Rule 424(b)(3)
File No. 33-99948
PRICING SUPPLEMENT NO. 3
dated
August 21, 1997
to the
Prospectus
dated
December 28, 1995
and
Prospectus Supplement
dated
January 3, 1996
------------------------
$120,000,000
GS FINANCIAL PRODUCTS U.S., L.P.
MEDIUM-TERM NOTES, SERIES B
-----------------
3% CITICORP EXCHANGEABLE NOTES DUE AUGUST 28, 2002
-----------------
AN INVESTMENT IN THE NOTES TO WHICH THIS PRICING SUPPLEMENT
RELATES PRESENTS CERTAIN RISKS THAT SHOULD BE CAREFULLY
CONSIDERED BY INVESTORS.
SEE "RISK FACTORS" BEGINNING ON PAGE 10.
----------------
This Pricing Supplement, Prospectus and Prospectus Supplement are to be
used by Goldman, Sachs & Co. in connection with offers and sales of the Issuer's
3% Citicorp Exchangeable Notes due August 28, 2002 (the "Notes"), related to
market-making transactions in the Notes, on one or more exchanges or in the
over-the-counter market or otherwise, at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. The Issuer will not receive any proceeds from such transactions.
Goldman, Sachs & Co. may act as principal or as agent in such transactions.
GOLDMAN, SACHS & CO.
---------------
<PAGE>
SEE "RISK FACTORS" IN THIS PRICING SUPPLEMENT AND "CERTAIN FACTORS" AND
"RISKS RELATED TO INDEXED SECURITIES" IN THE ACCOMPANYING PROSPECTUS, DATED
DECEMBER 28, 1995 (THE "PROSPECTUS"), FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY POTENTIAL INVESTORS IN THE NOTES, INCLUDING THAT THE
VALUE OF THE NOTES WILL DEPEND UPON FLUCTUATIONS IN THE VALUE OF THE COMMON
STOCK, PAR VALUE $1.00 PER SHARE (THE "COMMON STOCK"), OF CITICORP ("CITICORP").
CAPITALIZED TERMS USED HEREIN BUT NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS
ASSIGNED TO THEM IN THE PROSPECTUS OR THE PROSPECTUS SUPPLEMENT, DATED JANUARY
3, 1996.
THE FOLLOWING SUMMARY OF CERTAIN TERMS OF THE NOTES IS SUBJECT TO THE MORE
DETAILED TERMS OF THE NOTES INCLUDED ELSEWHERE IN THIS PRICING SUPPLEMENT.
Issuer: GS Financial Products U.S., L.P.
Securities Offered: 3% Citicorp Exchangeable Notes due August 28,
2002 (the "Notes"). The Notes are a series of the
Issuer's Medium-Term Notes, Series B.
Face Amount: $120,000,000.
Denominations: Face Amount of $250,000 and any integral multiples of
$250,000 in excess thereof.
Common Stock: Common stock, par value $1.00 per share, of Citicorp.
Issue Date: August 28, 1997.
Stated Maturity Date: August 28, 2002 or, if not a Business Day, the next
succeeding Business Day.
Interest Rate: 3% per annum from and including August 28, 1997 to
but excluding the Stated Maturity Date, Call Date or
Redemption Date, as the case may be.
Interest Payment Dates: February 28 and August 28 of each year and on the
Stated Maturity Date, commencing February 28, 1998,
or, if any such day is not a Business Day, the next
succeeding Business Day. See "Description of
Notes--Interest".
-2-
<PAGE>
Principal Amount: On the Stated Maturity Date, the Holder of a Note
will be entitled to receive an amount in cash equal
to 100% of the Face Amount if the Note has not been
exchanged by the Holder thereof prior to the fifth
Business Day immediately preceding the Stated Maturity
Date or called by the Issuer as described under "Call
Feature" or redeemed by the Issuer as described under
"Redemption," as the case may be, prior to the Stated
Maturity Date.
Exchange Right: On any Exchange Date (as defined under "Description
of Notes--Definitions"), subject to (i) a prior
call of the Notes as described below under "Call
Feature" or (ii) a prior redemption of the Notes as
described below under "Redemption", a Holder will have
the right to exchange each $250,000 Face Amount of a
Note for 1455.207 shares of Common Stock (the "Exchange
Rate"). See "Description of Notes--Exchange Right".
Notes may only be exchanged in minimum Face Amounts of
$250,000 and integral multiples of $250,000 in excess
thereof. A Holder will receive cash in lieu of any
fractional shares of Common Stock to which such Holders
might otherwise be entitled upon exchange. See
"Description of Notes--Exchange Right".
Exchange Rate: 1455.207 shares of Common Stock per $250,000 Face
Amount of Notes.
Call Feature: On and after September 14, 1999, the Notes are
subject to redemption, at the option of the Issuer, in
whole but not in part, at 100% of the Face Amount,
together with accrued interest to but excluding the
Call Date (as defined under "Description of
Notes--Definitions"). See "Description of Notes--Call
Feature". On and after the Call Notice Date (as defined
under "Description of Notes--Definitions") and until,
but not including, the fifth Business Day immediately
-3-
<PAGE>
preceding the Call Date, Holders of the Notes will be
able to exercise the Exchange Right.
Events of Default and
Acceleration: The amount payable upon an acceleration of the Notes
due to an Event of Default prior to the fifth Business
Day immediately preceding the Stated Maturity Date,
Redemption Date or Call Date, as the case may be, is
described under "Description of Notes--Events of
Default and Acceleration; Default Amount".
Redemption: During the period from the Issue Date to and including
September 13, 1999, the Notes are redeemable, at the
option of the Issuer, if the Issuer has determined it
will no longer maintain its public registrant status
with the Securities and Exchange Commission (the
"Commission"). Upon any such redemption, the Notes will
be redeemable as a whole and not in part and the amount
payable upon any such redemption will be the greater of
(i) 105% of the average of the Closing Values (as
defined under "Description of Notes--Redemption of
Notes") of the Notes on the 10 trading days immediately
preceding the date of the mailing of the notice of
redemption or (ii) 100% of the Face Amount of the Notes
to be redeemed. See "Description of Notes--Redemption
of Notes".
Specified Currency -
Principal and Interest: U.S. Dollars.
Regular Record Date So long as the Notes are maintained in the form of a
Global Note, the record date with respect to any
Interest Payment Date on such Note will be the
Business Day immediately preceding such Interest
Payment Date.
-4-
<PAGE>
Calculation Agent: GS&Co. The Calculation Agent, is an affiliate of
the Issuer, and will have no liability to the Issuer or
any holder of the Notes for any action taken or omitted
to be taken by it as Calculation Agent in good faith.
See "Risk Factors--Discretion of GS&Co. as Calculation
Agent" for a discussion of certain conflicts of
interest that may arise with respect to GS&Co.'s
responsibilities as Calculation Agent.
Form of Note: Global Note.
Defeasance: The provisions described in the Prospectus under
"Description of Notes--Defeasance and Covenant
Defeasance" do not apply to the Notes.
Tax Considerations: Although the matter is not free from doubt, the Notes
should be treated as instruments that are subject to
special rules governing contingent debt obligations.
See "United States Federal Income Tax Considerations".
Ranking of Notes: The Notes will be unsecured and general obligations
of the Issuer and will rank equally among themselves
and with all other unsecured and unsubordinated
indebtedness of the Issuer.
Listing: The Notes are listed on the American Stock Exchange
("AMEX"). The AMEX symbol for the Notes is "GSC.A".
Use of Proceeds: Approximately 98% of the net proceeds from the issuance
of the Notes were used by the Issuer to purchase shares
of Common Stock (although the Issuer will not be
required to retain such Common Stock) and to purchase
exchange-traded put options on such Common Stock.
