Global Equity Volatility Insights Bankof America Why S&P vol dispersion may be the best Merrill Lynch way to trade a bubble in Tech 06 June 2017 US Equity Derivatives Global How to detect and position for a potential Tech Bubble Our investment strategists recently warned against the risk of an overshoot in US Tech, as data on valuations, relative performance, and inflows invoke echoes of the late ‘90s. However, rising Tech vol alongside rising Tech stock prices — a classic sign of an asset bubble — has yet to materialize, suggesting still early stages of bubble formation. Derivatives can be a key tool for trading bubbles, allowing investors to capture asset price upside while mitigating reversal risk. To this end, we like stock replacing FANG positions or overlaying Tech exposure with Nasdaq 100 (NDX) put spreads. Long volatility dispersion strategies are particularly well-suited for trading asset bubbles, in our view, as they can profit from 4oth the inflation and deflation of a bubble without needing to time the top. Specifically, we like SPX 12M Top50 dispersion to position for a potential Tech Bubble as (i) the Top50 basket is dominated by Tech stocks, hence Global Equity Derivatives Rsch would benefit from any rise in their vol from currently low levels; (ii) the trade would eS benefit from any downward pressure on broad-market correlations as Tech stocks BofA Analytics = DATA DRIVEN = Nitin Saksena Equity-Linked Analys decouple from other large caps; and (iii) the late ‘90s Tech Bubble generated the most MLPF&S sustained period of elevated S&P vol dispersion in history. Stefano Pascale Equity-Linked Analys MLPF&S Europe Benjamin Bowler DTE Sep17 collars can hedge DTE-TMUS merger risk; value in Enel bullish riskies Fig te DTE GY has run too fast, too quick: investors who own stock should consider hedging a [email protected] pullback using a Sep17 collar (+17put/-18 call for 46bps) to hedge losses greater than William Chan, CFA >> 2.9% while retaining upside to 18 (stock’s ~15yr high is 18.05). Extending our EU equity Ste iene vs credit theme to single names, we find Enel 3m bullish risk reversals screen attractive Michael Youngworth as Enel’s projected 12m div yield is high versus Enel CDS (suggesting value in owning Ses Analys equity vs credit) and the price of 3M bullish risk reversals is low (versus other names) as well as versus history (2™ 5y percentile). Sieve Cousnen Equity-Linked Analys MLI (UK) . Paik As la at ty-Linked Analys Buy best-of puts to cheaply hedge a reversal in the melt-up rally MLI (UK) While still high central bank liquidity may continue to push markets higher, heavy equity Abhinandan Deb >> and option positioning suggests the risk of a market reversal. To minimize the cost of Sill ie ied hedges and take advantage of the recent decline in volatility and correlation, we suggest Nikolay Angeloff owning 14-Sep-2017 95% strike best-of puts on KOSPI2/HSI/NKY at 0.8%, a 45% Feed Analys discount to average vanilla puts. See Team Page for List of Analysts Table 1: 3M volatility (weekly changes) Unauthorized redistribution of this report is prohibited. This report is intended for [email protected] Implied Realized S&P500 9.5 (-0.1) 7.3 (04) ESTX50 13.0 (-0.4) 11.1 (-0.6} FTSE 10.6 (0.4) 9.2 (-0.5) DAX 12.2 (-0.7) 9.9 (-0.7) NKY 14.2 (-0.2) 12.5 (0.1) HSI 124 (0.3) 10.1 (-0.2} a . . _ KOSPI 12.8 (-0.3) 10.6 (0.0) >> Employed by a non-US affiliate of MLPF&S and is not registered/qualified as a research analyst under EEMUS 15.4(-0.1) 13.2 (08) the FINRA rules. TOP4O 1511.0) — 109(00) Refer to "Other Important Disclosures" for information on certain BofA Merrill Lynch entities that take oy ne responsibility for this report in particular jurisdictions. RDX 24.7 (1.2) 21.3(0.0) BofA Merrill Lynch does and seeks to do business with issuers covered in its research reports. As a IBOV 253 (0.5) 26.4 (02) result, investors should be aware that the firm may have a conflict of interest that could affect the ISE30 19.6 (-0.2) 14.0 (-0.4) objectivity of this report. Investors should consider this report as only a single factor in making Source: BofA Merrill Lynch Global Research their investment decision. Refer to important disclosures on page 32 to 36. Analyst Certification on page 29. Price Objective Basis/Risk on page 29. 11753360 Timestamp: 06 June 2017 01:43AM EDT HOUSE_OVERSIGHT_023575

BofAML GFSI™ X-Asset Risk Landscape GFSI below ‘normal’ for longest period since summer 2014 The GFSI continued its decline last week, falling to -0.21 as of 2-Jun from -0.17 a week prior. The indicator last spent a significant proportion of time below -0.2 back in summer 2014, when cross asset volatility recorded long term lows. + Equity risks led the broad based decline in stress across asset classes (Chart 2 and Chart 3), led by equity skew. ¢ While most stresses fell, crude oil volatility was among the top gainers (Chart 2) as oil continued its slide despite the May OPEC meeting seeing agreement for extending production cuts. - Also, Euro member bond spreads recorded a historically significant move higher (Chart 5) as the potential for early Italian elections causing political instability amidst ECB tapering revived concerns about European sovereign risk Chart 1: Latest* stress across GFSI sub-components 2.0 4 6S Fo _ @ Risk 15 4 S ex Red shaded area highlights components in ak Green shaded area highlights components in » 104 . 2 FI ew Bullish territory low £05 © 05 4 -1.0 #ée -1.5 5 : : Lee, >eave aa eravras ao > aed @ o oc sss esvpeoeopeoeadsse ESB ESSEBBESHR ESS SG EER ESS SS EAS ESSSSESSESREGZEESES atPoatyjnarP PHU MP aM eGEOZGRReFePUDBDSYHSAE4 He Qe twOaBara alt) BARE 2, eHRRET EZ ERERHRLE FS ECHZLSRLSHVSEELEZTLEESEBEES at pepEnOaRZFTtnanagtiggzg ti sasasazre ed S) RealtwnroetSeSSe2@Qe 6 = 26 AZEexuns x Os SekBrF pate 5B @B@oaeeb ea Sie o@ ex mE x e = 5 Bn lo) BeEnarD Fr SB BF Ses 2Be rene en ex =~FPeA Ferd = ACDBEBEES ofr eegtaag So7-P-PDeetesazaoe EKkMS a LSOUSRRER @BZ2ZEK ® Ao a} GSO So oo ute 8 sO & Oo n Ss os = 2 5 2 2e a = co oo eas - co Ww oO oO 2 n = = = ra) a ra) > > oO > wo 8 ad RQ PR ae 22 = Of s5 3s & = 4 a a =] ~ ~ in] a a a O uw A 8 & io) 5 £ £ zB is) Source: BofA Merrill Lynch Global Research. *Latest as of 2-Jun-17. Chart 2: Change** in stress across GFSI sub-components. W442 2 26 2 see e ame Risk B | | in 7 > Skew wu Z 2 | eo 8 E Fg o ns) 08 D3 ? arwvey oe Zz > far ee aqaars a as s&e& paAsA ee > Be See SSC eS TS HET ER ER BSESDEBSEHESESERESBSSESHEESES TUF AMmMeteOzpeoaPrPaeabtbsesUGtrAFrArBDIues sF2PtOetetdese5s er td5guung FG 2 2SEP CFC END ESB EEL EHP DFP HTFweenEGZFVEEZEwDEBENDSHVENVDRZSEZRHOSGZSO ® na oBE Oo >i-o Fe aQaoRugAE&R 2@F>O5 qQ7 D=0— 5 ozo oar &55 2S SRB>E SOSH EatTH Er SZsREOP SESS oe ow 7 8 AteS&is: w x =P Aan ao] 5h ox3 o ao 2 Sor og wreei eOgnger.es t Hee OeH BRE x xo FeSa eres tA SEK ess GervrteEstPsesS sg Pszr>sseBKFeEx FRAG BSneoRR° FS “BETS HgZgsr* stags = SASH Zee n 2a 2° B 2 5 Ss ez = 2 ne Sey z S 8 @ od iS B = & E zag iS) = & oD Source: BofA Merrill Lynch Global Research. **Latest as of 2-Jun-17. Change vs 1 week prior (26-May-17). The GFSI Risk Allocator (using Bull, Bear & Neutral weights of 2, 0, 1} suggested a 21.7% overweight position on 2-Jun (vs 13.0% OW as of 26-May). The percentages of Bullish, Bearish and Neutral GFSI components (as used in the Risk Allocator) as of 2-Jun were 30.4%, 8.7% and 60.9% respectively. Z Global Equity Volatility Insights | 06 June 2017 ate a HOUSE_OVERSIGHT_023576

