authority
regarding the proper U.S. federal tax treatment of the securities, and we do not plan to request a ruling from the Internal Revenue
Service (the “IRS”). Consequently, significant aspects of the tax treatment of the securities are uncertain, and the
IRS or a court might not agree with the treatment of the securities as prepaid forward contracts. If the IRS were successful in
asserting an alternative treatment of the securities, the tax consequences of the ownership and disposition of the securities might
be materially and adversely affected. Even if the treatment of the securities as prepaid forward contracts is respected, a security
may be treated as a “constructive ownership transaction,” with potentially adverse consequences described below under
“United States Federal Tax Considerations.” In addition, in 2007 the U.S. Treasury Department and the IRS released
a notice requesting comments on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. Any Treasury regulations or other guidance promulgated after consideration of these issues could materially
and adversely affect the tax consequences of an investment in the securities, including the character and timing of income or loss
and the degree, if any, to which income realized by non-U.S. persons should be subject to withholding tax, possibly with retroactive
effect. You should read carefully the discussion under “United States Federal Tax Considerations” and “Risk Factors
Relating to the Securities” in the accompanying product supplement and “United States Federal Tax Considerations”
in this pricing supplement. You should also consult your tax adviser regarding the U.S. federal tax consequences of an investment
in the securities, as well as tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
|
Information
About the Underlying Shares
The SPDR
®
S&P
®
Oil & Gas
Exploration and Production ETF is an exchange-traded fund that seeks to provide investment results that, before fees and expenses,
correspond generally to the performance of publicly traded equity securities of companies included in the S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
(the “ETF Underlying Index”). The
ETF is managed by SsgA Fund Management Inc. (“SSgA FM”), an investment advisor to the ETF, and the SPDR
®
Series Trust, a registered investment company. The Select Sector SPDR
®
Trust consists of numerous separate investment
portfolios, including the ETF. Information provided to or filed with the SEC by The SPDR
®
Series Trust pursuant
to the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, can be located by reference to SEC
file numbers 333-57793 and 811-08839, respectively, through the SEC’s website at http://www.sec.gov. In addition, information
may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated
documents. The SPDR
®
S&P
®
Oil & Gas Exploration and Production ETF trades on the NYSE Arca
under the ticker symbol “XOP.”
This pricing supplement relates only to the securities offered
hereby and does not relate to the underlying shares or other securities of the ETF. We have derived all disclosures contained in
this pricing supplement regarding the underlying shares and the ETF from the publicly available documents described above. In connection
with the offering of the securities, none of Citigroup Global Markets Holdings Inc., Citigroup Inc. or CGMI has participated in
the preparation of such documents or made any due diligence inquiry with respect to the ETF or the underlying shares.
The securities represent obligations of Citigroup Global Markets
Holdings Inc. (guaranteed by Citigroup Inc.) only. The ETF is not involved in any way in this offering and has no obligation relating
to the securities or to holders of the securities.
Neither we nor any of our affiliates make any representation
to you as to the performance of the underlying shares.
Historical Information
The graph below shows the closing prices of the underlying shares
for each day such price was available from January 3, 2011 to September 26, 2016. The table that follows shows the high and low
closing prices of, and dividends paid on, the underlying shares for each quarter in that same period. We obtained the closing prices
and other information below from Bloomberg L.P., without independent verification. You should not take the historical prices of
the underlying shares as an indication of future performance.
|
Citigroup Global Markets Holdings Inc.
