WEEKLY CROSS-ASSET MARKET OUTLOOK

04 OCTOBER 2016

ROBERT MCADIE

Global Markets Head of Research and Strategy

Non Independent Research – Marketing Communication www.GlobalMarkets.bnpparibas.com

Please refer to important information at the end of the report. This document is classified as non-objective research.

BNP PARIBAS MARKETS CALL

Event risk on the rise

Market outlook

Source: BNP Paribas, Bloomberg

• Rising event risk: political (elections, Brexit and Italian

referendum), regulatory, legal, CB policy and Opec

� Some markets are reflecting this risk more than others and in

many cases this risk is underpriced

� WTI and Brent vol has dropped, consistent with a stable price

range circa USD 45- USD 50/barrel

� Event risk volatility in US equities appears cheap

� Risk implied in USDMXN volatility is overdone

� Brexit risk to drive steeper GBPUSD volatility curve

� European bank stocks have overpriced the risk vs AT1 bonds

• Overall position: Global bond yields have bottomed and will

rise

� In December, we expect the Fed to hike rates and the ECB to

modify its QE program (the ECB is currently considering different

options). Both should drive steeper curves and higher rates.

� Overall, we expect 10y and longer-end yields to rise into year end.

� The Bank of Japan has created freedom for the 10-40y part of the

curve to steepen. In the medium to long term, the very long end ofglobal curves is likely to follow suit.

� Inflation expectations should rise with a positive base effect from oil

� Inflation breakevens are likely to rise

� Nominal yields are likely to adjust higher with real yields

rising

� Risk assets will remain under pressure

03/10/2016 LDN close

1 Month prognosisCurrent

vs prognosis

EURUSD 1.119 1.090 -2.61 %

GBPUSD 1.274 1.280 0.51 %

USDJPY 102.95 105.00 1.99 %

10yr Gilts 78 bp 75 -3 bp

10yr Bunds -5 bp 0 5 bp

10 Tsys 1.67% 1.75% 0.08 %

10yr JGBs -7 bp 0 7 bp

S&P 2,158 2,070 -4.08 %

SX5E 3,030 2,900 -4.27 %

SX7E 92 90 -2.56 %

FTSE 100 7,074 6,800 -3.88 %

Nikkei 225 16,736 16,800 0.38 %

GOLD 1,271 1,320 3.84 %

Oil (CL1) 49 48 -1.78 %

Itraxx Main S26 74bp 77 3 bp

Itraxx Xover S26

335bp 350 15bp

CDX IG S27 75bp 81 6 bp

2

Opec news has stabilised the oil market

Oil vol has dropped

Chart 1: Post-Opec meeting implied oil vol returns to lows Chart 2: Hedging is keeping forward prices down

Chart 3: Demand has been stronger than expected Chart 4: A stable to higher oil price has to feed into higher headline CPI

Source: Bloomberg, BNP Paribas

3

Headline inflation to rise with base effects and higher energy…

Source: BNP Paribas

Chart 1: US, eurozone and UK headline CPI to rise sharply in Q4

Source: BNP Paribas

Chart 3: Our economists’ inflation forecasts increasing through 2016

Headline inflation is set to accelerate sharply in Q4 due to:

� Base effects, as the impact of the 50% collapse in oil prices

between June 2015 and February 2016 drops out of the

inflation index.

� The rise in energy prices since February 2016 – US retail

gasoline prices are up by more than 30%.

� Robust core inflation – running at 2.3% y/y in the US,

largely thanks to the shelter component and healthcare.

Chart 2: Retail gasoline is up 30%+ from February lows (USD/gallon)

Source: Bloomberg, BNP Paribas

4

…which is not priced into the (inflation) market

How long is the market pricing for CPI to return to CB target?

