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 MAY
6, 2016
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Citigroup Global Markets Holdings Inc.
|
June
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,
2016
Medium-Term Senior Notes, Series
N
Pricing Supplement
No. 2016-USNCH0048
Filed Pursuant
to Rule 424(b)(2)
Registration Statement Nos.
333-192302 and 333-192302-06
|
Equity Linked Securities
with Geared Buffered Downside Based on the Russell 2000
®
Index Due June
-----
,
2021
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. The securities
offer semi-annual coupon payments at a higher rate than we would pay on conventional
debt securities of the same maturity. However, unlike conventional debt securities, the
securities will not necessarily repay their full stated principal amount at maturity.
The risk that you will receive less than the stated principal amount at maturity will
depend on the performance of the Russell 2000
®
Index (the “underlying
index”) from its initial index level to its final index level. The securities offer
a buffer against the first 25.00% of potential depreciation of the underlying index,
which means that you will be repaid the stated principal amount of your securities at
maturity so long as the underlying index does not depreciate by more than 25.00%.
However,
if the underlying index depreciates by more than 25.00%, you will lose 1.3333% of the
stated principal amount of your securities for every 1% by which that depreciation exceeds
25.00%. Accordingly, the lower the final index level, the less benefit you will receive
from the buffer. There is no minimum payment at maturity.
|
|
▪
|
The
securities are designed for investors who seek coupon payments at a higher rate than
the rate we would pay on conventional debt securities of the same maturity and, in exchange
for that higher rate, are willing to assume a risk of loss at maturity based on the performance
of the underlying index. The securities provide downside exposure, but no upside exposure,
to the underlying index.
|
|
▪
|
Investors
in the securities 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:
|
June , 2016 (expected to be June 1, 2016)
|
Issue date:
|
June , 2016 (three business days after the pricing date)
|
Valuation date:
|
June , 2021 (expected to be June 1, 2021), subject to
postponement if such date is not a scheduled trading day or if certain market disruption events occur
|
Maturity date:
|
June , 2021 (expected to be June 4, 2021)
|
Coupon payments:
|
On each coupon payment date, we will pay a coupon at
a rate of 4.75% to 5.25% per annum (to be determined on the pricing date). On each coupon payment date, the amount
of each coupon payment per security will be equal to (i) the coupon rate per annum
multiplied by
the stated principal
amount
divided by
(ii) 2.
|
Coupon payment dates:
|
Semi-annually on the day of each June and December
(expected to be the 4th day of each June and December), commencing December , 2016 (expected to be
December 4, 2016) and ending on the maturity date
|
Payment at maturity:
|
For each $1,000 stated principal
amount security you hold at maturity, you will receive the final coupon payment
plus
:
▪ If
the final index level is
greater than or equal to
the buffer level: $1,000
▪ If
the final index level is
less than
the buffer level: $1,000 × the index performance factor × 1.3333
If the underlying index
depreciates by more than 25.00% from the initial index level to the final index level, 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
|
Buffer level:
|
, 75.00% of the initial index level
|
Index performance factor:
|
The final index level
divided by
the initial index level
|
Listing:
|
The securities will not be listed on any securities exchange
|
CUSIP / ISIN:
|
17324C3H7 / US17324C3H75
|
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 $970.00 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-3.
Neither the Securities and Exchange
Commission (the “SEC”) nor any state securities commission has approved or disapproved of the securities or determined
that this pricing supplement and the accompanying product supplement, underlying supplement, prospectus supplement and prospectus
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 Supplement and Prospectus 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.
|
Equity Linked Securities with Geared Buffered Downside Based on the Russell 2000
®
Index Due June
---
, 2021
|
|
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 (excluding
the final coupon payment) for a range of hypothetical percentage changes from the initial index level to the final index level.
Equity Linked Securities with Geared Buffered Downside
Payment at Maturity Diagram
|
|
Your actual payment at maturity per security will depend on the
actual initial index level, the actual buffer 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 1,100.00 and a hypothetical buffer level of 825.00.
For ease of presentation, the examples disregard the final coupon payment.
Citigroup Global Markets Holdings Inc.
|
Equity Linked Securities with Geared Buffered Downside Based on the Russell 2000
®
Index Due June
---
, 2021
|
|
Example 1—Par Scenario A.