Chart 3: Equity stresses fell by the most last week 0.1 0.05 0.03 0.01 0.0 0.1 0.2 03 04 05 06 07 08 0.9 Commodities Credit FX Rates Equities mLatest stress (02-Jun-17) = Change in stress Source: BofA Merrill Lynch Global Research. 1wk change (26-May-17 to 2-Jun-17). Chart 5: Top 10 movers in stress (1-week abs chg %-ile vs history*) Chart 4: Among regions, Japan & US stresses declined the most aap Stress fall @a@s Stress rise 100% 90% 80% 70% 86% 33% 82% fe} 76% ro, 63% 61% 61% 61% sg9% %-ile of abs chg in stress vs history* 60% 50% eo? A i= Qa > faa 6 6 88 BSE EDS FAS x x~ €¢2 5 = oe ~ 32045 oo wo wo oD wa anon Os wo — rep) = Oo # rep) oa 2@ En 2 xrReoca Qe ew o = =~ & so 0 2H BD 2 Ge G re) = @ f€e& £ E505 EF 8 5 F oS £ 2 = © G78 Bo £5 & a 2 ar an om wi a 3 oO = Source: BofA Merrill Lynch Global Research. * %-ile of weekly mave in stress vs all historical weekly moves (earliest 3-Jan-00). Bar colours represent rise (red) or fall (green) in stress. 1wk change (26- May-17 to 2-Jun-17). 0.10 0.00 -0.10 -0.20 -0.30 -0.40 -0.50 EM Europe US Japan mLatest stress (02-Jun-17) © Change in stress Source: BofA Merrill Lynch Global Research. 1wk change (26-May-17 to 2-Jun-17). Chart 6: Global volatility & credit spread stress in the GFSI mLatest stress (02-Jun-17) = Change in stress 0.4 0.2 0.0 0.2 0.4 -0.6 0.8 -1.0 -1.2 -1.4 0.05 0.03 0.00 FX Vol HY CDS IG CDS Equity Vol Rates Vol x a) = ce = > fo) op) Commodity Vol Source: BofA Merrill Lynch Global Research. ]wk change (26-May-17 to 2-Jun-17). Bankof America Merrill Lynch Global Equity Volatility Insights | 06 June 2017 3 HOUSE_OVERSIGHT_023577

Volatility in the US How to trade the rise & fall of a potential Tech Bubble “Alexa, has the Tech Bubble started?” Our investment strategists recently warned against the risk of an overshoot in Tech, noting that the longer it takes Central Banks to tighten, the greater the risk of Tech and Growth stocks entering a speculative frenzy. Data on relative performance, valuation, and flows are reminiscent to varying degrees of the early stages of a bubble: ¢ Market cap hegemony: Following the GFC, Tech stocks ousted Financials from their top position in terms of market cap and now account for 23% of the S&P500, the highest %-age from any single sector since the dotcom bubble (Chart 7). - Dazzling growth vs. value outperformance: S&P 500 Growth stocks (SGX) on aggregate cost ~1.4x as much as their Value counterparts (SVX), the largest premium since the dotcom bubble (Chart 8). Notably, the S&P 500 Growth index is dominated by Tech stocks, which account for 36% of its total market cap. - Third longest streak of monthly gains: In May, the Nasdaq 100 recorded its seventh consecutive monthly gain, the longest streak since 2009. Remarkably, the index has managed to establish a longer streak only twice in its history, in 1986 (10 consecutive months) and in 1995 (8 months). The rally in these two episodes ultimately came to an abrupt halt. However, the index would have substantial further upside from current levels if it were to achieve similar gains (Chart 9). ¢ Lofty valuations: The valuation of Tech as measured by price to consensus forward 12M earnings expectations recently hit its highest value since Nov-07 and is exhibiting signs of acceleration (Chart 10}. However, Tech remains far cheaper than its dotcom bubble highs. ¢ — Irrational exuberance: Inflows to Tech funds are rising at their fastest annualized rate (25% of AUM) in 15 years, a sign of renewed exuberance. Chart 7: The last instance where a single sector dominated SPX market Chart 8: Growth has only been relatively more expensive vs. Value cap as the Tech sector does now was the dotcom bubble era during the peak of the dotcom bubble 35% Sector leadership in US equities 4500 18 30% 1250 16 25% 1000 f 14 20% 750 -u 1.2 15% 500 10% 250 Q N = ico} foe} Q N = ico} foe} Q N s+ ico} [o>} Lop} 12>} Lo>} Lop} Q Q Q OQ OQ = =— mm = Oo Oo oO Oo Oo Qo Qo Q QoQ Q Q Q Q ~~ — ~~ _ = —N N N N N N N N N 0 85 25885852825 mum Tech (MO Financials oo nk? i > > > 2 > = ~~ ) Discretionary (QW Industrials TONNE NNN NN NN i Staples GE Energy ems |_argest sector weight in the S&P500 = === Current = 95th %-ile A1B(RHS) ===—=S8P Value (SVX) (B) ====S&P Growth (SGX) (A) Source: BofA Merrill Lynch Global Research. Monthly data from Jan-1990 to Jun-17. Source: BofA Merrill Lynch Global Research. Daily data from 30-Jun-95 to 5-Jun-17 ; deg oes Bankof America 4 Global Equity Volatility Insights | 06 June 2017 Merrill Lynch HOUSE_OVERSIGHT_023578