The Issuer will write over-the-counter options,
the net proceeds of which, together with the remainder
of the net proceeds from the issuance of the Notes,
will be added to the Issuer's working capital to
support its Derivative Transaction activities. See "Use
of
-5-
<PAGE>
Proceeds and Hedging" in this Pricing Supplement
and "Use of Proceeds" in the accompanying Prospectus.
-6-
<PAGE>
HYPOTHETICAL RETURNS OF THE NOTES
The table below compares the total return to Stated Maturity of owning
Common Stock (which trades on the New York Stock Exchange, Inc. ("NYSE")) to the
total return of owning Notes assuming the Exchange Rate was initially
established at a ratio of the Face Amount to 125% of the price of the Common
Stock on August 21, 1997 of $137 7/16 per share. The excess over 100% of the
price of the Common Stock on August 21, 1997 is the "Premium" and is the
percentage by which the price of the Common Stock must increase to equal the
Face Amount at the Exchange Rate.
THE FOLLOWING TABLE IS PROVIDED FOR PURPOSES OF ILLUSTRATION ONLY. IT
SHOULD NOT BE TAKEN AS AN INDICATION OR PREDICTION OF FUTURE INVESTMENT RESULTS,
AND IS MERELY INTENDED TO ILLUSTRATE THE IMPACT OF VARIOUS ASSUMED COMMON STOCK
PRICES AT THE END OF THE INDICATED PERIOD ON THE PRICE OF THE NOTES, ASSUMING
ALL OTHER VARIABLES ARE HELD CONSTANT.
ASSUMPTIONS: Common Stock Price on August 21, 1997 in Dollars $137 7/16
Assumed Common Stock Dividend Yield 1.5%
Assumed Premium 25.0%
No exercise by Issuer of Call Feature or
Redemption right.
No antidilution adjustments to Exchange Date.
-7-
<PAGE>
AT STATED MATURITY DATE
<TABLE>
COMMON STOCK NOTES NOTES
C
<S> <C> <C> <C> <C>
ASSUMED COMMON
STOCK PRICE AT STATED TOTAL VALUE OF
ASSUMED MATURITY DATE AS % RETURN(1) OF NOTES AS TOTAL
COMMON(2) OF PRICE OF COMMON COMMON % OF FACE RETURN(1) OF
STOCK PRICE STOCK ON TRADE DATE STOCK AMOUNT(3) NOTES
$ 68.72 50.00% (42.50)% 100.00% 15.00%
82.46 60.00 (32.50) 100.00 15.00
96.21 70.00 (22.50) 100.00 15.00
109.95 80.00 (12.50) 100.00 15.00
123.69 90.00 (2.50) 100.00 15.00
137.44 100.00 7.50 100.00 15.00
151.18 110.00 17.50 100.00 15.00
164.93 120.00 27.50 100.00 15.00
178.67 130.00 37.50 104.00 17.50
192.41 140.00 47.50 112.00 25.50
206.16 150.00 57.50 120.00 33.50
219.90 160.00 67.50 128.00 41.50
233.64 170.00 77.50 136.00 49.50
</TABLE>
(1) Total Return represents the percentage change in the price of the Common
Stock and the Notes, respectively, over a five year period assuming, in
the case of the Notes, that the value of the Notes equals the greater of
the Face Amount of the Notes or the price of the Common Stock for which
they are exchangeable under the assumptions of footnote 3. The total
return calculation uses the value of such security at the end of the
specified period and includes any dividends or interest paid on such
security over the specified period but does not assume the reinvestment
thereof.
(2) Assumes stock price is unchanged from the last Exchange Date until the
Stated Maturity Date.
(3) Assumes the Notes are exchanged for shares on the last Exchange Date if
the value of the shares is greater than the Face Amount plus the last
coupon. There can be no assurance that the Notes will trade prior to Stated
Maturity at the price bearing that relationship to the price of the Common
Stock.
-8-
<PAGE>
THE ISSUER
The Issuer was formed as a Cayman Islands exempted limited partnership on
February 5, 1992. All the partnership interests in the Issuer are owned by
subsidiaries of The Goldman Sachs Group, L.P. ("Group").
The Issuer is a derivative products company engaged in the business of
entering into, as principal or guarantor, a variety of types of transactions,
principally interest rate swaps, interest rate options (e.g., interest rate
caps, interest rate floors and options on interest rate swaps), currency swaps
and options, commodity swaps and options, index swaps and forward contracts
(collectively, "Derivative Transactions"). Generally, the Issuer enters into or
guarantees Derivative Transactions in situations where two or more
counterparties (typically including a related party) wish to enter into one or
more Derivative Transactions between themselves, but want the Issuer to
substitute its credit for that of one or more of the counterparties. Market
practice for such transactions is that the Issuer typically substitutes its own
credit for that of one or more of the counterparties by entering into each of
such transactions directly as principal.
Because of the nature of its business, the Issuer does not intend to incur
any payment or delivery obligation unless it is entitled to receive an equal or
greater payment or delivery from one or more third parties (which may be
affiliates of Group). In general, the Issuer refers to transactions where all of
the payment obligations or delivery obligations can be met from cash flows or
delivery obligations from one or more other transactions in its portfolio as
being "hedged", and as not having "market risk".
At May 30, 1997, the Issuer had entered into or guaranteed $23 billion
notional amount of interest rate swaps and options, $7 billion notional amount
of currency options, forwards and swaps and $0.05 billion notional amount of
other swaps and options with a total of 78 counterparties. As of May 30, 1997,
the Issuer had partners' capital of approximately $141 million, which exceeded
the Issuer's exposure to any single obligor. See "Certain Factors--Credit Risk"
in the Prospectus.
The Issuer is not registered as a "Broker-Dealer" under the Securities
Exchange Act of 1934 or as an "investment company" under the Investment Company
Act of 1940.
-9-
<PAGE>
RISK FACTORS
Prior to making an investment decision with respect to the Notes, potential
investors are urged to consider those factors presented below and in the
Prospectus under "Certain Factors" and "Risks Relating to Indexed Securities".
RELATIONSHIP OF NOTES AND THE COMMON STOCK
The market price of the Notes is expected to be affected principally by
changes in the price of the Common Stock, interest rates and estimates of future
volatility in the Common Stock. As indicated under "Citicorp--Historical
Information", the price of the Common Stock has during certain recent periods
been volatile. It is impossible to predict whether the price of the Common Stock
will rise or fall. Trading prices of the Common Stock will be influenced by the
financial results and prospects of Citicorp and by complex and interrelated
political, economic, financial, bank regulatory and other factors that can
affect capital markets generally and the market segment of which the Common
Stock is a part. See "Citicorp".
EFFECT OF TRADING AND OTHER TRANSACTIONS BY THE ISSUER IN THE COMMON STOCK
As described under "Use of Proceeds and Hedging," the Issuer will hedge its
obligations under the Notes by acquiring shares of Common Stock and purchasing
exchange-traded put options on the Common Stock, writing over-the-counter
options and entering into interest rate and equity-linked swaps with GS&Co.
and/or Goldman Sachs Capital Markets, L.P., an affiliate of the Issuer ("GSCM").
It is anticipated that GS&Co. will hedge its obligations under the options from
time to time by (i) acquiring, disposing of or selling short the Common Stock or
other securities of Citicorp, (ii) taking positions in or disposing of positions
in listed or over-the-counter options on the Common Stock and (iii) taking
positions in or disposing of positions in listed or over-the-counter options or
other instruments based on broad market indices or indices designed to track the
performance of financial services stocks. Moreover, GS&Co. may liquidate its
hedges, in whole or in part, on or prior to the Stated Maturity Date, Redemption
Date or Call Date. Any of these activities may adversely affect the value of the
Notes. It is possible that GS&Co. could receive substantial returns with respect
to its hedging activities while the value of the Notes may decline. See "Use of
Proceeds and Hedging" for a further discussion of securities transactions that
will be engaged in by the Issuer and may be engaged in by GS&Co.
