RISK FACTORS RELATING TO THE NOTES
Because the terms of the notes differ from those of conventional debt securities,
an investment in the notes entails significant risks not associated with similar investments in a conventional debt security, including, among other things, fluctuations in the value of the Dow Jones-UBS Grains Sub-Index 3 Month Forward Total Return
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and other events that are difficult to predict and beyond our control. You should read the risk factors below together with the risk factors included in the documents incorporated by reference in the accompanying prospectus, including our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, which describe risks relating to our business more generally.
You May Receive Less than Your Initial Investment at Maturity or Upon Your Redemption or Our Call of the Notes if the Value of the Index Declines or Does Not Increase Significantly
The amount payable at maturity or upon your exercise of the redemption option or our call of notes, if any, will be based on the performance of the index from the pricing date to the relevant commodity business day and will be determined after deducting certain amounts as described under “Description of the Notes—Supplemental Return Amount” below. As a result, if the value of the index declines, remains the same or does not increase significantly, the amount you receive for each note will be less than the US$1,000 you paid for each note. This will be true even if the value of the index at one or more times during the term of the notes exceeds the value of the index on the pricing date.
The Calculation of the Supplemental Return Amount Will Have the Effect of Reducing Your Return on the Notes
Because the supplemental return amount on the relevant commodity business day will be determined after deducting (i) the hypothetical interest accrued on the 13-week U.S. Treasury Bills from but excluding the pricing date to and including the relevant commodity business day, (ii) a 0.24% annual fee accrued from but excluding the pricing date to and including the relevant commodity business day, and (iii) the cumulative negative coupon amounts, the value of the index must significantly increase for the amount payable at maturity or upon your redemption or our call of the notes to be greater than your initial investment in the notes.
Leverage Increases the Sensitivity of Your Notes to Changes in the Value of the Index
Because
the supplemental return amount includes a leverage factor of three times the stated principal amount of the notes
, changes in the value of the index will have a greater impact on the amount payable at maturity, your redemption, or our call than on a payout on securities that are not so leveraged. In particular, any decrease in the value of the index would result in a significantly greater decrease in the supplemental return amount and you would suffer losses on your investment in the notes substantially greater than you would if the supplemental return amount did not contain a leverage component.
The Redemption Option Must be for at Least 3,000 Notes Per Holder
If you elect to exercise your redemption option, you must offer to redeem at least 3,000 notes (US$3,000,000 aggregate stated principal amount) at one time. To redeem your notes on any commodity business day, you must instruct your broker to take the following steps through normal clearing system channels: (1) fill out an official notice of redemption; (2) deliver your official notice of redemption to us (which must be acknowledged by us) on any day during the term of the notes; and (3) transfer your book-entry interest in the notes to the trustee on our behalf on the fifth business day following the day on which your redemption is effective. If we receive your official notice of redemption at or before 10:00 a.m. (New York City time) on any commodity business day, your redemption will be effective on that commodity business day. If we receive your official notice of redemption on a day that is not a commodity business day or after 10:00 a.m. (New York City time) on any commodity business day, your redemption will be effective on the first commodity business day following that day.
The Notes Are Subject to the Credit Risk of Citigroup Inc., and Any Actual or Anticipated Changes to its Credit Ratings and Credit Spreads May Adversely Affect the Value of the Notes
You are subject to the credit risk of Citigroup Inc. If we default on our obligations under the notes, your investment would be at risk and you could lose some or all of your investment.
Suspension or Disruption of Futures Trading May Adversely Affect the Value of the Notes.
The futures markets are subject to temporary distortions or other disruptions due to various factors, including the lack of liquidity in the markets, the cessation of trading in futures contracts, the participation of speculators and government and futures exchange regulation and intervention, any of which could reduce the value of the notes. In addition, U.S. futures exchanges and some foreign exchanges have regulations that limit the amount of fluctuations in futures contract prices that may occur during a single business day. These limits are generally referred to as “daily price fluctuations” and the maximum or minimum price of a contract on any given day as a result of these limits is referred to as a “limit price.” Once a limit price has been reached in a particular contract, no trades may be made at a different price. Limit prices have the effect of precluding trading in a particular contract or forcing the liquidation of contracts at disadvantageous times or prices. These distortions or disruptions may affect one or more components of the index or the value of the index itself.
The Historical Performance of the Index Is Not an Indication of the Future Performance of the Index
The historical performance of the index, which is included in this pricing supplement, should not be taken as an indication of the future performance of the index during the term of the notes. Changes in value of the index will affect the value of the notes, but it is impossible to predict whether the value of the index will fall or rise.
The Notes Have a Mandatory Call Feature, Which Increases the Likelihood of Loss on Your Investment
We will call the notes on any commodity business day on which the closing value of the index is less than or equal to 85% of the initial index value in exchange for (i) the stated principal amount of the notes you then hold, plus (ii) the supplemental return amount as determined on the commodity business day following that commodity business day. Therefore, upon our call of the notes, the likelihood of loss on your investment in the notes would be greater because the closing value of the index on the relevant commodity business day is very likely to be significantly lower than the initial index value.
The Yield on the Notes May Be Lower Than the Yield on a Standard Debt Security of Comparable Maturity
You will receive a coupon at a floating rate equal to one-month U.S. dollar LIBOR minus 0.18%. As a result, the effective yield on the notes may be less than that which would be payable on a conventional fixed-rate, non-callable debt security of Citigroup Inc. of comparable maturity.
Higher Future Prices of the Futures Contracts Underlying the Index Relative to Their Current Prices May Decrease Your Return on the Notes
Unlike equities, which typically entitle the holder to a continuing stake in a corporation, commodity futures contracts normally specify a certain date for delivery of the underlying physical commodity. As the futures contracts underlying the index approach expiration, they are replaced by futures contracts that have a later expiration. Thus, for example, a futures contract purchased and held in April may specify May expiration. As time passes, the contract expiring in May is replaced by a contract for delivery in July. This process is referred to as “rolling.” If the market for these contracts is (putting aside other considerations) in “backwardation,” where the prices are lower in the distant delivery months than in the nearer delivery months, the sale of the May contract would take place at a price that is higher than the price of the July contract, thereby creating a “roll yield,” without necessarily being indicative of the performance of the contracts. While many of the contracts included in the index have historically exhibited periods of backwardation, backwardation will most likely not exist at all times. Moreover, many of the commodities included in the index have historically traded in markets in which the prices of contracts are higher in the distant delivery months than in the nearer delivery months, which is a market condition called “contango.” The presence of contango in the commodity markets could result in negative “roll yields,” which could adversely affect the value of the index and, accordingly, decrease your return on the notes, if any.
The Prices of the Grains Commodity Futures Contracts Are Highly Volatile and Affected by Many Complex Factors
The market prices of the underlying grains commodity futures contracts are volatile and may fluctuate rapidly based on numerous factors.
These include, among other things, changes in supply and demand relationships; weather; climatic events; the occurrence of natural disasters; agricultural, trade, fiscal, monetary and exchange control programs; domestic and foreign political and economic events and policies; disease; pestilence; technological developments; changes in interest rates, and trading activities in commodities and related contracts. This may in turn result in volatile changes in the index and thus, the supplemental return amount and the value of the notes.
Changes in the Composition and Valuation of the Dow Jones-UBS Grains Sub-Index 3 Month Forward Total Return
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May Adversely Affect the Amount You Receive at Maturity and the Value of the Notes
The composition of the index may change over time, as additional commodities satisfy the eligibility criteria or commodities currently included in the index fail to satisfy such criteria. The weighting factors applied to each commodity included in the index may change annually, based on changes in commodity production and volume statistics. In addition, UBS Securities LLC and DJI Opco, LLC, a subsidiary of S&P Dow Jones Indices LLC, may modify the methodology for determining the composition and weighting of the index and for calculating their value in order to assure that the index represents a measure of the performance over time of the markets for the underlying commodities. A number of modifications to the methodology for determining the contracts to be included in the commodity indices, and for valuing the commodity indices, have been made in the past several years and further modifications may be made in the future. Such changes could adversely affect the supplemental return amount and the value of the notes.
