Robotti Global Fund, LLC

Managing Member 60 East 42nd Street, Suite 3100 Robotti Global Management Company, LLC New York, NY 10165-0057

P: (646) 442-6709 F: (212) 986-0816

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December 24, 2015

Dear fellow investors,

Recently I completed a full review of our portfolio companies. I am convinced this is an opportune time to invest. My conviction is predicated on valuations – not on headline news such as what the Fed will do, or oil prices, or Chinese or American growth and jobs creation – all of whose impacts are temporary in nature.

We are concentrated in companies based in four markets: Turkey, Kazakhstan, Indonesia, and Hong Kong. All have been impacted severely by today’s investors’ fears: the unstoppable upward trajectory of the U.S. dollar and associated weakness in commodities. Although it is impossible to call a bottom, I believe investors in these markets will be well-rewarded by investments made today at these prevailing valuations. Within these markets, we’ve selected what we think are the best companies with the best upside.

I’ve attached two notes, one which I sent right after our meeting last month and another sent in April 2015. Since there hasn’t been a great deal of turnover in our portfolio this year, but there has been a significant and broad decline in our stocks and in the markets, these messages are consistent and also relevant. Our investment theses have not changed, whereas prices have significantly.

As you know, the Global Fund is my primary personal investment. I wish I had more capital to invest now. I trust some of you are not so constrained and can capitalize on this opportunity.

Bob, who is one of the largest investors, shares my excitement. As he has been involved in the recent portfolio review, I know he would also be pleased to discuss the Fund with any interested partners. Of course, I’m always available to discuss the Fund.

As you make your investment decisions at the end of this year, I hope you will choose to invest more in the Global Fund.

From balmy New York, I wish you and yours healthy and happy holidays!

Isaac Schwartz Robotti & Company One Grand Central Place 60 east 42nd street, 31st floor

Robotti Global Fund, LLC

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The above letter, including the attachments referenced therein, is an update letter with respect to the Robotti Global Fund, LLC (“RGF”) and was sent to partners of RGF via email on December 24, 2015. This letter should be read in conjunction with the following disclosure information:

This information is for illustration and discussion purposes only and is not intended to be a recommendation, or an offer to sell, or a solicitation of any offer to buy, a limited partnership interest in RGF, nor should it be construed or used as investment, tax, ERISA or legal advice. Any such offer or solicitation will be made only by means of delivery of a presentation, offering memorandum, limited partnership agreement, subscription documents, or other information relating to such investment and only to suitable investors in those jurisdictions where permitted by law. Investors in the Fund must be, at minimum, “accredited investors” within the meaning of Rule 501 of Regulation D under the Securities Act of 1933.

Further, the contents of this letter should not be relied upon in substitution of the exercise of independent judgment. The information is furnished as of the date shown, and is subject to change and to updating without notice; no representation is made with respect to its accuracy, completeness or timeliness and may not be relied upon for the purposes of entering into any transaction. The information herein is not intended to be a complete performance presentation or analysis and is subject to change. None of Robotti Global Fund, Robotti Global Management Company, LLC, as Managing Member of RGF, nor Robotti & Company Advisors, LLC, as investment advisor to RGF, or any affiliate, manager, member, officer, employee or agent or representative thereof makes any representation or warranty with respect to the information provided herein.

In addition, certain information has been obtained from third party sources and, although believed to be reliable, the information has not been independently verified and its accuracy or completeness cannot be guaranteed. Any investment is subject to risks that include, among others, the risk of adverse or unanticipated market developments, issuer default, and risk of illiquidity. Past performance is not indicative of future results. If interested, please contact us for additional information about the performance related data for RGF. Opinions contained in this letter reflect the judgment as of the day and time of the publication and are subject to change without notice and may no longer represent its current opinion or advice due to market change or for any other reason.

The information provided herein is confidential and proprietary and is, and will remain at all times, the property of Robotti Global Management Company and Robotti & Company Advisors, LLC, as investment managers, and/or their affiliates. The information is being provided for informational purposes only. A copy of Robotti & Company Advisors, LLC’s Form ADV, Part 2 is available upon request. Additional information about the Advisor is also available on the SEC’s website at www.adviserinfo.sec.gov

