SGMT Capital Research Inc. SYSTEMATIC GLOBAL MARKETS TREND

SEPTEMBER, 2016

Getting out of the Hole, Opus On the Saddle Point! More Time Investor Letter

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The SGMT trading system had a gross return of 3.17% for Level II in the month of September, 2016 Source of Returns by Currency (September, 2016):

2016 Gross Returns by Month:

Just as the FED indicated the case for a rate hike in August, the US ISM Non-Manufacturing Index 1

reported on September 6th stumbled badly 4 points in August to 51.4, the lowest since February 2010.

Level II Month Ccy Change SGMT Gross Return

Australian Dollar (AUD) 1.86% 1.66%

Canadian Dollar (CAD) -0.12% 0.27%

Swiss Franc (CHF) 1.21% 1.20%

Euro (EUR) 0.67% 0.55%

Great Britain Pound (GDB) -1.19% -0.87%

Japanese Yen (JPY) 2.02% 0.41%

Total Level II 3.17%

Jan Feb Mar Apr May Jun Jul Aug Sep YTD

0.07% 12.80% 5.39% 5.38% -6.22% -1.54% 5.83% -3.93% 3.17% 21.41%

Please refer to August SGMT Investor Letter for recapturing the FED case for rate hike left at end of August.1

After two strong US non-farm payrolls reports, September 2nd reported a low 151K of non-farm payrolls that was still considered to be above the 150K threshold. These two reports clouded the case for a September FED rate hike. As we have evidenced a split FED, Boston FED Rosengren turned from a dove to a hawk in a September 9 speech that disregarded the data dependence policy orientation as promoted by FED board to insist on a rate hike in September. Speeches by other members of the FED before the FED blackout period indicated a split decision on the rate hike. On September 21, it turned out indeed at the FED decision conference that the FED split with three dissents including Rosengren. In the Q&A session of the FED decision news conference, FED chairwoman Yellen characterized Rosengren’s dissent as being based on his concern for the US commercial real estate market risk which existed in pockets of the US economy and should be addressed as such by specific FED regulation authorities instead of monetary policy and her board was with her in driving US monetary policy. In the after math of the FED 2

September meeting, the Boston FED website statement and speeches by those dissenting FED presidents continued to make their cases to raise rate but laying out different reasons that showed no consensus of their views on their dissents. On the other hand, the BOJ only made a decision with curve twister implementation for its monetary policy a couple of hours earlier than the US FED monetary policy decision. The BOJ clearly did more talk than real action and whether they can actually deliver disappointed the markets. The BOE also stood waiting for Brexit to play out in coming months after having reduced their Bank Rate and boosting its QE program just last month. In the final days of September, OPEC output cap jump-started oil prices and Deutsche Bank woes with hedge fund clients pulling off exposures 3

suddenly sank its stock by 7% and rattled the markets in a risk off turn throughout the global markets. The concern of Deutsche Bank risk disappeared in the US market open the next day and its stock reversed the 7% drop the previous day. Markets and economists were as split as the FED members and major equity and bond indices were positively correlated, a strange behavior rarely seen in the markets.

As evidenced by the market behaviors and volatilities generated by FED related news, the split views of economic developments among the FED members, economists and market participants created an environment of uncertainties or lack of fundamental economic information (information voids) which SGMT has operated in since May. The economic data in September proved SGMT’s effective positioning from August into September to be correct despite the setback in the last couple of days in August when FED officials made the case for rate hike while the positioning continued to be subjected to the market swings of “information voids” only filled with the instant news and subjective views without solid supports of economic fundamentals. In view of FED’s own forecast adjustments (downwards), SGMT positions have stayed on the correct course in line with Yellen’s board and consistence with the market and economists forecast adjustments and evolved from medium high leverage to medium low leverage and then to medium high leverage again with some cross-over.

Looking forward, as the FED got out its way for now, the markets still operate in an environment of information voids like before. The markets will continue to be sensitive to news events and/or FED speakers going forward and may experience some assessments of risk adjustments before the markets can cool off emotionally. Yellen FED board still rides on the fence of a saddle point about raising rates that may cause the same market jittering if the economic data lacks a fair support and therefore may prefer a market stability short term goal in a transitional environment. The pressure for UK’s May government to clarify its stance on the path of Brexit will built up as time ticks away. Again SGMT will follow the markets as they further develop in coming months and ride on the turbulences of the information voids as well as the market adjustments.

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

FED Vice Chair Stanley Fischer did not dissent despite his “double-down” rate hike in August and other board members 2

were also with Yellen on the decision of rate holding.

The Wall Street Journal, “OPEC reaches understanding on output cut” by Benoit Faucon, Georgi Kantchev, and Selina 3

Williams.

BTOP index components sourced from barclayhedge.com.

