SGMT Capital Research Inc. SYSTEMATIC GLOBAL MARKETS TREND

DECEMBER, 2016

Trumponomics – A new era of economic dynamics to come

Investor Letter

The SGMT trading system had a gross return of -0.44% for Level II in the month of December, 2016 Source of Returns by Currency (December, 2016):

2016 Gross Returns by Month:

Level II Month Ccy Change SGMT Gross Return

Australian Dollar (AUD) -2.33% 2.66%

Canadian Dollar (CAD) -0.07% 0.41%

Swiss Franc (CHF) -0.18% -1.23%

Euro (EUR) -0.63% -0.63%

Great Britain Pound (GDB) -1.45% -1.45%

Japanese Yen (JPY) -2.09% -0.11%

Total Level II -0.44%

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

0.07%

12.80%

5.39% 5.38%

-6.22% -1.54% 5.83%

-3.93% 3.17%

-2.77% -9.18% -0.44 6.73%

The markets in December continued their positioning into Trumponomics without any sign of fears . The 1

Fed lifted the key interest rate as expected on December 14 and the tone of the Fed Chairwoman conference clearly moved to indicate possible faster rate hikes together with FED dots predicting 3 hikes in 2017 as a result of the Trump presidency’s policy orientation. Trumponomics became the dominant factor to drive the markets instead of the FED and was still far from clear. Market participants expressed different and even opposite views as Trumponomics is being developed and the Trump cabinet choices 2

seemed to incline a hardline and a conservative orientation in economic and trade management.

In December, SGMT strategy lowered its effective leverage from average 3.62 to 1.8 without resorting to the 18% risk control trigger given the murky status of Trumponomics. Generally, the market information 3

captured by SGMT continued to indicate the prospects of inflation and the risk of high volatilities to come, more or less in line with the bond markets. As of December end, SGMT positioned in low leverage and roughly dollar neutral.

Looking back to the year of 2016, SGMT model had performed well in the early part of the year as the FED held back from rate hikes in a slowing US economy, and oscillated with an un-trending economic cycle since May 2016. The Brexit in June hit a market unprepared for such a political risk. SGMT risk control successfully fended off the Brexit risk. After Brexit, it seemed that the market psychologies became fragile against any traditional fundamentals and risks. Such market psychology reached its climax with the Trump-election as some markets totally disregarded the fears about the Trump risks that carried right into the Trump win (see SGMT November Investor Letter). SGMT sided more in line with the bond markets as the Goldman analyst pointed at (see footnote 2) and suffered a setback to its 2016 performance in an environment where macro strategies were the worst-performing according to a Bloomberg report . 4

Looking forward, the prospects of Trumponomics are still in an early stage of development. The overruns of some markets and inherited risks may shape up a period of volatile markets going forward along with the development of Trumponomics and geopolitics vs the growth prospects (see SGMT November Investor letter). Along with the Trump presidency, the Brexit will also come to play in the first quarter of 2017. Best Wishes for the New Year

Please refer to November SGMT Investor Letter.1

Bloomberg, “Goldman Says Bonds, not Stocks, Have Properly Priced In Trumponomics”, by Luke Kawa; 2

“Trump Administration ‘Hell-Bent’ on Making Big Changes, Dalio Says”, by Bei Hu

Refer to November SGMT investor letter.3

Bloomberg, “Hedge Fund Winners and Losers Emerge as Year ends on Better Note”, by Katia Porzecanski, Nishant 4

Kumar and Bei Hu

SGMT is a systematic FX trading strategy, so it might be useful to compare our returns to our peers and similar competitors. The BTOP index is an index of other foreign exchange managers as provided by BarclayHedge.com. The following table shows the SGMT Capital vertical comparison statistics to the BTOP index components sourced from barclayhedge.com.

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Fund Name (SGMT As of November-2016) 2016 2015 2014Annual

Ret Inception Sharpe MaxdownAlpha vs SP500

Beta vs SP500

SGMT (Net) 2.21% 18.64% 25.27% 15.36% May-14 0.91 19.93% 1.362 -0.04SGMT (Gross) 7.20% 23.16% 32.90% 21.73% May-14 1.12 18.29% 1.846 -0.04

