Title of each class of securities to be registered
|
Maximum aggregate offering price
|
Amount of registration fee(1) (2)
|
||
Medium-Term Senior Notes, Series G
|
$2,980,000
|
$346.28
|
(1)
|
Calculated in accordance with Rule 457(r) of the Securities Act.
|
(2)
|
Pursuant to Rule 457(p) under the Securities Act, the $248,529.85 remaining of the relevant portion of the registration fees previously paid with respect to unsold securities registered on Registration Statement File No. 333-172554, filed on March 2, 2011 by Citigroup Funding Inc., a wholly owned subsidiary of Citigroup Inc., is being carried forward, of which $346.28 is offset against the registration fee due for this offering and of which $248,183.57 remains available for future registration fee offset. No additional registration fee has been paid with respect to this offering. See the “Calculation of Registration Fee” table accompanying the filing of Pricing Supplement No. 2015-CMTNG0369 dated February 12, 2015, filed by Citigroup Inc. on February 17, 2015, for information regarding the registration fees that are being carried forward.
|
Citigroup Inc.
|
April 30, 2015
Medium-Term Senior Notes, Series G
Pricing Supplement No. 2015-CMTNG0513
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-192302
|
▪
|
The securities offered by this pricing supplement are unsecured senior debt securities issued by Citigroup Inc. Unlike conventional debt securities, the securities do not pay interest and do not repay a fixed amount of principal at maturity. Instead, the securities offer a payment at maturity that may be greater than, equal to or less than the stated principal amount, depending on the performance of shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (the “underlying shares”) from the initial share price to the final share price.
|
▪
|
The securities offer modified exposure to the performance of the underlying shares, with the opportunity to participate in 68.50% of any appreciation of the underlying shares and a contingent buffer against a limited range of potential depreciation of the underlying shares as described below. In exchange for the contingent buffer, investors in the securities must be willing to forgo (i) full participation in any appreciation of the underlying shares and (ii) any dividends that may be paid on the underlying shares. In addition, investors in the securities must be willing to accept full downside exposure to the underlying shares, with no buffer, if the underlying shares depreciate by more than 25.00%. If the underlying shares depreciate by more than 25.00% from the pricing date to the valuation date, you will lose 1% of the stated principal amount of your securities for every 1% by which the final share price is less than the initial share price. There is no minimum payment at maturity.
|
▪
|
In order to obtain the modified exposure to the underlying shares that the securities provide, investors must be willing to accept (i) an investment that may have limited or no liquidity and (ii) the risk of not receiving any amount due under the securities if we default on our obligations.
|
KEY TERMS
|
|||
Underlying shares:
|
Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSE Arca symbol: "ASHR") (the "underlying share issuer" or "ETF")
|
||
Aggregate stated principal amount:
|
$2,980,000
|
||
Stated principal amount:
|
$1,000 per security
|
||
Pricing date:
|
April 30, 2015
|
||
Issue date:
|
May 5, 2015
|
||
Valuation date:
|
April 30, 2019, subject to postponement if such date is not a scheduled trading day or if certain market disruption events occur
|
||
Maturity date:
|
May 3, 2019
|
||
Payment at maturity:
|
For each $1,000 stated principal amount security you hold at maturity:
▪ If the final share price is greater than or equal to the initial share price:
$1,000 + the return amount
▪ If the final share price is less than the initial share price but greater than or equal to the barrier price:
$1,000
▪ If the final share price is less than the barrier price:
$1,000 × the share performance factor
If the final share price is less than the barrier price, your payment at maturity will be less, and possibly significantly less, than $750.00 per security. You should not invest in the securities unless you are willing and able to bear the risk of losing a significant portion of your investment.