GS&Co. and other affiliates of the Issuer may also engage in trading in the
Common Stock for their proprietary accounts, for other accounts under their
management and to facilitate transactions (including block transactions) on
behalf of customers. GS&Co. and other affiliates of the Issuer may also issue or
underwrite
-10-
<PAGE>
other securities or financial instruments with returns indexed to changes in the
value of the Common Stock. Trading in the Common Stock by GS&Co. and other
affiliates of the Issuer and the issuance or underwriting of other securities or
financial instruments indexed to the value of the Common Stock could adversely
affect the value of the Notes.
The Indenture relating to the Notes does not contain any restriction on the
ability of the Issuer to sell, pledge or otherwise convey all or any portion of
the Common Stock to be acquired by it, and no shares of Common Stock will be
pledged or otherwise held in escrow for exchange to Holders of Notes.
Consequently, in the event of a bankruptcy, insolvency or liquidation of the
Issuer, any Common Stock owned by the Issuer will be subject to the claims of
the creditors of the Issuer.
NO RIGHTS AS STOCKHOLDERS
Holders of the Notes will not be entitled to any rights with respect to the
Common Stock (including, without limitation, voting rights and rights to receive
any dividends or other distributions in respect thereof) unless and until the
Exchange Settlement Date (as defined under "Description of Notes--Definitions"),
and unless the applicable record date, if any, for the exercise of such rights
occurs after such date.
POTENTIAL CONFLICTS OF INTEREST
As discussed above under "Effect of Trading and other Transactions by the
Issuer in the Common Stock", GS&Co. and other affiliates of the Issuer expect to
engage in trading activities related to the Common Stock for their proprietary
accounts and to facilitate transactions (including block transactions) for
customers, and GS&Co. and other affiliates of the Issuer may engage in trading
for other accounts under their management. These trading activities may present
a conflict of interests between the interests of Holders of the Notes and the
interests GS&Co. and other affiliates of the Issuer will have in their
proprietary accounts, in the customer transactions and in accounts under their
management. These trading activities, if they influence the price of the Common
Stock, could be adverse to the interests of the Holders of the Notes.
GS&Co. and other affiliates of the Issuer may engage in business with
Citicorp in the future, including extending loans to, or making equity
investments in, Citicorp or providing advisory services to Citicorp, including
merger and acquisition advisory services, and maintaining a commercial banking
relationship with Citicorp. These activities may present a conflict between
GS&Co.'s (or such other of the Issuer's affiliate's) obligations to Citicorp and
the interests of Holders of the Notes. Moreover, GS&Co. has published and
anticipates that it will in the future publish research reports
-11-
<PAGE>
with respect to Citicorp. Any of these activities by GS&Co. or another
affiliate of the Issuer may affect the price of the Common Stock and/or the
value of the Notes.
As discussed under "Effect of Trading and other Transactions by the Issuer
in Common Stock," GS&Co. and its affiliates may engage in transactions in the
Common Stock, other securities of Citicorp and listed and over-the-counter
options on the Common Stock and various indices in order to hedge its option
positions with the Issuer. These activities may adversely affect the price of
the Common Stock and the Notes, but may result in a profit for GS&Co.
DISCRETION OF GS&CO. AS CALCULATION AGENT
GS&Co., as Calculation Agent, has discretion in making certain
determinations in connection with certain anti-dilution adjustments. See
"Description of Notes--Anti- Dilution Adjustments". The exercise of this
discretion by GS&Co. could adversely affect the value of the Notes and may
present conflicts of interest between GS&Co.'s activities as Calculation Agent
and GS&Co.'s activities for its proprietary accounts and in facilitating
transactions (including block transactions) for its customers and for accounts
under its management and GS&Co's future business or advisory relationships with
Citicorp. See "Potential Conflicts of Interest" above.
GS&Co. will have no liability to the Issuer or any holder of Notes for any
action taken or omitted to be taken by it as Calculation Agent in good faith.
LACK OF AFFILIATION BETWEEN THE ISSUER AND CITICORP; NO RESPONSIBILITY FOR
CITICORP DISCLOSURE
The Issuer is not affiliated with Citicorp and, as of the date of this
Pricing Supplement, does not have any material non-public information concerning
Citicorp. The Issuer assumes no responsibility for the adequacy or accuracy of
the information contained in this Pricing Supplement with respect to Citicorp or
in any of Citicorp's publicly available filings. Investors in the Notes should
make their own investigation into Citicorp. See "Citicorp".
Citicorp is not involved in the offering of the Notes and has no obligation
with respect to the Notes, including any obligation to take the interests of the
Holders of the Notes into consideration for any reason. Citicorp will not
receive any of the proceeds of the offering of the Notes made hereby and is not
responsible for, and has not participated in, the determination of the timing
of, prices for, or quantities of, the Notes offered hereby or the determination
or calculation of the amount to be paid to Holders of Notes at maturity.
Citicorp is not involved with the administration, marketing or
-12-
<PAGE>
trading of the Notes and has no obligations with respect to the amount to be
paid to Holders of the Notes.
POSSIBLE ILLIQUIDITY OF NOTES; SECONDARY TRADING IN THE NOTES
The Notes are listed on AMEX. The AMEX symbol for the Notes is "GSC.A".
The Notes are a new issue of securities and it is impossible to predict
whether a secondary market for the Notes will develop or how the Notes will
trade in any market that does develop. The Issuer has been advised by GS & Co.
that GS & Co. intends to make a market in the Notes but it is not obligated to
do so and any such market making may be discontinued at any time without notice.
DILUTION
The Exchange Rate is subject to adjustment for certain events arising from
stock splits and combinations, stock dividends, extraordinary cash dividends and
certain other events that affect Citicorp's capital structure. See "Description
of Notes--Anti-Dilution Adjustments" below. The Exchange Rate will not be
adjusted for other events, such as offerings of the Common Stock for cash or an
issuer tender or exchange offer at a premium to the then current market price or
a third party tender or exchange offer for less than all of the outstanding
shares of the Common Stock, that may adversely affect the price of the Common
Stock and, therefore, adversely affect the trading price of the Notes and the
amount of Common Stock to be exchanged for the Notes. There can be no assurance
that Citicorp will not make offerings of the Common Stock in the future or
effect an issuer tender or exchange offer or take any other action which
adversely affects the value of the Notes but does not result in an anti-dilution
adjustment.
CALL FEATURE
On and after September 14, 1999, the Notes are subject to redemption, at
the option of the Issuer, in whole but not in part, at 100% of the Face Amount,
together with accrued interest to but excluding the Call Date. The Call Feature
is expected to affect the price of the Notes in secondary market trading.
-13-
<PAGE>
DESCRIPTION OF NOTES
SEE "RISK FACTORS" IN THIS PRICING SUPPLEMENT AND "CERTAIN FACTORS" AND
"RISKS RELATING TO INDEXED SECURITIES" IN THE PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE NOTES.
The following description of Notes offered hereby supplements and, to the
extent inconsistent therewith, supersedes the general terms and provisions of
the Notes set forth in the accompanying Prospectus, dated December 28, 1995 (the
"Prospectus"), and the Prospectus Supplement, dated January 3, 1996 (the
"Prospectus Supplement"). For purposes of the general description of Notes set
forth in the Prospectus and the Prospectus Supplement, the Notes offered hereby
constitute "Indexed Notes". All capitalized and undefined terms used herein have
the meanings assigned to them in the Prospectus or the Prospectus Supplement.
GENERAL
The 3% Citicorp Exchangeable Notes due 2002 (the "Notes") will mature on
August 28, 2002 (the "Stated Maturity Date").
The Notes will be issued in the form of one or more Global Notes as
described under "Description of Notes--Book-Entry Notes" in the Prospectus
Supplement.
