Registration Statement No.333-264388
Filed Pursuant to Rule 433
Subject to Completion,
dated July 15, 2024
Pricing Supplement to the Prospectus dated May 26, 2022,
the Prospectus Supplement dated May 26, 2022 and the Product Supplement dated July 22, 2022
US$ [ ]
Senior Medium-Term Notes, Series I
Barrier Notes due January 27, 2025
Linked to the Least Performing of the shares of SPDR® Dow Jones® Industrial Average ETF and the shares of iShares® Russell
2000 ETF
| · | The notes are designed for investors who seek periodic interest payments at the interest rate (the "Interest
Rate") of 0.550% per month (approximately 6.60% per annum). Investors should be willing to forego any potential to participate in
the appreciation of the shares of The SPDR® Dow Jones® Industrial Average ETF and the shares of iShares Russell 2000 ETF (each,
a "Reference Asset" and, collectively, the "Reference Assets") , and be willing to lose some or all of their principal
at maturity. |
| · | The notes will pay a Coupon on each Coupon Payment Date at the Interest Rate. |
| · | The notes do not guarantee any return of principal at maturity. Instead, the payment at maturity will
be based on the Final Level of the Least Performing Reference Asset (as defined below) and whether the Final Level of any Reference Asset
has declined from its Initial Level to below its Trigger Level on the Valuation Date (a “Trigger Event”), as described below.
|
| · | If a Trigger Event has occurred, you will receive a delivery of shares of the Least Performing Reference
Asset (the “Physical Delivery Amount”) or, at our election, the cash equivalent (calculated as described below, the “Cash
Delivery Amount”), which will be worth less than the principal amount. Specifically, the value of any Physical Delivery Amount or
Cash Delivery Amount that you receive will decrease 1% for each 1% decrease in the level of the Least Performing Reference Asset from
its Initial Level to its Final Level. Any fractional shares included in the Physical Delivery Amount will be paid in cash. |
| · | Investing in the notes is not equivalent to a direct investment in the Reference Assets. |
| · | The notes will not be listed on any securities exchange. |
| · | All payments on the notes are subject to the credit risk of Bank of Montreal. |
| · | The notes will be issued in minimum denominations of $1,000 and integral multiples of $1,000. |
| · | Citigroup Global Markets Inc. (“Citigroup”), is the agent for this offering. See “Supplemental
Plan of Distribution (Conflicts of Interest)” below. |
| · | The notes will not be subject to conversion into our common shares or the common shares of any of our
affiliates under subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act (the “CDIC Act”). |
Terms of the Notes:1
| Pricing Date: |
July 23, 2024 |
|
Valuation Date: |
January 22, 2025 |
| Settlement Date: |
July 26, 2024 |
|
Maturity Date: |
January 27, 2025 |
1Expected. See “Key Terms of the Notes” below
for additional details.
Specific Terms of the Notes:
Series
Number |
Reference
Assets |
Ticker
Symbol |
Initial
Level |
Interest Rate |
Trigger
Level |
CUSIP |
Principal
Amount |
Price to
Public1 |
Agent’s
Commission1 |
Proceeds to
Bank of
Montreal1 |
| PSARC 528 |
The shares of SPDR® Dow Jones® Industrial Average ETF |
DIA |
[ ] |
0.550% per month (approximately 6.60% per annum)
|
[ ], 78.00% of its Initial Level |
06369NYR6 |
[ ] |
100% |
Up to 0.75%
[ ]
|
At least 99.25%
[ ]
|
| The shares of iShares Russell 2000 ETF |
IWM |
[ ] |
[ ], 78.00% of its Initial Level |
1 The total “Agent’s Commission” and “Proceeds
to Bank of Montreal” to be specified above will reflect the aggregate amounts at the time Bank of Montreal establishes its hedge
positions on or prior to the Pricing Date, which may be variable and fluctuate depending on market conditions at such times. Certain dealers
who purchased the notes for sale to certain fee-based advisory accounts may forego some or all of their selling concessions, fees or commissions.
The public offering price for investors purchasing the notes in these accounts may be between $992.50 and $1,000 per $1,000 in principal
amount. We or one of our affiliates may also pay a referral fee to certain dealers in connection with the distribution of the notes.
Investing in the notes involves risks, including
those described in the “Selected Risk Considerations” section beginning on page P-5 hereof, the “Additional Risk Factors
Relating to the Notes” section beginning on page PS-6 of the product supplement, and the “Risk Factors” section beginning
on page S-1 of the prospectus supplement and on page 8 of the prospectus.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these notes or passed upon the accuracy of this document, the product
supplement, the prospectus supplement or the prospectus. Any representation to the contrary is a criminal offense. The notes will be our
unsecured obligations and will not be savings accounts or deposits that are insured by the United States Federal Deposit Insurance Corporation,
the Deposit Insurance Fund, the Canada Deposit Insurance Corporation or any other governmental agency or instrumentality or other entity.
On the date hereof, based on the terms set forth
above, the estimated initial value of the notes is $986.90 per $1,000 in principal amount. The estimated initial value of the notes on
the Pricing Date may differ from this value but will not be less than $940.00 per $1,000 in principal amount. However, as discussed in
more detail below, the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy.
CITIGROUP GLOBAL
MARKETS INC.
Key Terms of the Notes:
| Reference Assets: |
The shares of SPDR® Dow Jones® Industrial Average ETF (ticker symbol "DIA") and the shares of iShares
Russell 2000 ETF (ticker symbol "IWM"). See "The Reference Assets" below for additional information. |
| |
|
| Underlying Index: |
With respect to respect to SPDR® Dow Jones® Industrial Average ETF, the Dow Jones Industrial Average®, and with respect to iShares® Russell 2000 ETF, the Russell 2000® Index. |
| |
|
| Coupons: |
A Coupon will be paid on the corresponding Coupon Payment Date at the Interest Rate. |
| |
|
| Interest Rate: |
0.550% per month (approximately 6.60% per annum). Accordingly, each Coupon will equal $5.50 |
| |
|
| Coupon Payment Dates:1 |
Interest will be paid on the 27th day of each month (or, if such day is not a business day, the next following business day), beginning on August 27, 2024 and ending on the Maturity Date. |
| |
|
| Payment at Maturity: |
You will receive $1,000 for each $1,000 in principal amount of the note,
unless a Trigger Event has occurred.
If a Trigger Event has occurred, you will receive at maturity, for each
$1,000 in principal amount of your notes, a number of shares equal to the Physical Delivery Amount or, at our election, the Cash Delivery
Amount. The Physical Delivery Amount will be less than the principal amount of your notes, and may be zero.
