The
information in this preliminary pricing supplement is not complete and may be changed. A registration statement relating
to these securities has been filed with the Securities and Exchange Commission. This preliminary pricing supplement and
the accompanying product supplement, underlying supplement, prospectus supplement and prospectus are not an offer to sell
these securities, nor are they soliciting an offer to buy these securities, in any state where the offer or sale is not
permitted.
SUBJECT
TO COMPLETION, DATED MARCH 17, 2017
|
Citigroup Global Markets Holdings Inc.
|
March
-----
,
2017
Medium-Term
Senior Notes, Series N
Pricing
Supplement No. 2017-USNCH0453
Filed
Pursuant to Rule 424(b)(2)
Registration
Statement Nos. 333-214120 and 333-214120-03
|
Buffer Securities
Based on the Russell 2000
®
Index Due April
-----
, 2019
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, equal to or less than the stated principal amount, depending on the performance
of the Russell 2000
®
Index (the “underlying index”) from the
initial index level to the final index level.
|
|
▪
|
The
securities offer leveraged exposure to a limited range of potential appreciation of the
underlying index and a limited buffer against the potential depreciation of the underlying
index as described below. In exchange for those features, investors in the securities
must be willing to forgo (i) any appreciation of the underlying index in excess of the
maximum return at maturity specified below and (ii) any dividends that may be paid on
the stocks that constitute the underlying index. In addition, investors in the securities
must be willing to accept downside exposure to any depreciation of the underlying index
in excess of the 15.00% buffer.
If the underlying index depreciates by more than the
buffer amount from the pricing date to the valuation date, you will lose 1% of the stated
principal amount of your securities for every 1% by which that depreciation exceeds the
buffer amount.
|
|
▪
|
In
order to obtain the modified exposure to the underlying index 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 index:
|
The Russell 2000
®
Index (ticker symbol: “RTY”)
|
Aggregate stated principal amount:
|
$
|
Stated principal amount:
|
$1,000 per security
|
Pricing date:
|
March , 2017 (expected to be March 31, 2017)
|
Issue date:
|
April , 2017 (three business days after the pricing
date)
|
Valuation date:
|
April , 2019 (expected to be April 1, 2019), subject
to postponement if such date is not a scheduled trading day or if certain market disruption events occur
|
Maturity date:
|
April , 2019 (expected to be April 4, 2019)
|
Payment at maturity:
|
For each $1,000 stated
principal amount security you hold at maturity:
▪ If
the final index level is
greater than
the initial index level:
$1,000 + the leveraged return amount, subject to the maximum return at maturity
▪ If
the final index level is
equal to the initial index level or less than
the initial index level by an amount
less
than or equal to
the buffer amount:
$1,000
▪ If
the final index level is
less than
the initial index level by an amount
greater than
the buffer amount:
($1,000 × the index performance factor) + $150.00
If the underlying index
decreases from the initial index level to the final index level by more than the buffer amount, your payment at maturity
will be less, and possibly significantly less, than the $1,000 stated principal amount per security. You should not invest
in the securities unless you are willing and able to bear the risk of losing a significant portion of your investment.
|
Initial index level:
|
, the closing level of the underlying index on
the pricing date
|
Final index level:
|
The closing level of the underlying index on the valuation date
|
Index performance factor:
|
The final index level
divided by
the initial index level
|
Index percent increase:
|
The final index level
minus
the initial index level,
divided by
the initial index level
|
Leveraged return amount:
|
$1,000 × the index percent increase × the leverage factor
|
Leverage factor:
|
150.00%
|
Maximum return at maturity:
|
The maximum return at maturity will be determined on the pricing date and will
be at least $202.50 per security (20.25% of the stated principal amount). Because of the maximum return at maturity, the payment
at maturity will not exceed $1,202.50 per security.