Robotti Global Fund, LLC

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Attachment #1 to the update letter of RGF that was sent to partners of RGF via email on November 19, 2015: Partner Letter, dated April 22, 2015 April 22, 2015 Dear fellow investors: Ever manic-depressive Mr. Market today presents us with some extraordinary opportunities in companies we’ve gotten to know through careful study over many years. I find it frustrating to have to reflect almost the same perspective during the last several quarters. Most major U.S. stock indices continue to hit new highs. The U.S. dollar continues to strengthen – dramatically – against almost all foreign currencies, especially versus the euro and most emerging market currencies. Interest rates remain at all-time lows. In Europe, amazingly, they have even gone negative. But this is really no surprise. That’s how trends in financial markets work. Of course, they also work that way on the other side, with what has been unpopular and out-of-favor tending to move lower for longer than is justified by fundamentals. Valuation gets ignored. Our portfolio, much of which skews toward emerging markets, including some indirect ties to Russia and oil-producing economies, reflects a few of today’s unpopular investment themes. One old friend described us as being at “the epicenter of contrarian.” We are neither pleased nor distraught to be contrarians, as long practice has shown us it’s irrelevant to the prospects for our investing. Our comfort comes from knowing we hold a portfolio populated with companies we have spent years researching, and in which we have high conviction that the market is misvaluing them. To see the direct effect of this unpopularity, we could look no further than our second-largest position, Halyk Savings Bank, which recently reported 2014 earnings and dividends to reveal it sells at a single- digit PE ratio and double-digit dividend yield. We think its earnings and dividends aren’t just sustainable but likely to increase meaningfully in a few years. But this position hasn’t been fun to hold. Our loss in it was so great in 2014 that it cancelled out our otherwise small net portfolio gains, leaving us with a small loss for the year, and it has declined meaningfully again this year. We recently added to the position, as we see an excellent risk-reward in the stock at this level. As of this writing, our holdings in Kazakhstan are spread in four companies, adding up to 13% of our capital. A year ago they were trading at levels we judged modest relative to long-term potential; after recent declines, they are simply extremely misvalued. We regard this as a “mark-to-market” loss – not a permanent capital loss – and in addition to adding to our position in Halyk, have also added to our stake in another Kazakh company also selling at a single-digit PE and double-digit dividend yield.

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But even outside of many core positions we have high confidence in, we haven’t just been resting and waiting for the market to correct itself. We have continued to be diligent in finding undervalued securities. This is one of those times when emerging markets have fallen so deeply out of favor that it has made sense for us to turn over a bit of the portfolio and buy stocks we’ve been eyeing for years. For instance, here are two such new positions in the portfolio: One is an Indonesian consumer products company with about $500 million in sales and $50 million in profits, which produces that nation’s leading nonsteroidal anti-inflammatory drug. It competes against Glaxo’s major global brand Panadol, both of which in turn compete with female street vendors selling jamu, Indonesian traditional herbal meds. We’ve visited the company regularly during the last five years but had not previously held a position in the stock. Then in the last two years, between a 40% drop in the price in local currency and a 30% weakening of the Indonesian rupiah against the greenback, the company’s market capitalization has more than halved, declining from a peak of more than $2 billion two years ago to $730 million today. Thinking about it another way, the stock has risen by only 50% in the last eight years, during which time earnings have nearly tripled. By the revenue and earnings growth significantly outpacing the stock price increase, this creates a very compelling case for the stock. As Indonesia’s middle class continues to expand, we actually think sales growth could accelerate due to the typical consumption patterns of some of their products. In addition to medicines, the company occupies an important position in the cosmetics industry, owning the Revlon brand in Indonesia and exclusively distributing Estee Lauder Clinique and Germany’s Beierdorf (maker of high-end skincare brands Nivea and Eucerin) in that market. We established the position by investing 2.5% of our capital in it. We also initiated a position in a small Turkish conglomerate that owns pieces of several attractive distribution businesses, including the BMW manufacturer and distributor for Turkey and the Caterpillar dealer for Turkey and several related countries (including Kazakhstan). According to the international financial reporting standards that Turkey follows, the PE is 13 – undemanding but not eye-raising. By looking through to the undistributed profits at unconsolidated subsidiary levels, however, the true, comprehensive PE is actually 4. This is extremely cheap – exceptionally so given the nature of the businesses held by the company, both in their returns on invested capital and growth prospects. We believe the private market value of the company is a multiple of where the shares trade. We have invested 2% of our capital in this company. The controlling family apparently believes the shares are cheap also, as they have been regular open market purchasers of the stock in the last years (including at around recent prices). Around the same time as these purchases, we sold longtime holdings in a Hong Kong furniture producer and a Singaporean travel agency. We think they are decent companies but much less attractive than other investments in our portfolio, and not the best way to invest our capital with the mispricing that has arisen in other securities. Here’s a chart showing where we are invested. We are fully invested, with no shorts at this time. We have thirty-five positions. Our ten largest make up 52% of our capital.

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Asia Europe Hong Kong 25% Western Europe 19% Indonesia & Singapore 23% The Balkans 6% Japan 1% Turkey 12% 49% Kazakhstan 13% 50%