Settlement for the Notes will be made in immediately available funds. The
Notes will trade in the Depositary's Settlement System and secondary market
trading activity for the Notes will settle in immediately available funds.
The Notes are subject to redemption, at the option of the Issuer, as
described under "Call Feature" below. In addition, the Notes are subject to
redemption, at the option of the Issuer, as described under "--Redemption of
Notes" below. The Notes are not entitled to the benefits of a sinking fund.
Solely for purposes of the aggregate principal amount of Notes required for
any consent, waiver, authorization or other action taken or to be taken by
holders of Notes pursuant to the Notes and the Indenture, the principal amount
of the Notes offered hereby will equal the Face Amount of the Notes.
The Specified Currency for the Notes is U.S. dollars.
GS & Co. will act as Calculation Agent with respect to the Notes. See "Risk
Factors--Potential Conflicts of Interest" and "--Discretion of GS & Co. as
Calculation Agent" in this Pricing Supplement.
-14-
<PAGE>
PRINCIPAL AMOUNT
The Notes will mature on the Stated Maturity Date. On the Stated Maturity
Date, the Holder of a Note will receive an amount in cash equal to 100% of the
Face Amount of such Note if such Note has not been exchanged by the Holder
thereof prior to the fifth Business Day immediately preceding the Stated
Maturity Date, redeemed by the Issuer as described under "Call Feature" or
redeemed by the Issuer as described under "Redemption," as the case may be,
prior to the Maturity Date.
INTEREST
Interest will accrue on the Face Amount of the Notes at 3% per annum from
and including the Issue Date to but excluding the Stated Maturity Date or, if
earlier, the Call Date or the Redemption Date. Interest on the Notes will be
payable semi-annually on February 28 and August 28 in each year and on the
Stated Maturity Date, commencing on February 28, 1998 or if any such day is not
a Business Day, the next succeeding Business Day (each, an "Interest Payment
Date"). So long as the Notes are maintained in the form of a Global Note, the
Regular Record Date with respect to any interest payment will be the Business
Day immediately preceding such Interest Payment Date; otherwise, the Regular
Record Date with respect to any Interest Payment Date will be the February 13 or
August 13, whether or not a Business Day, as the case may be, immediately
preceding such Interest Payment Date. Interest will be calculated on the basis
of a 360-day year consisting of twelve 30-day months.
EXCHANGE RIGHT
Subject to a prior redemption of the Notes as described under "Call
Feature" or under "--Redemption" below, as the case may be, the Holder of a Note
will be entitled to exchange each $250,000 Face Amount of Notes for 1455.207
shares of Common Stock (the "Exchange Rate"). In order to exercise the exchange
right, a Holder must deliver prior to 12:00 noon, New York time, on an Exchange
Date (such date being referred to as the "Exchange Notice Date") to The Bank of
New York, (i) a duly completed Notice of Exchange (with a copy to the
Calculation Agent) substantially in the form of Annex A hereto, and (ii) such
Note duly endorsed in blank. A Notice of Exchange delivered at or after 12:00
noon, New York time, will be considered delivered at the opening of business on
the following Business Day. So long as the Notes are in the form of a Global
Note, a Notice of Exchange may only be submitted by the Depositary participant
on whose books a Note to be exchanged is carried; otherwise, a Notice of
Exchange may only be submitted by a person in whose name a Note to be exchanged
is registered. Once given, a Notice of Exchange may not be withdrawn or revoked
without the written consent of the Issuer. The Exchange Rate is subject to
adjustment as a result of certain dilution events. See "--Anti-Dilution
-15-
<PAGE>
Adjustments--" below. Holders of Notes otherwise entitled to receive fractional
shares of Common Stock upon exchange will receive cash in lieu thereof based on
the Closing Price of the Common Stock on the Exchange Notice Date.
Delivery of shares of Common Stock in respect of the exchange of a Note and
cash in lieu of any fractional shares will be made on the Exchange Settlement
Date.
Any question as to the validity of a Notice of Exchange or as to whether
such Notice has been properly and timely given will be resolved by the
Calculation Agent in its sole discretion.
Holders of Notes will have no rights as holders of Common Stock until the
Exchange Settlement Date.
Upon any exercise of the Exchange Right with respect to a Note at any time
prior to 12:00 noon, New York time, on a Regular Record Date, the Holder of such
Note will not be entitled to the interest payment on the related Interest
Payment Date or on any Interest Payment Date thereafter. In the case of a Note
maintained in the form of a Global Note, if the exercise of the Exchange Right
with respect to such Note occurs at or after 12:00 noon, New York time, on a
Regular Record Date, then such Holder will receive interest in respect of such
Note on the related Interest Payment Date. In the event the Notes do not remain
in the form of a Global Note, a Holder who exercises the Exchange Right with
respect to a Note at or after 12:00 noon, New York time, on a Regular Record
Date but prior to the related Interest Payment Date will be entitled to the
interest payable in respect of such Note on such Interest Payment Date but will
be required to include with such Holder's Notice of Exchange the amount of
interest payable on such Interest Payment Date in respect of such Note.
Accordingly, if the Notes do note remain in the form of a Global Note and a
Holder exchanges a Note after a Regular Record Date but prior to the related
Interest Payment Date, such Note and a properly completed Notice of Exchange
must be accompanied by funds equal to the interest payable on such related
Interest Payment Date on the Face Amount of the Notes so exchanged.
Notwithstanding the foregoing, in the event the Issuer determines to redeem the
Notes pursuant to the exercise of the Call Feature and subsequent to the Call
Notice Date in respect thereof a Holder elects to exercise the Exchange Right
with respect to a Note, then the Issuer will pay to such Holder accrued but
unpaid interest in respect of such Note up to and including the date such Holder
has surrendered such Note for exchange.
-16-
<PAGE>
ANTI-DILUTION ADJUSTMENTS
GENERAL
The Exchange Rate will be subject to adjustment by the Calculation Agent as
described below to the extent that any of the events requiring such adjustment
occur during the period commencing on the date of this Pricing Supplement and
ending on the fifth Business Day immediately preceding the Stated Maturity Date,
Redemption Date or Call Date, as the case may be. No adjustments to the Exchange
Rate will be made other than those specified below. Such adjustments do not
cover all events that could affect the Exchange Rate, including, without
limitation, an issuer tender or exchange offer at a premium to the market price
or a third party tender or exchange offer for less than all of the outstanding
shares of Common Stock. See "Risk Factors--Dilution".
No adjustments to the Exchange Rate will be required unless such adjustment
would require a change of at least 0.1% in the Exchange Rate. The Exchange Rate
resulting from any of the adjustments specified below will be rounded to the
nearest one thousandth with five ten-thousandths being rounded upward.
All determinations made by the Calculation Agent will be at the sole
discretion of the Calculation Agent and, in the absence of manifest error, will
be conclusive for all purposes and binding on the Issuer and the Holders of
Notes, and the Calculation Agent will have no liability therefor. The
Calculation Agent will provide information as to any adjustments to the Exchange
Rate upon written request by any Holder of the Notes.
For purposes of clarity, it is intended that the adjustments for stock
splits, reverse stock splits, stock dividends, cash dividends and other
distributions described below are meant to apply only if such events actually
occur, as often as they occur.
STOCK SPLITS
If the Common Stock is subject to a stock split or reverse stock split,
then at the opening of business on the first day on which the Common Stock
trades without the right to receive such stock split (the "ex-dividend date"),
the Exchange Rate will be adjusted by multiplying such Exchange Rate by a
fraction, the numerator of which will be the number of shares of the Common
Stock outstanding at the close of business on the record date for holders of the
Common Stock entitled to such split plus or minus the change in the number of
shares resulting from such stock split or reverse stock split and the
denominator of which will be the number of shares of the Common Stock
outstanding at the close of business on such record date.