� Eurozone: not in next 30 years

• 10y BE swap is close to all-time lows

� US: In 9 years

• 10y BE swap is near financial-crisis levels

� UK: In 2 years

• 10y BE swap has risen post-Brexit with GBP

weakness

The market remains too pessimistic on inflation in the

eurozone and US

Chart 3: Breakevens are sensitive to energy prices, esp. in US

Source: BNP Paribas

Chart 1: Markets have given up on inflation hitting ECB target in Eurozone

Source: BNP Paribas

Chart 2: All 10y inflation swap breakevens bar UK are depressed (bp)

Source: Bloomberg, BNP Paribas

5

UK

US

EUR

14

15

16

17

18

19

20

%

Expiry

USDMXN ATM vol term structure

Current

FX event risk vol: US election risk is priced into USDMXN, UK Brexit risk

is underpriced in the back end of GBPUSD curve

US election

UK PM May’s comments on a

hard Brexit over the weekend

Chart 1: US election risk is priced beyond the election date Chart 2: USDMXN is fully pricing in the US election risk

Chart 3: Brexit risk has fallen since 23 June but is rising on PM comments Chart 4: GBPUSD vol curve to steepen as Brexit risk is realised

Source: Bloomberg, BNP Paribas

6

SPX volatility event risk: US election

� We think election volatility is still cheap, despite some

volatility premium being priced just after the elections.

� We estimate the SPX is pricing in a 1.6% move for the

election event (see table below). This is relatively

small compared with a 4% drop on the SPX in theaftermath of the Brexit result, in our view.

� On the other hand, we think there is more value on the

SPX volatility curve later in the year on the Italian

referendum and December Fed meeting.

� The five weeks following the US election are offered at

a much lower cost of volatility (roughly avg 14%

implied forward vol) than one might expect, given theimportance of both events

� Note that on 9 September, markets tumbled nearly

2.5% over concerns the September Fed would hike

rates.

Source: Bloomberg, BNP Paribas

Source: Bloomberg, BNP Paribas

SPX weekly forward volatility curve

SPX implied move by week

Trade idea

� Investors agreeing with the view that there is more value in December SPX volatility might consider buying an SPX 16Dec16 straddlefinanced by selling SPX 11Nov16 straddles for 1.42% indicatively. This structure provides volatility exposure for 35 days following

11 November.

7

European bank fundamentals have lagged US banks, but are improving

Source: Bloomberg, BNP Paribas

� Eurozone bank NPLs relative to total loans have

peaked.

� This has happened much later than in the US, where

the ratio has been improving since 2010.

� US banks have been able to keep lending growth at a

steadier pace than in Europe.

� Eurozone banks may have a lot less de-leveraging todo going forward.

5.00

7.50

10.00

12.50

RWA to equity ratio

EZ banks

US banks

Chart 1: Eurozone banks have managed to reduce their NPLs

Chart 3: …so there is scope for lending growth from hereChart 2: Leverage ratios are now lower for EU banks…

0

2.5

5

7.5

10

Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16

NPLs relative to total loans

EZ

banks

US

banks

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16

Loan growthUS

banks

EZ

banks

8

European banks valuations too pessimistic versus the US

Source: Bloomberg, BNP Paribas

� Eurozone banks still show lower profitability vs their

US counterparts, on the back of weak front bookmargins relative to back book margins.

� Valuations reflect that earnings risk is to the

downside, and there are still concerns over largederivative exposures, collateral valuations and the

associated accounting methodology.

� Regulatory uncertainty remains (Basel proposals), but

capital, funding and liquidity positions have improvedsignificantly

� Equity markets are too pessimistic

0.50

0.75

1.00

1.25

1.50

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

Price to book ratio

US banks

EZ banks

Chart 1: US banks have better profitability…

Chart 2: …and have been able to trade with a higher price to book ratioChart 3: Whilst EU bank NIM have fallen, current valuations too

pessimistic

9

Trade of the week: SX7E long term calls

Well flagged underperformance is fully priced into bank

stocks but not AT1

� The reasons for the bank sector’s underperformance are

well known and include (a) a huge hit to net interest income

from negative ECB deposit rates, (b) the cost of extracapital weighing on profitability and, of course, (c) heavy

regulatory fines levied on the sector.

� AT1 bonds are not reflecting the downside risk especially

in light of the current issues facing some European banks..Conversely equities are overestimating the downside for

the whole sector.

Glimmers of support for the bank sector:

� Analysts are starting to revise up modestly their return-on-

equity estimates for European banks.

� Several European retail banks are cutting the interest rates

offered to savers and are even starting to pass through

negative interest rates to wealthy investors and corporates.

Trade: Long SX7E Dec-20 calls strike 100, indicatively

offered at EUR 14.00, Dec-16 future ref.: 92.10, delta: 47%,

implied volatility: 31%.