|
|
Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
, 2017
|
|
|
SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF – Historical Closing Prices
January 3, 2011 to September 26, 2016
|
|
|
SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
(CUSIP of
the Underlying Shares: 78464A730)
|
High
|
Low
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Dividends
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|
2011
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First Quarter
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$64.50
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$52.75
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$0.32396
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Second Quarter
|
$64.97
|
$54.71
|
$0.03703
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Third Quarter
|
$65.24
|
$42.80
|
$0.07258
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Fourth Quarter
|
$57.56
|
$39.99
|
$0.15478
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|
2012
|
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|
First Quarter
|
$61.34
|
$52.67
|
$0.11384
|
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Second Quarter
|
$57.85
|
$45.20
|
$0.10682
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|
Third Quarter
|
$59.35
|
$48.73
|
$0.00000
|
|
Fourth Quarter
|
$57.38
|
$50.69
|
$0.11251
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|
2013
|
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|
First Quarter
|
$62.10
|
$55.10
|
$0.49350
|
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Second Quarter
|
$62.61
|
$54.71
|
$0.00000
|
|
Third Quarter
|
$66.47
|
$58.62
|
$0.31718
|
|
Fourth Quarter
|
$72.74
|
$65.02
|
$0.08437
|
|
2014
|
|
|
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|
First Quarter
|
$71.83
|
$64.04
|
$0.13573
|
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Second Quarter
|
$83.45
|
$71.19
|
$0.16189
|
|
Third Quarter
|
$82.08
|
$68.83
|
$0.16658
|
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Fourth Quarter
|
$66.84
|
$42.75
|
$0.20820
|
|
2015
|
|
|
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|
First Quarter
|
$53.94
|
$42.55
|
$0.15611
|
|
Second Quarter
|
$55.63
|
$46.43
|
$0.18548
|
|
Third Quarter
|
$45.22
|
$31.71
|
$0.18289
|
|
Fourth Quarter
|
$40.53
|
$28.64
|
$0.14316
|
|
Citigroup Global Markets Holdings Inc.
|
|
Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
, 2017
|
|
|
|
2016
|
|
|
|
|
First Quarter
|
$30.96
|
$23.60
|
$0.08588
|
|
Second Quarter
|
$37.50
|
$29.23
|
$0.07307
|
|
Third Quarter (through September 26, 2016)
|
$39.12
|
$32.75
|
$0.08075
|
The closing price of the underlying shares on September 26, 2016
was $36.06.
We make no representation as to the amount of dividends, if any,
that may be paid on the underlying shares in the future. In any event, as an investor in the securities, you will not be entitled
to receive dividends, if any, that may be payable on the underlying shares.
Description
of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
Investment Objective and Strategy
The ETF seeks to provide investment results that, before fees
and expenses, correspond generally to the performance of publicly traded equity securities of companies included in the ETF Underlying
Index. For additional information regarding the ETF Underlying Index, see “—The S&P
®
Oil & Gas
Exploration & Production Select Industry
®
Index” below.
Replication
In seeking to track the performance of the ETF Underlying Index,
the ETF employs a “replication” strategy, which means that the ETF typically invests in substantially all of the securities
represented in the ETF Underlying Index in approximately the same proportions as the ETF Underlying Index. Under normal market
conditions, the ETF generally invests substantially all, but at least 80%, of its total assets in the securities included in the
ETF Underlying Index. In addition, the ETF may invest in equity securities that are not included in the ETF Underlying Index, cash
and cash equivalents or money market instruments, such as repurchase agreements and money market funds (including money market
funds advised by SSgA FM).
Correlation
The ETF Underlying Index is a theoretical financial calculation,
while the ETF is an actual investment portfolio. The ETF seeks to track the performance of the ETF Underlying Index as closely
as possible (i.e., achieve a high degree of correlation with the ETF Underlying Index). However, the performance of the ETF and
the ETF Underlying Index will vary somewhat due to operating expenses, transaction costs, cash flows, regulatory requirements and
operational inefficiencies.