The hypothetical final
index level is 1,650.00 (a 50.00% increase from the hypothetical initial index level), which is
greater than
the hypothetical
buffer level.
Payment at maturity per security = $1,000
Because the hypothetical final index level is greater than the
hypothetical buffer level, your payment at maturity in this scenario would be equal to the $1,000 stated principal amount per security.
Even though the underlying index has appreciated significantly from its initial index level in this example, you would not participate
in that appreciation as a holder of the securities.
Example 2—Par Scenario B.
The hypothetical final
index level is 990.00 (a 10.00% decrease from the hypothetical initial index level), which is
greater than
the hypothetical
buffer level.
Payment at maturity per security = $1,000
Because the hypothetical final index level is greater than the
hypothetical buffer level, your payment at maturity in this scenario would be equal to the $1,000 stated principal amount per security.
Example 3—Downside Scenario A.
The hypothetical final
index level is 660.00 (a 40.00% decrease from the hypothetical initial index level), which is
less than
the hypothetical
buffer level.
Payment at maturity per security = $1,000 × the index performance
factor × 1.3333
= $1,000 × 0.60 × 1.3333
= $1,000 × 0.79998
= $799.98
Because the hypothetical final index level is less than the hypothetical
buffer level in this example, you would lose 1.3333% of the stated principal amount of your securities for every 1% by which the
depreciation of the underlying index exceeds 25.00%. In this scenario, the underlying index depreciated by 40.00% and you would
lose approximately 20.002% of the stated principal amount at maturity; therefore, the securities would provide an effective buffer
(which is the difference between the depreciation of the underlying index and the loss on the securities) of approximately 19.998%.
Example 4—Downside Scenario B.
The hypothetical final
index level is 330.00 (a 70.00% decrease from the hypothetical initial index level), which is
less than
the buffer level.
Payment at maturity per security = $1,000 × the index performance
factor × 1.3333
= $1,000 × 0.30 × 1.3333
= $1,000 × 0.39999
= $399.99
Because the hypothetical final index level is less than the hypothetical
buffer level in this example, you would lose 1.3333% of the stated principal amount of your securities for every 1% by which the
depreciation of the underlying index exceeds 25.00%. In this scenario, the underlying index depreciated by 70.00% and you would
lose approximately 60.001% of the stated principal amount at maturity; therefore, the securities would provide an effective buffer
(which is the difference between the depreciation of the underlying index and the loss on the securities) of approximately 9.999%.
A comparison of this example with the previous example illustrates the diminishing benefit of the buffer the greater the depreciation
of the underlying index.
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 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
Citigroup Global Markets Holdings Inc.
|
Equity Linked Securities with Geared Buffered Downside Based on the Russell 2000
®
Index Due June
---
, 2021
|
|
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 index. If the
underlying index depreciates by more than 25.00% from the initial index level to the final index level, you will lose 1.3333% of
the stated principal amount of your securities for every 1% by which that depreciation exceeds 25.00%. You should understand that
any depreciation of the underlying index beyond 25.00% will result in a magnified loss to your investment by 1.3333 times, which
will progressively offset any benefit you receive from the buffer feature of the securities. For example, if the final index level
is 50.00% less than the initial index level, your payment at maturity would equal $666.65. In this scenario, the effective buffer
(which is the difference between the depreciation of the underlying index and the loss on the securities) would be only 16.665%.
The lower the final index level, the less benefit you will receive from the buffer. There is no minimum payment at maturity, and
you may lose up to all of your investment.
|
|
§
|
The securities will be adversely affected by volatility in the level of the underlying index.
The more volatile the
level of the underlying index, the more likely it is that the final index level will be less than the buffer level and that you
will not receive the full stated principal amount of your securities at maturity. In general, higher coupon payments are associated
with greater expected volatility of the underlying index and, therefore, are associated with a greater expected likelihood as of
the pricing date that the final index level will be less than the buffer level and that you will incur a loss at maturity.
|
|
§
|
The securities offer downside exposure to the underlying index, but no upside exposure to the underlying index.
