investment strategy insights

8/19/2019 Investment Strategy Insights

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Investment Strategy Insights

INVESTMENT AND INSURANCE PRODUCTS: NOT FDIC INSURED – NOT CDIC INSURED – NOT GOVERNMENTINSURED – NO BANK GUARANTEE – MAY LOSE VALUE

Renato Grandmont

[email protected](212) 559 1766

Charles [email protected]

(212) 559 6485

Enrique Alvarez [email protected]

(212) 559 4222

David Nieuchowicz

[email protected](212) 559 8203

Nelson [email protected]

(212) 559 8601

Base CaseJuly 2015



2

Forecast SummaryGlobal Economic Forecasts and Changes to Our Views

Global Outlook

Citi economics has again reduced its 2015 global growthforecast, now at 2.6% (was 2.7%). 2016 growth wasreduced to 3.4% from 3.5%. In January, 2015 growth wasseen at 3.0% and 2016 at 3.4%. Though US 2015 GDPgrowth was chopped 0.3% (to 2.2%), Japan’s was hiked0.3% (to 1.0%), leading to the 2015 DM growth forecastremaining unchanged; EM was cut 0.1%, with forecastsreduced in India, Taiwan, South Africa, Brazil (now: -1.4%,was: -1.0%) and Mexico (now: +2.5%, was: +2.8%).

United States

Rates: 10Y seen at 2.45% in 4Q15, 4Q16 at 2.65%.

Rate Hike Timing: We expect the Fed to begin hiking inDecember 2015, but risks point to September.

Inflation: We estimate underlying inflation likely will staynear 1.8%, below the Fed’s 2% target through 2016. Thisimplies a Fed program of slow hikes, reaching only 1.25%by 4Q16.

Growth After Slow 1Q15: We view 1Q weakness astemporary, largely reflecting a harsh winter. Employmentand real income gains remain solid and we expect a boostto consumption growth from lower gasoline prices.

Eurozone

Growth, Inflation & QE: The recent increase ingovernment bond yields and the euro have not changedour optimistic forecasts but if rates rise further this wouldnegatively impact growth.

Greece: We see an agreement coming but risks of Grexitand other negative scenarios are rising.

Bullish elements: Income growth (corporate profits),upside risks to fixed investment forecasts, easing in banklending standards, rising share of financing needs relatedto fixed investment (expansion related, not refinancing).

Japan

New QE: We continue to expect the BoJ will implementJPY100Tn in easing measures this summer, but risks ofdelay are rising.

China

We expect a slow economy and easing (lowering of therequired reserve ratio, or RRR, and rate cuts). Someeconomic indicators are pointing to a rebound and asteepening rates curve is bullish.

Rate cuts may weigh on RMB in the near term.

All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of f uture events. These are Citi Research Forecasts.



Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 3

Macroeconomic ViewDeveloped Markets in Economic Recovery

Global GDP and Inflation Rates

2014 2015F 2016F 2014 2015F 2016F

Global 2.7% 2.6% 3.4% 2.6% 2.1% 2.6%Based on PPP 3.4% 3.1% 3.8% 3.3% 3.2% 3.5%Industrial Countries 1.7% 1.9% 2.5% 1.4% 0.5% 1.7%

United States 2.4% 2.2% 2.9% 1.3% 0.5% 1.8%Japan -0.1% 1.0% 1.9% 2.7% 0.7% 0.9%Euro Area 0.9% 1.5% 2.1% 0.4% 0.3% 1.6%United Kingdom 2.9% 2.6% 3.0% 1.5% 0.3% 1.4%Emerging Markets 4.3% 3.7% 4.7% 4.3% 4.6% 4.0%

China 7.4% 6.9% 6.7% 2.0% 1.5% 1.9%India 7.3% 7.9% 8.1% 5.9% 5.0% 4.8%Korea 3.3% 3.0% 3.3% 1.3% 1.0% 2.2%Russia 0.6% -3.0% 1.6% 7.8% 14.4% 7.6%Brazil 0.1% -1.4% 0.4% 6.3% 8.6% 6.3%Mexico 2.1% 2.5% 3.5% 4.0% 3.0% 3.8%Source: Citi Research, 17 June 2015

GDP Growth CPI Inflation

-15

-12

-9

-6-3

0

3

6

9

Mar 1990 Mar 1995 Mar 2000 Mar 2005 Mar 2010 Mar 2015

-5

-4

-3

-2-1

0

1

2

3

Fina ncial Co nd it io ns Ind ex (L eft ) In du str ia l Pr od uct io n ( Righ t)

Source: C iti as of 31 M arch 2015. N ote: Industrial Production is lagged 9 months.

Financial Conditions Index and Industrial Production

All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of f uture events.

The investor should not base its decision to enter into a trade solely on the basis of the forecasts.

Growth Prospects: We expect global growth to remain tepid this year but

ramp higher next year. US 2015 growth forecasts continue to fall. Emerging Markets (EM): Lower commodities prices will hamper growth in

exporting nations, causing a deterioration to many fiscal accounts. Tradegrowth has remained muted even as DM growth has accelerated, draggingforecast 2015 growth lower than 2014. Fed rate hikes may challenge EMcredit markets and sovereign borrowing, no hikes would be a positive.