|
||
Initial share price:
|
$48.76, the closing price of the underlying shares on the pricing date
|
||
Final share price:
|
The closing price of the underlying shares on the valuation date
|
||
Share performance factor:
|
The final share price divided by the initial share price
|
||
Share percent increase:
|
The final share price minus the initial share price, divided by the initial share price
|
||
Return amount:
|
$1,000 × share percent increase × upside participation rate
|
||
Upside participation rate:
|
68.50%
|
||
Barrier price:
|
$36.57, 75.00% of the initial share price
|
||
Listing:
|
The securities will not be listed on any securities exchange
|
||
CUSIP / ISIN:
|
17298CAC2 / US17298CAC29
|
||
Underwriter:
|
Citigroup Global Markets Inc. (“CGMI”), an affiliate of the issuer, acting as principal
|
||
Underwriting fee and issue price:
|
Issue price(1)(2)
|
Underwriting fee(3)
|
Proceeds to issuer
|
Per security:
|
$1,000.00
|
$25.00
|
$975.00
|
Total:
|
$2,980,000.00
|
$74,500.00
|
$2,905,500.00
|
Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
Barrier Securities
Payment at Maturity Diagram
|
|
n The Securities
|
n The Underlying Shares
|
April 2015
|
PS-2
|
Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
▪
|
You may lose some or all of your investment. Unlike conventional debt securities, the securities do not repay a fixed amount of principal at maturity. Instead, your payment at maturity will depend on the performance of the underlying shares. If the final share price is less than the barrier price, you will lose 1% of the stated principal amount of the securities for every 1% by which the final share price is less than the initial share price. There is no minimum payment at maturity on the securities, and you may lose up to all of your investment.
|
▪
|
The securities are designed for investors who seek exposure to the underlying shares but who are willing to forgo full upside participation in any appreciation of the underlying shares in order to obtain a contingent buffer against a limited range of potential depreciation of the underlying shares. You should understand that you will only participate in 68.50% of any appreciation of the underlying shares. As a result, the securities will underperform a direct investment in the underlying shares if the underlying shares appreciate from the pricing date to the valuation date. In addition, because investors in the securities will not receive any dividends paid on the underlying shares, the securities may underperform a direct investment in the underlying shares even in scenarios in which the underlying shares depreciate.
|
▪
|
The barrier feature of the securities exposes you to particular risks. If the final share price is less than the barrier price, the contingent buffer against a limited range of potential depreciation of the underlying shares offered by the securities will not apply and you will lose 1% of the stated principal amount of the securities for every 1% by which the final share price is less than the initial share price. Unlike securities with a non-contingent buffer feature, the securities offer no protection at all if the underlying
|
April 2015
|
PS-3
|
Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
|
shares depreciate by more than 25.00% from the initial share price to the final share price. As a result, you may lose your entire investment in the securities.
|
▪
|
The securities do not pay interest. Unlike conventional debt securities, the securities do not pay interest or any other amounts prior to maturity. You should not invest in the securities if you seek current income during the term of the securities.
|
▪
|
You will not have voting rights, rights to receive any dividends or other distributions or any other rights with respect to the ETF. As of April 30, 2015, the trailing 12-month dividend yield of the underlying shares was 0.21%. While it is impossible to know the future dividend yield of the underlying shares, if this trailing 12-month dividend yield were to remain constant for the term of the securities, you would be forgoing an aggregate yield of approximately 0.84% (assuming no reinvestment of dividends) by investing in the securities instead of investing directly in the underlying shares or in another investment linked to the underlying shares that provides for a pass-through of dividends. The payment scenarios described in this pricing supplement do not show any effect of lost dividend yield over the term of the securities.
|
▪
|
Your payment at maturity depends on the closing price of the underlying shares on a single day. Because your payment at maturity depends on the closing price of the underlying shares solely on the valuation date, you are subject to the risk that the closing price of the underlying shares on that day may be lower, and possibly significantly lower, than on one or more other dates during the term of the securities. If you had invested directly in the underlying shares or in another instrument linked to the underlying shares that you could sell for full value at a time selected by you, or if the payment at maturity were based on an average of closing prices of the underlying shares, you might have achieved better returns.
|
▪
|
The securities are subject to the credit risk of Citigroup Inc. If we default on our obligations under the securities, you may not receive anything owed to you under the securities.
|
▪
|
The securities will not be listed on a securities exchange and you may not be able to sell them prior to maturity. The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. CGMI currently intends to make a secondary market in relation to the securities and to provide an indicative bid price for the securities on a daily basis. Any indicative bid price for the securities provided by CGMI will be determined in CGMI’s sole discretion, taking into account prevailing market conditions and other relevant factors, and will not be a representation by CGMI that the securities can be sold at that price, or at all. CGMI may suspend or terminate making a market and providing indicative bid prices without notice, at any time and for any reason. If CGMI suspends or terminates making a market, there may be no secondary market at all for the securities because it is likely that CGMI will be the only broker-dealer that is willing to buy your securities prior to maturity. Accordingly, an investor must be prepared to hold the securities until maturity.
