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
|
$6,754,500
|
$869.98
|
(1)
|
Calculated in accordance with Rule 457(r) of the Securities Act.
|
(2)
|
Pursuant to Rule 457(p) under the Securities Act, the $2,456,716.76 remaining of 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 $869.98 is offset against the registration fee due for this offering and of which $2,455,846.78 remains available for future registration fee offset. No additional registration fee has been paid with respect to this offering.
|
Pricing Supplement No. 2014—CMTNG0144 to Product Supplement No. EA-02-03 dated November 13, 2013,
Prospectus Supplement and Prospectus each dated November 13, 2013
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-192302
Dated May 28, 2014
Citigroup Inc. Contingent Absolute Return Autocallable Optimization Securities
|
Investment Description
|
||||||
Contingent Absolute Return Autocallable Optimization Securities (the “Securities”) are unsecured, unsubordinated debt securities issued by Citigroup Inc. (“Citigroup”) linked to the performance of the shares of common stock of GT Advanced Technologies Inc. (the “Underlying Shares”). If the closing price of the Underlying Shares is greater than or equal to their closing price on the Trade Date (the "Starting Price") on any Valuation Date (which will occur first on August 27, 2014 and then quarterly thereafter as described on page PS-4 of this pricing supplement), including the Final Valuation Date, we will automatically call the Securities and pay you a Call Price equal to the stated principal amount per Security plus a Call Return based on the Call Return Rate. The Call Return increases the longer the Securities are outstanding, as described below, based on a fixed Call Return Rate. If by maturity the Securities have not been called and the closing price of the Underlying Shares is greater than or equal to the Trigger Price on the Final Valuation Date, we will repay the stated principal amount of your Securities plus pay you a return at maturity equal to the absolute value of the percentage decline in the closing price of the Underlying Shares from the Trade Date to the Final Valuation Date (the “Contingent Absolute Return”). However, if by maturity the Securities have not been called and the closing price of the Underlying Shares is less than the Trigger Price on the Final Valuation Date, the Contingent Absolute Return will not apply, and you will receive less than the stated principal amount of your Securities, and possibly nothing, at maturity, resulting in a loss that is proportionate to the decline in the closing price of the Underlying Shares from the Trade Date to the Final Valuation Date, up to a 100% loss of your investment.
Investing in the Securities involves significant risks. The Securities do not pay interest. You may lose some or all of your investment. The Contingent Absolute Return and any contingent repayment of the stated principal amount apply only if you hold the Securities to maturity. Any payment on the Securities, including any repayment of the stated principal amount, is subject to our creditworthiness and is not, either directly or indirectly, an obligation of any third party. If we were to default on our payment obligations, you may not receive any amounts owed to you under the Securities and you could lose your entire investment.
|
Features
|
Key Dates
|
||||||
q Call Return — We will automatically call the Securities for a Call Price equal to the stated principal amount plus the applicable Call Return based on the Call Return Rate if the closing price of the Underlying Shares on any Valuation Date, including the Final Valuation Date, is greater than or equal to the Starting Price. The Call Return increases the longer the Securities are outstanding, based on a fixed Call Return Rate. If the Securities are not called, investors will have the potential for downside market exposure to the Underlying Shares at maturity.
q Downside Market Exposure with Contingent Absolute Return at Maturity — If you hold the Securities to maturity, the Securities have not been called on any Valuation Date including the Final Valuation Date and the closing price of the Underlying Shares is greater than or equal to the Trigger Price on the Final Valuation Date, we will repay the stated principal amount of your Securities plus pay you the Contingent Absolute Return at maturity. However, if the closing price of the Underlying Shares is less than the Trigger Price on the Final Valuation Date, the Contingent Absolute Return will not apply and we will pay you less than the stated principal amount of your Securities, and possibly nothing, at maturity, resulting in a loss that will be proportionate to the full negative Underlying Return. The Contingent Absolute Return and any contingent repayment of the stated principal amount only apply if you hold the Securities to maturity. Any payment on the Securities, including any repayment of the stated principal amount, is subject to our creditworthiness.
