Citi CUBES Diversified Commodities Fund. Supplement to the Prospectus

Transcription

1 Diversified Commodities Fund Supplement to the Prospectus This supplement (the Supplement) contains information in relation to Shares issued in respect of the Citi CUBES Diversified Commodities Fund (the Fund) created by CitiFirst Investments plc (the Company), an umbrella open-ended investment company with variable capital governed by the laws of Ireland and authorised by the Irish Financial Services Regulatory Authority. In relation to the Fund and Shares issued in respect of the Fund, this Supplement forms part of, may not be distributed (other than to prior recipients of the Prospectus (as defined below)) unless accompanied by, and must be read in conjunction with, the Prospectus dated 13 April 2010 issued by the Company. Words and expressions defined in the Prospectus will, unless otherwise defined in this Supplement, have the same meaning when used in this Supplement. CitiFirst Investments plc An umbrella fund with segregated liability between sub-funds A company incorporated with limited liability as an investment company with variable capital under the laws of Ireland with registered number Dated 28 September 2010 PROSPECTIVE INVESTORS SHOULD DETERMINE WHETHER AN INVESTMENT IN THE SHARES IS APPROPRIATE IN THEIR PARTICULAR CIRCUMSTANCES AND SHOULD SEEK APPROPRIATE INDEPENDENT ADVICE WHERE NECESSARY TO DETERMINE THE CONSEQUENCES OF AN INVESTMENT IN THE SHARES AND TO ARRIVE AT THEIR OWN EVALUATION OF THE INVESTMENT.

2 TABLE OF CONTENTS Important Information...3 Fund Summary...5 Terms of the Shares Representing Interests in the Fund...9 Risk Factors...16 Other Information...25 Definitions

3 IMPORTANT INFORMATION THIS DOCUMENT IS IMPORTANT. BEFORE YOU PURCHASE ANY SHARES REPRESENTING INTERESTS IN THE FUND AS DESCRIBED IN THIS SUPPLEMENT YOU SHOULD ENSURE THAT YOU FULLY UNDERSTAND THE NATURE OF SUCH AN INVESTMENT, THE RISKS INVOLVED AND YOUR OWN PERSONAL CIRCUMSTANCES. IF YOU ARE IN ANY DOUBT ABOUT THE CONTENTS OF THIS SUPPLEMENT YOU SHOULD TAKE ADVICE FROM AN APPROPRIATELY QUALIFIED ADVISOR. It is the intention of the Company to link the Fund to the performance of the Index (as defined below) by investing on behalf of the Fund in Derivative Contracts. Risks associated with the use of derivatives are generally described in the Prospectus (see the section headed "Risk Factors") and this Supplement (see the section headed "Risk Factors"). The Directors of the Company expect that the Net Asset Value of the Fund will have medium to high volatility through investment in Derivative Contracts. Suitability of Investment You should inform yourself as to (a) the possible tax consequences, (b) the legal and regulatory requirements, (c) any foreign exchange restrictions or exchange control requirements and (d) any other requisite governmental or other consents or formalities which you might encounter under the laws of the countries of your incorporation, citizenship, residence or domicile and which might be relevant to your purchase, holding or disposal of the Shares. The value of the Shares may go up or down and you may not get back the amount you have invested. See the section headed "Risk Factors" of the Prospectus and the section headed "Risk Factors" of this Supplement for a discussion of certain risks that should be considered by you. An investment in the Shares is only suitable for you if you (either alone or with the help of an appropriate financial or other advisor) are able to assess the merits and risks of such an investment and have sufficient resources to be able to bear any losses that may result from such an investment. The contents of this document are not intended to contain and should not be regarded as containing advice relating to legal, taxation, investment or any other matters. Responsibility The Directors (whose names appear under the heading "Management of the Company Directors of the Company" of the Prospectus) accept responsibility for the information contained in the Prospectus and this Supplement. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this Supplement when read together with the Prospectus (as complemented, modified or supplemented by this Supplement) is in accordance with the facts as at the date of this Supplement and does not omit anything likely to affect the import of such information. Listing Application will be made to the Irish Stock Exchange for the listing of the Shares issued and available to be issued to be admitted to listing on the Official List and trading on the main market of the Irish Stock Exchange on or about the Initial Issue Date. This Supplement and the Prospectus together comprise listing particulars for the purposes of listing the Shares on the Official List and trading on the main market of the Irish Stock Exchange. 3

4 General This Supplement sets out information in relation to the Shares and the Fund. You must also refer to the Prospectus, which is separate to this document and describes the Company and provides general information about offers of Shares in the Company. You should not take any action in respect of the Shares unless you have received a copy of the Prospectus. Should there be any inconsistency between the contents of the Prospectus and this Supplement, the contents of this Supplement will, to the extent of any such inconsistency, prevail. This Supplement and the Prospectus should both be carefully read in their entirety before any investment decision with respect to the Shares is made. This Supplement has been prepared solely for the consideration of potential investors in the Shares. The Shares are not being, nor will they be, offered in any country for subscription or purchase to the public or to any section of the public where the marketing or offer of the Shares may be restricted by applicable law. Distribution of this Supplement and Selling Restrictions Distribution of this Supplement is not authorised unless accompanied by a copy of the Prospectus (other than to prior recipients of the Prospectus). The distribution of this Supplement and the offering or purchase of the Shares may be restricted in certain jurisdictions. If you receive a copy of this Supplement and/or the Prospectus you may not treat such document(s) as constituting an offer, invitation or solicitation to you to subscribe for any Shares unless, in the relevant jurisdiction, such an offer, invitation or solicitation could lawfully be made to you without compliance with any registration or other legal requirement or it is clear from the Supplement or addendum for the relevant jurisdiction that all registration and legal requirements for that relevant jurisdiction have been complied with. If you wish to apply for the opportunity to purchase any Shares, it is your duty to inform yourself of, and to observe, all applicable laws and regulations of any relevant jurisdiction. In particular, you should inform yourself as to the legal requirements of so applying, and any applicable exchange control regulations and taxes in the countries of your respective incorporation, citizenship, residence or domicile. 4