Alder Capital (Alder Global 20) -3.84% -3.27% 1.15% 5.55% Feb-01 0.27 28.51% 0.56 -0.01FDO Partners, LLC (Emerging Markets Quant. Currency) -8.27% -2.37% 1.98% 0.34% Jul-01 -0.38 12.62% 0.02 0.02First Quadrant L.P. (Tactical Currency Allocation L/S USD) 7.00% -1.53% 1.08% 1.90% May-95 -0.11 6.72% 0.18 -0.01Harmonic Capital (Currency 10v) -7.66% 7.91% 10.45% 3.90% May-03 0.30 16.73% 0.27 0.11Harness Investment Group Limited (FX) -4.27% -3.64% 8.28% 5.12% Apr-09 0.49 13.52% -0.15 0.48P/E Investments (FX Strategy - Aggressive) 8.79% 13.82% 49.08% 13.10% Oct-03 0.58 33.33% 1.16 0.05Premium Capital Advisors AG (Premium Currencies) 1.87% 5.22% 5.16% 3.50% Jan-04 0.32 14.51% 0.40 -0.13Quaesta Capital AG (v-Pro Volatility) -3.51% 20.08% 1.00% 5.38% Jul-07 0.82 9.39% 0.50 -0.08Salix Capital UK Ltd. (FDFX) -20.38% 13.50% 10.82% 5.06% Jan-11 0.48 15.58% 0.63 -0.15Rhicon Currency Management (Pte) Ltd (Strategic) -4.33% -3.33% 8.25% 4.40% Jan-04 0.44 11.74% 0.40 -0.03

Investment Capital Advisors LLC (ICA Managed Accounts) 21.85% 266.22% 26.02% 72.09% Nov-10 0.74 29.65% 7.77 -0.92Alternative Asset Management Ltd (ACMP (Long Only)) -9.65% 48.45% 122.39% 57.06% Sep-12 1.38 4.35% 8.87 0.32Quaesta Capital AG (v-Pro Dynamic Volatility) -4.23% 43.36% 2.58% 10.30% Jul-07 0.87 17.98% 0.96 -0.14CenturionFx Ltd (CENTURIONFX - 6X) 16.69% 39.44% 36.21% 50.90% Jan-06 1.99 21.60% 3.88 -0.2024FX Global Advisors Ltd. 69.69% 27.81% 26.94% 28.86% Jan-01 1.54 19.28% 2.25 0.03Hong Investment Advisors Ltd (HCM Rapier FX Index) -4.03% 25.32% 8.64% 8.92% May-13 0.71 13.55% 1.02 -0.24AE Capital Systematic FX Fund 4.58% 19.35% 5.74% 13.69% Oct-12 1.66 6.51% 1.11 -0.01P/E Investments (FX Strategy - Aggressive) 8.79% 13.82% 49.08% 13.10% Oct-03 0.58 33.33% 1.16 0.05Salix Capital UK Ltd. (FDFX) -20.38% 13.50% 10.82% 5.06% Jan-11 0.48 15.58% 0.63 -0.15Sequoia Capital Fund Management LLP (Systematic FX) -8.35% 12.97% -9.14% 5.25% Jun-11 0.53 19.09% 0.45 0.02

Investment Capital Advisors LLC (ICA Managed Accounts) 21.85% 266.22% 26.02% 72.09% Nov-10 0.74 29.65% 7.77 -0.92First Quadrant L.P. (Tactical Currency Allocation L/S USD 20%) 34.08% -12.19% 4.18% 6.76% Feb-11 0.33 31.76% 1.43 -0.71Alder Capital (Alder Global 20) -3.84% -3.27% 1.15% 5.55% Feb-01 0.27 28.51% 0.56 -0.01TMS Capital Ltd (Arktos GCS II) 6.89% -5.78% 3.83% 3.81% Feb-10 0.47 10.15% 0.39 -0.05IPM Informed Portfolio Mgmt. (IPM Systematic Curr. A) 11.05% 2.56% 7.01% 4.55% Apr-05 0.36 14.97% 0.55 -0.20P/E Investments (FX Strategy - Aggressive) 8.79% 13.82% 49.08% 13.10% Oct-03 0.58 33.33% 1.16 0.0524FX Global Advisors Ltd. 69.69% 27.81% 26.94% 28.86% Jan-01 1.54 19.28% 2.25 0.03Currency Insight Ltd (Global Currency Program) 0.76% 4.56% 2.24% 6.67% Jan-02 0.52 11.57% 0.61 -0.03Ortus Capital Management Ltd (Currency - Aggressive) 4.44% 0.87% 18.71% 12.09% Mar-04 0.40 52.79% 1.17 0.17Traub Capital Management, LLC (FX Strategy Fund I) 6.28% 9.39% 30.98% 5.55% Mar-11 0.32 22.87% 0.95 -0.39

Source�BarclayHedge.com for other funds and SGMT Capital Inc. as of November 2016 (red colored marks discountinued or no-updated funds)SGMT Performance Statistics As of December 31, 2016SGMT (Net) 1.75% 15.34% 25.27% 14.67% May-14 0.86 19.93% 1.269 -0.04SGMT (Gross) 6.73% 19.73% 32.90% 20.81% May-14 1.07 18.29% 1.753 -0.04

BTOP FX Index Components as of November-2016

Year 2015 Top Ranked CTA Currency Programs as of November-2016

January 2016 Monthly Top Ranked CTA Currency as of November-2016