|
Trade Date May 28, 2014
Settlement Date May 30, 2014
Valuation Dates1 Quarterly
Final Valuation Date1 June 1, 2015
Maturity Date June 5, 2015
1 See page PS-4 for additional details.
|
||||||
NOTICE TO INVESTORS: THE SECURITIES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. THE ISSUER IS NOT NECESSARILY OBLIGATED TO REPAY THE STATED PRINCIPAL AMOUNT OF THE SECURITIES AT MATURITY, AND THE SECURITIES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE UNDERLYING SHARES. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING A DEBT OBLIGATION OF CITIGROUP. YOU SHOULD NOT PURCHASE THE SECURITIES IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE SECURITIES.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER ‘‘SUMMARY RISK FACTORS’’ BEGINNING ON PAGE PS-5 OF THIS PRICING SUPPLEMENT AND UNDER ‘‘RISK FACTORS RELATING TO THE SECURITIES’’ BEGINNING ON PAGE EA-6 OF THE ACCOMPANYING PRODUCT SUPPLEMENT IN CONNECTION WITH YOUR PURCHASE OF THE SECURITIES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR SECURITIES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL INVESTMENT IN THE SECURITIES. THE SECURITIES WILL NOT BE LISTED ON ANY SECURITIES EXCHANGE AND MAY HAVE LIMITED OR NO LIQUIDITY.
|
Securities Offerings
|
||||
The Securities are offered at a minimum investment of 100 Securities at $10.00 per Security (representing a $1,000 investment), and integral multiples of $10.00 in excess thereof.
|
||||
Underlying Shares
|
Call Return Rate
|
Starting Price
|
Trigger Price
|
CUSIP/ISIN |
Shares of common stock of GT Advanced Technologies Inc.
|
21.70% per annum
|
$16.39
|
$9.01, which is 55% of the Starting Price
|
17322H610 / US17322H6100 |
Issue Price(1)
|
Underwriting Discount(2)
|
Proceeds to Us
|
||||
Offering of Securities
|
Total
|
Per
Security
|
Total
|
Per Security
|
Total
|
Per Security
|
Shares of common stock of GT Advanced Technologies Inc.
|
$6,754,500.00
|
$10.00
|
$101,317.50
|
$0.15
|
$6,653,182.50
|
$9.85
|
(1)
|
On the date of this pricing supplement, the estimated value of the Securities is $9.675, which is less than the issue price of the Securities. The estimated value of the Securities is based on proprietary pricing models of Citigroup Global Markets Inc. (“CGMI”) and our internal funding rate. It is not an indication of actual profit to CGMI or other of our affiliates, nor is it an indication of the price, if any, at which CGMI or any other person may be willing to buy the Securities from you at any time after issuance. See “Valuation of the Securities” in this pricing supplement.
|
(2)
|
CGMI, our affiliate and the lead agent for the sale of the Securities, has agreed to purchase from Citigroup as principal, and Citigroup has agreed to sell to CGMI, the aggregate stated principal amount of the Securities set forth above for $9.85 per Security. UBS Financial Services Inc. (“UBS”), the agent for the sale of the Securities, has agreed to purchase from CGMI as principal, and CGMI has agreed to sell to UBS, all of the Securities offered by this pricing supplement for $9.85 per Security, which includes the underwriting discount. UBS proposes to offer the Securities to the public at a price of $10.00 per Security. For additional information on the distribution of the Securities, see “Supplemental Plan of Distribution” in this pricing supplement. In addition to the underwriting discount, it is expected that CGMI and its affiliates may profit from expected hedging activity related to this offering, even if the value of the Securities declines. See “Use of Proceeds and Hedging” in the accompanying prospectus.
|
Citigroup Global Markets Inc.
|
UBS Financial Services Inc.
|
Additional Information about the Securities
|
The Securities are linked to the Underlying Shares of one, and only one, company and the purchaser of a Security will acquire a security linked to the Underlying Shares of one company. While the Securities offering relates only to the Underlying Shares, you should not construe that fact as a recommendation of the merits of acquiring an investment linked to the Underlying Shares or as to the suitability of an investment in the Securities.
The terms of the Securities are set forth in the accompanying product supplement, prospectus supplement and prospectus, as supplemented by this pricing supplement. The accompanying product supplement, prospectus supplement and prospectus contain important disclosures that are not repeated in this pricing supplement. For example, certain events may occur that could affect your payment at maturity and/or whether the Securities are automatically called prior to maturity. These events and their consequences are described in the accompanying product supplement in the sections “Description of the Securities—Certain Additional Terms for Securities Linked to ETF Shares or Company Shares—Consequences of a Market Disruption Event; Postponement of a Valuation Date,” “—Dilution and Reorganization Adjustments” and “Delisting of Company Shares,” and not in this pricing supplement. It is important that you read the accompanying product supplement, prospectus supplement and prospectus together with this pricing supplement in connection with your investment in the Securities. Certain terms used but not defined in this pricing supplement are defined in the accompanying product supplement.
