RISK FACTORS RELATING TO THE CITI EQUITY MULTI-RISK PREMIA INDEX CHF SERIES 2

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1 RISK FACTORS RELATING TO THE CITI EQUITY MULTI-RISK PREMIA INDEX CHF SERIES 2 1. Risks Associated with the MRP Index Risk Premia Strategy Risks The Citi Equity Multi-Risk Premia Index CHF Series 2 (Bloomberg ticker: CIISMREH <Index>) (the MRP Index ) provides exposure to three rules-based equity-linked long/short indices: (1) the Citi Multi VIBE Index; (2) the Citi Pure Quality Index; and (3) the Citi Pure Earnings Momentum Index (together the Component Indices and each a Component Index ), as described in the document entitled "Description of the Citi Equity Multi-Risk Premia Index CHF Series 2". Capitalised terms which are used, but not defined, in this document have the respective meanings given to such terms in the document entitled "Description of the Citi Equity Multi- Risk Premia Index CHF Series 2". Each of the Component Indices has been developed by Citigroup Global Markets Limited (the Index Sponsor ) with the aim of providing exposure to a specific type or "Style" of equity market risk (each a Style and collectively, the Styles ). However, there can be no assurance that these particular Styles of equity market risk will outperform the general equity market. If a particular Style underperforms the general equity market, the relevant Component Index may be expected to decline in value. The long/short nature of the Component Indices means that each of them may lose value even if the general equity market increases in value during a given period. Furthermore, the Component Indices may not adequately capture the relevant Style, with the result that any of the Component Indices may not accurately track the performance of a group of stocks which are considered representation of the relevant Style. Market Risk The Component Indices are designed with the objective of limiting directional equity market risk. In other words, the Component Indices are not expected to rise and fall in line with the general equity market. However, the Component Indices may have some exposure to directional equity market risk, such that a fall in the general equity market may result in a loss in value of any or all of the Component Indices. Combining three different Styles within the MRP Index provides a degree of diversification, however it also increases the risk that the combined exposure to the three Styles via the Component Indices may increase directional equity market risk within the MRP Index. Investors in financial products with a return linked to the MRP Index should be familiar with equity market risks. Correlation Risk The use of three Component Indices within the MRP Index is intended to provide an element of diversification. However the performance of the three Component Indices may be correlated, meaning that the Component Indices tend to rise or fall together to some degree. To the extent that the Component Indices are correlated, the benefit of diversification will be lost. Limitations of the Component Index Methodologies The performance of each of the Component Indices is dependent on a pre-defined rules-based methodology which is based on certain assumptions and fixed parameters. Please see below for a discussion of certain risks associated with each of the Component Indices. Weighting Methodology Risks The weighting of the Component Indices within the MRP Index is inversely related to their respective Maximum Drawdowns during the period preceding each Selection Day, which means that a Component Index with a relatively larger Maximum Drawdown will be assigned a relatively smaller Percentage Weight within the MRP Index. If the respective volatilities of the Component Indices change following the assignment of the Percentage Weights, this may lead to a relatively more volatile Component Index having a relatively large Percentage Weight within the MRP Index. Similarly, if a Component Index exhibits 'mean reversion', a Component Index may be assigned a relatively small Percentage Weight as a result of having a relatively large Maximum Drawdown in the recent past, only for 1

2 that Component Index to significant increase in value as a result of 'reverting to mean'. The relatively small Percentage Weight of that Component Index would cause the MRP Index to underperform on a relative basis. The weighting methodology used by the MRP Index may therefore be unsuccessful over any period of time. Other weighting methodologies, such as equal-weighting, may prove to be more successful. Risks Associated with the Volatility Target The MRP Index s annualized target volatility methodology will not prevent a decline in the level of the MRP Index. The exposure of the MRP Index to the weighted performance of the Component Indices (referred to as the Core Index ) is adjusted according to a rules-based methodology which is designed to target an annualized volatility level of 5% for the MRP Index, but the actual volatility of the MRP Index may be higher or lower than 5%. This may have a negative impact on the performance of the Index. The 5% annualized target volatility may act to reduce the exposure of the MRP Index to the Core Index if the natural annualized volatility of the Core Index is higher than 5%. In such circumstances, the volatility target will limit the performance of the MRP Index. If the natural annualized volatility of the Core Index is lower than 5%, the volatility target methodology will result in the MRP Index taking a leveraged exposure to the Core Index of up to 300%. See "Risks Associated with Leverage" below. Risks Associated with Leverage As a result of the target volatility mechanism, the exposure of the MRP Index to the Core Index may be up to 300% (i.e., 3 times). The amount of leverage used within the MRP Index is dynamic and depends at any time on the historic volatility of the Core Index