The information in this pricing
supplement is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities
and Exchange Commission. This pricing supplement and the accompanying product supplement, 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 DECEMBER
5, 2016
Pricing Supplement No. 2016—USNCH0263 to 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
Filed Pursuant to Rule 424(b)(2)
Registration Statement Nos. 333-214120 and 333-214120-03
Dated December
-----
, 2016
Citigroup
Global Markets Holdings Inc. $ ----- Capped Trigger GEARS
|
|
Linked to the Russell 2000
®
Index Due On or About December 31, 2019
All payments due on the securities are fully and unconditionally
guaranteed by Citigroup Inc.
The Capped Trigger GEARS offered
by this pricing supplement (the “
securities
”) are unsecured, unsubordinated debt obligations of Citigroup Global
Markets Holdings Inc. (the “
issuer
”), guaranteed by Citigroup Inc. (the “
guarantor
”), with
a return at maturity linked to the performance of the Russell 2000
®
Index (the “
underlying
”) from the initial underlying level to the final underlying
level. If the underlying return is positive, the issuer will repay the stated principal amount of the securities at maturity and
pay a return equal to the underlying return multiplied by the upside gearing of 2.00, but no more than the maximum gain of between
33.75% and 37.75% (to be determined on the trade date). If the underlying return is zero or negative and the final underlying level
is greater than or equal to the downside threshold, the issuer will repay the stated principal amount of the securities at maturity.
However, if the underlying return is negative and the final underlying level is less than the downside threshold, you will be fully
exposed to the negative underlying return and the issuer will pay you less than the stated principal amount at maturity, resulting
in a loss on the stated principal amount to investors that is proportionate to the percentage decline in the level of the underlying.
In this case, you will have full downside exposure to the underlying from the initial underlying level to the final underlying
level, and could lose all of your initial investment.
Investing in the securities involves significant risks. You will not receive
coupon payments during the 3-year term of the securities. You may lose a substantial portion or all of your initial investment.
You will not receive dividends or other distributions paid on any stocks included in the underlying. The contingent repayment of
the stated principal amount applies only if you hold the securities to maturity. Any payment on the securities, including any repayment
of the stated principal amount provided at maturity, is subject to the creditworthiness of the issuer and the guarantor. If the
issuer and the guarantor were to default on their obligations, you might not receive any amounts owed to you under the securities
and you could lose your entire investment.
Features
|
|
q
Enhanced Growth Potential Subject to Maximum Gain —
If the underlying return is positive, the issuer will repay the
stated principal amount of the securities at maturity and pay a return equal to the underlying return multiplied by the
upside gearing, but no more than the maximum gain. The upside gearing feature will provide leveraged exposure to a limited
range of positive performance of the underlying.
q
Downside Exposure with Contingent Repayment of Principal at Maturity —
If the underlying return is zero or
negative and the final underlying level is greater than or equal to the downside threshold, the issuer will repay the
stated principal amount of the securities at maturity. However, if the underlying return is negative and the final
underlying level is less than the downside threshold, the issuer will pay less than the stated principal amount of
the securities at maturity, resulting in a loss on the stated principal amount to investors that is proportionate to
the percentage decline in the level of the underlying.
The contingent repayment of the stated principal amount
applies only if you hold the securities to maturity. You might lose some or all of your initial investment. Any
payment on the securities is subject to the creditworthiness of the issuer and the guarantor. If the issuer and the
guarantor were to default on their obligations, you might not receive any amounts owed to you under the securities and you
could lose your entire investment.
|
|
|
Key Dates
1
|
Trade date
Settlement date
Final valuation date
2
Maturity date
|
December 27, 2016
December 30, 2016
December 26, 2019
December 31, 2019
|
1
Expected
2
See page PS-3
for additional details.
|
NOTICE TO INVESTORS: THE SECURITIES ARE SIGNIFICANTLY RISKIER
THAN CONVENTIONAL DEBT SECURITIES. THE ISSUER IS NOT NECESSARILY OBLIGATED TO REPAY YOUR INITIAL INVESTMENT IN THE SECURITIES AT
MATURITY, AND THE SECURITIES CAN HAVE THE FULL DOWNSIDE MARKET RISK OF THE UNDERLYING. THIS MARKET RISK IS IN ADDITION TO THE CREDIT
RISK INHERENT IN PURCHASING AN OBLIGATION OF CITIGROUP GLOBAL MARKETS HOLDINGS INC. THAT IS GUARANTEED BY CITIGROUP INC. YOU SHOULD
NOT PURCHASE THE SECURITIES IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN
THE SECURITIES. THE SECURITIES WILL NOT BE LISTED ON ANY SECURITIES EXCHANGE AND, ACCORDINGLY, MAY HAVE LIMITED OR NO LIQUIDITY.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER “SUMMARY
RISK FACTORS” BEGINNING ON PAGE PS-4 OF THIS PRICING SUPPLEMENT AND UNDER “RISK FACTORS RELATING TO THE SECURITIES”
BEGINNING ON PAGE EA-6 OF THE ACCOMPANYING PRODUCT SUPPLEMENT BEFORE PURCHASING ANY SECURITIES. EVENTS RELATING TO ANY OF THOSE
RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE VALUE OF, AND THE RETURN ON, YOUR SECURITIES. YOU MAY LOSE
SOME OR ALL OF YOUR INITIAL INVESTMENT IN THE SECURITIES.
