SGMT Capital Research Inc. SYSTEMATIC GLOBAL MARKETS TREND

JULY, 2016

Investor Letter

The SGMT trading system had a gross return of 5.83% for Level II in the month of July, 2016 Source of Returns by Currency (July, 2016):

2016 Gross Returns by Month:

Level II Month Ccy Change SGMT Gross Return

Australian Dollar (AUD) 2.15% 1.60%

Canadian Dollar (CAD) -0.78% -0.19%

Swiss Franc (CHF) 0.88% 1.37%

Euro (EUR) 0.87% 0.47%

Great Britain Pound (GDB) -0.40% 0.26%

Japanese Yen (JPY) 1.20% 2.42%

Total Level II 5.83%

Jan Feb Mar Apr May Jun Jul YTD

0.07% 12.80% 5.39% 5.38% -6.22% -1.54% 5.83% 22.50%

Brexit in late June continued to ripple through July. However, with the victory of Abe’s party parliament election in Japan, global stocks rose and the Yen weakened quickly on expectations of more BOJ stimulus in Japan. It was followed by a global equity market rally into most of the month of July, despite global tensions and disorders from various sources and the IMF’s lowered global growth expectations. In the currency market, the dollar rallied on the expectations of a FED rate hike prospect as well as lesser concerns of Brexit on the US economy from an emotional perspective regardless if these presumptions could really drive fundamentals. From a commodity and bond market perspective Brexit risk requires more time to evolve; otherwise, the economic trend (or more precisely, no-trend) picture has not fundamentally changed. Clearly, most global markets were in a sideways risk and trend reassessment period while other markets jumped forward creating certain risk informational dislocations among the markets. In the last week of July and before the BOJ meeting announcement, Japanese Prime Minister Abe announced ¥28 trillion stimulus plus ¥13 trillion fiscal measures to pop up Japan’s economy. It temporarily pushed Yen weaker. Finally, FED July meeting took no rate action as expected by markets but FED statement indicated “diminished risks to US economy” to open the door for possible later in the year rate hikes while a day later Atlantic FED Q2 GDP model predicated a 0.5% drop to 1.8%. The currency market had jumped ahead of the FED meeting to push the dollar higher but it did not stay there while bond markets reacted to the FED statement with lower yields, a clear sign of diverged views of different markets. In the last day of July, market anxieties over BOJ decision were built up to a similar level of that of Brexit and BOJ delivered a ¥6 trillion ETF purchases short of markets expectations and the BOJ’s own credibility to predict Japan’s CPI returning to 1.7% in 2017. Overall, July currency market action was emotional jittering that produced almost daily dollar up and down moves from speculation of the FED tightening, pushing the dollar higher. Then on the last day of July, the US Q2 GDP report disappointed, it seemed the FED and currency market proved to be more on the wrong side of US economic assessment than other markets.

The implementation of the non-market event risk management actions taken by SGMT one day prior to Brexit referendum in June were gradually lifted in first three weeks of July. The adaptation of gradual 1

normalization to SGMT model was due to the consideration of a prolonged period of Brexit political risk assessments rather than immediately material economic impacts. The gradual normalization of the SGMT special risk management actions in GBP and JPY positions had reduced some degree of portfolio volatilities in July and contributed about 0.5% pickup relative to SGMT full model. After the Brexit shock, SGMT model had generated information that generally pointed to a richer dollar against some currencies while a vulnerability of risk shocks for others. SGMT generally positioned itself in some dollar shorts and some restricted dollar exposures in others. As discussed above as well as in our June Investor Letter, in July, there were clearly some pockets of informational dislocations among the global markets as seen by SGMT model and the currency market. The patience of the SGMT strategy reaped the rewards from focusing on the fundamental identifications of the overall market information.

In looking forward, the patches of information voids or dislocations may continue to show up in the markets after Brexit but will certainly diminish their impact as cooler risk assessments of global markets continue. On the other hand, both the global economic status and the markets lack clear trends emerging from recent developments. Therefore, it may take longer for a trend strategy such as SGMT’s to emerge as the winner. Again SGMT will follow the markets as they further develop in coming months.

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

See SGMT June Investor Letter1

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Fund Name (SGMT As of June-16) 2016 2015 2014Annual

Ret Inception Sharpe MaxdownAlpha vs SP500

Beta vs SP500

SGMT (Net) 9.67% 13.05% 23.64% 21.35% May-14 1.33 20.18% 2.021 -0.02SGMT BackTest (Net) 3.12% 13.84% 32.27% 32.41% Feb-07 1.97 20.50% 2.527 -0.39SGMT (Gross) 15.75% 18.37% 32.17% 30.89% May-14 1.61 18.29% 2.700 -0.02SGMT BackTest (Gross) 8.09% 19.37% 44.45% 45.51% Feb-07 2.09 15.88% 3.408 -0.33