Risk: The risk of buying a call option is limited to the premium paid at inception.

A factor supporting this trade is: if banks reduce/or stop

their dividends the current discount of 14% between the fwd and spot level of the index (Chart 2) will narrow with

the fwd rising, thus benefiting the trade.

Chart 1: Eurozone banks vs AT1

Source: Bloomberg, BNP Paribas

Chart 2: SX7E forward near lows

Rich

Cheap

10

DisclaimersThis document has been written by our strategy teams. It does not purport to be an exhaustiveanalysis, and may be subject to conflicts of interest resulting from their interaction with salesand trading which could affect the objectivity of this report. This document is a marketingcommunication and is not independent investment research. It has not been prepared inaccordance with legal requirements designed to provide the independence of investmentresearch, and is not subject to any prohibition on dealing ahead of the dissemination ofinvestment research.

STEER™ is a trade mark of BNP Paribas.

This document constitutes a marketing communication and has been prepared by BNP Paribas for,and is directed at, (a) Professional Clients and Eligible Counterparties as defined by the EuropeanUnion Markets in Financial Instruments Directive (2004/39/EC) (“MiFID”), and (b) where relevant,persons who have professional experience in matters relating to investments falling within Article 19(5)of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, and at otherpersons to whom it may lawfully be communicated (together “Relevant Persons”). Any investment orinvestment activity to which this document relates is available only to and will be engaged in only withRelevant Persons. Any person who is not a Relevant Person should not act or rely on this documentor its content.

The information and opinions contained in this report have been obtained from, or are based on,public sources believed to be reliable, but there is no guarantee of the accuracy or completeness ofsuch information and such information has not been independently verified by BNP Paribas or by anyperson. None of BNP Paribas, any of its subsidiary undertakings or affiliates or its members,directors, officers, agents or employees accepts any responsibility or liability whatsoever or makes anyrepresentation or warranty, express or implied, as to the accuracy and completeness of theinformation or any opinions based thereon and contained in this document. and it should not be reliedupon as such.

This report does not constitute or form any part of any offer to sell or issue and is not a solicitation ofany offer to purchase any financial instrument, nor shall it or any part of it nor the fact of its distributionform the basis of, or be relied on, in connection with any contract or investment decision. To the extentthat any transaction is subsequently entered into between the recipient and BNP Paribas, suchtransaction will be entered into upon such terms as may be agreed by the parties in the relevantdocumentation. This document does not constitute an offer or solicitation to buy or sell any securitiesor other investment.

Information and opinions contained in the report are published for the assistance of recipients, but arenot to be relied upon as authoritative or taken in substitution for the exercise of judgement by anyrecipient, are subject to change without notice and not intended to provide the sole basis of anyevaluation of the instruments discussed herein. In providing this document, BNP Paribas offers noinvestment, financial, legal, tax or any other type of advice to, nor has any fiduciary duties towards,recipients. .Any reference to past performance should not be taken as an indication of futureperformance. To the fullest extent permitted by law, no BNP Paribas group company accepts anyliability whatsoever (including in negligence) for any direct or consequential loss arising from any useof or reliance on material contained in this report even where advised of the possibility of suchlosses.

All estimates and opinions included in this report are made as of the date of this report. Unlessotherwise indicated in this report there is no intention to update this report.

BNP Paribas SA and its affiliates (collectively “BNP Paribas”) may make a market in, or may, asprincipal or agent, buy or sell securities of any issuer or person mentioned in this report or derivativesthereon. Prices, yields and other similar information included in this report are included for informationpurposes. Numerousfactors will affect market pricing and there is no certainty that transactions could be executed at anyspecified price.

BNP Paribas may have a financial interest in any issuer or person mentioned in this document,including a long or short position in their securities and/or options, futures or other derivativeinstruments based thereon, or vice versa. BNP Paribas, including its officers and employees mayserve or have served as an officer, director or in an advisory capacity for any person mentioned in thisdocument. BNP Paribas may, from time to time, solicit, perform or have performed investmentbanking, underwriting or other services (including acting as adviser, manager, underwriter or lender)within the last 12 months for any person referred to in this document. BNP Paribas may be a party toan agreement with any person relating to the production of this document. BNP Paribas, may to theextent permitted by law, have acted upon or used the information contained herein, or the research oranalysis on which it was based, before the document was published. BNP Paribas may receive orintend to seek compensation for investment banking services in the next three months from or inrelation to any person mentioned in this document. Any person mentioned in this document may havebeen provided with relevant sections of this document prior to its publication in order to verify itsfactual accuracy.