|
Buffer amount:
|
15.00%
|
Listing:
|
The securities will not be listed on any securities exchange
|
CUSIP / ISIN:
|
17324CGN0 / US17324CGN02
|
Underwriter:
|
Citigroup Global Markets Inc. (“CGMI”), an affiliate of the issuer,
acting as principal
|
Underwriting fee and issue price:
|
Issue price
(1)
|
Underwriting fee
(2)
|
Proceeds to issuer
|
Per security:
|
$1,000.00
|
—
|
$1,000.00
|
Total:
|
$
|
—
|
$
|
(1) Citigroup Global Markets Holdings
Inc. currently expects that the estimated value of the securities on the pricing date will be at least $965.00 per security, which
will be less than the issue price. The estimated value of the securities is based on CGMI’s proprietary pricing models and
our internal funding rate. It is not an indication of actual profit to CGMI or other of our affiliates, nor is it an indication
of the price, if any, at which CGMI or any other person may be willing to buy the securities from you at any time after issuance.
See “Valuation of the Securities” in this pricing supplement.
(2) For more information on the
distribution of the securities, see “Supplemental Plan of Distribution” in this pricing supplement. 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-4.
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-02-05 dated October 14, 2016
Underlying Supplement No. 5 dated October 14, 2016
Prospectus Supplement and Prospectus each dated October 14, 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.
|
Buffer Securities Based on the Russell 2000
®
Index Due April
-----
, 2019
|
|
Additional
Information
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. 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 index that are not repeated in this
pricing supplement. It is important that you read the accompanying product supplement, underlying supplement, prospectus supplement
and prospectus together with this pricing supplement before deciding whether to invest in the securities. Certain terms used but
not defined in this pricing supplement are defined in the accompanying product supplement.
Hypothetical
Examples
The diagram below illustrates your payment at maturity for a
range of hypothetical percentage changes from the initial index level to the final index level. The diagram and examples below
are based on a hypothetical maximum return of 20.25%.
Investors in the securities will not receive any dividends
on the stocks that constitute the underlying index. The diagram and examples below do not show any effect of lost dividend yield
over the term of the securities.
See “Summary Risk Factors—Investing in the securities is not equivalent to investing
in the underlying index or the stocks that constitute the underlying index” below.
Buffer Securities
Payment at Maturity Diagram
|
|
n
The Securities
|
n
The Underlying Index
|
Your actual payment at maturity per security will depend on the
actual maximum return, which will be determined on the pricing date, the actual initial index level and the actual final index
level. The examples below are intended to illustrate how your payment at maturity will depend on whether the final index level
is greater than or less than the initial index level and by how much. The examples are based on a hypothetical initial index level
of 1,383.000.
Citigroup Global Markets Holdings Inc.
|
Buffer Securities Based on the Russell 2000
®
Index Due April
-----
, 2019
|
|
Example 1—Upside Scenario A.
The hypothetical final
index level is 1,452.150 (an approximately 5.00% increase from the hypothetical initial index level), which is
greater than
the hypothetical initial index level.
Payment at maturity per security = $1,000 + the leveraged return
amount, subject to the hypothetical maximum return at maturity of $202.50 per security
= $1,000 + ($1,000 × the index percent increase ×
the leverage factor), subject to the hypothetical maximum return at maturity of $202.50 per security
= $1,000 + ($1,000 × 5.00% × 150.00%), subject to
the hypothetical maximum return at maturity of $202.50 per security
= $1,000 + $75.00, subject to the hypothetical maximum return
at maturity of $202.50 per security
= $1,075.00
Because the underlying index appreciated from the hypothetical
initial index level to the hypothetical final index level and the leveraged return amount of $75.00 per security results in a total
return at maturity of 7.50%, which is less than the hypothetical maximum return at maturity of 20.25%, your payment at maturity
in this scenario would be equal to the $1,000 stated principal amount per security
plus
the leveraged return amount, or
$1,075.00 per security.
Example 2—Upside Scenario B.
The hypothetical final
index level is 2,074.500 (an approximately 50.00% increase from the hypothetical initial index level), which is
greater than
the hypothetical initial index level.