You will also receive the final Coupon. Even with Coupons, the return
on the notes may be negative. |
| |
|
| Trigger Event: |
A Trigger Event will be deemed to occur if the Final Level of any Reference Asset is less than its Trigger Level on the Valuation Date. |
| |
|
| Least Performing Reference Asset: |
The Reference Asset with the lowest Percentage Change. |
| |
|
| Percentage Change: |
With respect to each Reference Asset, the quotient, expressed as a percentage,
of the following formula:
(Final Level - Initial Level)
Initial Level |
| |
|
| Initial Level:2 |
With respect to each Reference Asset, the closing level of that Reference Asset on the Pricing Date. |
| |
|
| Trigger Level:2 |
With respect to each Reference Asset, 78.00% of its Initial Level. |
| |
|
| Final Level:2 |
With respect to each Reference Asset, the closing level of that Reference Asset on the Valuation Date. |
| |
|
| Pricing Date:1 |
July 23, 2024 |
| |
|
| Settlement Date:1 |
July 26, 2024 |
| |
|
| Valuation Date:1 |
January 22, 2025 |
| |
|
| Maturity Date:1 |
January 27, 2025 |
| |
|
| Physical Delivery Amount:2 |
The number of shares of the Least Performing Reference Asset equal to $1,000 divided by its Initial Level. Any fractional shares will be paid in cash. |
| |
|
| Cash Delivery Amount:2 |
The amount in cash equal to the product of (1) the Physical Delivery Amount and (2) the Final Level of the Least Performing Reference Asset. |
| |
|
| Calculation Agent: |
BMO Capital Markets Corp. |
| |
|
| Selling Agent: |
Citigroup |
1 Expected and subject to the occurrence of a market disruption
event, as described in the accompanying product supplement. If we make any change to the expected Pricing Date and Settlement Date, the
Coupon Payment Dates, the Valuation Date and Maturity Date will be changed so that the stated term of the notes remains approximately
the same.
2 As determined by the calculation agent and subject to adjustment
in certain circumstances. See "General Terms of the Notes — Anti-dilution Adjustments to a Reference Asset that is an Equity
Security (Including Any ETF)" and "— Adjustments to a Reference Asset that Is an ETF" in the product supplement for
additional information.
Additional Terms of the Notes
You should read this document together with the
product supplement dated July 22, 2022, the prospectus supplement dated May 26, 2022 and the prospectus dated May 26, 2022. This document,
together with the documents listed below, contains the terms of the notes 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, fact sheets, brochures or other educational materials of ours or the agent. You should carefully
consider, among other things, the matters set forth in Additional Risk Factors Relating to the Notes in the product supplement, as the
notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and
other advisers before you invest in the notes.
You may access these documents on the SEC website
at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Product supplement dated July 22, 2022:
https://www.sec.gov/Archives/edgar/data/927971/000121465922009102/r712220424b2.htm
Prospectus supplement dated May 26, 2022 and prospectus dated
May 26, 2022:
https://www.sec.gov/Archives/edgar/data/0000927971/000119312522160519/d269549d424b5.htm
Our Central Index Key, or CIK, on the SEC website
is 927971. As used in this document, "we", "us" or "our" refers to Bank of Montreal.
We have filed a registration statement (including
a prospectus) with the SEC for the offering to which this document relates. Before you invest, you should read the prospectus in that
registration statement and the other documents that we have filed with the SEC for more complete information about us and this offering.
You may obtain these documents free of charge by visiting the SEC's website at http://www.sec.gov. Alternatively, we will arrange to send
to you the prospectus (as supplemented by the prospectus supplement and product supplement) if you request it by calling our agent toll-free
at 1-877-369-5412.
Selected Risk Considerations
An investment in the notes involves significant
risks. Investing in the notes is not equivalent to investing directly in the Reference Assets. These risks are explained in more detail
in the “Additional Risk Factors Relating to the Notes” section of the product supplement.
Risks Related to the Structure or Features of the Notes
| · | Your investment in the notes may result in a loss. — The notes do not guarantee any return of principal. The payment
at maturity will be based on the Final Level of the Least Performing Reference Asset and whether a Trigger Event has occurred. If the
Final Level of the Least Performing Reference Asset is less than its Trigger Level, a Trigger Event will occur and you will lose 1% of
the principal amount for each 1% that the Final Level of the Least Performing Reference Asset is less than its Initial Level. In such
a case, you will receive at maturity a delivery of shares of the Least Performing Reference Asset, or, at our election, the cash equivalent,
which will be worth less than the principal amount of the notes and may be zero. Accordingly, even with Coupons, the return on the
notes may be negative. |
| · | Your return on the notes is limited to the Coupons regardless of any increase in the level of any Reference Asset — You
will not receive a payment at maturity with a value greater than your principal amount plus the final Coupon. Accordingly, your maximum
return on the applicable notes is limited to the potential return represented by the Coupons. |
| · | Your payment at maturity may be determined solely by reference to the Least Performing Reference Asset, even if any other Reference
Assets perform better. — If a Trigger Event occurs with respect to any Reference Asset and the Final Level of any Reference
Asset is less than its Initial Level, your payment at maturity will be determined by reference to the performance of the Least Performing
Reference Asset. Even if the levels of any other Reference Assets have increased over the term of the notes, or have experienced a decline
that is less than that of the Least Performing Reference Asset, your return at maturity will only be determined by reference to the performance
of the Least Performing Reference Asset if a Trigger Event occurs. |
| · | The payments on the notes will be determined by reference to each Reference Asset individually, not to a basket, and the payments
on the notes will be based on the performance of the Least Performing Reference Asset. — The payment at maturity if a Trigger
Event occurs, will be determined only by reference to the performance of the least performing Reference Asset as of the Valuation Date,
regardless of the performance of any other Reference Assets. The notes are not linked to a weighted basket, in which the risk may be mitigated
and diversified among each of the basket components. For example, in the case of notes linked to a weighted basket, the return would depend
on the weighted aggregate performance of the basket components reflected as the basket return. As a result, a decrease of the level of
one basket component could be mitigated by the increase of the level of the other basket components, as scaled by the weighting of that
basket component. However, in the case of the notes, the individual performance of each Reference Asset will not be combined, and the
performance of one Reference Asset will not be mitigated by any positive performance of any other Reference Assets. Instead, your return
at maturity will depend solely on the Final Level of the Least Performing Reference Asset if a Trigger Event occurs. |
| · | Any decline in the closing level of the Least Performing Reference Asset from the Valuation Date to the Maturity Date will reduce
the value of the Physical Delivery Amount. — If we deliver the Physical Delivery Amount on the Maturity Date instead of paying
the Cash Delivery Amount, the number of shares deliverable will be determined on the Valuation Date. The market value of the Physical
Delivery Amount on the Maturity Date may be less than the cash equivalent of such shares determined on the Valuation Date due to any decline
in the closing level of the Least Performing Reference Asset during the period between the Valuation Date and the Maturity Date. Conversely,
if we pay the Cash Delivery Amount instead of delivering the Physical Delivery Amount on the Maturity Date, the Cash Delivery Amount will
be determined on the Valuation Date and the payment that you receive on the Maturity Date may be less than the market value of such shares
that you would have received had we instead delivered such shares due to fluctuations in their market value during the period between
the Valuation Date and the Maturity Date |
| · | Your return on the notes may be lower than the return on a conventional debt security of comparable maturity. — The
return that you will receive on your notes, which could be negative, may be less than the return you could earn on other investments.