and the MRP Index itself. The use of leverage will magnify the losses (as well as gains) attributable to the Core Index which will have a direct impact on the performance of the MRP Index. Effect of Notional Fees and Costs The level of the MRP Index reflects deductions for an index fee and specified notional costs which are representative of the costs that would be incurred in replicating the performance of the MRP Index. The index fee and the notional costs therefore act as a drag on the performance of the MRP Index. The index fee is 1% per annum and is accrued and deducted from the level of the MRP Index on a daily basis. The level of each of the Citi Pure Quality Index and the Citi Pure Earnings Momentum Index within the Core Index is reduced by a notional replication cost of 0.75% per annum which is accrued and deducted on a daily basis. These notional replication costs will reduce the performance of each such Component Index and, consequently, the MRP Index. Each adjustment of the Exposure of the MRP Index to the Core Index is subject to a notional transaction cost of 0.01% of the amount by which the Exposure is adjusted, and such notional transaction cost is deducted from the level of the MRP Index. The total amount of the notional transaction costs in respect of any given period will depend on the frequency and size of the adjustments in the Exposure of the MRP Index to the Core Index. The Component Indices are subject to their own notional fees and costs, as described below. Foreign Currency Risk The level of the MRP Index is calculated in CHF. The Citi Multi VIBE Index is also calculated in CHF, however each of the Citi Pure Quality Index and the Citi Pure Earnings Momentum Index are calculated in EUR. For the purpose of calculating the Core Index, and therefore the MRP Index, the daily performance of each of the Citi Pure Quality Index and the Citi Pure Earnings Momentum Index is converted from EUR to CHF without any hedging of the associated currency risk. The level of the Citi Multi VIBE Index reflects the performance of a number of sub-indices, converted to CHF from their respective base currencies (USD, EUR and GBP), without any hedging of the associated currency risk. Foreign exchange rates may therefore adversely affect the level of the MRP Index. Foreign exchange rates may be volatile and may move in an unanticipated fashion. Historic exchange rates should not be considered indicate of future exchange rates. Investors in financial products linked to the MRP Index which are 2

3 denominated in a currency other CHF will be exposed to movements in the exchange rate between CHF and the currency in which the relevant financial product is denominated. Use of Fixed Index Parameters In common with all algorithmic indices, the MRP Index uses a rules-based methodology which contains fixed parameters. For example, the Rebalancing Dates are scheduled to occur quarterly and the weights of the Component Indices are determined according to a defined methodology which observes the Maximum Drawdown for each Component Index during the three-month prior to the relevant Rebalancing Date. The MRP Index methodology assumes that these fixed parameters are reasonable, but alternative parameters could have a positive effect on the performance of the MRP Index. 2. Risks Associated with the Citi Multi VIBE Index VIBE Methodology Risk The Citi Multi VIBE Index provides weighted exposure to three Citi VIBE Spread Indices. The performance of the Citi VIBE Spread Indices is highly dependent on the success or otherwise of the VIBE Methodology as a weighting methodology as compared to the typical market capitalization weighting methodology of traditional equity indices. See "Risks Associated with the Citi VIBE Regional Indices" below. Concentration Risk The three Citi VIBE Spread Indices are not equally weighted within the Citi Multi VIBE Index. On Rebalancing Dates, 50% is allocated to the Citi VIBE Trend US Spread Index, 25% is allocated to the Citi VIBE Eurozone Spread Index and 25% is allocated to the Citi VIBE UK Spread Index. Correlation Risk The use of three Citi VIBE Spread Indices within the MRP Index is intended to provide an element of diversification. However the performance of the three Component Indices may be correlated, meaning that the Citi VIBE Spread Indices tend to rise or fall together to some degree. To the extent that the Citi VIBE Spread Indices are correlated, the benefit of diversification will be lost. Rebalancing Frequency Limitations The Citi Multi VIBE Index is rebalanced on a quarterly basis on each Rebalancing Date in order to return the weights of each Citi VIBE Spread Index to the specified weights. However, each of the individual Citi VIBE Spread Indices will experience a different performance, which means that the respective weights of the Citi VIBE Spread Indices will vary between Rebalancing Dates. As such, the actual weights of the Citi VIBE Spread Indices may deviate significantly from their specified weights. This may increase the exposure to a particular Citi VIBE Spread Index to a greater extent than would have been the case if the Citi Multi VIBE Index was rebalanced on a more frequent basis. 3. Risks Associated with the Citi VIBE Spread Indices Citi VIBE Spread Strategy Risks Each of the Citi VIBE Spread Indices provides exposure to a rules-based equity-linked long/short strategy. In each case, the Long Position is one or more Citi Indices which comprises stocks weighted according to the VIBE Methodology and the Short Position is a benchmark equity index which comprises stocks weighted according to the market capitalization of the component stocks. The VIBE Methodology attempts to weight stocks in a manner that will result in each of the stocks contributing equally to the overall volatility of the relevant Citi Index. The performance of the Citi VIBE Spread Indices is highly dependent on the success or otherwise of the VIBE Methodology. If the VIBE Methodology is less successful than a traditional market capitalization weighting methodology, the Citi VIBE Spread Indices may be expected to decline in value. The long/short nature of the Citi VIBE Spread Indices means that each of them may lose value even if the general equity market increases in value during a given period. Furthermore, the VIBE Methodology may not be successful in equalizing the volatility contribution of the component stocks. See "Risks Associated with the Citi VIBE Regional Indices" below. 3

