World Investment Navigator - Citi Private Bank · World Investment Navigator . ... appreciation and higher consumer price inflation. International firms domiciled in ... Source: Citi

January 2017

World Investment Navigator

Investment Products: Not FDIC Insured ● Not CDIC Insured ● Not Government Insured ● No Bank Guarantee ● May Lose Value

Table of Contents

1. Tactical Outlook 3

2. Quadrant in Charts: Now, About Those Promises… 8

3. Asset Class Views in Charts 41

4. Appendix 49

2

1. Tactical Outlook

Opinions expressed herein may differ from the opinions expressed by other businesses or affiliates of Citigroup, Inc., and are not intended to be a forecast of future events, a guarantee of future results for investment advice, and are subject to change based on market and other conditions.

4

2.0

0.0

12.0

2.0

2.0

6.9

20.9

6.9

7.0

1.9

3.9

8.5

26.1

3.5

0.5

12.0

2.3

3.7

7.9

16.9

7.0

6.7

1.7

3.9

7.9

26.1

0 10 20 30

Cash

Gold

Hedge Funds

Emerging market debt

Developed high yield

Developed IG corp

Developed sovereign

Emerging all cap equities

Developed SMID equities

Developed Asia ex. Japan

Japan Large Cap

Europe large cap equities

NAM large cap equities

GIC Level 3 Asset Allocation

Tactical

Strategic

Global Investment Committee (GIC) Views The Citi Private Bank Global Investment Committee left its asset allocation unchanged, overweighting US dollar assets while keeping a small tactical overweight in both cash and gold as a risk hedge.

The allocation to global equities remains at -1.0% and fixed income -1.0%. Within this allocation, we maintained a neutral (full) allocation to US equities, an overweight to US credit and to select emerging markets fixed income. We also maintained large underweights in European and Japanese government bonds. In international equities markets, we see currency depreciation hampering potential returns measured in US dollars over the next 12-18 months. This reflects an expected diverging path for US monetary policy vs other central banks and a variety of political risks. (Hedging forex risk remains an option, but with trade-offs that require bespoke solutions).

The 100 basis point rise in long-term US bond yields since October reflects both stronger growth and inflation expectations. Rate pressures are likely to be felt at the shorter-end of the U.S, yield curve this year. The policy backdrop in the US suggests some rise in interest rate volatility. However, the rise in yields also represents a stronger future return opportunity across the risk spectrum. US high yield debt, variable rate loans and some hybrids offer solid risk-adjusted returns, with the energy sector powering recovery. Municipal debt for US tax payers is again attractively priced. Emerging markets have been set back by prospective US monetary and regulatory policies. However, select Latin American bonds amply compensate investors for risk.

Details on US tax and trade policies are only likely to emerge piecemeal in the coming few months, which could add to global financial market volatility.

Heightened growth expectations actually leave greater vulnerability to the equity market sectors that have rallied the most in the past two months. However, underlying US profits were already recovering and tax reforms are likely to boost EPS for the majority of US firms before 2017 ends.

The possibility that the US Congress will fund domestic tax cuts with a tax on imports adds several risks to an otherwise strong stimulus effort. During an adjustment period, the policy could hamper trade flows and result in a mix of both US dollar appreciation and higher consumer price inflation. International firms domiciled in every region could be impacted.

International political risks are heightened beyond the US influence this year with several national leadership elections in Europe, Brexit negotiations, and a power transition in China. Given uncertainties over US tax, trade and monetary policies, we remain tactically underweight Euro assets and select Southeast Asian markets. Nonetheless, the GIC may take actions to allocate more or less to risk assets depending on policy developments and valuations in coming months.

Asset Allocation (level 3)

Source: Citi Private Bank, as of GIC meeting January 26, 2017. SMID = Size of companies capitalization is classified as small to mid.

5

Asset Class Tactical Positioning

Investment Rationale Underweight Neutral Overweight

North American large cap equity

The GIC maintains its neutral, fully-invested weighting on U.S. large cap equities. The sharp rotation within equity sectors sensitive to higher interest rates suggests durability, amid the many significant global risks. President Trump and the Republican controlled congress appears likely to succeed in passing sizeable U.S. corporate and personal income tax cuts. A stronger U.S. dollar will hurt multinational earnings, but attract foreign investment in the U.S. if trade relationships hold.

European large cap equity

We believe the UK referendum and U.S. presidential election highlight pending political risks in Europe, where inter-country cooperation is of greater financial importance than elsewhere. The long list of political hurdles during the coming year led us to reduce our equity allocation to underweight in the region despite central bank support and reasonable valuations.

Japan large cap equity

We remain neutral Japan large caps. Japan is one of the largest beneficiaries of U.S. policy divergence, with Fed tightening helping to weaken the yen. While this is negative for international investors in yen assets, equity gains typically far outstrip depreciation as Japanese exporter margins are boosted. The volatile outlook and domestic challenges in Japan keep us from an overweight.

Developed small and mid cap equity (SMID)

To reflect our downward adjustment to the outlook for equities as noted above, we remain underweight developed market SMID, with underweights coming out of the U.K. and continental Europe, though neutral the U.S.

Emerging Asia Over the last year we reduced weightings in Asian equities given a less significant currency adjustment in China after a decade of appreciation. In anticipation of some further U.S. dollar appreciation and interest rate pressures, we keep our Southeast Asian equity weightings to underweight.

Emerging EMEA Since increasing our allocations to South Africa and Turkey in June to a neutral weighting, we kept the rest of the region unchanged at a neutral weighting.

Emerging Latin America

Latin America has been the hardest hit by a resurgent US dollar since the Trump election. This has set back early signs of recovery that were strongly priced in the region earlier in 2016. However, the sharp declines in regional asset prices from 2011-2015 leave valuations attractive now. We maintain modest overweights in the commodity-linked Andean markets of Chile, Colombia and Peru. Mexico and Brazil remain at a neutral at present.

GIC Asset Class Views: Equities

For illustrative purposes only. Past performance is no guarantee of future results. Real Results may Vary.

Source: Citi Private Bank, as of GIC meeting January 26, 2017.

6

Asset class Tactical positioning

Investment rationale Underweight Neutral Overweight

North American sovereign bonds

We remain overweight in short-term U.S. Treasuries, as an alternative to cash, and keep U.S. intermediate and long-term Treasuries at a fully invested neutral weighting. With nearly a quarter of the developed market sovereign bond universe with negative yields, higher yielding US Treasuries provide a better asset allocation alternative.

European sovereign bonds

Negative policy rates and slow economic growth have left core European bond yields low, though questions over the ECB purchase program and U.S. rates have generated a backup. Political risks remain elevated, particularly for EU periphery countries. For this reason we continue to keep Italian bonds as our largest relative underweight position.

Emerging market (EM) sovereign bonds

Though likely to remain volatile, LatAm remains cheap given the downturn in asset prices from the oil price decline over the last few years. Given our positive outlook on oil and commodities more broadly, we remain overweight Latam (hard currency and local). We are also overweight local Asian bonds, and neutral EMEA.

US Inflation-linked The rise in oil prices and high probability of fiscal stimulus out of a Republican controlled U.S. Congress have pushed up inflation expectations. The committee remains overweight U.S. Treasury Inflation Protected Securities (TIPS).

Corporate investment grade

US IG credit remains at an overweight, and we keep a neutral duration relative to it’s benchmark. Given low yields and ongoing political headwinds, we keep Euro corporates neutral.

Corporate high yield

We remain overweight both US and Euro high yield. In the US, energy bonds have bounced back sharply since the oil price lows in early 2016, but selective opportunity remains. Higher carry should drive outperformance within fixed income in a rising rate environment. In addition, last month we increased our HY exposure by adding to US variable-rate bank loans which benefit from rising LIBOR and lower price volatility relative to HY bonds. We recommend investors diversify with both.

GIC Asset Class Views: Fixed Income

Hedge Funds

Macro/CTA funds offer an opportunity to exploit greater market volatility. We retain a slight overweight in the segment while keeping our overall allocation to hedge funds at neutral. The GIC has a favorable view of very select private equity and real estate investments, but does not recommend changing these weightings over tactical time periods.

Commodities

With equities and bonds seeing an increase in correlation, the value of diversification is weakening somewhat. In contrast, gold and risk assets have maintained a significant negative correlation. While higher real interest rates and greater confidence would represent a downside risk to the gold price, the much larger part of our portfolio allocations would benefit from such a welcome trend, if it were to emerge. We keep Gold a small tactical overweight.

Source: Citi Private Bank, as of GIC meeting January 26, 2017.

GIC Asset Class Views: Alternatives


7

0.2

0.4

1.9

2.1

2.2

2.7

4.4

13.6

26.2

13.0

26.2

17.8

23.4

22.6

0 5 10 15 20 25 30

MSCI Japan

MSCI UK

MSCI Europe ex UK

MSCI World Small Cap

MSCI World

S&P 500

MSCI EM

Total Return (%)Last 12 monthsYTD Return

-0.9

-0.8

-0.6

-0.5

-0.44

-0.2

-0.1

0.5

0.8

1.0

1.4

0.7

8.2

4.1

2.5

0.22

-0.9

5.9

3.4

12.2

11.6

21.6

-4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24

Developed Sov

Global I-Linked

Euro HG Corp

Global Agg

US MBS

US Treasury

US HG Corp

EM (Local) Govt

Euro HY Corp

EM (USD) Govt

US HY Corp

Total Return (%)Last 12 monthsYTD Return

Market Performance

Local Currency Fixed Income index returns, YTD & last 12 mo. Local Currency Equity index returns, YTD & last 12 mo.