The information presented herein does not comprise a prospectus of securities for the purposes of EUDirective 2003/71/EC.

The securities described herein may not be eligible for sale in all jurisdictions or to certain categoriesof investors.

This document was produced by a BNP Paribas group company. This document is for the use ofintended recipients and may not be reproduced (in whole or in part) or delivered or transmitted to anyother person without the prior written consent of BNP Paribas. By accepting this document you agreeto this.

UK: In the UK, this report is being communicated by BNP Paribas London Branch. 10 HarewoodAvenue, London NW1 6AA; tel: +44 20 7595 2000; fax: +44 20 7595 2555- www.bnpparibas.com.Incorporated in France with Limited Liability. Registered Office: 16 boulevard des Italiens, 75009Paris, France. 662 042 449 RCS Paris. BNP Paribas London Branch is lead supervised by theEuropean Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR). BNPParibas London Branch is authorised by the ECB, the ACPR and the Prudential Regulation Authorityand subject to limited regulation by the Financial Conduct Authority and Prudential RegulationAuthority. Details about the extent of our authorisation and regulation by the Prudential RegulationAuthority, and regulation by the Financial Conduct Authority are available from us on request. BNPParibas London Branch is registered in England and Wales under no. FC13447.

11

DisclaimersFrance: This report has been approved for publication in BNP Paribas, incorporated in France withLimited Liability (Registered Office: 16 boulevard des Italiens, 75009 Paris, France, 662 042 449 RCSParis, www.bnpparibas.com) is authorized and supervised by European Central Bank (ECB) and byAutorité de Contrôle Prudentiel et de Résolution (ACPR) in respect of supervisions for which thecompetence remains at national level, in terms of Council Regulation n° 1024/2013 of 15 October2013 conferring specific tasks on the ECB concerning policies relating to the prudential supervision ofcredit institutions.Germany: This report is being distributed in Germany by BNP Paribas S.A. NiederlassungDeutschland, a branch of BNP Paribas S.A. whose head office is in Paris, France. 662 042 449 RCSParis, www.bnpparibas.com). BNP Paribas Niederlassung Deutschland is authorized and leadsupervised by the European Central Bank (ECB) and by Autorité de Contrôle Prudentiel et deRésolution (ACPR) and is subject to limited supervision and regulation by Bundesanstalt fürFinanzdienstleistungsaufsicht (BaFin) in respect of supervisions for which the competence remains atnational level, in terms of Council Regulation n°2013/1024 of 15 October 2013 conferring specifictasks on the ECB concerning policies relating to the prudential supervision of credit institutions as wellas Council Directive n° 2013/36/EU of 26 June, 2013 and Section 53b German Banking Act(Kreditwesengesetz - KWG) providing for the principles of shared supervision between the nationalcompetent authorities in case of branches and applicable national rules and regulations. BNP ParibasNiederlassung Deutschland is registered with locations at Europa Allee 12, 60327 Frankfurt(commercial register HRB Frankfurt am Main 40950) and Bahnhofstrasse 55, 90429 Nuremberg(commercial register Nuremberg HRB Nürnberg 31129).

Belgium: BNP Paribas Fortis SA/NV is authorized and supervised by European Central Bank (ECB)and by the National Bank of Belgium, boulevard de Berlaimont 14, 1000 Brussels, and is also underthe supervision on investor and consumer protection of the Financial Services and Markets Authority(FSMA), rue du congrès 12-14, 1000 Brussels and is authorized as insurance agent under FSMAnumber 25789 A

Ireland: This report is being distributed in Ireland by BNP Paribas S.A., Dublin Branch. BNP Paribas isincorporated in France as a Société Anonyme and regulated in France by the European Central Bankand by the Autorité de Contrôle Prudentiel et de Résolution.Netherlands: This report is being distributed in the Netherlands by BNP Paribas Fortis SA/NV,Netherlands Branch, a branch of BNP Paribas SA/NV whose head office is in Brussels, Belgium. BNPParibas Fortis SA/NV, Netherlands Branch, Herengracht 595, 1017 CE Amsterdam, is authorised andsupervised by the European Central Bank (ECB) and the National Bank of Belgium and is alsosupervised by the Belgian Financial Services and Markets Authority (FSMA) and it is subject to limitedregulation by the Netherlands Authority for the Financial Markets (AFM) and the Dutch Central Bank(De Nederlandsche Bank).