The S&P
®
Oil & Gas Exploration & Production Select Industry
®
Index
The ETF Underlying Index is an equal-weighted index that is designed
to measure the performance of the oil and gas exploration and production sub-industry portion of the S&P
®
Total
Market Index (“TMI”). Each of the component stocks included in the ETF Underlying Index is a constituent company within
the oil and gas exploration and production sub-industry of the TMI. The ETF Underlying Index includes companies in the following
GICS
®
Sub-Industries: Integrated Oil & Gas; Oil & Gas Exploration & Production; and Oil & Gas Refining
& Marketing. The ETF Underlying Index was launched on June 19, 2006 and had an initial value of 1,000 as of a base date of
December 17, 1999. As of August 31, 2016, the ETF Underlying Index was comprised of 58 constituents. The ETF Underlying Index is
reported by Bloomberg L.P. under the ticker symbol “SPSIOP.”
The ETF Underlying Index is an S&P
®
Select
Industry Index. For information about the construction and calculation of the S&P
®
Select Industry Indices,
including the ETF Underlying Index, please refer to the section “Equity Index Descriptions—S&P Select Industry
Indices” in the accompanying underlying supplement. Please refer to the same section for information about the TMI.
All disclosures contained in this pricing supplement or in
the underlying supplement regarding the ETF Underlying Index and the TMI, including the makeup, method of calculation and changes
of their respective components, are derived from publicly available information prepared by S&P Dow Jones Indices LLC. None
of Citigroup Global Markets Holdings Inc., Citigroup Inc. or CGMI has independently verified such information.
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 security should be treated as a prepaid forward contract for U.S. federal income
tax purposes. By purchasing a security, 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 securities is respected and subject
to the discussion in “United States Federal Tax Considerations” in the accompanying product supplement, the following
U.S. federal income tax consequences should result under current law:
|
|
·
|
You should not recognize taxable income over the term of the securities prior to maturity, other than pursuant to a sale or
exchange.
|
|
Citigroup Global Markets Holdings Inc.
|
|
Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
-----
, 2017
|
|
|
|
|
·
|
Upon a sale or exchange of a security (including retirement at maturity), you should recognize gain or loss equal to the difference
between the amount realized and your tax basis in the security. Subject to the discussion below concerning the potential application
of the “constructive ownership” rules under Section 1260 of the Internal Revenue Code of 1986, as amended (the “Code”),
any gain or loss recognized upon a sale, exchange or retirement of a security should be long-term capital gain or loss if you held
the security for more than one year.
|
Even if the treatment of the securities as prepaid forward contracts
is respected, your purchase of a security may be treated as entry into a “constructive ownership transaction,” within
the meaning of Section 1260 of the Code, with respect to the underlying shares. In that case, all or a portion of any long-term
capital gain you would otherwise recognize in respect of your securities would be recharacterized as ordinary income to the extent
such gain exceeded the “net underlying long-term capital gain.” Any long-term capital gain recharacterized as ordinary
income under Section 1260 would be treated as accruing at a constant rate over the period you held your securities, and you would
be subject to an interest charge in respect of the deemed tax liability on the income treated as accruing in prior tax years. Due
to the lack of governing authority under Section 1260, our counsel is not able to opine as to whether or how Section 1260 applies
to the securities. You should read the section entitled “United States Federal Tax Considerations—Tax Consequences
to U.S. Holders—Potential Application of Section 1260 of the Code” in the accompanying product supplement for additional
information and consult your tax adviser regarding the potential application of the “constructive ownership” rule.
Subject to the discussion 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 securities, 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 securities, provided that (i) income in respect of the securities 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 described above. 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 securities, including
the character and timing of income or loss and the degree, if any, to which income realized by non-U.S. persons should be subject
to withholding tax, possibly with retroactive effect. If withholding tax applies to the securities, we will not be required to
pay any additional amounts with respect to amounts so withheld.
You should read the section entitled “United States
Federal Tax Considerations” in the accompanying product supplement. The preceding discussion, when read in combination with
that section, constitutes the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences
of owning and disposing of the securities.
You should also consult your tax adviser regarding all aspects
of the U.S. federal income and estate tax consequences of an investment in the securities and any tax consequences arising under
the laws of any state, local or non-U.S. taxing jurisdiction.