You may access the accompanying product supplement, prospectus supplement and prospectus on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for November 13, 2013 on the SEC website):
¨ Product Supplement No. EA-02-03 dated November 13, 2013:
¨ Prospectus Supplement and Prospectus each dated November 13, 2013:
References to “Citigroup Inc.,” “Citigroup,” “we,” “our” and “us” refer to Citigroup Inc. and not to any of its subsidiaries.
This pricing supplement, together with the documents listed above, contains the terms of the Securities and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours. The description in this pricing supplement of the particular terms of the Securities supplements, and, to the extent inconsistent with, replaces, the descriptions of the general terms and provisions of the debt securities set forth in the accompanying product supplement, prospectus supplement and prospectus. You should carefully consider, among other things, the matters set forth in “Summary Risk Factors” in this pricing supplement and “Risk Factors Relating to the Securities” in the accompanying product supplement, as the Securities involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers in connection with your decision to invest in the Securities.
|
Investor Suitability
|
||
The Securities may be suitable for you if, among other considerations:
¨ You fully understand the risks inherent in an investment in the Securities, including the risk of loss of your entire initial investment.
¨ You can tolerate the loss of all or a substantial portion of your investment and are willing to make an investment that may have the same downside market risk as the Underlying Shares.
¨ You believe the closing price of the Underlying Shares will be greater than or equal to the Starting Price on any one of the specified Valuation Dates, including the Final Valuation Date, or you believe the closing price of the Underlying Shares will not be less than the Trigger Price on the Final Valuation Date.
¨ You can tolerate fluctuations in the value of the Securities prior to maturity that may be similar to or exceed the downside price fluctuations of the Underlying Shares.
¨ You are willing to hold securities that will be called on the earliest Valuation Date on which the closing price of the Underlying Shares is greater than or equal to the Starting Price, and you are otherwise willing to hold such securities to maturity.
¨ You are willing to make an investment whose positive return is limited to the applicable Call Return, regardless of the potential appreciation of the Underlying Shares, which could be significant, or, if the Securities have not been called, to the Contingent Absolute Return (as limited by the Trigger Price).
¨ You are willing to invest in the Securities based on the Call Return Rate indicated on the cover page of this pricing supplement.
¨ You are willing to invest in Securities for which there may be little or no secondary market and you accept that the secondary market will depend in large part on the price, if any, at which CGMI is willing to purchase the Securities.
¨ You do not seek current income from this investment and are willing to forgo any dividends paid on the Underlying Shares.
¨ You are willing to assume the credit risk of Citigroup for all payments under the Securities, and understand that if we default on our obligations, you may not receive any amounts due to you, including any repayment of the stated principal amount.
|
The Securities may not be suitable for you if, among other considerations:
¨ You do not fully understand the risks inherent in an investment in the Securities, including the risk of loss of your entire initial investment.
¨ You do not believe the closing price of the Underlying Shares will be greater than or equal to the Starting Price on any one of the specified Valuation Dates, including the Final Valuation Date, or you believe the closing price of the Underlying Shares will be less than the Trigger Price on the Final Valuation Date, exposing you to the full downside performance of the Underlying Shares.
¨ You seek an investment that is designed to provide a full return of your stated principal amount at maturity.
¨ You cannot tolerate the loss of all or a substantial portion of your investment, and you are not willing to make an investment that may have the same downside market risk as the Underlying Shares.
¨ You seek an investment that participates in the full appreciation of the Underlying Shares and whose positive return is not limited to the applicable Call Return, or, if the Securities have not been called, to the Contingent Absolute Return (as limited by the Trigger Price).
¨ You are not willing to invest in the Securities based on the Call Return Rate indicated on the cover page of this pricing supplement.
¨ You are unable or unwilling to hold securities that will be called on the earliest Valuation Date on which the closing price of the Underlying Shares is greater than or equal to the Starting Price, or you are otherwise unable or unwilling to hold such securities to maturity.
¨ You seek an investment for which there will be an active secondary market.
¨ You seek current income from your investment, or prefer to receive any dividends paid on the Underlying Shares.
¨ You prefer the lower risk of conventional fixed income investments with comparable maturities and credit ratings.
¨ You cannot tolerate fluctuations in the value of the Securities prior to maturity that may be similar to or exceed the downside price fluctuations of the Underlying Shares.