Source: Citi Private Bank using Bloomberg, as of January 26, 2017. Source: Citi Private Bank using Bloomberg, as of January 26, 2017. *Global Aggregate, Global inflation linked and Local EM index are in hedged USD terms.

Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance.


2. Quadrant in Charts: Now, About Those Promises…

9

Like Brexit, Warnings of Doomsday Swirled in the US Election

• Pre-election Trump plan would reduce U.S. taxes by nearly 3 percentage points of GDP.

• Infrastructure spending could also rise. Tax cuts seem more likely, and a larger immediate impact.

• Corporate tax and investment reforms look promising, but dovetail with the risks of trade conflict.

1.0

0.5

0.0

0.5

1.0

'12 '13 '14 '15 '16 '17

Yie

ld (%

)

10yr US TIPS yield

Source: Haver Analytics as of January 2017. Source: Haver Analytics as of January 2017.

US 10yr US Treasury (TIPS) yield US 10yr breakeven rate

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

'12 '13 '14 '15 '16 '17

Rat

e (%

)

10yr US breakeven rate

Post Trump victory, both real economic growth and inflation expectations have risen.



10

List of Larger Budget Items from Latest Trump Plan as Candidate Cut U.S. personal income taxes: 3 brackets ranging from 12%-33% vs 5 brackets ranging from 10%-39.6%. Repeals Alternative Minimum Tax. Limits deductions for upper incomes. Eliminate “Obamacare”(ACA) taxes. Statutory corporate tax rate cut to 15% from 35% (loopholes make current effective rates much lower). Pass through entities can choose 15% rate vs paying individual income tax rate with no special deductions. Foreign profits held abroad can be repatriated at 10% rate vs 35%.

Full and immediate expensing for business equipment outlays.

Stepped up infrastructure investment: $550 billion over 10 years. Private? Public?

Large list of unknowns, but expect productive US Congress pre-Nov. 2018 elections

Congressional Wish List • Possible change of entire U.S. corporate tax system to Territorial/VAT system • ****Border Adjustment Tax**** • Reforms of Medicare/Medicaid • Complete repeal of Obamacare (Affordable Care Act or ACA) • Personal Tax Simplification

Source: Citi Private Bank as of January 2017.

For illustrative purposes only.

11

Border Adjustment Taxes: How do they work

• Hurts retailers, especially for low margin imported goods. Even a low corporate income tax rate that applied without the deduction of import costs would eradicate the profit of importers.

• Due to the effect of a rising dollar exporters would likely not benefit significantly, but also are unlikely to be harmed materially.

• A traditionally VAT tax is charged wherever a product is consumed.

• In contrast the border adjustment tax is dependent on the location of production.

• US Production = Tax Free, Non-US Production = Taxed.

Imports would be taxed at 20%

Imports (including intermediate inputs) would no longer be deductible from corporate income

Exports would be deductible from corporate income

Source: Citi Private Bank as of January 2017.


12

Border Adjustment Taxes

Pros / Who is helped Cons / Who is hurt P

rior t

o E

nact

men

t Stronger Dollar in Anticipation • US Importers/ non-US manufacturing • Domestic manufacturers with foreign

inputs • Holders of USD Assets (especially non-

US holders) • US consumers of imported goods • Workers at plants which anticipate the tax

and delay moves offshore

Stronger Dollar in Anticipation • US Exporters • US holders of non-USD denominated

Assets • Non-US consumers of US goods and

services

Afte

r Ena

ctm

ent • US manufacturers for US consumption

(especially ones without non-US inputs) • Holders of USD Assets (especially non-

US holders) • Workers at plants which now make

economic sense • US Industrial real estate • Robotics manufacturers

• US Retailers who depend on foreign products

• US manufacturers who depend on foreign inputs

• Non-US manufacturers • Non-US labor / consumers • US Consumers who face higher prices

Surprising Results: US exporters should experience little benefit as the stronger dollar should offset tax benefits.

Investors reaching for higher yield in foreign markets who seek stability through USD denominated bonds would face higher default rates as the stronger dollar increases repayment costs. Source: Citi Private Bank as of January 2017.


13

US Stimulus: Trump makes Tax Cuts of 2001-2003 look timid Trump, Ryan Tax Plans Would Slash Taxes by 3% of GDP. Spending is Key Question

U.S Federal Deficit as % of GDP Total US Government Spending (inflation adjusted) in Recovery Periods

3.0

3.5

4.0

4.5

5.0

2015 2016 2017 2018 2019 2020 2021

Fisc

al D

efic

it as

a S

hare

of G

DP Current Forecast

Pre-Election Forecast

One Time Corporate Tax Repatriation

90

95

100

105

110

115

120

125

130

135

0 +4 +8 +12 +16 +20 +24 +28 +32 +36

Exp

ansi

on S

tart

= 10

0

Quarters from Expansion Start

1971

1975

1983

1991

2002

2009

Source: Citi Research, Citi Private Bank as of January 2017. Source: Citi Private Bank as of January 2017.

• The historically large size and scope of tax cuts suggests a 1 percent acceleration of real economic growth and higher inflation by late in 2017 through 2018, even if a large portion is “saved.”

• This stimulus can shift the likely timing of a future US downturn beyond the next two years and have a large impact on all global asset prices. It creates larger “bust” risks beyond.


14

0

0

0

0

0

0

0

0

0

0

1

75

80

85

90

95

100

105

110

'82 '87 '92 '97 '02 '07 '12 '17Small Business Confidence

Revived Animal Spirits

National Federation of Independent Business (NFIB) Small Business Confidence has soared

Source: Haver Analytics as of January 2017.


15

0

0

0

0

0

0

0

0

0

0

1

0

5

10

15

20

25

30

35

40

45

'82 '87 '92 '97 '02 '07 '12 '17% of small business planning to expand capex

0

0

0

0

0

0

0

0

0

0

1

-15

-10

-5

0

5

10

15

20

'82 '87 '92 '97 '02 '07 '12 '17% of small business planning to increase employment

Despite soaring headline, hiring plans increased more modestly

NFIB Small Business hiring plans


NFIB plans to expand capital expenditures



16

0

0

0

0

0

0

0

0

0

0

1

0

5

10

15

20

25

30

'82 '87 '92 '97 '02 '07 '12 '17% of small business saying regulation is biggest problem

0

0

0

0

0

0

0

0

0

0

1

0

5

10

15

20

25

30

35

'82 '87 '92 '97 '02 '07 '12 '17% of small business saying now is a good time to expand

What else is showing up in small business surveys?

Percent of Small Businesses saying “Now is a good time to expand”


Percent of Small Businesses saying “Regulation is single biggest problem”



17

-4

-3

-2

-1

0

1

2

3

4

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Yea

r-to-

Yea

r P

erce

nt C

hang

e

ADP non-farm privateemployment, Small Business

-50

-40

-30

-20

-10

0

10

20

30

40

50

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Yea

r-to-

Yea

r P

erce

nt C

hang

e

Job Openings

Will positive survey sentiment show up in hard data?

Job Openings and Labor Turnover Survey (JOLTS): Job Openings


ADP Small Businesses



18

Consumer Confidence has run up in the wake of Trump’s election

0

0

0

0

0

0

0

0

0

0

1

0

20

40

60

80

100

120

140

160

'81 '86 '91 '96 '01 '06 '11 '16

U.S. ConsumerSentiment

Consumer Confidence showing signs of improvement



19

US equities lead data in anticipation of growth and tax cuts

S&P 500 EPS and Industrial Production S&P 500 vs Industrial Production

-20

-15

-10

-5

0

5

10

-80

-60

-40

-20

0

20

40

'85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15Y

ear-t

o-Y

ear

Per

cent

Yea

r-to-

Yea

r P

erce

nt

EPS (Left)

Industrial Production (Right)-20

-15

-10

-5

0

5

10

-80

-60

-40

-20

0

20

40

'85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15

Yea

r-to-

Yea

r P

erce

nt

Yea

r-to-

Yea

r P

erce

nt

S&P 500 (Left)

Industrial Production (Right)




20

0

25

50

75

100

125

0

400

800

1,200

1,600

2,000

2,400

'86 '90 '94 '99 '03 '07 '12 '16

Ear

ning

s $/

Sha

re (E

PS

)

Inde

x P

rice

S&P 500 Index Price and Citi Price Target (Left)

EPS ($, Right)

2017 EPS Citi Research Estimates ($, Right)

-50

-40

-30

-20

-10

0

10

20

30

40

50

'86 '90 '94 '99 '03 '07 '12 '16

Year

-to-Y

ear

Per

cent

Cha

nge

S&P 500 Index Price and Citi TargetEPS2017 EPS Citi Research Estimates

There are good reasons to expect decent returns in 2017

S&P 500 & consensus EPS (Y/Y%) S&P 500 and consensus EPS

Source: Thompson Reuters, FactSet and Haver Analytics as of January 2017. All forecasts are expressions of opinion, are not a guarantee of future results, are subject to change without notice and may not meet our expectations due to a variety of economic, market, and other factors.

Source: Thompson Reuters, FactSet and Haver Analytics as of January 2017. All forecasts are expressions of opinion, are not a guarantee of future results, are subject to change without notice and may not meet our expectations due to a variety of economic, market, and other factors.