5 FUND SUMMARY Investment Objective The investment objective of the Fund is to achieve capital appreciation by gaining exposure to the Citi CUBES (DJ-UBSCI SM Weighted) Index (the Index) which is intended to track exposure to commodities broadly in proportion to the exposure to commodities within the Dow Jones-UBS Commodity Index SM (DJ- UBSCI SM ). The DJ-UBSCI SM is designed to be a highly liquid and diversified benchmark for commodities investments. DJ-UBSCI SM uses liquidity data and U.S. dollar-weighted production data in determining the relative quantities of commodities to be included in the index. At present, DJ-UBSCI SM includes the following 19 commodities across the following sectors: energy (crude oil, natural gas, gasoline and heating oil), precious metals (gold and silver), industrial metals (copper, aluminium, nickel and zinc), agriculture (wheat, corn, soybeans, soybean oil, coffee, sugar and cotton) and livestock (lean hogs and live cattle). Details of how the Fund is exposed to the Index is set out below. Investment Policy and Derivative Contracts In order to achieve the investment objective, the Company on behalf of the Fund intends to invest the net proceeds of any issue of Shares (whether on the Initial Issue Date or subsequently) in Fund Assets. The Fund Assets will only include Derivative Contracts entered into with an Approved Counterparty (expected to be Citi and/or one or more of its Affiliates). The Company on behalf of the Fund will enter into a separate Derivative Contract in respect of each Class with each Derivative Contract for each Class referencing the relevant Currency Version of the Index. Each Derivative Contract will be on similar terms except in relation to the level of fees. Such Derivative Contracts shall be fully funded swaps entered into with an Approved Counterparty. The terms of the Derivative Contracts will provide that in return for receiving the net subscription proceeds of the Shares of the relevant Classes, the Derivative Contracts will give exposure to the performance of the Currency Versions of the Index. The Investment Advisor will advise the Manager in respect of the Derivative Contracts that the Company will enter into on behalf of the Fund in order to achieve its investment objective. Each Derivative Contract will be collateralised to comply with applicable investment restrictions and will comprise an ISDA Master Agreement (including the Schedule and, if applicable, the Credit Support Annex) and a confirmation. Any interest payable in respect of the collateral will be delivered to the Company pursuant to the terms of the Derivative Contract, following which delivery such interest shall form part of the Fund Assets. Further details relating to the Derivative Contracts are set out under "Documentation" below. Leverage Exposure to the Index is not leveraged and the Fund will not be subject to any shortfall risk. Where the Fund invests in fully funded swaps to gain an exposure to the Index, such investment will not generate any leverage within the Fund. 5

6 Description of the Index The Index is sponsored by Citi (the Index Sponsor). The Index reflects the weighted performance of the Citi Commodities Curve Beta Enhanced Indices (Citi CUBES) as set out under the heading "Underlying Indices" below (each an Underlying Index and together, the Underlying Indices). The Index is rebalanced at the beginning of each month to the commodity weights of the DJ-UBSCI SM existing at the end of the immediately preceding month. The Dow Jones-UBS Commodity Index SM (DJ-UBSCI SM ) is designed to be a highly liquid and diversified benchmark for commodities investments. DJ-UBSCI SM uses liquidity data and U.S. dollar-weighted production data in determining the relative quantities of commodities to be included in the index. At present, DJ-UBSCI SM includes 19 commodities across the energy, precious metals, industrial metals, agriculture and livestock sectors. DJ-UBSCI SM was created in 1998, and is presently owned by UBS Securities LLC. The index is jointly marketed by UBS Securities LLC and Dow Jones & Company and calculated by Dow Jones & Company in conjunction with UBS Securities LLC. The Index was established on 1 July 2009 and back-calculated from the Start Date of 31 December 1998 and is based on a pre-defined set of systematic rules set out in the Index Conditions. The Index Conditions and any changes to the Index are available on the website of the Index Sponsor at The Index has four currency versions: USD, EUR, GBP and JPY (each a Currency Version). The Index Value in respect of each Currency Version is determined in accordance with the relevant Index Conditions. Whilst the Index Sponsor has agreed that it will act in good faith and in a commercially reasonable manner in making determinations and calculations and take into account the matters referred to in the Index Conditions in so doing, there can be no assurance that the making of any such determination or calculation will not affect the performance of the Index and in turn the Net Asset Value per Share of each Class. The basis on which the Index Sponsor will make determinations and calculations is respectively set out in the Index Conditions. The market risk of the Fund will be measured in accordance with the Risk Management Policy of the Fund. Exposure to the Index is not leveraged. While the Index Sponsor currently employs the methodology described in the Index Conditions to calculate the Index, if market, regulatory, juridical or fiscal circumstances or, without limitation, any other circumstances arise that would, in the determination of the Index Sponsor, necessitate a modification or change to such methodology, the Index Sponsor may make such modifications or changes as it considers appropriate to maintain the economic objectives of the Index. For so long as the Financial Regulator so requires, promptly upon becoming aware that any such modifications or changes which would have a material effect on such methodology are to be, or have been, made, the Company shall, if required, on behalf of the Fund, notify the Financial Regulator in accordance with the Financial Regulator's requirements and obtain the approval of the Financial Regulator. 6