Chart 9: In May, the Nasdaq recorded its longest streak of monthly gains since 2009 (7M). However, compared to the only other instances of longer streaks (‘86, ‘95) the current bull run is still only half the size Chart 10: Tech valuations seem to be gaining momentum and are now at their highest levels since before the GFC but remain far from dotcom bubble peaks 60 50 40 30 20 10 00 90 80 = 100 as of 30-Sep-85 May-86 Bull Run === Oct-95 Bull Run May-17 Bull Run Source: BofA Merrill Lynch Global Research. Data from Sep-85 to 31-May-17 60 50 40 30 20 10 or Ow OO st © conwmnonDm @D Dm ODD D DD DMD MD 98 2000 2001 2003 2005 -Koonwtw eogor rcs NN NN NN == SPX Tech P/E (price to consensus forward 12m earnings expectations) Current Source: BofA Merrill Lynch Global Research. Monthly data from Jan-86 to May-17. In addition to strong price performance, lofty valuations, and exuberant inflows, asset bubbles also tend to have two other hallmarks, best seen through the derivatives lens: (i) asset volatility rising alongside asset prices (Charts 11 & 12), and (ii) declining correlation as assets closest to the source of the bubble decouple from those farther removed (Chart 11). Chart 11: During the 2000s Tech Bubble, Tech vol rose with Tech stocks and broader market correlations fell as Tech stocks decoupled from other large caps — both classic signs of an asset bubble Chart 12: Historically, in major asset bubbles, realized volatility has tended to rise meaningfully not only after the bubble deflates, but also in the run-up to the market peak 70% 5000 fe} «n 4000 0 ‘a 40% AS 3000 30% 2000 on > ~s “0% 1000 0% 0 ‘95 '96 ‘97 '98 '99 ‘00 ‘01 ‘02 ‘03 ‘04 === NDX 1Y realized vol =——=SPX 1Y realized correl NDX (right) Source: BofA Merrill Lynch Global Research. Daily data from 3-Jan-95 through 31-Dec-03. SPX correlation = average pairwise realized correlation of all 500 stocks. 75% ; Asset bubbles (peak): 2 * Dow Jones (Sep-29) 1 = 65% + + Gold (Jan-80) S 55% 4 * Nikkei (Jan-90) Ls * Nasdaq 100 (Mar-00) Si 45% | * HSCEI (Oct-07) 2 * Crude oil (Jul-08) s 35% - * Biotech (Jun-15) 2 25% 15% NotoonoayotOeNoodt iN) — 1 TT NN NostOoeo LOS STO OON ~~ [i i i ee ee OO a es a Weeks from peak Source: BofA Merrill Lynch Global Research. While Nasdaq 100 (NDX) implied volatility has spiked in recent weeks and now trades in the 94" percentile as a spread to S&P 500 (SPX) implied volatility (Chart 14), the absolute level of NDX 3M implied vol remains historically low (2"¢ percentile since Jun- 09). In our view, at least for now, the spread widening is more of a response to the outsized sell-off seen in Tech stocks on 17-May rather than the volatility market trying to price in the onset of another Tech Bubble. Indeed, the -2.5% drop in the NDX on 17- May was a six standard deviation (60) event relative to trailing realized volatility (and the fourth worst risk-adjusted daily return since 1985), even more extreme than the 50 decline experienced by the S&P. Bankof America Merrill Lynch Global Equity Volatility Insights | 06 June 2017 5 HOUSE_OVERSIGHT_023579

Chart 13: The -2.5% drop in the NDX on 17-May was a six standard deviation (60) event relative to trailing realized volatility and the fourth worst risk-adjusted daily return since 1985 Chart 14: The 60 sell-off in the NDX on 17-May has helped drive short- dated Tech implied vol higher relative to S&P vol, although the absolute level of Tech vol still remains historically low 6 40% : 16% 4 35% NDX vol = 2nd %-ile 44% 2 30% 12% 0 25% 10% 20% 8% : 15% 6% 4 10% A% 6 5% 2% Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 '85 ‘87 '89 '91 '93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05 'O7 ‘09 11 ‘13 '15 17 NDX 3M ATM implied vol NDX - SPX 3M ATM implied vol spread (right) Daily NDX return / trailing (EWMA) vol 1 ——— 17-May-17 Source: BofA Merrill Lynch Global Research. Daily data from 4-Feb-85 through 2-Jun-17. Source: BofA Merrill Lynch Global Research. Daily data from 17-Jun-09 through 2-Jun-17. EWMA = exponentially-weighted moving average realized volatility with lambda = 0.94. Hedge near-term reversal risk via FANG stock replacement or NDX put spreads As we have previously noted, asset bubbles can be notoriously difficult to trade, as fundamentals give way to chasing higher highs, and derivatives can be a key tool for capturing asset price upside while mitigating reversal risk. Chart 15: Proxy hedge screen for a Nasdaq 100 (NDX) benchmark suggests NDX is the best hedge for itself, as basis risk runs too high with other assets 1) Nov08 (-39%) 2) Mar08 (-18%) 3) Mar09 (-15% 4 Augi1 (-14% 3) Feb16 (-13%) 6) Jul06 (-13%) 7) Jult0 (-12%) 8) Aug15 (-10% 9) Nov12 (-10% 40) May12 (-9%) S&P500 OZAIG oh 7) 3 DX ESTX50 @ 6 1 7 COLE 31014 NIKKEI @ 3 8 9300_0_@ 10 HYG ©& 9 105 ou CC MAO mCCOML OD SOG H © FISE @ © 1 5) men 8 mE ( (O_© TWSE @ 5 7) 96 8 1004 HSI @ 6 7 _6__O¢ 5110 NIFTY @ 8 m0 : Oo ¢ 6 HSCEI @ 6 7 3 e 1(8 pm ON 4 2 5 | KOSPI @ 5 8 9)m@i(3 umn 6 ml ‘0 4 Aluminum 2) G 8 3) i AO Dd _G EEM US @ AGG CJORULOD | 10 TLT* OGDmE ge Summ SL 7 | | () ASX200 © 6)(8 5) MNO, 17 2 RDXUSD G 2 [G IO p)_¢ ! 40 AUDUSD © 9 8 3) 4 | a ET TG GLD* 40 3 8) @ 7 ‘ 54 2 CADUSD @)G 6) = —_ 00_@ I NZDUSD (8 IG CO me GT CU Copper (6 8 e @@ OG EURUSD © 3) 0 a 7 | () USDJPY @ 4 L_O68__O0__ © ‘ BOVESPA (2 VOC IO 1) 4 TOP40 @) © G0 6 87 3 ‘ Crude Oil (619 3) ae O_O __O_@ 1 GBPUSD (x2 p.GO__ ot) @ I ° Average -0.5 0.0 0.5 1.0 15 2.0 25 Estimated hedge benefit per unit cost vs. NDX Source: BofA Merrill Lynch Global Research. Data as of 2-Jun-17. *Call option volatility used. We continue to like hedging the risk of a US Tech overshoot via stock replacement Strategies, for example, stock replacing long “FANG” positions with either cheap calls on the individual FANG stocks or with outperformance calls on FANG vs. S&P. 6 Global Equity Volatility Insights | 06 June 2017 ate a HOUSE_OVERSIGHT_023580

