Market Update ASLF 2016 Fernando Guzmán Puerto Rico DCC Head

Capital Market PR Continues under a unsustainable debt condition. PR Government officially went into default on it’s 72 billion in debt after decade of economic contraction Puerto Rico's economy has been struggling since 2006 Material increases in debt levels High illiquid condition. Claw back executed to prioritize constitutional debt. Other buckets on default Large awareness from US Congress & US Department of Treasury 8% of population (300k people) leaving the island during the last decade Government austerity measures taken, but not enough for recovery Government exposure in local banks equivalent to 33% of their Tier 1 capital US bankruptcy laws don't allow government institutions in Puerto Rico to declare bankruptcy Source: Government Development Bank of Puerto Rico

Recent Market Developments No significant activity since 1Q2014  Credit downgrade into junk (Jan 2014) diminished the Puerto Rico government’s chances of accessing the capital markets.  Government’s last issuance dated March 2014 when raised US$3.5 billion in G.O.’s Local public companies performance  5 companies in PRSI (no stock exchange in PR). All in negative performance.  Last significant event from a private company: Evertec’s IPO in 2012 ($700MM) Tax law changes  Effective April 1, 2016, the Sales and Use Tax will be replaced with a Value Added Tax regime (VAT). Source: Bloomberg

Service Update Pre-match for physical transactions Implementation of pre- match status functionality for physical securities transaction Key Development Change Impact Auto reverse instructions are properly managed. Clients may stop the settlements process even if the securities are in transit with the Trust. Implementation of MT537 and MT548 (pending transactions and settlement status) Additional SWIFT messages now available with updates related to physical settlements for a process that may take up 8 days. Integration of additional SWIFT capabilities Capacity to match bulk payment without breakdown with clients’ instructions to post segregated items Improvement managing bulk payments from trusts Citi is posting credit per items from a bulk payment without segregation

Forthcoming Initiatives Customers with US securities (DCC or FED) will be transferred to US Americas Securities Window. Services will be provide directly from the Americas Securities Services hub. Transfer of clients with US Custody to USA Corporate Event for the payment of fractional shares Participants of Mutual Funds will receive monthly Corporate Event with the payments of fractional shares. This will modify the current process of manual credits for such participations.

Country Hot Topic Local expectation waiting for US Congress to take action regarding PR debt  Puerto Rico cannot declare bankruptcy under federal law.  Restructuring local law was challenged by bondholders in the federal court.  Congressmen made the commitment to present legislation to attend the issue by the end of 1Q16.  US lawmakers are pushing for a federal control board to manage financial budgets and expenses. Impact of PR debt exposure in local banks, retirement systems and other financial Institutions  Local banks’ government exposure equivalent to 45% of total market cap and to 33% of T1 capital.

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