Although there are some reporting differences (for instance, some companies we count as Hong Kong actually have economic risks related to Mainland China or Southeast Asia) this should give a good flavor for how we are invested. We’ve already talked some about Kazakhstan, how we find the opportunity in stocks there extraordinary after studying the market closely the last five years. Let’s take another place where we invest that isn’t actively followed by most global investors, Turkey. In Turkey, we have four investments, with the larger positions being in two blue chips whose earnings have tracked the excellent performance of the Turkish economy in the last several years (which has defied the sluggish Eurozone). In only six years since my first visit, I can clearly feel Istanbul’s rising prosperity when walking around. Yet the stock market has not tracked the economy. For one thing, Turkey’s new lira has been on a continuous downtrend since it was created in 2004 to replace the old broken lira. For Turkish financial assets, this depreciation has had a meaningful effect. For instance, the two Turkish blue chips we own have actually had stock prices that are flat in U.S. dollars over the last decade – despite a doubling of their greenback earnings during that period! Or take one of our two small caps, such as the BMW distributor mentioned above, whose shares currently trade at 21 lira, near an all-time high. Although in nominal lira terms, the stock has doubled in the last five years, since the lira has halved, the stock price has been flat in hard currency. The lira earnings during that time have quadrupled – thus, the PE multiple has halved. So these investments we hold in Turkey aren’t just cheap and out-of-favor, although all are trading at or below book value and appear that way. In fact, they are well-positioned growth companies, whose earnings have the opportunity to expand, which would likely coincide with multiple expansion as well. We can understand some frustration to being an outside investor in a fund. All you get to see are the net results. It is natural to read into those numbers, since there is little else to read – although I would refer you back to our past letters. Certainly the glaring performance of the S&P has been a stark contrast to our own portfolio recently. But the return potential of our investments is enormous. I am very pleased the significant portion of my net worth is invested in these securities through the fund. I know Bob and another partner-colleague feel the same way. I hope many of you will consider adding to your investment in the fund at this time. I am available at any time to discuss this or for any inquiries. Thank you for your continued support. Sincerely, Isaac Schwartz

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The above letter, dated April 22, 2015, is an update letter with respect to the Robotti Global Fund, LLC (“RGF”) and was sent to partners of RGF. This letter should be read in conjunction with the following disclosure information: This information is for illustration and discussion purposes only and is not intended to be a recommendation, or an offer to sell, or a solicitation of any offer to buy, a limited partnership interest in RGF, nor should it be construed or used as investment, tax, ERISA or legal advice. Any such offer or solicitation will be made only by means of delivery of a presentation, offering memorandum, limited partnership agreement, subscription documents, or other information relating to such investment and only to suitable investors in those jurisdictions where permitted by law. Investors in the Fund must be, at minimum, “accredited investors” within the meaning of Rule 501 of Regulation D under the Securities Act of 1933. Further, the contents of this letter should not be relied upon in substitution of the exercise of independent judgment. The information is furnished as of the date shown, and is subject to change and to updating without notice; no representation is made with respect to its accuracy, completeness or timeliness and may not be relied upon for the purposes of entering into any transaction. The information herein is not intended to be a complete performance presentation or analysis and is subject to change. None of Robotti Global Fund, Robotti Global Management Company, LLC, as Managing Member of RGF, nor Robotti & Company Advisors, LLC, as investment advisor to RGF, or any affiliate, manager, member, officer, employee or agent or representative thereof makes any representation or warranty with respect to the information provided herein. In addition, certain information has been obtained from third party sources and, although believed to be reliable, the information has not been independently verified and its accuracy or completeness cannot be guaranteed. Any investment is subject to risks that include, among others, the risk of adverse or unanticipated market developments, issuer default, and risk of illiquidity. Past performance is not indicative of future results. If interested, please contact us for additional information about the performance related data for RGF. Opinions contained in this letter reflect the judgment as of the day and time of the publication and are subject to change without notice and may no longer represent its current opinion or advice due to market change or for any other reason. Note: certain absolute statements are not intended to represent absolute literal fact, but rather represent certain colloquialisms/mannerisms expressed by select market participants (but not necessarily individuals associated with RGF). Opinions contained in this letter reflect the judgment as of the day and time of the publication and are subject to change without notice and may no longer represent its current opinion or advice due to market change or for any other reason. The information provided herein is confidential and proprietary and is, and will remain at all times, the property of Robotti Global Management Company and Robotti & Company Advisors, LLC, as investment managers, and/or their affiliates. The information is being provided for informational purposes only. A copy of Robotti & Company Advisors, LLC’s Form ADV, Part 2 is available upon request. Additional information about the Advisor is also available on the SEC’s website at www.adviserinfo.sec.gov

Robotti Global Fund, LLC

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Attachment #2 to the update letter of RGF that was sent to partners of RGF via email on November 19, 2015: Partner Letter, sent via email, dated November 15, 2015 November 15, 2015 Dear partners: It was great seeing many of you at our investor presentation last week, and sharing why today’s challenges are tomorrow’s opportunities. Since our meeting, there’ve been several news items on our two largest holdings, which are each around 10% of the portfolio. Last week, the Journal reported a rumor about Paninvest in Indonesia, that the company may sell a subsidiary for $500 million. Paninvest’s total market capitalization is only $180 million, and we estimate it has more than $800 million worth of business value outside of this subsidiary. If the subsidiary is worth near the rumored number, that would further highlight Paninvest’s extreme undervaluation. On to Kazakhstan. Last week, Jim Rogers commented in Barron’s: “I was negative on Kazakhstan for decades but last year I noticed that good things were happening. They are making dramatic improvements and I’m getting interested in investing there.” His measured bullishness on Kazakhstan contrasts sharply with his bearishness on most global financial assets. More substantive than Jim Rogers, this week Reuters reported Kazakhstan’s government plans to raise $8 billion through IPOs of 43 companies currently owned by the sovereign wealth fund. This will be very good for the market, highlighting the undervaluation of existing Kazakh assets, while creating a bigger, more liquid market for all Kazakh securities. These are tangible signs of budding investor interest, and they follow an FT article last month about the broadening nature of Chinese investment into Kazakhstan: “If before Chinese investment [into Kazakhstan] was directed at the oil and gas sector, now it will be in infrastructure, industry, agriculture, tourism and other areas,” quoting a director of the China Institute for Contemporary International Relations, a government-linked think- tank.

