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Alpha ReCharge 2

This product is not available for subscription.

Overview

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.


Indicative Terms

  • ASX listed
  • Maturity: 16 February 2012 (2.25 Years)
  • Currency: AUD
  • No Capital Protection at Maturity
  • Type: Deferred Purchase Agreement
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.
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.
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 )
ASX Code Series A: RAASOA
Series B: RAASOB
Issue Price per Unit Series A: AUD 0.1468
Series B: AUD 0.1633
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.

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.
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.
Notional Exposure Amount
Notional Exposure per Unit x number of Units held
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%
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
Volatility-Adjusted Portfolio Return In respect of each Series, the Volatility-Adjusted Portfolio Return is a percentage calculated according to the following formula:

(Volatility-Adjusted Portfolio Value / Volatility-Adjusted Portfolio Value on Issue Date) – 100%

The Volatility-Adjusted Portfolio Value on the Issue Date is set to AUD 1.00
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:

Coupon Payment Rate = Min [7%, Max (Volatility-Adjusted Portfolio Return, 0%)]
Coupon Payment per Unit* In respect of each Series:

Coupon Payment Rate x Notional Exposure per Unit
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:

Final Value per Unit = Max (Volatility-Adjusted Portfolio Return at Maturity – sum of the Coupon Payment Rates, 0%) x Notional Exposure per Unit
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.
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
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.

* 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

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.


Notification

  • Issue Date Notification


Download

  • 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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