Policy Questions: Despite a weaker euro, our economists doubt theECB’s QE program will be enough to break the economy out of low-flationand see the ECB scaling up their QE program over time. The BoJ shouldalso significantly expand QE further around midyear. We should see the

first Fed hike in late-2015, and we expect the first BoE hike in early 2016.The UK and US tightening should be more gradual than historical norms.US fiscal conflict issues may come back toward late 2015.

-3.0

-1.5

0.0

1.5

3.0

4.5

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

Contributions to Global Growth

(in percentage po ints)

E merg ing Markets Devel oped M arkets

Source: IM F, CIRA, 25 March 2015

Forecasts



4Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation.Bloomberg charts as of 22 June 2015

Fixed IncomeLow-rate World Remains Afoot

-0.50.00.51.01.52.02.53.03.54.0

0 5 10 15 20 25 306/22/2015 1-Week 1-Month YTD 1-Year

Source: Bloomberg

US Yield Curve

(in percent and years)

Short and Long Rates (Forecasts)

Current 4Q15F 2Q16F Current 4Q15F 4Q16FUnited States 0.25 0.50 0.75 2.37 2.45 2.65Japan 0.10 0.10 0.10 0.48 0.45 0.70Euro Area 0.05 0.05 0.05 0.81 0.70 1.25

Australia 2.00 1.75 1.75 2.99 2.75 3.40United Kingdom 0.50 0.50 1.00 2.06 1.95 2.60China 2.25 1.75 1.75 3.65 3.57 3.70India 7.25 7.00 7.00 8.17 7.75 7.50Korea NA NA NA 2.56 2.28 2.46Russia 11.50 10.00 9.00 10.91 NA NABrazil 13.75 13.25 12.50 13.09 12.61 13.48Mexico 3.00 3.25 3.50 6.50 6.02 6.61

Policy Rates (quarter end) Long Rates*

Note: Developed Markets long rates are period averages. Emerging Markets long rate forecasts

are full-year averages. Long Euro Area rates are German yields. Source: Citi Research, 17 June

2015

0

5

10

15

20

Jun 90 Jun 95 Jun 00 Jun 05 Jun 10 Jun 15

Credit Bond Yields(in percent)

High Yield BBB Yield US 10-Year Bond EM Sovereign Yield

Source: Bloomberg



Yield Curve Steepness: The trend towards a flatter US Treasury curvewas broken in late April. Surging Eurozone rates and better US economicdata helped push the US long end higher. We anticipate only mild rises inthe long end through the end of the year and a slow Fed hiking cyclekeeping the short end anchored.

Rate Hikes: Citi anticipates that the Fed will increase the policy rate inDecember of 2015, though this target could be moved closer on good USeconomic news, or later if growth disappoints. The Fed hiking cycle willlikely occur at a gradual pace, with small rate increases offered.

Corporate Credit: Potential defaults and downgrades within the Energysector of High Yield corporate credit are the main risks ahead. High grade

is most exposed to a rising rate environment. Emerging Markets: EM credit should remain hampered by a stronger US

dollar and weak commodities prices. Politics in LatAm is a risk.




EquitiesFocused on US Growth, Earnings Recovery and EM Risks

600

800

1000

1200

1400

1600

1800

20002200

5

15

25

35

45

55

65

7585


S&P 500 Index and Volatility

VIX Index ( left scal e) S&P 500 Index ( ri gh t sca le)Source: Bloomberg

-60

-30

0

30

60

90

-1.2

-0.6

0.0

0.6

1.2

1.8


US Panic/Euphoria Model (Other PE)

S&P 500 12-Month Forward Return (r ight scale) The Other PE (left scale)

Euphoria

Panic

Source: Cit i Research as of 29 May 2015

All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of f uture events. The investor should not base itsdecision to enter into a trade solely on the basis of the forecasts.

Consensus EPS Estimates & Citi Index TargetsP/E EPS YoY % Div Yld End 2015 Target

6/16/15 15E 15E 15E Levels ReturnsGlobal (MSCI World) 493 16.8 4.4 2.5 525 6.5%Developed 17.4 3.1 2.5Emerging 965 12.6 13.3 2.7 1180 22.2%

US (S&P 500) 2,096 18.3 1.8 2.0 2,200 4.9%Europe (Euro Stoxx) 357 16.4 13.5 3.2 450 25.9%UK (FTSE 100) 6,710 16.4 -9.1 3.9 7,700 14.8%Japan (Topix) 1,640 13.4 7.3 3.1 1,650 0.6%China 75 9.7 30.1 1.6 85 12.7%India 26,687 16.0 5.0 3.2 33,000 23.7%Brazil (Bovespa) 53,702 20.6 34.8 1.8 59,000 9.9%Mexico (Bolsa) 44,722 16.6 18.8 3.1 47,000 5.1%Russia 978 13.4 69.8 3.7 NA N/A

P/E, EPS YoY% and Div Yld based on MSCI Indexes. 15E denotes 2015 Estimates. Source: MSCI,

Citi Research, 12 June 2015.

Earnings Outlook: The outlook for earnings is positive globally. US

corporate earnings will likely continue to grow in 2015 and 2016, even asearnings have already hit record levels. Europe, EM and Japan earningswill keep rebounding.

US Outlook: Citi estimates US large caps and small caps will finish 2015at new highs, primarily contingent on earnings expansion. The near-termoutlook is clouded as valuations are rich and the Fed is about to hike rates.