-17-
<PAGE>
STOCK DIVIDENDS
If the Common Stock is subject to a stock dividend that is given ratably to
all holders of shares of the Common Stock, then at the opening of business on
the ex-dividend date, the Exchange Rate will be adjusted by multiplying such
Exchange Rate by a fraction, the numerator of which will be the number of shares
of the Common Stock outstanding at the opening of business on such ex-dividend
date plus the number of shares constituting such stock dividend and the
denominator of which will be the number of shares of the Common Stock
outstanding at the opening of business on such ex-dividend date.
DIVIDENDS AND OTHER DISTRIBUTIONS
There will be no adjustments to the Exchange Rate to reflect cash dividends
or other distributions paid with respect to the Common Stock other than (i)
distributions that constitute Spin-Off Events as described in the first
paragraph under "--Merger, Consolidation or Sale of Assets" below and (ii)
Extraordinary Dividends as described below. A dividend or other distribution
with respect to the Common Stock will be deemed to be an "Extraordinary
Dividend" if such dividend or other distribution exceeds the immediately
preceding non-Extraordinary Dividend, if any, for the Common Stock by an amount
equal to at least 10% of the Closing Price of the Common Stock on the first
Business Day immediately preceding the ex-dividend date. If an Extraordinary
Dividend occurs with respect to the Common Stock, the Exchange Rate will be
adjusted by multiplying such Exchange Rate by a fraction, the numerator of which
will be the Closing Price of the Common Stock on the Business Day immediately
preceding the ex-dividend date with respect to such Extraordinary Dividend and
the denominator of which will be the difference between such Closing Price and
the Extraordinary Dividend Amount. The "Extraordinary Dividend Amount" with
respect to an Extraordinary Dividend for the Common Stock will equal (i) in the
case of cash dividends or other distributions that constitute quarterly
dividends, the amount per share of such Extraordinary Dividend minus the amount
per share of the immediately preceding non-Extraordinary Dividend for the Common
Stock or (ii) in the case of cash dividends or other distributions that do not
constitute quarterly dividends, the amount per share of such Extraordinary
Dividend. To the extent an Extraordinary Dividend is not paid in cash, the value
of the non-cash component will be determined by the Calculation Agent, whose
determination will be conclusive. A distribution on the Common Stock that
constitutes a Spin-Off Event and that also constitutes an Extraordinary Dividend
will only cause an adjustment to the Exchange Rate pursuant to the first
paragraph under "--Merger, Consolidation or Sale of Assets" below.
-18-
<PAGE>
RIGHTS AND WARRANTS
If Citicorp issues rights or warrants to all holders of the Common Stock to
subscribe for or purchase the Common Stock at an exercise price per share less
than the Closing Price of the Common Stock on the record date for determining
the holders of the Common Stock entitled to receive such rights and warrants,
then the Exchange Rate will be adjusted by multiplying such Exchange Rate by a
fraction, the numerator of which will be the number of shares of the Common
Stock outstanding at the close of business on such record date, plus the number
of additional shares of the Common Stock offered for subscription or purchase
pursuant to such rights or warrants and the denominator of which will be the
number of shares of the Common Stock outstanding at the close of business on
such record date, plus the number of additional shares of the Common Stock which
the aggregate offering price of the total number of shares of the Common Stock
so offered for subscription or purchase pursuant to such rights or warrants
would purchase at the Closing Price of the Common Stock on such record date,
which will be determined by multiplying such total number of shares offered by
the exercise price of such rights or warrants and dividing the product so
obtained by such Closing Price.
MERGER, CONSOLIDATION OR SALE OF ASSETS
If (A) (i) there occurs any reclassification or change of the Common Stock,
(ii) Citicorp or any surviving entity or subsequent surviving entity of Citicorp
(a "Successor") has been subject to a merger, combination or consolidation and
either (x) is not the surviving entity or (y) survives and all of the
outstanding shares of the Common Stock are exchanged for or converted into
Exchange Property (as defined below), (iii) any statutory exchange of securities
of Citicorp or any Successor with another entity occurs (other than pursuant to
clause (ii) above), (iv) any sale, lease, transfer, or conveyance to another
entity of the property of Citicorp or any Successor as an entirety or
substantially an entirety, (v) Citicorp or any Successor is liquidated,
dissolved or wound up, (vi) Citicorp issues to all of its shareholders equity
securities of an issuer other than Citicorp (other than in a transaction
described in clauses (ii), (iii), (iv) or (v) above, a "Spin-off Event") or
(vii) a tender or exchange offer is consummated for all the outstanding shares
of the Common Stock or for all of a particular type of Exchange Property (any
such event in clauses (i) through (vii), a "Reorganization Event"), and (B) in
the case of (i) a Reorganization Event other than a Spin-Off Event, the
effective time of such Reorganization Event occurs prior to the fifth Business
Day immediately preceding the Stated Maturity Date, Redemption Date or Call
Date, as the case may be, or (ii) a Spin-Off Event, the record date fixed for
the determination of the shareholders of Citicorp entitled to receive the
securities distributed in such Spin-Off Event (the "Spin-Off Record Date")
occurs prior to the fifth Business Day immediately preceding the Stated Maturity
Date, Redemption Date or
-19-
<PAGE>
Call Date, as the case may be, then each Note will be exchangeable for the
Transaction Value of each type of Exchange Property (as defined below). The
"Transaction Value" means (i) for any cash received in any such Reorganization
Event, the product of (A) the Exchange Rate (as in effect immediately prior to
such Reorganization Event) and (B) the amount of cash received per share of the
Common Stock, (ii) for any property other than cash or securities received in
any such Reorganization Event, the product of (A) the Exchange Rate applicable
to such Exchange Property on the Exchange Notice Date, and (B) the market value
of such Exchange Property on such Exchange Notice Date received for each share
of the Common Stock as determined by the Calculation Agent, and (iii) for any
security received in any such Reorganization Event, an amount equal to the
product of (A) the Exchange Rate applicable to such Exchange Property on the
Exchange Notice Date and (B) the Closing Price per share of such security on
such Exchange Exchange Notice Date multiplied by the quantity of such security
received for each share of the Common Stock. "Exchange Property" means
securities, cash or any other assets distributed in any Reorganization Event,
including, in the case of a Spin-off Event, the share of the Common Stock with
respect to which the spun-off security was issued.
For purposes of the preceding paragraph, in the case of a consummated
tender or exchange offer for all of a particular type of Exchange Property,
Exchange Property will be deemed to include the amount of cash or other property
paid by the offeror in the tender or exchange offer with respect to such
Exchange Property (in an amount determined on the basis of the rate of exchange
in such tender or exchange offer). In the event of a tender or exchange offer
with respect to Exchange Property in which an offeree may elect to receive cash
or other property, Exchange Property will be deemed to include the kind and
amount of cash and other property received by offerees who elect to receive
cash.
The Calculation Agent will be solely responsible for the determination and
calculation of any adjustments to the Exchange Rate and of any related
determinations and calculations with respect to any distributions of stock,
other securities or other property or assets (including cash) in connection with
any corporate event described in the second preceding paragraph, and its
determinations and calculations with respect thereto will be conclusive and
binding on the Issuer and the Holders of the Notes.
CALL FEATURE
On or after September 14, 1999, the Issuer may redeem the Notes, in whole
but not in part, at 100% of the Face Amount, together with any accrued and
unpaid interest to but excluding the Call Date.
-20-
<PAGE>
On and after the Call Notice Date and until the fifth Business Day
immediately preceding the Call Date, Holders of Notes will continue to be
entitled to exercise the Exchange Right.