The Notes Will Not Be Regulated by the Commodity Futures Trading Commission
Unlike an investment in the notes, an investment in a collective investment vehicle that invests in futures contracts on behalf of its participants may be regulated as a commodity pool and its operator may be required to be registered with and regulated by the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator. Because the notes are not interests in a commodity pool, they will not be regulated by the CFTC as a commodity pool, we will not be registered with the CFTC as a commodity pool operator, and you will not benefit from the CFTC’s or any non-U.S. regulatory authority’s regulatory protections afforded to persons who trade in futures contracts or who invest in regulated commodity pools.
One-month U.S. Dollar LIBOR and the Manner in Which It Is Calculated May Change in the Future
The method by which one-month U.S. dollar LIBOR is calculated may change in the future, as a result of governmental actions, actions by the publisher of one-month U.S. dollar LIBOR or otherwise. We cannot predict whether the method by which one-month U.S. dollar LIBOR is calculated will change or what the impact of any such change might be. Any such change could affect the level of one-month U.S. dollar LIBOR in a way that has a significant adverse effect on the notes.
DESCRIPTION OF THE NOTES
The description in this pricing supplement of the particular terms of the notes supplements, and to the extent inconsistent therewith replaces, the descriptions of the general terms and provisions of the debt securities set forth in the accompanying prospectus and prospectus supplement.
You may access the prospectus supplement and prospectus on the SEC Web site at www.sec.gov as follows (or if such address has changed, by reviewing our filing for December 20, 2012 on the SEC Web site):
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Prospectus Supplement dated December 20, 2012 and Prospectus dated May 12, 2011
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General
The Notes Based Upon the Dow Jones-UBS Grains Sub-Index 3 Month Forward Total Return
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Due December 22, 2014 (the “Notes”) are index-linked securities issued by Citigroup Inc. that have a maturity of approximately thirteen months, unless earlier redeemed or called. At maturity or upon your earlier redemption or our call, you might receive less than the stated principal amount of your investment in the Notes.
The Notes will bear interest at a floating rate equal to one-month U.S. dollar LIBOR minus 0.18%. Interest on the Notes will be paid on the 13th day of each month (except that the final interest payment will be made on the maturity date or the date of earlier redemption or call), commencing December 13, 2013. If the floating rate of interest payable for any such month is determined to be less than 0.00%, which will occur if one-month U.S. dollar LIBOR is less than or equal to 0.18%, that negative coupon amount will be carried forward and deducted from any payment you receive at maturity or upon earlier redemption or call of the Notes.
At maturity or upon your redemption or our call of the Notes you will receive (i) the stated principal amount of the Notes
plus
(ii) the Supplemental Return Amount. The Supplemental Return Amount may be negative, zero or positive. Therefore, the amount you receive at maturity or upon your redemption or our call of the Notes may be less than your initial investment in the Notes.
The Supplemental Return Amount includes a leverage factor of three times the stated principal amount of the Notes, will be based on the change in the value of the Dow Jones-UBS Grains Sub-Index 3 Month Forward Total Return
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(the “Index”) from the date of this pricing supplement (the “Pricing Date”) to the relevant Commodity Business Day and will be determined after deducting (i) the hypothetical interest accrued on the 13-week U.S. Treasury Bills from but excluding the Pricing Date to and including that Commodity Business Day, (ii) a 0.24% annual fee accrued from but excluding the Pricing Date to and including that Commodity Business Day and (iii) the cumulative negative coupon amounts. The deduction of the aforementioned factors will reduce the Supplemental Return Amount and therefore the return on your Notes, if any.
The aggregate stated principal amount of Notes issued will be US$3,000,000 (3,000 Notes). The Notes will be issued only in fully registered form and in denominations of US$1,000 per Note and integral multiples thereof. The Notes are a series of unsecured debt securities issued by Citigroup Inc. under the senior debt indenture described in the accompanying prospectus supplement and prospectus. The Notes will rank equally with all other unsecured and unsubordinated debt of Citigroup Inc. The return of the stated principal amount of your investment in the Notes is not guaranteed. All payments on the Notes are subject to the credit risk of Citigroup Inc. The CUSIP for the Notes is 1730T0C49. The ISIN for the Notes is US1730T0C496.
Reference is made to the accompanying prospectus supplement and
prospectus
for a detailed summary of additional provisions of the Notes and of the senior debt indenture under which the Notes will be issued.
Coupon
You will receive a coupon at a floating rate equal to one-month U.S. dollar LIBOR (U.S. dollar-LIBOR-BBA) minus 0.18%. Interest on the Notes will be paid in cash on the 13th day of each month (except that the final interest payment will be made on the maturity date or the date of earlier redemption or call) (each, an “Interest Payment Date”), commencing December 13, 2013. The one-month U.S. dollar LIBOR rate applicable to any monthly interest period will be determined on the second Business Day prior to November 13, 2013 (the “Issue
Date”), in the case of the initial interest period, or each Interest Payment Date, in the case of all other interest periods. An interest period is the period from, and including, each Interest Payment Date to, but excluding, the following Interest Payment Date; provided that the initial interest period is the period from, and including, the Issue Date to, but excluding, the first Interest Payment Date.
The amount of each coupon payment (the “Coupon Amount”) will be calculated as follows:
Stated Principal Amount ×
[
(One-month U.S. dollar LIBOR minus 0.18%) × Elapsed Days/360
]
If the floating rate of interest payable for any month is determined to be less than 0.00%, which will occur if one-month U.S. dollar LIBOR is less than or equal to 0.18% for that month, we will not pay any Coupon Amount for that month, and the negative Coupon Amount will be carried forward and deducted from any payment you receive at maturity or upon earlier redemption or call of the Notes. The sum of the absolute value of all negative Coupon Amounts is referred to herein as the “Negative Coupon Amount.”
If an Interest Payment Date falls on a day that is not a Business Day, the interest payment to be made on that Interest Payment Date will be made on the next succeeding Business Day. Such payment will have the same force and effect as if made on that Interest Payment Date, and no additional interest will accrue as a result of delayed payment.
For purposes of calculating the Coupon Amounts, “Elapsed Days” are the number of calendar days from and including the prior Interest Payment Date (or, with respect to the initial interest period, the Issue Date), to but excluding the current Interest Payment Date.
A “Business Day” is any day on which banking institutions in the City of New York and London, England are open for business.
Determination of One-month U.S. Dollar LIBOR
One-month U.S. dollar LIBOR is a daily reference rate fixed in U.S. dollars based on the interest rates at which banks borrow funds from each other for a term of one month, in marketable size, in the London interbank market. For any relevant date, one-month U.S. dollar LIBOR will equal the rate for one-month U.S. dollar LIBOR appearing on Reuters page “LIBOR01” (or any successor page as determined by the calculation agent) as of 11:00 am (London time) on that date.
If a rate for one-month U.S. dollar LIBOR is not published on Reuters page “LIBOR01” (or any successor page as determined by the calculation agent) on any day on which the rate for one-month U.S. dollar LIBOR is required, then the calculation agent will request the principal London office of each of five major reference banks in the London interbank market, selected by the calculation agent, to provide such bank’s offered quotation to prime banks in the London interbank market for deposits in U.S. dollars in an amount that is representative of a single transaction in that market at that time (a “Representative Amount”) and for a term of three months as of 11:00 am (London time) on such day. If at least two such quotations are so provided, the rate for one-month U.S. dollar LIBOR will be the arithmetic mean of such quotations. If fewer than two such quotations are provided, the calculation agent will request each of three major banks in New York City to provide such bank’s rate to leading European banks for loans in U.S. dollars in a Representative Amount and for a term of three months as of approximately 11:00 am (New York City time) on such day. If at least two such rates are so provided, the rate for one-month U.S. dollar LIBOR will be the arithmetic mean of such rates. If fewer than two such rates are so provided, then the rate for one-month U.S. dollar LIBOR will be one-month U.S. dollar LIBOR in effect as of 11:00 am (New York City time) on the immediately preceding Business Day.
Payment at Maturity
Unless redeemed by you or called by us, the Notes will mature on December 22, 2014 (the “Maturity Date”). You will receive at maturity
(i) the stated principal amount of the Notes you then hold, plus (ii) the Supplemental Return Amount as determined on December 15, 2014 (or, if such day is not a Commodity Business Day, the next succeeding Commodity Business Day but in no event later than the Business Day immediately preceding the Maturity Date) (the “Final Valuation Date”). If the Maturity Date falls on a day that is not a Business
Day, the payment to be made on the Maturity Date will be made on the next succeeding Business Day with the same force and effect as if made on the Maturity Date, and no additional interest will accrue as a result of such delayed payment.