We are offering Capped Trigger GEARS Linked to the Russell 2000
®
Index. Any return at maturity will be determined by the performance of the underlying. The securities are our unsecured, unsubordinated
debt obligations, guaranteed by Citigroup Inc., and are offered for a minimum investment of 100 securities at the issue price described
below. The initial underlying level, the maximum gain and the downside threshold will be set on the trade date.
Underlying
|
Initial Underlying Level
|
Upside Gearing
|
Maximum Gain
|
Downside Threshold
|
CUSIP/ ISIN
|
Russell 2000
®
Index (Ticker: RTY)
|
|
2.00
|
33.75% to 37.75%
|
-----
, 75.00% of the initial underlying level
|
17325E168 / US17325E1689
|
See “Additional Terms Specific to the Securities”
in this pricing supplement. The securities will have the terms specified in the accompanying product supplement, prospectus supplement
and prospectus, as supplemented by this pricing supplement.
Neither the Securities and Exchange Commission (the “
SEC
”)
nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy of
this pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any
representation to the contrary is a criminal offense. The securities are not bank deposits and are not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other governmental agency.
|
Issue Price
(1)
|
Underwriting Discount
(2)
|
Proceeds to Issuer
|
Per security
|
$10.00
|
$0.25
|
$9.75
|
Total
|
$
|
$
|
$
|
|
(1)
|
Citigroup Global Markets Holdings Inc. currently expects that the estimated value of the securities on the trade date will
be at least $9.500 per security, which will be less than the issue price. The estimated value of the securities is based on proprietary
pricing models of Citigroup Global Markets Inc. (“
CGMI
”) and our internal funding rate. It is not an indication
of actual profit to CGMI or other of our affiliates, nor is it an indication of the price, if any, at which CGMI or any other person
may be willing to buy the securities from you at any time after issuance. See “Valuation of the Securities” in this
pricing supplement.
|
|
(2)
|
The underwriting discount is $0.25 per security. CGMI, acting as principal, expects to purchase from Citigroup Global Markets
Holdings Inc., and Citigroup Global Markets Holdings Inc. expects to sell to CGMI, the aggregate stated principal amount of the
securities set forth above for $9.75 per security. UBS Financial Services Inc. (“
UBS
”), acting as principal,
expects to purchase from CGMI, and CGMI expects to sell to UBS, all of the securities for $9.75 per security. UBS will receive
an underwriting discount of $0.25 per security for each security it sells. UBS proposes to offer the securities to the public at
a price of $10.00 per security. For additional information on the distribution of the securities, see “Supplemental Plan
of Distribution” in this pricing supplement. In addition to the underwriting discount, CGMI and its affiliates may profit
from expected hedging activity related to this offering, even if the value of the securities declines. See “Use of Proceeds
and Hedging” in the accompanying prospectus.
|
Citigroup Global Markets Inc.
|
UBS Financial Services Inc.
|
Additional Terms Specific to the Securities
|
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 that are not
repeated in this pricing supplement. It is important that you read the accompanying product supplement, underlying supplement,
prospectus supplement and prospectus together with this pricing supplement before you decide whether to invest in the securities.
Certain terms used but not defined in this pricing supplement are defined in the accompanying product supplement.
You may access the accompanying
product supplement, underlying supplement, prospectus supplement and prospectus on the SEC website at www.sec.gov as follows (or
if such address has changed, by reviewing our filings for October 14, 2016 on the SEC website):
|
¨
|
Prospectus
Supplement and Prospectus each dated October 14, 2016:
|
https://www.sec.gov/Archives/edgar/data/200245/000119312516738765/d271357d424b2.htm
You may revoke your offer to purchase
the securities at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right
to change the terms of, or reject any offer to purchase, the securities prior to the trade date. The applicable agent will notify
you in the event of any material changes to the terms of the securities, and you will be asked to accept such changes in connection
with your purchase of the securities. You may also choose to reject such changes, in which case the applicable agent may reject
your offer to purchase the securities. References to “Citigroup Global Markets Holdings Inc.,” “we,” “our”
and “us” refer to Citigroup Global Markets Holdings Inc. and not to any of its subsidiaries. References to “Citigroup
Inc.” refer to Citigroup Inc. and not to any of its subsidiaries. In this pricing supplement, “securities” refers
to the Capped Trigger GEARS Linked to the Russell 2000
®
Index that are offered hereby, unless the context otherwise
requires.
This pricing supplement, together
with the documents listed above, contains the terms of the securities and supersedes all other prior or contemporaneous oral statements
as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures
for implementation, sample structures, brochures or other educational materials of ours. The description in this pricing supplement
of the particular terms of the securities supplements, and, to the extent inconsistent with, replaces, the descriptions of the
general terms and provisions of the debt securities set forth in the accompanying product supplement, prospectus supplement and
prospectus. You should carefully consider, among other things, the matters set forth in “Summary Risk Factors” in
this pricing supplement and “Risk Factors Relating to the Securities” in the accompanying product supplement, as the
securities involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax,
accounting and other advisers before deciding to invest in the securities.