7 The Underlying Indices As at the date of this Supplement, the Index reflects the weighted performance of the Underlying Indices set out in the table below. No Underlying Index WTI Crude ER Natural Gas ER Gasoline ER Heating Oil ER Gold ER Silver ER Copper (CMX) ER Aluminum ER Nickel ER Zinc ER Wheat (CBOT) ER Corn ER Soybeans ER Soybean Oil ER Coffee ER Sugar ER Cotton ER Lean Hogs ER Live Cattle ER Commodity Contract Type Commodity Contract Type Details Exchange Bloomberg Ticker WTI Crude Oil NYMEX CL Natural Gas NYMEX NG RBOB Gasoline NYMEX XB Heating Oil NYMEX HO Gold COMEX GC Silver COMEX SI Copper COMEX HG Aluminum LME LA Nickel LME LN Zinc LME LX Wheat CBOT W Corn CBOT C Soybeans CBOT S Soybean Oil CBOT BO Coffee NYBOT KC Sugar NYBOT SB Cotton NYBOT CT Lean Hogs CME LH Live Cattle CME LC 7

8 Each Underlying Index is a mono-index representing exposure to one commodity. The index sponsor in respect of the Underlying Indices (the Underlying Index Sponsor) selects a futures contract for each commodity which will comprise the relevant Underlying Index for the relevant month in accordance with the Index Conditions. Full details of the methodology of the Underlying Indices are set out in the Index Conditions of (the Index Conditions), which are available on the following website: Legal Structure Set out below is a simplified structure diagram showing the legal structure underlying the Shares including the Index. Shares issued in respect of the Fund CitiFirst Investments plc Derivative Contracts (1) Approved Counterparty (2) Diversified Commodities Fund Index ( (DJ-UBSCI SM Weighted) Index) (3) (1) The Derivative Contracts through which the Fund will gain exposure to the relevant Currency Version of the Index. The Derivative Contracts may not exactly match the performance of the Index. This tracking error is due to, but not limited to, errors and any costs. The Derivative Contracts will be collateralised in order that the investment restrictions applicable in respect of the Fund are complied with. (2) Citi and/or its Affiliates. (3) The Index provides notional exposure to the Underlying Indices. 8

9 Share Classes TERMS OF THE SHARES REPRESENTING INTERESTS IN THE FUND On the Initial Issue Date, the following Classes of Shares may be issued in respect of the Fund: the Class A Shares denominated in each of USD, EUR, GBP and JPY and the Class I Shares denominated in each of USD, EUR, GBP and JPY. The terms of each Class of Shares will differ and are described more fully below. The Company in respect of the Fund may create other Classes of Shares in the future. Valuation The Net Asset Value of the Fund and the Net Asset Value per Share of each Class will be determined as of the Valuation Point on each Dealing Day in accordance with the rules set out in the Prospectus. The Net Asset Value per Share will differ on each Dealing Day as: (a) the value of the Derivative Contracts will increase or decrease over time by reference to the performance of the Index; (b) the value of the Fund Assets will increase or decrease over time by reference to a variety of factors including, amongst others, market risks, credit quality, corporate actions, macro economic factors, currency markets, interest rates and speculation; (c) fees payable to the Approved Counterparty for the provision and hedging of the Derivative Contracts, which are not expected to exceed 0.50 per cent. per annum; and (d) fees and expenses in relation to the Fund will accrue over time. The Net Asset Value per Share will be calculated separately for each Class of Share. The Net Asset Value of the Fund will be determined separately by reference to the relevant Fund Assets. If additional Classes of Shares are issued, the Net Asset Value per Share will also be calculated separately for each such additional Class. Accordingly, you should note that the Net Asset Value per Share at any time may be less than the original value of your investment and you should be prepared to sustain a loss of some or all of your investment. Repurchase Price The Repurchase Price of each Share on any Dealing Day will be the Net Asset Value per Share of the relevant Class as determined on that Dealing Day. If Shares are repurchased by the Company on behalf of the Fund, a proportion of the Fund Assets may be realised by the Company on behalf of the Fund. Dividend Policy There are no dividend entitlements for the Shares. The Directors intend to operate the Fund relating to the GBP Class A Shares and the GBP Class I Shares with the objective of satisfying the conditions for certification by HMRC as a reporting fund for United Kingdom tax purposes, although no guarantee can be given that this will be the outcome. It is intended that the Company on behalf of the Fund relating to the GBP Class A Shares and the GBP Class I Shares will make an application for certification by HMRC as a reporting fund for the purposes of relevant United Kingdom tax legislation. 9