|
▪
|
The estimated value of the securities on the pricing date, based on CGMI’s proprietary pricing models and our internal funding rate, is less than the issue price. The difference is attributable to certain costs associated with selling, structuring and hedging the securities that are included in the issue price. These costs include (i) the selling concessions paid in connection with the offering of the securities, (ii) hedging and other costs incurred by us and our affiliates in connection with the offering of the securities and (iii) the expected profit (which may be more or less than actual profit) to CGMI or other of our affiliates in connection with hedging our obligations under the securities. These costs adversely affect the economic terms of the securities because, if they were lower, the economic terms of the securities would be more favorable to you. The economic terms of the securities are also likely to be adversely affected by the use of our internal funding rate, rather than our secondary market rate, to price the securities. See “The estimated value of the securities would be lower if it were calculated based on our secondary market rate” below.
|
▪
|
The estimated value of the securities was determined for us by our affiliate using proprietary pricing models. CGMI derived the estimated value disclosed on the cover page of this pricing supplement from its proprietary pricing models. In doing so, it may have made discretionary judgments about the inputs to its models, such as the volatility of the underlying shares, dividend yields on the underlying shares and the stocks held by the ETF and interest rates. CGMI’s views on these inputs may differ from your or others’ views, and as an underwriter in this offering, CGMI’s interests may conflict with yours. Both the models and the inputs to the models may prove to be wrong and therefore not an accurate reflection of the value of the securities. Moreover, the estimated value of the securities set forth on the cover page of this pricing supplement may differ from the value that we or our affiliates may determine for the securities for other purposes, including for accounting purposes. You should not invest in the securities because of the estimated value of the securities. Instead, you should be willing to hold the securities to maturity irrespective of the initial estimated value.
|
▪
|
The estimated value of the securities would be lower if it were calculated based on our secondary market rate. The estimated value of the securities included in this pricing supplement is calculated based on our internal funding rate, which is the rate at which we are willing to borrow funds through the issuance of the securities. Our internal funding rate is generally lower than the market rate implied by traded instruments referencing our debt obligations in the secondary market for those debt obligations, which we refer to as our secondary market rate. If the estimated value included in this pricing supplement were based on our secondary market rate, rather than our internal funding rate, it would likely be lower. We determine our internal funding rate based on factors such as the costs associated with the securities, which are generally higher than the costs associated with conventional
|
April 2015
|
PS-4
|
Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
|
debt securities, and our liquidity needs and preferences. Our internal funding rate is not an interest rate that we will pay to investors in the securities, which do not bear interest.
|
▪
|
The estimated value of the securities is not an indication of the price, if any, at which CGMI or any other person may be willing to buy the securities from you in the secondary market. Any such secondary market price will fluctuate over the term of the securities based on the market and other factors described in the next risk factor. Moreover, unlike the estimated value included in this pricing supplement, any value of the securities determined for purposes of a secondary market transaction will be based on our secondary market rate, which will likely result in a lower value for the securities than if our internal funding rate were used. In addition, any secondary market price for the securities will be reduced by a bid-ask spread, which may vary depending on the aggregate stated principal amount of the securities to be purchased in the secondary market transaction, and the expected cost of unwinding related hedging transactions. As a result, it is likely that any secondary market price for the securities will be less than the issue price.
|
▪
|
The value of the securities prior to maturity will fluctuate based on many unpredictable factors. The value of your securities prior to maturity will fluctuate based on the price and volatility of the underlying shares and a number of other factors, including the price and volatility of the stocks held by the ETF, the dividend yields on the underlying shares and the stocks held by the ETF, the exchange rate between the U.S. dollar and the Chinese renminbi, interest rates in the United States and China, the time remaining to maturity and our creditworthiness, as reflected in our secondary market rate. You should understand that the value of your securities at any time prior to maturity may be significantly less than the issue price.
|
▪
|
Immediately following issuance, any secondary market bid price provided by CGMI, and the value that will be indicated on any brokerage account statements prepared by CGMI or its affiliates, will reflect a temporary upward adjustment. The amount of this temporary upward adjustment will steadily decline to zero over the temporary adjustment period. See “Valuation of the Securities” in this pricing supplement.