I have pasted all four articles mentioned below. These articles just show the beginning of theses we’ve explored for years garnering mainstream acceptance. There’s a long runway ahead. As you review your investments at year-end, we would be pleased to set up a call to discuss how Robotti Global Fund is positioned today, with a portfolio full of excellent companies in a few highly prospective, temporarily depressed markets. Wishing you a great holiday season, Isaac Schwartz

Robotti Global Fund, LLC

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The above letter, including the attachments referenced therein, is an update letter with respect to the Robotti Global Fund, LLC (“RGF”) and was sent to partners of RGF via email on November 19, 2015. This letter should be read in conjunction with the following disclosure information: This information is for illustration and discussion purposes only and is not intended to be a recommendation, or an offer to sell, or a solicitation of any offer to buy, a limited partnership interest in RGF, nor should it be construed or used as investment, tax, ERISA or legal advice. Any such offer or solicitation will be made only by means of delivery of a presentation, offering memorandum, limited partnership agreement, subscription documents, or other information relating to such investment and only to suitable investors in those jurisdictions where permitted by law. Investors in the Fund must be, at minimum, “accredited investors” within the meaning of Rule 501 of Regulation D under the Securities Act of 1933. Further, the contents of this letter should not be relied upon in substitution of the exercise of independent judgment. The information is furnished as of the date shown, and is subject to change and to updating without notice; no representation is made with respect to its accuracy, completeness or timeliness and may not be relied upon for the purposes of entering into any transaction. The information herein is not intended to be a complete performance presentation or analysis and is subject to change. None of Robotti Global Fund, Robotti Global Management Company, LLC, as Managing Member of RGF, nor Robotti & Company Advisors, LLC, as investment advisor to RGF, or any affiliate, manager, member, officer, employee or agent or representative thereof makes any representation or warranty with respect to the information provided herein. In addition, certain information has been obtained from third party sources and, although believed to be reliable, the information has not been independently verified and its accuracy or completeness cannot be guaranteed. Any investment is subject to risks that include, among others, the risk of adverse or unanticipated market developments, issuer default, and risk of illiquidity. Past performance is not indicative of future results. If interested, please contact us for additional information about the performance related data for RGF. Opinions contained in this letter reflect the judgment as of the day and time of the publication and are subject to change without notice and may no longer represent its current opinion or advice due to market change or for any other reason. Note: certain statements on the attached material are not intended to represent absolute literal fact, but rather represent certain colloquialisms/mannerisms expressed by select market participants (but not necessarily individuals associated with RGF). Opinions contained in this letter reflect the judgment as of the day and time of the publication and are subject to change without notice and may no longer represent its current opinion or advice due to market change or for any other reason. The information provided herein is confidential and proprietary and is, and will remain at all times, the property of Robotti Global Management Company and Robotti & Company Advisors, LLC, as investment managers, and/or their affiliates. The information is being provided for informational purposes only. A copy of Robotti & Company Advisors, LLC’s Form ADV, Part 2 is available upon request. Additional information about the Advisor is also available on the SEC’s website at www.adviserinfo.sec.gov

Robotti Global Fund, LLC

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Indonesia’s Paninvest Seeks $500 Million From Sale of Insurance Business Italy’s Generali, Canada’s Intact, Hong Kong’s FWD are among the bidders in fray for the nonlife insurance business P.R. VENKAT AND I MADE SENTANA Nov. 12, 2015 1:55 a.m. ET PT Paninvest Tbk, an Indonesia-based holding company with interests in sectors spanning from insurance to banks to tourism, is seeking to sell its general insurance business and has received initial interest from companies from around the world, people with knowledge of the process said Thursday. Italian insurance firm Assicurazioni Generali SpA, Canada’s Intact Financial Corp. Intact Financial Corp. and Hong Kong-based Pacific Century Group’s insurance arm FWD are among the bidders seeking to buy the nonlife insurance business in a deal valued at about US$500 million, these people said. Generali, Intact, and FWD declined to comment. Paninvest officials weren't available for comment. Global insurers are eager to increase their sales across Asia as penetration rates for insurance products remain low relative to more mature markets. In April, Canadian firm Manulife Financial Corp.Manulife Financial Corp. reached a multiyear deal valued at over $1 billion allowing it to distribute its insurance products exclusively through Singaporean lender DBS Group Holdings Ltd.’s branches across Asia. Last year, Prudential PLC renewed a distribution partnership with Standard Chartered PLC. That followed AIA Group Ltd. and Citigroup Inc. inking a multibillion-dollar deal for AIA to distribute its insurance products through Citigroup’s Asia-Pacific retail branch network in late 2013. HSBC Holdings PLC sells its own insurance products through its banking network. Paninvest assets amounted to 25.311 trillion rupiah (US$1.9 billion) in the first nine months of the year, up from IDR21.15 trillion a year earlier, as revenue rose to IDR3.90 trillion rupiah from IDR2.89 trillion rupiah a year earlier. Paninvest, which also owns a majority stake in PT Bank Panin, will offer the buyer of its general insurance business the exclusive rights to sell insurance products through the bank’s branches for at least 15 years. Such deals can be highly attractive to foreign insurers seeking to gain a foothold in new markets. Bank Panin is one of the 10 largest banks in Indonesia in term of assets with 556 branches across Indonesia. In 2013, Paninvest sold a 40% stake in its life insurance business Panin Life to Japanese insurer Dai-ichi Life Insurance Co. for around $340 million. Within Southeast Asia, Indonesia offers a particularly attractive market for foreign insurers. It has a large population of 245 million people and an expanding middle class, and its economy is expected to grow between 4.7% to 5.1% this year. In the past Indonesia has attracted investors seeking growth in the country’s insurance sector. In December 2013, Japan’s fourth-largest life insurer by assets, Sumitomo Life Insurance Co. bought a 40% stake in PT BNI Life Insurance for about $353.6 million. Write to P.R. Venkat at venkat.pr@wsj.com and I Made Sentana at i-made.sentana@wsj.com