Emerging Markets: We would focus on countries with exposure to USgrowth, reform agendas, robust GDP expansion and solid expectedearnings growth in 2015. US rate rises, a weak yen (and yuan) andsluggish DM imports are weighing on earnings and cheap valuations.

Japan/Europe: Central bank liquidity will likely support Eurozone andJapan earnings and equity prices. Politics (Greece) and geopolitics(Russia) are the principal risks in Europe; policy mistakes in Japan.

The 12-Month Forward Return indicates the 1-year returnrecorded from a specified date.




CurrenciesFrom Strengthening Fundamentals to Policy Normalization to Loosening Policies

All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of f uture events.Currency risk: One currency may decline in value versus another. The value of a multicurrency portfolio will fluctuate with exchange rates.

65

85

105

125

145

165

0

400

800

1200

1600

2000

Jun 75 Jun 85 Jun 95 Jun 05 Jun 15

US Dollar Index versus Gold Price

Go ld P rice (L HS, US do lla rs) Dol lar In de x ( RHS ) EM Cu rr en cy In de x ( RHS )

Source: Bloomberg

70

90

110

130

150

170

0.8

1.0

1.2

1.4

1.6

Jun 95 Jun 00 Jun 05 Jun 10 Jun 15

DM Exchange Rates(USD/EUR; JPY/USD)

Euro YenSource: Bloomberg

USD Strengths: Given our expectations of significant monetary easing in

most DM (and many EM), we expect to see more appreciation for the dollarin 2015. Looking at USD price movements historically, the typical bullishUSD cycle lasts five to six years and the total move higher is on averageabout 40%. The current 4-year USD appreciation cycle has seen the USDstrengthen by about 20%, so by historical standards this suggests the USDhas room to appreciate further.

EUR/USD: As the ECB embarks upon QE and the Fed begins to hikepolicy rates (likely in late 2015), the euro should weaken further. We seethe euro at parity to the dollar in early 2016.

Emerging Markets: EM currencies are supported by carry trades and the

lack of local quantitative easing programs, so Citi strategists believe EMcurrencies, though likely headed lower, may fall less against USD thanmost DM currencies.

Exchange Rate Forecasts

Spot 2015 YE 2016 YE

Euro 1.12 1.03 1.03

Japanese yen 124 129 130

Australian Dollar 0.77 0.71 0.68

Swiss Franc 0.93 1.02 1.02

British Pound 1.57 1.50 1.49

Chinese Renminbi 6.21 6.24 6.28

Indian Rupee 64.1 64.7 65.0

Korean Won 1,118 1,139 1,112

Russian Ruble 54.2 55.8 56.5

Brazilian Real 3.10 3.35 3.30

Mexican Peso 15.4 15.4 14.8

Source: Citi Research as of 5 June 2015. Spot price as of 17 Jun 2015.

Versus US Dollar


http://slidepdf.com/reader/full/investment-strategy-insights 7/247Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation.Bloomberg charts as of 22 June 2015

CommoditiesReacting to Global Demand Questions

0.0

1.0

2.0

3.0

4.0

5.0


Key Commodity Prices(rebased to 1)

Oil Gold Corn Copper

Source: Bloomberg

All forecasts are expressions of opinion and are subject to change without notice and are not intended tobe a guarantee of future events. The investor should not base its decision to enter into a trade solely on

the basis of the forecasts.

0

4

8

12

16

20

Apr 07 Apr 08 Apr 09 Apr 10 Apr 11 Apr 12 Apr 13 Apr 14 Apr 15US Europe Japan

Global Natural Gas Prices

(in US$ per million BTU)

Source: World Bank as of 11 May 2015

Energy: Oversupply in the oil market pushed oil prices as low as $42 in

March, 60% below June 2014. Since March, prices have rebounded butCiti strategists believe we will see some weakness toward the end of theyear. US supply will likely continue to increase given productivity gainsfrom the switch to horizontal oil rigs and rigs coming back on firmer prices.

Precious Metals: Concerns about the Fed backing off normalization,coupled with low interest rates and quantitative easing in major economieshave supported the price of gold.

Industrial Metals: Slowing supply growth bodes well for copper, demandseems firm with global growth seen strong in 2016.

Agriculture: Citi strategists expect grain supplies to remain high butdemand looks strong, balancing markets. Weather remain a wildcard as weenter critical US/Canada growing season.

Spot 4Q15 2Q16 5Yr CyclicalEnergy

WTI Crude USD/bl 61.1 54.0 58.0 70.0 Brent Crude USD/bl 64.1 63.0 65.0 75.0 Natural Gas (USD/MMBtu) 2.88 2.70 2.90 3.50 Base Metals

LME Aluminium USD/mt 1,707 1,830 1,870 2,200 LME Copper USD/mt 5,750 7,000 7,250 6,200 LME Nickel USD/mt 12,725 17,520 21,000 21,000 Bulk Commodities

Iron Ore Spot (TSI) USD/mt 64.10 38.00 39.00 55.00 Precious Metals

Gold USD/oz 1,178 1,170 1,205 1,050 Silver USD/oz 16.10 15.80 16.20 16.50 Platinum USD/oz 1,079 1,250 1,280 1,763 Agriculture

Corn (USd/bu) 359 360 405 N/AWheat (USd/bu) 496 510 545 N/ASource: Citi Research 17 June 2015. Estimates are period averages.