4 Risks Relating to the "Beta Adjustment" in the Citi VIBE Eurozone Spread Index and the Citi VIBE UK Spread Index Each of the Citi VIBE Eurozone Index and the Citi VIBE UK Spread Index includes a "beta adjustment" feature which is designed with the aim of reducing equity market directional bias. In each case, a "beta adjustment" is made to the Long-Short Allocation if the Beta for the Long-Short Allocation relative to the Benchmark Equity Index is negative, with the aim of reducing the extent to which the Beta is negative. No "beta adjustment" is made if the Beta is positive. A negative Beta indicates that the returns of the Long-Short Allocation are generally moving in the opposite direction to those of the Benchmark Equity Index (i.e., 'negative correlation'). The "beta adjustment" is intended to counteract this negative correlation, however even with the beta adjustment the actual performances of the Long-Short Allocation and the Benchmark Equity Index may continue to move in opposite directions. In this scenario, the performance of the relevant Citi VIBE Spread Index will be more volatile and may experience greater falls in value. The size of the "beta adjustment" is variable (depending on the prevailing Beta calculation) and subject to a maximum of 20% of the "excess return" performance of the Benchmark Equity Index (being the returns of the Benchmark Equity Index in excess of a 3-month LIBOR (inter-bank) interest rate). The 20% cap may mean that the methodology is not able to fully counteract the negative correlation. Where the "excess return" performance of the Benchmark Equity Index is negative, this will have a negative impact on the performance of the relevant Citi VIBE Spread Index. The "beta adjustment" means that the Citi VIBE Eurozone Spread Index and the Citi VIBE UK Spread Index do not provide a pure exposure to the difference between the VIBE weighting methodology and the market capitalization weighting methodology used by the Benchmark Equity Index. Risks Relating to Differences in Constituent Stocks - Citi VIBE Eurozone Spread Index The Long Position in the Citi VIBE Eurozone Spread Index comprises the Citi VIBE Eurozone Index which comprises up to 75 Eurozone stocks which are the constituents of the S&P Euro 75 Index. By contrast, the Short Position in the Citi VIBE Eurozone Spread Index comprises the EURO STOXX 50 Net Total Return Index which comprises 50 Eurozone stocks. This difference in the stocks underlying the Long Position and the Short Position will affect the performance of the Citi VIBE Eurozone Spread Index. - Citi VIBE UK Spread Index The Long Position in the Citi VIBE Eurozone Spread Index comprises the Citi VIBE UK Index which comprises up to 100 UK stocks which are the constituents of the S&P United Kingdom Index. By contrast, the Short Position in the Citi VIBE Eurozone Spread Index comprises the FTSE 100 TM Total Return Index which comprises 100 UK stocks. Although there may be substantial overlap between these two groups of stocks, there may be differences in the stocks underlying the Long Position and the Short Position which will affect the performance of the Citi VIBE UK Spread Index. - Citi VIBE Trend US Spread Index The Long Position in the Citi VIBE Trend US Spread Index comprises an equally weighted exposure to the Citi VIBE US Index and the Citi VIBE US Alpha Trend Index. The Citi VIBE US Index comprises up to 100 US stocks which are constituents of the S&P 100 Index. However, the Citi VIBE US Alpha Trend Index comprises 50 stocks selected from the constituents of the S&P 100 Index on a quarterly basis according to a trend-based ranking methodology. The Short Position in the Citi VIBE Trend US Spread Index comprises the S&P 100 Index which comprises 100 US stocks. Because the Citi VIBE US Alpha Trend Index includes only 50 stocks from the 100 constituents of the S&P 100 Index, there will be a difference in the weights of the stocks underlying the Long Position as compared to the weights of the stocks underlying the Short Position which is not solely due to the differences between the VIBE weighting methodology and the market capitalization weighting methodology. This difference will affect the performance of the Citi VIBE Trend US Spread Index. 4

5 Rebalancing Frequency Limitations The Long-Short Allocation within each Citi VIBE Spread Index is rebalanced to equal (and opposite) weights on a quarterly basis on each Rebalancing Date. However, due to the differences in the performance of the Long Position and the Short Position, their respective weights within the Citi VIBE Spread Indices will vary between Rebalancing Dates. This may increase the directional equity market risk within the relevant Citi VIBE Spread Index such that the relevant Citi VIBE Spread Index is affected by falls in the equity market generally to a greater extent than if the Rebalancing Dates occurred more frequently. The Citi VIBE Trend US Spread Index is also rebalanced on a quarterly basis on each Rebalancing Date in order to return the weights of the Citi VIBE US Index and the Citi VIBE US Alpha Trend Index (together, the two Long Indices ) to equal weights. However, each of the Long Indices will experience a different performance, which means that the respective weights of the Long Indices will vary between Rebalancing Dates. The Citi VIBE Trend US Spread Index may therefore have a greater exposure to either of the Long Indices between Rebalancing Date which may have a greater adverse effect on the Citi VIBE Trend US Spread Index than if the Rebalancing Dates occurred more frequently. Effect of Notional Replication Costs The levels of the Citi VIBE Eurozone Spread Index and the Citi VIBE UK Spread Index are each reduced by a notional replication cost of 0.10% per annum which is accrued and deducted on a daily basis. In each case, this notional replication cost will reduce the performance of the relevant index. 