¨ You are not willing to assume the credit risk of Citigroup for all payments under the Securities, including any repayment of the stated principal amount.
|
Final Terms
|
|
Issuer:
|
Citigroup Inc.
|
Stated Principal Amount per Security:
|
$10.00 per Security (subject to a minimum purchase of 100 Securities)
|
Term:
|
Approximately 12 months, unless called earlier
|
Maturity Date:
|
June 5, 2015
|
Underlying Shares1:
|
The shares of common stock of GT Advanced Technologies Inc.
|
Automatic Call Feature:
|
The Securities will be automatically called if the closing price of the Underlying Shares on any Valuation Date (including the Final Valuation Date) is greater than or equal to the Starting Price. If the Securities are automatically called, we will pay you on the applicable Call Settlement Date a cash payment per $10.00 stated principal amount of the Securities equal to the Call Price for the applicable Valuation Date.
|
Valuation Dates3:
|
The Valuation Dates will be August 27, 2014, November 25, 2014, February 25, 2015 and June 1, 2015 (the “Final Valuation Date”).
|
Call Settlement Dates:
|
Four (4) business days following the applicable Valuation Date, except that the Call Settlement Date for the Final Valuation Date is the Maturity Date.
|
Call Price:
|
The Call Price will be calculated based on the following formula:
$10.00 + applicable Call Return
|
Call Return/Call Return Rate:
|
The Call Price will be based upon the applicable Call Return. The Call Return increases the longer the Securities are outstanding and will be prorated based on the fixed Call Return Rate of 21.70% per annum.
The Call Return will be a fixed amount equal to the stated principal amount multiplied by the prorated Call Return Rate (based on equal proration for each quarter and an assumed term of exactly one year). The table below sets forth each Valuation Date and the corresponding Call Price for the Securities.
|
Valuation Date3
|
GT Advanced Technologies Inc.
|
August 27, 2014
|
$10.5425
|
November 25, 2014
|
$11.0850
|
February 25, 2015
|
$11.6275
|
June 1, 2015 (Final Valuation Date)
|
$12.1700
|
Payment at Maturity (per Security):
|
If the Securities are not called and the Final Price of the Underlying Shares is greater than or equal to the Trigger Price on the Final Valuation Date, we will pay you a cash payment on the Maturity Date per Security equal to:
$10.00 × (1 + Contingent Absolute Return)
If the Securities are not called and the Final Price of the Underlying Shares is less than the Trigger Price on the Final Valuation Date, then the Contingent Absolute Return will not apply, and we will pay you a cash payment on the Maturity Date that is less than your stated principal amount and may be zero, resulting in a loss that is proportionate to the negative Underlying Return, equal to:
$10.00 × (1 + Underlying Return)
Accordingly, you may lose all or a substantial portion of your stated principal amount at maturity, depending on how significantly the Underlying Shares decline.
|
Underlying Return:
|
Final Price – Starting Price
Starting Price
|
Trigger Price3:
|
A percentage of the Starting Price of the Underlying Shares, as specified on the cover page of this pricing supplement.
|
Contingent Absolute Return:
|
The absolute value of the Underlying Return. For example, if the Underlying Return is –5%, the Contingent Absolute Return will equal 5%.
|
Starting Price3:
|
The closing price of the Underlying Shares on the Trade Date, as specified on the cover page of this pricing supplement.
|
Final Price:
|
The closing price of the Underlying Shares on the Final Valuation Date
|
Investment Timeline
|
|||
Trade Date:
|
The closing price of the Underlying Shares (the Starting Price) is observed, the Trigger Price is determined and the Call Return Rate is set.
|
||
Quarterly:
|
The Securities will be called if the closing price of the Underlying Shares on any Valuation Date is greater than or equal to the Starting Price.
If the Securities are called, we will pay the Call Price for the applicable Valuation Date, equal to the stated principal amount plus the applicable Call Return.
|
||
|
|||
Maturity Date:
|
The Final Price of the Underlying Shares is observed on the Final Valuation Date.
If the Securities have not been called and the Final Price is greater than or equal to the Trigger Price, we will pay you an amount in cash per Security equal to:
$10.00 × (1 + Contingent Absolute Return)
If the Securities have not been called and the Final Price is less than the Trigger Price, then the Contingent Absolute Return will not apply, and we will pay you an amount in cash per Security that is less than the stated principal amount, and possibly zero, at maturity, resulting in a loss proportionate to the decline of the Underlying Shares, equal to:
$10.00 × (1 + Underlying Return)
|
Summary Risk Factors
|
¨
|
You may lose some or all of your investment — The Securities differ from ordinary debt securities in that we will not necessarily repay the stated principal amount of your Securities at maturity. Instead, your return on the Securities is linked to the performance of the Underlying Shares. If the Final Price of the Underlying Shares is less than the Trigger Price, the Contingent Absolute Return feature will not apply and you will lose 1% of the stated principal amount of your Securities for every 1% by which the Final Price of the Underlying Shares is less than the Starting Price. You may lose up to all of your investment in the Securities.