Payment Upon Your Redemption
On any Commodity Business Day prior to the scheduled Final Valuation Date, you may redeem the Notes you then hold, in whole only, in exchange for (i) the stated principal amount of the Notes you then hold, plus (ii) the Supplemental Return Amount as determined on the same Commodity Business Day on which the notice of redemption is effective.
Exercise of Your Redemption Option
If you elect to exercise your redemption option, you must offer to redeem at least 3,000 Notes (US$3,000,000 aggregate stated principal amount) at one time. To redeem your Notes on any Commodity Business Day, you must instruct your broker to take the following steps through normal clearing system channels: (1) fill out an official notice of redemption; (2) deliver your official notice of redemption to us (which must be acknowledged by us) on any Commodity Business Day from and including the date that the Notes are settled to but excluding the fifth Commodity Business Day prior to the Maturity Date; and (3) transfer your book-entry interest in the Notes to the trustee on our behalf on the fifth Business Day following the day on which your redemption is effective. If we receive your official notice of redemption at or before 10:00 a.m. (New York City time) on any Commodity Business Day from and including the date that the Notes are settled to but excluding the fifth Commodity Business Day prior to the Maturity Date, your redemption will be effective on that Commodity Business Day. If we receive your official notice of redemption on a day that is not a Commodity Business Day or after 10:00 a.m. (New York City time) on any Commodity Business Day, your redemption will be effective on the first Commodity Business Day following that day. You will receive the amount payable to you upon your redemption on the fifth Business Day following the date your redemption is effective.
Payment Upon Our Call
If on any Commodity Business Day prior to the scheduled Final Valuation Date, the closing value of the Index is less than or equal to 85% of the Index Initial, we will call the Notes for (i) the stated principal amount of the Notes you then hold, plus (ii) the Supplemental Return Amount as determined on the Commodity Business Day following that Commodity Business Day (such following Commodity Business Day, the “Call Date”). You will receive the amount payable to you upon our call on the fifth Business Day following the Call Date.
Supplemental Return Amount
The “Supplemental Return Amount” will be calculated as follows, whether at maturity, upon your redemption or our call:
For the purpose of calculating the Supplemental Return Amount, “Elapsed Days” shall mean the number of calendar days from and including the Pricing Date to and including the Commodity Business Day on which the Final Index Value is determined.
The “Index Initial,” also called the “Initial Index Value,” is the closing value of the Index published by the Index Sponsors or any successor and displayed on Bloomberg Screen page DJUBGR3T <INDEX> on the Pricing Date, which was 201.9178.
The “Index Final,” also called the “Final Index Value,” is the closing value of the Index published by the Index Sponsors or any successor and displayed on Bloomberg Screen page DJUBGR3T <INDEX> (or any successor page) on any relevant Commodity Business Day.
The “Index Sponsors” are UBS Securities LLC and
DJI Opco, LLC, a subsidiary of S&P Dow Jones Indices LLC.
The “Tbill Amount” on any Commodity Business Day is determined as follows:
“c” means, with respect to a Commodity Business Day d, the number of calendar days from (but excluding) the prior Commodity Business Day to (and including) such Commodity Business Day d.
“TBill
(d-1)
” means, with respect to a Commodity Business Day d, the most recent weekly auction high rate for 13-week U.S. Treasury Bills, as reported on the website www.treasurydirect.gov/RI/OFBills under the column headed “Discount Rate %” published by the Bureau of Public Debt of the U.S. Treasury, or any successor source, on such Commodity Business Day d, provided, that if such auction high rate is not published on such Commodity Business Day d, TBill
(d-1)
shall be the rate published for the most recent previous auction.
“Commodity Business Day” means a day, as determined in good faith by the Calculation Agent, on which trading is generally conducted on the Relevant Exchanges (as defined below) for each Index Contract (as defined below) comprising the Index.
If a Market Disruption Event relating to or one or more of the commodities contracts underlying the Index or any Successor Index (each an “Index Contract”) is in effect on any relevant Commodity Business Day, the Calculation Agent will calculate the closing Index value in good faith in accordance with the formula for and method of calculating the Index last in effect prior to commencement of the Market Disruption Event, using:
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for each Index Contract that
did not
suffer a Market Disruption Event on such Commodity Business Day, the settlement price on the applicable Relevant Exchange of such Index Contract on such Commodity Business Day, and
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for each Index Contract that
did
suffer a Market Disruption Event on such Commodity Business Day, the settlement price of such Index Contract on the applicable Relevant Exchange on the immediately succeeding trading day on which no Market Disruption Event occurs or is continuing with respect to such
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Index Contract (which settlement price for such Index Contract shall be used to determine the Final Index Value);
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provided
however that if a Market Disruption Event has occurred or is continuing with respect to such Index Contract on each scheduled trading day from and including such Commodity Business Day to and including the earlier of (a) the fifth scheduled trading day following such Commodity Business Day and (b) the Business Day immediately preceding the Maturity Date (the earlier of (a) and (b), the “Cut-Off Day”), then the Calculation Agent will determine the price for such Index Contract on the Cut-Off Day acting in good faith and commercially reasonable manner, taking into account the latest available quotation for the settlement price of such Index Contract and any other information that in good faith it deems relevant (which price shall be used to determine the Final Index Value).
A “Market Disruption Event” means any of the following events, as determined in good faith by the Calculation Agent:
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(A)
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the termination or suspension of, or material limitation or disruption in the trading on a Relevant Exchange of an Index Contract;
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(B)
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the settlement price on a Relevant Exchange of an Index Contract has increased or decreased by an amount equal to the maximum permitted price change from the previous day’s settlement price; or
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(C)
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the settlement price of an Index Contract is not published by the Relevant Exchange.
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Notwithstanding the foregoing, the following events will not constitute Market Disruption Events:
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(1)
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a limitation on the hours in a trading day and/or number of days of trading, if it results from an announced change in the regular business hours of the Relevant Exchange; or
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(2)
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a decision to permanently discontinue trading in an Index Contract or options or futures contracts relating to the Index or any commodity underlying the Index.
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For purposes of the above, (a) “Relevant Exchange” means any organized exchange or market of trading for any futures contract (or any combination thereof) then included in the Index or any Successor Index; and (b) “trading day” means a day, as determined in good faith by the Calculation Agent, on which trading is generally conducted on the Relevant Exchange applicable to the affected Index Contract.
Discontinuance of the Index
If the Index Sponsors discontinue publication of the Index, and if the Index Sponsors or another entity publish a successor or substitute index that the Calculation Agent determines, in good faith, to be comparable to the relevant index, then the value of the relevant index will be determined by reference to the value of that index, which we refer to as a “Successor Index.”
Upon any selection by the Calculation Agent of a Successor Index, the Calculation Agent will cause notice to be furnished to the registered holders of the Notes. If the Index Sponsors discontinue the publication of the Index and a Successor Index is not selected by the Calculation Agent or is no longer published on any date of determination of the value of the Index, the value to be substituted for the Index for that date will be a value computed by the Calculation Agent for that date in accordance with the procedures last used to calculate the relevant Index prior to any such discontinuance.
If the Index Sponsors discontinue publication of the Index prior to the determination of the Supplemental Return Amount and the Calculation Agent determines that no Successor Index is available at that time, then on each Commodity Business Day until the earlier to occur of (a) the determination of the Supplemental Return Amount and (b) a determination by the Calculation Agent that a Successor Index is available, the Calculation Agent will determine the value that is to be used in computing the value of the Index or the relevant index as described in the preceding paragraph. If a Successor Index is selected or the Calculation Agent calculates a substitute for the relevant index as described above, the Successor Index or value will be substituted for the relevant index for all purposes, including for purposes of determining whether a Commodity Business Day or Market Disruption Event occurs. Notwithstanding these alternative arrangements, discontinuance of the publication of the Index may adversely affect the value of the Notes. All determinations made by the Calculation Agent will be at the sole discretion of the Calculation Agent and will be conclusive for all purposes and binding on us, Citigroup Inc. and the beneficial owners of the Notes, absent manifest error.