Although
you will be exposed to downside risk with respect to the underlying index, you will not participate in any appreciation in the
level of the underlying index over the term of the securities and will not receive any dividends paid on the stocks that make up
the underlying index. Consequently, your return on the securities will be limited to the coupon payments you receive, and may be
significantly less than the return on the underlying index over the term of the securities.
|
|
§
|
Your payment at maturity depends on the closing level of the underlying index on a single day.
If the closing level
of the underlying index on the valuation date is less than the buffer level, you will not receive the full stated principal amount
of your securities at maturity, even if the closing level is greater than the buffer level on other dates during the term of the
securities.
|
|
§
|
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) 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
|
Citigroup Global Markets Holdings Inc.
|
Equity Linked Securities with Geared Buffered Downside Based on the Russell 2000
®
Index Due June
---
, 2021
|
|
rate at which we are willing to borrow
funds through the issuance of the securities. Our internal funding rate is generally lower than our secondary market rate, which
is the rate that CGMI will use in determining the value of the securities for purposes of any purchases of the securities from
you in the secondary market. If the estimated value included in this pricing supplement were based on our secondary market rate,
rather than our internal funding rate, it would likely be lower. We determine our internal funding rate based on factors such as
the costs associated with the securities, which are generally higher than the costs associated with conventional debt securities,
and our liquidity needs and preferences. Our internal funding rate is not the same as the coupon that is payable on the securities.
Because there is not an active market
for traded instruments referencing our outstanding debt obligations, CGMI determines our secondary market rate based on the market
price of traded instruments referencing the debt obligations of Citigroup Inc., our parent company and the guarantor of all payments
due on the securities, but subject to adjustments that CGMI makes in its sole discretion. As a result, our secondary market rate
is not a market-determined measure of our creditworthiness, but rather reflects the market’s perception of our parent company’s
creditworthiness as adjusted for discretionary factors such as CGMI’s preferences with respect to purchasing the securities
prior to maturity.
|
§
|
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 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
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Citigroup Global Markets Holdings Inc.
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Equity Linked Securities with Geared Buffered Downside Based on the Russell 2000
®
Index Due June
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, 2021
|
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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.
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§
|
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.
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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 described herein. If the IRS were successful in asserting an alternative treatment
for the securities, the tax consequences of 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. While it is not clear whether the securities would be viewed as similar to the typical
prepaid forward contract described in the notice, 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 is subject to withholding tax,
possibly with retroactive effect.
|
As described below under “United
States Federal Tax Considerations,” in connection with any information reporting requirements we may have in respect of the
securities under applicable law, we intend to treat a portion of each coupon payment as attributable to interest and the remainder
to option premium. However, in light of the uncertain treatment of the securities, it is possible that other persons having withholding
or information reporting responsibility in respect of the securities may treat a security differently, for instance, by treating
the entire coupon payment as ordinary income at the time received or accrued by a holder and/or treating some or all of each coupon
payment on a security to a non-U.S. person as subject to withholding tax at a rate of 30%. Moreover, it is possible that in the
future we may determine that we should withhold at a rate of 30% on coupon payments on the securities to non-U.S. persons. If withholding
applies to the securities, we will not be required to pay any additional amounts with respect to amounts so withheld.
You should review carefully the section
of this pricing supplement entitled “United States Federal Tax Considerations.” You should also consult your tax adviser
regarding the U.S. federal tax consequences of an investment in the securities (including possible alternative treatments and the
issues presented by the 2007 notice), as well as tax consequences arising under the laws of any state, local or non-U.S. taxing
jurisdiction.
Citigroup Global Markets Holdings Inc.
|
Equity Linked Securities with Geared Buffered Downside Based on the Russell 2000
®
Index Due June
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, 2021
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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—Russell 2000
®
Index—License with Russell” in the accompanying underlying supplement.
Please refer to the sections “Risk Factors” and “Equity
Index Descriptions—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 May 3, 2016 was 1,121.76.
The graph below shows the closing levels of the underlying index
for each day such level was available from January 3, 2011 to May 3, 2016. We obtained the closing levels from Bloomberg L.P.,
without independent verification. You should not take the historical levels of the underlying index as an indication of future
performance.
Russell 2000
®
Index – Historical Closing Levels
January 3, 2011 to May 3, 2016
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Citigroup Global Markets Holdings Inc.