|
▪
|
The underlying shares are subject to risks associated with emerging markets. The stocks held by the ETF trade in mainland Chinese markets. Non-U.S. markets tend to be more volatile than U.S. markets. In addition, companies located in emerging markets, such as China, may be subject to heightened political, economic, social and financial risks.
|
▪
|
The underlying shares are subject to risks associated with investing in mainland China. The ETF holds shares issued by mainland Chinese issuers that trade on mainland Chinese exchanges, and the ETF is therefore subject to all of the risks of investing in mainland China, including heightened risks of inflation or nationalization and market fluctuations caused by economic and political developments. In addition, the Chinese economy may be highly vulnerable to changes in local or global trade conditions, and may suffer from a rise in the Chinese government’s debt burden. Mainland Chinese securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially resulting in market distortions and volatility. Moreover, the Chinese economy may differ favorably or unfavorably from the economy in the United States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources, labor conditions and self-sufficiency. Also, there is generally less publicly available information about foreign companies than about U.S. companies that are subject to the reporting requirements of the SEC, and foreign companies are subject to accounting, auditing and financial reporting standards and requirements different from those applicable to U.S. reporting companies.
|
▪
|
Fluctuations in exchange rates will affect the price of the ETF. Because the ETF invests in shares that are traded in Chinese renminbi, while the net asset value of the ETF is based on the U.S. dollar value of those shares, holders of the securities will be exposed to currency exchange rate risk with respect to the Chinese renminbi relative to the U.S. dollar. If the U.S. dollar appreciates relative to the Chinese renminbi, the price of the underlying shares will likely decline for that reason alone. Exchange rate movements are the result of numerous factors specific to the relevant countries, including the supply of, and the demand for, the relevant currencies, as well as government policy, intervention or actions, but are also influenced significantly from time to time by political or economic developments, and by macroeconomic factors and speculative actions related to each applicable region. Of particular importance to potential currency exchange risk are: existing and expected rates of inflation; existing and expected interest rate levels; the balance of payments; and the extent of governmental surpluses or deficits in the applicable countries. All of these factors are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of the applicable countries and other countries important to international trade and finance.
|
▪
|
Our offering of the securities is not a recommendation of the underlying shares. The fact that we are offering the securities does not mean that we believe that investing in an instrument linked to the underlying shares is likely to achieve favorable returns. In fact, as we are part of a global financial institution, our affiliates may have positions (including short positions) in the underlying shares or the stocks held by the ETF or in instruments related to the underlying shares or such stocks, and may publish research
|
April 2015
|
PS-5
|
Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
|
or express opinions, that in each case are inconsistent with an investment linked to the underlying shares. These and other activities of our affiliates may affect the price of the underlying shares in a way that has a negative impact on your interests as a holder of the securities.
|
▪
|
The price of the underlying shares may be adversely affected by our or our affiliates' hedging and other trading activities. We have hedged our obligations under the securities through CGMI or other of our affiliates, who have taken positions directly in the underlying shares or the stocks held by the ETF and other financial instruments related to the underlying shares or such stocks and may adjust such positions during the term of the securities. Our affiliates also trade the underlying shares or the stocks held by the ETF and other financial instruments related to the underlying shares or such stocks on a regular basis (taking long or short positions or both), for their accounts, for other accounts under their management or to facilitate transactions on behalf of customers. These activities could affect the price of the underlying shares in a way that negatively affects the value of the securities. They could also result in substantial returns for us or our affiliates while the value of the securities declines.
|
▪
|
We and our affiliates may have economic interests that are adverse to yours as a result of our affiliates’ business activities. Our affiliates may currently or from time to time engage in business with the underlying share issuer or the issuers of the stocks held by the ETF, including extending loans to, making equity investments in or providing advisory services to such issuers. In the course of this business, we or our affiliates may acquire non-public information about such issuers, which we will not disclose to you. Moreover, if any of our affiliates is or becomes a creditor of any such issuer, they may exercise any remedies against any such issuer that are available to them without regard to your interests.