Even if your return on the notes is positive, your return may be less than the return you would earn if you bought a conventional senior
interest bearing debt security of ours with the same maturity or if you invested directly in the Reference Assets. Your investment may
not reflect the full opportunity cost to you when you take into account factors that affect the time value of money. |
| · | A higher Interest Rate or lower Trigger Levels may reflect greater expected volatility of the Reference Assets, and greater expected
volatility generally indicates an increased risk of loss at maturity. — The economic terms for the notes, including the Interest
Rate and Trigger Levels, are based, in part, on the expected volatility of the Reference Assets at the time the terms of the notes are
set. “Volatility” refers to the frequency and magnitude of changes in the level of a Reference Asset. The greater the expected
volatility of the Reference Assets as of the Pricing Date, the greater the expectation is as of that date that a Trigger Event could occur
and, as a consequence, an increased risk of loss. All things being equal, this greater expected volatility will generally be reflected
in a higher Interest Rate than the yield payable on our conventional debt securities with a similar maturity or on otherwise comparable
securities, and/or a lower Trigger Levels than those terms on otherwise comparable securities. Therefore, a relatively higher Interest
Rate may indicate an increased risk of loss. Further, a relatively lower Trigger Levels may not necessarily indicate that the notes have
a greater likelihood of a return of principal at maturity. You should be willing to accept the downside market risk of the Reference Assets
and the potential to lose a significant portion or all of your initial investment. |
Risks Related to the Reference Assets
| · | Owning the notes is not the same as owning shares of the Reference Assets or a security directly linked to the Reference Assets.
— The return on your notes will not reflect the return you would realize if you actually owned shares of the Reference Assets or
a security directly linked to the performance of the Reference Assets and held that investment for a similar period. Your notes may trade
quite differently from the Reference Assets. Changes in the level of a Reference Asset may not result in comparable changes in the market
value of your notes. Even if the levels of the Reference Assets increase during the term of the notes, the market value of the notes prior
to maturity may not increase to the same extent. It is also possible for the market value of the notes to decrease while the levels of
the Reference Assets increase. In addition, any dividends or other distributions paid on the Reference Assets will not be reflected in
the amount payable on the notes. |
| · | You will not have any shareholder rights and will have no right to receive any shares of a Reference Asset — Unless
and until we choose to deliver shares of a Reference Asset at maturity, neither you nor any other holder or owner of the notes will have
any voting rights, any right to receive dividends or other distributions, or any other rights with respect to the Reference Assets. You
will have no rights with respect to any underlying securities. |
| · | No delivery of shares of the Reference Assets. — We may choose, in our sole discretion, whether to deliver the Physical
Delivery Amount or pay the Cash Delivery Amount at maturity. You should not invest in the notes if you wish to elect whether to receive
cash or shares at maturity. |
| · | Changes that affect an Underlying Index will affect the market value of the notes, and the amount you will receive at maturity.
— With respect to each Reference Asset, the policies of the applicable index sponsor concerning the calculation of the applicable
Underlying Index, additions, deletions or substitutions of the components of the applicable Underlying Index and the manner in which changes
affecting those components, such as stock dividends, reorganizations or mergers, may be reflected in the applicable Reference Asset and,
therefore, could affect the share price of the Reference Asset, the amounts payable on the notes, and the market value of the notes prior
to maturity. The amount payable on the notes and their market value could also be affected if the applicable index sponsor changes these
policies, for example, by changing the manner in which it calculates the applicable Underlying Index, or if the applicable index sponsor
discontinues or suspends the calculation or publication of the applicable Underlying Index. |
| · | We have no affiliation with any index sponsor of any Underlying Index and will not be responsible for any index sponsor's actions.
— The sponsors of the Underlying Indices are not our affiliates and will not be involved in the offering of the notes in any way.
Consequently, we have no control over the actions of any index sponsor , including any actions of the type that would require the calculation
agent to adjust the payment to you at maturity. The index sponsors have no obligation of any sort with respect to the notes. Thus, the
index sponsors have no obligation to take your interests into consideration for any reason, including in taking any actions that might
affect the value of the notes. None of our proceeds from the issuance of the notes will be delivered to any index sponsor of any Underlying
Index. |
| · | Adjustments to a Reference Asset could adversely affect the notes. — The sponsor and advisor of each Reference Asset
is responsible for calculating and maintaining that Reference Asset. The sponsor and advisor of each Reference Asset can add, delete or
substitute the stocks comprising that Reference Asset or make other methodological changes that could change the share price of the applicable
Reference Asset at any time. If one or more of these events occurs, the calculation of the amount payable at maturity may be adjusted
to reflect such event or events. Consequently, any of these actions could adversely affect the amount payable at maturity and/or the market
value of the notes. |
| · | We, Citigroup, and our or their affiliates do not have any affiliation with any applicable investment advisor or the any Reference
Asset Issuer and are not responsible for their public disclosure of information. — The investment advisor of each Reference
Asset advises the issuer of the applicable Reference Asset (each, a “Reference Asset Issuer” and, collectively, the “Reference
Asset Issuers”) on various matters, including matters relating to the policies, maintenance and calculation of the applicable Reference
Asset. We, Citigroup, and our or their affiliates are not affiliated with the investment advisor of any Reference Asset or any Reference
Asset Issuer in any way and have no ability to control or predict their actions, including any errors in or discontinuance of disclosure
regarding the methods or policies relating to a Reference Asset. No investment advisor of a Reference Asset nor any Reference Asset Issuer
is involved in the offerings of the notes in any way and has no obligation to consider your interests as an owner of the notes in taking
any actions relating to a Reference Asset that might affect the value of the notes. Neither we, Citigroup, nor any of our affiliates has
independently verified the adequacy or accuracy of the information about any investment advisor or any Reference Asset Issuer contained
in any public disclosure of information. You, as an investor in the notes, should make your own investigation into the Reference Asset
Issuers. |
| · | The correlation between the performance of a Reference Asset and the performance of the applicable Underlying Index may be imperfect.