10 General Information Relating to the Fund Initial Offer Period Initial Issue Date Final Repurchase Date Business Day Dealing Day Valuation Point Dealing Deadline Settlement Date The Initial Offer Period will start at 9.00 a.m. (Dublin time) on 1 October 2010 and end at 5.00 p.m. (Dublin time) on 12 November 2010 or such later time and date as may be determined by the Directors at their absolute discretion and notified to the Financial Regulator. 17 November 2010 or such earlier or later date as may be determined by the Directors at their absolute discretion. Not applicable. A day (other than a Saturday or a Sunday) on which (a) the Trans- European Automated Real-time Gross Settlement Express Transfer (TARGET2) System is open; (b) commercial banks and foreign exchange markets are open for general business and settle payments in Dublin, London and Luxembourg; and (c) CREST, Clearstream, Luxembourg and Euroclear are open for business. Any Business Day which is also a day during which all exchanges on which all Commodity Contract Types included in the Index trades (as listed in Condition 1.2) are scheduled to be open for trading (an Exchange Business Day), except that if there is no such Business Day that is also an Exchange Business Day in any fortnight the Directors shall designate a day as the Dealing Day so that there shall be at least one Dealing Day per fortnight. Shareholders will be able to contact the Administrator to ascertain the next scheduled Dealing Day p.m., UK time on each Business Day a.m., UK time on each Dealing Day. The Directors may, in exceptional circumstances, elect to extend the Dealing Deadline in their sole and absolute discretion, provided any extension shall be before the relevant Valuation Point. In the case of subscriptions, this will be up to two Business Days immediately following the relevant Dealing Day, assuming receipt of the relevant signed subscription application request prior to the Dealing Deadline for such Dealing Day and cleared funds as confirmed by the Administrator. In the case of repurchases, up to five Business Days after the relevant Dealing Day, assuming receipt of the relevant signed repurchase request prior to the Dealing Deadline for such Dealing Day as confirmed by the Administrator. Minimum Fund Size USD 50,000,000 (or the equivalent in such other relevant currency) or such other amount as the Directors may determine from time to time at their absolute discretion. 10

11 Compulsory Early Repurchase In the event that the Derivative Contracts entered into in respect of the Fund are terminated early, the Company will give notice to the holders of the Shares of the relevant Classes of such early repurchase and such Shares will be compulsorily repurchased on the date specified for repurchase in such notice. The Company may compulsorily repurchase all of the Shares if the Net Asset Value per Share of any Share is less than 10 per cent. of the Initial Issue Price for such Share by giving notice to the holders of the Shares of such early repurchase and the Shares will be compulsorily repurchased on the date specified for repurchase in such notice. If, at any time, the total outstanding share holding of a particular Class of Shares is equal to or less than the Minimum Share Class size, the Company may compulsorily repurchase all of the Shares of that particular Class of Shares by giving notice to the holders of that Class of Shares of such early repurchase and those Shares will be compulsorily repurchased on the date specified for repurchase in such notice. Base Currency Investment Advisor Manager Promoter Distributor Custodian Administrator USD Citi. The address and business description of the Investment Advisor are included in the Prospectus. Capita Financial Managers (Ireland) Limited. Citibank International plc. Citi. J.P.Morgan Bank (Ireland) plc. Capita Financial Administrators (Ireland) Limited. 11

12 Description of the Class A Shares and the Class I Shares Share class description Class A Class I Currency USD / EUR / GBP / JPY USD / EUR / GBP / JPY Listing Irish Stock Exchange Initial Issue Price USD 100 / EUR 100 / GBP 100 / JPY 1,000 per Share USD 100 / EUR 100 / GBP 100 / JPY 1,000 per Share Preliminary Charge During the Initial Offer Period up to 5 per cent. of the Initial Issue Price On any subsequent Dealing Day, up to 5 per cent. of the Net Asset Value per Share as of the applicable Dealing Day Manager and Administration Fee Up to 1.00 per cent. Up to 0.5 per cent. Repurchase Charge Not applicable Not applicable Right to Exchange Yes Yes Exchange Charge Zero Zero Minimum Initial Investment Amount Minimum Additional Investment Amount USD 1,000 / EUR 1,000 / GBP 1,000 / JPY 100,000 USD 1,000 / EUR 1,000 / GBP 1,000 / JPY 100,000 USD 1,000,000 / EUR 1,000,000 / GBP 1,000,000 / JPY 100,000,000 USD 1,000,000 / EUR 1,000,000 / GBP 1,000,000 / JPY 100,000,000 Minimum Repurchase Amount 10 Shares 10,000 Shares Minimum Share Class Size USD 10,000,000 / EUR 10,000,000 / GBP 10,000,000 / JPY 1,000,000,000 USD 10,000,000 / EUR 10,000,000 / GBP 10,000,000 / JPY 1,000,000,000 Minimum Shareholding 10 Shares 10,000 Shares SEDOL Code B466FQ0 / B40H4H3 / B3ZY4X8 / B3X66T6 ISIN Code IE00B466FQ00 / IE00B40H4H31 / IE00B3ZY4X80 / IE00B3X66T63 B3YRW89 / B408WN8 / B45LS12 / B43J948 IE00B3YRW893 / IE00B408WN86 / IE00B45LS127 / IE00B43J