Citi Commodity Price Forecasts


http://slidepdf.com/reader/full/investment-strategy-insights 8/24Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 8

Global GDP Rates 2014 2015F 2016F

Global 2.7% 2.6% 3.4%

Industrial Countries 1.7% 1.9% 2.5%

United States 2.4% 2.2% 2.9%

Japan -0.1% 1.0% 1.9%

Euro Area 0.9% 1.5% 2.1%

United Kingdom 2.9% 2.6% 3.0%

Emerging Markets 4.3% 3.7% 4.7%

China 7.4% 6.9% 6.7%

India 7.3% 7.9% 8.1%

Russia 0.6% -3.0% 1.6%

Brazil 0.1% -1.4% 0.4%

Mexico 2.1% 2.5% 3.5%Source: Citi Research, 17 June 2015

Policy Rates ForecastsCurrent 3Q15 4Q15 1Q16 2Q16 3Q16

United States 0.25 0.25 0.50 0.50 0.75 1.00

Japan 0.10 0.10 0.10 0.10 0.10 0.10

Euro Area 0.05 0.05 0.05 0.05 0.05 0.05

United Kingdom 0.50 0.50 0.50 0.75 1.00 1.00Source: Citi Research, 17 June 2015

Citi House View Summary



Gold

Equities

Cash

Fixed Income

Overweight Neutral

UnderweightOverweight

Alternatives

Neutral

CPB Asset Allocation

1. Europe: Core, Peripheryand UK

2. US

3. Japan

4. Emerging Markets

5. Developed Asia ex-Japan

1. High Yield

2. Corporate High Grade(focus on 7- to 10-yearbonds)

3. Emerging Markets

4. Inflation Linked

5. Developed Sovereign(ranking: US, Japan,Europe)

Citi Research Economic Outlook

Our economists forecast below trend global GDP growth in 2015, flat growth in the USand European reflation on QE. Removal of accommodative policy in the US and UKand decline of EM macro advantages are significant challenges. More Eurozone andJapan QE will likely provide support.



Citi Private Bank Asset Allocation

Strategic Asset Allocation Pies

Adaptive Valuation Strategies (AVS)

Source: Citi Private Bank's Global

Investment Committee, June 2015

Strategic Asset Allocation Commentary

Adaptive Valuation Strategies (AVS), our proprietarystrategic asset allocation methodology, uses a valuation-driven forecasting method and employs a riskmeasurement framework that draws on historicalperformance metrics to set allocation levels.

Changes to the Strategic Asset Allocation areimplemented annually in the beginning of each calendar

year.

Cash: 12%

Fixed Income: 76%

Equities: 4 %

Hedge Funds: 8%

Precious Metals: 0%

Level 1Seeks liquidity management andcapital preservation

Cash: 8%

Fixed Income: 53%

Equities: 25%

Hedge Funds: 14%

Precious Metals: 0%

Level 2Seeks income generation andcapital preservation

Cash: 2%

Fixed Income: 30%

Equities: 52%

Hedge Funds: 16%

Precious Metals: 0%

Level 3Seeks modest capital appreciationand, secondly, capital

Cash: 0%

Fixed Income: 21%

Equities: 79%

Hedge Funds: 0%

Precious Metals: 0%

Level 4Seeks long-term growth of capitalwith moderate volatility

Cash: 0%

Fixed Income: 3%

Equities: 97%

Hedge Funds: 0%

Precious Metals: 0%

Level 5Seeks maximum long-term growthof capital

https://www.privatebank.citibank.com/pdf/Whitepaper.pdf

https://www.privatebank.citibank.com/pdf/Whitepaper.pdf



Citi Private Bank Asset Allocation

Tactical Asset Allocation Pies

Source: Citi Private Bank's Global

Investment Committee, June 2015

Global Investment Committee (GIC)

Tactical Asset Allocation Commentary

The Global Investment Committee (GIC) adds a monthlytactical under/overweight overlay to the strategicallocation recommendation. The GIC incorporatesquantitative and qualitative inputs, such as economicdata, forecasts and observed market trends.

The GIC continues to have a tilt to risky assets: anoverweight to equities (focus on DM; small EM equity

overweight) and an underweight to fixed income (strongunderweight to DM sovereign debt; small overweight toriskier HY).

Cash: 12%

Fixed Income: 73%

Equities: 7 %

Hedge Fu nds: 8%

Precious Metals: 0%

Level 1Seeks liquidity management andcapital preservation

Cash: 8%

Fixed Income: 49%

Equities: 29%

Hedge Funds: 14%

Precious Metals: 0%

Level 2Seeks income generation andcapital preservation

Cash: 2%

Fixed Income: 25%

Equities: 58%

Hedge Funds: 16%

Precious Metals: 0%

Level 3Seeks modest capital appreciationand, secondly, capital preservation

Cash: 0%

Fixed Income: 6%

Equities: 74%

Hedge Funds: 20%

Precious Metals: 0%

Level 4Seeks long-term growth of capitalwith moderate volatility

Cash: 0%

Fixed Income: 0%

Equities: 80%

Hedge Funds: 20%

Precious Metals: 0%

Level 5Seeks maximum long-term growthof capital



Citi Private Bank Asset Allocations: Our Active Stance Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)

Our Active Tactical Stance on Asset Allocation

Tilt Toward Risk: overweight equities, underweight to fixedincome.