— The performance of each Reference Asset is linked principally to the performance of the applicable Underlying Index. However,
because of the potential discrepancies identified in more detail in the product supplement, the return on a Reference Asset may correlate
imperfectly with the return on the applicable Underlying Index. |
| · | The Reference Assets are subject to management risks. — The Reference Assets are subject to management risk, which is
the risk that the applicable investment advisor’s investment strategy, the implementation of which is subject to a number of constraints,
may not produce the intended results. For example, the applicable investment advisor may invest a portion of a Reference Asset Issuer’s
assets in securities not included in the relevant industry or sector but which the applicable investment advisor believes will help applicable
the Reference Asset track the relevant industry or sector. |
| · | You must rely on your own evaluation of the merits of an investment linked to the Reference Assets. — In the ordinary
course of their businesses, we, Citigroup, and our or their affiliates from time to time may express views on expected movements in the
prices of the Reference Assets or the prices of the securities held by the Reference Assets. One or more of us, Citigroup, and our or
their affiliates have published, and in the future may publish, research reports that express views on the Reference Assets or these securities.
However, these views are subject to change from time to time. Moreover, other professionals who deal in the markets relating to the Reference
Assets at any time may have significantly different views from those of us, Citigroup, and our or their affiliates. You are encouraged
to derive information concerning the Reference Assets from multiple sources, and you should not rely on the views expressed by us, Citigroup,
and our or their affiliates.
Neither the offering of the notes nor any views which our affiliates from time to time may express in the ordinary course of their businesses
constitutes a recommendation as to the merits of an investment in the notes. |
Risks Relating to the iShares® Russell 2000 ETF
| · | An investment in the notes is subject to risks associated in investing in stocks with a small market capitalization. —
The iShares® Russell 2000 ETF invests in stocks issued by companies with relatively small market capitalizations. These companies
often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies. As a result, the
level of the iShares® Russell 2000 ETF may be more volatile than that of a market measure that does not track solely small-capitalization
stocks. Stock prices of small-capitalization companies are also generally more vulnerable than those of large-capitalization companies
to adverse business and economic developments, and the stocks of small-capitalization companies may be thinly traded, and be less attractive
to many investors if they do not pay dividends. In addition, small capitalization companies are typically less well-established and less
stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable
to loss of those individuals. Small capitalization companies tend to have lower revenues, less diverse product lines, smaller shares of
their target markets, fewer financial resources and fewer competitive strengths than large-capitalization companies. These companies may
also be more susceptible to adverse developments related to their products or services. |
General Risk Factors
| · | Your investment is subject to the credit risk of Bank of Montreal. — Our credit ratings and credit spreads may adversely
affect the market value of the notes. Investors are dependent on our ability to pay any amounts due on the notes, and therefore investors
are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or
increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the notes. |
| · | Potential conflicts. — We and our affiliates play a variety of roles in connection with the issuance of the notes, including
acting as calculation agent. In performing these duties, the economic interests of the calculation agent and other affiliates of ours
and Citigroup and any of its affiliates are potentially adverse to your interests as an investor in the notes. We, Citigroup or one or
more of our or their affiliates may also engage in trading of shares of the Reference Assets or the securities held by a Reference Asset
on a regular basis as part of our general broker-dealer and other businesses, for proprietary accounts, for other accounts under management
or to facilitate transactions for our customers. Any of these activities could adversely affect the level of the Reference Assets and,
therefore, the market value of, and the payments on, the notes. We, Citigroup or one or more of our or their affiliates may also issue
or underwrite other securities or financial or derivative instruments with returns linked or related to changes in the performance of
the Reference Assets. By introducing competing products into the marketplace in this manner, we, Citigroup or one or more of our or their
affiliates could adversely affect the market value of the notes. |
| · | Our initial estimated value of the notes will be lower than the price to public. — Our initial estimated value of the
notes is only an estimate, and is based on a number of factors. The price to public of the notes will exceed our initial estimated value,
because costs associated with offering, structuring and hedging the notes are included in the price to public, but are not included in
the estimated value. These costs include any underwriting discount and selling concessions, the profits that we and our affiliates expect
to realize for assuming the risks in hedging our obligations under the notes and the estimated cost of hedging these obligations. The
initial estimated value of the notes may be as low as the amount indicated on the cover page hereof. |
| · | Our initial estimated value does not represent any future value of the notes, and may also differ from the estimated value of any
other party. — Our initial estimated value of the notes as of the date hereof is, and our estimated value as determined on the
Pricing Date will be, derived using our internal pricing models. This value is based on market conditions and other relevant factors,
which include volatility of the Reference Assets, dividend rates and interest rates. Different pricing models and assumptions could provide
values for the notes that are greater than or less than our initial estimated value. In addition, market conditions and other relevant
factors after the Pricing Date are expected to change, possibly rapidly, and our assumptions may prove to be incorrect. After the Pricing
Date, the value of the notes could change dramatically due to changes in market conditions, our creditworthiness, and the other factors
set forth herein and in the product supplement. These changes are likely to impact the price, if any, at which we, Citigroup or any of
our or their affiliates would be willing to purchase the notes from you in any secondary market transactions. Our initial estimated value
does not represent a minimum price at which we, Citigroup or our or their affiliates would be willing to buy your notes in any secondary
market at any time. |
| · | The terms of the notes are not determined by reference to the credit spreads for our conventional fixed-rate debt. —
To determine the terms of the notes, we will use an internal funding rate that represents a discount from the credit spreads for our conventional
fixed-rate debt. As a result, the terms of the notes are less favorable to you than if we had used a higher funding rate. |
| · | Certain costs are likely to adversely affect the value of the notes. — Absent any changes in market conditions, any secondary
market prices of the notes will likely be lower than the price to public. This is because any secondary market prices will likely take
into account our then-current market credit spreads, and because any secondary market prices are likely to exclude all or a portion of
any underwriting discount and selling concessions, and the hedging profits and estimated hedging costs that are included in the price
to public of the notes and that may be reflected on your account statements. In addition, any such price is also likely to reflect a discount
to account for costs associated with establishing or unwinding any related hedge transaction, such as dealer discounts, mark-ups and other
transaction costs. As a result, the price, if any, at which we, Citigroup or any of our or their affiliates or any other party may be
willing to purchase the notes from you in secondary market transactions, if at all, will likely be lower than the price to public. Any
sale that you make prior to the Maturity Date could result in a substantial loss to you. |
| · | Lack of liquidity. — The notes will not be listed on any securities exchange. Citigroup or one or more of our or their
affiliates may offer to purchase the notes in the secondary market, but none of us, Citigroup or any of our or their affiliates is required
to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Because
other dealers are not likely to make a secondary market for the notes, the price at which you may be able to trade the notes is likely
to depend on the price, if any, at which we, Citigroup or one or more of our or their affiliates is willing to buy the notes. |
| · | Hedging and trading activities. — We, Citigroup or any of our or their affiliates may have carried out or may carry out
hedging activities related to the notes, including purchasing or selling shares of the Reference Assets or securities held by the Reference
Assets, futures or options relating to the Reference Assets or securities held by the Reference Assets or other derivative instruments
with returns linked or related to changes in the performance on the Reference Assets or securities held by the Reference Assets. We, Citigroup
or any of our or their affiliates may also trade in the Reference Assets, such securities, or instruments related to the Reference Assets
or such securities from time to time. Any of these hedging or trading activities on or prior to the Pricing Date and during the term of
the notes could adversely affect the payments on the notes. |
| · | Many economic and market factors will influence the value of the notes. — In addition to the levels of the Reference
Assets and interest rates on any trading day, the value of the notes will be affected by a number of economic and market factors that
may either offset or magnify each other, and which are described in more detail in the product supplement. |
| · | Significant aspects of the tax treatment of the notes are uncertain. — The tax treatment of the notes is uncertain. We
do not plan to request a ruling from the Internal Revenue Service or from any Canadian authorities regarding the tax treatment of the
notes, and the Internal Revenue Service or a court may not agree with the tax treatment described herein.