|
¨
|
The appreciation potential of the Securities is limited — Your potential total return on the Securities at maturity or upon earlier automatic call is limited to the applicable Call Return, in the case where the Securities are called, and is limited to the difference between the Starting Price and the Trigger Price (expressed as a percentage of the Starting Price), in the case where the Securities are not called. You will not participate in any potential appreciation of the Underlying Shares even though you may be subject to its full downside performance. In addition, any Contingent Absolute Return will be limited by the Trigger Price, as any decline of the Underlying Shares below the Trigger Price will result in no Contingent Absolute Return being paid and the potential to lose up to all of your investment. As a result, the return on an investment in the Securities may be significantly less than the return on a hypothetical direct investment in the Underlying Shares.
|
¨
|
The Contingent Absolute Return feature and any contingent repayment of principal apply only at maturity — You should be willing to hold the Securities to maturity. If you are able to sell the Securities prior to maturity, you may have to sell them for a loss even if the price of the Underlying Shares is greater than the Trigger Price at that time. See "The value of the Securities prior to maturity will fluctuate based on many unpredictable factors" below.
|
¨
|
The Securities do not pay interest — Unlike conventional debt securities, the Securities do not pay interest or any other amounts prior to maturity or earlier automatic call. You should not invest in the Securities if you seek current income during the term of the Securities.
|
¨
|
Investing in the Securities is not equivalent to investing in the Underlying Shares — You will not have voting rights, rights to receive dividends or other distributions or any other rights with respect to the Underlying Shares. Moreover, unlike a direct investment in the Underlying Shares, the appreciation potential of the Securities is limited, as described above.
|
¨
|
The Securities are subject to the credit risk of Citigroup Inc. — Any payment on the Securities will be made by Citigroup Inc. and therefore is subject to the credit risk of Citigroup Inc. If we default on our obligations under the Securities, you may not receive any payments that become due under the Securities. As a result, the value of the Securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any decline, or anticipated decline, in our credit ratings or increase, or anticipated increase, in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the Securities.
|
¨
|
The performance of the Securities will depend on the closing price of the Underlying Shares solely on the quarterly Valuation Dates — The performance of the Securities (including whether the Securities are automatically called and, if they are not called, the amount of your payment at maturity) will depend on the closing price of the Underlying Shares only on the Valuation Dates. You will not receive the stated principal amount of your Securities at maturity if the closing price of the Underlying Shares on the Final Valuation Date is less than the Trigger Price, even if the closing price of the Underlying Shares is greater than the Trigger Price on other days during the term of the Securities. Moreover, your Securities will be automatically called prior to maturity if the closing price of the Underlying Shares is greater than or equal to the Starting Price on any Valuation Date prior to the Final Valuation Date, even if the closing price of the Underlying Shares is less than the Starting Price on other days during the term of the Securities. Because the performance of the Securities depends on the closing price of the Underlying Shares on a small number of dates, the performance of the Securities will be particularly sensitive to volatility in the closing price of the Underlying Shares, particularly around the Valuation Dates. You should understand that the price of the Underlying Shares has historically been highly volatile. See “Information about the Underlying Shares” in this pricing supplement.
|
¨
|
The Securities may be automatically called prior to maturity — On any Valuation Date occurring quarterly during the term of the Securities, the Securities will be automatically called if the closing price of the Underlying Shares on that Valuation Date is greater than or equal to the Starting Price. Thus, the term of the Securities may be limited to as short as three months. The earlier the Securities are automatically called, the lower the amount of the Call Return you will receive. If the Securities are automatically called prior to maturity, you may not be able to reinvest your funds in another investment that provides a similar yield with a similar level of risk.
|
¨
|
The Securities may be adversely affected by volatility in the closing price of the Underlying Shares — If the closing price of the Underlying Shares is volatile, or if the volatility of the Underlying Shares increases over the term of the Securities, it is more likely that you will not receive the stated principal amount of the Securities at maturity. This is because greater volatility in the closing price of the Underlying Shares is associated with a greater likelihood that the closing price of the Underlying Shares will be less than the Trigger Price on the Final Valuation Date. You should understand that, in general, the higher the Call Return Rate as determined on the Trade Date, the greater the expected likelihood as of the Trade Date that the closing price of the Underlying Shares will be less than the Trigger Price on the Final Valuation Date, such that you would not receive the stated principal amount of the Securities at maturity. Volatility refers to the magnitude and frequency of changes in the
|
|
price of the Underlying Shares over any given period. Although the Underlying Shares may theoretically experience volatility in either a positive or a negative direction, the price of the Underlying Shares is much more likely to decline as a result of volatility than to increase. Historically, the price of the Underlying Shares has been volatile. See “Information about the Underlying Shares” below for selected historical data.