Underweight to High Grade corporate debt, overweightHigh Yield (HY) bonds (US and especially European).

Large underweight to developed markets (DM) sovereigndebt and small underweight to emerging markets (EM)debt.

Overweight DM equities (Europe large and small/mid cap,UK, US large, Japan). Small overweight EM North Asiaequities (China, Taiwan, India). Small underweight Brazil.Neutral US SMID.

Change to Tactical Asset Allocation

No changes, the GIC decided to keep its allocation steady

this month.

June 2015 Over/Underweights: with Alternatives

Level 1 Level 2 Level 3 Level 4 Level 5Cash 0.0% 0.0% 0.0% 0.0% 0.0%Fixed Income -2.2% -3.7% -5.5% -6.0% 0.0%Developed Sovereign FI -5.5% - 6.7% -5.9% - 4.0% 0.0%North America -0.6% -0.9% -1.1% -1.0% 0.0%Europe -1.8% -2.3% -2.1% -1.6% 0.0% Asia ex Japan -0.1% -0.1% -0.1% 0.0% 0.0%Japan -3.2% -3.6% -2.6% -1.3% 0.0%Supranational/Agencies 0.1% 0.1% 0.0% -0.1% 0.0%Developed Inv estment Grade FI 2.0% 1.6% -0.1% -1.9% 0.0%Developed High Yield FI 1.5% 1.7% 1.0% 0.2% 0.0%

Emerging Market FI -0.2% -0.3% -0.5% -0.2% 0.0%Emerging Market Asia FI 0.0% 0.0% -0.1% -0.1% 0.0%Emerging Market EMEA FI -0.1% -0.2% -0.3% -0.1% 0.0%Emerging Market LatAm FI 0.0% - 0.1% - 0.1% 0.0% 0.0%Equities 2.2% 3.7% 5.5% 6.0% 0.0%Developed Market EQ 1.9% 3.1% 4.4% 4.6% -0.6%North America Large Cap 0.9% 1.4% 1.7% 1.6% -1.2%North America Small/Mid Cap 0.1% 0.1% 0.0% -0.1% -0.7%Europe Equities 0.6% 1.2% 2.2% 2.6% 1.4%Japan Equities 0.2% 0.3% 0.5% 0.6% 0.2%

Asian Equities 0.1% 0.1% 0.0% -0.0% -0.3%Emerging Markets EQ 0.3% 0.6% 1.1% 1.3% 0.6%Emerging Latin America Equities 0.0% 0.0% -0.2% -0.3% -0.6%Emerging EMEA Equities 0.0% 0.0% 0.0% 0.0% -0.2%Emerging Asia Equities 0.2% 0.6% 1.3% 1.7% 1.4%Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 0.0% 0.0% 0.0% 0.0% 0.0%Source: Citi Private Bank's Global Investment Committee, 20 May 2015



Citi Private Bank Asset Allocations: Strategic and Tactical Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)

July 2015 Strategic Allocations: with Alternatives

Level 1 Level 2 Level 3 Level 4 Level 5Cash 12.0% 8.0% 2.0% 0.0% 0.0%Fixed Income 75.6% 53.0% 30.0% 12.3% 0.0%Developed Sovereign FI 38.4% 26.9% 14.1% 6.2% 0.0%North America 11.5% 8.1% 4.2% 1.9% 0.0%Europe 16.3% 11.4% 6.0% 2.6% 0.0% Asia ex Japan 0.3% 0.2% 0.1% 0.0% 0.0%Japan 9.4% 6.6% 3.5% 1.5% 0.0%Supranational/Agencies 0.9% 0.6% 0.3% 0.2% 0.0%Developed Inv estment Grade FI 32.7% 22.9% 12.0% 5.3% 0.0%Developed High Yield FI 2.3% 1.6% 1.9% 0.4% 0.0%

Emerging Market FI 2.3% 1.6% 2.1% 0.4% 0.0%Emerging Market Asia FI 1.6% 1.1% 1.5% 0.3% 0.0%Emerging Market EMEA FI 0.3% 0.2% 0.3% 0.1% 0.0%Emerging Market LatAm FI 0.3% 0.2% 0.3% 0.1% 0.0%Equities 4.4% 25.0% 52.0% 67.7% 80.0%Developed Market EQ 3.8% 21.8% 45.3% 59.1% 69.8%North America Large Cap 1.9% 10.9% 22.6% 29.5% 34.8%North America Small/Mid Cap 0.3% 1.9% 4.0% 5.2% 6.1%Europe Equities 1.1% 6 .1% 12.7% 16.5% 19.5%Japan Equities 0.3% 1.8% 3.8% 4.9% 5.8%

Asian Equities 0.2% 1.1% 2.2% 2.9% 3.4%Emerging Markets EQ 0.6% 3.2% 6.7% 8.7% 10.3%Emerging Latin America Equities 0.1% 0.6% 1.3% 1.7% 2.0%Emerging EMEA Equities 0.1% 0.6% 1.2% 1.6% 1.8%Emerging Asia Equities 0.4% 2.0% 4.2% 5.5% 6.4%Hedge Funds 8.0% 14.0% 16.0% 20.0% 20.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 100.0% 100.0% 100.0% 100.0% 100.0%Source: Citi Private Bank's Global Investment Committee, 24 June 2015