REDEMPTION OF NOTES
During the period from the Issue Date to and including September 13, 1999,
the Notes are redeemable, at the option of the Issuer, if the Issuer certifies
to the Trustee that it has determined to terminate its periodic reporting
obligation with the Commission, as described in the first paragraph of
"Description of Notes--Redemption" in the Prospectus as supplemented and
superseded by the following discussion. Any such redemption of the Notes will be
made as a whole and not in part, and the Notes will be redeemed at a redemption
price equal to the greater of (i) 105% of the average of the Closing Values of
the Notes on the 10 trading days immediately preceding the Issuer Notice Date
(as defined below under "--Definitions") and (ii) 100% of the Face Amount of the
Notes to be redeemed, in each case together with any accrued and unpaid interest
up to but not including the Redemption Date. "Closing Value" means, with respect
to any trading day, the average of the bid and ask prices as reported on such
trading day by a broker-dealer selected by the Issuer (which may be the
Calculation Agent) to determine the Closing Value.
On and after the Issuer Notice Date and until the fifth Business Day
immediately preceding the Redemption Date, Holders of the Notes will continue to
be entitled to exercise the Exchange Right.
EVENTS OF DEFAULT AND ACCELERATION; DEFAULT AMOUNT
In case an Event of Default with respect to the Notes shall have occurred
and be continuing prior to the fifth Business Day immediately preceding the
Stated Maturity Date, Redemption Date or Call Date, as the case may be, the
amount payable to a Holder on any day on which the principal of the Notes
becomes payable upon any acceleration, will equal the Default Amount and, on or
after such fifth Business Day, the Face Amount plus accrued and unpaid interest;
provided, however, that, solely for purposes of the aggregate principal amount
of Notes required for any consent, waiver, authorization or other action taken
or to be taken by holders of Notes pursuant to the Notes and the Indenture, the
Principal Amount of the Notes offered hereby will equal the Face Amount of the
Notes.
DEFINITIONS
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which the NYSE (or, if different, the principal securities exchange on which the
-21-
<PAGE>
Common Stock (or, in the case of a Reorganization Event, any Exchange Property)
is then listed) is authorized or obligated by law or executive order to close.
"Call Date" means any date on or after September 14, 1999 fixed by the
Issuer for the redemption of the Notes, but in no event earlier than 10 Business
Days following the Call Notice Date.
"Call Notice Date" means any Business Day on which the Issuer, or the
Trustee on behalf of the Issuer, mails to Holders a notice of redemption.
"Citicorp" means Citicorp, a Delaware corporation.
"Closing Price" means, with respect to any security on any date, the
closing sale price or last reported sale price, regular way, for the security on
the principal national securities exchange on which such security is listed for
trading on such date or, in the event such security is not listed on any
national securities exchange, on the National Market System (the "NMS") of the
National Association of Securities Dealers, Inc. (the "NASD") on any such date
or, in the event such security is not quoted through the NMS of the NASD on any
such date, on such other U.S. national market system that is the primary market
for the trading of such security or, in the event such security is not listed on
any national securities exchange, or through the NMS of the NASD or any other
U.S. national market system, the Closing Price with respect to such security
will be the mean, as determined by the Calculation Agent, of the bid prices for
such security obtained from as many dealers in such security (which may include
the Calculation Agent or its affiliate), but not exceeding three, as will make
such bid prices available to the Calculation Agent.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $1.00 per share, of
Citicorp.
"Default Amount" means, on any day, an amount, in U.S. dollars, equal to
the cost of having a Qualified Financial Institution expressly assume, as of
such day, the due and punctual payment of the principal amount of and interest
on the Notes, and the performance and observance of every covenant thereof and
of the Indenture on the part of the Issuer to be performed or observed with
respect to such Notes (or to undertake other obligations providing the same
economic value to the Holder of the Notes as the Issuer's obligations
thereunder). Such cost will equal (i) the lowest amount that a Qualified
Financial Institution (selected as provided below) would charge to effect such
assumption (or undertaking) plus (ii) the reasonable expenses (including
reasonable attorneys' fees) incurred by a Holder of the Notes in preparing any
documentation
-22-
<PAGE>
necessary for such assumption (or undertaking). During the Default Quotation
Period, each of the Holder of a Note and the Issuer may request a Qualified
Financial Institution to provide a quotation of the amount it would charge to
effect such assumption (or undertaking) and will notify the other in writing of
such quotation. The amount referred to in clause (i) of this paragraph will
equal the lowest (or, if there is only one, the only) quotation so obtained, and
as to which notice is so given, during the Default Quotation Period; provided,
however, that, with respect to any quotation, the party not obtaining such
quotation may object, on reasonable and significant grounds, to the effectuation
of such assumption (or undertaking) by the Qualified Financial Institution
providing such quotation and notify the other party in writing of such grounds
within two Business Days after the last day of the Default Quotation Period, in
which case such quotation will be disregarded in determining the Default Amount.
The Default Quotation Period will be the period beginning on the day the Default
Amount first becomes due and payable and ending on the third Business Day after
such due day, unless no such quotation is so obtained, or unless every such
quotation so obtained is objected to within five Business Days after such due
day as provided above, in which case the Default Quotation Period will continue
until the third Business Day after the first Business Day on which prompt notice
is given of such a quotation as provided above, unless such quotation is
objected to as provided above within five Business Days after such first
Business Day, in which case the Default Quotation Period will continue as
provided in this sentence. Notwithstanding the foregoing, if the Default
Quotation Period (and the subsequent two Business Day objection period) has not
ended prior to the fifth Business Day immediately preceding the Stated Maturity
Date, Redemption Date or Call Date, as the case may be, then the Default Amount
will equal the Face Amount.
"Exchange Date" means any Business Day that falls during the period
beginning on the Issue Date to but excluding the earliest of the fifth Business
Day immediately preceding the (i) Stated Maturity Date, (ii) the Redemption Date
or (iii) the Call Date.
"Exchange Notice Date" has the meaning set forth under "Exchange Right".
"Exchange Rate" means 1455.207.
"Exchange Settlement Date" means the third Business Day after the Exchange
Notice Date.
"Issuer Notice Date" means any Business Day on which the Issuer, or the
Trustee on behalf of the Issuer, mails to Holders a notice of redemption with
respect to the Notes.
"NYSE" means the New York Stock Exchange, Inc.
-23-
<PAGE>
"Qualified Financial Institution" means, at any time, a financial
institution organized under the laws of any jurisdiction in the United States of
America, Europe or Japan that at such time has outstanding debt obligations with
a stated maturity of one year or less from the date of issue and rated A-1 or
higher by Standard & Poor's Ratings Group or P-1 or higher by Moody's Investors
Service, Inc. (or such other comparable rating, if any, then used by such rating
agency).
"Redemption Date" means any date prior to and including September 13, 1999
fixed for redemption of the Notes by the Issuer, but in no event earlier than 10
Business Days following the Issuer Notice Date.
CALCULATION AGENT
All determinations made by the Calculation Agent will be at the sole
discretion of the Calculation Agent and, in the absence of manifest error, will
be conclusive for all purposes and binding on the Issuer and the Holders of
Notes, and the Calculation Agent will have no liability therefor.
DEFEASANCE AND COVENANT DEFEASANCE
The Notes are not subject to defeasance or covenant defeasance as described
under "Description of Debt Securities--Defeasance and Covenant Defeasance" in
the Prospectus.
USE OF PROCEEDS AND HEDGING
In connection with hedging the Issuer's obligations under the Notes, the
Issuer will acquire shares of Common Stock; purchase exchange-traded put options
on the Common Stock; and write over-the-counter options and enter into interest
rate and equity-linked swaps with GS&Co. and/or GSCM. The Issuer used
approximately 98% of the net proceeds from the issuance of the Notes to purchase
shares of Common Stock (although the Issuer will not be required to retain such
Common Stock) and exchange-traded put options on the Common Stock and will add
the net proceeds from the writing of the over-the-counter options and the
remainder of the net proceeds from the issuance of the Notes to its working
capital to support its Derivative Transaction activities.