13 Fees and expenses The following fees will be incurred by the Company on behalf of the Fund and will affect the Net Asset Value per Share of each Class issued in respect of the Fund. (a) Manager and Administration Fee Up to 1.00 per cent. per annum in respect of the Class A Shares and up to 0.5 per cent. per annum in respect of the Class I Shares of the aggregate Net Asset Value per Share (plus VAT, if any) is payable by the Company out of the assets of the Fund attributable to the Shares to the Manager. Such fee will be calculated and accrued on each Dealing Day using the Net Asset Value per Share on such Dealing Day. The Manager and Administration Fee will be paid monthly in arrears. The Manager will pay out of the Manager and Administration Fee (and not out of the assets of the Fund) the fees of the Investment Advisor, Administrator, Distributor and the Custodian. The Manager is not entitled to be reimbursed out of the assets of the Fund for its out-of-pocket expenses. Each of the Administrator, the Investment Advisor, the Distributor and the Custodian (including the expenses of any sub-custodian which shall be at normal commercial rates) is entitled to be repaid by the Manager its agreed upon transaction and other charges (which will be at normal commercial rates) and other reasonable out-of-pocket expenses out of the assets of the Fund (plus VAT if any). (b) Other fees and charges Shareholders should also note that a Preliminary Charge may be charged by the Distributor, some of which may be paid by the Distributor to Sub-Distributors, on the subscription of any Share of the relevant Class as set out in the section headed "Description of the Shares" above. The costs of establishment in respect of the Fund shall not be borne by the Fund but shall be borne by Citi. The fees payable to the Approved Counterparty for the provision and hedging of the Derivative Contracts are not expected to exceed 0.50 per cent. per annum. This section headed Fees and Expenses should be read in conjunction with the section headed Fees and Expenses in the Prospectus. Risk Management The Company has filed with the Financial Regulator a risk management policy statement setting out how it intends to measure, monitor and manage the various risks associated with Derivative Contracts it intends to enter into with Approved Counterparties. The Company on behalf of the relevant Fund will only enter into Derivative Contracts of the type listed in the risk management policy statement. The Company will, on request, provide supplementary information to Shareholders relating to the risk management methods employed, including the quantitative limits that are applied and any recent developments in the risk and yield characteristics of the main categories of investments held by the Company on behalf of the Fund. 13

14 Documentation The Derivative Contracts to be entered into by the Approved Counterparty and the Company on behalf of the Fund will (together with any interest accrued in respect of the Collateral pursuant to the terms of the Derivative Contracts as further described below) comprise the Fund Assets and give exposure to the Currency Versions of the Index. The Derivative Contracts may not exactly match the performance of the relevant Currency Version of the Index. This tracking error is due to, but not limited to, errors and costs. Each Derivative Contract will be collateralised to comply with applicable investment restrictions and will comprise an ISDA Master Agreement (including the Schedule and, if applicable, the Credit Support Annex) and a confirmation. The Derivative Contracts will be dated as of a date on or before the Initial Issue Date. On or shortly prior to the first issue of Shares of any other Class created in respect of the Fund, a new Derivative Contract will be entered into by the Company with an Approved Counterparty to take account of the relevant new Class. From time to time, appropriate modifications (for example, additional confirmations) may be made in relation to repurchases and subscriptions of Shares. In addition, the Derivative Contracts will include provisions relating to their termination. Collateral The Approved Counterparty to each Derivative Contract will be required under the terms of the relevant Derivative Contract to provide collateral (the Collateral) to the Company so that the Company's risk exposure to the relevant Approved Counterparty is in compliance with the Financial Regulator's UCITS requirements. For the purposes of efficient portfolio management as well as for investment purposes, the Company may enter into repurchase (repo) transactions with respect to any cash provided to it as Collateral by the Approved Counterparty. Any such repo transactions will be undertaken subject to the conditions and limits set out in the Financial Regulator Notices and the Collateral obtained under such repo transactions must equal or exceed in value at all times the value of the amount invested. Investment Restrictions The general investment restrictions set out under "Funds Investment Restrictions" in the Prospectus apply to the Fund. In addition to the general investment restrictions set out in the paragraph above, the Fund will not invest more than 10 per cent. in aggregate of its Net Asset Value in either UCITS and/or any CIS. Limited recourse The Company is a limited liability investment company. A Shareholder will solely be entitled to look to the Fund Assets (which will only consist of payments made to the Company under the Derivative Contracts) in respect of all payments in respect of its Shares. Accordingly, the ability of the Company to make payments in respect of the Shares is highly dependent on the credit risk of the Approved Counterparty to the Derivative Contracts (expected to be Citi and/or its Affiliates. If the realised net assets of the Fund are insufficient to pay any amounts payable in respect of the Shares, the Shareholder will have no further right of payment in respect of such Shares nor any claim against or recourse to any of the assets of any other Fund or any other asset of the Company. Borrowings 14

15 In accordance with the general provisions set out in the Prospectus under the heading "Funds Borrowing and Lending Powers", the Company on behalf of the Fund may borrow up to 10 per cent. of the Net Asset Value of the Fund on a temporary basis. 15