Portugal: BNP Paribas – Sucursal em Portugal Avenida 5 de Outubro, 206, 1050-065 Lisboa,Portugal. www.bnpparibas.com. Incorporated in France with Limited Liability. Registered Office: 16boulevard des Italiens, 75009 Paris, France. 662 042 449 RCS Paris. BNP Paribas – Sucursal emPortugal is lead supervised by the European Central Bank (ECB) and the Autorité de ContrôlePrudentiel et de Résolution (ACPR). BNP Paribas - Sucursal em Portugal is authorized by the ECB,the ACPR and Resolution and it is authorized and subject to limited regulation by Banco de Portugaland Comissão do Mercado de Valores Mobiliários. BNP Paribas - Sucursal em Portugal is registeredin C.R.C. of Lisbon under no. NIPC 980000416. VAT Number PT 980 000 416.”

Spain: This report is being distributed in Spain by BNP Paribas S.A., S.E., a branch of BNP ParibasS.A. whose head office is in Paris, France (Registered Office: 16 boulevard des Italiens, 75009 Paris,France). BNP Paribas S.A., S.E., C/Ribera de Loira 28, Madrid 28042 is authorised and supervised bythe European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR)and subject to limited regulation by the Bank of Spain.

United States: This report may be distributed (i) by BNP Paribas Securities Corp. to U.S. personswho qualify as an institutional investor under FINRA Rule 2210(a)(4), or (ii) by a subsidiary or affiliateof BNP Paribas that is not registered as a US broker-dealer only to U.S. persons who are considered“major U.S. institutional investors” (as such term is defined in Rule 15a-6 under the SecuritiesExchange Act of 1934, as amended). U.S. persons who wish to effect transactions in securitiesdiscussed herein must contact a BNP Paribas Securities Corp. representative unless otherwiseauthorized by law to contact a non-US affiliate of BNP Paribas. BNP Paribas Securities Corp. is abroker dealer registered with the Securities and Exchange Commission (“SEC”) and the CommodityFutures Trading Commission (“CFTC”) and member of FINRA, SIPC, NFA, NYSE and other principalexchanges.

Brazil: This report was prepared by Banco BNP Paribas Brasil S.A. or by its subsidiaries, affiliatesand controlled companies, together referred to as "BNP Paribas", for information purposes only anddo not represent an offer or request for investment or divestment of assets. Banco BNP Paribas BrasilS.A. is a financial institution duly incorporated in Brazil and duly authorized by the Central Bank ofBrazil and by the Brazilian Securities Commission to manage investment funds. Notwithstanding thecaution to obtain and manage the information herein presented, BNP Paribas shall not be responsiblefor the accidental publication of incorrect information, nor for investment decisions taken based on theinformation contained herein, which can be modified without prior notice. Banco BNP Paribas BrasilS.A. shall not be responsible to update or revise any informationcontained herein. Banco BNP Paribas Brasil S.A. shall not be responsible for any loss caused by theuse of any information contained herein.

Israel: BNP Paribas does not hold a licence under the Investment Advice and Marketing Law of Israel,to offer investment advice of any type, including, but not limited to, investment advice relating to anyfinancial products.

South Africa: BNP Paribas Securities South Africa (Pty) Ltd (Registration number 1996/009716/07) isa licensed member of the Johannesburg Stock Exchange and an authorised Financial ServicesProvider (FSP 29451) in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002.Any view or opinion expressed in this report does not constitute advice and the recipient should obtaintheir own advice prior to making any decision or taking any action whatsoever based hereon.

Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan)Limited or by a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm inJapan, to certain financial institutions defined by article 17-3, item 1 of the Financial Instruments andExchange Law Enforcement Order. BNP Paribas Securities (Japan) Limited is a financial instrumentsfirm registered according to the Financial Instruments and Exchange Law of Japan and a member ofthe Japan Securities Dealers Association and the Financial Futures Association of Japan. BNPParibas Securities (Japan) Limited accepts responsibility for the content of a report prepared by t.