The end of the energy-sector recession has left US EPS rising back at its underlying trend, in excess of 6% and independently of either corporate tax rate cuts of new macro stimulus steps

21

-80

-60

-40

-20

0

20

40

60

80

85

90

95

100

105

110

115

Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17

Leve

l

Jan

4, 2

016

= 10

0

S&P 500 (Left) CESI (Right)

Various assets have rallied in highly correlated trade A key consideration is what part is related to the already stronger U.S. growth data versus what part is policy hope to be delivered sometime later.


Correlation between stocks and bonds has broken down

S&P 500 & USD Citi Economic Surprise Index (CESI)



-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

'01 '04 '07 '10 '13 '16

Cor

rela

tion

90-Day 1-Year

22

Economic surprises tend to peak in the winter months


Average USD CESI, by Month of Year USD Citi Economic Surprise

-50

-40

-30

-20

-10

0

10

20

30

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Ave

rage

Ind

ex L

evel

by

Mon

th

-100

-80

-60

-40

-20

0

20

40

60

80

100

'10 '11 '12 '13 '14 '15 '16 '17

Inde

x Le

vel




23

Sector rotations show stronger cyclical activity expected

Industry beneficiaries/losers diverge


60

80

100

120

140

160

180

200

'11 '12 '13 '14 '15 '16 '17

Jan

3 20

11 =

100

Industrials

Financials

Utilities

Telecom



Cyclical sectors

Defensive sectors

24

The challenge to US consumer incomes will precede tax cuts We believe that its possible for US CPI to reach above +4% Y/Y within 1Q 2017

-120

-90

-60

-30

0

30

60

90

120

150

-3

0

3

6

9

'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18Ye

ar-to

-Yea

r Per

cent

Year

-to-Y

ear P

erce

nt

CPI (Left)Crude oil (Right)

Estimates

Crude Oil Price vs U.S. Inflation

-4

-2

0

2

4

6

8

10

'05 '07 '09 '11 '13 '15

Year

-to-Y

ear P

erce

nt C

hang

e

Nominal disposable US Income, Y/Y%

Last Oil Surge

Source: Haver Analytics as of January 2017. Source: Haver Analytics as of January 2017. All forecasts are expressions of opinion, are not a guarantee of future results, are subject to change without notice and may not meet our expectations due to a variety of economic, market, and other factors.



25

0

20

40

60

80

100

120

140

'12 '13 '14 '15 '16 '17 '18

Dolla

rs P

er B

arre

l

BrentCiti Research ForecastFutures Price

0

20

40

60

80

100

120

'12 '13 '14 '15 '16 '17 '18

Dol

lars

Per

Bar

rel

WTI

Citi Research Forecast

Futures Price

Stay bullish energy, though OPEC hopes pulled gains forward


WTI Crude oil price Brent oil price


All forecasts are expressions of opinion, are not a guarantee of future results, are subject to change without notice and may not meet our expectations due to a variety of economic, market, and other factors. Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes

only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. For illustrative purposes only. Past performance is no guarantee of future results. Real Results may Vary.

-60

-40

-20

0

20

40

60

'86 '91 '96 '01 '06 '11 '16

Year

-to-Y

ear P

erce

nt

Future supply boom

Future supply bust

U.S. Capital Investment Spending In Energy Sector


26

USD drivers are strengthening, but so is investor positioning • Focus on reflation and renewed policy divergence between U.S., Europe, Japan. Some EM weak, some strong. Large valuation divergences within many asset markets offer opportunity.

• New worries: Market expectations for stronger growth might run ahead of the slow timing for fiscal action. (mid or late 2017). Be wary of a greater role for politics choosing industry winners and losers. Diversify broadly.

US Yield Premiums, USD Index Surge So Does the USD Long Book

60

70

80

90

100

110

120

130

-300

-200

-100

0

100

200

300

400

'86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16

Bas

is P

oint

s

German/US Spread (Left) DXY (Right)


0

10

20

30

40

50

60

70

80

90

100

68

72

76

80

84

88

92

96

100

104

'04 '07 '10 '13 '17

Per

cent

of O

pen

Inte

rest

DXY

Lev

elDXY (left) Net Long Postion (right)



27

Trump vs Reagan comparisons

• History, policy suggest a stronger USD, but not valuation. Inflation risk is significant.

• Reagan took office in January 1981 with the USD near a record low. Inflation was 11.8% and fell to 4.5% by end of his 2nd term.

• The USD just posted a sharp rally from 2011-to-date. Both U.S. rates and inflation are near record lows, beginning to rise, not fall.

Asset Values, Economy at Different Starting Point

80

85

90

95

100

105

110

115

120

125

130

'80 '84 '88 '92 '96 '00 '04 '08 '12 '16

4

2

0

2

4

6

8

10

12

14

16

'78 '82 '86 '90 '95 '99 '03 '07 '12 '16

CPI-U: All Items, Y/Y % Change

Real Broad Trade-Weighted Exchange Value of the US$ CPI-U: All Items, y/y % change

Source: Haver Analytics as of January 2017. Note: In 2004, the United States Congress enacted such a tax holiday for U.S. multinational companies, allowing them to repatriate foreign profits to the United States at a 5.25% tax rate. The trade-weighted US dollar index, is a measure of the value of the United States dollar relative to other world currencies.




28

Exchange Rates vs. 5yr sovereign spread

Euro / USD vs. 5yr sovereign spread UK Pound / USD vs. 5yr sovereign spread

-6

-5

-4

-3

-2

-1

0

1

2

3

40.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Per

cent

Eur

o/U

SD

Euro/USD (Left)

5yr sovereign spread (Right)

-5

-4

-3

-2

-1

0

1

21.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Per

cent

GB

P/U

SD

Pound/USD (Left)





29

0

1

2

3

4

5

6

7

60

80

100

120

140

160

180

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16P

erce

nt

Yen/

US

D

Yen/USD (Left)


0

1

2

3

4

5

6

7

8

9

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Per

cent

CAD

/US

D

CAD/USD (Left)



Japanese Yen/USD vs. 5yr sovereign spread Canadian Dollar/USD vs. 5yr sovereign spread




30


Swiss Franc/USD vs. 5yr sovereign spread Brazilian Real/USD vs. 5yr sovereign spread

0

1

2

3

4

5

6

7

8

9

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Per

cent

Fran

c/U

SD

Franc/USD (Left)


-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

'95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17

Per

cent

BR

L/U

SD

BRL/USD (Left)





31

Foreign exchange vs. relative inflation ratios

Euro / USD vs. Inflation Ratio UK Pound / USD vs. Inflation Ratio

98

100

102

104

106

108

110

112

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Euro/USD (Left)

U.S CPI / Euro Area CPI (Right)

98

100

102

104

106

108

110

112

114

116

118

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Pound/USD (Left)

U.S CPI / U.K. CPI (Right)




32


Switzerland Franc / USD vs. Inflation Ratio Brazilian Real / USD vs. Inflation Ratio

60

65

70

75

80

85

90

95

100

105

110

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Franc/USD (Left)

Switzerland CPI / U.S. CPI (Right)

80

100

120

140

160

180

200

220

240

260

280

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Real/USD (Left)

Brazil CPI / U.S. CPI (Right)




33


Canadian Dollar / USD vs. Inflation Ratio

80

85

90

95

100

105

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

CAD/USD (Left)

Canada CPI / U.S. CPI (Right)




34

Total EM credit growth in USD has slowed

EM credit in USD, Y/Y% Real Trade Weighted Dollar against EM

10

5

0

5

10

15

20

25

30

35

'00 '02 '04 '06 '08 '10 '12 '14 '16

Emerging Market Economies:Credit in US$, Y/Y%

80

90

100

110

120

130

140

'72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16

Real TWD of EM

Source: Haver Analytics as of January 2017. Source: Haver Analytics as of January 2017. Real Trade Weighted value of USD: Other Important Trading Partners (OITP) index is used as a proxy for a basket of EM currencies vs the US Dollar



35

Total EM credit growth in USD has slowed

EM Africa/Middle East credit in USD, Y/Y% EM Asia credit in USD, Y/Y%

20

10

0

10

20

30

40

50

60

'00 '02 '04 '06 '08 '10 '12 '14 '16

Africa and Middle East: Creditin US$, Y/Y%

10

5

0

5

10

15

20

25

30

35

40

'00 '02 '04 '06 '08 '10 '12 '14 '16

Emerging Asia and Pacific:Credit in US$, Y/Y%




36

Total EM credit growth in USD has slowed EM Europe credit in USD, Y/Y% EM Latam credit in USD, Y/Y%

20

10

0

10

20

30

40

50

'00 '02 '04 '06 '08 '10 '12 '14 '16

Emerging Europe: Creditin US$, Y/Y%

10

5

0

5

10

15

20

'00 '02 '04 '06 '08 '10 '12 '14 '16

Latin America and Caribbean:Credit in US$, Y/Y%




37

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

'02 '05 '08 '11 '14 '17

Cor

rela

tion

30-Day 90-Day

Gold hit by higher rates, higher USD, but meant as hedge

Gold vs S&P 500, 30-Day and 60-Day rolling correlations




38

Valuation differentials now largely driving GIC FI weights

-300

-200

-100

0

100

200

300

400

500

'86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16

Spre

ad (b

p)

Yield Spread Between Global Investment Committee Fixed Income Overweights vs Underweights

Yield premiums historically wide despite historically low absolute yields.