The Internal Revenue Service has released a notice that may affect the taxation of holders of “prepaid forward contracts”
and similar instruments. According to the notice, the Internal Revenue Service and the U.S. Treasury are actively considering whether
the holder of such instruments should be required to accrue ordinary income on a current basis. While it is not clear whether the notes
would be viewed as similar to such instruments, it is possible that any future guidance could materially and adversely affect the tax
consequences of an investment in the notes, possibly with retroactive effect.
Please read carefully the section entitled "U.S. Federal Tax Information" herein, the section entitled "Supplemental Tax
Considerations—Supplemental U.S. Federal Income Tax Considerations" in the accompanying product supplement, the section entitled
"United States Federal Income Taxation" in the accompanying prospectus and the section entitled "Certain Income Tax Consequences"
in the accompanying prospectus supplement. You should consult your tax advisor about your own tax situation. |
Examples of the Hypothetical Payout for a $1,000 Investment in the
Notes
The following tables illustrate the hypothetical
payments on a note, assuming different scenarios. The hypothetical payments are based on a $1,000 investment, a hypothetical Initial Level
of $100.00 for each Reference Asset, a hypothetical Trigger Level of $78.00 for each Reference Asset (78.00% of the hypothetical Initial
Level), a hypothetical interest rate of 0.550% per month (approximately 6.60% per annum), and a range of hypothetical closing levels of
the Least Performing Reference Asset.
The hypothetical examples shown below are intended
to help you understand the terms of the notes. The actual amount of cash or shares that you will receive at maturity will depend upon
the Final Level of the Least Performing Reference Asset. The numbers appearing in the following examples have been rounded for ease of
analysis.
The table below illustrates the hypothetical total
Coupons per note over the term of the notes based on the hypothetical terms set forth above. The hypothetical total Coupons paid per note
over the term of the notes will be equal to the maximum amount shown in the table below.
| Number of Coupons |
Total Coupon Payments |
| 1 |
$5.50 |
| 2 |
$11.00 |
| 3 |
$16.50 |
| 4 |
$22.00 |
| 5 |
$27.50 |
| 6 |
$33.00 |
The following table illustrates the hypothetical
payments on a note at maturity.
Hypothetical Final Level of the
Least Performing Reference Asset |
Hypothetical Final Level of the
Least Performing Reference Asset
Expressed as a Percentage of its
Initial Level |
Payment at Maturity (Excluding
Coupons)* |
| $200.00 |
200.00% |
$1,000.00 |
| $180.00 |
180.00% |
$1,000.00 |
| $160.00 |
160.00% |
$1,000.00 |
| $140.00 |
140.00% |
$1,000.00 |
| $120.00 |
120.00% |
$1,000.00 |
| $100.00 |
100.00% |
$1,000.00 |
| $90.00 |
90.00% |
$1,000.00 |
| $80.00 |
80.00% |
$1,000.00 |
| $78.00 |
78.00% |
$1,000.00 |
| $77.99 |
77.99% |
$779.90 |
| $60.00 |
60.00% |
$600.00 |
| $40.00 |
40.00% |
$400.00 |
| $20.00 |
20.00% |
$200.00 |
| $0.00 |
0.00% |
$0.00 |
* Represents the cash value of the hypothetical
Physical Delivery Amount on the Valuation Date. We may elect to deliver either the Physical Delivery Amount or the Cash Delivery Amount.
If we elect to deliver the Physical Delivery Amount, the actual value received and your total return on the notes on the Maturity Date
will depend on the value of the Least Performing Reference Asset on the Maturity Date.
U.S. Federal Tax Information
By purchasing the notes, each holder agrees (in the absence of a change
in law, an administrative determination or a judicial ruling to the contrary) to treat each note as an investment unit consisting of a
Debt Portion and a Put Option (as such terms are defined in the accompanying product supplement) for U.S. federal income tax purposes.
In the opinion of our counsel, Mayer Brown LLP, it would generally be reasonable to treat the notes as an investment unit consisting of
a Debt Portion and a Put Option in respect of the Reference Assets for U.S. federal income tax purposes. The following table sets forth
the amount of stated interest on the notes and the portion that will be treated as an interest payment on the Debt Portion and as payment
for the Put Option for U.S. federal income tax purposes.
| Interest Rate per Annum |
Treated as an Interest Payment on
the Debt Portion |
Treated as Payment for the Put
Option |
| 6.600% |
[*]% |
[*]% |
Please see the discussion in the accompanying product
supplement under “Supplemental Tax Considerations—Supplemental U.S. Federal Income Tax Considerations — Notes Treated
as an Investment Unit Consisting of a Debt Portion and a Put Option, as a Pre-Paid Contingent Income-Bearing Derivative Contract, or as
a Pre-Paid Derivative Contract—Notes Treated as an Investment Unit Consisting of a Debt Portion and a Put Option,” which applies
to the notes, except the following disclosure which supplements, and to the extent inconsistent supersedes, the discussion in the product
supplement.
Under current Internal Revenue Service guidance,
withholding on "dividend equivalent" payments (as discussed in the product supplement), if any, will not apply to notes that
are issued as of the date of this pricing supplement unless such notes are "delta-one" instruments. Based on our determination
that the notes are not delta-one instruments, non-United States holders (as defined in the product supplement) should not generally be
subject to withholding on dividend equivalent payments, if any, under the notes.