Alteration of Method of Calculation
If at any time the method of calculating the Index or a Successor Index is changed in any material respect, or if the Index or a Successor Index is in any other way modified so that the value of the Index or a Successor Index does not, in the opinion of the Calculation Agent, fairly represent the value of that index had the changes or modifications not been made, then, from and after that time, the Calculation Agent will, at the close of business in New York, New York, make those adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a calculation of a value of an index comparable to the Index or the Successor Index as if the changes or modifications had not been made, and calculate the value of the index with reference to the Index or the Successor Index. Accordingly, if the method of calculating the Index or the Successor Index is so modified that the value of the Index or the Successor Index is a fraction or a multiple of what it would have been if it had not been modified, then the Calculation Agent will adjust that index in order to arrive at a value of the index as if it had not been modified.
Defeasance
The Notes are not subject to the defeasance provisions described in the accompanying prospectus under “Description of Debt Securities—Defeasance.”
Events of Default and Acceleration
In case an Event of Default (as defined in the accompanying prospectus) with respect to the Notes shall have occurred and be continuing, the amount declared due and payable upon any acceleration of the Notes will be determined by the Calculation Agent and will equal, for each Note, the amount to be received at maturity, calculated as though the date of acceleration were the Final Valuation Date. The final interest payment, if any, will be prorated from, and including, the immediately preceding Interest Payment Date to, but excluding, the date of acceleration.
In case of default under the Notes, whether in the payment of interest or any other payment due under the Notes, no interest will accrue on such overdue payment either before or after the Maturity Date.
Paying Agent and Trustee
Citibank, N.A. will serve as paying agent and registrar for the Notes and will also hold the global security representing the Notes as custodia
n for DTC. The Bank of New York Mellon, under an indenture dated as of March 15, 1987, will serve as trustee for the Notes.
Calculation Agent
The Calculation Agent for the Notes will be Citibank, N.A – Commodity Derivatives Calculations. All determinations made by the Calculation Agent will be made in good faith and will, in the absence of manifest error, be conclusive for all purposes and binding on Citigroup Inc. and the holders of the Notes. Citibank, N.A. is obligated to carry out its duties and functions as Calculation Agent in good faith and using its reasonable judgment.
DESCRIPTION OF THE DOW JONES-UBS GRAINS SUB-INDEX
3 MONTH FORWARD TOTAL RETURN
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The Dow Jones-UBS Grains Sub-Index 3 Month Forward Total Return
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is a modified version of the total return version of the Dow Jones-UBS Grains Sub-Index. The Dow Jones-UBS Grains Sub-Index is a sub-index of the Dow Jones-UBS Commodity Index
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. As a sub-index of the total return version of the Dow Jones-UBS Commodity Index
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, the Dow Jones-UBS Grains Sub-Index is constructed and valued in the same way as the total return version of the
Dow Jones-UBS Commodity Index
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, except that it is specifically limited to grains (
corn, soybeans and wheat (soft and hard red winter)
). The weights of the commodities in the Dow Jones-UBS Grains Sub-Index will have weights that are in proportion to the weights of the commodities in the
Dow Jones-UBS Commodity Index
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. The Dow Jones-UBS Grains Sub-Index 3 Month Forward Total Return
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is constructed and valued in the same way as the Dow Jones-UBS Grains Sub-Index, except that the expiration dates of the commodities contracts in the Index are advanced, as compared to the Dow Jones-UBS Grains Sub-Index. The delivery months for the reference contracts are the months that would be the delivery months for the reference contracts three months in the future under the Dow Jones-UBS Commodity Index
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.
The description below relates generally to the
Dow Jones-UBS Commodity Index
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, which is currently composed of commodity futures contracts on twenty different commodities. Investors in the Notes should understand that the Index is composed only of commodity futures contracts on corn, soybeans and wheat (soft and hard red winter).
The
Dow Jones-UBS Commodity Index
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is composed of futures contracts on physical commodities and is intended to reflect the returns that are potentially available through (1) an unleveraged investment in those contracts plus (2) the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.
Dow Jones-UBS Commodity Index
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We have derived all information contained in this pricing supplement regarding the Index and the
Dow Jones-UBS Commodity Index
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(each a “DJ-UBS Commodity Index” and collectively, the “DJ-UBS Commodity Indices”),
including, without limitation, their make-up, methods of calculation and changes in their components from (i) publicly available sources and (ii) a summary of the Dow Jones-UBS Commodity Index
SM
Handbook (a document that is considered proprietary to DJI Opco, LLC (“DJI Opco”), a subsidiary of S&P Dow Jones Indices LLC (“S&P Dow Jones”), and UBS Securities LLC (“UBS
”)
and is available to those persons who enter into a license agreement available at http://www.djindexes.com/commodity/?go=handbook). Such information reflects the policies of, and is subject to change by, UBS and DJI Opco. We have not independently verified this information. You, as an investor in the Notes, should make your own investigation into the DJ-UBS Commodity Indices, UBS and DJI Opco. UBS and DJI Opco are not involved in the offer of the Notes in any way and have no obligation to consider your interests as a holder of the Notes. UBS and DJI Opco have no obligation to continue to publish the DJ-UBS Commodity Indices, and may discontinue publication of the DJ-UBS Commodity Indices at any time in their sole discretion. Information contained on the S&P Dow Jones website is not incorporated by reference in, and should not be considered a part of, this pricing supplement. We make no representation or warranty as to the accuracy or completeness of information contained on the S&P Dow Jones website.
Overview
The Dow Jones-UBS Commodity Index
SM
was introduced in July of 1998. The Dow Jones-UBS Commodity Index
SM
currently is composed of the prices of twenty-two exchange-traded futures contracts on twenty physical commodities. A futures contract is a bilateral agreement providing for the purchase and sale of a specified type and quantity of a commodity or financial instrument during a stated delivery month for a fixed price. For a general description of the commodity futures markets, please see “—The Commodity Futures Markets” below. The commodities included in the Dow Jones-UBS Commodity Index
SM
for 2013 are as follows: aluminum, crude oil (WTI and Brent), coffee, copper, corn, cotton, unleaded gasoline, gold, heating oil, lean hogs, live cattle, natural gas, nickel, silver, soybean oil, soybeans, soybean meal, sugar, wheat (soft and hard red winter) and zinc. Futures contracts and options on futures contracts on the Dow Jones-UBS Commodity Index
SM
are currently listed for trading on the Chicago Board of Trade (“CBOT”), New York Board of Trade (“NYBOT”), Commodities Exchange division of the New York Mercantile Exchange (“COMEX”), New York Mercantile Exchange (“NYMEX”), London Metals Exchange (“LME”) and ICE Futures Europe.
The Dow Jones-UBS Commodity Index
SM
is a proprietary index that AIG International, Inc. developed and that UBS and DJI Opco calculate. The methodology for determining the composition and weighting of the Dow Jones-UBS Commodity Index
SM
and for calculating its value is subject to modification by UBS and DJI Opco at any time.
The Dow Jones-UBS Commodity Index
SM
is composed of exchange-traded futures contracts on physical commodities. Its component weightings are determined primarily based on liquidity data, which is the relative amount of trading activity of a particular commodity, and secondarily based on production data. The Dow Jones-UBS Commodity Index
SM
is published by Bloomberg L.P. under the ticker symbols “DJUBS” for the excess return version and “DJUBSTR” for the total return version.
UBS and DJI Opco publish both a total return version and excess return version of each of the DJ-UBS Commodity Indices.
The total return version of each DJ-UBS Commodity Index reflects the returns on a fully collateralized investment in the excess return version of such DJ-UBS Commodity Index. Accordingly, the total return version of each DJ-UBS Commodity Index combines the returns of the relevant excess return version with returns on cash collateral invested in Treasury Bills. The cash collateral returns are calculated using the most recent weekly auction high rate for 3 Month U.S. Treasury Bills, as reported on the website www.publicdebt.treas.gov/AI/OFBills under the column heading “Discount Rate %,” published by the Bureau of the Public Debt of the U.S. Treasury (or any successor source). Information contained on the Bureau of the Public Debt of the U.S. Treasury website is not incorporated by reference in, and should not be considered a part of, this pricing supplement. We make no representation or warranty as to the accuracy or completeness of information contained on the Bureau of the Public Debt of the U.S. Treasury website. Weekly auction high rates are generally published once each week on Monday.
UBS and its affiliates actively trade futures contracts and options on futures contracts on the commodities that underlie the Dow Jones-UBS Commodity Index
SM
, as well as commodities, including commodities included in the Dow Jones-UBS Commodity Index
SM
. This trading may affect the value of the DJ-UBS Commodity Indices.