July 2015 Tactical Allocations: with Alternatives



Asian Equities 0.3% 1.2% 2.3% 2.9% 3.1%Emerging Markets EQ 0.9% 3.8% 7.8% 10.0% 10.9%Emerging Latin America Equities 0.2% 0.6% 1.1% 1.4% 1.4%Emerging EMEA Equities 0.2% 0.6% 1.2% 1.5% 1.6%Emerging Asia Equities 0.6% 2.6% 5.5% 7.1% 7.8%Hedge Funds 8.0% 14.0% 16.0% 20.0% 20.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 100.0% 100.0% 100.0% 100.0% 100.0%Source: C iti Private Bank's Global Investment Committee, 24 J une 2015




Citi Private Bank Asset Allocations: Changes from Last Month Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)

July 2015 Strategic Allocations: Change


Emerging Market FI 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Market Asia FI 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Market EMEA FI 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Market LatAm FI 0.0% 0.0% 0.0% 0.0% 0.0%Equities 0.0% 0.0% 0.0% 0.0% 0.0%Developed Market EQ 0.0% 0.0% 0.0% 0.0% 0.0%North America Large Cap 0.0% 0.0% 0.0% 0.0% 0.0%North America Small/Mid Cap 0.0% 0.0% 0.0% 0.0% 0.0%Europe Equities 0.0% 0.0% 0.0% 0.0% 0.0%Japan Equities 0.0% 0.0% 0.0% 0.0% 0.0%

Asian Equities 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Markets EQ 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Latin America Equities 0.0% 0.0% 0.0% 0.0% 0.0%Emerging EMEA Equities 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Asia Equities 0.0% 0.0% 0.0% 0.0% 0.0%Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 0.0% 0.0% 0.0% 0.0% 0.0%Source: Cit i Private Bank's Global Investment Committee, 24 J une 2015

July 2015 Tactical Allocations: Change


Emerging Market FI 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Market Asia FI 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Market EMEA FI 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Market LatAm FI 0.0% 0.0% 0.0% 0.0% 0.0%Equities 0.0% 0.0% 0.0% 0.0% 0.0%Developed Market EQ 0.0% 0.0% 0.0% 0.0% 0.0%North America Large Cap 0.0% 0.0% 0.0% 0.0% 0.0%North America Small/Mid Cap 0.0% 0.0% 0.0% 0.0% 0.0%Europe Equities 0.0% 0.0% 0.0% 0.0% 0.0%Japan Equities 0.0% 0.0% 0.0% 0.0% 0.0%





Non-Illiquid Asset Allocations: Strategic and Tactical Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC) Excluding Hedge Funds

July 2015 Strategic Allocations: Traditionals



Asian Equities 0.4% 1.4% 2.7% 3.4% 4.2%Emerging Markets EQ 1.2% 4.2% 8.0% 10.1% 12.4%Emerging Latin America Equities 0.2% 0.8% 1.6% 2.0% 2.4%Emerging EMEA Equities 0.2% 0.8% 1.4% 1.8% 2.2%Emerging Asia Equities 0.7% 2.7% 5.0% 6.4% 7.8%Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 100.0% 100.0% 100.0% 100.0% 100.0%Source: Cit i Private Bank's Global Investment Committee, 24 J une 2015