Payment at maturity per security = $1,000 + the leveraged return
amount, subject to the hypothetical maximum return at maturity of $202.50 per security
= $1,000 + ($1,000 × the index percent increase ×
the leverage factor), subject to the hypothetical maximum return at maturity of $202.50 per security
= $1,000 + ($1,000 × 50.00% × 150.00%), subject to
the hypothetical maximum return at maturity of $202.50 per security
= $1,000 + $750.00, subject to the hypothetical maximum return
at maturity of $202.50 per security
= $1,202.50
Because the underlying index appreciated from the hypothetical
initial index level to the hypothetical final index level and the leveraged return amount of $750.00 per security would result
in a total return at maturity of 75.00%, which is greater than the hypothetical maximum return at maturity of 20.25%, your payment
at maturity in this scenario would equal the maximum payment at maturity of $1,202.50 per security. In this scenario, an investment
in the securities would underperform a hypothetical alternative investment providing 1-to-1 exposure to the appreciation of the
underlying index without a maximum return.
Example 3—Par Scenario.
The hypothetical final index
level is 1,313.850 (an approximately 5.00% decrease from the hypothetical initial index level), which is
less than
the hypothetical
initial index level by an amount that is
less than
the buffer amount of 15.00%.
Payment at maturity per security = $1,000
Because the underlying index did not depreciate from the hypothetical
initial index level to the hypothetical final index level by more than the 15.00% buffer amount, your payment at maturity in this
scenario would be equal to the $1,000 stated principal amount per security.
Example 4—Downside Scenario.
The hypothetical final
index level is 414.900 (an approximately 70.00% decrease from the hypothetical initial index level), which is
less than
the hypothetical initial index level by an amount that is
more than
the buffer amount of 15.00%.
Payment at maturity per security = ($1,000 × the index
performance factor) + $150.00
= ($1,000 × 30.00%) + $150.00
= $300.00 + $150.00
= $450.00
Because the underlying index depreciated from the hypothetical
initial index level to the hypothetical final index level by more than the 15.00% buffer amount, your payment at maturity in this
scenario would reflect 1-to-1 exposure to the negative performance of the underlying index beyond the 15.00% buffer amount.
Citigroup Global Markets Holdings Inc.
|
Buffer Securities Based on the Russell 2000
®
Index Due April
-----
, 2019
|
|
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 index. Accordingly, the securities
are suitable only for investors who are capable of understanding the complexities and risks of the securities. You should consult
your own financial, tax and legal advisors as to the risks of an investment in the securities and the suitability of the securities
in light of your particular circumstances.
The following is a summary of certain key risk factors for investors
in the securities. You should read this summary together with the more detailed description of risks relating to an investment
in the securities contained in the section “Risk Factors Relating to the Securities” beginning on page EA-6 in the
accompanying product supplement. You should also carefully read the risk factors included in the accompanying prospectus supplement
and in the documents incorporated by reference in the accompanying prospectus, including Citigroup Inc.’s most recent Annual
Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, which describe risks relating to the business of Citigroup
Inc. more generally.
|
▪
|
You may lose up to 85.00% 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 index. If the
underlying index depreciates by more than the buffer amount, you will lose 1% of the stated principal amount of the securities
for every 1% by which that depreciation exceeds the buffer amount.
|
|
▪
|
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.
|
|
▪
|
Your potential return on the securities is limited.
Your potential total return on the securities at maturity is limited
to the maximum return at maturity of at least 20.25%, which is equivalent to a maximum return at maturity of $202.50 per security.
The actual maximum return at maturity will be determined on the pricing date. Taking into account the leverage factor and assuming
a maximum return at maturity of 20.25%, any increase in the final index level over the initial index level by more than 13.50%
will not increase your return on the securities and will progressively reduce the effective amount of leverage provided by the
securities.
|
|
▪
|
Investing in the securities is not equivalent to investing in the underlying index or the stocks that constitute the underlying
index.