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Jim Rogers: His Outlook For Stocks, Commodities The legendary investor thinks a global bear market is coming. While he waits, here’s what he’s buying. By JOHN KIMELMAN November 10, 2015 At age 73, Jim Rogers, the international investor who once motorcycled around the world to find opportunities, says he’s slowing down his investment activity a bit. But for Rogers, who fights Father Time with daily two-hour exercise sessions at his Singapore home, this step back is not a concession to age. It’s more about the limited opportunities he sees right now in the many markets he studies, due to his concern that mounting worldwide debt and too much easy money will lead to a global bear market. “The next time around, we are going to have a very serious problem, I’m afraid,” said Rogers, speaking by phone from a hotel room in Beijing last week. “So basically what I’m saying is that I’m not racing around looking for markets.” Rogers, an Alabama native, first gained fame in the 1970s as he and hedge-fund partner George Soros racked up a 4,200% gain in 10 years. Now, managing his own account, Rogers is nibbling at investments before his projected big shake-out comes. He concedes that global stock indexes could have “another leg up” as central banks “panic” and keep short-term rates low. But it will end badly, he concludes. During a 40-minute interview with Barrons.com, Rogers offered a few ideas for U.S. investors, including a few China ETFs he holds, and a few short ideas. He also shared his take on commodities, including gold. Here are excerpts of that discussion. Barrons.com: You’re regarded in the U.S. financial media as a go-to source for investing in emerging markets, principally China, and commodities. I want you to help me put these investment sectors in perspective. Let’s say you’re a 50-year-old Barron’s reader with a few million dollars in net worth. How much of your assets should be in these areas? Rogers: Well, it depends on the time [in the market cycle] and it depends on the person. I don’t think anybody should ever be interested in anything that they don’t know about. If you can’t find Kazakhstan on the map, don’t invest there. Q: What if the time frame is now and the investors are folks who are comfortable with risks of emerging markets and commodities? A: Right now as I look at the world, I’m not terribly optimistic. The American stock market has been in a bull market now 6 ½ years. In America we’ve had economic setbacks every 4 to 7 years since the beginning of the Republic and chances are we’re certainly getting closer to being due for some kind of correction, bear market even. And the next bear market is going to be worse than most of us have experienced because the debt is so much higher. You know we had a problem in 2008 because of high debt, but since then debt worldwide has gone through the roof. I mean nobody has reduced their debt, no nation has reduced its debt since 2008 — the debt has gotten higher and higher. So the next time around we are going to have a very serious problem. What I’m saying is that I’m not racing around looking for markets. I’m afraid that the big picture is such that we are going to have more problems in the next year or two and being long most stocks or most investments is not going to be great. Q: So where do you think the big global problems are going to start? A: Big problems are going to come from the U.S. essentially because it has been the American central bank which has been the most at fault. We’re the ones who started all this money printing and everybody else of course copied us, but it is the first time in recorded history that you’ve had all the major central banks printing staggering amounts of money: Japan, America, Europe, Great Britain, we’re all doing it. Having said that, you look back at previous bear markets they usually start with a small, marginal country that snowballs and the next thing you know we’re all in trouble. There is going to be another leg up in stocks as central banks continue to panic [and keep rates low.] I suspect it will be the last one. Q: In an interview with my colleague Kopin Tan in 2013 you said that you wouldn’t buy China’s stock market “unless it collapses.” This summer, did it collapse enough to get you interested, and are you still a buyer? A: In July 2015, I started buying on the collapse. There were a couple of days where it was down very big on a day. Well I was one of the buyers on those days. I haven’t been terribly active since. Q: And you are using ETFs to invest in China? A: I own FXI [the iShares China Large-Cap ETF] and ASHR [the Deutsche X-trackers Harvest CSI300 ETF], as well as some based in Singapore. But the best investment might be AMP Capital China Ord (ticker: AGF.AU ) units listed in Australia, which is a closed-end fund trading at a big discount. Q: Do you have any short positions right now that you’d care to share? A: I have been shorting U.S. junk bonds by going long the Proshares Short High Yield (SJB ) and I’m shorting U.S. tech stocks through the ProShares Ultrashort QQQ ( QID ). Q: But if you think U.S. stocks have one last leg up, why are you shorting these risk-on assets that should be helped by a rising market?