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Equity Linked Securities with Geared Buffered Downside Based on the Russell 2000
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Index Due June
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, 2021
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United States Federal Tax Considerations
Prospective investors should note that the discussion under
the section called “United States Federal Tax Considerations” in the accompanying product supplement generally does
not apply to the securities issued under this pricing supplement and is superseded by the following discussion. However, the discussion
below is subject to the discussion in “United States Federal Tax Considerations—Assumption by Citigroup Inc.”
in the accompanying product supplement, and you should read it in conjunction with that discussion.
The following is a discussion of the material U.S. federal income
and certain estate tax consequences of the ownership and disposition of the securities. It applies to you only if you are an initial
holder of a security that purchases the security for cash at its stated principal amount, and holds the security as a capital asset
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”).
This discussion does not address all of the tax consequences that
may be relevant to you in light of your particular circumstances or if you are a holder subject to special rules, such as:
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a financial institution;
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a dealer or trader subject to a mark-to-market method of tax accounting with respect to the securities;
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a person holding the securities as part of a “straddle” or conversion transaction or one who enters into a “constructive
sale” with respect to a security;
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a U.S. Holder (as defined below) whose functional currency is not the U.S. dollar;
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an entity classified as a partnership for U.S. federal income tax purposes;
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a “regulated investment company”;
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a tax-exempt entity, including an “individual retirement account” or “Roth IRA”; or
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a person subject to the alternative minimum tax.
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If an entity that is classified as a partnership for U.S. federal
income tax purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend on the status
of the partner and the activities of the partnership. If you are a partnership holding the securities or a partner in such a partnership,
you should consult your tax adviser as to the particular U.S. federal income tax consequences of holding and disposing of the securities
to you.
This discussion is based on the Code, administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of which may
affect the tax consequences described herein, possibly with retroactive effect. This discussion does not address the effect of
any applicable state, local or non-U.S. tax laws or the potential application of the Medicare contribution tax.
You should consult
your tax adviser about the application of the U.S. federal income and estate tax laws to your particular situation (including the
possibility of alternative treatments of the securities), as well as any tax consequences arising under the laws of any state,
local or non-U.S. jurisdiction.
Tax Treatment of the Securities
Due to the absence of statutory, judicial or administrative authorities
that directly address the U.S. federal tax treatment of the securities or similar instruments, there is substantial uncertainty
regarding the U.S. federal tax consequences of an investment in the securities. In connection with any information reporting requirements
we may have in respect of the securities under applicable law, we intend (in the absence of an administrative determination or
judicial ruling to the contrary) to treat each security for U.S. federal income tax purposes as a unit comprising (i) an option
written by you that, if exercised, requires you to pay at maturity an amount equal to the Deposit (as defined below) in exchange
for an amount determined by reference to the final value of the index (the “Put Option”) and (ii) a deposit with us
of a fixed amount of cash equal to the stated principal amount of the security to secure your potential obligation under the Put
Option (the “Deposit”). In the opinion of our tax counsel, Davis Polk & Wardwell LLP, which is based on current
market conditions, this treatment of the securities is reasonable under current law; however, our tax counsel has advised us that
due to the lack of any controlling legal authority it is unable to conclude affirmatively that this treatment is more likely than
not to be upheld, and that alternative treatments are possible. Under this treatment:
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a portion of each coupon payment made with respect to a security will be attributable to interest on the Deposit; and
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the remainder will represent option premium attributable to your grant of the Put Option (with respect to each coupon payment
received and, collectively, all coupon payments received, “Put Premium”).
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We will specify in the final pricing supplement the portion of
each coupon payment that we will allocate to interest on the Deposit and to Put Premium, respectively.
We do not plan to request a ruling from the IRS, and the IRS
or a court might not agree with this treatment. Accordingly, you should consult your tax adviser regarding the U.S. federal tax
consequences of an investment in the securities. Unless otherwise stated, the following discussion is based on the treatment of
each security as a Put Option and a Deposit.
Citigroup Global Markets Holdings Inc.
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Equity Linked Securities with Geared Buffered Downside Based on the Russell 2000
®
Index Due June
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, 2021
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Tax Consequences to U.S. Holders
This section applies only to U.S. Holders. You are a “U.S.
