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Alpha ReCharge

This product is not available for subscription.

Overview

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.


Indicative Terms

  • Maturity: 7 February 2014 (4.5 Years)
  • Currency: AUD
  • No Capital Protection at Maturity
  • Type: Deferred Purchase Agreement
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.
Reference Index S&P/ASX 200 Price Index (Reuters: .AXJO; Bloomberg: AS51 )
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
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%)]
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
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.

* 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.

Investment Profile

Time Horizon (Years)
1 or Less
1-3
3-4
4-5
5 or more
Open-ended
Risk
Very Low
Low
Moderate
High
Very High
Speculative
Investment Objective
Full Protection
Partial Protection
Conditional Protection
No Protection
Income
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.


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  • Product Disclosure Statement

More Information

For further information on Alpha ReCharge contact Alpha.

Phone : 1300 76 96 94.
Email : info@alpha-invest.com.au

Disclaimer
This material is made available by Citigroup Global Markets Australia Pty Limited (“Citigroup Global Markets”) ABN 64 003 114 832 and AFSL 240992, Participant of the ASX Group and a Participant of the Sydney Futures Exchange Limited. The Financial Products referred to in this document are issued by Citigroup Global Markets. Warrants can be traded on ASX and investors can obtain a copy of the relevant Product Disclosure Statement by contacting Citigroup. Investors may also apply for Instalment Warrants under the Product Disclosure Statement. This information does not take into account the investment objectives or financial situation of any particular person. Investors should be aware that there are risks of investing and that prices both rise and fall. Investors should seek their own independent financial advice based on their own circumstances before making a decision. Warrants are not bank deposits or obligations of, or guaranteed by, Citibank, N.A., Citibank Pty Limited or any of its affiliates or subsidiaries and are subject to investment risks, including the possible loss of the principal amount invested.

The terms set forth herein are intended for discussion purposes only and subject to the final expression of the terms of a transaction as set forth in a definitive agreement and/or confirmation. Although the information contained herein is based upon generally available information and has been obtained from sources believed to be reliable, we do not guarantee its accuracy, and such information may be incomplete or condensed. Any prices used herein are historic and may not be available when any order is entered. All opinions and estimates included in this document constitute our judgment as of this date and are subject to change without notice. This material does not purport to identify the nature of the specific market or other risks associated with a particular transaction. Before entering into a derivative transaction, you should ensure that you fully understand the terms of the transaction, relevant risk factors, the nature and extent of your risk of loss and the nature of the contractual relationship into which you are entering. You should also carefully evaluate whether the transaction is appropriate for you in light of your experience, objectives, financial resources, and other relevant circumstances and whether you have the operational resources in place to monitor the associated risks and contractual obligations over the term of the transaction.

The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor or agent. Therefore prior to entering into the proposed transaction you should determine, without reliance upon us or our affiliates, the economic risks and merits, as well as the legal, tax and accounting characterizations and consequences of the transaction, and independently determine that you are able to assume these risks. In this regard, by acceptance of these materials, you acknowledge that you have been advised that (a) we are not in the business of providing legal, tax or accounting advice, (b) you understand that there may be legal, tax or accounting risks associated with the transaction, (c) you should receive legal tax and accounting advice from advisors with appropriate expertise to assess relevant risks, and (d) you should apprise senior management in your organization as to the legal, tax and accounting advice (and, if acceptable, risks) associated with this transaction and our disclaimers as to these maters. If you are acting as a financial adviser or agent, you should evaluate these considerations in light of the circumstances applicable to your principal and the scope of your authority. If you believe you need assistance in evaluating and understanding the terms or risks of a particular derivative transaction, you should consult appropriate advisers before entering into the transaction.

We and/or our affiliates (together, the “Firm”) may from time to time take proprietary positions and/or make a market in instruments identical or economically related to derivative transactions entered into with you, or may have an investment banking or other commercial relationship with and access to information from the issuer(s) of financial products underlying derivative transactions entered into with you. We may also undertake proprietary activities, including hedging transactions related to the initiation or termination of a derivative transaction with you, that may adversely affect the market price, rate, index or other market factors(s) underlying a derivative transaction entered into with you and consequently the value of the transaction. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding.

© Citigroup 2012. All Rights Reserved. Citi and the Red Arc Device are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world. Any unauthorized use, duplication, redistribution or disclosure is prohibited by law and will result in prosecution.
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