Source: The Yield Book and Citi Private Bank as of January 2017.



39

US HY bank loans offer high yields with lower volatility Higher up in capital structure, yield tied to LIBOR which rises with Fed funds Rate

21.5

22.0

22.5

23.0

23.5

24.0

0.5

0.6

0.7

0.8

0.9

1.0

1.1

Jan-16 Apr-16 Jul-16 Oct-16 Jan-17

(Pric

e)

Yie

ld (%

)

3-month USD LIBORUS HY bank loans

Rising LIBOR has fueled HY loan outperformance

Source: FactSet, S&P as of January 2017.

94

98

102

106

110

114

118

122

Jan-16 Apr-16 Jul-16 Oct-16 Jan-17

Tota

l Ret

urn

US HY bondsUS HY bank loansUS IG corp bondsUS Treasury

Source: Bloomberg Barclays Indices, S&P as of January 2017.

HY variable-rate loans display relatively lower price volatility



40

Institutional managers forced to chase year-end rallies “Winter is for Bulls, Summer for Bears”…Don’t Extrapolate Year-End Periods Forever

Year Term

Average Real Total Return

Percent Positive

Year 1 All Years 4.6 55First term 1.7 45Second term 8.2 67




Averages All Years 8.0 68First term 7.8 64Second term 8.4 75

Source: Citi Private Bank, FactSet, Haver Analytics, MSCI, Standard & Poor’s, STOXX Limited, and The Yield Book and Citi Private Bank as of January 2017.

Index 1Q Avg 2Q Avg 3Q Avg 4Q Avg 4Q Low Return 4Q High Return Sample PeriodMSCI World Index 2.4 2.5 -0.4 4.9 -20.7 19.0 26 yearsUS 2.6 2.4 0.5 4.9 -27.5 17.8 26 yearsEurope 3.1 3.0 -0.6 4.8 -22.1 25.1 26 yearsUK 1.9 1.4 1.1 5.1 -8.7 16.8 26 yearsJapan 2.0 1.5 -2.1 1.6 -22.3 17.6 26 yearsAsia Ex-Japan 3.5 3.0 -0.3 6.5 -21.6 48.7 26 yearsChina -3.8 7.1 -0.1 3.9 -33.4 47.5 21 yearsLatam 4.1 3.6 1.2 6.7 -20.4 31.0 19 yearsEM EMEA 4.3 2.2 1.1 6.9 -27.5 34.3 17 yearsSeasonality of Global Fixed Income Market Performance (Total Returns By Calendar Quarter)Index 1Q Avg 2Q Avg 3Q Avg 4Q Avg 4Q Low Return 4Q High Return Sample PeriodUS Treasury 0.6 1.3 2.7 1.5 -2.6 8.9 25 yearsGerman Bunds 1.3 0.7 2.4 1.8 -2.5 7.8 25 yearsUK Gilts 0.5 1.1 3.4 3.0 -2.2 10.6 25 yearsUS MBS 1.2 1.4 2.1 1.6 -0.5 5.0 25 yearsHG Corps (USD) 1.1 1.8 2.4 1.8 -1.6 5.2 25 yearsHY Corps (USD) 3.2 2.4 1.1 2.1 -17.2 8.6 25 yearsSeasonality of Commodity Market Performance (Total Returns By Calendar Quarter)Index 1Q Avg 2Q Avg 3Q Avg 4Q Avg 4Q Low Return 4Q High Return Sample PeriodWTI Crude Oil 6.8 6.6 1.8 -6.1 -55.7 24.8 25 yearsGold 2.2 0.1 2.8 0.7 -13.5 12.4 25 years

Seasonality of Global and Regional Share Market Performance (Total Returns By Calendar Quarter)



3. Asset Class Views in Charts

42

7.0

1.9

3.9

0.7

2.7

5.0

1.6

24.5

6.7

1.7

3.9

0.7

2.74.5

1.6

24.5

0

5

10

15

20

25

30

Small/Mid cap

Asia ex. JPlarge cap

Japanlarge cap

Nordic UKlarge cap

Cont.Europe

Canadalarge cap

USlarge cap

GIC

Lev

el 3

Ass

et A

lloca

tion Strategic

Tactical

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

70

80

90

100

110

120

130

'12 '13 '14 '15 '16 '17

Inde

x

Exch

ange

Rat

e

USD/JPYJapan equities (RHS)

-60

-40

-20

0

20

40

60

80

100-60

-40

-20

0

20

40

60

'77 '82 '87 '92 '97 '02 '07 '12 '17

YoY

%

YoY

%

S&P 500Initial jobless claims (inverted, RHS)

0

2

4

6

8

10

12

14

16

18

20

'66 '71 '76 '81 '86 '91 '96 '01 '06 '11 '16

Yie

ld (%

)

S&P 500 earnings & dividend yield on 10yr trailing EPS avgUS BBB 20+yrs corporate bond yields10yr U.S. Treasury bond yield

Stocks

Corps

Govts

Equities: Developed Markets The GIC maintains its neutral, fully-invested weighting on U.S. large cap equities. The sharp rotation within equity sectors sensitive to higher interest rates suggests durability, amid the many significant global risks. President Trump and the Republican controlled congress appears likely to succeed in passing sizeable U.S. corporate and personal income tax cuts. A stronger USD will hurt multinational earnings, but attract foreign investment in the U.S. if trade relationships hold.

Figure 2: Yields on equities compare favorably to those on bond markets

Figure 3: Year-to-year percentage change in S&P 500 and initial jobless claims Figure 4: Japanese equities are positively correlated to USD/JPY

Source: Bloomberg as of January 20, 2017. Source: Haver Analytics, as of January 20, 2017.

Figure 1: GIC Developed market equity tactical & strategic allocations (level 3)

Source: Citi Private Bank as of GIC meeting January 26, 2017. Source: Haver Analytics as of December 30, 2016.

Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. For illustrative purposes only. Past performance is no guarantee of

future results. Real Results may Vary.

43

-4

-2

0

2

4

6

8

10

12

1996 2001 2006 2011 2016 2021Emerging and Developing Economies Ex-China China

IMFForecast

6.1

6.2

6.3

6.4

6.5

6.6

6.7

6.8

6.9

7.0760780800820840860880900920940960980

10001020

May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17

Exh

ange

Rat

e

Inde

x Le

vel

World equitiesCNY/USD (inverted axis, RHS)

0.8 0.9

5.2

1.10.9

5.0

0

1

2

3

4

5

6

Latin America EMEA Asia

GIC

Lev

el 3

Ass

et A

lloca

tion

Strategic

Tactical

-100

-50

0

50

100

150

200

'97 '01 '05 '09 '13 '17

YoY

%

WTI Crude Oil

Brazil equities

Equities: Emerging Markets Latin America has been the hardest hit by a resurgent US dollar since the Trump election. This has set back early signs of recovery that were strongly priced in the region earlier in 2016. However, the sharp declines in regional asset prices from 2011-2015 leave valuations attractive now. We maintain modest overweights in the commodity-linked Andean markets of Chile, Colombia and Peru. Mexico and Brazil remain at a neutral at present.

Source: Citi Private Bank as of GIC meeting January 26, 2017. Source: Haver Analytics and MSCI as of January 20, 2017.

Source: FactSet and The Yield Book as of January 20, 2017. Source: Haver Analytics and IMF as of January 20, 2017. All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events

Figure 7: Global equities sold off during prior periods of CNY volatility

Figure 6: Tight historical correlation of Brazilian equities and crude oil

Figure 8: Emerging Markets Current Account Balance as % of GDP

Figure 5: GIC Emerging market tactical & strategic allocations (level 3)



44

99

100

101

102

103

104

105

106

107

108

109

Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17

Tota

l Ret

urn

(Jan

uary

1=1

00)

US nominal Treasury, 7-10yr

US TIPS, 7-10yr

-1

0

1

2

3

4

5

6

'01 '03 '05 '07 '10 '12 '14 '17

Yie

ld (%

)

10yr US Treasury yield

10yr German Bund yield

2.0

4.6

0.1 0.2

1.5

6.7

1.1

3.5

2.32.0

0.2 0.1

1.4

4.9

0.9

4.2

0

1

2

3

4

5

6

7

8

EM Japan Asiaex. JP

Nordic UK Cont.Europe

Canada US

GIC

Lev

el 3

Asse

t Allo

catio

n Strategic

Tactical

100

200

300

400

500

600

700

'12 '13 '14 '15 '16 '17

Spr

ead

(bp)

EM (USD) Latam sov spreadEM (USD) Middle East/Africa sov spreadEM (USD) E. Europe sov spreadEM (USD) Asia sov spread

Fixed Income: Government Debt We remain overweight in short-term U.S. Treasuries, as an alternative to cash, and keep U.S. intermediate and long-term Treasuries at a fully invested neutral weighting. With nearly a quarter of the developed market sovereign bond universe with negative yields, higher yielding US Treasuries provide a better asset allocation alternative.

Source: Citi Private Bank as of GIC meeting January 26, 2017.

Figure 9: GIC fixed income government tactical & strategic allocations (level 3) Figure 10: U.S. Treasury/German Bund spreads to remain historically wide

Figure 11: Wide divergences in EM regions, continue to favor Latam Figure 12: US TIPS should outperform nominals with stable/rising oil prices

Source: The Yield Book as of January 20, 2017.