The suitability considerations identified
below are not exhaustive. Whether or not the securities are a suitable investment for you will depend on your individual circumstances,
and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have
carefully considered the suitability of an investment in the securities in light of your particular circumstances. You should
also review “Summary Risk Factors” beginning on page PS-4 of this pricing supplement, “The Russell 2000
®
Index” beginning on page PS-9 of this pricing supplement, “Risk Factors Relating to the Securities” beginning
on page EA-6 of the accompanying product supplement and “Equity Index Descriptions—The Russell Indices” beginning
on page 78 of the accompanying underlying supplement.
The securities may be suitable for you if, among other considerations:
|
|
The securities may
not
be suitable for you if, among other considerations:
|
|
|
|
¨
You
fully understand the risks inherent in an investment in the securities, including the risk of loss of your entire initial
investment.
¨
You
can tolerate a loss of all or a substantial portion of your initial investment and are willing to make an investment that
may have the full downside market risk of an investment in the underlying or in the stocks included in the underlying.
¨
You
believe that the level of the underlying will increase over the term of the securities and are willing to give up any
appreciation in excess of the maximum gain (the actual maximum gain will be set on the trade date).
¨
You
understand and accept that your potential return is limited by the maximum gain and you would be willing to invest in
the securities if the maximum gain was set equal to the bottom of the range indicated on the cover page hereof (the actual
maximum gain will be set on the trade date).
¨
You
can tolerate fluctuations in the value of the securities prior to maturity that may be similar to or exceed the downside
fluctuations in the level of the underlying.
¨
You
do not seek current income from your investment and are willing to forgo dividends or any other distributions paid on
the stocks included in the underlying for the term of the securities.
¨
You
understand and accept the risks associated with the underlying.
¨
You
are willing and able to hold the securities to maturity, and accept that there may be little or no secondary market for
the securities and that any secondary market will depend in large part on the price, if any, at which CGMI is willing
to purchase the securities.
¨
You
are willing to assume the credit risk of Citigroup Global Markets Holdings Inc. and Citigroup Inc. for all payments under
the securities, and understand that if Citigroup Global Markets Holdings Inc. and Citigroup Inc. default on their obligations
you might not receive any amounts due to you, including any repayment of the stated principal amount.
|
|
¨
You
do not fully understand the risks inherent in an investment in the securities, including the risk of loss of your entire
initial investment.
¨
You
require an investment designed to guarantee a full return of the stated principal amount at maturity.
¨
You
cannot tolerate the loss of all or a substantial portion of your initial investment, and you are not willing to make an
investment that may have the full downside market risk of an investment in the underlying or in the stocks included in
the underlying.
¨
You
believe that the level of the underlying will decline during the term of the securities and the final underlying level
is likely to close below the downside threshold on the final valuation date, or you believe the underlying will appreciate
over the term of the securities by more than the maximum gain (the actual maximum gain will be set on the trade date).
¨
You
seek an investment that participates in the full appreciation in the level of the underlying or that has unlimited return
potential, or you would be unwilling to invest in the securities if the maximum gain was set equal to the bottom of the
range indicated on the cover page hereof (the actual maximum gain will be set on the trade date).
¨
You
cannot tolerate fluctuations in the value of the securities prior to maturity that may be similar to or exceed the downside
fluctuations in the level of the underlying.
¨
You
seek current income from this investment or prefer to receive the dividends and any other distributions paid on the stocks
included in the underlying for the term of the securities.
¨
You
do not understand or accept the risks associated with the underlying.
¨
You
are unwilling or unable to hold the securities to maturity, or you seek an investment for which there will be an active
secondary market.
¨
You
are not willing to assume the credit risk of Citigroup Global Markets Holdings Inc. and Citigroup Inc. for all payments
under the securities, including any repayment of the stated principal amount.
|
Indicative Terms
|
Issuer
|
Citigroup Global Markets
Holdings Inc.
|
Guarantee
|
All payments due on
the securities are fully and unconditionally guaranteed by Citigroup Inc.
|
Issue price
|
100% of the stated principal
amount per security
|
Stated principal amount
|
$10.00 per security
|
Term
|
Approximately 3 years
|
Trade date
1
|
December 27, 2016
|
Settlement date
1
|
December 30, 2016
|
Final
valuation date
1, 2
|
December
26, 2019
|
|
Maturity date
1
|
December 31, 2019
|
Underlying
|
Russell 2000
®
Index (Ticker: RTY)
|
Maximum gain
|
33.75% to 37.75%. The
actual maximum gain will be determined on the trade date.
|
Downside threshold
|
-----
,
75.00% of the initial underlying level
|
Upside gearing
|
2.00
|
Payment at maturity (per $10.00
stated principal amount of securities)
|
If the underlying return
is positive,
Citigroup Global Markets Holdings Inc. will pay you a cash payment per $10.00 stated principal amount
of securities that provides you with the stated principal amount of $10.00 plus a return equal to the underlying return
multiplied by the upside gearing, but no more than the maximum gain, calculated as follows:
$10.00
× (1 + the
lesser of
(i) underlying return × upside gearing and (ii) maximum gain)
If the underlying return
is zero or negative and the final underlying level is greater than or equal to the downside threshold on the final valuation
date,
Citigroup Global Markets Holdings Inc. will pay you a cash payment of $10.00 per $10.00 stated principal amount
of securities.