The Dow Jones-UBS Commodity Index Supervisory and Advisory Committees
UBS and DJI Opco have established the Dow Jones-UBS Commodity Index Supervisory Committee (the “Supervisory Committee”) and the Dow Jones-UBS Commodity Index Advisory Committee (the “Advisory Committee”) to assist them in connection with the operation of the Dow Jones-UBS Commodity Index
SM
. The Supervisory Committee is comprised of three members, two of whom are appointed by UBS and one of whom is appointed by DJI Opco, and makes all final decisions related to the Dow Jones-UBS Commodity Index
SM
, with advice and recommendations from the Advisory Committee. The Advisory Committee includes six to twelve members drawn from the financial and academic communities. Both the Supervisory and Advisory Committees meet annually to consider any changes to be made to the Dow Jones-UBS Commodity Index
SM
for the coming year. These committees may also meet at such other times as may be necessary.
Four Main Principles Guiding the Creation of the Dow Jones-UBS Commodity Index
SM
The Dow Jones-UBS Commodity Index
SM
was created using the following four main principles:
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|
·
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ECONOMIC SIGNIFICANCE. A commodity index should fairly represent the importance of a diversified group of commodities to the world economy. To achieve a fair representation, the Dow Jones-UBS Commodity Index
SM
uses both liquidity data and dollar-weighted production data in determining the relative quantities of included commodities. The Dow Jones-UBS Commodity Index
SM
primarily relies on liquidity data, or the relative amount of trading activity of a particular commodity, as an important indicator of the value placed on that commodity by financial and physical market participants. The Dow Jones-UBS Commodity Index
SM
also relies on production data as a useful measure of the importance of a commodity to the world economy. Production data alone, however, may underestimate the economic significance of storable commodities (
e.g.
, gold) relative to non-storable commodities (
e.g.
, live cattle). Production data alone also may underestimate the investment value that financial market participants place on certain commodities, and/or the amount of commercial activity that is centered around various commodities. Accordingly, production statistics alone do not necessarily provide as accurate a blueprint of economic importance as the markets themselves. The Dow Jones-UBS Commodity Index
SM
thus relies on data that is both endogenous to
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the futures market (liquidity) and exogenous to the futures market (production) in determining relative weightings.
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|
·
|
DIVERSIFICATION. A second major goal of the Dow Jones-UBS Commodity Index
SM
is to provide diversified exposure to commodities as an asset class. Disproportionate weighting of any particular commodity or sector increases volatility and negates the concept of a broad-based commodity index. Instead of diversified commodities exposure, the investor is unduly subjected to micro-economic shocks in one commodity or sector. As described further below, diversification rules have been established and are applied annually. Additionally, the Dow Jones-UBS Commodity Index
SM
is re-balanced annually on a price-percentage basis in order to maintain diversified commodities exposure over time.
|
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·
|
CONTINUITY. The third goal of the Dow Jones-UBS Commodity Index
SM
is to be responsive to the changing nature of commodity markets in a manner that does not completely reshape the character of the Dow Jones-UBS Commodity Index
SM
from year to year. The Dow Jones-UBS Commodity Index
SM
is intended to provide a stable benchmark so that end-users may be reasonably confident that historical performance data (including such diverse measures as correlation, spot yield, roll yield and volatility) is based on a structure that bears some resemblance to both the current and future composition of the Dow Jones-UBS Commodity Index
SM
.
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·
|
LIQUIDITY. Another goal of the Dow Jones-UBS Commodity Index
SM
is to provide a highly liquid index. The explicit inclusion of liquidity as a weighting factor helps to ensure that the Dow Jones-UBS Commodity Index
SM
can accommodate substantial investment flows. The liquidity of an index affects transaction costs associated with current investments. It also may affect the reliability of historical price performance data.
|
These four principles represent goals of the Dow Jones-UBS Commodity Index
SM
and its creators, and there can be no assurance that these goals will be reached by either UBS or DJI Opco.
Composition of the Dow Jones-UBS Commodity Index
SM
—Commodities Available for Inclusion
A number of commodities have been selected which are believed to be sufficiently significant to the world economy to merit consideration for inclusion in the Dow Jones-UBS Commodity Index
SM
and that are tradable through a qualifying related futures contract. With the exception of several metals contracts (aluminum, lead, tin, nickel and zinc) that trade on the London Metal Exchange (“LME”) and the contract for Brent crude oil, each of the potential commodities is the subject of a futures contract that trades on a U.S. exchange.
As of the date of this pricing supplement, the 24 commodities available for inclusion in the Dow Jones-UBS Commodity Index
SM
were aluminum, crude oil (WTI and Brent), cocoa, coffee, copper, corn, cotton, unleaded gasoline, gold, heating oil, lead, lean hogs, live cattle, natural gas, nickel, platinum, silver, soybean oil, soybeans, soybean meal, sugar, tin, wheat (soft and hard red winter) and zinc.
The 20 Dow Jones-UBS Commodities for 2013 are as follows: aluminum, crude oil (WTI and Brent), coffee, copper, corn, cotton, unleaded gasoline, gold, heating oil, lean hogs, live cattle, natural gas, nickel, silver, soybean oil, soybeans, soybean meal, sugar, wheat (soft and hard red winter) and zinc.
Designated Contracts for Each Commodity
A futures contract known as a Designated Contract is selected by UBS for each commodity available for inclusion in the Dow Jones-UBS Commodity Index
SM
. UBS may select more than one Designated Contract for certain commodities or may select Designated Contracts that are traded outside of the United States or in currencies other than the U.S. Dollar in light of the principles of Index design set out in “—Four Main Principles Guiding the Creation of the Dow Jones-UBS Commodity Index
SM
” above. Additionally, in the event that changes in regulations concerning position limits materially affect the ability of market participants to replicate the Dow Jones-UBS Commodity Index
SM
in the underlying futures markets, it may become appropriate to include multiple Designated Contracts for one or more commodities in order to enhance liquidity.
Historically, through and including the composition of the Dow Jones-UBS Commodity Index
SM
for 2013, UBS has chosen as the Designated Contract for each Commodity one contract that is traded in North America and denominated in U.S. dollars (with the exception of several LME contracts and crude oil and wheat).
The termination or replacement of a futures contract on an established exchange occurs infrequently; if a Designated Contract were to be terminated or replaced, a comparable futures contract, if available, would be selected to replace that Designated Contract. The Supervisory Committee may, however, terminate, replace or otherwise change a Designated Contract, or make other changes to the Dow Jones-UBS Commodity Index
SM
, pursuant to special meetings.
The Designated Contracts for the 2013 Dow Jones-UBS Commodities are set forth below.
Dow Jones-UBS Commodity Index
SM
Breakdown by Commodity
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Aluminum
|
High Grade Primary Aluminum
|
LME
|
25 metric tons
|
$/metric ton
|
|
Cocoa
|
Cocoa
|
NYBOT*
|
10 metric tons
|
$/metric ton
|
|
Coffee
|
Coffee “C”
|
NYBOT
|
37,500 lbs
|
cents/
pound
|
|
Copper**
|
Copper
|
COMEX***
|
25,000 lbs
|
cents/
pound
|
|
Corn
|
Corn
|
CBOT
|
5,000 bushels
|
cents/
bushel
|
|
Cotton
|
Cotton
|
NYBOT
|
50,000 lbs
|
cents/
pound
|
|
WTI Crude Oil
|
Light, Sweet Crude Oil
|
NYMEX
|
1,000 barrels
|
$/barrel
|
|
Brent Crude Oil
|
Brent Crude Oil
|
ICE
|
1,000 barrels
|
$/barrel
|
|
Gold
|
Gold
|
COMEX
|
100 troy oz.
|
$/troy oz.
|
|
Heating Oil
|
Heating Oil
|
NYMEX
|
42,000 gallons
|
cents/
gallon
|
|
Lead
|
Refined Standard Lead
|
LME
|
25 metric tons
|
$/metric ton
|
|
Live Cattle
|
Live Cattle
|
CME^
|
40,000 lbs
|
cents/
pound
|
|
Lean Hogs
|
Lean Hogs
|
CME^
|
40,000 lbs
|
cents/
pound
|
|
Natural Gas
|
Henry Hub Natural Gas
|
NYMEX
|
10,000 mmbtu
|
$/mmbtu
|
|
Nickel
|
Primary Nickel
|
LME
|
6 metric tons
|
$/metric ton
|
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Platinum
|
Platinum
|
NYMEX
|
50 troy oz.