Source: The Yield Book of January 20, 2017. Source: The Yield Book as of January 20, 2017.

Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not

include any expenses, fees or sales charges, which would lower performance. For illustrative purposes only. Past performance is no guarantee of future results. Real Results may Vary.

45

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

'12 '13 '14 '15 '16 '17

Yie

ld (%

)

US IG corp yieldEuro IG corp yield

-5.6

-25.4

-1.4

17.8

38.5

12.6

24.9

66.4

14.4

-40-30-20-10

010203040506070

HYM HY Energy related HY ex-energy related

Tota

l ret

urn

(%)

2015 2016 From Feb 2016 bottom in oil thru year-end

0.4

1.6

2.1

4.5

0.8

2.9

2.1

5.5

0

2

4

6

Europehigh yield

UShigh yield

EuropeIG Corp

USIG Corp

GIC

Lev

el 3

Ass

et A

lloca

tion

Strategic

Tactical

0.10.4

0.91.3

2.42.6 2.8

3.3

4.0

5.8

0

1

2

3

4

5

6

7

10yrJGB

10yrBunds

EURHG Corp

10yrGilts

10yrUST

USCMBS

USDMBS

USDHG Corp

EURHY

USDHY

Yie

ld (%

) Yields

Fixed Income: Credit US IG credit remains at an overweight, and we keep a neutral duration relative to it’s benchmark. Given low yields and ongoing political headwinds, we keep Euro corporates neutral.


Figure 15: HY energy has rebounded as oil has stabilized

Figure 13: GIC fixed income credit tactical & strategic allocations (level 3) Figure 14: Continue to favor higher yielding US IG corporate bonds over European

Figure 16: High yield debt valuations appear relatively attractive amid low sovereign yields

Source: The Yield Book as of January 20, 2017. Source: Bloomberg Barclay’s Capital as of January 20, 2017.

Source: Bloomberg Barclays Capital as of January 20, 2017.



46

Hedge Funds Macro/CTA funds offer an opportunity to exploit greater market volatility. We retain a slight overweight in the segment while keeping our overall allocation to hedge funds at neutral. The GIC has a favorable view of very select private equity and real estate investments, but does not recommend changing these weightings over tactical time periods.

Event Time frame MSCI DM (Local, %)

MSCI EM (Local, %)

DJ UBS Commodities (%) HFRI Macro (%) Barclay CTA

(%)

Federal Reserve rate hike Feb 1994 to Jun 1994 -5.0 7.2 9.4% -2.3 5.6

Asian financial crisis Jul 1997 to Aug 1998 -2.6 -46.6 -31.1 7.0 2.4

Tech bubble to ‘02 recession Aug 2000 to Sep 2002 -47.2 -25.3 -1.7 15.5 23.1

Global financial crisis Oct 2007 to Feb 2009 -52.2 -53.2 -42.2 4.7 16.1

European Debt Crisis Jan 2011 to Dec 2011 -7.6 -14.9 -13.4 -4.2 -3.1

Low growth environment Jan 2012 to Dec 2012 13.1 13.9 -1.1 -0.1 -1.7

Current period Trailing 12-month 6.8 7.1 11.4 1.3 -2.6*

Table 1: Macro/CTA strategy in risk-on environment

Strategies December 2016 (%)

Trailing 12-Month 2016 Q1 2016 (%) Q2 2016 (%) Q3 2016 (%) Q4 2016 (%)

HFRI Fund of Funds Composite Index 1.1 0.7 0.7 -3.1 0.6 2.3 1.1

HFRI Event-Driven (Total) Index 1.5 10.5 10.5 -0.7 2.9 4.5 3.5

HFRI Relative Value (Total) Index 1.2 7.8 7.8 -0.3 3.0 3.0 2.0

HFRI Equity Hedge (Total) Index 0.8 5.5 5.5 -1.8 1.4 4.6 1.3

HFRI Macro (Total) Index 1.1 1.3 1.3 1.6 1.2 -1.0 -0.4

Barclay Trader Indexes CTA* -0.1 -2.6 -1.3 0.9 0.9 -1.8 -1.3

Table 2: Hedge fund strategies comparison

Source: Citi Private Bank using Bloomberg, as of December 30, 2016. *For the index noted, data is lagged one month. Therefore total returns are as of November 30, 2016. Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. For illustrative purposes only. Past performance is no guarantee of future results. Real Results may Vary.

47

-600

-100

400

900

1400

1900

3

4

5

6

7

8

9

10

11

12

'87 '92 '97 '02 '07 '12 '17

Uni

ts

Mill

ions

of B

arre

ls/d

ay

U.S. crude oil production (millions ofbarrels/day)Active oil rig count (units, RHS)

250

300

350

400

450

500

550

'85 '89 '93 '97 '01 '05 '09 '13 '17

Mill

ions

of B

arre

ls

U.S. stocks of crude oil(millions of barrels)

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

700

750

800

850

900

950

1000

1050

1100

'13 '14 '15 '16 '17

YoY

%

Inde

x

Emerging market equitiesBase metals (YoY, RHS)

Commodities With equities and bonds seeing an increase in correlation, the value of diversification is weakening somewhat. In contrast, gold and risk assets have maintained a significant negative correlation. While higher real interest rates and greater confidence would represent a downside risk to the gold price, the much larger part of our portfolio allocations would benefit from such a welcome trend, if it were to emerge. We keep Gold a small tactical overweight.

Figure 18: Base metal prices are positively correlated to emerging market equities

Figure 20: Current U.S. oil production high despite declines in new drilling activity Figure 19: Crude oil inventories beginning to fall from record levels

0.5% Precious metals

0.0% Industrial metals

0.0% Agriculture

0.0% Energy

Figure 17: GIC commodities tactical allocation (level 3)

0.5%


Source: Haver Analytics as of January 20, 2017.

Source: Bloomberg and MSCI as of January 20, 2017. MSCI Emerging Markets index is used.

Source: Haver Analytics as of January 20, 2017.



48

Structural Risks to GIC Positioning

Global Recession Emerging Markets Collapse

Risk

• U.S. and global growth contracts on monetary tightening or some unpredicted, severe shock.

• Corporate earnings fall hard. Trade contracts sharply between nations.

• A surging US dollar and collapsing trade send EM economies into a new contraction.

• China’s economy experiences a true hard landing.

• The oil price collapses anew.

Likely impact on asset markets

• US and global stocks fall. • Credit spreads widen. • U.S. dollar surges. • Safe-haven bond markets

such as Japan’s surge further into negative yield territory.

• Latin American and other EM equity and credit markets plunge as do regional currencies.

• Commodities, including gold, fall on the weight of higher real interest rates.



4. Appendix

50

Contacts North America/Latin America EMEA ASIA

Steven Wieting Global Chief Investment Strategist +1.212.559.0499 [email protected] Kris Xippolitos Head of Fixed Income Strategy +1.212.559.1277 [email protected] Chris Dhanraj NAM Investment Strategist +1.212.559.6251 [email protected] Jorge Amato Latin America Investment Strategist +1.212.559.0114 [email protected] Joseph Kaplan Global Investment Strategy +1.212.559.3772 [email protected] Malcolm Spittler Global Investment Strategy +1.212.559.8651 [email protected]

Jeffrey Sacks EMEA Investment Strategist +44.207.508.7325 [email protected] Shan Gnanendran EMEA Capital Markets +44.207.508.0631 [email protected] Maya Issa Global Investment Strategy [email protected]

Ken Peng Asia Investment Strategist +852.2868.8904 [email protected] Shirley Wong Asia Investment Strategy +852.2298.6119 [email protected]