4. Risks Associated with the Citi VIBE US Alpha Trend Index Risks Associated with the VIBE Methodology The Citi VIBE US Alpha Trend Index uses the VIBE Methodology to weight its constituent stocks. As described under the heading "Risks Associated with the Citi VIBE Regional Indices" below, the VIBE Methodology may not be successful and may underperform underperform a market capitalization-weighted index during any period, and particularly during an upward trend in the investment cycle. Risks of a Momentum Strategy The Citi VIBE US Alpha Trend Index uses a momentum-based methodology to select 50 constituent stocks from the S&P 100 Index on a quarterly basis. The methodology ranks stocks according to the difference, for each stock, between (1) the short-term performance of a stock (measured over 3 months), and (2) the long-term performance of that same stock (measured over 5 years). The 50 highest ranked stocks according to this momentum-based ranking methodology are selected on a quarterly basis as components of the Citi VIBE US Alpha Trend Index. There is no guarantee that this methodology will be successful in all market conditions. For instance, a momentum based indicator may not work in volatile market conditions. If the price of a stock constantly changes direction, or there is no clearly discernible trend, then the momentum based indicator may not work as intended by the methodology. Similarly, if the price of a stock tends to experience a period of underperformance following a period of outperformance (i.e., it may be said to exhibit 'mean reversion'), a momentum-based selection methodology may be expected to result in loses. The stock selection methodology will only work if the selected stocks perform well during the period in which they are included in the Citi VIBE US Alpha Trend Index. Concentration Risk The Citi VIBE US Alpha Trend Index comprises 50 stocks, which is less than the number of stocks included in many benchmark equity indices and broad based equity investment products. Accordingly the Citi VIBE US Alpha Trend Index may be more volatile and decline in value more quickly than many benchmark equity indices and broad based equity investment products. 5. Risks Associated with the Citi VIBE Regional Indices Strategy Risk The Citi Volatility Balanced Beta methodology ( VIBE Methodology ) used by the Citi VIBE Regional 5

6 Indices employs a quantitative risk-weighting strategy that determines the percentage weights of the constituent stocks on a quarterly basis in a manner intended to cause each constituent to contribute equally to the overall volatility of the relevant Citi VIBE Regional Index. This strategy is designed with the aim of providing diversification among the selected constituents, with lower volatility, when compared to an equivalent equal-weighted or market capitalization-weighted index. However, there is no guarantee that this will be the case, especially over short periods. The VIBE Methodology may not be successful and may not outperform any alternative strategy that might be employed in respect of the constituent stocks. In particular, the benefits of the VIBE Methodology may only become apparent over a long period and the Citi VIBE Regional Indices may underperform market capitalization-weighted indices during an upward trend in the investment cycle. The Percentage Weights assigned to the constituents are equally dependent on the percentage weights which the optimization model used by the VIBE Methodology determines would achieve (a) an equal implied risk contribution for each constituent, and (b) an equal trend-following risk contribution for each constituent. There can be no assurance that this particular blend of implied and historic volatilities and correlations will be successful over any particular period of time. Investors in Index Linked Products should be aware of this limitation in considering their investment decision. Volatility as a Measure for Risk In determining the risk contribution of each constituent, the VIBE Methodology relies exclusively on market price volatility as a measure of risk. Although market prices may in theory reflect all available public information, this may not always be the case. Furthermore, there are many types of risk inherent in an equity investment. The Index does not attempt to identify or quantify any specific risks which may be relevant to a stock, sector, industry, country or region, such as commercial, operational, credit, financing, macro, political, regulatory or legal risks. The reliance of the VIBE Methodology solely on volatility as a measure of risk may fail to accurately identify and account for specific risks or fail to adjust for overall risk in line with the objectives of the Citi VIBE Regional Indices. Equity Market Risk The Citi VIBE Regional Indices are comprised of stocks. As with any equity index, the Citi VIBE Regional Indices may decline, possibly significantly. Risk That the Volatility Contributions of the Constituents May Not be Equalized The VIBE Methodology may not be successful in its aim of equalizing the contributions of the constituent stocks to the overall volatility of the relevant Citi VIBE Regional Index. There are a number of reasons why this may be the case, including the following: Each Citi VIBE Regional Index is rebalanced quarterly