|
¨
|
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 Trade 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 concession 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, dividends on the Underlying Shares 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 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 dividends on the Underlying Shares, interest rates generally, 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. The stated payout from the Issuer, including the Call Return and the Contingent Absolute Return, only applies if you hold the Securities to maturity or earlier automatic call.
|
¨
|
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 decline to zero over the temporary adjustment period. See “Valuation of the Securities” in this pricing supplement.
|
¨
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Our offering of the Securities does not constitute a recommendation of the Underlying Shares — You should not take our offering of the Securities as an expression of our views about how the Underlying Shares will perform in the future or as a recommendation to invest in the Underlying Shares, including through an investment in the Securities. As we are part of a global financial institution, our affiliates may, and often do, have positions (including short positions) in the Underlying Shares that conflict with an investment in the Securities. You should undertake an independent determination of whether an investment in the Securities is suitable for you in light of your specific investment objectives, risk tolerance and financial resources.
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Our affiliates, or UBS Financial Services Inc. or its affiliates, may publish research, express opinions or provide recommendations that are inconsistent with investing in or holding the Securities — Any such research, opinions or recommendations could affect the price of the Underlying Shares and the value of the Securities. Our affiliates, and UBS Financial Services Inc. and its affiliates, publish research from time to time on financial markets and other matters that may influence the value of the Securities, or express opinions or provide recommendations that may be inconsistent with purchasing or holding the Securities. Any research, opinions or recommendations expressed by our affiliates or by UBS Financial Services Inc. or its affiliates may not be consistent with each other and may be modified from time to time without notice. These and other activities of our affiliates or UBS Financial Services Inc. or its affiliates may adversely affect the price of the Underlying Shares and may have a negative impact on your interests as a holder of the Securities. Investors should make their own independent investigation of the merits of investing in the Securities and the Underlying Shares to which the Securities are linked.
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Trading and other transactions by our affiliates, or by UBS Financial Services Inc. or its affiliates, in the equity and equity derivative markets may impair the value of the Securities — We have hedged our exposure under the Securities through CGMI or other of our affiliates, who likely trade the Underlying Shares or enter into equity and/or equity derivative transactions, such as over-the-counter options or exchange-traded instruments, relating to the Underlying Shares. It is possible that our affiliates could receive substantial returns from these hedging activities while the value of the Securities declines. Our affiliates and UBS Financial Services Inc. and its affiliates may also engage in trading in the Underlying Shares or instruments linked to the Underlying Shares on a regular basis as part of their respective general broker-dealer and other businesses, for proprietary accounts, for other accounts under management or to facilitate transactions for customers, including block transactions. Such trading and hedging activities may affect the price of the Underlying Shares and reduce the return on your investment in the Securities. Our affiliates or UBS Financial Services Inc. or its affiliates may also issue or underwrite other securities or financial or derivative instruments with returns linked or related to the Underlying Shares. By introducing competing products into the marketplace in this manner, our affiliates or UBS Financial Services Inc. or its affiliates could adversely affect the value of the Securities. Any of the foregoing activities described in this paragraph may reflect trading strategies that differ from, or are in direct opposition to, investors’ trading and investment strategies relating to the Securities.
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Our affiliates, or UBS Financial Services Inc. or its affiliates, may have economic interests that are adverse to yours as a result of their respective business activities — Our affiliates or UBS Financial Services Inc. or its affiliates may currently or from time to time engage in business with the issuer of the Underlying Shares, including extending loans to, making equity investments in or providing advisory services to such issuer. In the course of this business, our affiliates or UBS Financial Services Inc. or its affiliates may acquire non-public information about such issuer, which they will not disclose to you. Moreover, if any of our affiliates or UBS Financial Services Inc. or any of its affiliates is or becomes a creditor of such issuer, they may exercise any remedies against such issuer that are available to them without regard to your interests.