July 2015 Tactical Allocations: Traditionals







Asset Class PerformanceThe Case for Diversification

2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD

MSCI Emerging

Markets39.4%

BarCap US Gov 10-

Year 18.9%

MSCI Emerging

Markets78.5%

DJ Equity REIT

Index27.7%

BarCap US Gov 10-

Year 15.5%

DJ Equity REIT

Index19.6%

Russell 2000 Small

Cap Index38.8%

DJ Equity REIT

Index26.0%

Russell 2000 Small

Cap Index7.2%

DJ UBS Commodity

Total Return Index

16.2%

BarCap Global Corp

-5.1%

BarCap Global Corp

HY

36.7%

Russell 2000 Small

Cap Index

26.9%

DJ Equity REIT

Index

7.5%

MSCI Emerging

Markets

18.2%

S&P 500 Large Cap

Index

32.4%

S&P 500 Large Cap

Index

13.2%

S&P 500 Large Cap

Index

3.5%

BarCap Global Corp

HY

13.3%

BarCap Global Corp

HY

-5.9%

DJ Equity REIT

Index

28.5%

MSCI Emerging

Markets

18.9%

BarCap Global Corp

4.8%

Russell 2000 Small

Cap Index

16.3%

BarCap Global Corp

HY

4.7%

BarCap US Gov 10-

Year

8.5%

MSCI Emerging

Markets

2.8%

BarCap US Gov 10-Year

10.4%

Russell 2000 SmallCap Index

-33.8%

Russell 2000 SmallCap Index

27.2%

DJ UBS CommodityTotal Return Index

16.8%

BarCap Global CorpHY

3.0%


16.0%

DJ Equity REITIndex

2.7%

BarCap Global Corp7.2%


1.5%

S&P 500 Large Cap

Index

5.5%

DJ UBS Commodity

Total Return Index

-35.6%

S&P 500 Large Cap

Index

26.5%

S&P 500 Large Cap

Index

15.1%

S&P 500 Large Cap

Index

2.1%

S&P 500 Large Cap

Index

16.0%

BarCap Global Corp

0.1%

BarCap Global Corp

HY

5.5%

BarCap US Gov 10-

Year

0.6%

BarCap Global Corp

3.2%

S&P 500 Large Cap

Index

-37.0%

DJ UBS Commodity

Total Return Index

18.9%

BarCap Global Corp

HY

9.7%

Russell 2000 Small

Cap Index

-4.2%

BarCap Global Corp

10.9%

MSCI Emerging

Markets

-2.6%

MSCI Emerging

Markets

0.5%

BarCap Global Corp

-0.4%

Russell 2000 Small

Cap Index

-1.6%

DJ Equity REIT

Index

-37.6%

BarCap Global Corp

16.6%

BarCap US Gov 10-

Year

9.4%

DJ UBS Commodity

Total Return Index

-13.3%

BarCap US Gov 10-

Year

3.8%

BarCap US Gov 10-

Year

-5.8%

Russell 2000 Small

Cap Index

0.3%

DJ Equity REIT

Index

-1.6%

DJ Equity REIT

Index

-15.6%

MSCI Emerging

Markets

-53.3%

BarCap US Gov 10-

Year

6.9%

BarCap Global Corp

7.2%

MSCI Emerging

Markets

-18.4%

DJ UBS Commodity

Total Return Index

-1.1%

DJ UBS Commodity

Total Return Index

-9.5%

DJ UBS Commodity

Total Return Index

-10.1%

DJ UBS Commodity

Total Return Index

-4.4%

Source: Bloomberg, 22 Jun 2015



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Brazilian Bovespa: The Bovespa Index is a gross total return index weighted by traded volume and is comprised of the most liquid stocks traded on the Sao Paulo Exchange. The

Bovespa Index has been divided 10 times by a factor of 10 since Jan 1, 1985: 12/02/85, 08/29/88, 04/14/89, 01/12/90, 05/28/91, 01/21/92, 01/26/93, 08/27/93, 02/10/94, and 03/03/97.

Citigroup Global Markets High Yield Market Index : A measure that tracks actual economic data relative to consensus estimates of market economists

Citigroup Global Markets High Yield Market Index: The High-Yield Market Index includes cash-pay, deferred-interest, and Rule 144A bonds with remaining maturities of at least one

year and a minimum amount outstanding of $100 million. The issuers must be domiciled in the United States or Canada for consideration in this index.

Citigroup Global Emerging Market Sovereign Bond Index: The Global Emerging Market Sovereign Bond Index (ESBI) includes Brady bonds and US dollar-denominated emerging

market sovereign debt issued in the global, Yankee, and Eurodollar markets excluding loans. The ESBI offers diversification benefits with respect to the geographical and asset class

dimensions. It comprises debt in Africa, Asia, Europe, and Latin America.

The Consumer Confidence Survey: Reflects prevailing business conditions and likely developments for the months ahead. This monthly report details consumer attitudes and buying

intentions, with data available by age, income, and region

CPI Inflation: Consumer Price Index (CPI) - The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of US inflation. The US

Department of Labor publishes the CPI every month.

Current Balance: The difference between the nation's total exports of goods, services and transfers and its total imports of them. Current account balance calculations exclude

transactions in financial assets and liabilities.

Currency Abbreviations: AUD: Australia; NZD: New Zealand; NOK: Norway; GBP: UK; EUR: Euro Zone; SEK: Sweden; CAD: Canada; CHF: Switzerland; JPY: Japan; ZAR: South

Africa; PLN: Poland; BRL: Brazil; RUB: Russia; KRW: Korea; TRY: Turkey; MXN: Mexico; CNY: China; INR: India

DJIA: Dow Jones Industrial Average - The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that

trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest US companies are performing.

DXY Index: The DXY Index represents a basket of currencies, giving a price level for the US dollar.

Event Driven: In the context of hedge funds, a style of management that combines many different types of hedge fund investing such as merger arbitrage, distressed securities and high

yield investing, in conjunction with an important "event" that is supposed to unlock firm value (like a merger announcement, earnings announcement, or a regulator decision).

Fiscal Balance: The Fiscal Balance represents the difference between General Government revenues over expenses. It includes capital expenditure, but excludes depreciation.

Global Macro: Directional Macro strategies frequently employ leverage and may trade futures, options on future contracts and foreign exchange contracts as well as trade in diversified

markets or focus on one market sector. Two types of strategies employed by directional macro managers are discretionary and systematic trading.

Industrial Production: Measures the output of the industrial sector of an economy. The industrial sector includes manufacturing, mining, and utilities.

LIBOR: London Interbank Offered Rate - A short-term interest rate often quoted as a 1,3,6-month rate for U.S. dollars.

Managed Futures: In the context of hedge funds, a style of management that focuses on short-term trading in the futures market.

Glossary



17

Glossary (Cont’d)

Mexican Bolsa: A capitalization weighted index of the leading stocks traded on the Mexican Stock Exchange. The index was developed with a base level of .78 as of October 30, 1978.

MSCI World Consumer Discretionary Price Index: An index measuring the performance of the Consumer Discretionary equities of developed countries including U.S.; a useful

benchmark for global funds.

MSCI World Free Index: An index measuring the performance of equities of developed and EM countries; a useful benchmark for global funds.

Nikkei 225 Index: Applies mainly to international equities. Price-weighted average of 225 stocks of the first section of the Tokyo Stock Exchange started on May 16, 1949. Japanese

equivalent of the US Dow.