If the underlying return
is negative and the final underlying level is less than the downside threshold on the final valuation date,
Citigroup
Global Markets Holdings Inc. will pay you a cash payment at maturity less than the stated principal amount of $10.00 per
security, resulting in a loss on the stated principal amount that is proportionate to the percentage decline in the level
of the underlying, calculated as follows:
$10.00
× (1 + underlying return)
In this scenario, you
will be exposed to the full negative underlying return, and you will lose a substantial portion or all of the stated principal
amount in an amount proportionate to the percentage decline in the underlying.
|
Underlying return
|
final
underlying level – initial underlying level
initial underlying level
|
Initial underlying level
|
-----
,
the closing level of the underlying on the trade date
|
Final underlying level
|
The closing level of
the underlying on the final valuation date
|
INVESTING IN THE SECURITIES INVOLVES
SIGNIFICANT RISKS. YOU MAY LOSE A SUBSTANTIAL PORTION OR ALL OF YOUR INITIAL INVESTMENT. ANY PAYMENT ON THE SECURITIES, INCLUDING
ANY REPAYMENT OF THE STATED PRINCIPAL AMOUNT AT MATURITY, IS SUBJECT TO THE CREDITWORTHINESS OF THE ISSUER AND THE GUARANTOR.
IF CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND CITIGROUP INC. WERE TO DEFAULT ON THEIR OBLIGATIONS, YOU MIGHT NOT RECEIVE ANY AMOUNTS
OWED TO YOU UNDER THE SECURITIES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
|
Trade
date:
|
|
The closing level of the underlying
(initial underlying level) is observed, the maximum gain is set and downside threshold is determined.
|
|
|
|
|
|
Maturity
date:
|
|
The final underlying level
is determined on the final valuation date and the underlying return is calculated.
If the underlying return
is positive,
Citigroup Global Markets Holdings Inc. will pay you a cash payment per $10.00 stated principal amount
of securities that provides you with the stated principal amount of $10.00 plus a return equal to the underlying return
multiplied by the upside gearing, but no more than the maximum gain, calculated as follows:
$10.00
× (1 + the
lesser of
(i) underlying return × upside gearing and (ii) maximum gain)
If the underlying return
is zero or negative and the final underlying level is greater than or equal to the downside threshold on the final valuation
date,
Citigroup Global Markets Holdings Inc. will pay you a cash payment of $10.00 per $10.00 stated principal amount
of securities.
If the underlying return
is negative and the final underlying level is less than the downside threshold on the final valuation date,
Citigroup
Global Markets Holdings Inc. will pay you a cash payment at maturity less than the stated principal amount of $10.00 per
security, resulting in a loss on the stated principal amount that is proportionate to the percentage decline in the level
of the underlying, calculated as follows:
$10.00
× (1 + underlying return)
In this scenario, you
will be exposed to the full negative underlying return, and you will lose a substantial portion or all of the stated principal
amount in an amount proportionate to the percentage decline in the underlying.
|
____________________
|
1
|
In the event that we make
any changes to the expected trade date and settlement date, the final valuation date
and maturity date may be changed to ensure that the stated term of the securities remains
the same.
|
|
2
|
Subject to postponement
as described under “Description of the Securities—Certain Additional Terms
for Securities Linked to an Underlying Index—Consequences of a Market Disruption
Event; Postponement of a Valuation Date” in the accompanying product supplement.
|
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. Accordingly, the securities are suitable only for investors who are capable of understanding the complexities
and risks of the securities. You should consult your own financial, tax and legal advisers as to the risks of an investment in
the securities and the suitability of the securities in light of your particular circumstances.
The following
is a summary of certain key risk factors for investors in the securities. You should read this summary together with the more
detailed description of risks relating to an investment in the securities contained in the section “Risk Factors Relating
to the Securities” beginning on page EA-6 in the accompanying product supplement. You should also carefully read the risk
factors included in the accompanying prospectus supplement and in the documents incorporated by reference in the accompanying
prospectus, including Citigroup Inc.’s most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form
10-Q, which describe risks relating to the business of Citigroup Inc. more generally.
|
¨
|
You
may lose some or all of your investment —
The securities differ from ordinary
debt securities in that we will not necessarily repay the full stated principal amount
of your securities at maturity. Instead, your return on the securities is linked to the
performance of the underlying and will depend on whether, and the extent to which, the
underlying return is positive or negative. If the final underlying level is less than
the downside threshold, you will lose 1% of the stated principal amount of the securities
for every 1% by which the final underlying level is less than the initial underlying
level. There is no minimum payment at maturity on the securities, and you may lose up
to all of your investment in the securities.
|
|
¨
|
The
reduced market risk offered by the securities is contingent, and you will have full downside
exposure to the underlying if the final underlying level is less than the downside threshold
—
If the final underlying level is below the downside threshold, the contingent
reduced market risk with respect to a limited range of potential depreciation of the
underlying offered by the securities will not apply and you will lose 1% of the stated
principal amount of the securities for every 1% by which the final underlying level is
less than the initial underlying level. The securities will have full downside exposure
to the decline of the underlying if the final underlying level is below the downside
threshold. As a result, you may lose your entire investment in the securities. Further,
this contingent reduced market risk applies only if you hold the securities to maturity.