Supplemental Plan of Distribution (Conflicts of Interest)
Citigroup will purchase the notes from us at a purchase
price reflecting the commission set forth on the cover hereof. Citigroup has informed us that, as part of its distribution of the notes,
it may reoffer the notes to other dealers who will sell them. Each such dealer, or each additional dealer engaged by a dealer to whom
Citigroup reoffers the notes, will receive a commission from Citigroup, which will not exceed the commission set forth on the cover page.
We or one of our affiliates may also pay a referral fee to certain dealers in connection with the distribution of the notes.
Certain dealers who purchase the notes for sale
to certain fee-based advisory accounts may forego some or all of their selling concessions, fees or commissions. The public offering price
for investors purchasing the notes in these accounts may be less than 100% of the principal amount, as set forth on the cover page of
this document. Investors that hold their notes in these accounts may be charged fees by the investment advisor or manager of that account
based on the amount of assets held in those accounts, including the notes.
We will deliver the notes on a date that is greater
than one business day following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), trades in the secondary market generally are required to settle in one business day, unless the parties to any such trade
expressly agree otherwise. Accordingly, purchasers who wish to trade the notes more than one business day prior to the issue date will
be required to specify alternative settlement arrangements to prevent a failed settlement.
We reserve the right to withdraw, cancel or modify
the offering of the notes and to reject orders in whole or in part. You may cancel any order for the notes prior to its acceptance.
You should not construe the offering of the notes
as a recommendation of the merits of acquiring an investment linked to the Reference Assets or as to the suitability of an investment
in the notes.
We, Citigroup or one or more of our or their affiliates
may, but is not obligated to, make a market in the notes. We, Citigroup and/or any of our or their affiliates will determine any secondary
market prices that it is prepared to offer in its sole discretion.
We, Citigroup or one or more of our or their affiliates
may use the final pricing supplement relating to the notes in the initial sale of the notes. In addition, we, Citigroup or one of our
or their affiliates may use the final pricing supplement in market-making transactions in any notes after their initial sale. Unless Citigroup
or we or one of our or their affiliates inform you otherwise in the confirmation of sale, the final pricing supplement is being used in
a market-making transaction.
For a period of approximately one month following
issuance of the notes, the price, if any, at which we or Citigroup or one of our or their affiliates would be willing to buy the notes
from investors, and the value that we, Citigroup or one of our or their affiliates may also publish for the notes through one or more
financial information vendors and which could be indicated for the notes on any brokerage account statements, will reflect a temporary
upward adjustment from our estimated value of the notes that would otherwise be determined and applicable at that time. This temporary
upward adjustment represents a portion of (a) the hedging profit that we or our affiliates expect to realize over the term of the notes
and (b) any underwriting discount and the selling concessions paid in connection with this offering. The amount of this temporary upward
adjustment will decline to zero on a straight-line basis over the one-month period.
The notes and the related offer to purchase notes
and sale of notes under the terms and conditions provided herein do not constitute a public offering in any non-U.S. jurisdiction, and
are being made available only to individually identified investors pursuant to a private offering as permitted in the relevant jurisdiction.
The notes are not, and will not be, registered with any securities exchange or registry located outside of the United States and have
not been registered with any non-U.S. securities or banking regulatory authority. The contents of this document have not been reviewed
or approved by any non-U.S. securities or banking regulatory authority. Any person who wishes to acquire the notes from outside the United
States should seek the advice or legal counsel as to the relevant requirements to acquire these notes.
British Virgin Islands. The notes have not
been, and will not be, registered under the laws and regulations of the British Virgin Islands, nor has any regulatory authority in the
British Virgin Islands passed comment upon or approved the accuracy or adequacy of this document. This pricing supplement and the related
documents shall not constitute an offer, invitation or solicitation to any member of the public in the British Virgin Islands for the
purposes of the Securities and Investment Business Act, 2010, of the British Virgin Islands.
Cayman Islands. Pursuant to the Companies
Law (as amended) of the Cayman Islands, no invitation may be made to the public in the Cayman Islands to subscribe for the notes by or
on behalf of the issuer unless at the time of such invitation the issuer is listed on the Cayman Islands Stock Exchange. The issuer is
not presently listed on the Cayman Islands Stock Exchange and, accordingly, no invitation to the public in the Cayman Islands is to be
made by the issuer (or by any dealer on its behalf). No such invitation is made to the public in the Cayman Islands hereby.
Dominican Republic. Nothing in this pricing
supplement constitutes an offer of securities for sale in the Dominican Republic. The notes have not been, and will not be, registered
with the Superintendence of Securities Market of the Dominican Republic (Superintendencia del Mercado de Valores), under Dominican Securities
Market Law No. 249-17 (“Securities Law 249-17”), and the notes may not be offered or sold within the Dominican Republic or
to, or for the account or benefit of, Dominican persons (as defined under Securities Law 249-17 and its regulations). Failure to comply
with these directives may result in a violation of Securities Law 249-17 and its regulations.
Israel. This pricing supplement is intended
solely for investors listed in the First Supplement of the Israeli Securities Law of 1968, as amended. A prospectus has not been prepared
or filed, and will not be prepared or filed, in Israel relating to the notes offered hereunder. The notes cannot be resold in Israel other
than to investors listed in the First Supplement of the Israeli Securities Law of 1968, as amended.
No action will be taken in Israel that would permit
an offering of the notes or the distribution of any offering document or any other material to the public in Israel. In particular, no
offering document or other material has been reviewed or approved by the Israel Securities Authority. Any material provided to an offeree
in Israel may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have
been provided directly by us or the selling agents.
Nothing in this pricing supplement or any other
offering material relating to the notes, should be considered as the rendering of a recommendation or advice, including investment advice
or investment marketing under the Law For Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management, 1995,
to purchase any note. The purchase of any note will be based on an investor’s own understanding, for the investor’s own benefit
and for the investor’s own account and not with the aim or intention of distributing or offering to other parties. In purchasing
the notes, each investor declares that it has the knowledge, expertise and experience in financial and business matters so as to be capable
of evaluating the risks and merits of an investment in the notes, without relying on any of the materials provided.
Mexico. The notes have not been registered
with the National Registry of Securities maintained by the Mexican National Banking and Securities Commission and may not be offered or
sold publicly in Mexico. This pricing supplement and the related documents may not be publicly distributed in Mexico. The notes may only
be offered in a private offering pursuant to Article 8 of the Securities Market Law.