For those who wish to remain fully invested and/or seek broader index-level hedges for Tech positions, we suggest 3M put spreads on NDX for two reasons: (i) our cross-asset hedging analysis (Chart 15) shows little value in proxy hedging Nasdaq 100 exposure, even with relatively lower vol S&P options, as the basis risk has tended to be too high historically for proxy hedging to be reliably beneficial; and (ii) compared to outright puts, put spreads help limit long exposure to short-dated NDX implied volatility that is low but not cheap (Chart 14). Hedge inflation & deflation of a Tech Bubble via SPX 12M Top50 dispersion Dispersion strategies can be particularly attractive hedges for asset bubbles as idiosyncratic market moves generate high volatility (to which dispersion is positively correlated) with a limited rise in correlation (to which dispersion is negatively correlated). Importantly, as seen from Chart 11, this can occur both during the run-up to the market peak as well as after the bubble pops. In other words, long vol dispersion strategies can profit from Both the inflation and deflation of an asset bubble, without requiring an investor to time the top. With the SPX Top50 largely dominated by Tech stocks (34% of total market cap) and with average longer-dated single stock vol in the basket trading close to 3yr lows (12M SPX Top50 ATMf implied vol is in its 2"? %-ile since Jun-14, Chart 16), we recommend investors go long 12M SPX Top50 dispersion. Chart 18 shows that such a strategy would have recorded its best performance during the formation and subsequent bursting of the dotcom bubble as volatility increased in tandem with falling correlation (see Chart 11). Importantly, while implied correlation continues trading in a new, lower range since the US election, the spread to realized correlation has remained healthy with the SPX Top50 12M implied vs. 6M realized correlation spread in its 81* %-ile over the past 3 years (Chart 17}. This makes selling the correlation premium (inherently embedded in long dispersion strategies) attractive vs. history. Chart 16: Average SPX Top50 single stock 12M ATMf implied vol is Chart 17: Implied to realized correlation spread on the SPX Top50 depressed vs. history, in part driven by Tech market cap dominating the basket is historically elevated, making selling the correlation premium index and Tech vol the 2" lowest across sectors on a historical basis embedded in long dispersion strategies attractive 50% 80% 40% 70% 30% ss 60% 20% 50% C4 9 10% 40% 0% 30% Q @o > 2 x?) 7) > ec s £ & &§ 8 G&G 8 10% x< a 2 = 3 Ee ou a 9 i = 0% wo a 2 5 Jun-14. Dec-14 Jun-15-Dec-15 = Jun-16 9 Dec-16 = Jun-17 SPX Top50: 12m ATMf implied vs. 6m realized correlation (A - B) 12m SPX Top50 ATMf implied correlation (A) 6m SPX Tops0 realized correlation (B) Current (81st %-ile) Source: BofA Merrill Lynch Global Research. Daily data from 5-Jun-14 to 5-Jun-17. Source: BofA Merrill Lynch Global Research. Daily data from 2-Jun-14 to 2-Jun-17. m 3yr %-ile of average 12m ATMF implied vol © Sector market cap as a %-age of total SPX Top50 market cap Bankof America <> ; dee Ios Merrill Lynch Global Equity Volatility Insights | 06 June 2017 7 HOUSE_OVERSIGHT_023581

Chart 18: Long SPX Top50 dispersion strategies performed the best during the dotcom bubble era, providing adequate convexity during both its formation as well as its bursting 90% Long dispersion provided better convexity vs. outright long vol position both 80% during the ‘making’ and the ‘bursting’ of the dotcom bubble 70% 60% 50% 40% 30% 20% 10% 0% QoQ n sts Oo DW Oona FH MW Oo NN ST LO DoD DOD DoD OD ODO G2 8B Oo [> LT LT TV ao DoD DD DD DD QoQ oOo TT TT TwDaTy~nNI— nd ndIn NN NN N 2m SPX realized vol 2m SPX realized dispersion Source: BofA Merrill Lynch Global Research. Daily data from 14-Mar-90 to 2-Jun-17 deg oes Bankof America 8 Global Equity Volatility Insights | 06 June 2017 Merrill Lynch HOUSE_OVERSIGHT_023582