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Fund Name (SGMT As of August-2016) 2016 2015 2014 Annual Ret Inception Sharpe MaxdownAlpha vs SP500

Beta vs SP500

SGMT (Net) 11.27% 15.28% 24.17% 20.41% May-14 1.10 20.18% 1.669 -0.02SGMT BackTest (Net) 2.04% 13.84% 32.27% 31.61% Feb-07 1.87 20.50% 2.431 -0.37SGMT (Gross) 17.68% 21.34% 32.90% 29.28% May-14 1.38 18.29% 2.311 -0.02SGMT BackTest (Gross) 7.18% 19.37% 44.45% 44.43% Feb-07 2.01 16.55% 3.297 -0.32

Alder Capital (Alder Global 20) 5.90% -3.27% 1.15% 6.29% Feb-01 0.32 28.51% 0.61 -0.01FDO Partners, LLC (Emerging Markets Quant. Currency) -7.22% -2.37% 1.98% 0.42% Jul-01 -0.37 11.62% 0.02 0.03First Quadrant L.P. (Tactical Currency Allocation L/S USD) 4.63% -1.53% 1.08% 1.82% May-95 -0.14 6.72% 0.17 -0.01Harmonic Capital (Currency 10v) -6.68% 7.91% 10.45% 4.06% May-03 0.32 16.73% 0.28 0.10Harness 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) -15.75% 13.82% 49.08% 11.15% Oct-03 0.50 33.33% 1.02 0.04Premium Capital Advisors AG (Premium Currencies) -1.70% 5.22% 5.16% 3.28% Jan-04 0.28 14.51% 0.38 -0.13Quaesta Capital AG (v-Pro Volatility) -3.16% 20.08% 1.00% 5.57% Jul-07 0.84 9.39% 0.52 -0.08Salix Capital UK Ltd. (FDFX) -17.49% 13.50% 10.82% 5.69% Jan-11 0.53 13.76% 0.73 -0.16Rhicon Currency Management (Pte) Ltd (Strategic) 1.02% -3.33% 8.25% 4.94% Jan-04 0.51 8.56% 0.45 -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) -4.77% 43.36% 2.58% 10.52% Jul-07 0.88 17.98% 0.98 -0.15CenturionFx Ltd (CENTURIONFX - 6X) 12.97% 39.44% 36.21% 51.90% Jan-06 2.01 21.60% 3.94 -0.2024FX Global Advisors Ltd. 76.60% 27.81% 26.94% 29.71% Jan-01 1.59 19.28% 2.32 0.03Hong Investment Advisors Ltd (HCM Rapier FX Index) -7.82% 25.32% 8.64% 8.31% May-13 0.65 13.55% 0.96 -0.23AE Capital Systematic FX Fund 4.13% 19.35% 5.74% 14.50% Oct-12 1.73 6.51% 1.32 -0.04P/E Investments (FX Strategy - Aggressive) -15.75% 13.82% 49.08% 11.15% Oct-03 0.50 33.33% 1.02 0.04Salix Capital UK Ltd. (FDFX) -17.49% 13.50% 10.82% 5.69% Jan-11 0.53 13.76% 0.73 -0.16Sequoia Capital Fund Management LLP (Systematic FX) -4.95% 12.97% -9.14% 6.24% Jun-11 0.62 19.09% 0.51 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%) 21.89% -12.19% 4.18% 5.26% Feb-11 0.25 31.76% 1.33 -0.73Alder Capital (Alder Global 20) 5.90% -3.27% 1.15% 6.29% Feb-01 0.32 28.51% 0.61 -0.01TMS Capital Ltd (Arktos GCS II) 3.83% -5.78% 3.83% 3.50% Feb-10 0.43 10.15% 0.38 -0.05IPM Informed Portfolio Mgmt. (IPM Systematic Curr. A) 14.89% 2.56% 7.01% 4.96% Apr-05 0.41 14.97% 0.59 -0.19P/E Investments (FX Strategy - Aggressive) -15.75% 13.82% 49.08% 11.15% Oct-03 0.50 33.33% 1.02 0.0424FX Global Advisors Ltd. 76.60% 27.81% 26.94% 29.71% Jan-01 1.59 19.28% 2.32 0.03Currency Insight Ltd (Global Currency Program) -2.94% 4.56% 2.24% 6.51% Jan-02 0.51 11.57% 0.59 -0.03Ortus Capital Management Ltd (Currency - Aggressive) 11.04% 0.87% 18.71% 12.90% Mar-04 0.43 52.79% 1.23 0.18Traub Capital Management, LLC (FX Strategy Fund I) -10.95% 9.39% 30.98% 2.46% Mar-11 0.15 22.87% 0.73 -0.42

Source�BarclayHedge.com for other funds and SGMT Capital Inc. as of June 16 (red colored marks discountinued or no-updated funds)SGMT Performance Statistics As of September 30, 2016SGMT (Net) 14.67% 14.71% 24.17% 21.15% May-14 1.09 20.18% 1.652 -0.02SGMT BackTest (Net) 4.20% 13.84% 32.27% 31.59% Feb-07 1.86 20.50% 2.437 -0.36SGMT (Gross) 21.41% 20.68% 32.90% 29.82% May-14 1.37 18.29% 2.292 -0.02SGMT BackTest (Gross) 9.57% 19.37% 44.45% 44.31% Feb-07 2.01 16.55% 3.307 -0.31

BTOP FX Index Components as of August-2016

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

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