You will not have voting rights, rights to receive dividends or other distributions or any other rights with respect
to the stocks that constitute the underlying index. As of March 15, 2017, the average dividend yield of the underlying index was
approximately 1.44% per year. While it is impossible to know the future dividend yield of the underlying index, if this average
dividend yield were to remain constant for the term of the securities, you would be forgoing an aggregate yield of approximately
2.88% (assuming no reinvestment of dividends) by investing in the securities instead of investing directly in the stocks that constitute
the underlying index or in another investment linked to the underlying index that provides for a pass-through of dividends. The
payment scenarios described in this pricing supplement do not show any effect of lost dividend yield over the term of the securities.
|
|
▪
|
Your payment at maturity depends on the closing level of the underlying index on a single day.
Because your payment
at maturity depends on the closing level of the underlying index solely on the valuation date, you are subject to the risk that
the closing level of the underlying index on that day may be lower, and possibly significantly lower, than on one or more other
dates during the term of the securities. If you had invested in another instrument linked to the underlying index that you could
sell for full value at a time selected by you, or if the payment at maturity were based on an average of closing levels of the
underlying index, you might have achieved better returns.
|
|
▪
|
The 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
|
Citigroup Global Markets Holdings Inc.
|
Buffer Securities Based on the Russell 2000
®
Index Due April
-----
, 2019
|
|
and hedging the securities that
are included in the issue price. These costs include (i) hedging and other costs incurred by us and our affiliates in connection
with the offering of the securities and (ii) 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 index, dividend
yields on the stocks that constitute the underlying index and interest rates. CGMI’s views on these inputs may differ from
your or others’ views, and as an underwriter in this offering, CGMI’s interests may conflict with yours. Both the models
and the inputs to the models may prove to be wrong and therefore not an accurate reflection of the value of the securities. Moreover,
the estimated value of the securities set forth on the cover page of this 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 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.
|
|
▪
|
The value of the securities prior to maturity will fluctuate based on many unpredictable factors.
The value of your
securities prior to maturity will fluctuate based on the level and volatility of the underlying index and a number of other factors,
including the price and volatility of the stocks that constitute the underlying index, the dividend yields on the stocks that constitute
the underlying index, interest rates generally, the time remaining to maturity and our and Citigroup Inc.’s creditworthiness,
as reflected in our secondary market rate. Changes in the level of the underlying index may not result in a comparable change in
the value of your securities. You should understand that the value of your securities at any time prior to maturity may be significantly
less than the issue price.
|
|
▪
|
Immediately following issuance, any secondary market bid price provided by CGMI, and the value that will be indicated on
any brokerage account statements prepared by CGMI or its affiliates, will reflect a temporary upward adjustment.
The amount
of this temporary upward adjustment will steadily decline to zero over the temporary adjustment period. See “Valuation of
the Securities” in this pricing supplement.
|
|
▪
|
The securities will be subject to risks associated with small capitalization stocks.
The stocks that constitute the
underlying index are issued by companies with relatively small market capitalization. The stock prices of smaller companies may
be more volatile than stock prices of large capitalization companies. These companies tend to be less well-established than large
market
|
Citigroup Global Markets Holdings Inc.
|
Buffer Securities Based on the Russell 2000
®
Index Due April
-----
, 2019
|
|
capitalization companies. Small
capitalization companies may be less able to withstand adverse economic, market, trade and competitive conditions relative to larger
companies. Small capitalization companies are less likely to pay dividends on their stocks, and the presence of a dividend payment
could be a factor that limits downward stock price pressure under adverse market conditions.
|
▪
|
Our offering of the securities does not constitute a recommendation of the underlying index.