16 RISK FACTORS GENERAL Overview An investment in the Shares involves certain risks and the description of the risks that follows is not, and does not purport to be, exhaustive. More than one investment risk may have simultaneous effects with respect to the value of the Shares and the effect of any single investment risk may not be predictable. In addition, more than one investment risk may have a compounding effect and no assurance can be given as to the effect that any combination of investment risks may have on the value of the Shares. The statements in these Risk Factors are qualified in their entirety by the remaining contents of this Supplement and the Prospectus. Capitalised terms used but not defined in these Risk Factors have the meanings given to them elsewhere in this Supplement. Suitability Prospective investors should determine whether an investment in the Shares is appropriate in their particular circumstances and should consult with their legal, business and tax advisors to determine the consequences of an investment in the Shares and to arrive at their own evaluation of the investment. Investment in the Shares is only suitable for investors who: (a) (b) (c) have the requisite knowledge and experience in financial and business matters to evaluate the merits and risks associated with an investment in the Shares; have access to, and knowledge of, appropriate analytical tools to evaluate such merits and risks in the context of their financial situation; and are capable of bearing the economic risk of an investment in the Shares. Prospective investors should make there own independent decision to invest in Shares. Prospective investors should not rely on any information communicated (in any manner) by the Company, the Directors, the Manager or Citi or any of their respective Affiliates as investment advice or as a recommendation to invest in the Shares, which shall include, amongst other things, any such information, explanations or discussions concerning the terms and conditions of the Shares, or related features. No information communicated (in any manner) by the Company, the Directors, the Manager, Citi or any of their respective Affiliates shall be regarded as an assurance or guarantee regarding the expected performance of the Index, the Underlying Indices or the Shares. Prospective investors should understand that the amounts payable in respect of the Shares will depend on the performance of the Index. Prospective investors may lose part or all of their originally invested capital. Furthermore, any return on the Shares may be less than the amount that might have been achieved had the capital invested in the Shares been placed on deposit or invested in fixed income investment grade bonds for the same period. The Company, the Directors, the Manager or Citi or any of their respective Affiliates will not act as a fiduciary or trustee for, or as an advisor to, investors in the Shares. 16

17 Potential conflicts of interest Citi and its Affiliates have various roles that may give rise to potential conflicts of interest in relation to the Shares. In particular, Citi and/or its Affiliates act as Investment Advisor, Distributor and Promoter in respect of the Shares, Citi and/or one of its Affiliates is expected to act as the Approved Counterparty and Calculation Agent in respect of the Derivative Contracts, Citi will act as Index Sponsor for the Index and as Underlying Index Sponsor in respect of the Underlying Indices. Citi and its Affiliates will only have the duties and responsibilities expressly agreed to by them in their relevant capacities and will not be deemed to have other duties or responsibilities or be deemed to have a standard of care other than as expressly provided in respect of each capacity in which they act. Citi and its Affiliates may, for their own account (including for the purpose of hedging the Approved Counterparty's obligations under the Derivative Contracts) or on behalf of their customers, trade in financial instruments, including derivatives, linked to the Index or the Underlying Indices. These activities may result in conflicts of interest for Citi and its Affiliates and may, directly or indirectly, affect the level of the Index and/or the Underlying Indices (either positively or negatively) and in turn the Net Asset Value of the Shares. Furthermore, Citi and/or its Affiliates may from time to time acquire non-public information relating to the Index and/or the Underlying Indices, interest rates, exchange rates and/or other factors that may affect the value of the Shares. Any such information will not be disclosed to the Company, the Manager or the Shareholders. Citi and/or its Affiliates may from time to time express views as to the Index, the Underlying Indices, interest rates, exchange rates and other factors that may affect the value of the Shares. Any such views may not be taken into account by Citi in the performance of its role as Calculation Agent, Investment Advisor or any other role held by it in respect of the Shares. Citi and/or its Affiliates may from time to time subscribe or request that Shares held by them be repurchased. Any such subscriptions or repurchases may adversely affect the value of the other Shares then in issue. Calculation Agent discretion The Net Asset Value per Share of each Class will depend on the value of the Derivative Contracts through which the Shares will be exposed to the Index. If events occur that affect the composition of the Index or its valuation, the Calculation Agent to the Derivative Contracts may make changes to the terms of the Derivative Contracts to take account of these events which may be adverse to Shareholders. Furthermore, any such changes may be made by the Calculation Agent without the consent of Shareholders and the Calculation Agent is under no obligation to take into account the interests of Shareholders. 17