51

Glossary Li Ke Qiang Index (or Keqiang Index) measures China’s economy using three indicators; railway cargo volume, electricity consumption and loans disbursed by banks. Asia Pacific ex Japan equities are measured against the MSCI Asia Pacific ex Japan Large Cap Index, which is free-float adjusted and weighted by market capitalization. The index is designed to measure the performance of large cap stocks in Australia, Hong Kong, New Zealand and Singapore. Cash is measured against the three-month LIBOR, which is the interest rate that banks charge each other in the international inter-bank market for three-month loans (usually denominated in Eurodollars). CBOE Volatility Index (VIX) is a key measure of market expectations of near-term volatility conveyed by Standard & Poor’s 500 stock index option prices. CBOE Crude Oil Volatility Index (OVX) measures the market’s expectation of 30-day volatility of crude oil prices MOVE index: The Merrill lynch Option Volatility Estimate Index is a yield curve weighted index of the normalized implied volatility US Treasury options CBOE SKEW Index ("SKEW") is an index derived from the price of S&P 500 tail risk. Similar to VIX, the price of S&P 500 tail risk is calculated from the prices of S&P 500 out-of-the-money options. SKEW typically ranges from 100 to 150. A SKEW value of 100 means that the perceived distribution of S&P 500 log-returns is normal, and the probability of outlier returns is therefore negligible. Citigroup GRAMI (Global Risk Aversion Macro Index) measures risk aversion across asset classes. It is an equally weighted index of developed and emerging market sovereign spreads, US credit spreads, TED spread and implied FX, equity and swap volatility. GRAMI is shown as standard deviations from the mean. Citi Economic Surprise Index cover all G10 economies and are available by each country. They are defined as weighted historical standard deviations of data surprises (actual releases vs Bloomberg survey median). A positive reading of the Economic Surprise Index suggests that economic releases have on balance beating consensus. The indexes are calculated daily in a rolling three-month window. The weights of economic indicators are derived from relative high-frequency spot FX impacts of 1 standard deviation data surprises. The indexes also employ a time decay function to replicate the limited memory of markets. Commodities are measured against the Dow Jones-UBS Commodity Index, which is composed of futures contracts on physical commodities traded on exchanges, with the exception of aluminum, nickel and zinc, which trade on the London Metal Exchange (LME). The major commodity sectors are represented, including energy, petroleum, precious metals, industrial metals, grains, livestock, softs, agriculture and ex. energy. Corporate high yield is measured against the Citigroup US High Yield Market Index, which includes all issues rated between CCC and BB+. The minimum issue size is $50 million. All issues are individually trader priced monthly. Corporate investment grade is measured against the Citi World Broad Investment Grade Index (WBIG) – Corporate, a subsector of the WBIG. This index includes fixed rate global investment grade corporate debt within the finance, industrial and utility sectors, denominated in the domestic currency. The index is rebalanced monthly. Developed market large cap equities are measured against the MSCI World Large Cap Index. This is a free-float adjusted, market-capitalization weighted index designed to measure the equity market performance of the large cap stocks in 23 developed markets. Large cap is defined as stocks representing roughly 70% of each market’s capitalization. Developed market small and mid cap equities are measured against the MSCI World Small Cap Index, a capitalization-weighted index that measures small cap stock performance in 23 developed equity markets. Developed sovereign is measured against the Citi World Government Bond Index (WGBI), which consists of the major global investment grade government bond markets and is composed of sovereign debt, denominated in the domestic currency. To join the WGBI, the market must satisfy size, credit and barriers-to-entry requirements. In order to ensure that the WGBI remains an investment grade benchmark, a minimum credit quality of BBB–/Baa3 by either S&P or Moody's is imposed. The index is rebalanced monthly. World Government bond index-ex US is measured against the Citi World Government Bond Index (WGBI), which consists of the major global investment grade government bond markets excluding the United States and is composed of sovereign debt, denominated in the domestic currency. To join the WGBI, the market must satisfy size, credit and barriers-to-entry requirements. In order to ensure that the WGBI remains an investment grade benchmark, a minimum credit quality of BBB–/Baa3 by either S&P or Moody's is imposed. The index is rebalanced monthly. Emerging sovereign is measured against the Citi Emerging Market Sovereign Bond Index (ESBI). This index includes Brady bonds and US dollar-denominated emerging market sovereign debt issued in the global, Yankee and Eurodollar markets, excluding loans. It is composed of debt in Asia, Latin America (Latam), Europe/Middle East/Africa (EMEA) We classify an emerging market as a sovereign with a maximum foreign debt rating of BBB+/Baa1 by S&P or Moody's. Defaulted issues are excluded. Sub-indices for these regions are also used for greater detail.

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Glossary Europe ex UK equities are measured against the MSCI Europe ex UK Large Cap Index, which is free-float adjusted and weighted by market capitalization. The index is designed to measure the performance of large cap stocks in each of Europe’s developed markets, excluding the United Kingdom. Global bonds are measured against the Citigroup Broad Investment Grade Bond. The index is weighted by market capitalization and includes fixed rate Treasury, government sponsored, mortgage, asset backed, and investment grade (BBB–/Baa3) issues with a maturity of one year or longer and a minimum amount outstanding of $1 billion for Treasuries, $5 billion for mortgages, and $200 million for credit, asset-backed and government-sponsored issues. Global equities are measured against the MSCI All Country World Index, which represents 48 developed and emerging equity markets. Index components are weighted by market capitalization. Japan equities are measured against the MSCI Japan Large Cap Index. A free-float-adjusted market-capitalization-weighted index designed to measure large-cap stock performance in Japan. Topix is the Tokyo Stock Exchange Tokyo Price Index. Along with the Nikkei 225, is an important stock market index for the Tokyo Stock Exchange in Japan, tracking all domestic companies of the exchange's First Section Nikke Index is a price-weighted average of the top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange LDXY Index is a spot index of emerging Asia's most actively traded currency pairs valued against the US dollar. MSCI EM (Emerging Markets) Index is free-float adjusted and weighted by market capitalization. The index is designed to measure equity market performance in regions of Asia, Latin America, Europe, and Africa MSCI North America Index is free-float adjusted and weighted by market capitalization. The index is designed to measure equity market performance in the US and Canada. MSCI World Index (Gross) is free-float adjusted and weighted by market capitalization. The index is designed to measure global developed market equity performance. Emerging markets equities are measured against the MSCI Emerging Markets Index, which is free-float adjusted and weighted by market capitalization. The index is designed to measure equity market performance of 22 emerging markets in Asia, Latin America, Europe, and Africa. Sub-indices are also available for these regions and by country. Shanghai Shenzhen CSI 300 Index (CSI 300) Index is a free-float weighted index that consists of 300 A-share stocks listed on the Shanghai or Shenzhen Stock Exchanges. Hang Seng Composite Index (HSI) is a market-cap weighted index that covers about 95% of the total market capitalisation of companies listed on the Main Board of the Hong Kong Stock Exchange. TWSE, or TAIEX, Index is capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange. German DAX is a blue chip stock market consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. FTSE 100 is a share index of the largest 100 companies listed on the London Stock Exchange with the highest market capitalization. The FTSE 250 is the 101st to 350th largest companies listed on the London Stock exchange. S&P/TSX Composite is the headline index for the Canadian equity market. Securitized: Citi World Broad Investment Grade Index (WBIG) – Securitized is a subsector of the WBIG. This index includes global investment grade collateralized debt denominated in the domestic currency, including mortgage-backed securities, covered bonds (Pfandbriefe) and asset-backed securities. The index is rebalanced monthly. Supranationals: Citi World Broad Investment Grade Index (WBIG) – Government Related is a subsector of the WBIG. This index includes fixed rate investment grade agency, supranational and regional government debt, denominated in the domestic currency. The index is rebalanced monthly. UK equities are measured against the MSCI UK Large Cap Index, which is free-float adjusted and weighted by market capitalization. The index is designed to measure large-cap stock performance in the United Kingdom. Europe STOXX 600 Index is a consists of 600 companies which represents large, mid and small capitalization companies across 18 countries of the European region: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

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Glossary S&P 100 index is a subset of the S&P 500,and includes 100 leading U.S. stocks with exchange-listed options. Constituents of the S&P 100 are selected for sector balance and represent about 57% of the market capitalization of the S&P 500 and almost 45% of the market capitalization of the U.S. equity markets. The stocks in the S&P 100 tend to be the largest and most established companies in the S&P 500. US Dollar Index (DXY) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and six major world currencies. The ICE US computes this by using the rates supplied by some 500 banks. Thomson Reuters/Core Commodity CRB index (CRY) is a commodity futures index which comprises 19 commodities: Aluminium, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, Silver, Soybeans, Sugar, Unleaded Gas and Wheat. US equities are measured against the Standard & Poor’s 500 Index, a capitalization-weighted index which includes a representative sample of 500 leading companies in leading industries of the US economy. Although the S&P 500 focuses on the large cap segment of the market, with over 80% coverage of US equities, it is also an ideal proxy for the total market. Wells Fargo Hybrid & Preferred Securities Financial Index: The Wells Fargo Hybrid and Preferred Securities Aggregate Index is a modified market-capitalization weighted index composed of preferred stock and securities that are functionally equivalent to preferred stock including, but not limited to, depositary preferred securities, perpetual subordinated debt and certain securities issued by banks and other financial institutions that are eligible for capital treatment with respect to such instruments akin to that received for issuance of straight preferred stock. Hedge funds are measured against the HFRI Fund Weighted Composite Index. This is an equally weighted composite index including both domestic and offshore funds, with no fund of funds. The index includes over 2,000 constituent funds. All funds report assets in USD and all funds report net of all fees returns on a monthly basis. Fund must have at least $50 million under management or have been actively trading for at least 12 months. HFRI Fund of Funds Composite Index – Fund of Funds invest with multiple managers through funds or managed accounts. The strategy designs a diversified portfolio of managers with the objective of significantly lowering the risk (volatility) of investing with an individual manager. The Fund of Funds manager has discretion in choosing which strategies to invest in for the portfolio. A manager may allocate funds to numerous managers within a single strategy, or with numerous managers in multiple strategies. The minimum investment in a Fund of Funds may be lower than an investment in an individual hedge fund or managed account. The investor has the advantage of diversification among managers and styles with significantly less capital than investing with separate managers. HFRI Event-Driven (Total) Index: event driven is also known as ‘corporate life cycle’ investing. This involves investing in opportunities created by significant transactional events, such as spin-offs, mergers and acquisitions, bankruptcy reorganizations, recapitalizations and share buybacks. Returns for HFRI indices are to be considered estimated returns for the previous stated quarter as HFRI may revise index data from time to time, as necessary. Generally final index returns are made available by HFRI four months after a particular month end. HFRI Relative Value (Total) Index – Investment Managers who maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities. Managers employ a variety of fundamental and quantitative techniques to establish investment theses, and security types range broadly across equity, fixed income, derivative or other security types. Fixed income strategies are typically quantitatively driven to measure the existing relationship between instruments and, in some cases, identify attractive positions in which the risk adjusted spread between these instruments represents an attractive opportunity for the investment manager. RV position may be involved in corporate transactions also, but as opposed to ED exposures, the investment thesis is predicated on realization of a pricing discrepancy between related securities, as opposed to the outcome of the corporate transaction. HFRI Equity Hedge (Total) Index – Equity Hedge: Investment Managers who maintain positions both long and short in primarily equity and equity derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. EH managers would typically maintain at least 50% exposure to, and may in some cases be entirely invested in, equities, both long and short. HFRI Macro (Total) Index – Macro: Investment Managers which trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets. Managers employ a variety of techniques, both discretionary and systematic analysis, combinations of top down and bottom up theses, quantitative and fundamental approaches and long and short term holding periods. Although some strategies employ RV techniques, Macro strategies are distinct from RV strategies in that the primary investment thesis is predicated on predicted or future movements in the underlying instruments, rather than realization of a valuation discrepancy between securities. In a similar way, while both Macro and equity hedge managers may hold equity securities, the overriding investment thesis is predicated on the impact movements in underlying macroeconomic variables may have on security prices, as opposes to EH, in which the fundamental characteristics on the company are the most significant are integral to investment thesis. Barclay CTA Index is a leading industry benchmark of representative performance of commodity trading advisors. There are currently 565 programs included in the calculation of the Barclay CTA Index for the year 2011, which is unweighted and rebalanced at the beginning of each year. LIBOR (London Inter-Bank Offered Rate) is based on rates that contributor banks in London offer each other for inter-bank deposits. From a bank's perspective, deposits are simply funds that are loaned to them. So in effect, a LIBOR is a rate at which a fellow London bank can borrow money from other banks. LIBOR is offered in various durations (i.e. overnight, one month, 3 month, 6 month, 1 year).