Notable trends and dislocations (US) Major US equity indices soar to all-time highs as the low vol regime persists Friday marked the end of the second full week following the political turmoil on Wed, 17-May. Since then, volatility has once again collapsed (10d realized is at 4.6%) and the S&P 500 term structure of volatility has steepened with the 3m-1m spread trading in the 90" 2y %-ile. Low S&P 500 short-dated vols pushed down the back end of the curve (ly and beyond), while Russell 2000 1y+ vols remained bid (Chart 19}. Last week, the VIX printed 2 of its 15 closes below 10 since 1990 (Chart 20). Vol-of-vol remained supported with the VVIX/VIX ratio setting yet another record (8.58) on Friday. All of this happened as SPX, NDX and INDU finished the week at all-time highs. Chart 19: In the trading sessions following the political turmoil and ensuing volatility spike on 17-May, long-term vols (ly and above) reset lower for SPX but remained bid for RTY 20% 18% 20% 16% 15% 14% 12% ies 0 10% 5% 8% 6% us 0 4% -5% 1m 3m 6m ly 1.5y 2y RTY change (RHS) SPX change (RHS) SPX 17-May === SPX 1-Jun RTY 17-May =——_RTY 1-Jun Source: BofA Merrill Lynch Global Research. Chart 20: 2017 is already the 5" calmest year for the VIX with 76 YTD closes below 12. Despite the short-lived vol spike on 17-May, the VIX had a very calm month of May, extending into June as it printed 6 out of its 15 historic closes below 10 45 ™N : 140 a8 3 (70 35 g 100 30 S 80 25 = 60 i = 40 0 2 E 20 z 0 ‘06 ‘95 ‘93 '05 ‘17 ‘94 14 ‘07 16 '92 ‘04 13 ‘15 YTD == >= Average VIX level (RHS) —)=Max VIX level (RHS) Source: BofA Merrill Lynch Global Research, Bloomberg. Daily data from Jan-90 to 5-Jun-17. The political turmoil on 17-May caused short-term vols to reset higher and the VIX jumped to 15.59 from 10.65 the prior day. Short-term vols in turn moved the back end of the curve higher with e.g. SPX (RTY) 1y vols trading higher by 1.05% (0.79%). However, the agitation in equity markets was short-lived. The front end of the curve collapsed over the subsequent trading sessions and resulted in a very steep term structure for both indices, similar to what we have become accustomed to over the prior months. By the end of last week, SPX long term vols (1y and beyond) had moved to virtually the same levels where they traded prior to the vol spike. RTY long-term vols, however, remain bid. With only five months of the year behind us, the VIX has already closed below 12 on 76 days. Since 1990, only 4 other years have seen a larger number of trading sessions with the VIX closing below 12. Of the 15 trading sessions in VIX’s history since 1990 when the index closed below 10, 6 were between May-17 and Jun-17. The low short-dated implied vol is in part driven by realized vol; 10d is at 4.5%, which is already subdued even for the current low- vol regime (17th %-ile since the US election last November). Bankof America Merrill Lynch Global Equity Volatility Insights | 06 June 2017 9 HOUSE_OVERSIGHT_023583

Rates vol is near all-time lows and is favorable for positioning for a break-out Since the US Election last November, the 10y US Treasury rate has fluctuated between 2.17% and 2.63%, constantly being jostled up or down by various economic forces. It is currently trading towards the bottom of that range. Our rates strategists have a year- end target of 2.85% for the 10y rate (just above the median forecast). Long-term rates have remained low due to uncertainty around Fiscal policy (Trump’s plans on infrastructure spending), subdued inflation expectations and a slower than expected Fed hiking cycle. On the other hand, a near full-employment economy, hopes for infrastructure spending, potential for higher inflation driven by energy prices & increased government spending and an accelerated hiking cycle are providing a floor for long-term rates. In the end, uncertainty remains and analysts’ estimates for the year- end target vary widely between 1.6% and 3.7% (based on 59 forecasts with median and mean of 2.8%). For investors who believe that long-term rates will break out of their range we recommend going long TLT 6m 35-delta strangles. The structure has rarely been cheaper in history (Chart 22) and at present TLT 6m implied vol is 94bps below 6m realized, with the spread at its lowest since Aug-15. A 3m version of the 35-delta strangle prices just as attractively versus its history. Chart 21: Rates volatility, as measured by the Merrill Option Volatility Chart 22: With vol and skew in favor of the structure, the price of a TLT Estimate index (MOVE) and by TLT (20+ year bond ETF) 3m ATMf vols, 6m 35d strangle is near all-time lows. Investors can go long the trade to are the lowest they have been all year and are very near the all-time position for a break-out from the range lows 7.0% r 150 300 25% 65% 430 ) S Nov-1 an 20% oy lection 110 2/0 " oan — 5.0% 90 150 4.5% 70 10% 40% 100 35% 50 NN OO YOY TAFT won oo OM : o% SERSSR 5224325235 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 === Price of TLT 6m 35-delta strangle ======2-Jun-17 <=—=TLT (RHS) MOVE Index 2Jun-17 TLT 3m ATME vol 2Nun-17 Source: BofA Merrill Lynch Global Research. Daily data from Jun-12 to Jun-17. Source: BofA Merrill Lynch Global Research. Daily data from Jan-90 to Jun-17 for MOVE Index and Jun- 12 toJun-17 for TLT vols. deg oes Bankof America 10 Global Equity Volatility Insights | 06 June 2017 Merrill Lynch HOUSE_OVERSIGHT_023584

Chart 23: Steep put skew in FXB, the ETF underlying GBP, favors buying downside protection via cheap put spreads against the odds of a hung parliament outcome in the UK general election The UK general election is scheduled to take place on Thu, 8- Jun-17. When the election was called on 18-April, the polls 50% 4% oa ; . 45% pointed to a landslide victory for the Conservative Party. This 40% 3% boosted the UK’s currency as investors assumed that such an a outcome would lead to a “smoother” Brexit. Indeed, on that day 75% 2% the Sterling (GBPUSD} recorded its third best daily performance 20% over the past 8 years. fe} 10% 1% However, while official polls still suggest an outright majority 5% ; for the Conservative Party, the odds of a hung parliament have mm oe © © oO oO OO nM ee ED O% increased in recent weeks. As a consequence the boost in the ¢3 5286 8 8 ¢ 2 & currency after the election was called has slightly faded. With oP £H 9 20 FD ur Set 8 significant further downside room to its recent pre-rally lows +m Sete Le ingle wel 289 and FX markets complacent with prevailing opinion poll data, ‘1m Sterling (FXB) ATMf implied vol (B) there clearly could be a significant near-term correction in the Curent sterling if the probability of a hung parliament becomes reality. Source: BofA Merrill Lynch Global Research. Daily data from 5-Jun-16 to 6-Jun-17. Hence we favor hedging downside risk in sterling via cheap FXB put spreads to lever steep put skew (3m 95%-ATMf implied vol spread at its 1-yr 90" %-ile). Table 2: Current S&P500 volatility and correlation measures relative to the prior two year of historical daily data 1-week change Over 2-year historical period 2Jun17 26May17 Change ar Minimum 25% Median 75% = Maximum 1-month ATM implied volatility 14% 16% -0.2% 0.1% 14% 10.0% 11.8% 14.5% 31.8% 1-year ATM implied volatility 13.8% 13.9% -0.1% 2.5% 13.4% 15.4% 16.2% 17.3% 22.5% 1-week intraday realized volatility 6.2% 6.1% 0.1% 3.7% 5.2% 8.5% 10.7% 14.0% 53.7% 1-year minus 1-month term structure 6.3% 6.3% 0.0% 97.8% -12.0% 2.1% 43% 5.4% 10% 3-month 90 minus 110 skew 79% 8.7% -0.8% 47% 71% 9.5% 11.3% 11.8% 13.8% 1-year top 50 implied correlation 45 42 45 85 -0.44 6.7% 42.03 49.79 54.34 57.14 65.55 3-month top 50 realized correlation 27.15 30.72 297 24.4% 12.57 27.90 37.28 48.45 60.41 VIX 1-month ATMf implied vol 16.5% 15.9% 0.6% 20.4% 61.2% 17.9% 85.0% 95.2% 162.2% VIX 1-month 110 minus 90 skew 28.4% 28.5% -0.1% 96.2% 9.3% 18.6% 21.5% 23.8% 30.3% Source: BofA Merrill Lynch Global Research Bankof America Global Equity Volatility Insights | 06 June 2017.11 Merrill Lynch HOUSE_OVERSIGHT_023585