|
▪
|
Even if the underlying share issuer pays a dividend that it identifies as special or extraordinary, no adjustment will be required under the securities for that dividend unless it meets the criteria specified in the accompanying product supplement. In general, an adjustment will not be made under the terms of the securities for any cash dividend paid on the underlying shares unless the amount of the dividend per underlying share, together with any other dividends paid in the same fiscal quarter, exceeds the dividend paid per underlying share in the most recent fiscal quarter by an amount equal to at least 10% of the closing price of the underlying shares on the date of declaration of the dividend. Any dividend will reduce the closing price of the underlying shares by the amount of the dividend per underlying share. If the underlying share issuer pays any dividend for which an adjustment is not made under the terms of the securities, holders of the securities will be adversely affected. See "Description of the Securities—Certain Additional Terms for Securities Linked to ETF Shares or Company Shares—Dilution and Reorganization Adjustments—Certain Extraordinary Cash Dividends" in the accompanying product supplement.
|
▪
|
An adjustment will not be made for all events that may have a dilutive effect on or otherwise adversely affect the market price of the underlying shares. For example, we will not make any adjustment for ordinary dividends or extraordinary dividends that do not meet the criteria described above. Moreover, the adjustments we do make may not fully offset the dilutive or adverse effect of the particular event. Investors in the securities may be adversely affected by such an event in a circumstance in which a direct holder of the underlying shares would not.
|
▪
|
The securities may become linked to shares of an issuer other than the original underlying share issuer upon the occurrence of a reorganization event or upon the delisting of the underlying shares. For example, if the underlying share issuer enters into a merger agreement that provides for holders of the underlying shares to receive shares of another entity, the shares of such other entity will become the underlying shares for all purposes of the securities upon consummation of the merger. Additionally, if the underlying shares are delisted or the ETF is otherwise terminated, the calculation agent may, in its sole discretion, select shares of another ETF to be the underlying shares. See "Description of the Securities—Certain Additional Terms for Securities Linked to ETF Shares or Company Shares—Dilution and Reorganization Adjustments" and "—Delisting, Liquidation or Termination of an ETF" in the accompanying product supplement.
|
▪
|
The calculation agent, which is an affiliate of ours, will make important determinations with respect to the securities. If certain events occur, such as market disruption events, events with respect to the underlying share issuer that may require a dilution adjustment or the delisting of the underlying shares, CGMI, as calculation agent, will be required to make discretionary judgments that could significantly affect your payment at maturity. In making these judgments, the calculation agent’s interests as an affiliate of ours could be adverse to your interests as a holder of the securities.
|
▪
|
The price of the underlying shares may not completely track the performance of the index underlying the ETF. The price of the underlying shares will reflect transaction costs and fees of the underlying share issuer that are not included in the calculation of the index underlying the ETF. In addition, the underlying share issuer may not hold all of the shares included in, and may hold securities and derivative instruments that are not included in, the index underlying the ETF. These risks are heightened with respect to the ETF due to restrictions placed on ownership of Chinese A-Shares by foreign investors.
|
▪
|
Changes made by the investment adviser to the underlying share issuer or by the sponsor of the index underlying the ETF may adversely affect the underlying shares. We are not affiliated with the investment adviser to the underlying share issuer or with the sponsor of the index underlying the ETF. Accordingly, we have no control over any changes such investment adviser or sponsor may make to the underlying share issuer or the index underlying the ETF. Such changes could be made at any time and could adversely affect the performance of the underlying shares.
|
April 2015
|
PS-6
|
Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
▪
|
The U.S. federal tax consequences of an investment in the securities are unclear. There is no direct legal authority regarding the proper U.S. federal tax treatment of the securities, and we do not plan to request a ruling from the Internal Revenue Service (the “IRS”). Consequently, significant aspects of the tax treatment of the securities are uncertain, and the IRS or a court might not agree with the treatment of the securities as prepaid forward contracts. If the IRS were successful in asserting an alternative treatment of the securities, the tax consequences of the ownership and disposition of the securities might be materially and adversely affected. Even if the treatment of the securities as prepaid forward contracts is respected, a security may be treated as a “constructive ownership transaction,” with consequences described below under “United States Federal Tax Considerations.” In addition, in 2007 the U.S. Treasury Department and the IRS released a notice requesting comments on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. Any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities, including the character and timing of income or loss and the degree, if any, to which income realized by non-U.S. persons should be subject to withholding tax, possibly with retroactive effect. You should read carefully the discussion under “United States Federal Tax Considerations” and “Risk Factors Relating to the Securities” in the accompanying product supplement and “United States Federal Tax Considerations” in this pricing supplement. You should also consult your tax adviser regarding the U.S. federal tax consequences of an investment in the securities, as well as tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
|
April 2015
|
PS-7
|
Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
Deutsche X-trackers Harvest CSI 300 China A-Shares ETF – Historical Closing Prices
November 6, 2013 to April 30, 2015
|
Deutsche X-trackers Harvest CSI 300 China A-Shares ETF
|
High
|
Low
|
Dividends
|
2013
|
|||
Fourth Quarter (beginning November 6, 2013)
|
$26.09
|
$23.92
|
$0.00000
|
2014
|
|||
First Quarter
|
$24.20
|
$21.27
|
$0.00000
|
Second Quarter
|
$23.19
|
$21.67
|
$0.00000
|
Third Quarter
|
$26.04
|
$22.19
|
$0.00000
|
Fourth Quarter
|
$37.21
|
$24.90
|
$0.10183
|
2015
|
|||
First Quarter
|
$42.89
|
$33.67
|
$0.00000
|
Second Quarter (through April 30, 2015)
|
$49.40
|
$42.32
|
$0.00000
|
April 2015
|
PS-8
|
Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
|
i.