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Even if the issuer of the Underlying Shares pays a dividend that it identifies as special or extraordinary, we are not obligated to make any adjustment under the Securities for that dividend unless it meets the criteria specified in the accompanying product supplement — In general, we are not obligated to make an adjustment 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 issuer of the Underlying Shares pays any dividend for which an adjustment is not made under the terms of the Securities, holders of the Securities may be adversely affected. See “Description of the Securities—Certain Additional Terms for Securities Linked to Company Shares or ETF Shares—Dilution and Reorganization Adjustments—Certain Extraordinary Cash Dividends” in the accompanying product supplement.
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The Securities will not be adjusted for all events that could affect the price of the Underlying Shares — For example, we are not obligated to make any adjustment for ordinary dividends, extraordinary dividends that do not meet the criteria described above, partial tender offers or additional public offerings of the Underlying Shares. 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.
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If the Underlying Shares are delisted, we may call the Securities prior to maturity for an amount that may be less than the stated principal amount — If we exercise this call right, you will receive the amount described under “Description of the Securities—Certain Additional Terms for Securities Linked to Company Shares or ETF Shares—Delisting of Company Shares” in the accompanying product supplement. This amount may be less, and possibly significantly less, than the stated principal amount of the Securities.
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The Securities may become linked to shares of an issuer other than the original issuer of the Underlying Shares upon the occurrence of a reorganization event or upon the delisting of the Underlying Shares — For example, if the issuer of the Underlying Shares enters into a merger agreement that provides for holders of Underlying Shares to receive stock of another entity, the stock 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 and we do not exercise our call right, the calculation agent may, in its sole discretion, select shares of another issuer to be the Underlying Shares. See “Description of the Securities—Certain Additional Terms for Securities Linked to Company Shares or ETF Shares—Dilution and Reorganization Adjustments” and “—Delisting of Company Shares” in the accompanying product supplement.
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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, corporate events with respect to the issuer of the Underlying Shares 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 what you receive at maturity. Such judgments could include, among other things:
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determining whether a market disruption event with respect to the Underlying Shares has occurred;
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if a market disruption event with respect to the Underlying Shares occurs on any Valuation Date, determining whether to postpone the Valuation Date, as described under “Description of the Securities—Certain Additional Terms for Securities Linked to Company Shares or ETF Shares—Consequences of a Market Disruption Event; Postponement of the Valuation Date” in the accompanying product supplement;
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determining the closing price of the Underlying Shares if the price is not otherwise available or a market disruption event has occurred with respect to the Underlying Shares;
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determining the appropriate adjustments to be made to the Starting Price and Trigger Price upon the occurrence of an event described under “Description of the Securities—Certain Additional Terms for Securities Linked to Company Shares or ETF Shares—Dilution and Reorganization Adjustments”; and
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in the event of a delisting of the Underlying Shares and we do not exercise our call right, determining whether to select “successor shares” and, if so, determining which shares to select as successor shares, as described under “Description of the Securities—Certain Additional Terms for Securities Linked to Company Shares or ETF Shares—Delisting of Underlying Shares (Other than Shares of an ETF) in the accompanying product supplement.
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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.
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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. As described below under “United States Federal Tax Considerations,” 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.
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Hypothetical Examples
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Stated Principal Amount:
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$10.00
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Term:
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12 months
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Hypothetical Starting Price:
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$100.00
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Hypothetical Trigger Price:
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$55.00 (which is 55% of the hypothetical Starting Price)
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Hypothetical Call Return Rate:
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17.75% per annum (or approximately 4.44% per quarterly period)
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Valuation Dates:
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Valuation Dates will occur quarterly as set forth on page PS-4 in this pricing supplement.