The fact that we are offering
the securities does not mean that we believe that investing in an instrument linked to the underlying index is likely to achieve
favorable returns. In fact, as we are part of a global financial institution, our affiliates may have positions (including short
positions) in the stocks that constitute the underlying index or in instruments related to the underlying index or such stocks
over the term of the securities, and may publish research or express opinions, that in each case are inconsistent with an investment
linked to the underlying index. These and other activities of our affiliates may affect the level of the underlying index in a
way that has a negative impact on your interests as a holder of the securities.
|
|
▪
|
The level of the underlying index may be adversely affected by our or our affiliates’ hedging and other trading activities.
We expect to hedge our obligations under the securities through CGMI or other of our affiliates, who may take positions directly
in the stocks that constitute the underlying index and other financial instruments related to the underlying index or such stocks
and may adjust such positions during the term of the securities. Our affiliates also trade the stocks that constitute the underlying
index and other financial instruments related to the underlying index or such stocks on a regular basis (taking long or short positions
or both), for their accounts, for other accounts under their management or to facilitate transactions on behalf of customers. These
activities could affect the level of the underlying index in a way that negatively affects the value of the securities. They could
also result in substantial returns for us or our affiliates while the value of the securities declines.
|
|
▪
|
We and our affiliates may have economic interests that are adverse to yours as a result of our affiliates’ business
activities.
Our affiliates may currently or from time to time engage in business with the issuers of the stocks that constitute
the underlying index, including extending loans to, making equity investments in or providing advisory services to such issuers.
In the course of this business, we or our affiliates may acquire non-public information about such issuers, which we will not disclose
to you. Moreover, if any of our affiliates is or becomes a creditor of any such issuer, they may exercise any remedies against
such issuer that are available to them without regard to your interests.
|
|
▪
|
The calculation agent, which is an affiliate of ours, will make important determinations with respect to the securities.
If certain events occur, such as market disruption events or the discontinuance of the underlying index, CGMI, as calculation agent,
will be required to make discretionary judgments that could significantly affect your payment at maturity. In making these judgments,
the calculation agent’s interests as an affiliate of ours could be adverse to your interests as a holder of the securities.
|
|
▪
|
Adjustments to the underlying index may affect the value of your securities.
Russell Investment Group (the “underlying
index publisher”) may add, delete or substitute the stocks that constitute the underlying index or make other methodological
changes that could affect the level of the underlying index. The underlying index publisher may discontinue or suspend calculation
or publication of the underlying index at any time without regard to your interests as holders of the securities.
|
|
▪
|
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. 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 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.
|
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 securities should not be subject to withholding under Section 871(m).
However, information about the application of Section 871(m) to the securities will be updated in the final pricing supplement.
Moreover, the IRS could challenge a conclusion that the securities should not be subject to withholding under Section 871(m). If
withholding applies to the securities, 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.
Citigroup Global Markets Holdings Inc.
|
Buffer Securities Based on the Russell 2000
®
Index Due April
-----
, 2019
|
|
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 Index
The Russell 2000
®
Index is designed to track the
performance of the small capitalization segment of the U.S. equity market. All stocks included in the Russell 2000
®
Index are traded on a major U.S. exchange. It is calculated and maintained by Russell Investments, a subsidiary of Russell Investment
Group. The Russell 2000
®
Index is reported by Bloomberg L.P. under the ticker symbol “RTY.”
“Russell 2000
®
Index” is a trademark
of Russell Investment Group and has been licensed for use by Citigroup Inc. and its affiliates. For more information, see “Equity
Index Descriptions—The Russell Indices—License Agreement” in the accompanying underlying supplement.
Please refer to the sections “Risk Factors” and “Equity
Index Descriptions—The Russell Indices—The Russell 2000
®
Index” in the accompanying underlying
supplement for important disclosures regarding the Russell 2000
®
Index, including certain risks that are associated with an investment linked to the Russell 2000
®
Index.
Historical Information
The closing level of the underlying index on March 15, 2017 was
1,382.830.
The graph below shows the closing level of the underlying index
for each day such level was available from January 2, 2008 to March 15, 2017. We obtained the closing levels from Bloomberg L.P.,
without independent verification.