|
$/troy oz.
|
|
Silver
|
Silver
|
COMEX
|
5,000 troy oz.
|
cents/troy oz.
|
|
Soybeans
|
Soybeans
|
CBOT
|
5,000 bushels
|
cents/
bushel
|
|
Soybean Meal
|
Soybean Meal
|
CBOT
|
100 short tons
|
$/short ton
|
|
Soybean Oil
|
Soybean Oil
|
CBOT
|
60,000 lbs
|
cents/
pound
|
|
Sugar
|
World Sugar No. 11
|
NYBOT
|
112,000 lbs
|
cents/
pound
|
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Tin
|
Refined Tin
|
LME
|
5 metric tons
|
$/metric ton
|
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Unleaded Gasoline (RBOB)
|
Reformulated Gasoline Blendstock for Oxygen Blending
†
|
NYMEX
|
42,000 gal
|
cents/gallon
|
|
Wheat (Chicago)
|
Soft Wheat
|
CBOT
|
5,000 bushels
|
cents/
bushel
|
|
Wheat (Kansas)
|
Hard Red Winter Wheat
|
KCBOT
|
5,000 bushels
|
cents/
bushel
|
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Zinc
|
Special High Grade Zinc
|
LME
|
25 metric tons
|
$/metric ton
|
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*
|
The New York Board of Trade (“NYBOT”) located in New York City.
|
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**
|
The Dow Jones-UBS Commodity Index
SM
uses the High Grade Copper Contract traded on the COMEX division of the New York Mercantile Exchange for copper contract prices and LME volume data in determining the weighting for the Dow Jones-UBS Commodity Index
SM
.
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***
|
The New York Commodities Exchange (“COMEX”) located in New York City.
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^
|
The Chicago Mercantile Exchange (“CME”) located in Chicago, Illinois.
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†
|
Represents a replacement of the New York Harbor Unleaded Gasoline contract. This replacement occurred during the regularly scheduled roll of futures contracts comprising the Dow Jones-UBS Commodity Index
SM
in April 2006.
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Commodity Groups
For purposes of applying the diversification rules discussed above and below, the commodities available for inclusion in the Dow Jones-UBS Commodity Index
SM
are assigned to Commodity Groups. The Commodity Groups, and the commodities currently included in each Commodity Group, are as follows:
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Energy
|
Crude Oil (WTI and Brent)
Heating Oil
Natural Gas
Unleaded Gasoline (RBOB)
|
Livestock
|
Lean Hogs
Live Cattle
|
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Precious Metals
|
Gold
Silver
Platinum*
|
Grains
|
Corn
Soybeans
Soybean Oil
Soybean Meal
Wheat
|
|
Industrial Metals
|
Aluminum
Copper
Lead*
Nickel
Tin*
Zinc
|
Softs
|
Cocoa
Coffee
Cotton
Sugar
|
|
*
|
Commodities not currently included in the Dow Jones-UBS Commodity Index
SM
|
Dow Jones-UBS Commodity Index
SM
Breakdown by Commodity Group
The Commodity Group Breakdown set forth below is based on the weightings and composition of the Dow Jones-UBS Commodity Index
SM
set forth under “The Dow Jones-UBS Commodity Index
SM
2013 Commodity Index Percentages” below.
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Energy
|
32.40%
|
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Precious Metals
|
14.72%
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Industrial Metals
|
16.95%
|
|
Livestock
|
5.18%
|
|
Grains
|
17.30%
|
|
Softs
|
8.09%
|
|
Soybean Meal
|
2.61%
|
|
Soybean Oil
|
2.74%
|
The Commodity Group Breakdown set forth below is based on the weightings and composition of the Dow Jones-UBS Commodity Index
SM
set forth under “The Dow Jones-UBS Commodity Index
SM
2012 Commodity Index Percentages” below.
|
Energy
|
32.63%
|
|
Precious Metals
|
12.56%
|
|
Industrial Metals
|
18.64%
|
|
Livestock
|
5.75%
|
|
Grains
|
22.09%
|
|
Softs
|
8.33%
|
The Commodity Group Breakdown set forth below is based on the weightings and composition of the Dow Jones-UBS Commodity Index
SM
set forth under “The Dow Jones-UBS Commodity Index
SM
2011 Commodity Index Percentages” below.
|
Energy
|
33.00%
|
|
Precious Metals
|
13.74%
|
|
Industrial Metals
|
17.84%
|
|
Livestock
|
5.36%
|
|
Grains
|
22.38%
|
|
Softs
|
7.68%
|
Annual Reweightings and Rebalancings of The Dow Jones-UBS Commodity Index
SM
The Dow Jones-UBS Commodity Index
SM
is reweighted and rebalanced each year in January on a price-percentage basis. The annual weightings for the Dow Jones-UBS Commodity Index
SM
are determined each year in the third or fourth quarter by UBS under the supervision of the Supervisory Committee following advice from the Advisory Committee and are published as promptly as practicable following the calculation. The annual weightings for the next calendar year are implemented the following January.
For example, the composition of the Dow Jones-UBS Commodity Index
SM
for 2013 was approved by the Dow Jones-UBS Index Oversight Committee in October of 2012 and published on October 24, 2012. The January 2013 reweighting and rebalancing was based on the following percentages:
The Dow Jones-UBS Commodity Index
SM
2013 Commodity Index Percentages
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Natural Gas
|
10.4235920%
|
|
WTI Crude Oil
|
9.2058850%
|
|
Brent Crude
|
5.7941150%
|
|
Unleaded Gasoline
|
3.4613410%
|
|
Heating Oil
|
3.5193580%
|
|
Live Cattle
|
3.2834170%
|
|
Lean Hogs
|
1.8997650%
|
|
Wheat
|
3.4332700%
|
|
KCBT Wheat
|
1.3206450%
|
|
Corn
|
7.0531450%
|
|
Soybeans
|
5.4947720%
|
|
Soybean Oil
|
2.7426180%
|
|
Soy Meal
|
2.6066650%
|
|
Aluminum
|
4.9131960%
|
|
Copper
|
7.2773320%
|
|
Zinc
|
2.5192160%
|
|
Nickel
|
2.2436190%
|
|
Gold
|
10.8186130%
|
|
Silver
|
3.8975030%
|
|
Sugar
|
3.8839680%
|
|
Cotton
|
1.7658200%
|
|
Coffee
|
2.4421460%
|
In addition, the composition of the Dow Jones-UBS Commodity Index
SM
for 2012 was approved by the Dow Jones-UBS Index Oversight Committee in October of 2010 and published on October 11, 2011. The January 2012 reweighting and rebalancing was based on the following percentages:
The Dow Jones-UBS Commodity Index
SM
2012 Commodity Index Percentages
|
|
|
|
WTI Crude Oil
|
9.687164%
|
|
Brent Crude Oil
|
5.312836%
|
|
Natural Gas
|
10.765109%
|
|
Gold
|
9.793633%
|
|
Soybeans
|
7.084197%
|
|
Copper
|
7.063949%
|
|
Corn
|
6.670520%
|
|
Aluminum
|
5.876747%
|
|
|
|
|
Commodity
|
Weighting
|
|
Wheat
|
4.961809%
|
|
Sugar
|
3.758390%
|
|
Live Cattle
|
3.634988%
|
|
Heating Oil
|
3.459529%
|
|
Unleaded Gasoline
|
3.405982%
|
|
Soybean Oil
|
3.372386%
|
|
Zinc
|
3.118735%
|
|
Silver
|
2.769133%
|
|
Nickel
|
2.579840%
|
|
Coffee
|
2.572395%
|
|
Lean Hogs
|
2.112660%
|
|
Cotton
|
2.000000%
|
In addition, the composition of the Dow Jones-UBS Commodity Index
SM
for 2011 was approved by the Dow Jones-UBS Index Oversight Committee in October of 2010 and published on October 29, 2010. The January 2011 reweighting and rebalancing was based on the following percentages:
The Dow Jones-UBS Commodity Index
SM
2011 Commodity Index Percentages
|
|
|
|
Crude Oil
|
14.709297%
|
|
Natural Gas
|
11.218962%
|
|
Gold
|
10.449067%
|
|
Soybeans
|
7.856815%
|
|
Copper
|
7.539090%
|
|
Corn
|
6.978537%
|
|
Aluminum
|
5.203285%
|
|
Wheat
|
4.605238%
|
|
Heating Oil
|
3.575070%
|
|
Unleaded Gasoline
|
3.496671%
|
|
Live Cattle
|
3.359133%
|
|
Sugar
|
3.326014%
|
|
Silver
|
3.289633%
|
|
Soybean Oil
|
2.937244%
|
|
Zinc
|
2.849355%
|
|
Coffee
|
2.355773%
|
|
Nickel
|
2.250815%
|
|
Lean Hogs
|
2.000000%
|
|
Cotton
|
2.000000%
|
Information concerning the Dow Jones-UBS Commodity Index
SM
, including weightings and composition, may be obtained at the Dow Jones website. Information contained on the Dow Jones website is not incorporated by reference in, and should not be considered part of, this pricing supplement.