18 RISKS RELATING TO THE SHARES Capital at risk The Shares are not capital protected. Accordingly, investors may lose part or all of the capital originally invested by them. Early repurchase Investors should note that although there is no Final Repurchase Date in respect of each Class of Shares, the outstanding Shares of each Class of Shares will be compulsorily repurchased early in certain circumstances, for example: (a) (b) (c) (d) if the Derivative Contracts are terminated early for any reason, the outstanding Shares of the relevant Classes may be compulsorily repurchased; if the Derivative Contracts are terminated early as a result of an adjustment or disruption event, the outstanding Shares of the relevant Classes will be compulsorily repurchased; if, at any time, the Net Asset Value per Share of any Share is less than 10 per cent. of the Initial Issue Price of the relevant Share, all of the outstanding Shares will be compulsorily repurchased; or if, at any time, the total outstanding share holding of a particular Class of Shares is equal to or less than the Minimum Share Class Size, the Company may compulsorily repurchase all of the Shares of that particular Class of Shares by giving notice to the holders of that Class of Shares of such early repurchase and those Shares will be compulsorily repurchased on the date specified for repurchase in such notice. Derivative Contracts The Derivative Contracts provide exposure to the Index but the absolute return under the Derivative Contracts may not correspond directly to the return on the Index. This tracking error is due to a number of factors including, but not limited to, errors and any costs. Cross liability between Classes On the Initial Issue Date there will be more than one Class of Shares issued in respect of the Fund. Additional Classes of Shares may be created at any time without the consent of the then existing Shareholders in accordance with the Financial Regulator's requirements. Each Class of Shares issued in respect of the Fund will perform differently as a result of differences in currency and fees (as applicable). The Company on behalf of the Fund will enter into Derivative Contracts that are designed to generate the cashflows payable in respect of the Shares of the relevant Classes. There is no legal segregation of assets and liabilities between Classes and there is no separate portfolio of assets held for each Class. Accordingly, if more than one Class of Shares has been issued and there is a shortfall attributable to one Class, this will adversely affect the other Classes of Shares issued in respect of the Fund. See the paragraphs entitled "Allocation of shortfalls among Classes of a Fund" and "Segregated Liability between Funds" in the section headed "Risk Factors" of the Prospectus. Fees and expenses The Net Asset Value of the Shares will be reduced by certain fees and expenses as described under "Fees and Expenses" in the section of this document headed "Terms of the Shares Representing Interests in the Fund". 18

19 Taxation Each Shareholder will assume and be solely responsible for any and all taxes of any jurisdiction or governmental or regulatory authority, including, without limitation, any state or local taxes or other like assessment or charges that may be applicable to any payment to it in respect of the Shares. In the event that withholding or deduction of any taxes from payments of principal or interest, if any, in respect of the Shares is required by law in any jurisdiction, the Company is not under any obligation to make any additional payments to the Shareholders in respect of such withholding or deduction. Collateral The Approved Counterparty is required to provide Collateral in accordance with the UCITS Guidelines. The Approved Counterparty is required to provide Collateral under each Derivative Contract to which the Company will have recourse if the Approved Counterparty defaults in its obligations under such Derivative Contract. The Collateral may comprise, or in the case of cash collateral be invested in, assets which are not admitted to any public trading market and may therefore be illiquid and not readily realisable, and from time to time the value of such assets may be less than the amount of the termination payment under such Derivative Contract. In such circumstances, the amount realisable by investors in respect of the Shares may be limited to the amount realisable on the Collateral which may be less than the expected Net Asset Value per Share. The Shares are not a substitute for direct investment in commodities An investment in the Shares is not a substitute for a direct investment in commodities and returns on the Shares may not reflect the returns that could be obtained by owning the commodities that underlie the Underlying Indices. The performance of the Shares is dependent on foreign exchange rates Classes of Shares denominated in currencies other than USD are exposed to the Currency Version of the Index relating to the currency of denomination. Consequently, returns in respect of a Class denominated in one currency may differ from those in respect of Classes denominated in different currencies. For example, if the Index Value (which is denominated in USD) increases, the amount of increase in the Currency Version denominated in Euros will depend on the USD / Euro exchange rate specified in the Index Conditions; if the USD is relatively weak against the Euro, the increase in the Currency Version denominated in Euro will be smaller than if the USD is relatively strong against the Euro. In addition, the exchange rates used in determining the Currency Versions may be less favourable than exchange rates which may be obtained from other sources. 19

20 RISKS RELATING TO THE INDEX The performance of the Shares will depend on the Index The Index was developed by Citi. Citi calculates and maintains the Index based on the methodology set out in the Index Conditions and is also responsible for publishing the Index Value and the Currency Versions of the Index on Bloomberg. The Shares are linked to the Index through the Derivative Contracts. The Index provides exposure to the Underlying Indices. Accordingly, potential investors in the Shares should determine whether an investment linked to the Index is suitable for them in light of their individual circumstances and investment objectives. In particular, prospective investors should ensure that they understand the nature of the Index's exposure to the Underlying Indices, how each Underlying Index is composed and calculated in accordance with its rules and how their investment will be linked to the Index. Prospective investors should be aware that although the Shares will be affected by the performance of the Index and the Underlying Indices, the Shares will perform differently to the performance of the Index and the Underlying Indices. There can be no assurance that the Index will reflect a successful investment policy. Neither the Index nor the Underlying Indices is designed to be representative of any market in relation to commodities or a segment of any such market. Prospective investors should note that the past performance of the Index or Underlying Indices or any similar index or trading policy should not be used as a guide to the future performance of the Index or the Underlying Indices, as applicable. Exposure to the relevant Currency Version of the Index is achieved through an investment in Derivative Contracts, which seek to provide Shareholders of each Class with a return linked to the relevant Currency Version of the Index. Returns across Classes will be the same as those in respect of any other Classes denominated in the same currency save for differences arising from the different fees charged. Given the nature of Derivative Contracts and the costs that may be involved in their utilisation, the value of the Derivative Contracts (which ultimately determine the return Shareholders will receive) may not exactly track the value of the relevant Currency Version of the Index. Shareholders should thus be familiar with the risks associated with such an approach to investment. The Index is exposed to commodity risks Through its exposure to the Underlying Indices, the Index is calculated by reference to the prices of certain commodity contracts and is therefore subject to many of the risks of direct investment in commodities. In addition to general economic and market factors, the commodity markets are subject to temporary distortions or other disruptions due to various factors, including changes in supply and demand, the lack of liquidity in those markets, speculation and government regulation and intervention, any of which may increase the risk of price volatility. Commodity futures markets are subject to regulations that limit the amount of fluctuation in prices that may occur during a single business day. Commodities are also subject to changes in regulation that may affect their price or liquidity. Reduced liquidity of underlying contracts may affect the level of the Index and Underlying Indices or require changes to their components or methodology. 20