on the Rebalancing Dates. Between Rebalancing Dates, the volatility contributions of the constituents will fluctuate. The more time that has passed since the latest Rebalancing Date, the more unequal the volatility contributions of the constituents are likely to be. Moreover, even on a Rebalancing Date, the volatility contributions of the constituents will likely not be equal because the Percentage Weights are calculated as of the Selection Day occurring three Index Business Days prior to the Rebalancing Date. The Citi VIBE Regional Indices will only come close to achieving to achieving their objective of equal volatility contributions of their constituents if the particular measures of covariance used by the VIBE Methodology prove to be accurate indicators of the constituents future covariance. This may not be the case. Each of the approaches used by the VIBE Methodology to measure covariance is subject to a number of assumptions and limitations, some of which are mentioned in "Fixed Algorithmic Model Parameters" below. Any given constituent s covariance with the other constituents may change rapidly and may differ significantly from its historical levels or from the levels calculated by the VIBE Methodology. The Percentage Weight of each constituent in the VIBE Regional Indices is subject to a maximum limit of 10%. If, but for this rule, the VIBE Methodology would have resulted in one or more constituents having a Percentage 6

7 Weight greater than 10%, the constituents will not contribute equally to the overall volatility of the Index, even on the relevant Rebalancing Date. The optimization algorithm used by the VIBE Methodology to determine the Percentage Weights that would equalize the volatility contributions of the constituents is complex, can only be performed by a computer and is highly sensitive to the precision of its inputs (i.e., the covariance calculations performed pursuant to the VIBE Methodology). The precision of the inputs to the optimization algorithm may vary depending on the rounding conventions used in the financial market for the primary data used in the calculations performed pursuant to the VIBE Methodology as well as the rounding conventions determined to be appropriate by the Index Calculation Agent. Concentration Risk The VIBE Methodology assigns Percentage Weights to the constituents in a manner intended to cause each constituent to contribute equally to the overall volatility of the relevant Citi VIBE Regional Index. This does not mean that the constituents will have equal weights in the Index. In fact, given the 10% limit on the Percentage Weight of any Constituent on a Rebalancing Date, the Index could potentially concentrate substantially all of its exposure in only 10 Constituents. Accordingly, the Index may be less diversified, and by that measure more risky, than the Eligible Universe Index. If the Index becomes concentrated in a limited number of stocks, the Index may decline significantly if those stocks decline in value. Performance Risk The Citi VIBE Regional Indices may underperform other indices with the same constituents, where those other indices employ a different weighting scheme. The VIBE Methodology used by the Citi VIBE Regional Indices does not seek to outperform the Eligible Universe Index from which its components are selected or any other equity benchmark in absolute terms. Certain Stocks That Are Included in the Eligible Universe Index Will be Excluded The constituents of each Citi VIBE Regional Index will comprise all of the component stocks of the associated Eligible Universe Index as of the relevant quarterly Selection Day, except (i) stocks which are included on the Index Sponsor's Restricted Trading List (being a list of stocks which the Index Sponsor and/or any of its affiliates are not permitted to hold, buy, sell or otherwise deal in for a period of time due to laws, regulations or internal policies), (ii) any stocks which do not have sufficient historical data for the VIBE Methodology to be calculated, and (iii) the stock of Citigroup Inc. It is not possible at the present time to predict which or how many of the stocks included in the Eligible Universe Index will be included on the Restricted Trading List at any given time in the future, and the identity of the stocks on the Restricted Trading List at any given time will not be made public. Moreover, the Index Sponsor and its affiliates will decide whether a stock is included on the Restricted Trading List without regard to any effect on the Citi VIBE Regional Indices or any Index Linked Product. Over any given period of time, it is possible that the stock of Citigroup Inc. or the stocks on the Restricted Trading List during that period will appreciate significantly in value, and this will not be reflected in the level of the Citi VIBE Regional Indices. Rebalancing Frequency Limitations The frequency of rebalancing of the Citi VIBE Regional Indices is quarterly. The VIBE Methodology only evaluates the constituents on the quarterly Selection Days which precede the Rebalancing Dates, which means that new Percentage Weights are only determined on these days. As the price, historic volatility and exponential moving average of each stock and the Index Level itself all move daily, the equal contribution to volatility of the Citi VIBE Regional Index that is determined on a Selection Day may no longer be accurate or valid on any other Index Business Day. As a result, the weights of the constituents between Rebalancing Dates may deviate significantly from the weights which would be required for the constituents to contribute equally to the volatility of the Citi VIBE Regional Index on an ongoing basis. In particular, the Citi VIBE Regional Index may not achieve its objectives during periods of significant change in the volatilities of individual stocks and/or the correlations between stocks. For example, (i) if a group of constituents which have historically exhibited lower than average volatilities (and have therefore been assigned relatively higher weights by the VIBE Methodology) undergo a sudden increase in volatility; or (ii) if a group of constituents which have historically exhibited a lower than average correlation with other 7