We make no representation or warranty as to the accuracy or completeness of information contained on the Dow Jones website.
Determination of Relative Weightings
The relative weightings of the Dow Jones-UBS Commodities are determined annually according to both liquidity and dollar-adjusted production data in 2/3 and 1/3 shares, respectively. Each June, for each commodity designated for potential inclusion in the Dow Jones-UBS Commodity Index
SM
, liquidity is measured by the Commodity Liquidity Percentage (“CLP”) and production by the Commodity Production Percentage (“CPP”). The CLP for each commodity is determined by taking a five-year average of the product of trading volume and the historical dollar value of the Designated Contract for that commodity, and dividing the result by the sum of such products for all commodities which were designated for potential inclusion in the Dow Jones-UBS Commodity Index
SM
. The CPP is determined for each commodity by taking a five-year average of annual world production figures, adjusted by the historical dollar value of the Designated Contract, and dividing the result by the sum of such production figures for all the commodities which were designated for potential inclusion in the Dow Jones-UBS Commodity Index
SM
. The CLP and the CPP are then combined (using a ratio of 2:1) to establish the Commodity Index Percentage (“CIP”) for each commodity. This CIP is then adjusted in accordance with certain diversification rules in order to determine the commodities which will be included in the Dow Jones-UBS Commodity Index
SM
(the “Dow Jones-UBS Commodities”) and their respective percentage weights.
Diversification Rules
The Dow Jones-UBS Commodity Index
SM
is designed to provide diversified exposure to commodities as an asset class. To ensure that no single commodity or commodity sector dominates the Dow Jones-UBS Commodity Index
SM
, the following diversification rules are applied to the annual reweighting and rebalancing of the Dow Jones-UBS Commodity Index
SM
as of January of each year:
|
|
·
|
No single commodity (
e.g.
, natural gas or silver) may constitute more than 15% of the Dow Jones-UBS Commodity Index
SM
.
|
|
|
·
|
No single commodity, together with its derivatives (
e.g.
, crude oil, together with heating oil and unleaded gasoline), may constitute more than 25% of the Dow Jones-UBS Commodity Index
SM
.
|
|
|
·
|
No related group of commodities designated as a “Commodity Group” (
e.g.
, energy, precious metals, livestock or grains) may constitute more than 33% of the Dow Jones-UBS Commodity Index
SM
.
|
|
|
·
|
No single commodity included in the Dow Jones-UBS Commodity Index
SM
may constitute less than 2% of the Dow Jones-UBS Commodity Index
SM
.
|
Following the annual reweighting and rebalancing of the Dow Jones-UBS Commodity Index
SM
in January, the percentage of any commodity included in The Dow Jones-UBS Commodity Index
SM
(the “Index Commodity”) or Commodity Group at any time prior to the next reweighting or rebalancing will fluctuate and may exceed or be less than the percentages established in January.
Commodity Index Multipliers
Following application of the diversification rules discussed above, CIPs are incorporated into the Dow Jones-UBS Commodity Index
SM
by calculating the new unit weights for each Index Commodity. Near the beginning of each new calendar year, the CIPs, along with the settlement prices determined on that date for Designated Contracts included in the Dow Jones-UBS Commodity Index
SM
, are used to determine a Commodity Index Multiplier (“CIM”) for each Index Commodity. This CIM is used to achieve the percentage weightings of the Dow Jones-UBS Commodities, in dollar terms, indicated by their respective CIPs. After the CIMs are calculated, they remain fixed throughout the year. As a result, the observed price percentage of each Index Commodity will float throughout the year, until the CIMs are reset the following year based on new CIPs.
Calculations
The price return version of the Dow Jones-UBS Commodity Index
SM
is calculated by Dow Jones, in conjunction with UBS, by applying the impact of the changes to the futures prices of commodities included in the Dow Jones-UBS Commodity Index
SM
(based on their relative weightings). Once the CIMs are determined as discussed above, the calculation of the price return version of the Dow Jones-UBS Commodity Index
SM
is a mathematical process whereby the CIMs for the Dow Jones-UBS Commodities are multiplied by the prices in U.S. dollars for the applicable Designated Contracts. These products are then summed. The percentage change in this sum is then applied to the prior Dow Jones-UBS Commodity Index
SM
price return level to calculate the new Dow Jones-UBS Commodity Index
SM
price return level.
The total return version of the Dow Jones-UBS Commodity Index
SM
is calculated by Dow Jones, in conjunction with UBS, by applying the impact of the changes in the level of the price return version of the Dow Jones-UBS Commodity Index
SM
and adding interest that could be earned on funds committed to the trading of the underlying futures contracts. Once the level of the price return version of the Dow Jones-UBS Commodity Index
SM
is determined as discussed above, the daily return on a 3-month T-bill is added to the percentage change in the price return version of the Dow Jones-UBS Commodity Index
SM
(as compared with the prior Dow Jones-UBS Commodity Index
SM
price return level) to obtain the total return. The total return is then applied to the prior Dow Jones-UBS Commodity Index
SM
total return level to calculate the new Dow Jones-UBS Commodity Index
SM
total return level.
Dissemination and Publication
Dow Jones disseminates the Dow Jones-UBS Commodity Index
SM
level approximately every fifteen (15) seconds (assuming the Dow Jones-UBS Commodity Index
SM
level has changed within such fifteen-second interval) from 8:00 a.m. to 3:30 p.m. (New York time), and publishes the final Dow Jones-UBS Commodity Index
SM
level for each DJ-UBS Business Day at approximately 4:00 p.m. (New York time) on each such day. Dow Jones-UBS Commodity Index
SM
levels can also be obtained from the official websites of both UBS and Dow Jones Indexes and are also published in
The Wall Street Journal
.
A “DJ-UBS Business Day” is a day on which the sum of the Commodity Index Percentages (as defined below in “Annual Reweightings and Rebalancings of the Dow Jones-UBS Commodity Index
SM
”) for the Dow Jones-UBS Commodities that are open for trading is greater than 50%. For example, based on the weighting of the Dow Jones-UBS Commodities for 2011, if the CBOT and the New York Mercantile Exchange (“NYMEX”) are closed for trading on the same day, a DJ-UBS Business Day will not exist.
The Dow Jones-UBS Commodity Index
SM
Is a Rolling Index
The Dow Jones-UBS Commodity Index
SM
is composed of futures contracts on physical commodities. Unlike equities, which typically entitle the holder to a continuing stake in a corporation, commodity futures contracts normally specify a certain date for the delivery of the underlying commodity. In order to avoid delivering the underlying physical commodities and to maintain exposure to the underlying physical commodities, periodically futures contracts on physical commodities specifying delivery on a nearby date must be sold and futures contracts on physical commodities that have not yet reached the delivery period must be purchased. The rollover for each contract occurs over a period of five DJ-UBS Business Days each month according to a pre-determined schedule. This process is known as “rolling” a futures position. The Dow Jones-UBS Commodity Index
SM
is a “rolling index.”