Volatility in Europe Notable trends and dislocations (Europe) European equities were mostly flat over the week with the notable exception of the DAX which rallied 1.8% led by Bayer (which accounts for almost 10% of the index). In contrast, the Russian RDXUSD dropped by 3.3% as oil prices continued to decline. Short-dated (3M) implied vols dropped to 2y lows on the ESTX50, DAX and CAC which helped push 12M-3M volatility term-structures to 2y highs on all three indices. ¢ The short 1xAug / long 2x Sep / short 1x Oct V2X futures fly jumped to 3.7v on 31-May given speculation around early Italian elections. This is higher than equivalent V2X flies at the same number of days to both the UK referendum and the French elections. The current price is higher than 94% of the values of historical flies 1d before the expiry of the earliest leg, suggesting it has ample room to trade lower should political uncertainty abate by Aug. ¢ SX5E 2Y var convexity (var strike vs ATMf vol) has been driven lower by (A) a decline in the Tail liquidity Risk Premium and (B) volatility skew becoming more linear (i.e., less convex in strike) e GBPUSD short-dated (1wk) implied has reached its 92nd 4yr percentile ahead of the UK snap election on 8-Jun. It is however still at least 2.7v below the levels witnessed ahead of previous well known political catalysts. - DTE GY has run too fast, too quick: hedge a potential reversal using a Sep17 collar (+17put/-18 call} for 46bps to hedge losses greater than 2.9% while retaining upside to 18 (near 15yr high of 18.05) by the Sep expiry - Equity vs credit: Enel stock attractive vs CDS given cheap bullish risky & high div yield vs CDS: Among 50 companies which have high dividend yields relative to bond yields (as highlighted by BofAML credit and equity strategists), we note that Enel’s projected 12m div yield is higher than its CDS and the price of 3M bullish risk reversals are cheap (vs other names and vs a 5-year history). ESTX50 Sep/Oct fwd vol rose as early Italian elections are (slightly) more likely According to our economists, the agreement reached between major Italian parties on a German-style proportional electoral law has made early elections more likely. They note that the Italian press cite possible early election dates between 10-Sep and 22-Oct, i.e., almost entirely within the V2X Sep future’s volatility bucket (which also encompasses German elections). This may in part be why the short 1xAug / long 2x Sep / short 1x Oct V2X futures fly jumped to 3.7v on 31-May, which is higher than equivalent flies ahead of both the UK referendum and recently concluded French elections (Chart 24). However, our economists view an early vote within September as technically difficult. deg oes Bankof America 12 Global Equity Volatility Insights | 06 June 2017 Merrill Lynch HOUSE_OVERSIGHT_023586

Chart 24: The V2X Aug17/Sep17/Oct17 futures fly reached 3.7v on 31- May. This is higher than equivalent flies at the same number of days before both the UK referendum and recently concluded French elections === |talian/German election (Aug/Sep/Oct) fly Italian referendum (Oct16/Nov16/Dec16) fly 16 7 UK referendum (May16/Jun16/Jul16) fly French election (Mar/Apr/May) fly 120 110 100 90 80 70 60 50 40 30 20 10 O Trading days to event Source: BofA Merrill Lynch Global Research. Data: 8-Jan-16 to 5-Jun-17. Chart 26: The current price of the V2X Aug/Sep/Oct fly would have overestimated the value of a 1d/26d/46d fly (i.e., equivalent to the Aug/Sep/Oct fly 1d before the Aug expiry) 94% of the time since Jun-09 French elections (~13 vols) —— UK referendum (~4 vols) ——» | 1 Sa TS A | oo BM ON Fk ® ‘09 ‘10 ‘11 12 13 14 15 ‘16 Price of 1d / 26d / 46d fly* (equiv. of Aug/Sep/Oct fly 1d before Aug expiry) === Current price of Aug/Sep/Oct fly Source: BofA Merrill Lynch Global Research. Data: 2-Jun-16 to 1-Jun-17. *Using constant maturity futures. Chart 25: The V2X Sep17-Oct17 spread is actually significantly lower than the equivalent UK referendum and French election spreads, suggesting the majority of excess volatility is being priced in SX5E Sep/Oct fwd vol 8 == Italian/German election (Sep-Oct) spread Italian referendum (Nov16-Dec16) spread —— UK referendum (Jun16-Jul16) spread French election (Apr-May) spread 120 110 100 90 80 70 60 50 40 30 20 10 0 Trading days to event Source: BofA Merrill Lynch Global Research. Data: 8-Jan-16 to 5-Jun-17. The current price of the V2X Aug/Sep/Oct fly would have overestimated the value of a 1d/26d/46d fly (i.e., equivalent tenor to the Aug/Sep/Oct fly 1d before the Aug expiry) 94% of the time since Jun-09. This suggests it has ample room to trade lower should political uncertainty abate by Aug. However, if instead implied risk becomes more concentrated in the 20-Sep to 20-Oct period ahead of the Aug expiry (due to, say, political developments in Italy or Germany increasing risk perception), the fly would stand to gain considerably. Bankof America Merrill Lynch Global Equity Volatility Insights | 06 June 2017 13 HOUSE_OVERSIGHT_023587

