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Alpha ReCharge 2 is designed for Investors seeking exposure to the S&P/ASX 200 (Series A) and/or Hang Seng China Enterprises Index (Series B) through the benefit of controlled dynamic volatility adjusted portfolios. The volatility adjustment methodology used is an innovative risk control mechanism that dynamically adjusts the Index Allocation of the relevant 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 2 seeks to provide Investors with leveraged exposure to the relevant Reference Index in rising markets and to decrease exposure in falling markets. |
| Arranger | Alpha Structured Investments Pty Limited | |
|---|---|---|
| Issuer | Citigroup Global Markets Australia Pty Limited | |
| Guarantor | Citigroup Inc. | |
| No Capital Protection* |
In respect of each Series, the Investment Amount is not capital protected.
Investors should be aware that each Coupon Payment per Unit and/or the Final Value per Unit may be zero. All payments are subject to the credit worthiness of the Issuer and Citigroup Inc. For more details, please refer to Section 2 of the PDS. |
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| Product | Alpha ReCharge 2 | |
| Initial Offer Opens | 12 October 2009 at 9:00 am (Sydney time) | |
| Initial Offer Closes | 10 November 2009 at 5:00 pm (Sydney time) | |
| Issue Date | 16 November 2009 | |
| Term | 2 years and 3 months | |
| Maturity Date | 16 February 2012 | |
| Maturity Payment Date | 5 Business Days after the Maturity Date or such later date as determined by the Issuer in its discretion as is reasonably necessary for the Issuer to fulfil its obligations under the Terms | |
| Denomination | Australian Dollars ("AUD") | |
| Investment | Alpha ReCharge 2 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 in the selected Series. | |
| Series | A series of Units in Alpha ReCharge 2 issued under this PDS which offers exposure to the selected Reference Index. Series A offers exposure to the S&P/ASX 200 Price Index. Series B offers exposure to the Hang Seng China Enterprises Index. The Investor may select one or both of the Series to invest in. |
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| Reference Index | Series A: S&P/ASX 200 Price Index (Reuters: .AXJO; Bloomberg: AS51 Series B: Hang Seng China Enterprises Index (Reuters: .HSCE; Bloomberg: HSCEI |
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| ASX Code | Series A: RAASOA Series B: RAASOB |
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| Issue Price per Unit | Series A: AUD 0.1468 Series B: AUD 0.1633 |
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| General Offer Period | In respect of each Series, a General Offer Period is a period during which Investors can invest in Alpha ReCharge 2 after the Issue Date. Any such Investment will be for the balance of the Term, so that it expires on the Maturity Date. The General Offer Period is 17 November 2009 to 4 January 2012. During the General Offer Period, Units will be issued at the Purchase Price per Unit. Applications made during the General Offer Period will be processed on a weekly basis or such other timing as determined by the Issuer in its discretion in consultation with the Arranger. If you are an AFSL holder please contact Alpha to obtain the details for the processing of Applications during the General Offer Period. The General Offer Period may include dates where Citigroup Inc. (S&P A (Stable), Moody's A3 (Stable), Fitch A+ (Stable) as at the date of the PDS) may have earnings releases and potential corporate actions that may adversely affect the credit quality of Alpha ReCharge 2. By investing in Alpha ReCharge 2, the Investor acknowledges the above. For more details please refer to Section 2 of the PDS. |
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| Purchase Price per Unit | In respect of each Series, the market price of the Units determined by the Issuer at the time of issue of Units on the Purchase Date. Note that the Purchase Price per Unit may not be the same as the Issue Price per Unit. The prevailing Purchase Price per Unit before the Purchase Date will be available from the Issuer or your licensed financial adviser. Potential Investors should not make an investment decision without considering that prevailing Purchase Price per Unit. |
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| Purchase Date | A date (after the Issue Date) in any given week during the General Offer Period in which the Issuer receives cleared funds from the Investor and on which the Issuer issues Units in a Series. | |
| Investment Amount | The Issue Price per Unit or Purchase Price per Unit (as applicable) multiplied by the number of Units applied for in the Application Form. | |
| Total Amount | The aggregate of the Investment Amount and the Financial Adviser Fee (or, if the Financial Adviser waives the Financial Adviser Fee, the Total Amount is the Investment Amount). For an Investment Amount of AUD 14,680 (Series A) and AUD 16,330 (Series B) and assuming that the Financial Adviser Fee of AUD 2,200 (Series A and Series B) is not waived by the Financial Adviser, the Total Amount is equal to AUD 16,880 (Series A) and AUD 18,530 (Series B) respectively. | |