Alder Capital (Alder Global 20) 9.15% -3.27% 1.15% 6.57% Feb-01 0.34 28.51% 0.64 -0.01FDO Partners, LLC (Emerging Markets Quant. Currency) -4.05% -2.37% 1.98% 0.65% Jul-01 -0.29 8.60% 0.05 0.03First Quadrant L.P. (Tactical Currency Allocation L/S USD) 4.05% -1.53% 1.08% 1.81% May-95 -0.15 6.72% 0.17 -0.01Harmonic Capital (Currency 10v) -7.10% 7.91% 10.45% 4.07% May-03 0.32 16.73% 0.29 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) -12.44% 13.82% 49.08% 11.64% Oct-03 0.52 33.33% 1.05 0.05Premium Capital Advisors AG (Premium Currencies) -3.47% 5.22% 5.16% 3.17% Jan-04 0.27 14.51% 0.36 -0.13Quaesta Capital AG (v-Pro Volatility) -1.81% 20.08% 1.00% 5.84% Jul-07 0.88 9.39% 0.54 -0.08Salix Capital UK Ltd. (FDFX) -16.73% 13.50% 10.82% 5.97% Jan-11 0.55 13.28% 0.76 -0.16Rhicon Currency Management (Pte) Ltd (Strategic) 2.24% -3.33% 8.25% 5.11% Jan-04 0.53 8.56% 0.47 -0.03

Investment Capital Advisors LLC (ICA Managed Accounts) 43.04% 266.22% 26.02% 79.88% Nov-10 0.82 29.65% 8.19 -0.95Alternative 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) -2.63% 43.36% 2.58% 11.00% Jul-07 0.92 17.98% 1.01 -0.15CenturionFx Ltd (CENTURIONFX - 6X) 11.09% 39.44% 36.21% 52.67% Jan-06 2.03 21.60% 4.00 -0.2024FX Global Advisors Ltd. 62.64% 27.81% 26.94% 29.38% Jan-01 1.59 19.28% 2.28 0.03Hong Investment Advisors Ltd (HCM Rapier FX Index) -12.17% 25.32% 8.64% 7.11% May-13 0.55 13.55% 0.86 -0.22AE Capital Systematic FX Fund 7.27% 19.35% 5.74% 16.11% Oct-12 1.99 6.51% 1.32 -0.04P/E Investments (FX Strategy - Aggressive) -12.44% 13.82% 49.08% 11.64% Oct-03 0.52 33.33% 1.05 0.05Salix Capital UK Ltd. (FDFX) -16.73% 13.50% 10.82% 5.97% Jan-11 0.55 13.28% 0.76 -0.16Sequoia Capital Fund Management LLP (Systematic FX) -8.74% 12.97% -9.14% 5.70% Jun-11 0.56 19.09% 0.50 0.01

Investment Capital Advisors LLC (ICA Managed Accounts) 43.04% 266.22% 26.02% 79.88% Nov-10 0.82 29.65% 8.19 -0.95First Quadrant L.P. (Tactical Currency Allocation L/S USD 20%) 19.04% -12.19% 4.18% 4.97% Feb-11 0.24 31.76% 1.32 -0.74Alder Capital (Alder Global 20) 9.15% -3.27% 1.15% 6.57% Feb-01 0.34 28.51% 0.64 -0.01TMS Capital Ltd (Arktos GCS II) 4.61% -5.78% 3.83% 3.72% Feb-10 0.45 10.15% 0.42 -0.05IPM Informed Portfolio Mgmt. (IPM Systematic Curr. A) 16.60% 2.56% 7.01% 5.18% Apr-05 0.42 14.97% 0.59 -0.19P/E Investments (FX Strategy - Aggressive) -12.44% 13.82% 49.08% 11.64% Oct-03 0.52 33.33% 1.05 0.0524FX Global Advisors Ltd. 62.64% 27.81% 26.94% 29.38% Jan-01 1.59 19.28% 2.28 0.03Currency Insight Ltd (Global Currency Program) -2.94% 4.56% 2.24% 6.59% Jan-02 0.51 11.57% 0.60 -0.03Ortus Capital Management Ltd (Currency - Aggressive) 11.33% 0.87% 18.71% 13.11% Mar-04 0.43 52.79% 1.25 0.18Traub Capital Management, LLC (FX Strategy Fund I) -8.01% 9.39% 30.98% 3.17% Mar-11 0.19 22.87% 0.77 -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 July 29, 2016SGMT (Net) 15.95% 13.05% 24.17% 23.52% May-14 1.34 20.18% 2.040 -0.02SGMT BackTest (Net) 6.75% 13.84% 32.27% 32.58% Feb-07 1.97 20.50% 2.531 -0.40SGMT (Gross) 22.50% 18.37% 32.90% 32.94% May-14 1.62 18.29% 2.724 -0.02SGMT BackTest (Gross) 12.01% 19.37% 44.45% 45.60% Feb-07 2.09 16.55% 3.413 -0.34

BTOP FX Index Components as of June-16

Year 2015 Top Ranked CTA Currency Programs as of June-16

January 2016 Monthly Top Ranked CTA Currency as of June-16