Chart 27: SX5E 2Y var convexity (var strike vs. ATMf vol) has been driven lower by (A) a decline in the Tail liquidity Risk Premium and (B) volatility skew becoming more linear (i.e., less convex in strike) (A) VarSwap - 1dStrip TRP ayy ——(B) VarSwap - Linear skew approximation* We recently noted that ESTX50 long-dated (2Y) variance ° FB) convexity (var strike vs. ATMf vol) had declined considerably in ———VarSwap - ATMf vol , F er P recent months. This has been driven by (A) a decline in the Tail liquidity Risk Premium (as defined in our piece More to variance swaps than meets the eye) and (B) volatility skew becoming more linear (i.e., 80-90 skew being similar to 90-100 skew). Both these components of variance convexity suggest that long-dated ESTX50 tails (e.g., VarSwaps or far OTM puts} are historically cheap vs. ATMF vol. 6% 4% 2% 0% NN OO MO Of FT FTF ODO DO OHO OO Ob Oo ~ Mm Q2 f£¢ > a2 ff Se a fC Se lho Oller OO on © fay wo fay oc ®D oc © fay o QD - Soa >- BSBA > BO FOF BHO -O B Source: BofA Merrill Lynch Global Research. Data: 21-Sep-16 to 31-May-17. *Linear approximation of variance strike = ATMf vol squared x (1 +3 x T x skew squared), where T is time to maturity and skew = [implied vol at strike 90 - implied vol at strike 100 ]/[ 90 - 100]. For more details see Derman’s 1999 paper: More than you ever wanted to know about volatility swaps. Chart 28: GBPUSD short-dated (1 wk) implied has reached its 92"! 4yr percentile ahead of the UK snap election on 8-Jun. It is, however, still at least 2.7v below the levels witnessed ahead of previous known events. - F Jun-16 Jan-17 Brexit ; ; ; Semis aseiarate sq. SURIEME court With the UK parliamentary elections less than one week away, 35 rulling May-15 UK short-dated (1 wk} implied vols on both the FTSE and GBPUSD 30 general election Jun-17 snap appear more elevated vs. history, compared to last week. UK election . sss oe, 2 GBPUSD 1wk ATM vol is exhibiting some concern as it is a trading in its 92°¢ 4yr percentile. It is, however, still at least 2.7v 20 lower than the same measure ahead of previous known political 15 events. In contrast, FTSE 1wk ATMf implied vol is still well below 4yr median levels. 10 5 0 = st s+ wo wo wo Lo ice} ico} ico} ico} | maeel | maoed > a > «a > > > a > a > «a > ise] =) [o] o ise] Po) [o] o D i] [o] o o Ss £ 24 Ss £ 264te Ss £€& 2e fs Source: BofA Merrill Lynch Global Research. Data from 5-Jun-13 to 5-Jun-17 D he Tel has run fi ickly; hedge using a Sep17 +17P/-18C collar BofAML equity telecom analysts have reiterated their recommendation to be cautious on Deutsche Tel as the company may face regulatory hurdles in their T-Mobile merger. Given the stock has outperformed European telcos (SXKP} by 15.1% over the past 1 year, investors who own the stock should consider hedging downside with a long DTE GY Sep17 17 put, short DTE GY Sep17 18 call for 0.46%, in our view. Indeed, spending 0.46% to protect gains is attractive as the price of the structure has rarely been cheaper (only 14% of the time since Jun-08, Chart 29). Moreover, Chart 30 illustrates that this structure enables stock owners to protect from losses greater than 2.1% while retaining 3.6% upside potential if the stock rises to 18 (near its 15-year high) by the Sep expiry. deg oes Bankof America 14 Global Equity Volatility Insights | 06 June 2017 Merrill Lynch HOUSE_OVERSIGHT_023588

Chart 29: DTE GY 3.5month +40delta put /-38 delta call collars Chart 30: DTE collars enable stock owners to protect against losses (equivalent to Sep17 +17 put /-18 call) are cheap relative to history >2.9% while retaining upside to the stock’s ~15yr high (€18.05) === Option trade (long Sep 17 put / short Sep 18 call) DTE GY stock + option trade —DTE GY 3.5m 40d put - 38d call price (%) 6% 20% DTE GY stock 9 aa 15% 4% 10% Current stock price: 39% ; ; 4 €17.42 0 The option price has been cheaper 9 om ee 3 5% ~~ ° only 14% of the time since Jun-08 o mee a 0% a Saal oe 9 i Ree "% -5% + -2.9% i ae O% QORROSH HANNO OTTH HOS 10% + -8.2% 15-year high in the stock price: €18.05 eoeoe¢ be ¢@ 6¢ 6 e¢ SE He HED = = S 2 So B90 5S TBAB VFB ASB MV 5B90 3 D fee ee ah ee ee Gn ee ee ee eh ce ee a ee ee | Deutsche Tel stock price on September expiry day Source: BofA Merrill Lynch Global Research. Daily data from 2-Jun-08 to 5-Jun-17. Source: BofA Merril Lynch Global Research. Data as of 5Jun-17 Enel stock attractive vs credit given cheap bullish risky & high div yield vs CDS On 31-May-17, we recommended buying SX5E bullish risk reversals and selling IBOXX HY TRS as a low carry / low risk trade with gearing to improving earnings and FCF. We now look for similar opportunities at the single name level. Among the 50 companies which have high projected 12m dividend yield relative to bond yields (as highlighted by BofAML credit and equity strategists — Chart 9), we highlight a subset (15 names) where we have option data since at least Jun-12 (last 5yrs). The names in the bottom-right corner of Chart 31 indicate the cheapest 3m -25d put/+25delta call risk-reversals where projected dividend yield is highest relative to the CDS spread. We note that: « Royal Dutch Shell’s stock yield is attractive vs CDS: Shell’s projected 12m div yield is 7.5% while its CDS is 52bps (0.5%), resulting in a div yield-CDS spread of 7.0%, the highest in our screen; this suggests value in Shell equity vs credit. ¢ Cheap bullish risk reversals in Enel and Iberdrola: 3m -25delta put/+25delta call risk reversals in Enel and Iberdrola are the lowest across the 15 names in Chart 31. Notably, bullish risk reversals in Enel are also particularly cheap versus history as the price of 3m -95%f / +105%f bullish risk reversals is below its 5" 5-y %-ile. Bankof America Merrill Lynch Global Equity Volatility Insights | 06 June 2017 15 HOUSE_OVERSIGHT_023589