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A: Well, one has to be hedged in case one is wrong. Q: What would you say to an investor now who has little to no exposure in commodities and sees that most assets have been beaten down. What types of commodities do you think have the best potential now going forward? A: I would say agriculture through the ( RJA ) [Elements Rogers International Commodity Agriculture ETN]. It is amazing how low some of these agricultural prices are. The average age of American farmers is 58 now. The average age in Japan is 66. There are more people in America who study public relations than study agriculture. It has been a nightmare industry for a long time and that’s got to change. I would certainly buy agriculture. [Rogers designed the index that RJA tracks.] Q: What about other commodities? A: I would probably start to buy oil in a small way, energy in a small way. I think it may be at the bottom, but since I don’t have much confidence in my convictions right now, I want to see more. There is a lot of bad news that keeps coming out about energy and yet the prices don’t go down. Historically, I have noticed that if something is going up and good news comes out and it doesn’t keep going up it usually means the top is being set. Likewise if something is going down, and bad news comes out and it doesn’t continue to go down, it usually means we are making a bottom, so I suspect that energy is making a bottom. Q: What about gold? A: I own gold, but I wouldn’t buy gold at the moment. I still expect a great opportunity to buy gold in the next year or two or three. I guess I would buy agriculture with both feet, energy with a toe and watch the others. Q: What percentage of one’s investment assets should be in commodities now? A: I would certainly put a fair amount of money in agriculture. It could be 10% of a portfolio. Q: What about currency investing? A: I’ll tell you, my largest currency position is the U.S. dollar. I expect some problems going forward in the world financial markets, and during those problems people will seek a safe haven. They think U.S. dollars are a safe haven. The U.S. may be the largest debtor nation in the world, but as you look around, certainly you are not going to the euro or the yen these days, so I own a lot of U.S. dollars and as the turmoil comes, the U.S. dollar will go higher and higher. It may turn into a bubble, depending on the severity of the turmoil. But if gets overpriced, I hope I will sell it at that point. Q: I have read that you are pessimistic about bond markets in general just as many investors are — because rates can’t get much lower. But are there any bond markets you like right now? A: I own Russia government bonds, but maturing in 2018 so that’s short-term and not really a bond. I am pessimistic on bonds because of the low rates. Q: I know you just arrived in China from Kazakhstan, where you had some speaking engagements. What do you think of that natural-resource rich country as a place to invest in? A: Well, Kazakhstan has made some dramatic changes [in their legal system]. I was negative on Kazakhstan for decades but last year I noticed that good things were happening. They are making dramatic improvements and I’m getting interested in investing there. Because oil is very low, it seems to be making a bottom, which would put countries like Kazakhstan even better on the radar screen because it has been a disaster. But the country has vast natural resources and they are making dramatic changes from what I can see. I haven’t bought anything yet but I’ve instructed my office to find me a broker. That’s just the first step; it doesn’t mean I’ll do anything. But at least I’m interested enough that I am now looking for a broker. Q: Thanks for your time, Jim, and have a safe flight home.

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UPDATE 1-Kazakhstan plans IPOs for 43 large state firms in 2016-17 Wed Nov 18, 2015 6:19am EST Related: IPOS, BASIC MATERIALS, ENERGY, FINANCIALS Nov 18 Kazakhstan plans to sell stakes of at least 25 percent in 43 large state-owned companies via initial public offerings (IPOs) in 2016-17, the Samruk-Kazyna sovereign wealth fund said on Wednesday. The government faces a plunge in revenues from oil, Kazakhstan's main export. President Nursultan Nazarbayev told a government meeting on Wednesday he wanted Kazakh businessmen and companies to take part in the privatisations. The stakes will be sold on the floor of the oil-rich nation's financial centre being built in the capital Astana, the fund said. The businesses to go public include oil and gas company KazMunaiGas, uranium company Kazatomprom, railway company Kazakhstan Temir Zholy and mining firm Tau-ken Samruk, it said. Tau-ken Samruk has a 30 percent stake in Glencore-controlled zinc producer Kazzinc. Offered for sale will also be stakes in electricity firms united in the fund's division Samruk-Energo. Samruk-Kazyna manages state-owned stakes in companies representing all major branches of Central Asia's largest economy. Two sources close to the government told Reuters this month the companies in which the state would sell stakes included miner Eurasian Resources Group (ERG), flagship carrier Air Astana and Kazakhtelecom. These companies, however, were not mentioned in Samruk's statement on Wednesday. The fund said that besides holding IPOs in the 43 large companies, it would privatise 182 "non-core assets" through auctions in the same period. The total value of the capital of all the companies slated for sell-off is around 2.5 trillion tenge ($8.1 billion), the fund said. (Reporting by Mariya Gordeyeva; Writing by Dmitry Solovyov; Editing by Jason Neely and Mark Potter)