| Minimum Investment Amount | 100,000 Units (Series A: equivalent to AUD 14,680; Series B: equivalent to AUD 16,330) and multiples of 10,000 Units (Series A: equivalent to AUD 1,468; Series B: equivalent to AUD 1,633) thereafter. | |
| Notional Exposure per Unit | Series A: AUD 1.00 Series B: AUD 1.00 The Notional Exposure per Unit is the amount of notional exposure that Investors obtain per Unit in respect of the Volatility-Adjusted Portfolio. This means that every Unit has AUD 1.00 exposure to its Volatility-Adjusted Portfolio despite the Issue Price per Unit or Purchase Price per Unit of less than AUD 1.00 per Unit. Investors will thus obtain notional "leverage" to the Volatility-Adjusted 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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| Notional Exposure Amount | ||
| Volatility-Adjusted Portfolio | In respect of each Series, the Volatility-Adjusted Portfolio is a notional portfolio with volatility-adjusted exposure to the Reference Index and to a cash component that changes according to the Index Allocation. | |
| Index Allocation | In respect of each Series, the percentage allocation of the Reference Index within the Volatility-Adjusted 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 | In respect of each Series, the Historical Volatility is an annualised average volatility of the Reference Index during the preceding Volatility Period, determined in accordance with the Volatility Formula | |
| Volatility Target | Series A: 18% Series B: 20% |
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| Volatility-Adjusted Portfolio Value | In respect of each Series, the Volatility-Adjusted Portfolio Value is the closing value of the Volatility-Adjusted Portfolio on any Trading Day, including the Coupon Observation Dates and the Maturity Date |
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| Volatility-Adjusted Portfolio Return | In respect of each Series, the Volatility-Adjusted Portfolio Return is a percentage calculated according to the following formula: The Volatility-Adjusted Portfolio Value on the Issue Date is set to AUD 1.00 |
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| Coupon Observation Dates | 16 November 2010, 16 November 2011 | |
| Coupon Ex Dates | 1 Business Day after each Coupon Observation Date | |
| Coupon Record Dates | 6 Business Days after each Coupon Observation Date | |
| Coupon Payment Dates | 11 Business Days after each Coupon Observation Date | |
| Coupon Payment Rate* | In respect of each Series, on each Coupon Observation Date the Coupon Payment Rate is equal to the Volatility-Adjusted Portfolio Return, except that the Coupon Payment Rate cannot be less than 0% nor more than 7%. This is represented by the following formula: |
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| Coupon Payment per Unit* | In respect of each Series: |
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| Final Value per Unit* | In respect of each Series, the Final Value per Unit at Maturity is equal to the Volatility-Adjusted 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 zero. This is represented by the following formula: |
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| Risks | In addition to the lack of capital protection, other risks relating to Alpha ReCharge 2 include: market risk (that Coupon Payments per Unit may be zero and in relation to the performance of the Volatility-Adjusted Portfolio at Maturity), Early Maturity risk and changes to tax and law risk. Please see section 2 of the PDS for more information on risks. |
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| Delivery Asset | Ordinary shares in the Commonwealth Bank of Australia (the "Commonwealth Bank") (an ASX listed share, ASX code: CBA) | |
| Fees: | Financial Adviser Fee – An upfront fee of 2.20% (including GST) of the Notional Exposure
Amount payable by the Investor when making an Application. This fee is payable to the
Issuer who collects it and pays it to the Financial Adviser. This fee may be waived by your
Financial Adviser by indicating this in the appropriate section of the Application Form.
For an Investment Amount of AUD 14,680 (Series A) and AUD 16,330 (Series B) this
equates to a Financial Adviser Fee of AUD 2,200. If the Financial Adviser Fee is not
waived, the Total Amount payable by the Investor would be AUD 16,880 (Series A) and
AUD 18,530 (Series B). Arranger Fee – An upfront fee payable by the Issuer of up to 1.43% (including GST) of the Notional Exposure Amount. For an Investment Amount of AUD 14,680 (Series A) and AUD 16,330 (Series B) this equates to AUD 1,430. The Arranger Fee 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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| Quotation | The Issuer will apply for the official quotation of Alpha ReCharge 2 within 7 days after the date of this PDS to enable trading on the ASX. | |
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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. For more details, please refer to Section 2 of the 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 | ||