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Important Information In any instance where distribution of this communication (“Communication”) is subject to the rules of the US Commodity Futures Trading Commission (“CFTC”), this communication constitutes an invitation to consider entering into a derivatives transaction under US CFTC Regulations §§ 1.71 and 23.605, where applicable, but is not a binding offer to buy/sell any financial instrument.

This Communication is prepared by Citi Private Bank (“CPB”), a business of Citigroup, Inc. (“Citigroup”), which provides its clients access to a broad array of products and services available through Citigroup, its bank and non-bank affiliates worldwide (collectively, “Citi”). Not all products and services are provided by all affiliates, or are available at all locations.

Citi Private Bank is a business of Citigroup Inc. (“Citigroup”), which provides its clients access to a broad array of products and services available through bank and non-bank affiliates of Citigroup. Not all products and services are provided by all affiliates or are available at all locations. In the US, brokerage products and services are provided by Citigroup Global Markets Inc. (“CGMI”), member SIPC. Accounts carried by Pershing LLC, member FINRA, NYSE, SIPC. CGMI and Citibank, N.A are affiliated companies under the common control of Citigroup. Outside the US, brokerage products and services are provided by other Citigroup affiliates. Investment Management services (including portfolio management) are available through CGMI, Citibank, N.A. and other affiliated advisory businesses.

CPB personnel are not research analysts, and the information in this Communication is not intended to constitute “research”, as that term is defined by applicable regulations. Unless otherwise indicated, any reference to a research report or research recommendation is not intended to represent the whole report and is not in itself considered a recommendation or research report.

This Communication is provided for information and discussion purposes only, at the recipient’s request. The recipient should notify CPB immediately should it at any time wish to cease being provided with such information. Unless otherwise indicated, (i) it does not constitute an offer or recommendation to purchase or sell any security, financial instrument or other product or service, or to attract any funding or deposits, and (ii) it does not constitute a solicitation if it is not subject to the rules of the CFTC (but see discussion above regarding communication subject to CFTC rules) and (iii) it is not intended as an official confirmation of any transaction. Unless otherwise expressly indicated, this Communication does not take into account the investment objectives, risk profile or financial situation of any particular person and as such, investments mentioned in this document may not be suitable for all investors. Citi is not acting as an investment or other advisor, fiduciary or agent. The information contained herein is not intended to be an exhaustive discussion of the strategies or concepts mentioned herein or tax or legal advice. Recipients of this Communication should obtain advice based on their own individual circumstances from their own tax, financial, legal and other advisors about the risks and merits of any transaction before making an investment decision, and only make such decisions on the basis of their own objectives, experience, risk profile and resources. The information contained in this Communication is based on generally available information and, although obtained from sources believed by Citi to be reliable, its accuracy and completeness cannot be assured, and such information may be incomplete or condensed. Any assumptions or information contained in this Communication constitute a judgment only as of the date of this document or on any specified dates and is subject to change without notice. Insofar as this Communication may contain historical and forward looking information, past performance is neither a guarantee nor an indication of future results, and future results may not meet expectations due to a variety of economic, market and other factors. Further, any projections of potential risk or return are illustrative and should not be taken as limitations of the maximum possible loss or gain. Any prices, values or estimates provided in this Communication (other than those that are identified as being historical) are indicative only, may change without notice and do not represent firm quotes as to either price or size, nor reflect the value Citi may assign a security in its inventory. Forward looking information does not indicate a level at which Citi is prepared to do a trade and may not account for all relevant assumptions and future conditions. Actual conditions may vary substantially from estimates which could have a negative impact on the value of an instrument. Views, opinions and estimates expressed herein may differ from the opinions expressed by other Citi businesses or affiliates, and are not intended to be a forecast of future events, a guarantee of future results, or investment advice, and are subject to change without notice based on market and other conditions. Citi is under no duty to update this document and accepts no liability for any loss (whether direct, indirect or consequential) that may arise from any use of the information contained in or derived from this Communication. Investments in financial instruments or other products carry significant risk, including the possible loss of the principal amount invested. Financial instruments or other products denominated in a foreign currency are subject to exchange rate fluctuations, which may have an adverse effect on the price or value of an investment in such products. This Communication does not purport to identify all risks or material considerations which may be associated with entering into any transaction. Structured products can be highly illiquid and are not suitable for all investors. Additional information can be found in the disclosure documents of the issuer for each respective structured product described herein. Investing in structured products is intended only for experienced and sophisticated investors who are willing and able to bear the high economic risks of such an investment. Investors should carefully review and consider potential risks before investing.

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Important Information OTC derivative transactions involve risk and are not suitable for all investors. Investment products are not insured, carry no bank or government guarantee and may lose value. Before entering into these transactions, you should: (i) ensure that you have obtained and considered relevant information from independent reliable sources concerning the financial, economic and political conditions of the relevant markets; (ii) determine that you have the necessary knowledge, sophistication and experience in financial, business and investment matters to be able to evaluate the risks involved, and that you are financially able to bear such risks; and (iii) determine, having considered the foregoing points, that capital markets transactions are suitable and appropriate for your financial, tax, business and investment objectives.

This material may mention options regulated by the US Securities and Exchange Commission. Before buying or selling options you should obtain and review the current version of the Options Clearing Corporation booklet, Characteristics and Risks of Standardized Options. A copy of the booklet can be obtained upon request from Citigroup Global Markets Inc., 390 Greenwich Street, 3rd Floor, New York, NY 10013 or by clicking the following links, http://www.theocc.com/components/docs/riskstoc.pdf or http://www.theocc.com/components/docs/about/publications/november_2012_supplement.pdf.

If you buy options, the maximum loss is the premium. If you sell put options, the risk is the entire notional below the strike. If you sell call options, the risk is unlimited. The actual profit or loss from any trade will depend on the price at which the trades are executed. The prices used herein are historical and may not be available when you order is entered. Commissions and other transaction costs are not considered in these examples. Option trades in general and these trades in particular may not be appropriate for every investor. Unless noted otherwise, the source of all graphs and tables in this report is Citi. Because of the importance of tax considerations to all option transactions, the investor considering options should consult with his/her tax advisor as to how their tax situation is affected by the outcome of contemplated options transactions. None of the financial instruments or other products mentioned in this Communication (unless expressly stated otherwise) is (i) insured by the Federal Deposit Insurance Corporation or any other governmental authority, or (ii) deposits or other obligations of, or guaranteed by, Citi or any other insured depository institution.

Citi often acts as an issuer of financial instruments and other products, acts as a market maker and trades as principal in many different financial instruments and other products, and can be expected to perform or seek to perform investment banking and other services for the issuer of such financial instruments or other products. The author of this Communication may have discussed the information contained therein with others within or outside Citi, and the author and/or such other Citi personnel may have already acted on the basis of this information (including by trading for Citi's proprietary accounts or communicating the information contained herein to other customers of Citi). Citi, Citi's personnel (including those with whom the author may have consulted in the preparation of this communication), and other customers of Citi may be long or short the financial instruments or other products referred to in this Communication, may have acquired such positions at prices and market conditions that are no longer available, and may have interests different from or adverse to your interests.

IRS Circular 230 Disclosure: Citi and its employees are not in the business of providing, and do not provide, tax or legal advice to any taxpayer outside Citi. Any statement in this Communication regarding tax matters is not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

Neither Citi nor any of its affiliates can accept responsibility for the tax treatment of any investment product, whether or not the investment is purchased by a trust or company administered by an affiliate of Citi. Citi assumes that, before making any commitment to invest, the investor and (where applicable, its beneficial owners) have taken whatever tax, legal or other advice the investor/beneficial owners consider necessary and have arranged to account for any tax lawfully due on the income or gains arising from any investment product provided by Citi. This Communication is for the sole and exclusive use of the intended recipients, and may contain information proprietary to Citi which may not be reproduced or circulated in whole or in part without Citi’s prior consent. The manner of circulation and distribution may be restricted by law or regulation in certain countries. Persons who come into possession of this document are required to inform themselves of, and to observe such restrictions. Citi accepts no liability whatsoever for the actions of third parties in this respect. Any unauthorized use, duplication, or disclosure of this document is prohibited by law and may result in prosecution.