12

Disclaimers

another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities(Japan) Limited. Some of the foreign securities stated on this report are not disclosed according to theFinancial Instruments and Exchange Law of Japan.

Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch, abranch of BNP Paribas whose head office is in Paris, France. BNP Paribas Hong Kong Branch isregistered as a Licensed Bank under the Banking Ordinance and regulated by the Hong KongMonetary Authority. BNP Paribas Hong Kong Branch is also a Registered Institution regulated by theSecurities and Futures Commission for the conduct of Regulated Activity Types 1, 4 and 6 under theSecurities and Futures Ordinance.

Singapore: BNP Paribas Singapore Branch is regulated in Singapore by the Monetary Authority ofSingapore under the Banking Act, the Securities and Futures Act and the Financial Advisers Act. Thisreport may not be circulated or distributed, whether directly or indirectly, to any person in Singaporeother than (i) to an institutional investor pursuant to Section 274 of the Securities and Futures Act,Chapter 289 of Singapore ("SFA"), (ii) to an accredited investor or other relevant person, or anyperson under Section 275(1A) of the SFA, pursuant to and in accordance with the conditions specifiedin Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, anyother applicable provisions of the SFA.

South Korea: Branch: BNP Paribas Seoul Branch is regulated by the Financial Services Commissionand Financial Supervisory Service for the conduct of its financial investment business in the Republicof Korea. This report does not constitute an offer to sell to or the solicitation of an offer to buy fromany person any financial products where it is unlawful to make the offer or solicitation in South Korea.Securities: BNP Paribas Securities Korea is registered as a Licensed Financial Investment BusinessEntity under the FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT and regulatedby the Financial Supervisory Service and Financial Services Commission. This report does notconstitute an offer to sell to or the solicitation of an offer to buy from any person any financial productswhere it is unlawful to make the offer or solicitation in South Korea.

Taiwan: BNP Paribas Taipei Branch is registered as a licensed bank under the Banking Act andregulated by the Financial Supervisory Commission, R.O.C. This report is directed only at Taiwanesecounterparties who are licensed or who have the capacities to purchase or transact in such products.This report does not constitutean offer to sell to or the solicitation of an offer to buy from any person any financial products where it isunlawful to make the offer or solicitation in Taiwan.

Australia: This material, and any information in related marketing presentations (the Material), isbeing distributed in Australia by BNP Paribas ABN 23 000 000 117, a branch of BNP Paribas 662 042449 R.C.S., a licensed bank whose head office is in Paris, France. BNP Paribas is licensed inAustralia as a Foreign Approved Deposit-taking Institution by the Australian Prudential RegulationAuthority (APRA) and delivers financial services to Wholesale clients under its Australian FinancialServices Licence (AFSL) No. 238043 which is regulated by the Australian Securities & InvestmentsCommission (ASIC).The Material is directed to Wholesale clients only and is not intended for Retailclients (as both terms are defined by the Corporations Act 2001, sections 761G and 761GA). TheMaterial is subject to change without notice and BNP Paribas is under no obligation to update the

information or correct any inaccuracy that may appear at a later date.Some or all of the information contained in this report may already have been published onhttps://globalmarkets.bnpparibas.com© BNP Paribas (2016). All rights reserved.

IMPORTANT DISCLOSURES by producers and disseminators of investment recommendationsfor the purposes of the Market Abuse Regulation:

Although the disclosures provided herein have been prepared on the basis of information we believeto be accurate, we do not guarantee the accuracy, completeness or reasonableness of any suchdisclosures. The disclosures provided herein have been prepared in good faith and are based oninternal calculations, which may include, without limitation, rounding and approximations.

BNP Paribas and/or its affiliates are a market maker or liquidity provider in financial instrument of theissuer mentioned in the recommendation.

BNP Paribas and/or its affiliates may provide such services as described in Sections A and B of AnnexI of MiFID II (Directive 2014/65/EU), to the Issuer to which this recommendation relates. However,BNP Paribas is unable to disclose specific relationships/agreements due to client confidentialityobligations.