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China Business

China’s Great Game: In Russia’s backyard Beijing’s hope to reshape the former Soviet states of central Asia is at odds with Moscow’s ambitions OCTOBER 14, 2015 By: Jack Farchy The handful of shiny new buildings sprouting out of a barren landscape of dusty steppe and rusting shipping containers is an incongruous sight. One of them, a sparkling tower of marble and glass, is empty aside from a duty-free shop on the ground floor. Next door, a shop sells Russian honey and Chinese ladies’ shoes, displayed side by side. This is Khorgos, the dividing line between China and Kazakhstan. And while it may not look like much now, China has ambitions to transform this border point at what was once the edge of the Russian empire into a new gateway to the west. “East meets west. It’s here. This is the linking point,” says Hicham Belmaachi, commercial director of a newly-built dry port at the border, designed to speed up the transit of Chinese goods via Xinjiang on their way to central Asia, Europe or the Middle East. With promises of tens of billions of dollars in investment, the Chinese strategy, if realized, could reshape the former Soviet economies of central Asia, which have been battered by falling commodity prices and recession in Russia. But increasing economic dependence on China at a time of uncertainty over the health of its economy is not universally popular in the central Asian states. And the launch of a regional integration drive has put Beijing on a collision course with Moscow, which has been lobbying countries to join its Eurasian Economic Union. It also raises the stakes for Beijing: as China invests more in this fragile region bordering Afghanistan, it is finding it harder to resist being drawn into political and military affairs. “This is China’s inadvertent empire. It’s a part of the world where they are clearly becoming the most significant geopolitical player,” says Raffaello Pantucci, a specialist on the region at the Royal United Services Institute. “I don’t think they’ve given consideration to what that means in the longer term.” Echoes of ancient camel bells Two years ago, Mr Xi stood in Kazakhstan’s futuristic capital of Astana and invoked the memory of Zhang Qian, the diplomat who helped open China’s trade with the world in the 2nd century BC. “As I stand here and look back at that episode of history, I could almost hear the camel bells echoing in the mountains and see the wisp of smoke rising from the desert,” the Chinese leader said. Describing Kazakhstan as a “magic land”, he called for the creation of a new “economic belt” along the old trade routes. “The ancient Silk Road has gained fresh vitality,” he said.

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Others see parallels with a more recent period in history: the tussle for influence between the Russian and British empires in the 19th century. As China expands its influence in parts of the former Soviet Union, central Asia could become the focus of a new “Great Game” between Beijing, Moscow and possibly Iran, Turkey and western countries.

But as western interest in the region recedes with the military drawdown from Afghanistan, and Russia’s ability to invest is curtailed by its own economic recession, the Great Game in the region may turn out to be one-sided. Over the past two decades China has quietly become the pre-eminent economic power in the region; now many central Asian governments greet the prospect of Chinese investment as their last chance to stave off a downturn that could threaten political stability. Trade between China and the five post-Soviet central Asian states — Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan — has risen from $1.8bn in 2000 to $50bn in 2013, according to IMF data, before dropping slightly amid the decline in commodity prices. That means China has surpassed Russia in recent years to become the region’s single largest trade partner.

“If you look at investment needs in the region, then Chinese participation is very important to say the least,” says Agris Preimanis, central Asia economist at the European Bank for Reconstruction and Development, a major western investor in the region. “They are increasingly active in all sectors and you just cannot see western capital or Russian capital taking their place.”

In Kazakhstan, Chinese companies own somewhere between one-fifth and one-quarter of the country’s oil production — about the same proportion as the national oil company. In Turkmenistan, holder of the world’s fourth-largest gas reserves, China has replaced Russia’s Gazprom as the dominant buyer of Turkmen gas, accounting for 61 per cent of exports last year. Much of that shift is thanks the Central Asia-China gas pipeline, opened in 2009, which provides the region’s energy-rich economies with a major export route not controlled by Moscow. In the region’s poorer countries, China has also become an economic power. Chinese companies have invested in oil refineries and cement plants in Kyrgyzstan and Tajikistan, and in roads and tunnels across the region.

Data on the scale of Chinese investment are sketchy, as much is done at a bilateral level between Chinese state banks, such as China Development Bank or China Eximbank, and central Asian governments or state companies.

But in one example, the Tajik deputy finance minister last year told the FT that Beijing would invest $6bn in Tajikistan over the next three years — a figure equivalent to two-thirds of the country’s annual gross domestic product.

This economic dominance means that often it seems that China, not Russia, is now the most important patron of central Asian governments. After Kazakhstan allowed its currency to float freely in August, triggering an immediate devaluation of more than a fifth, its first priority was to reassure Beijing.

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“Where is the first visit of the Kazakh president after this decision? Where was the first commitment that all the investments are in place? China,” says Kairat Kelimbetov, the central bank governor.