GS&Co., in order to hedge its position under the options entered into with
respect to the Notes, may buy or sell Common Stock contemporaneously with the
pricing of the Notes. After the date hereof, GS&Co. may from time to time (i)
acquire, dispose of or sell short shares of Common Stock or other securities of
Citicorp, (ii) take positions in or dispose of positions in listed or
over-the-counter options on the Common Stock and/or (iii) take positions in or
dispose of positions in listed or over-the-counter
-24-
<PAGE>
options or other instruments based on broad market indices or indices designed
to track the performance of financial services stocks. In addition, the Issuer,
GS&Co. or one of its affiliates may purchase or otherwise acquire a long or
short position in Notes from time to time and may, in their sole discretion,
hold or resell such Notes.
GS&Co. may liquidate its hedges, in whole or in part, on or prior to the
Stated Maturity Date, Redemption Date or Call Date, as the case may be. Such
liquidation may involve purchase or sales of (i) the Common Stock, (ii) listed
or over-the-counter options on the Common Stock or (iii) listed or
over-the-counter options or other instruments based on broad market indices or
indices designed to track the performance of financial services stocks.
WHILE THE HEDGING ACTIVITY DISCUSSED ABOVE MAY ADVERSELY AFFECT THE MARKET
VALUE FROM TIME TO TIME OF THE NOTES AND THE VALUE OF THE COMMON STOCK TO BE
RECEIVED ON ANY EXCHANGE SETTLEMENT DATE, THERE WILL BE NO DIRECT RELATIONSHIP
BETWEEN THE GAINS OR LOSSES THAT AFFILIATES OF THE ISSUER REALIZE FROM THEIR
HEDGING ACTIVITIES AND THE VALUE OF THE COMMON STOCK FOR WHICH THE NOTES WILL BE
EXCHANGED ON ANY EXCHANGE SETTLEMENT DATE. SEE "RISK FACTORS--EFFECT OF TRADING
AND OTHER TRANSACTIONS BY THE ISSUER IN THE COMMON STOCK" AND "--POTENTIAL
CONFLICTS OF INTEREST".
CITICORP
According to publicly available documents, Citicorp is the parent of
Citibank, N.A. and provides a broad range of financial services. Citicorp's
operations include commercial, mortgage and investment banking, trust services,
consumer finance and credit card services. Citicorp operates in over 3,200
locations in 98 countries and territories throughout the world. Citicorp is
subject to the information reporting requirements of the Securities Exchange Act
of 1934, as amended. Accordingly, Citicorp files reports, proxy statements and
other information with the Commission. Copies of such reports, proxy statements
and other information may be inspected and copied at certain offices of the
Commission or on the Commission's web site (http://www.sec.gov.).
THIS PRICING SUPPLEMENT RELATES ONLY TO THE NOTES OFFERED HEREBY AND DOES
NOT RELATE TO THE COMMON STOCK. ALL DISCLOSURES CONTAINED IN THIS PRICING
SUPPLEMENT REGARDING CITICORP ARE DERIVED FROM THE PUBLICLY AVAILABLE DOCUMENTS
DESCRIBED IN THE PRECEDING PARAGRAPH OR OTHER SPECIFIED SOURCES. THE ISSUER HAS
NOT PARTICIPATED IN THE PREPARATION OF SUCH DOCUMENTS OR MADE ANY DUE DILIGENCE
INQUIRY WITH RESPECT TO THE INFORMATION PROVIDED
-25-
<PAGE>
THEREIN AND ASSUMES NO RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF ANY SUCH
INFORMATION. INVESTORS IN THE NOTES ARE URGED TO CONDUCT THEIR OWN INVESTIGATION
INTO CITICORP. THE ISSUER MAKES NO REPRESENTATION THAT SUCH PUBLICLY AVAILABLE
DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE INFORMATION REGARDING CITICORP ARE
ACCURATE OR COMPLETE. FURTHERMORE, THERE CAN BE NO ASSURANCE THAT ALL EVENTS
OCCURRING PRIOR TO THE DATE OF THIS PRICING SUPPLEMENT (INCLUDING EVENTS THAT
WOULD AFFECT THE ACCURACY OR COMPLETENESS OF THE PUBLICLY AVAILABLE DOCUMENTS
DESCRIBED IN THE PRECEDING PARAGRAPH) THAT WOULD AFFECT THE TRADING PRICE OF THE
COMMON STOCK HAVE BEEN PUBLICLY DISCLOSED. SUBSEQUENT DISCLOSURE OF ANY SUCH
EVENTS OR THE DISCLOSURE OF OR FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS
CONCERNING CITICORP COULD AFFECT THE TRADING PRICE OF THE NOTES.
HISTORICAL INFORMATION
The Common Stock is quoted on the NYSE under the symbol "CCI". The
following table sets forth the quarterly high and low Closing Prices for the
Common Stock quoted on the NYSE for the four calendar quarters in 1995 and 1996,
and for the first three calendar quarters in 1997 (through August 21, 1997), and
the closing price at August 21, 1997, all as reported by Bloomberg Financial
Services. The Issuer assumes no responsibility for the accuracy or completeness
of this information and has relied upon this information without independent
verification. The historical prices of the Common Stock should not be taken as
an indication of future performance.
-26-
<PAGE>
<TABLE>
<S> <C> <C> <C>
HIGH LOW
($) ($)
1995
Quarter ended March 31............................. 45 38 7/8
Quarter ended June 30.............................. 59 3/4 42 7/8
Quarter ended September 30 ........................ 71 7/8 58 3/8
Quarter ended December 31. ........................ 73 3/8 63 5/8
1996
Quarter ended March 31............................. 81 62 1/2
Quarter ended June 30.............................. 86 5/8 75 3/8
Quarter ended September 30......................... 90 5/8 76 1/4
Quarter ended December 31.......................... 109 1/4 91 3/8
1997
Quarter ended March 31............................. 126 3/8 100 1/4
Quarter ended June 30.............................. 124 3/8 102 3/8
Quarter ended September 30......................... 139 11/16 123 5/16
(through August 21, 1997)
Closing price on August 21, 1997............................ 137 7/16
</TABLE>
-27-
<PAGE>
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING DISCUSSION, TO THE EXTENT INCONSISTENT THEREWITH, REPLACES
THE DISCUSSION OF UNITED STATES TAXATION SET FORTH IN THE PROSPECTUS SUPPLEMENT.
PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE UNITED STATES FEDERAL INCOME TAX AND ANY OTHER TAX TREATMENT OF THE NOTES.
The following summary of the principal United States federal income tax
consequences of ownership of the Notes deals only with a Note held as a capital
asset by an initial purchaser who or that is (i) a citizen or resident of the
United States, (ii) a domestic corporation or (iii) otherwise subject to United
States federal income taxation on a net income basis in respect of a Note (a
"U.S. Holder"). It does not discuss the rules that may apply to special classes
of holders such as life insurance companies, banks, tax-exempt organizations,
dealers in securities, currencies or commodities, persons that hold Notes that
are a hedge or that are hedged against price risks or that are part of a
straddle or conversion transaction, or persons whose functional currency is not
the U.S. dollar. The summary is based on current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), its legislative history, existing
and proposed regulations thereunder, published rulings and court decisions, all
as in effect on the date hereof and all subject to change at any time, perhaps
with retroactive effect.
Although the matter is not free from doubt, the Notes should be treated as
debt instruments that are subject to special rules governing contingent payment
debt obligations and the discussion below (except for the final paragraph)
assumes that the Notes will be so treated. Under those rules, the amount of
interest taken into account for each accrual period will be determined by
constructing a projected payment schedule for the Notes and applying rules
similar to those for accruing original issue discount on a hypothetical
noncontingent debt instrument with that projected payment schedule. This method
is applied by first determining the yield at which the Issuer would issue a
noncontingent fixed rate debt instrument with terms and conditions similar to
the Notes (the "comparable yield") and then determining a payment schedule as of
the issue date that would produce the comparable yield. These rules will have
the effect of requiring U.S. Holders to include interest in income in respect of
the Notes prior to the receipt of cash attributable to such income. A U.S.