8 constituents (and have therefore been assigned relatively higher weights by the VIBE Methodology) undergo a sudden increase in correlation, the Citi VIBE Regional Index may deviate substantially from the theoretical equal risk-contribution weighting scheme. Fixed Algorithmic Model Parameters In common with all algorithmic strategies, the Citi VIBE Regional Indices use a rules-based methodology which contains fixed parameters. For example, (i) implied volatilities are calculated by reference to 120 daily logreturn observations of the constituents and the 3-month implied spot volatility of a benchmark equity index, and (ii) historic volatilities are calculated by reference to 120 daily exponential moving average observations where each exponential moving average is calculated for a period of 40 Index Business Days. The Index methodology assumes that these observation periods and other fixed parameters are reasonable in the context of the Citi VIBE Regional Indices, however, alternative parameters could have a positive effect on the performance of the Index. Net Total Return Indices Each of the Citi VIBE Regional Indices is a total return index, reflecting the notional reinvestment of dividends in the constituents on which the dividends are paid. Unlike certain other total return indices, however, the amounts are notionally reinvested in the Index following a specified deduction approximating a withholding tax rate. This notional tax rate may be higher than the effective tax rate that would apply to any particular investor in an Index Linked Product. The Index Sponsor may change this tax rate at any time. Accordingly, the performance of the relevant Citi VIBE Regional Index may be lower than the performance that an investor could achieve by directly investing in the constituents in a manner following the strategy underlying the VIBE Methodology and reinvesting dividend proceeds on an after-tax basis. 6. Risks Associated with the Citi Style Indices Strategy Risk The Citi Style Indices use a dynamic allocation strategy which provides long/short exposure to a notional basket of European stocks selected and weighted with the aim of offering the purest (or greatest) sensitivity to one of a number of investment Styles (based on Style Factor Scores determined, attributed and published by Citi Research in respect of such stocks in one or more research reports), whilst also taking into account each stock s sensitivity to the other Styles. There can be no assurance that this weighting methodology will achieve superior returns as compared to more traditional weighting methodologies based on market capitalization or an equallyweighted scheme. The Citi Style Indices are not designed to outperform a benchmark and, indeed, it is possible that alternative methods of equity portfolio construction may outperform the methodology used by the Citi Style Indices. Risk that a Citi Style Index May Not Accurately Reflect the Relevant Style The Citi Style Indices rely on the Style Factor Scores given to the universe of stocks to purify the exposure of each Citi Style Index to the relevant Style. However, there is no assurance that the Style Factor Scores or the weights assigned to the stocks comprised in any Citi Style Index from time to time will accurately reflect the actual sensitivity of the stocks to the relevant Style. The name given to each Citi Style Index reflects the Style that it intends to capture (such as Quality and Earnings Momentum ), corresponds with the names devised and used by Citi Research in their research reports and represents an attempt to categorise stocks that may exhibit, or may tend to exhibit, certain characteristics or behaviours as more fully described in Citi Research publications. A Citi Style Index may not perform in a manner that reflects the name given to it and may not perform in a manner similar to other indices or products bearing the same or similar label. The terms Quality and Earnings Momentum as used in connection with the Citi Style Indices merely reflect a broad category into which the relevant Citi Style Index may be ascribed. These terms do not (and are not intended to, and should not be understood or construed to) signify any actual expectation (or past experience) of performance, returns, volatility, correlation, or any particular risk profile. These terms, as used in connection with the Citi Style Indices, are not a measure or indication of the investment risk of any exposure to the Index. 8

9 Risks Associated with Long/Short Indices The Citi Style Indices use a long/short construction to gain exposure to the performance of a number of European stocks in an attempt to maximize sensitivity to a specific Style. As a result, the Citi Style Indices may decline as a result of a loss on a "short position" in certain stocks and/or a loss on a "long position" in other stocks. This means that the Citi Style Indices are not expected to perform in line with equities markets generally and each of the Citi Style Indices may lose value even if the general equity market increases in value during a given period. Each of the Citi Style Indices is a "total return" index, which means that the performance of both the "long" constituents and the "short" constituents within each Citi Style Index reflects the notional reinvestment of dividends paid in respect of such constituents. It is important to note, however, that the amounts notionally reinvested in the long position within the Citi Style Index are calculated following a specified deduction approximating a withholding tax rate. The amounts