Switzerland. This pricing supplement is not
intended to constitute an offer or solicitation to purchase or invest in any notes. Neither this pricing supplement nor any other offering
or marketing material relating to the notes constitutes a prospectus compliant with the requirements of articles 35 et seq. of the Swiss
Financial Services Act ("FinSA")) for a public offering of the notes in Switzerland and no such prospectus has been or will
be prepared for or in connection with the offering of the notes in Switzerland.
Neither this pricing supplement nor any other offering
or marketing material relating to the notes has been or will be filed with or approved by a Swiss review body (Prüfstelle). No application
has been or is intended to be made to admit the notes to trading on any trading venue (SIX Swiss Exchange or on any other exchange or
any multilateral trading facility) in Switzerland. Neither this pricing supplement nor any other offering or marketing material relating
to the notes may be publicly distributed or otherwise made publicly available in Switzerland.
The notes may not be publicly offered, directly
or indirectly, in Switzerland within the meaning of FinSA except (i) in any circumstances falling within the exemptions to prepare a prospectus
listed in article 36 para. 1 FinSA or (ii) where such offer does not qualify as a public offer in Switzerland, provided always that no
offer of notes shall require the Issuer or any offeror to publish a prospectus pursuant to article 35 FinSA in respect to such offer and
that such offer shall comply with the additional restrictions set out below (if applicable). The Issuer has not authorised and does not
authorise any offer of notes which would require the Issuer or any offeror to publish a prospectus pursuant to article 35 FinSA in respect
of such offer. For purposes of this provision "public offer" shall have the meaning as such term is understood pursuant to article
3 lit. g and h FinSA and the Swiss Financial Services Ordinance ("FinSO").
The notes do not constitute participations in a
collective investment scheme within the meaning of the Swiss Collective Investment Schemes Act. They are not subject to the approval of,
or supervision by, the Swiss Financial Market Supervisory Authority ("FINMA"), and investors in the notes will not benefit from
protection under CISA or supervision by FINMA.
Prohibition of Offer to Private Clients in Switzerland
- No Key Information Document pursuant to article 58 FinSA (Basisinformationsblatt für Finanzinstrumente) or equivalent document
under foreign law pursuant to article 59 para. 2 FinSA has been or will be prepared in relation to the notes. Therefore, the following
additional restriction applies: Notes qualifying as "debt securities with a derivative character" pursuant to article 86 para.
2 FinSO may not be offered within the meaning of article 58 para. 1 FinSA, and neither this pricing supplement nor any other offering
or marketing material relating to such notes may be made available, to any retail client (Privatkunde) within the meaning of FinSA in
Switzerland.
The notes may also be sold in the following jurisdictions,
provided, in each case, any sales are made in accordance with all applicable laws in such jurisdiction:
Additional Information Relating to the Estimated Initial Value of
the Notes
Our estimated initial value of the notes on the
date hereof, and that will be set forth on the cover page of the final pricing supplement relating to the notes, equals the sum of the
values of the following hypothetical components:
| · | a fixed-income debt component with the same tenor as the notes, valued using our internal funding rate for structured notes; and |
| · | one or more derivative transactions relating to the economic terms of the notes. |
The internal funding rate used in the determination
of the initial estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. The value
of these derivative transactions is derived from our internal pricing models. These models are based on factors such as the traded market
prices of comparable derivative instruments and on other inputs, which include volatility, dividend rates, interest rates and other factors.
As a result, the estimated initial value of the notes on the Pricing Date will be determined based on the market conditions on the Pricing
Date.
The Reference Assets
We have derived the following information from publicly
available documents. We have not independently verified the accuracy or completeness of the following information. We are not affiliated
with any Reference Asset Issuer and the Reference Asset Issuers will have no obligations with respect to the notes. This document relates
only to the notes and does not relate to the shares of the Reference Assets or any securities included in any Underlying Index. Neither
we nor any of our affiliates participates in the preparation of the publicly available documents described below. Neither we, Citigroup,
nor any of our or their affiliates has made any due diligence inquiry with respect to the Reference Assets in connection with the offering
of the notes. There can be no assurance that all events occurring prior to the date hereof, including events that would affect the accuracy
or completeness of the publicly available documents described below and that would affect the trading price of the shares of any Reference
Asset, have been or will be publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose material
future events concerning any Reference Asset could affect the price of the shares of that Reference Asset on the Valuation Date, and therefore
could affect the payments on the notes.
The selection of a Reference Asset is not a recommendation
to buy or sell the shares of that Reference Asset. Neither we nor any of our affiliates make any representation to you as to the performance
of the shares of any Reference Asset. Information provided to or filed with the SEC under the Exchange Act and the Investment Company
Act of 1940 relating to the Reference Assets may be obtained through the SEC’s website at http://www.sec.gov.
We encourage you to review recent levels of the
Reference Assets prior to making an investment decision with respect to the notes.
The SPDR® Dow Jones® Industrial Average ETF
The SPDR® Dow Jones® Industrial Average
ETF seeks to provide investment results that, before fees and expenses, correspond generally to the performance of the Dow Jones Industrial
Average®. The SPDR® Dow Jones® Industrial Average ETF utilizes a “replication” investment approach in attempting
to track the performance of the underlying index. The SPDR® Dow Jones® Industrial Average ETF typically invests in substantially
all of the securities which comprise the underlying index in approximately the same proportions as the underlying index.
The Dow Jones Industrial Average® (“INDU”)
The INDU is a price-weighted index, which means
an underlying stock’s weight in the INDU is based on its price per share rather than the total market capitalization of the issuer.
The INDU is designed to provide an indication of the composite performance of 30 common stocks of corporations representing a broad cross-section
of U.S. industry. The corporations represented in the INDU tend to be market leaders in their respective industries and their stocks are
typically widely held by individuals and institutional investors.
The INDU is maintained by an Averages Committee
comprised of three representatives of S&P Dow Jones Indices and two representatives of The Wall Street Journal (“WSJ”).
The Averages Committee was created in March 2010, when Dow Jones Indexes became part of CME Group Index Services, LLC, a joint venture
company owned by CME Group Inc. and by Dow Jones & Company. Generally, composition changes occur only after mergers, corporate acquisitions
or other dramatic shifts in a component's core business. When such an event necessitates that one component be replaced, the entire INDU
is reviewed. As a result, when changes are made they typically involve more than one component. While there are no rules for component
selection, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth and is of interest
to a large number of investors.
Changes in the composition of the INDU are made
entirely by the Averages Committee without consultation with the corporations represented in the INDU, any stock exchange, any official
agency or us. Unlike most other indices, which are reconstituted according to a fixed review schedule, constituents of the INDU are reviewed
on an as-needed basis. Changes to the common stocks included in the INDU tend to be made infrequently, and the underlying stocks of the
INDU may be changed at any time for any reason. The companies currently represented in the INDU are incorporated and headquartered in
the United States and its territories and their stocks are listed on the New York Stock Exchange and Nasdaq.
