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Alpha ReCharge is designed for Investors seeking exposure to the S&P/ASX 200 ("Reference Index") through the benefit of a controlled dynamic volatility adjusted portfolio. The volatility adjustment methodology used is an innovative risk control mechanism that dynamically adjusts the Index Allocation of the Dynamic Portfolio according to Historical Volatility. The rationale being that volatility in rising markets has historically been low, while in falling markets the volatility in the market rapidly increases. The effect of the Global Financial Crisis on global markets has been one such example. In overall terms, Alpha ReCharge seeks to provide Investors with leveraged exposure to the Reference Index in rising markets and to decrease exposure in falling markets. |
| Arranger | Alpha Structured Investments Pty Ltd | |
|---|---|---|
| Issuer | Citigroup Global Markets Australia Pty Limited | |
| Guarantor | Citigroup Inc. | |
| Product | Alpha ReCharge (Volatility Target S&P/ASX 200 Price Index) | |
| Offer Closes | 31 July 2009 at 5:00 pm (Sydney time) | |
| Issue Date | 7 August 2009 | |
| Maturity Date | 7 February 2014 | |
| Term | 4 years and 6 months | |
| Denomination | Australian Dollars ("AUD") | |
| Investment | Alpha ReCharge is an agreement between the Investor and the Issuer under which the Investor agrees to purchase the Delivery Parcel from the Issuer on a deferred basis governed by the Terms. The Investment comprises the number of Units held by the Investor. | |
| Issue Price | AUD 0.22175 per Unit | |
| Investment Amount | The actual amount paid by the Investor to the Issuer by the Offer Closes. | |
| Minimum Investment Amount | 100,000 Units (equivalent to AUD 22,175) and multiples of 1,000 Units (equivalent to AUD 221.75) thereafter. | |
| Notional Exposure per Unit | AUD 1.00 The Notional Exposure per Unit is the amount of notional exposure that Investors obtain in respect of the Dynamic Portfolio on the Issue Date. This means that every Unit has AUD 1.00 exposure to the Dynamic Portfolio despite the Issue Price of less than AUD 1.00 per Unit. Investors will thus obtain notional “leverage” to the Dynamic Portfolio without borrowing. This feature has the potential to increase gains or magnify losses. Please see Section 2 of this PDS for risks associated with leverage. |
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| Reference Index | S&P/ASX 200 Price Index (Reuters: .AXJO; Bloomberg: AS51 |
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| Dynamic Portfolio | Notional portfolio with volatility-adjusted exposure to the Reference Index and a cash component that changes according to the Index Allocation. | |
| Index Allocation | The percentage allocation of the Reference Index within the Dynamic Portfolio that changes according to the relationship between Historical Volatility and the Volatility Target as monitored on each Trading Day. | |
| Volatility Period | 60 consecutive Trading Days. | |
| Historical Volatility | Annualised average volatility of the Reference Index during the preceding Volatility Period, determined in accordance with the Volatility Formula. | |
| Volatility Target | 16.5% | |
| Dynamic Portfolio Value | Closing value of the Dynamic Portfolio on any Trading Day, including the Coupon Observation Dates and the Maturity Date. | |
| Dynamic Portfolio Return |
The Dynamic Portfolio Return is calculated according to the following formula: Dynamic Portfolio Value / Dynamic Portfolio Value on Issue Date – 100% The Dynamic Portfolio Value on the Issue Date is set to AUD 1.00 |
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| Coupon Observation Dates | 9 August 2010, 8 August 2011, 7 August 2012 and 7 August 2013 | |
| Coupon Payment Dates | 5 Business Days after each Coupon Observation Date | |
| Coupon Payment Rate* | On each Coupon Observation Date the Coupon Payment Rate is equal to the Dynamic Portfolio Return, except that the Coupon Payment Rate cannot be less than 0% nor more than 7%. This is represented by the following formula: Coupon Payment Rate = Min [7%, Max (Dynamic Portfolio Return , 0%)] |
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| Final Value per Unit* | The Final Value per Unit at Maturity is equal to the Dynamic Portfolio Return at Maturity less the sum of the Coupon Payment Rates throughout the Term, multiplied by the Notional Exposure per Unit. However the Final Value per Unit cannot be less than 0%. This is represented by the following formula: Final Value per Unit = Max (Dynamic Portfolio Return at Maturity – sum of the Coupon Payment Rates, 0%) x Notional Exposure per Unit |
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| No Capital Protection* | There is no Capital Protection for this Investment. Investors should be aware that each Coupon Payment per Unit and/or the Final Value per Unit may be zero. | |
| Delivery Asset | Shares in the Commonwealth Bank of Australia (the “Commonwealth Bank”) (an ASX listed share, ASX code: CBA) | |
| Fees: | Financial Adviser Fee – An upfront fee payable by the Issuer of up to 3.30% (including GST) of the Notional Exposure Amount. Arranger Fee – An upfront fee payable by the Issuer of up to 1.375% (including GST) of the Notional Exposure Amount. These fees will be paid by Citi at no additional cost to Investors. Administration Fee – If there is no Delivery Parcel deliverable in accordance with the Terms, the Issuer is entitled on the Maturity Date to a fee for the costs incurred in relation to the administration of the Portion. The fee would ordinarily be payable by the Investor, however the Issuer will keep the Portion in satisfaction of that fee and no additional amount will be payable by the Investor. |
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* There is no capital protection for this product. Any payments are subject to the credit worthiness of Citigroup Global Markets Australia Pty Limited and Citigroup Inc. (S&P A (Stable), Moody’s A3 (Stable), Fitch A+ (Stable) as at the date of the PDS). For more details, please refer to Section 2 of this PDS. |
| Time Horizon (Years) |
1 or Less
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1-3
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3-4
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5 or more
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Open-ended
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| Risk |
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Moderate
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High
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Very High |
Speculative
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| Investment Objective |
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Partial Protection
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Conditional Protection
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No Protection |
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Growth |
| The above table is a quick reference guide to certain parameters of the product relating to maturity, risk and type of investment goals this product will seek to meet. This is not a recommendation of the product, does not constitute investment advice and should not be construed as doing so. |
| Phone | : | 1300 76 96 94. | |
| : | info@alpha-invest.com.au | ||