notionally reinvested in the short position within the Citi Style Index are notionally reinvested without any such deduction. Because the Citi Style Indices measure the performance of the long position minus the performance of the short position, this difference in the calculation of amounts notionally reinvested will, all other things being equal, act as a drag on the performance of the Citi Style Indices. The Universe of Stocks is Dependent on Inclusion by Citi Research and the Use of Filters Which Will Exclude Certain Stocks The universe of stocks which are eligible for inclusion in the Citi Style Indices is defined by reference to the European stocks for which Citi Research publish Style Factor Scores. The universe of stocks is expected to be updated periodically by Citi Research at the discretion of Citi Research and may be amended in future without regard to the Citi Style Indices and without notice to investors in any Index Linked Product. Stocks will be excluded from the universe of eligible stocks according to quantitative filters which are designed to exclude stocks which, for example, (i) are not deemed to be sufficiently liquid or (ii) for which the cost of borrowing the stock (for the purpose of establishing a short position in the stock) is deemed to be too high. These quantitative filters may operate in such a way as to dilute the effectiveness of the Style Factor Scores in identifying stocks which may be weighted to as to achieve an exposure to a particular Style. Style Factor Scores Are Published Without Regard to the Citi Style Indices All research reports, strategy papers and other materials published by Citi Research are published by Citi Research for general information purposes only and are not published in connection with the Citi Style Indices or any Index Linked Products. The Citi Style Indices have been developed, and operate, independently of Citi Research. Research teams within the Index Sponsor or its affiliates may issue research reports on stocks that are, or may become, constituents of the Citi Style Indices. These reports are entirely independent of the Citi Style Indices and any Index Linked Product. The Style Factor Scores may not be in a single report or document published by Citi Research. However, investors may request that an electronic copy of a single complete list of all of the latest Style Factor Scores for all constituents is provided or made available to them free of charge. Risk of Non-Publication of Style Factor Scores Citi Research is under no obligation to publish or update the Style Factor Scores at any particular frequency, or at all. If the set of European stocks in relation to which Style Factor Scores are determined by Citi Research are changed, or the relevant Style Factors Scores of any constituents of a Citi Style Index are changed, then this will be reflected in the next scheduled rebalancing of the Citi Style Indices. If Citi Research announces that it will cease publication of the Style Factor Scores entirely, or no Style Factor Scores are published by Citi Research for a continuous 12 month period, or a legal or regulatory issue arises that makes it impermissible, inadvisable or undesirable for Citi Research to continue to publish the Style Factor Scores, then the Index Sponsor may discontinue and cancel the Citi Style Indices, which may result in the early termination of any Index Linked Products. 9

10 Concentration Risk The number of stocks included as constituents of a Citi Style Index at any time is dependent on (a) the number of stocks which Citi Research identify in publications relating to style factor scoring of pan-european equities, and (b) the number of such stocks which remain following the application of the various selection filters. No assurance can be given as to the number of stocks which will be constituents of the Index from time to time. The Index methodology limits the maximum weight of each constituent to 5% on each Rebalancing Date, with a resulting reallocation to the other constituents in the event that the methodology would allocate a weight in excess of 5% for any constituent. While this individual weight constraint is designed to limit a concentration of exposures, it remains possible that a number of constituents could all be assigned a weight of 5%. There is no maximum or minimum limit on the number of stocks which may be included in a Citi Style Index. Therefore a Citi Style Index may be more or less concentrated than other equity indices or investment products linked to equity market performance generally. Foreign Exchange Risk The base currency of the Citi Style Indices is EUR, whereas a number of the constituents may be denominated in other European currencies (e.g. Norwegian stocks will be denominated in NOK; UK stocks will be denominated in GBP). For the purpose of calculating the level of the Citi Style Indices, the performance of each constituent which is not denominated in EUR is converted to EUR without any hedging of the associated currency risk. An investor in an Index Linked Product is therefore subject to exchange rate risk versus EUR in respect of constituents not denominated in EUR. Exchange rates are influenced by many factors and may be volatile. The change in one or more exchange rates over any period may adversely affect the performance of the Citi Style Indices. Rebalancing Frequency Limitations The frequency of rebalancing of the Citi Style Indices is monthly. The Citi Style Index methodology only evaluates the constituents on the monthly Selection Days which precede the Rebalancing Dates, which means that new constituents and weights are only determined on these days. As time passes following a monthly Selection Day, the risk increases that the components and their respective weights within a particular Citi Style Index will be less effective in achieving an exposure to the relevant Style. 