If you are able to sell the securities prior to maturity you may have to sell them for
a loss even if the underlying has not declined below the downside threshold.
|
|
¨
|
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.
|
|
¨
|
The
appreciation potential of the securities is limited by the maximum gain —
Your
potential total return on the securities at maturity is limited by the maximum gain.
As a result, the return on an investment in the securities may be less than the return
on a direct investment in the underlying. In addition, the maximum gain reduces the effect
of the upside gearing for all final underlying levels exceeding the final underlying
level at which, by multiplying the corresponding underlying return by the upside gearing,
the maximum gain is reached.
|
|
¨
|
Investing
in the securities is not equivalent to investing in the underlying or the stocks that
constitute the underlying —
You will not have voting rights, rights to receive
any dividends or other distributions or any other rights with respect to the stocks that
constitute the underlying. As of December 2, 2016, the average dividend yield of the
underlying was approximately 1.49% per year. While it is impossible to know the future
dividend yield of the underlying, if this average dividend yield were to remain constant
for the term of the securities, you would be forgoing an aggregate yield of approximately
4
.
47% (assuming no reinvestment of dividends) by investing in the securities instead
of investing directly in the stocks that constitute the underlying or in another investment
linked to the underlying that provides for a pass-through of dividends. The payment scenarios
described in this pricing supplement do not show any effect of lost dividend yield over
the term of the securities. You should understand that the underlying is not a total
return index, which means that it does not reflect dividends paid on the stocks included
in the underlying. Therefore, the return on your securities will not reflect any reinvestment
of dividends.
|
|
¨
|
Your
payment at maturity depends on the closing level of the underlying on a single day —
Because your payment at maturity depends on the closing level of the underlying solely
on the final valuation date, you are subject to the risk that the closing level of the
underlying 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 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,
you might have achieved better returns.
|
|
¨
|
The
probability that the underlying will fall below the downside threshold on the final valuation
date will depend in part on the volatility of the underlying —
“Volatility”
refers to the frequency and magnitude of changes in the level of the underlying.
In general, the greater the volatility of the underlying, the greater the probability
that the underlying will experience a large decline over the term of the securities and
fall below the downside threshold on the final valuation date. The underlying has
historically experienced significant volatility. As a result, there is a significant
risk that the underlying will fall below the downside threshold on the final valuation
date and that you will incur a significant loss on your investment in the securities.
The terms of the securities are set, in part, based on expectations about the volatility
of the underlying as of the trade date. If expectations about the volatility of
the underlying change over the term of the securities, the value of the securities may
be adversely affected, and if the actual volatility of the underlying proves to be greater
than initially expected, the securities may prove to be riskier than expected on the
trade date.
|
|
¨
|
The
securities are subject to the credit risk of Citigroup Global Markets Holdings Inc. and
Citigroup Inc. —
Any payment on the securities will be made by Citigroup Global
Markets Holdings Inc. and is guaranteed by Citigroup Inc., and therefore is subject to
the credit risk of both 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 any payments that become due under the securities.
As a result, the value of the securities prior to maturity will be affected by changes
in the market’s view of our and Citigroup Inc.’s creditworthiness. Any decline,
or anticipated decline, in either of our or Citigroup Inc.’s credit ratings or
increase, or anticipated increase, in the credit spreads charged by the market for taking
either of our or Citigroup Inc.’s credit risk is likely to adversely affect the
value of the securities.
|
|
¨
|
The
securities will not be listed on a 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.
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¨
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The
estimated value of the securities on the trade date, based on CGMI’s proprietary
pricing models and our internal funding rate, will be less than the issue price —
The difference is attributable to certain costs associated with selling, structuring
and hedging the securities that are included in the issue price. These costs include
(i) the underwriting discount paid in connection with the offering of the securities,
(ii) hedging and other costs incurred by us and our affiliates in connection with the
offering of the securities and (iii) the expected profit (which may be more or less than
actual profit) to CGMI or other of our affiliates in connection with hedging our obligations
under the securities. These costs adversely affect the economic terms of the securities
because, if they were lower, the economic terms of the securities would be more favorable
to you. The economic terms of the securities are also likely to be adversely affected
by the use of our internal funding rate, rather than our secondary market rate, to price
the securities. See “The estimated value of the securities would be lower if it
were calculated based on our secondary market rate” below.
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|
¨
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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, dividend yields on the stocks that constitute the underlying and interest
rates. CGMI’s views on these inputs may differ from your or others’ views,
and as an underwriter in this offering, CGMI’s interests may conflict with yours.
Both the models and the inputs to the models may prove to be wrong and therefore not
an accurate reflection of the value of the 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.
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¨
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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.
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¨
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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.
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¨
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The
value of the securities prior to maturity will fluctuate based on many unpredictable
factors —
As described under “Valuation of the Securities” below,
the payout on the securities could be replicated by a hypothetical package of financial
instruments consisting of a fixed-income bond and one or more derivative instruments.
As a result, the factors that influence the values of fixed-income bonds and derivative
instruments will also influence the terms of the securities at issuance and the value
of the securities prior to maturity. Accordingly, the value of your securities prior
to maturity will fluctuate based on the level and volatility of the underlying, dividend
yields on the stocks that constitute the underlying, interest rates generally, the time
remaining to maturity and our and Citigroup Inc.’s creditworthiness, as reflected
in our secondary market rate. You should understand that the value of your securities
at any time prior to maturity may be significantly less than the issue price. The stated
payout from the issuer, including the potential application of the upside gearing and
the downside threshold, only applies if you hold the securities to maturity.