Dow Jones-UBS Commodity Index
SM
Calculation Disruption Events
From time to time, disruptions can occur in trading futures contracts on various commodity exchanges. The daily calculation of the Dow Jones-UBS Commodity Index
SM
will be adjusted in the event that UBS and DJI Opco determine that any of the following index calculation disruption events exists:
(a) the termination or suspension of, or material limitation or disruption in the trading of any futures contract used in the calculation of the Dow Jones-UBS Commodity Index
SM
on that day;
(b) the settlement price of any futures contract used in the calculation of the Dow Jones-UBS Commodity Index
SM
reflects the maximum permitted price change from the previous day’s settlement price;
(c) the failure of an exchange to publish official settlement prices for any futures contract used in the calculation of the Dow Jones-UBS Commodity Index
SM
; or
(d) with respect to any futures contract used in the calculation of the Dow Jones-UBS Commodity Index
SM
that trades on the LME, a business day on which the LME is not open for trading.
License Agreement
The Dow Jones-UBS Commodity Indexes
SM
are a joint product of DJI Opco, a subsidiary of S&P Dow Jones, and UBS, and have been licensed for use by Citigroup Global Markets Inc. “Dow Jones” and “DJ” are trademarks of Dow Jones Trademark Holdings LLC (“Dow Jones”); “UBS” is a registered trademark of UBS AG (“UBS AG”); “S&P” is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”); and these trademarks have been licensed for use by DJI Opco and sublicensed for certain purposes by Citigroup Global Markets Inc. (the “Licensee”).
The Notes are not sponsored, endorsed, sold or promoted by Dow Jones, UBS AG, UBS, DJI Opco or any of their subsidiaries or affiliates. None of Dow Jones, UBS AG, UBS, DJI Opco or any of their subsidiaries or affiliates makes any representation or warranty, express or implied, to the owners of or counterparts to the Notes or any member of the public regarding the advisability of investing in securities or commodities generally or in the Notes particularly. The only relationship of Dow Jones, UBS AG, UBS, DJI Opco or any of their subsidiaries or affiliates to the Licensee is the licensing of certain trademarks, trade names and service marks and of the Dow Jones-UBS Commodity Indices, which are determined, composed and calculated by DJI Opco in conjunction with UBS without regard to the Licensee or the Notes. UBS and DJI Opco have no obligation to take the needs of the Licensee or the owners of the Notes into consideration in determining, composing or calculating Dow Jones-UBS Commodity Indices. None of Dow Jones, UBS AG, UBS, DJI Opco or any of their respective subsidiaries or affiliates is responsible for or has participated in the determination of the timing of, prices at, or quantities of the Notes to be issued or in the determination or calculation of the equation by which the Notes are to be converted into cash, surrendered or redeemed, as the case may be. None of Dow Jones, UBS AG, UBS, DJI Opco or any of their subsidiaries or affiliates shall have any obligation or liability, including, without limitation, to securities customers, in connection with the administration, marketing or trading of the Notes. Notwithstanding the foregoing, UBS AG, UBS, CME Group Inc., an affiliate of S&P Dow Jones, and their respective subsidiaries and affiliates may independently issue and/or sponsor financial products unrelated to the Notes currently being issued by the Licensee, but which may be similar to and competitive with the Notes. In addition, UBS AG, UBS, CME Group Inc. and their subsidiaries and affiliates actively trade commodities, commodity indexes and commodity futures (including the Dow Jones-UBS Commodity Index
SM
and Dow Jones-UBS Commodity Index Total Return
SM
), as well as swaps, options and derivatives which are linked to the performance of such commodities, commodity indexes and commodity futures. It is possible that this trading activity will affect the value of the Dow Jones-UBS Commodity Indices and the Notes.
This pricing supplement relates only to the Notes and does not relate to the exchange traded physical commodities underlying any of the Dow Jones-UBS Commodity Index Total Return
SM
Components. Purchasers of the Notes should not conclude that the inclusion of a futures contract in the Dow Jones-UBS Commodity Indices is any form of investment recommendation of the futures contract or the underlying exchange-traded physical commodity by Dow Jones, UBS AG, UBS, DJI Opco or any of their subsidiaries or affiliates. The information in this pricing supplement regarding the Dow Jones-UBS Commodity Indices components has been derived solely from publicly available documents. None of Dow Jones, UBS AG, UBS, DJI Opco or any of their subsidiaries or affiliates has made any due diligence inquiries with respect to the Dow Jones-UBS Commodity Indices components in connection with the Notes. None of Dow Jones, UBS AG, UBS, DJI Opco or any of their subsidiaries or affiliates makes any representation that these publicly available documents or any other publicly available information regarding the Dow Jones-UBS Commodity Indices components, including without limitation a description of factors that affect the prices of such components, are accurate or complete.
NONE OF DOW JONES, UBS AG, UBS, DJI OPCO OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW JONES-UBS COMMODITY INDICES OR ANY DATA RELATED THERETO AND NONE OF DOW JONES, UBS AG, UBS, DJI OPCO OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. NONE OF DOW JONES, UBS AG, UBS, DJI OPCO OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES MAKES ANY WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE LICENSEE, OWNERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES-UBS COMMODITY INDICES
OR ANY DATA RELATED THERETO. NONE OF DOW JONES, UBS AG, UBS, DJI OPCO OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES MAKES ANY EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DOW JONES-UBS COMMODITY INDICES OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES, UBS AG, UBS, DJI OPCO OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS AMONG UBS, DJI OPCO AND THE LICENSEE, OTHER THAN UBS AG AND THE LICENSORS OF DJI OPCO.
The Commodity Futures Markets
Contracts on physical commodities are traded on regulated futures exchanges, in the over-the-counter market and on various types of physical and electronic trading facilities and markets. As of the date of this pricing supplement, all of the contracts included in the DJ-UBS Commodity Indices are exchange-traded futures contracts. An exchange-traded futures contract is a bilateral agreement providing for the purchase and sale of a specified type and quantity of a commodity or financial instrument during a stated delivery month for a fixed price. A futures contract on an index of commodities typically provides for the payment and receipt of a cash settlement based on the value of such commodities. A futures contract provides for a specified settlement month in which the commodity or financial instrument is to be delivered by the seller (whose position is described as “short”) and acquired by the purchaser (whose position is described as “long”) or in which the cash settlement amount is to be made.
There is no purchase price paid or received on the purchase or sale of a futures contract. Instead, an amount of cash or cash equivalents must be deposited with the broker as “initial margin.” This amount varies based on the requirements imposed by the exchange clearing houses, but may be as low as 5% or less of the value of the contract. This margin deposit provides collateral for the obligations of the parties to the futures contract.
By depositing margin in the most advantageous form (which may vary depending on the exchange, clearing house or broker involved), a market participant may be able to earn interest on its margin funds, thereby increasing the potential total return that may be realized from an investment in futures contracts. The market participant normally makes to, and receives from, the broker subsequent payments on a daily basis as the price of the futures contract fluctuates. These payments are called “variation margin” and make the existing positions in the futures contract more or less valuable, a process known as “marking to market.”
Futures contracts are traded on organized exchanges, known as “contract markets” in the United States, through the facilities of a centralized clearing house and a brokerage firm which is a member of the clearing house. The clearing house guarantees the performance of each clearing member which is a party to the futures contract by, in effect, taking the opposite side of the transaction. At any time prior to the expiration of a futures contract, subject to the availability of a liquid secondary market, a trader may elect to close out its position by taking an opposite position on the exchange on which the trade obtained the position. This operates to terminate the position and fix the trader’s profit or loss.
U.S. contract markets, as well as brokers and market participants, are subject to regulation by the Commodity Futures Trading Commission. Futures markets outside the United States are generally subject to regulation by comparable regulatory authorities. However, the structure and nature of trading on non-U.S. exchanges may differ from the foregoing description. From their inception to the present, the DJ-UBS Commodity Indices have been composed exclusively of futures contracts traded on regulated exchanges.
Historical Data on the Dow Jones-UBS Grains Sub-Index 3 Month Forward Total Return
SM
The following table sets forth, for each of the quarterly periods indicated, the high and low closing values of Dow Jones-UBS Grains Sub-Index 3 Month Forward Total Return
SM
, as reported by Reuters. These historical data on the Dow Jones-UBS Grains Sub-Index 3 Month Forward Total Return
SM
are not indicative of the future performance of the Dow Jones-UBS Grains Sub-Index 3 Month Forward Total Return
SM
or what the value of the Notes may be. Any historical upward or downward trend in the Dow Jones-UBS Grains Sub-Index 3 Month
Forward Total Return
SM
during any period set forth below is not an indication that the Dow Jones-UBS Grains Sub-Index 3 Month Forward Total Return
SM
is more or less likely to increase or decrease at any time during the term of the Notes.
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