Section A and B services include A. Investment services and activities: (1) Reception andtransmission of orders in relation to one or more financial instruments; (2) Execution of orders onbehalf of clients; (3) Dealing on own account; (4) Portfolio management; (5) Investment advice; (6)Underwriting of financial instruments and/or placing of financial instruments on a firm commitmentbasis; (7) Placing of financial instruments without a firm commitment basis; (8) Operation of an MTF;and (9) Operation of an OTF. B. Ancillary services: (1) Safekeeping and administration of financialinstruments for the account of clients, including custodianship and related services such ascash/collateral management and excluding maintaining securities accounts at the top tier level; (2)Granting credits or loans to an investor to allow him to carry out a transaction in one or more financialinstruments, where the firm granting the credit or loan is involved in the transaction; (3) Advice toundertakings on capital structure, industrial strategy and related matters and advice and servicesrelating to mergers and the purchase of undertakings; (4) Foreign exchange services where these areconnected to the provision of investment services; (5) Investment research and financial analysis orother forms of general recommendation relating to transactions in financial instruments; (6) Servicesrelated to underwriting; and (7) Investment services and activities as well as ancillary services of thetype included under Section A or B of Annex 1 related to the underlying of the derivatives includedunder points (5), (6), (7) and (10) of Section C (detailing the MiFID II Financial Instruments) wherethese are connected to the provision of investment or ancillary services.

BNP Paribas and/or its affiliates do not, as a matter of policy, permit pre-arrangements with issuers toproduce recommendations.

BNP Paribas and/or its affiliates acknowledge the importance of conflicts of interest prevention andhave established robust policies and procedures and maintain effective organisational structure toprevent and avoid conflicts of interest that could impair the objectivity of the recommendation

13

Disclaimers

including, but not limited to, information barriers, personal account dealing restrictions andmanagement of inside information.

BNP Paribas and/or its affiliates understand the importance of protecting confidential information andmaintain a “need to know” approach when dealing with any confidential information. Informationbarriers are a key arrangement we have in place in this regard. Such arrangements, along withembedded policies and procedures, provide that information held in the course of carrying on one partof its business to be withheld from and not to be used in the course of carrying on another part of itsbusiness. It is a way of managing conflicts of interest whereby the business of the bank is separatedby physical and non-physical information barriers. The Control Room manages this information flowbetween different areas of the bank where confidential information including inside information andproprietary information is safeguarded. There is also a conflict clearance process before gettinginvolved in a deal or transaction.

In addition, there is a mitigation measure to manage conflicts of interest for each transaction withcontrols put in place to restrict the information flow, involvement of personnel and handling of clientrelations between each transaction in such a way that the different interests are appropriatelyprotected. Gifts and Entertainment policy is to monitor physical gifts, benefits and invitation to eventsthat is in line with the firm policy and Anti-Bribery regulations. BNP Paribas maintains several policieswith respect to conflicts of interest including our Personal Account Dealing and Outside BusinessInterests policies which sit alongside our general Conflicts of Interest Policy, along with severalpolicies that the firm has in place to prevent and avoid conflicts of interest.

BNP Paribas and/or its affiliates as a matter of policy do not permit issuers to review or seeunpublished recommendations.

The remuneration of the producer of the investment recommendation may be linked to trading or anyother fees in relation to their global business line received by BNP Paribas and/or affiliates.

IMPORTANT DISCLOSURES by disseminators of investment recommendations for thepurposes of the Market Abuse Regulation:

The BNP Paribas disseminator of the investment recommendation is identified above includinginformation regarding the relevant competent authorities which regulate the disseminator.

The date and time of the first dissemination by this disseminator is addressed above.

The disseminator and producer of the investment recommendations are part of the same group, i.e.the BNP Paribas group. The relevant Market Abuse Regulation disclosures required to be made byproducers and disseminators of investment recommendations are provided by the producer for and onbehalf of the BNP Paribas Group legal entities disseminating those recommendations and the samedisclosures also apply to the disseminator.

For further details on the basis of recommendation specific disclosures available at this link (e.g.valuations or methodologies, and the underlying assumptions, used to evaluatefinancial instruments or issuers, interests or conflicts that could impair objectivity

recommendations or to 12 month history of recommendations history) are available athttps://globalmarkets.bnpparibas.com/gmportal/private/globalTradeIdea. If you are unable to accessthe website please contact your BNP Paribas representative for a copy of this document.

14