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¨
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Immediately
following issuance, any secondary market bid price provided by CGMI, and the value that
will be indicated on any brokerage account statements prepared by CGMI or its affiliates,
will reflect a temporary upward adjustment —
The amount of this temporary upward
adjustment will decline to zero over the temporary adjustment period. See “Valuation
of the Securities” in this pricing supplement.
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¨
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The
securities will be subject to risks associated with small capitalization stocks —
The stocks that constitute the underlying 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.
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¨
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Our
affiliates, or UBS or its affiliates, may publish research, express opinions or provide
recommendations that are inconsistent with investing in or holding the securities —
Any such research, opinions or recommendations could affect the level of the underlying
and the value of the securities. Our affiliates, and UBS and its affiliates, publish
research from time to time on financial markets and other matters that may influence
the value of the securities, or express opinions or provide recommendations that may
be inconsistent with purchasing or holding the securities. Any research, opinions or
recommendations expressed by our affiliates or by UBS or its affiliates may not be consistent
with each other and may be modified from time to time without notice. These and other
activities of our affiliates or UBS or its affiliates may adversely affect the level
of the underlying and may have a negative impact on your interests as a holder of the
securities. Investors should make their own independent investigation of the merits of
investing in the securities and the underlying to which the securities are linked.
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¨
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Trading
and other transactions by our affiliates, or by UBS or its affiliates, in the equity
and equity derivative markets may impair the value of the securities —
We expect
to hedge our exposure under the securities through CGMI or other of our affiliates, who
will likely enter into equity and/or equity derivative transactions, such as over-the-counter
options or exchange-traded instruments, relating to the underlying or the stocks included
in the underlying and may adjust such positions during the term of the securities. It
is possible that our affiliates could receive substantial returns from these hedging
activities while the value of the securities declines. Our affiliates and UBS and its
affiliates may also engage in trading in instruments linked to the underlying on a regular
basis as part of their respective general broker-dealer and other businesses, for proprietary
accounts, for other accounts under management or to facilitate transactions for customers,
including block transactions. Such trading and hedging activities may affect the level
of the underlying and reduce the return on your investment in the securities. Our affiliates
or UBS or its affiliates may also issue or underwrite other securities or financial or
derivative instruments with returns linked or related to the underlying. By introducing
competing products into the marketplace in this manner, our affiliates or UBS or its
affiliates could adversely affect the value of the securities. Any of the foregoing activities
described in this paragraph may reflect trading strategies that differ from, or are in
direct opposition to, investors’ trading and investment strategies relating to
the securities.
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¨
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Our
affiliates, or UBS or its affiliates, may have economic interests that are adverse to
yours as a result of their respective business activities —
Our affiliates
or UBS or its affiliates may currently or from time to time engage in business with the
issuers of the stocks that constitute the underlying, including extending loans to, making
equity investments in or providing advisory services to such issuers. In the course of
this business, our affiliates or UBS or its affiliates may acquire non-public information
about those issuers, which they will not disclose to you. Moreover, if any of our affiliates
or UBS or any of its affiliates is or becomes a creditor of any such issuer, they may
exercise any remedies against that issuer that are available to them without regard to
your interests.
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¨
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The
calculation agent, which is an affiliate of ours, will make important determinations
with respect to the securities —
If certain events occur, such as market disruption
events or the discontinuance of the underlying, CGMI, as calculation agent, will be required
to make discretionary judgments that could significantly affect what you receive at maturity.
Such judgments could include, among other things, any level required to be determined
under the securities. In addition, if certain events occur, CGMI will be required to
make certain discretionary judgments that could significantly affect your payment at
maturity. Such judgments could include, among other things:
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|
¨
|
determining
whether a market disruption event has occurred;
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¨
|
if
a market disruption event occurs on the final valuation date, determining whether to
postpone the final valuation date;
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¨
|
determining
the level of the underlying if the level of the underlying is not otherwise available
or a market disruption event has occurred; and
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¨
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selecting
a successor underlying or performing an alternative calculation of the level of the underlying
if the underlying is discontinued or materially modified (see “Description of the
Securities—Certain Additional Terms for Securities Linked to an Underlying Index—Discontinuance
or Material Modification of an Underlying Index” in the accompanying product supplement).
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In making
these judgments, the calculation agent’s interests as an affiliate of ours could be adverse to your interests as a holder
of the securities.
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¨
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Adjustments
to the underlying may affect the value of your securities —
Russell Investment
Group (the “underlying publisher”) may add, delete or substitute the stocks
that constitute the underlying or make other methodological changes that could affect
the level of the underlying. The underlying publisher may discontinue or suspend calculation
or publication of the underlying at any time without regard to your interests as holders
of the 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 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. You should read carefully the discussion
under “United States Federal Tax Considerations” and “Risk Factors
Relating to the Securities” in the accompanying product supplement and “United
States Federal Tax Considerations” in this pricing supplement. You should also
consult your tax adviser regarding the U.S. federal tax consequences of an investment
in the securities, as well as tax consequences arising under the laws of any state, local
or non-U.S. taxing jurisdiction.