Holder” if for U.S. federal income tax purposes you are a beneficial owner of a security that is:
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a citizen or individual resident of the United States;
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a corporation created or organized in or under the laws of the United States, any state therein or the District of Columbia;
or
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an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
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Coupon Payments.
We intend to treat interest paid with
respect to the Deposit as ordinary interest income that is taxable to you at the time it accrues or is received in accordance with
your method of tax accounting.
The Put Premium should not be taken into account until retirement
or earlier sale or exchange of the security.
Sale or Exchange Prior to Retirement.
Upon a sale or exchange
of a security prior to retirement, you should apportion the amount realized between the Deposit and the Put Option based on their
respective values on the date of sale or exchange. If the value of the Put Option is negative, you should be treated as having
made a payment of such negative value to the purchaser in exchange for the purchaser’s assumption of the Put Option, in which
case a corresponding amount should be added to the amount realized in respect of the Deposit.
You should recognize gain or loss with respect to the Deposit
in an amount equal to the difference between (i) the amount realized that is apportioned to the Deposit (other than any amount
attributable to accrued interest on the Deposit, which should be treated as a payment of interest) and (ii) your basis in the Deposit
(i.e., the price you paid to acquire the security). Such gain or loss should be long-term capital gain or loss if you have held
the security for more than one year, and short-term capital gain or loss otherwise.
You should recognize gain or loss in respect of the Put Option
in an amount equal to the total Put Premium you previously received, decreased by the amount deemed to be paid by you, or increased
by the amount deemed to be paid to you, in exchange for the purchaser’s assumption of the Put Option. This gain or loss should
be short-term capital gain or loss.
Tax Treatment at Retirement
. The coupon payment received
upon retirement will be treated as described above under “Coupon Payments.”
If a security is retired for its stated principal amount (without
taking into account any coupon payment), the Put Option should be deemed to have expired unexercised, in which case you should
recognize short-term capital gain in an amount equal to the sum of all payments of Put Premium received, including the Put Premium
received upon retirement.
At maturity, if you receive an amount of cash that is different
(without taking into account the final coupon payment) from the stated principal amount of a security, the Put Option should be
deemed to have been exercised and you should be deemed to have applied the Deposit toward the cash settlement of the Put Option.
In that case, you should recognize short-term capital gain or loss with respect to the Put Option in an amount equal to the difference
between (i) the sum of the total Put Premium received (including the Put Premium received at maturity) plus the cash you receive
at maturity, excluding the final coupon payment, and (ii) the Deposit.
Possible Alternative Tax Treatments of an Investment in the
Securities
Alternative U.S. federal income tax treatments of the securities
are possible that, if applied, could materially and adversely affect the timing and/or character of income, gain or loss with respect
to the securities. A security could be treated as a debt instrument issued by us, in which case the timing and character of taxable
income with respect to coupon payments on the securities would differ from that described herein and all or a portion of any gain
you realize would generally be treated as ordinary income. In addition, you could be subject to special reporting requirements
if any loss exceeded certain thresholds. Under other possible treatments, the entire coupon on the securities might either be (i)
treated as income to you at the time received or accrued or (ii) not accounted for separately as giving rise to income to you until
the sale, exchange or retirement of the securities. You should consult your tax adviser regarding these issues.
Other possible U.S. federal income tax treatments of the securities
are possible that could also affect the timing and character of income or loss with respect to the securities. 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. While it is not clear whether the securities would be viewed as similar to the
typical prepaid forward contract described in the notice, 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, possibly with retroactive
effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the securities,
including possible alternative treatments and the issues presented by this notice.
Tax Consequences to Non-U.S. Holders
This section applies only to Non-U.S. Holders. You are a “Non-U.S.
Holder” if for U.S. federal income tax purposes you are a beneficial owner of a security that is:
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an individual who is classified as a nonresident alien;
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a foreign corporation; or
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Citigroup Global Markets Holdings Inc.
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Equity Linked Securities with Geared Buffered Downside Based on the Russell 2000
®
Index Due June
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, 2021
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a foreign trust or estate.
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You are not a Non-U.S. Holder for the purposes of this discussion
if you are (i) an individual who is present in the United States for 183 days or more in the taxable year of disposition or (ii)
a former citizen or resident of the United States. If you are or may become such a beneficial owner during the period in which
you hold a security, you should consult your tax adviser regarding the U.S. federal tax consequences of an investment in the securities
to you.