When Tajikistan, the region’s poorest country, was running low on central bank reserves this summer, it signed a swap agreement with the People’s Bank of China worth Rmb3.2bn ($500m). It is not always smooth travelling on the new Silk Road. In a region that has traditionally felt greater cultural affinities with Russia and Turkey, politicians are frequently suspicious of China. A proposal for China to lease a large area of land for agriculture triggered rare public protests in Kazakhstan in 2010.

Dosym Satpayev, a Kazakh political scientist who heads the Almaty-based Risk Assessment Group, warns: “Any attempt by China to increase influence in Kazakhstan will awake more anti-China sentiment.”

Moscow’s compromise While many see the new Silk Road as more of a formalisation of China’s presence in the region than a specific plan, the fanfare surrounding it has raised hackles among those who see central Asia as part of Russia’s “sphere of influence”. Zhao Huasheng, director of the Centre for Russia and Central Asia studies at Fudan University, says that when the Silk Road strategy was announced, Russian officials saw it as a challenge to Moscow’s own regional integration project, the Eurasian Economic Union.

“China provided a lot of explanation,” he says. “China sees the projects developing in parallel, in a co-operative way.”

In the past, Russia blocked attempts to increase the reach of another Chinese-led regional group, the Shanghai Cooperation Organisation, which includes all the central Asian states apart from Turkmenistan.

Yet when Mr Xi visited Moscow in May, the two countries signed a declaration on co-operation between the Eurasian Economic Union and the Silk Road project. Alexander Gabuev, senior associate at the Carnegie Moscow Center, a think-tank, says the deal was the result of “painful internal discussions” in Moscow. Analysts say the unspoken agreement between Moscow and Beijing appears to be that Russia will cede economic dominance in central Asia to China, but maintain its military and security heft in the region.

“What the Kremlin is hoping for is a division of labour between Moscow and Beijing in central Asia,” says Mr Gabuev. “In this grand scheme, China will be the major driver for economic development, while Moscow will remain the dominant hard security provider.” Liu Yazhou, a general in the People’s Liberation Army, called central Asia “a rich piece of cake given to today’s Chinese people by heaven” in a 2010 essay that became a kind of manifesto for China’s expansionist policy in the region. Analysts see two broad motivations behind the dramatic increase in Chinese investment in the region that started in the 1990s.

First, as China’s commodity consumption skyrocketed, central Asia was a nearby source of oil, gas, uranium, copper and gold supplies. Second, Beijing wanted co-operation from the newly-independent states to keep its restive Xinjiang region in check. Xinjiang’s native Uighurs have much in common with the cultures, languages and religion of central Asia, and there is a large Uighur minority in the region.

But China may find it hard to stay out of security matters as its economic interests in the region increase. It has already started providing some military aid to Kyrgyzstan and Tajikistan. “Even though this is an economic project it could create political impact or influence,” says Prof Zhao. “I think China will get more involved in security in the region. But it doesn’t mean China will be involved in that region militarily.”

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General Liu writes of the cultural affinities between Xinjiang and the peoples of central Asia, noting: “The advantageous factor is that they all derive great benefits from economic co-operation with China.”

A new route to market With the launch of the new Silk Road, analysts see a shift in investments towards infrastructure and other sectors. “If before Chinese investment was directed at the oil and gas sector, now it will be in infrastructure, industry, agriculture, tourism and other areas,” says Ding Xiaoxing, director of central Asia studies at the China Institute for Contemporary International Relations, a government-linked think-tank.

At Khorgos, the Kazakh-Chinese border crossing, this shift is becoming reality. Rows of gleaming new railway tracks stretch into the distance, ready to handle ever-increasing volumes of Chinese cargo. Mr Belmaachi boasts that his team can shift a trainload of cargo from a Chinese to a Kazakh train — the two countries’ railways have different-sized gauges — in just 47 minutes.

The state railway company, Kazakhstan Temir Zholy (KTZ), has invested 245bn tenge ($900m) to build the dry port, which started operations in August and launches officially next Monday. China’s Jiangsu province in September announced an agreement to invest $600m over five years in logistics and industrial zones around Khorgos.

Darryl Hadaway, a former regional head of Deloitte who is starting a logistics business focused on Kazakhstan, says Khorgos can become a hub for regional and international trade, serving the role that Atlanta does in the US

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Already, the number of containers travelling by train between China and Europe via Kazakhstan has increased 18 times between 2011 and 2014, and is on track to double again this year, according to KTZ. The route is attractive to electronics companies such as HP — which has helped to pioneer it — for whom the shorter transit time compared to shipping by sea is worth paying for. The journey from China to Europe takes 14-16 days, compared with a month or more by sea, although the cost of shipping one container is some $9,000 compared with $3,000 by sea. KTZ is hoping to capture 6 per cent of the trade between China and Europe by 2020; currently 98 per cent goes by sea. “Companies in Europe and China have never studied this option in detail. People were really busy shipping by sea and not focusing on this route,” says Mr Belmaachi. “I really think this is the next big thing for the supply chain.” Increasing the number of trains plying the route may also help to open up new trade routes for perishable products, like fruit and vegetables, says Mr Hadaway. “There is a whole range of products coming out of Asia that have never been able to access this market.” Read the complete series here