|
the shares have been listed for more than three months, except that shares listed for less than three months may be eligible for inclusion in the ETF underlying index if the daily average total market value of the shares since the shares’ initial listing is in the top thirty of all the A-Shares;
|
|
ii.
|
the shares are neither ST Stock nor *ST Stock; and
|
|
iii.
|
the shares have not been suspended from trading for 3 months as of the date of determination of eligibility for inclusion in the ETF underlying index.
|
|
i.
|
calculate each eligible A-Share’s daily average trading value and daily average total market value during the most recent year, or in case of a new issue, during the 4th trading day that it was a public company;
|
|
ii.
|
rank the shares in the eligible universe by A-Share daily average trading value over the most recent year in descending order and delete the bottom ranked 50%; and
|
|
iii.
|
rank the remaining shares by A-Share daily average market value over the most recent year in descending order.
|
|
i.
|
The total number of A-Shares of that constituent is determined.
|
|
ii.
|
Shares that are not considered “free float” shares are subtracted from the total number of A-Shares. Non-free float shares include restricted trading shares as well as (a) long-term holdings of founders, families, and senior executives, (b) government holdings, (c) strategic holdings, (d) frozen shares, (e) restricted employee shares and (f) cross-holdings. If the holdings of
|
April 2015
|
PS-9
|
Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
|
shareholders in the foregoing categories and other persons acting in concert exceeds 5% of the number of A-Shares, the holdings will be defined as non-free float.
|
|
iii.
|
The percentage of the total number of A-Shares of the constituent represented by its free float shares is determined by dividing the free float shares by the total number of A-Shares. This percentage is referred to as the “negotiable market cap ratio.”
|
|
iv.
|
The “inclusion factor” is determined for the constituent based on its negotiable market cap ratio in accordance with the following table:
|
If the Negotiable Market Cap Ratio is …
|
≤15%
|
(15 - 20)%
|
(20 – 30)%
|
(30 – 40)%
|
(40 – 50)%
|
(50 – 60)%
|
(60 – 70)%
|
(70 - 80)%
|
>80%
|
then the Inclusion Factor is …
|
Nearest higher percentage point
|
20%
|
30%
|
40%
|
50%
|
60%
|
70%
|
80%
|
100%
|
|
v.
|
The adjusted number of shares of the constituent is equal to the constituent’s inclusion factor multiplied by the constituent’s total number of A-Shares.
|
|
i.
|
Rights or bonus share issue: in the case of a rights issue or issue of bonus shares, the divisor is adjusted the day before the issuance. For purposes of the adjustment, the Adjusted Market Cap after Adjustment = Ex-right Price × Adjusted Number of Shares + Adjusted Market Cap before Adjustment (excluding stocks adjusted for right issue and bonus issue)
|
|
ii.
|
Share changes: when shares of constituents change due to corporate actions (e.g. re-issuance, listing of right issue), the ETF underlying index is adjusted the day before the changes. For purposes of the adjustment, Adjusted Market Cap after Adjustment = closing price × Adjusted Number of Shares after changes
|
|
iii.
|
Share changes caused by shareholders’ behavior: Share changes caused by shareholders’ behavior are adjusted semi-annually. The effective date is the first trading day of January and July each year and the ETF underlying index is adjusted before the effective day
|
|
iv.