Repo rate: A repo is a repurchase agreement. A procedure for borrowing money by selling securities to a counterparty and agreeing to buy them back later at a slightly higher price

based on a rate of interest called the repo rate.

Russell Mid-Cap Index: A market capitalization-weighted benchmark index made up of the 800 smallest US companies in the Russell 1000.

Russell Top 200 Growth Index: A market capitalization-weighted benchmark index made up of the largest 200 US companies by market cap that exhibit growth characteristics.

Russell Top 200 Value Index: A market capitalization-weighted benchmark index made up of the largest 200 US companies by market cap that exhibit value characteristics.

Russell 2000 Index: A market capitalization-weighted benchmark index made up of the 2000 smallest US companies in the Russell 3000.

S&P/ Case-Shiller US National is the broadest national measurement of home prices, with coverage going beyond the 20 MSAs that make up the composites.

S&P/Case-Shiller Composite-20 Home Price Index reflects price changes for Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle, Tampa, Boston,

Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington DC. In addition to those 10 markets.

S&P 400 Index: A market capitalization-weighted benchmark index made up of 400 securities with market values between $200 million and $5 billion

S&P 500 Index: Index of 500 widely held common stocks that measures the general performance of the market.

VIX Index: The Chicago Board Options Exchange SPX Volatility Index reflects a market estimate of future volatility, based on the weighted average of the implied volatilities for a wide

range of strikes 1st & 2nd month expirations are used until 8 day from expiration, then the 2nd and 3rd are used.

U.S. Treasuries: Interest-bearing obligations if the U.S. government issued by the U.S. Department of the Treasury as a means of borrowing money to meet government

expenditures not covered by tax revenues. There are three types of marketable Treasury securities-bills, notes and bonds.

U.S. Investment-Grade Bonds: A bond that is assigned a rating in the top four categories by commercial credit rating companies. S&P classifies investment-grade bonds as BBB or

higher, and Moody's classifies investment grade bonds as BAA or higher. Related: High-yield bond.

U.S. High Yield Bonds: A bond with a speculative credit rating of BB (S&P) or BA (Moody's) or lower. Junk or high-yield bonds offer investors higher yields than bonds of financially

sound companies. Two agencies, Standard & Poors and Moody's Investor Services, provide the rating systems for companies' credit.

Wilshire 5000 Index: Measures the performance of all US equity securities with readily available price data. Over 5,000 capitalization weighted security returns are used to adhust the

index. The Wilshire 5000 base is its 12/31/1980 capitalization of $1,404.596 billion.



18

Glossary (Agency Ratings)

Moody's

Investment grade

Aaa: Moody judges obligations rated Aaa to be the highest quality,with the "smallest degree of risk".Aa1, Aa2, Aa3: Moody judges obligations rated Aa to be highquality, with "very low credit risk", but "their susceptibility to long-term risks appears somewhat greater".A1, A2, A3: Moody judges obligations rated A as "upper-mediumgrade", subject to "low credit risk", but that have elements "presentthat suggest a susceptibility to impairment over the long term".Baa1, Baa2, Baa3: Moody judges obligations rated Baa to be

"moderate credit risk". They are considered medium-grade and assuch "protective elements may be lacking or may becharacteristically unreliable".

Speculative grade

Ba1, Ba2, Ba3: Moody judges obligations rated Ba to have"questionable credit qualityB1, B2, B3: Moody judges obligations rated B as speculative and"subject to high credit risk", and have "generally poor creditquality."Caa1, Caa2, Caa3: Moody judges obligations rated Caa as of "poorstanding and are subject to very high credit risk", and have"extremely poor credit quality. Such banks may be in default..."Ca: Moody judges obligations rated Ca as "highly speculative" andare "usually in default on their deposit obligations".C: Moody judges obligations rated C as "the lowest rated class ofbonds and are typically in default," and "potential recovery valuesare low".

S&P

Investment Grade

AAA: the best quality borrowers, reliable and stable(many of them governments)AA: quality borrowers, a bit higher risk than AAAA: economic situation can affect financeBBB: medium class borrowers, which are satisfactoryat the moment

Non-Investment Grade

BB: more prone to changes in the economy

B: financial situation varies noticeablyCCC: currently vulnerable and dependent onfavorable economic conditions to meet itscommitmentsCC: highly vulnerable, very speculative bondsC: highly vulnerable, perhaps in bankruptcy or inarrears but still continuing to pay out on obligationsCI: past due on interestR: under regulatory supervision due to its financialsituationSD: has selectively defaulted on some obligationsD: has defaulted on obligations and S&P believes thatit will generally default on most or all obligationsNR: not rated

Fitch

Investment grade

AAA: the best quality companies, reliableand stableAA: quality companies, a bit higher riskthan AAAA: economic situation can affect financeBBB: medium class companies, which aresatisfactory at the moment

Non-investment grade

BB: more prone to changes in the economyB: financial situation varies noticeablyCCC: currently vulnerable and dependenton favorable economic conditions to meetits commitmentsCC: highly vulnerable, very speculativebondsC: highly vulnerable, perhaps in bankruptcyor in arrears but still continuing to pay outon obligationsD: has defaulted on obligations and Fitchbelieves that it will generally default onmost or all obligationsNR: not publicly rated



19

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