Subject to the discussion below regarding “FATCA,”
under current law, you generally should not be subject to U.S. federal withholding or income tax in respect of payments on the
securities or amounts received on the sale, exchange or retirement of 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 provide to
the applicable withholding agent an appropriate IRS Form W-8 certifying under penalties of perjury that you are not a U.S. person.
If you are engaged in a U.S. trade or business, and if income
from the securities is effectively connected with the conduct of that trade or business, you generally will be subject to regular
U.S. federal income tax with respect to that income in the same manner as if you were a U.S. Holder, unless an applicable income
tax treaty provides otherwise. In this event, if you are a corporation, you should also consider the potential application of a
30% (or lower treaty rate) branch profits tax.
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.
While it is not clear whether the securities would be viewed as similar to the typical prepaid forward contract described in the
notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these issues might materially
and adversely affect the withholding tax consequences of an investment in the securities, possibly with retroactive effect. You
should consult your tax adviser regarding the issues presented by the notice.
While we currently do not intend to withhold on payments on
the securities to Non-U.S. Holders (subject to the discussion below regarding “FATCA” and the Form W-8 certification
requirement described above), in light of the uncertain treatment of the securities other persons having withholding or information
reporting responsibility in respect of the securities may treat some or all of each coupon payment on a security as subject to
withholding tax at a rate of 30%. Moreover, it is possible that in the future we may determine that we should withhold at a rate
of 30% on coupon payments on the securities. We will not be required to pay any additional amounts with respect to amounts withheld.
U.S. Federal Estate Tax
If you are an individual Non-U.S. Holder, or an entity the property
of which is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example,
a trust funded by such an individual and with respect to which the individual has retained certain interests or powers), you should
note that, absent an applicable treaty exemption, a security may be treated as U.S. situs property subject to U.S. federal estate
tax. If you are such an individual or entity, you should consult your tax adviser regarding the U.S. federal estate tax consequences
of an investment in the securities.
Information Reporting and Backup Withholding
Amounts paid on the securities, and payment of the proceeds of
a taxable disposition of the securities, may be subject to information reporting and, if you fail to provide certain identifying
information (such as an accurate taxpayer identification number if you are a U.S. Holder) or meet certain other conditions, may
also be subject to backup withholding at the rate specified in the Code. If you are a Non-U.S. Holder that provides an appropriate
IRS Form W-8, you will generally establish an exemption from backup withholding. Amounts withheld under the backup withholding
rules are not additional taxes and may be refunded or credited against your U.S. federal income tax liability, provided the relevant
information is timely furnished to the IRS.
FATCA Legislation
Legislation commonly referred to as “FATCA” generally
imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to
certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An
intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements.
This legislation generally applies to certain financial instruments that are treated as paying U.S.-source interest or other U.S.-source
“fixed or determinable annual or periodical” income (“FDAP income”). Withholding (if applicable) applies
to payments of U.S.-source FDAP income and, for dispositions after December 31, 2018, to payments of gross proceeds of the disposition
(including upon retirement) of certain financial instruments treated as providing for U.S.-source interest or dividends. Although
the application of these rules to the securities is not entirely clear because the U.S. federal income tax treatment of the securities
is unclear, it would be prudent to assume that a withholding agent will treat the securities as subject to the withholding rules
under FATCA. If withholding applies to the securities, we will not be required to pay any additional amounts with respect to amounts
withheld. You should consult your tax adviser regarding the potential application of FATCA to the securities.
The preceding discussion, when read in conjunction with “United
States Federal Tax Considerations—Assumption by Citigroup Inc.” in the accompanying product supplement, 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 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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Equity Linked Securities with Geared Buffered Downside Based on the Russell 2000
®
Index Due June
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, 2021
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Supplemental Plan of Distribution
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 four 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 four-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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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.
Citigroup Global Markets Holdings Inc.
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Equity Linked Securities with Geared Buffered Downside Based on the Russell 2000
®
Index Due June
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, 2021
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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)
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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
Contact
Clients may contact their local brokerage representative. Third-party
distributors may contact Citi Structured Investment Sales at (212) 723-7005.
© 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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