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Constituents adjustment: The divisor is adjusted before the effective day of a periodical review or adjustment event
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Adjusted Market Cap before Adjustment
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=
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Adjusted Market Cap after Adjustment
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Old divisor
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New divisor
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i.
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IPO. If the total A-Share market capitalization of IPO shares (which equals the issue price multiplied by total A-Shares) ranks in the top 10 (compared with all the A-Shares by average daily A-Share market capitalization of the past year since the listing announcement of the IPO) in the overall market and it satisfies the requirements to be included in the ETF underlying index universe, then fast entry rules are applied here. Namely, it will be added in the ETF underlying index after the close of the tenth trading day. Meanwhile, the last ranked old constituent by daily average market capitalization of the most recent year will be deleted from the ETF underlying index. If an IPO meets the criteria of fast entry, but the time span between its listing time and the effective day of the next periodical review is less than 20 trading days, fast entry rules are not applied immediately but will be implemented together with the next periodical review.
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ii.
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Merger and Acquisition.
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April 2015
|
PS-10
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Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
|
a.
|
Two constituent companies merge: The stock of the resulting new company will be added to the ETF underlying index and there will be a vacancy. The vacancy will be filled by the highest ranking stock in the reserve list (i.e., a list of shares that would next have been included in the ETF underlying index but for falling below the 300th stock in the ranking of eligible shares described above).
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b.
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One constituent company and one non-constituent company merge: The stock of the resulting new company will be added to the ETF underlying index.
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c.
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One non-constituent company purchases or takes over one constituent company: If the stock of the resulting new company ranks higher than the highest stock in the reserve list, the new stock will be added to the ETF underlying index. Otherwise, the highest ranking stock in the reserve list will be added to the ETF underlying index when the constituent is delisted.
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d.
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Merger, spin-off, acquisition and restructuring of non-constituents: If the total market capitalization of the stock of the resulting new company ranks top 10 in the overall market, fast entry rules are applied here. Otherwise, these corporate events are considered at the next periodical review.
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|
iii.
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Spin-off. If one constituent company is split so as to form two or more companies, then whether the resulting companies are eligible for inclusion or not depends on their rankings. If two or more of the resulting companies rank higher than the lowest constituent, then the resulting companies that rank higher than the lowest constituent will be added to the ETF underlying index and the lowest constituent(s) will be removed to keep the number of the constituents constant. If one or more of the resulting companies ranks higher than the lowest constituent, then the (these) new resulting company will be added to the ETF underlying index. If more than 1 company enters the ETF underlying index, the lowest constituents will be removed to keep the number of the constituents constant. If all of the resulting companies rank lower than the lowest constituent, but some or all of the resulting companies rank higher than the highest stock in the reserve list, then the highest new company will replace the split company to be added to the ETF underlying index. If all of the resulting companies rank lower than the lowest constituent and the highest stock in the reserve list, then the highest company in the reserve list will be added to the ETF underlying index.
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iv.
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Suspension. If a constituent is suspended from trading, CSI will determine whether to delete it from the ETF underlying index or not according to different suspension reasons.
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v.
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Temporary Delisted and Delisting. If a constituent company is temporarily delisted or delisted from the A-Share market, it will be removed from the ETF underlying index and be replaced by the highest-ranking company in the reserve list.
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vi.
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Bankruptcy. If a constituent company enters bankruptcy proceedings, it will be removed as soon as practicable and the highest-ranking stock in the reserve list will be added to the ETF underlying index.
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|
·
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You should not recognize taxable income over the term of the securities prior to maturity, other than pursuant to a sale or exchange.
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|
·
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Upon a sale or exchange of a security (including retirement at maturity), you should recognize gain or loss equal to the difference between the amount realized and your tax basis in the security. Subject to the discussion below concerning the potential application of the “constructive ownership” rules under Section 1260 of the Internal Revenue Code of 1986, as amended (the “Code”), any gain or loss recognized upon a sale, exchange or retirement of a security should be long-term capital gain or loss if you held the security for more than one year.
|
April 2015
|
PS-11
|
Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
April 2015
|
PS-12
|
Citigroup Inc.
|
Barrier Securities Based on Shares of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF Due May 3, 2019
|
April 2015
|
PS-13
|