Holder will not include payments of interest in income but will (as discussed
below) reduce its adjusted basis by the amount of such payments.
The rules governing contingent payment obligations do not provide any rule
for determining the term of the Notes for purposes of computing the comparable
yield and projected payment schedule. It would be reasonable, however, to
compute the
-28-
<PAGE>
comparable yield and projected payment schedule (and the Issuer intends to make
the computation in such a manner) based upon an assumption that the Notes will
remain outstanding until the Stated Maturity Date with a projected contingent
payment made at such time.
The comparable yield and projected payment schedule may be obtained from
the Issuer by contacting Denis Dennehy at 212-902-1000. A U.S. Holder is
required to use the comparable yield and projected payment schedule determined
by the Issuer in determining its interest accruals in respect of the Notes,
unless such U.S. Holder timely discloses and justifies on its federal income tax
return the use of a different comparable yield and projected payment schedule to
the Internal Revenue Service.
THE COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE IS NOT PROVIDED FOR ANY
PURPOSE OTHER THAN THE DETERMINATION OF A U.S. HOLDER'S INTEREST ACCRUALS IN
RESPECT OF THE NOTES, AND THE ISSUER MAKES NO REPRESENTATION REGARDING THE
AMOUNT OF CONTINGENT PAYMENTS WITH RESPECT TO THE NOTES.
A U.S. Holder will recognize gain or loss upon the sale, exchange or
retirement of the Notes in an amount equal to the difference, if any, between
the fair market value of the amount received by the U.S. Holder and the U.S.
Holder's adjusted basis in the Notes. United States Holders should be aware that
the receipt of Common Stock will also be treated as a taxable disposition of the
Notes (although the Issuer will not be subject to any information reporting
requirement with respect to such disposition) with the holder being treated as
having received an amount equal to the fair market value of the Common Stock. In
general, a U.S. Holder's adjusted basis in a Note will equal the amount paid for
the Note, increased by the amount of interest previously accrued by the holder
(in accordance with the comparable yield and the projected payment schedule),
and decreased by the amount of interest payments received by the holder with
respect to the Note.
Any gain upon sale, exchange or retirement of the Notes will be ordinary
income; any loss will be ordinary loss to the extent of interest included as
income in the current or previous taxable years by the U.S. Holder in respect of
the Notes, and thereafter, capital loss. A U.S. Holder's holding period in any
Common Stock received will begin on the date after the receipt of such Common
Stock and its basis will equal the value of the Common Stock on the date of
receipt.
If a U.S. Holder purchases a Note at a date later than the issue date (a
"subsequent purchaser") at a price that is different than the Issue Price, the
premium and market discount rules would not apply. Instead, the difference would
be allocated on a reasonable economic basis between accruals of interest and the
final payment at
-29-
<PAGE>
maturity. To the extent that such difference is allocated to accruals of
interest, the difference will be treated under rules analogous to those that
apply to premium or original issue discount (i.e., any excess in the subsequent
purchaser's purchase price that is allocable to daily accruals of interest would
create premium that could be offset against accruals of interest income that
might otherwise be required in respect of a Note and any decrease in the
subsequent purchaser's purchase price as compared to the Issue Price might
result in such purchaser being required to include additional amounts in
interest income prior to the receipt of cash interest payments). To the extent
such difference is allocated to the final payment, the difference will increase
or decrease the ordinary income or loss recognized upon the receipt of such
payment.
Alternatively, it is possible that the Internal Revenue Service would treat
the Notes as a forward contract to purchase Common Stock or in some other
fashion. Prospective purchasers of Notes should consult their tax advisors with
respect to the tax consequences of any such alternative treatment.
VALIDITY OF NOTES
The validity of the Notes offered hereby has been passed upon by Maples and
Calder, George Town, Grand Cayman, Cayman Islands, British West Indies, and by
Sullivan & Cromwell, New York, New York. Sullivan & Cromwell has relied as to
all matters of Cayman Islands law upon the opinion of Maples and Calder. See
"Validity of Notes" in the Prospectus.
-----------------
The Issuer's Medium-Term Notes, Series B will be offered for sale in the
aggregate principal amount of up to $500,000,000 (or the equivalent thereof in
any foreign currencies or currency units) (provided that the Issuer reserves the
right to increase such aggregate principal amount from time to time). After
giving effect to the issuance of the Notes to which this Pricing Supplement
relates, $233,797,724 principal amount of Medium-Term Notes, Series B have been
issued by the Issuer.
-----------------
GOLDMAN, SACHS & CO.
-----------------
The date of this Pricing Supplement is August 21, 1997.
-30-
<PAGE>
Annex A
NOTICE OF EXCHANGE
Dated: [On or after August 28, 1997]
The Bank of New York
101 Barclay Street, 21W
Corporate Trust Administration
New York, New York 10286
Attn: Steve Torgeson (212-815-5919)
Ming Shiang (212-815-4701)
Fax: (212-815-5915)
With a copy to:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attn: Sharon Himmelfarb (212-902-7921)
Tony Monaco (212-902-7921)
Fax: (212-902-7993)
Dear Sirs:
The undersigned holder of the Medium Term Notes, Series B of GS Financial
Products U.S., L.P. (the "Issuer") entitled as "3% Citicorp Exchangeable Notes
due August 28, 2002" (the "Notes") hereby irrevocably elects to exercise with
respect to the Face Amount of the Notes indicated below, as of the date hereof
(or, if this letter is received at or after 12:00 noon, New York time, on any
Business Day, as of the next Business Day), provided that such day is prior to
the fifth Business Day prior to the earliest of (i) the Stated Maturity Date,
(ii) the Redemption Date or (iii) the Call Date, the Exchange Right as described
in Pricing Supplement No. 3 dated August 21, 1997 (the "Pricing Supplement") to
the Prospectus Supplement dated January 3, 1996 to the Prospectus dated December
28, 1995. If at the time of delivery of this Notice of Exchange, the Notes are
not in the form of a Global Note and this notice is delivered at or after 12:00
noon, New York time, on a Regular Record Date but prior to the related Interest
Payment Date, then this notice must be accompanied by funds equal to the
interest payable on the related Interest Payment Date on the Face Amount of
Notes to which this Notice relates. Capitalized terms not defined herein have
the meanings given to such terms in the Pricing Supplement. Please date and
acknowledge receipt of this notice in the place provided below on the date of
receipt, and telecopy a copy to the telecopy number indicated, whereupon the
Issuer will deliver shares of
<PAGE>
Common Stock and, if applicable, cash three (3) Business Days after the Exchange
Notice Date in accordance with the terms of the Notes, as described in the
Pricing Supplement.
Once given, this Notice of Exchange may not be withdrawn or revoked without
the written consent of the Issuer.
Very truly yours,
-------------------------
(Name of Holder)*
By:______________________
(Title)
-----------------------
(Telecopy Number)
$------------------------
Face Amount of Notes
surrendered for exchange
#________________________
DTC participant account
number for share delivery,
if applicable
- --------
* If the Notes to be exchanged are represented by a Global Note, this Notice
of Exchange may only be submitted by the Depositary participant on whose
books such Notes are carried; otherwise, this Notice may only be submitted
by a person in whose name such Notes are registered.
-2-
<PAGE>
Receipt of the above Official
Notice of Exchange is hereby acknowledged
The Bank of New York
By:____________________________
Name:
GOLDMAN, SACHS & CO., as Calculation Agent
By GOLDMAN, SACHS & CO.,
as Calculation Agent
By:____________________________
(Title)
Date and time of acknowledgment ____________________
-3-