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Hypothetical
terms only. Actual terms may vary. See the cover page for actual offering terms.
The diagram below illustrates your
hypothetical payment at maturity for a range of hypothetical percentage changes from the initial underlying level to the final
underlying level. The diagram below is based on a hypothetical maximum gain of 33.75%.
Investors in the securities will
not receive any dividends on the stocks that constitute the underlying. 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 or the stocks that constitute the underlying” above.
The following table and hypothetical
examples below illustrate the payment at maturity per $10.00 stated principal amount of securities for a hypothetical range of
performances for the underlying from -100.00% to +100.00% and assume an initial underlying level of 1,330.00, a downside threshold
of 997.50 (75.00% of the initial underlying level) and a maximum gain of 33.75%. The actual initial underlying level, downside
threshold and maximum gain will be determined on the trade date. The hypothetical payment at maturity examples set forth below
are for illustrative purposes only and may not be the actual returns applicable to a purchaser of the securities. The actual payment
at maturity will be determined based on the final underlying level on the final valuation date. You should consider carefully
whether the securities are suitable to your investment goals. The numbers appearing in the table and in the examples below have
been rounded for ease of analysis.
Final
Underlying Level
|
Underlying
Return
|
Payment
at Maturity
|
Total
Return on Securities at Maturity
(1)
|
2,660.000
|
100.000%
|
$13.375
|
33.750%
|
2,527.000
|
90.000%
|
$13.375
|
33.750%
|
2,394.000
|
80.000%
|
$13.375
|
33.750%
|
2,261.000
|
70.000%
|
$13.375
|
33.750%
|
2,128.000
|
60.000%
|
$13.375
|
33.750%
|
1,995.000
|
50.000%
|
$13.375
|
33.750%
|
1,862.000
|
40.000%
|
$13.375
|
33.750%
|
1,729.000
|
30.000%
|
$13.375
|
33.750%
|
1,596.000
|
20.000%
|
$13.375
|
33.750%
|
1,554.438
|
16.875%
|
$13.375
|
33.750%
|
1,463.000
|
10.000%
|
$12.000
|
20.000%
|
1,330.000
|
0.000%
|
$10.000
|
0.000%
|
1,197.000
|
-10.000%
|
$10.000
|
0.000%
|
1,064.000
|
-20.000%
|
$10.000
|
0.000%
|
997.500
|
-25.000%
|
$10.000
|
0.000%
|
997.367
|
-25.010%
|
$7.499
|
-25.010%
|
931.000
|
-30.000%
|
$7.000
|
-30.000%
|
798.000
|
-40.000%
|
$6.000
|
-40.000%
|
665.000
|
-50.000%
|
$5.000
|
-50.000%
|
532.000
|
-60.000%
|
$4.000
|
-60.000%
|
399.000
|
-70.000%
|
$3.000
|
-70.000%
|
266.000
|
-80.000%
|
$2.000
|
-80.000%
|
133.000
|
-90.000%
|
$1.000
|
-90.000%
|
0.000
|
-100.000%
|
$0.000
|
-100.000%
|
1
The “Total Return on Securities at Maturity” is calculated as (a) the payment at maturity per security minus
the $10.00 issue price per security
divided by
(b) the $10.00 issue price per security.
Example 1 — The final underlying
level of 2,128.00 is greater than the initial underlying level of 1,330.00, resulting in an underlying return of 60.00%.
Because
the underlying return of 60.00% multiplied by the upside gearing of 2.00 is greater than the maximum gain of 33.75%, Citigroup
Global Markets Holdings Inc. would pay you the stated principal amount plus a return equal to the maximum gain of 33.75%, resulting
in a payment at maturity of $13.375 per $10.00 stated principal amount of securities (a total return at maturity of 33.75%*),
calculated as follows:
$10.00 × (1
+ the
lesser of
(i) underlying return × upside gearing and (ii) maximum gain)
$10.00 ×
(1 + the
lesser of
(i) 60.00% × 2.00 and (ii) 33.75%)
$10.00 ×
(1 + 33.75%) = $13.375
In this example, an investment in
the securities would underperform a direct investment in the underlying.
Example 2 — The final underlying
level of 1,463.00 is greater than the initial underlying level of 1,330.00, resulting in an underlying return of 10.00%.
Because
the underlying return of 10.00% multiplied by the upside gearing of 2.00 is less than the maximum gain of 33.75%, Citigroup Global
Markets Holdings Inc. would pay you the stated principal amount plus a return equal to 20.00%, resulting in a payment at maturity
of $12.00 per $10.00 stated principal amount of securities (a total return at maturity of 20.00%*), calculated as follows:
$10.00 × (1
+ the
lesser of
(i) underlying return × upside gearing and (ii) maximum gain)
$10.00 ×
(1 + the
lesser of
(i) 10.00% × 2.00 and (ii) 33.75%)
$10.00 ×
(1 + 20.00%) = $12.00
Example 3 — The final underlying
level of 1,197.00 is less than the initial underlying level of 1,330.00 (resulting in an underlying return of -10.00%) but greater
than the downside threshold of 997.50.
Because the underlying return is negative and the final underlying level is greater
than the downside threshold, Citigroup Global Markets Holdings Inc. would pay you a payment at maturity of $10.00 per $10.00 stated
principal amount of securities (a total return at maturity of 0.00%*).