You should not take the historical levels of the underlying index as an indication of future
performance.
Russell 2000
®
Index – Historical Closing Levels
January 2, 2008 to March 15, 2017
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United States
Federal Tax Considerations
You should read carefully the discussion under “United
States Federal Tax Considerations” and “Risk Factors Relating to the Securities” in the accompanying product
supplement and “Summary Risk Factors” in this pricing supplement.
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.
Citigroup Global Markets Holdings Inc.
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Assuming this treatment of the securities is respected and subject
to the discussion in “United States Federal Tax Considerations” in the accompanying product supplement, the following
U.S. federal income tax consequences should result under current law:
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You should not recognize taxable income over the term of the securities prior to maturity, other than pursuant to a sale or
exchange.
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Upon a sale or exchange of a security (including retirement at maturity), you should recognize capital gain or loss equal to
the difference between the amount realized and your tax basis in the security. Such gain or loss should be long-term capital gain
or loss if you held the security 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 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, 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 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.
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 securities and representations provided by us, our counsel is of the opinion that the securities
should not be treated as transactions that have a “delta” of one within the meaning of the regulations with respect
to any U.S. Underlying Equity and, therefore, should not be Specified Securities subject to withholding tax under Section 871(m).
A determination that the securities are
not subject to Section 871(m) is not binding on the IRS, and the IRS may disagree with this treatment. Moreover, Section 871(m)
is complex and its application may depend on your particular circumstances. For example, if you enter into other transactions relating
to the underlier, you could be subject to withholding tax or income tax liability under Section 871(m) even if the securities 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 securities.
This information is indicative and will
be supplemented and superseded in the final pricing supplement or as 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 securities based on circumstances as of the pricing date
for the securities and, therefore, it is possible that the securities will be subject to withholding tax under Section 871(m).
If withholding tax applies to the securities,
we will not be required to pay any additional amounts with respect to amounts withheld.
You should read the section entitled “United States
Federal Tax Considerations” in the accompanying product supplement. The preceding discussion, when read in combination with
that section, constitutes the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences
of owning and disposing of the securities.
You should also consult your tax adviser regarding all aspects
of the U.S. federal income and estate tax consequences of an investment in the securities and any tax consequences arising under
the laws of any state, local or non-U.S. taxing jurisdiction.
Citigroup Global Markets Holdings Inc.
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Supplemental
Plan of Distribution
CGMI, an affiliate of Citigroup Global Markets Holdings Inc.
and the underwriter of the sale of the securities, is acting as principal and will not receive any underwriting fee for any securities
sold in this offering.
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 level of the underlying index 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 certain terms of the securities
have not yet been fixed and because it is uncertain what the values of the inputs to CGMI’s proprietary pricing models will
be on the pricing date.
For a period of approximately three 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 three-month temporary adjustment period. However, CGMI is not obligated to buy the securities
from investors at any time. See “Summary Risk Factors — The securities will not be listed on any securities exchange
and you may not be able to sell them prior to maturity.”
Certain Selling
Restrictions
Hong Kong Special Administrative Region
The contents of this pricing supplement and the accompanying
product supplement, underlying supplement, prospectus supplement and prospectus have not been reviewed by any regulatory authority
in the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”). Investors are
advised to exercise caution in relation to the offer. If investors are in any doubt about any of the contents of this pricing supplement
and the accompanying product supplement, underlying supplement, prospectus supplement and prospectus, they should obtain independent
professional advice.
The securities have not been offered or sold and will not be
offered or sold in Hong Kong by means of any document, other than
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(i)
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to persons whose ordinary business is to buy or sell shares or debentures (whether as principal or agent); or
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(ii)
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to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “Securities
and Futures Ordinance”) and any rules made under that Ordinance; or
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(iii)
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in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance
(Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance; and
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There is no advertisement, invitation or document relating to
the securities which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except
if permitted to do so under the securities laws of Hong Kong) other than with respect to securities which are or are intended to
be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and
Futures Ordinance and any rules made under that Ordinance.