7. General Risks Associated with the Citi Indices Notional Exposures Each Citi Index reflects the performance of notional positions in its constituents. There is no actual portfolio of assets to which any person is entitled or in which any person has any ownership interest. In each case, the Citi Index merely identifies certain hypothetical investment positions, the performance of which will be used as a reference point for the purpose of calculating the level of that Citi Index. Fixed Index Parameters The performance of each Citi Index is dependent on the pre-defined rules-based methodology set out in the relevant Index Conditions. In common with other algorithmic strategies, the manner in which the universe is determined and the constituent weights are determined uses a rules-based methodology which contains fixed parameters based on certain assumptions. It is assumed that these fixed parameters are reasonable in the context of the relevant Citi Index. There is no assurance that other methodologies and alternative parameters would not result in better performance than the fixed methodology of the relevant Citi Index. Back-tested Performance Each of the Citi Indices has a limited history. The past performance of a Citi Index prior to its live date has been derived from a back-testing simulation by applying the methodology for the Citi Index to historic data. Back-tested performance is provided for illustrative purposes only and should not be considered indicative of future performance. Any transaction or instrument linked to a Citi Index may bear additional fees which would impact the overall returns of such transaction or instrument. Any scenario analysis is for illustrative purposes only and does not represent the actual performance of the relevant Citi Index nor does it purport to describe all possible performance outcomes for such Citi Index. 10

11 Limited Operating History Each Citi Index was launched by the Index Sponsor on the specified Index Launch Date and has been calculated by the Index Calculation Agent for the period from the specified Index Start Date. Any back-testing or similar performance analysis performed by any person in respect of the Index must be considered illustrative only and may be based on estimates or assumptions not used by the Index Calculation Agent when determining the Index Level. Disruption Events In the event that any of the constituents of a Citi Index experiences a market disruption, is materially modified or ceases to exist, the Index Sponsor and/or the Index Calculation Agent may postpone calculations, make good faith price determinations, suspend the publication of the relevant Citi Index and/or discontinue calculation and publication of the relevant Citi Index as further described in Discretion of the Index Sponsor below. Discretion of the Index Sponsor Citigroup Global Markets Limited, as the Index Sponsor of each Citi Index, will determine prices and other data relevant to the calculation of the level of each Citi Index, including whether a market disruption event or other adjustment event (including, without limitation, corporate actions and successor events) has occurred. In certain circumstances, the Index Sponsor may make modifications to a Citi Index that could change the level of the Citi Index or suspend or discontinue calculation and dissemination of the Citi Index, any of which may affect the level of the Citi Index. Potential Conflicts of Interest Citi entities perform various roles in connection with each Citi Index and products linked to the Citi Indices, and conflicts of interest may arise for any such entity as a consequence of the roles it performs in relation to a Citi Index or a product linked to a Citi Index, or more generally. The Index Sponsor and its affiliates may trade the constituents underlying the Index in the ordinary course of business, for their own accounts and for the accounts of their customers. Such trading activities could potentially affect the value of such constituents and/or the level of a Citi Index. The Index Sponsor or its affiliates may act as issuer, agent or underwriter for issuances of securities, or enter into other transactions, with returns linked or related to changes in the level of a Citi Index or the components underlying such Citi Index and, in connection therewith, may enter into hedging transactions. Such transactions may affect the level of a Citi Index and may generate a profit for the Index Sponsor or its affiliates, even in the case of a decline in the level of the relevant Citi Index. No responsibility of Index Sponsor The Index Sponsor makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to each Citi Index or any data included herein. Without limiting any of the foregoing, in no event shall the Index Sponsor have any liability for any special, punitive, indirect, or consequential damages or for any lost profits, even if notified of the possibility of such damages. This list of risk factors is not intended to be exhaustive. All persons should seek such advice as they consider necessary from their professional advisors, investment, legal, tax or otherwise, without reliance on the Index Sponsor, the Index Calculation Agent, any of their respective affiliates or any of their respective directors, officers, employees, representatives, delegates and agents. This document is the Index Sponsor s proprietary and confidential material. No person may reproduce or disseminate the information contained in this document without the prior written consent of the Index Sponsor Citigroup Global Markets Limited. All rights reserved. Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its Affiliates and are used and registered throughout the world. Citigroup Global Markets Limited is authorized in the United Kingdom by the Prudential Regulation Authority ( PRA ) and is regulated in the United Kingdom by the Financial Conduct Authority and the PRA. 30 July