Supplemental
Plan of Distribution
CGMI, an affiliate of Citigroup Global Markets Holdings Inc.
and the underwriter of the sale of the securities, is acting as principal and will receive an underwriting fee of up to $10.00
for each security sold in this offering. J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A. will act as placement agents
for the securities and, from the underwriting fee to CGMI, will receive a placement fee of $10.00 for each security they sell in
this offering to accounts other than fiduciary accounts. The amount of the underwriting fee to CGMI will be equal to the
placement fee paid to the placement agents. CGMI and the placement agents will forgo an underwriting fee and placement fee
for sales to fiduciary accounts. In addition to the underwriting fee, CGMI and its affiliates may profit from expected hedging
activity related to this offering, even if the value of the securities declines. See “Use of Proceeds and Hedging”
in the accompanying prospectus.
CGMI is an affiliate of ours. Accordingly, this offering will
conform with the requirements addressing conflicts of interest when distributing the securities of an affiliate set forth in Rule
5121 of the Financial Industry Regulatory Authority. Client accounts over which Citigroup Inc. or its subsidiaries have investment
discretion will not be permitted to purchase the securities, either directly or indirectly, without the prior written consent of
the client.
See “Plan of Distribution; Conflicts of Interest”
in the accompanying product supplement and “Plan of Distribution” in each of the accompanying prospectus supplement
and prospectus for additional information.
A portion of the net proceeds from the sale of the securities
will be used to hedge our obligations under the securities. We expect to hedge our obligations under the securities through CGMI
or other of our affiliates. CGMI or such other of our affiliates may profit from this expected hedging activity even if the value
of the securities declines. This hedging activity could affect the closing price of the
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Citigroup Global Markets Holdings Inc.
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Contingent Buffered Digital Notes Based on Shares of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF Due October
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, 2017
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underlying shares and, therefore, the value of and your return
on the securities. For additional information on the ways in which our counterparties may hedge our obligations under the securities,
see “Use of Proceeds and Hedging” in the accompanying prospectus.
Valuation of
the Securities
CGMI calculated the estimated value of the securities set forth
on the cover page of this pricing supplement based on proprietary pricing models. CGMI’s proprietary pricing models generated
an estimated value for the securities by estimating the value of a hypothetical package of financial instruments that would replicate
the payout on the securities, which consists of a fixed-income bond (the “bond component”) and one or more derivative
instruments underlying the economic terms of the securities (the “derivative component”). CGMI calculated the estimated
value of the bond component using a discount rate based on our internal funding rate. CGMI calculated the estimated value of the
derivative component based on a proprietary derivative-pricing model, which generated a theoretical price for the instruments that
constitute the derivative component based on various inputs, including the factors described under “Summary Risk Factors—The
value of the securities prior to maturity will fluctuate based on many unpredictable factors” in this pricing supplement,
but not including our or Citigroup Inc.’s creditworthiness. These inputs may be market-observable or may be based on assumptions
made by CGMI in its discretionary judgment.
The estimated value of the securities is a function of the terms
of the securities and the inputs to CGMI’s proprietary pricing models. As of the date of this preliminary pricing supplement,
it is uncertain what the estimated value of the securities will be on the pricing date because it is uncertain what the values
of the inputs to CGMI’s proprietary pricing models will be on the pricing date.
For a period of approximately six months following issuance of
the securities, the price, if any, at which CGMI would be willing to buy the securities from investors, and the value that will
be indicated for the securities on any brokerage account statements prepared by CGMI or its affiliates (which value CGMI may also
publish through one or more financial information vendors), will reflect a temporary upward adjustment from the price or value
that would otherwise be determined. This temporary upward adjustment represents a portion of the hedging profit expected to be
realized by CGMI or its affiliates over the term of the securities. The amount of this temporary upward adjustment will decline
to zero on a straight-line basis over the six-month temporary adjustment period. However, CGMI is not obligated to buy the securities
from investors at any time. See “Summary Risk Factors—The securities will not be listed on any securities exchange
and you may not be able to sell them prior to maturity.”
©
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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