The INDU initially consisted of 12 common stocks
and was first published in the WSJ in 1896. The INDU was increased to include 20 common stocks in 1916 and to 30 common stocks in 1928.
The number of common stocks in the INDU has remained at 30 since 1928, and, in an effort to maintain continuity, the constituent corporations
represented in the INDU have been changed on a relatively infrequent basis.
Computation of the INDU
The level of the INDU is the sum of the primary
exchange prices of each of the 30 component stocks included in the INDU, divided by a divisor that is designed to provide a meaningful
continuity in the level of the INDU. Because the INDU is price-weighted, stock splits or changes in the component stocks could result
in distortions in the index level. In order to prevent these distortions related to extrinsic factors, the divisor is periodically changed
in accordance with a mathematical formula that reflects adjusted proportions within the INDU. The current divisor of the INDU is published
daily in the WSJ and other publications. In addition, other statistics based on the INDU may be found in a variety of publicly available
sources.
iShares® Russell 2000 ETF (“IWM”)
iShares® Russell 2000 ETF is listed on the NYSE
Arca under the ticker symbol “IWM.” The iShares® Russell 2000 ETF seeks investment results that correspond generally to
the price and yield performance, before fees and expenses, of the Russell 2000® Index. iShares Trust is a registered investment company
that consists of numerous separate investment portfolios, including the iShares® Russell 2000 ETF. iShares Trust and BlackRock Fund
Advisors have entered into an investment advisory agreement under which BlackRock Fund Advisors was appointed as the Investment Advisor
for the iShares® Russell 2000 ETF.
The Russell 2000® Index
The Russell 2000® Index was developed by Russell
Investments (“Russell”) before FTSE International Limited (“FTSE”) and Russell combined in 2015 to create FTSE
Russell, which is wholly owned by London Stock Exchange Group. Russell began dissemination of the Russell 2000® Index (Bloomberg L.P.
index symbol “RTY”) on January 1, 1984. The Russell 2000® Index was set to 135 as of the close of business on December
31, 1986. FTSE Russell calculates and publishes the Russell 2000® Index. The Russell 2000® Index is designed to track the performance
of the small capitalization segment of the U.S. equity market. As a subset of the Russell 3000® Index, the Russell 2000® Index
consists of the smallest 2,000 companies included in the Russell 3000® Index. The Russell 3000® Index measures the performance
of the largest 3,000 U.S. companies. The Russell 2000® Index is determined, comprised, and calculated by FTSE Russell without regard
to the notes.
Selection of Stocks Comprising the Russell 2000® Index
All companies eligible for inclusion in the Russell
2000® Index must be classified as a U.S. company under FTSE Russell’s country-assignment methodology. If a company is incorporated,
has a stated headquarters location, and trades on a standard exchange in the same country (American Depositary Receipts and American Depositary
Shares are not eligible), then the company is assigned to its country of incorporation. If any of the three factors are not the same,
FTSE Russell defines three Home Country Indicators (“HCIs”): country of incorporation, country of headquarters, and country
of the most liquid exchange (as defined by a two-year average daily dollar trading volume) (“ADDTV”) from all exchanges within
a country. Using the HCIs, FTSE Russell compares the primary location of the company’s assets with the three HCIs. If the primary
location of its assets matches any of the HCIs, then the company is assigned to the primary location of its assets. If there is insufficient
information to determine the country in which the company’s assets are primarily located, FTSE Russell will use the primary location
of the company’s revenue for the same cross-comparison and assigns the company to the appropriate country in a similar fashion.
FTSE Russell uses the average of two years of assets or revenues data to reduce potential turnover. If conclusive country details cannot
be derived from assets or revenues data, FTSE Russell will assign the company to the country in which its headquarters are located unless
the country is a Benefit Driven Incorporation “BDI” country. If the country in which its headquarters are located is a BDI,
it will be assigned to the country of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Aruba, Bahamas,
Barbados, Belize, Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Channel Islands, Cook Islands, Curacao, Faroe Islands, Gibraltar,
Guernsey, Isle of Man, Jersey, Liberia, Marshall Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and Turks and Caicos Islands. For
any companies incorporated or headquartered in a U.S. territory, including countries such as Puerto Rico, Guam, and U.S. Virgin Islands,
a U.S. HCI is assigned. “N-Shares” of companies controlled by entities in mainland China are not eligible for inclusion in
the Russell 2000® Index.
All securities eligible for inclusion in the Russell
2000® Index must trade on a major U.S. exchange. Stocks must have a closing price at or above $1.00 on their primary exchange on the
“rank day” in May of each year (timetable is announced each spring) to be eligible for inclusion during annual reconstitution.
However, in order to reduce unnecessary turnover, if an existing member’s closing price is less than $1.00 on the last day of May,
it will be considered eligible if the average of the daily closing prices (from its primary exchange) during the month of May is equal
to or greater than $1.00. FTSE Russell adds initial public offerings (IPOs) each quarter to ensure that new additions to the institutional
investing opportunity set are reflected in representative indexes. A stock added during the quarterly IPO process is considered a new
index addition, and therefore must have a closing price on its primary exchange at or above $1.00 on the last day of the eligibility period
in order to qualify for index inclusion. If an existing index member does not trade on the rank day, it must price at $1.00 or above on
another eligible U.S. exchange to remain eligible.
Royalty trusts, limited liability companies, closed-end
investment companies (companies that are required to report Acquired Fund Fees and Expenses, as defined by the SEC, including business
development companies, are not eligible), blank check companies, special-purpose acquisition companies, exchange traded funds, mutual
funds and limited partnerships are ineligible for inclusion. Preferred and convertible preferred stock, redeemable shares, participating
preferred stock, warrants, rights, installment receipts and trust receipts are not eligible for inclusion in the Russell 2000® Index.
Annual reconstitution is a process by which the
Russell 2000® Index is completely rebuilt. On the rank day of July, all eligible securities are ranked by their total market capitalization.
The largest 4,000 become the Russell 3000E Index, and the other FTSE Russell indexes are determined from that set of securities. Reconstitution
of the Russell 2000® Index occurs on the last Friday in June or, when the last Friday in June is the 29th or 30th, reconstitution
occurs on the prior Friday. In addition, FTSE Russell adds initial public offerings to the Russell 2000® Index on a quarterly basis
based on total market capitalization ranking within the market-adjusted capitalization breaks established during the most recent reconstitution.
After membership is determined, a security’s
shares are adjusted to include only those shares available to the public. This is often referred to as “free float.” The purpose
of the adjustment is to exclude from market calculations the capitalization that is not available for purchase and is not part of the
investable opportunity set.
14
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