Non-insured Product: These securities are not insured by any
governmental agency. These securities are not bank deposits and are not covered by the Hong Kong Deposit Protection Scheme.
Singapore
This pricing supplement and the accompanying product supplement,
underlying supplement, prospectus supplement and prospectus have not been registered as a prospectus with the Monetary Authority
of Singapore, and the securities will be offered pursuant to exemptions under the Securities and Futures Act, Chapter 289 of Singapore
(the “Securities and Futures Act”). Accordingly, the securities may not be offered or sold or made the subject of an
invitation for subscription or purchase nor may this pricing supplement or any other document or material in connection with the
offer or sale or invitation for subscription or purchase of any securities be circulated or distributed, whether directly or indirectly,
to any person in Singapore other than (a) to an institutional investor pursuant to Section 274 of the Securities and Futures Act,
(b) to a relevant person under Section 275(1) of the Securities and Futures Act or to any person pursuant to Section 275(1A) of
the Securities and Futures Act and in accordance with the conditions specified in Section 275 of the Securities and Futures Act,
or (c) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the Securities and Futures
Act. Where the securities are subscribed or purchased under Section 275 of the Securities and Futures Act by a relevant person
which is:
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a corporation (which is not an accredited investor (as defined in Section 4A of the Securities and Futures Act)) the sole business
of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited
investor; or
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(b)
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a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is
an individual who is an accredited investor, securities (as defined in Section 239(1) of the Securities and Futures Act) of that
corporation or the beneficiaries’ rights and interests (howsoever described) in that trust shall not be transferable for
6 months after that corporation or that trust has acquired the relevant securities pursuant to an offer under Section 275 of the
Securities and Futures Act except:
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(i)
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to an institutional investor or to a relevant person defined in Section 275(2) of the Securities and Futures Act or to any
person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the Securities and Futures Act; or
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(ii)
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where no consideration is or will be given for the transfer; or
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(iii)
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where the transfer is by operation of law; or
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(iv)
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pursuant to Section 276(7) of the Securities and Futures Act; or
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(v)
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as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005
of Singapore.
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Any securities referred to herein may not be registered with
any regulator, regulatory body or similar organization or institution in any jurisdiction.
The securities are Specified Investment Products (as defined
in the Notice on Recommendations on Investment Products and Notice on the Sale of Investment Product issued by the Monetary Authority
of Singapore on 28 July 2011) that is neither listed nor quoted on a securities market or a futures market.
Non-insured Product: These securities are not insured by any
governmental agency. These securities are not bank deposits. These securities are not insured products subject to the provisions
of the Deposit Insurance and Policy Owners’ Protection Schemes Act 2011 of Singapore and are not eligible for deposit insurance
coverage under the Deposit Insurance Scheme.
Additional
Terms of the Securities
The section “Description of Debt Securities—Covenants—Limitations
on Mergers and Sales of Assets” in the accompanying prospectus shall be amended to read in its entirety as follows:
The indenture provides that neither Citigroup Global Markets
Holdings nor Citigroup will merge or consolidate with another entity or sell other than for cash or lease all or substantially
all its assets to another entity, except, in the case of Citigroup, if such lease or sale is to one or more of its Subsidiaries,
unless:
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either (1) the Citi entity is the continuing entity, or (2) the successor entity, if other than the Citi entity, is a U.S.
corporation, partnership or trust and expressly assumes by supplemental indenture the obligations of the Citi entity evidenced
by the securities issued pursuant to the indenture; and
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immediately after the transaction, there would not be any default in the performance of any covenant or condition of the indenture
(
Sections 5.05 and 16.05
).
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Other than the restrictions
described above, the indenture does not contain any covenants or provisions that would protect holders of the debt securities in
the event of a highly leveraged transaction.
Contact
Clients may contact their local brokerage representative. Third-party
distributors may contact Citi Structured Investment Sales at (212) 723-7005.
© 2017 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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