The views expressed in this document by the Global Investment Committee do not constitute research, investment advice or trade recommendations, and are not tailored to meet the individual investment circumstances or objectives of any investor. Recipients of this document should not rely on the views expressed or the information included in this document as the primary basis for any investment decision. Investors are urged to consult with their financial advisors before buying or selling securities. Some or all of the content of this document, including expressions of opinion and data, may be provided to other businesses within Citigroup Inc. or affiliates of Citigroup Inc. for their own use and benefit or for the benefit of their customers prior to dissemination to the recipients of this document. If such other businesses and affiliates act on the information before the recipients of this document, the actions of these businesses may minimize or negate certain investment opportunities of the recipients of this document.

Other businesses within Citigroup Inc. and affiliates of Citigroup Inc. may give advice, make recommendations, and take action in the interest of their clients, or for their own accounts, that may differ from the views expressed in this document. All expressions of opinion are current as of the date of this document and are subject to change without notice. Citigroup Inc. is not obligated to provide updates or changes to the information contained in this document.

http://www.theocc.com/components/docs/riskstoc.pdf

http://www.theocc.com/components/docs/about/publications/november_2012_supplement.pdf

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Important Information The expressions of opinion are not intended to be a forecast of future events or a guarantee of future results. Past performance is not a guarantee of future results. Real results may vary.

Although information in this document has been obtained from sources believed to be reliable, Citigroup Inc. and its affiliates do not guarantee its accuracy or completeness and accept no liability for any direct or consequential losses arising from its use. Throughout this publication where charts indicate that a third party (parties) is the source, please note that the attributed may refer to the raw data received from such parties. No part of this document may be copied, photocopied or duplicated in any form or by any means, or distributed to any person that is not an employee, officer, director, or authorized agent of the recipient without Citigroup Inc.’s prior written consent.

Citigroup Inc. may act as principal for its own account or as agent for another person in connection with transactions placed by Citigroup Inc. for its clients involving securities that are the subject of this document or future editions of the Quadrant and Quadrant Asia.

Bonds are affected by a number of risks, including fluctuations in interest rates, credit risk and prepayment risk. In general, as prevailing interest rates rise, fixed income securities prices will fall. Bonds face credit risk if a decline in an issuer’s credit rating, or creditworthiness, causes a bond’s price to decline. High yield bonds are subject to additional risks such as increased risk of default and greater volatility because of the lower credit quality of the issues. Finally, bonds can be subject to prepayment risk. When interest rates fall, an issuer may choose to borrow money at a lower interest rate, while paying off its previously issued bonds. As a consequence, underlying bonds will lose the interest payments from the investment and will be forced to reinvest in a market where prevailing interest rates are lower than when the initial investment was made.

Mortgage-backed securities ("MBS"), which include collateralized mortgage obligations ("CMOs"), also referred to as real estate mortgage investment conduits ("REMICs"), may not be suitable for all investors. There is the possibility of early return of principal due to mortgage prepayments, which can reduce expected yield and result in reinvestment risk. Conversely, return of principal may be slower than initial prepayment speed assumptions, extending the average life of the security up to its listed maturity date (also referred to as extension risk).

Additionally, the underlying collateral supporting non-Agency MBS may default on principal and interest payments. In certain cases, this could cause the income stream of the security to decline and result in loss of principal. Further, an insufficient level of credit support may result in a downgrade of a mortgage bond's credit rating and lead to a higher probability of principal loss and increased price volatility. Investments in subordinated MBS involve greater credit risk of default than the senior classes of the same issue. Default risk may be pronounced in cases where the MBS security is secured by, or evidencing an interest in, a relatively small or less diverse pool of underlying mortgage loans. MBS are also sensitive to interest rate changes which can negatively impact the market value of the security. During times of heightened volatility, MBS can experience greater levels of illiquidity and larger price movements. Price volatility may also occur from other factors including, but not limited to, prepayments, future prepayment expectations, credit concerns, underlying collateral performance and technical changes in the market. Alternative investments referenced in this report are speculative and entail significant risks that can include losses due to leveraging or other speculative investment practices, lack of liquidity, volatility of returns, restrictions on transferring interests in the fund, potential lack of diversification, absence of information regarding valuations and pricing, complex tax structures and delays in tax reporting, less regulation and higher fees than mutual funds and advisor risk. Asset allocation does not assure a profit or protect against a loss in declining financial markets. The indexes are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. Past performance is no guarantee of future results. International investing entails greater risk, as well as greater potential rewards compared to US investing. These risks include political and economic uncertainties of foreign countries as well as the risk of currency fluctuations. These risks are magnified in countries with emerging markets, since these countries may have relatively unstable governments and less established markets and economics. Investing in smaller companies involves greater risks not associated with investing in more established companies, such as business risk, significant stock price fluctuations and illiquidity.

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Important Information Factors affecting commodities generally, index components composed of futures contracts on nickel or copper, which are industrial metals, may be subject to a number of additional factors specific to industrial metals that might cause price volatility. These include changes in the level of industrial activity using industrial metals (including the availability of substitutes such as man-made or synthetic substitutes); disruptions in the supply chain, from mining to storage to smelting or refining; adjustments to inventory; variations in production costs, including storage, labor and energy costs; costs associated with regulatory compliance, including environmental regulations; and changes in industrial, government and consumer demand, both in individual consuming nations and internationally. Index components concentrated in futures contracts on agricultural products, including grains, may be subject to a number of additional factors specific to agricultural products that might cause price volatility. These include weather conditions, including floods, drought and freezing conditions; changes in government policies; planting decisions; and changes in demand for agricultural products, both with end users and as inputs into various industries. The information contained herein is not intended to be an exhaustive discussion of the strategies or concepts mentioned herein or tax or legal advice. Readers interested in the strategies or concepts should consult their tax, legal, or other advisors, as appropriate.

In Hong Kong, this document is issued by CPB operating through Citibank, N.A., Hong Kong branch, which is regulated by the Hong Kong Monetary Authority. Any questions in connection with the contents in this document should be directed to registered or licensed representatives of the aforementioned entity. In Singapore, this document is issued by CPB operating through Citibank, N.A., Singapore branch, which is regulated by the Monetary Authority of Singapore. Any questions in connection with the contents in this document should be directed to registered or licensed representatives of the aforementioned entity. In the United Kingdom, Citibank N.A., London Branch (registered branch number BR001018), Citigroup Centre, Canada Square, Canary Wharf, London, E14 5LB, is authorised and regulated by the Office of the Comptroller of the Currency (USA) and authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. The contact number for Citibank N.A., London Branch is +44 (0)20 7508 8000. Citibank Europe plc is regulated by the Central Bank of Ireland. It is authorised by the Central Bank of Ireland and by the Prudential Regulation Authority. It is subject to supervision by the Central Bank of Ireland, and subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request. Citibank Europe plc, UK Branch is registered as a branch in the register of companies for England and Wales with registered branch number BR017844. Its registered address is Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB. VAT No.: GB 429 6256 29. Citibank Europe plc is registered in Ireland with number 132781, with its registered office at 1 North Wall Quay, Dublin 1. Citibank Europe plc is regulated by the Central Bank of Ireland. Ultimately owned by Citigroup Inc., New York, USA.

In Jersey, this document is communicated by Citibank N.A., Jersey Branch which has its registered address at PO Box 104, 38 Esplanade, St Helier, Jersey JE4 8QB. Citibank N.A., Jersey Branch is regulated by the Jersey Financial Services Commission. Citibank N.A. Jersey Branch is a participant in the Jersey Bank Depositors Compensation Scheme. The Scheme offers protection for eligible deposits of up to £50,000. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details of the Scheme and banking groups covered are available on the States of Jersey website www.gov.je/dcs, or on request.

In Canada, Citi Private Bank is a division of Citibank Canada, a Schedule II Canadian chartered bank. Certain investment products are made available through Citibank Canada Investment Funds Limited (“CCIFL”), a wholly owned subsidiary of Citibank Canada. Investment Products are subject to investment risk, including possible loss of principal amount invested. Investment Products are not insured by the CDIC, FDIC or depository insurance regime of any jurisdiction and are not guaranteed by Citigroup or any affiliate thereof.

CCIFL is not currently a member, and does not intend to become a member of the Mutual Fund Dealers Association of Canada (“MFDA”); consequently, clients of CCIFL will not have available to them investor protection benefits that would otherwise derive from membership of CCIFL in the MFDA, including coverage under any investor protection plan for clients of members of the MFDA. This document is for information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities to any person in any jurisdiction. The information set out herein may be subject to updating, completion, revision, verification and amendment and such information may change materially. Citigroup, its affiliates and any of the officers, directors, employees, representatives or agents shall not be held liable for any direct, indirect, incidental, special, or consequential damages, including loss of profits, arising out of the use of information contained herein, including through errors whether caused by negligence or otherwise. Copyright 2017, Citigroup Inc. Citi, Citi and Arc Design and other marks used herein are service marks of Citigroup Inc. or its affiliates, used and registered throughout the world.

http://www.gov.je/dcs

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