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Closing Price on first Valuation Date:
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$105.00 (greater than or equal to Starting Price, Securities are called)
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Call Price (per $10.00 stated principal amount):
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$10.44
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Closing Price on first Valuation Date:
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$95.00 (less than Starting Price, Securities NOT called)
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Closing Price on second Valuation Date:
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$90.00 (less than Starting Price, Securities NOT called)
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Closing Price on third Valuation Date:
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$85.00 (less than Starting Price, Securities NOT called)
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Closing Price on Final Valuation Date:
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$105.00 (greater than or equal to Starting Price, Securities are called)
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Call Price (per $10.00 stated principal amount):
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$11.78
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Closing Price on first Valuation Date:
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$95.00 (less than Starting Price, Securities NOT called)
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Closing Price on second Valuation Date:
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$90.00 (less than Starting Price, Securities NOT called)
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Closing Price on third Valuation Date:
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$85.00 (less than Starting Price, Securities NOT called)
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Closing Price on Final Valuation Date:
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$80.00 (less than Starting Price, but greater than the Trigger Price, Securities NOT called)
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Payment at Maturity (per $10.00 stated principal amount):
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$10.00 × (1 + Contingent Absolute Return)
$10.00 × (1 + |-20%|)
$10.00 × (1 + 20%)
$12.00
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Closing Price on first Valuation Date:
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$95.00 (less than Starting Price, Securities NOT called)
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Closing Price on second Valuation Date:
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$90.00 (less than Starting Price, Securities NOT called)
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Closing Price on third Valuation Date:
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$85.00 (less than Starting Price, Securities NOT called)
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Closing Price on Final Valuation Date:
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$50.00 (less than Starting Price and Trigger Price, Securities NOT called)
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Payment at Maturity (per $10.00 stated principal amount):
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$10.00 × [1 + Underlying Return]
$10.00 × (1 – 50.0%)
$5.00
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Closing Price on first Valuation Date:
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$95.00 (less than Starting Price, Securities NOT called)
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Closing Price on second Valuation Date:
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$50.00 (less than Starting Price, Securities NOT called)
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Closing Price on third Valuation Date:
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$15.00 (less than Starting Price, Securities NOT called)
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Closing Price on Final Valuation Date:
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$0.00 (less than Starting Price and Trigger Price, Securities NOT called)
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Payment at Maturity (per $10.00 stated principal amount):
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$10.00 × [1 + Underlying Return]
$10.00 × (1 – 100.0%)
$0.00
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United States Federal Tax Considerations
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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 the Securities (including retirement upon an automatic redemption or at maturity), you should recognize capital gain or loss equal to the difference between the amount realized and your tax basis in the Securities. Such gain or loss should be long-term capital gain or loss if you held the Securities for more than one year.
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Information about the Underlying Shares
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GT Advanced Technologies Inc.
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Quarter Begin
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Quarter End
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Quarterly High
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Quarterly Low
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Close
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7/24/2008*
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9/30/2008
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$14.59
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$8.47
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$10.85
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10/1/2008
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12/31/2008
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$10.07
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$1.75
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$2.89
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1/2/2009
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3/31/2009
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$6.75
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$3.32
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$6.64
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4/1/2009
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6/30/2009
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$8.27
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$5.14
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$5.32
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7/1/2009
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9/30/2009
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$6.98
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$4.78
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$5.81
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10/1/2009
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12/31/2009
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$5.94
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$4.64
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$5.56
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1/4/2010
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3/31/2010
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$6.40
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$5.06
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$5.23
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4/1/2010
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6/30/2010
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$6.15
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$5.01
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$5.60
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7/1/2010
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9/30/2010
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$8.78
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$5.56
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$8.37
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10/1/2010
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12/31/2010
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$9.46
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$6.69
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$9.12
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1/3/2011
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3/31/2011
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$11.67
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$9.34
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$10.66
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4/1/2011
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6/30/2011
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$16.20
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$9.32
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$16.20
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7/1/2011
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9/30/2011
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$17.11
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$7.02
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$7.02
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10/3/2011
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12/30/2011
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$8.95
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$6.63
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$7.24
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1/3/2012
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3/30/2012
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$9.64
|
$7.42
|
$8.27
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4/2/2012
|
6/29/2012
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$8.38
|
$4.05
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$5.28
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7/2/2012
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9/28/2012
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$6.94
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$4.76
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$5.45
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10/1/2012
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12/31/2012
|
$5.36
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$2.86
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$3.02
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1/2/2013
|
3/28/2013
|
$3.76
|
$2.65
|
$3.29
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4/1/2013
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6/28/2013
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$4.59
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$3.09
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$4.15
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7/1/2013
|
9/30/2013
|
$8.51
|
$4.07
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$8.51
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10/1/2013
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12/31/2013
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$10.40
|
$7.50
|
$8.72
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1/2/2014
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3/31/2014
|
$19.14
|
$8.74
|
$17.05
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4/1/2014
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5/28/2014**
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$18.67
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$13.20
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$16.39
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*
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The common stock of GTAT commenced trading on July 24, 2008. Accordingly, the “Quarterly High,” “Quarterly Low” and “Close” data indicated for the third calendar quarter of 2008 are for the shortened period from July 24, 2008 through September 30, 2008.
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**
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As of the date of this pricing supplement, available information for the second calendar quarter of 2014 includes data for the period from April 1, 2014 through May 28, 2014.Accordingly, the “Quarterly High,” “Quarterly Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the second calendar quarter of 2014.
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Supplemental Plan of Distribution
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Validity of the Securities
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Validity of the Securities
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