Example 4 — The final underlying
level of 399.00 is less than the initial underlying level of 1,330.00 (resulting in an underlying return of -70.00%) and less
than the downside threshold of 997.50.
Because the underlying return is negative and the final underlying level is less than
the downside threshold, Citigroup Global Markets Holdings Inc. would pay you a payment at maturity of $3.00 per $10.00 stated
principal amount of securities (a total return at maturity of -70.00%*), calculated as follows:
$10.00 ×
(1 + underlying return)
$10.00 ×
(1+ -70.00%) = $3.00
If the final underlying level
is less than the downside threshold, you will be fully exposed to the negative underlying return, resulting in a loss on the stated
principal amount that is proportionate to the percentage decline in the level of the underlying. Under these circumstances, you
will lose a significant portion or all of the stated principal amount at maturity. Any payment on the securities, including any
repayment of the stated principal amount at maturity, is subject to the creditworthiness of the issuer and the guarantor, and
if the issuer and the guarantor were to default on their obligations, you could lose your entire investment.
* The total return at maturity is
calculated as (a) the payment at maturity per security minus the $10.00 issue price per security
divided by
(b) the $10.00
issue price per security.
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 underlying, including information concerning
its composition and calculation and certain risks that are associated with an investment linked to the underlying.
The graph below illustrates the performance of the underlying
from January 2, 2008 to December 2, 2016. The closing level of the underlying on December 2, 2016 was 1,314.25. We obtained the
closing levels of the underlying from Bloomberg, and we have not participated in the preparation of or verified such information.
The historical closing levels of the underlying should not be taken as an indication of future performance and no assurance can
be given as to the final underlying level or any future closing level of the underlying. We cannot give you assurance that the
performance of the underlying will result in a positive return on your initial investment and you could lose a significant portion
or all of the stated principal amount at maturity.
United States Federal
Tax Considerations
|
You should read carefully the discussion
under “United States Federal Tax Considerations” and “Risk Factors Relating to the Securities” in the
accompanying product supplement and “Summary Risk Factors” in this pricing supplement.
In the opinion of our counsel, Davis
Polk & Wardwell LLP, which is based on current market conditions, a security should be treated as a prepaid forward contract
for U.S. federal income tax purposes. By purchasing a security, you agree (in the absence of an administrative determination or
judicial ruling to the contrary) to this treatment. There is uncertainty regarding this treatment, and the IRS or a court might
not agree with it.
Assuming this treatment of the securities
is respected and subject to the discussion in “United States Federal Tax Considerations” in the accompanying product
supplement, the following U.S. federal income tax consequences should result under current law:
You should not recognize taxable
income over the term of the securities prior to maturity, other than pursuant to a sale or exchange.
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.
Subject to the discussion in “United
States Federal Tax Considerations” in the accompanying product supplement, if you are a Non-U.S. Holder (as defined in the
accompanying product supplement) of the securities, you generally should not be subject to U.S. federal withholding or income
tax in respect of any amount paid to you with respect to the securities, provided that (i) income in respect of the securities
is not effectively connected with your conduct of a trade or business in the United States, and (ii) you comply with the applicable
certification requirements.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income
over the term of their investment. It also asks for comments on a number of related topics, including the character of income
or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance
of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the
instruments are linked; the degree,
if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax;
and whether these instruments are or should be subject to the “constructive ownership” regime, 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. If withholding tax applies to the securities, we will not be
required to pay any additional amounts with respect to amounts so withheld.
You should read the section entitled
“United States Federal Tax Considerations” in the accompanying product supplement. The preceding discussion, when
read in combination with that section, constitutes the full opinion of Davis Polk & Wardwell LLP regarding the material U.S.
federal tax consequences of owning and disposing of the securities.
You should also consult your
tax adviser regarding all aspects of the U.S. federal income and estate tax consequences of an investment in the securities and
any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Supplemental Plan of
Distribution
|
CGMI, an affiliate of Citigroup
Global Markets Holdings Inc. and the lead agent for the sale of the securities, will receive an underwriting discount of $0.25
for each security sold in this offering. UBS, as agent for sales of the securities, expects to purchase from CGMI, and CGMI expects
to sell to UBS, all of the securities sold in this offering for $9.75 per security. UBS proposes to offer the securities to the
public at a price of $10.00 per security. UBS will receive an underwriting discount of $0.25 per security for each security it
sells to the public. The underwriting discount will be received by UBS and its financial advisors collectively. If all of the
securities are not sold at the initial offering price, CGMI may change the public offering price and other selling terms.
CGMI is an affiliate of ours. Accordingly,
this offering will conform with the requirements addressing conflicts of interest when distributing the 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. It is expected that CGMI or such other affiliates may profit from such
expected hedging activity even if the value of the securities declines. This hedging activity could affect the closing level of
the underlying 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 trade 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 trade date.
During a temporary adjustment period
immediately 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 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 over the temporary adjustment period. CGMI currently expects that the temporary adjustment period
will be approximately 8 months, but the actual length of the temporary adjustment period may be shortened due to various factors,
such as the volume of secondary market purchases of the securities and other factors that cannot be predicted. 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 a securities exchange and you may not be able to sell them prior to maturity.”
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