21 The composition of the Index is subject to change The Index is re-weighted monthly based on the weights of the commodities within DJ-UBSCI SM. Additions and removals of commodities based upon the re-weighting formulation in the DJ-UBSCI SM will result in similar changes to the composition of the Index. Index Sponsor discretion The Net Asset Value per Share will largely depend on the Index Value or the level of the Currency Versions of the Index to which the Shares are exposed through the Derivative Contracts. Potential investors in the Shares should note that the methodology for calculating the Index confers on the Index Sponsor broad discretions in making certain determinations, calculations and decisions which could adversely affect the Index Value, the levels of the Currency Versions and the Shares. The Index Sponsor is not required to (and will not) consider the interests of Shareholders when exercising its discretion nor any liability in respect of any decisions taken. Adjustment to Index Methodology If market, regulatory, juridical or fiscal circumstances or, without limitation, any other circumstances arise that would, in the determination of the Index Sponsor, necessitate a modification or change to the methodology for calculating the Index as described in the Index Conditions, the Index Sponsor may make such modifications or changes as it considers appropriate to maintain the economic objectives of the Index. Any changes will be available on the website: Exposure to the Index is notional Prospective investors should understand that the "investments" made in the Index are notional investments each with no separate legal personality, and that adjustments to the level of investment in them will be made solely in books and records kept on behalf of the Index Sponsor. Shareholders claims are limited to the Fund Assets held by the Company on behalf of the Fund which will comprise Derivative Contracts and any interest accrued in respect of the Collateral pursuant to the terms of the Derivative Contracts. The Net Asset Value of the Shares will therefore be impacted by the change in value of the Derivative Contracts. Factors that could impact the value of Derivatives Contracts include conditions in currency markets, interest rates, volatilities (realised and implied by the market), supply and demand factors and such other modelling and quantitative assumptions that the Approved Counterparty and/or the market may take into consideration when valuing derivatives. Prospective investors should understand that due to costs and expenses at the various levels of the structure underlying the Shares, the performance of the Shares will not fully correlate to changes in the value of the Index over the life of the Shares. RISKS RELATING TO THE UNDERLYING INDICES The Underlying Indices may underperform commodities benchmark indices The Underlying Indices may underperform other commodities indices including the S&P GSCI TM and DJ-UBSCI SM. The Underlying Indices employ a strategy which differs from the prefixed monthly roll schedule of the S&P GSCI TM and DJ-UBSCI SM. Consequently, the Index will not exactly reflect the performance of the DJ-UBSCI SM and may underperform it. 21

22 The performance of the Underlying Indices may be significantly lower than the performance of certain underlying components The performance of the Underlying Indices could be lower and in certain circumstances significantly lower than the performance of alternative indices with similar risk characteristics. This could be the case even if some of the futures contracts which comprise the Underlying Indices, or the commodities underlying such futures contracts, have generated significant returns. Underperformance by one or more of the futures contracts included in the Underlying Indices may reduce the performance of the Underlying Indices and thus the Index. The Underlying Indices have limited performance history The Underlying Indices were established on 1 July 2009 and are back-calculated from 31 December Consequently, the Underlying Indices have a limited performance history, and no actual investment allowing a tracking of the performance of the Underlying Indices was possible before the establishment date of 1 July The Underlying Indices may be subject to currency risk The Underlying Indices may be exposed to currency rate risk because the prices of the components underlying the Underlying Indices may be converted from a currency other than USD into USD for the purposes of calculating the value of the Underlying Indices. Discretion of the Underlying Index sponsor Citigroup Global Markets Ltd. as the Underlying Indices Sponsor will determine prices and other data relevant to the calculation of the level of the Underlying Indices, including whether a market disruption event or other event permitting suspension or discontinuation of an Underlying Index has occurred. The Underlying Index Sponsor may change the futures contracts underlying the Underlying Indices, make other methodological changes that could result in a change in the level of the relevant Underlying Indices or alter, discontinue or suspend calculation or publication of one or more Underlying Indices, any of which may affect the level of the Underlying Indices and thus the Index. Not acting as advisor The level of each Underlying Index is determined in accordance with the relevant index methodology. The Underlying Index Sponsor does not act as an advisor and has no obligation to consider the interests of any third parties in calculating or revising the Underlying Indices. Before investing in any product or entering into any transaction referencing the Underlying Indices, potential investors should consult their own investment and tax advisors and determine whether such an investment or transaction is suitable. THE CONSIDERATIONS SET OUT ABOVE ARE NOT, AND ARE NOT INTENDED TO BE, A COMPREHENSIVE LIST OF ALL CONSIDERATIONS RELEVANT TO A DECISION TO PURCHASE OR HOLD THE SHARES. THE ATTENTION OF INVESTORS IS ALSO DRAWN TO THE SECTION HEADED "RISK FACTORS" IN THE PROSPECTUS. 22