Chart 31: Among the 50 names highlighted by BofAML equity & credit strategists, the 15 below have liquid options. Notably, Shell equity shows best value vs CDS (highest div yield - CDS). Enel risk reversals price lowest across names & vs history (large bubble size denotes low %-ile of risk reversal price vs 5y history) e@ Automobiles & Parts @Oil&Gas OHealthCare e@RealEstate O@Telecommunications Utilities -0.10% Highest div yield vs CDS Bubble size legend: The bigger the bubble RDSA NA the cheaper the risk reversal versus history* 0.15% 0.20% 0.25% -0.30% -0.35% 0% -0.40% -~0.45% 0.50% Cheapest risk- 0.55% reversal i 0 2.0% 2.5% 3.0% 3.5% 4.0% 45% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% Projected 1y div yield** - CDS Current price of 3m -25d put / +25d call bullish risk reversal Source: BofA Merrill Lynch Global Research. Data as of 2-Jun-17. *5-yr percentile of 3m 959%f-105%f bullish risk-reversals. **Projected dividend yield = implied 12m dividends/current stack price, where implied 12m dividends are derived from mid-single stock dividend swap pricing. This screen is not a recommended list either individually or as a group of stocks. Investors should consider the fundamentals of the companies and their own individual circumstances/abjectives before making any investment decisions Chart 32: Korean-issued SX5E-linked structured products in May17 fell Chart 33: We estimate current vega outstanding from Korean-issued to €0.9bn from €1.3bn in Apr17 SX5E-linked structured products sums up to €53mn vega and would peak at €81mn vega should the SX5E fall to 2875 (all else equal) EUR bn . 35 m Issuance of SX5E structured products in South Korea SX5E Vega (from Korean structured product issuance) 90 M ax vega: 2.0 80 €81mn at ~2875 45 70 ‘ — 60 = 1.0 0.9 w 50 > 40 0.5 > 30 20 0.0 ttt TTTMONMONMONNNDODOWOHOORRRER 10 = 02 = 02 = O02 = 2000 2500 3000 3500 4000 4500 Source: BofA Merrill Lynch Global Research. Monthly Korean structured product issuance data from Jan-14 to May-17 Source: BofA Merrill Lynch Global Research. Data as of 2-Jun-17. SX5E Dec18 div futures are high relative to Dec17 and BofAML div forecasts SX5E Dec18 dividend futures are trading at €122.4 (6.8% higher than Dec17 dividend futures), which is unusually high relative to history. Indeed, Chart 34 highlights that the second DED future (currently Dec18) is at its highest level in 8 years relative to the first (currently Dec17). Moreover, Dec18 div futures are trading only 1.5% below BofAML fundamental bottom-up forecasts of 124.2 for 2018, suggesting low upside potential if BofAML forecasts materialise (Chart 35). deg oes Bankof America 16 Global Equity Volatility Insights | 06 June 2017 Merrill Lynch HOUSE_OVERSIGHT_023590

Chart 34: The SX5E DED2 future (currently SX5E Dec18 div future) is the Chart 35: The DED2 div future (122.4) is not heavily discounted vs highest in 9-years relative to DED1 BofAML fundamental bottom-up forecasts (only 1.5% upside potential 440 400% versus forecasts) === 0 130 90% ; Saag Bal Rad realised dividends 50 7 =mtie== Dividend future 1302 120 ais Bro | Consensus J 1949 : 70% ‘oS | paauabie BofAML 110 2139 | "0 1163 ie 60% 5 : “ 180 Median £120 5 Fa 90 40% Allo 4 3 Ps < 80 30% x 100 4 4 70 mmm 20% i 99 J 59.1 div 40% «+. pts paid - mame (0% 80 -R aes in 2017 =—O—Current 70 a om 50 Se AA Ee Gre SM ot AS ms SY DED1 DED2 DED3 DED4 DEDS SSSSSSSSSESESES5SSSOSSSESS TENN NNN NON NON ON ON ON ON ON ON ON Source: BofA Merrill Lynch Global Research. Data from 5-Jun-09 to 5-Jun-17. Historical values of DED1 are fixed at its current level of 116.6 and historical levels of DED2, DED3, DED4 and DED5 are re- Source: BofA Merrill Lynch Global Research. Data as of 2-Jun-17 scaled using historical their historical ratios to DED1 (DED2/DED1, DED3/DED1, DED4/DED1 and DED5/DED1) as a multiplying factor. Table 3: Volatility measures of major equity indices in the EMEA region (data as of 02-Jun-17) Equity 3Mth ATM implied volatilit 10D realised volatili 12Mth-3Mth ATM i-vol spread 3Mth 90-110 skew index Weekly Weekly Weekly Weekly Weekly Current change 2Yrpercentile Current change 2Yrpercentile Current change 2Yrpercentile Current change 2Yrpercentile return ESTX50 3.0% 0.4% 0% 6.1% -3.9% 3% 3.6% 0.4% 100% 7.1% 0A% 18% 0.4% FTSE 0.6% 0.4% 4% 4.2% -3.6% 3% 2.8% -0.1% 87% 5.3% 0.4% 2% 0.0% DAX 2.2% 0.7% 0% 7.1% -0,8% 8% 3.8% 0.4% 100% 7.1% 0.6% 22% 1.8% CAC 2.9% 0.3% 0% 6.1% -3.9% 3% 2.7% 0.3% 100% 7.2% 0.2% 18% 0.1% SMI 1.5% 0.1% 4% 6.5% -4.6% 6% 2.1% 0.0% 94% 6.2% 0.1% 19% 0.0% RDXUSD 24.7% 1.2% 14% 21.7% -7.3% 35% 14% -1.0% 80% 4.8% 0.1% 19% -3.3% TOP40 5.19% 1.0% 5% 93% 3.9% 9% 2.3% -0.4% 65% 7.2% 0.5% 15% -2.1% ISE30 9.6% -0.2% 1% 12.9% 0.6% 16% 3.5% -0.1% 86% 6.7% 0.1% 64% 1.4% Source: BofA Merrill Lynch Global Research European volatility: Sector snapshot Table 4: Volatility measures and indicative option prices for major European sector indices (data as of 02-Jun-17) Bearish — <<<< ------------------e-nnnnnnnenncneanecnenncnnnnens >>>> Bullish 3Mth ATMf implied 3Mth 90%-110% risk Equity volatility Real vol* 3Mth 95%-85% put spread 3Mth 100%-110% call spread** reversal™* index Current Current Current price Weekly Max price Weekly Max price™* Weekly Weekly 2Yr (%of change 2Yr payout (%of change 2Yr payout (%of change 2Yr Weekly Current change %-ile Current spot) (bps) %-ile ratio spot) (bps) %-ile ratio spot) (bps) %-ile — return SX3P (Fd&Bv) 0.5% -02% 1% 85% 0.6% -3 1% 7 2.0% -4 1% 49 -0.2% 2 85% 0.6% SX6P (Utils) 1.7% = -0.2% = 1% 0.4% 0.7% -] 1% 13.8 2.3% 3 2% 44 -0.3% 1 100% — -0.2% SX7E (Banks) 23.0% 0.9% 3% 20.9% 9% 8 4% 53 3.6% 12 13% 28 -0.5% -/ 40% — -3.1% $X7P (Banks) 98% 1.2% 12% 14.0% 6% nm 13% 64 3.3% 15 17% 3.0 -0.5% -8 60% — -2.1% SXAP (Auto) 73% = -0.2% 2% 3.5% 3% -] 2% 74 3.1% = 2% 3.2 -0.4% 0 54% 0.9% SXDP (Health) 3.1% -0.6% 2% 86% 0.9% -/ 2% 115 24% -14 2% 4] -0.2% 10 = 82% = 1.6% SXEP (Oil&Gas) 54% =—-0.2% = 1% 2.5% 2% -] 2% 85 2.8% -1 1% 3.6 -0.3% -] 94% — -2.2% SXIP (Insur) 5.1% -03% 2% 86% 1% =2 3% 9.0 2.8% 3 6% 35 -0.5% 3 64% 0.8% SXKP (Telecom) 49% -20% 1% 1.5% 1% -21 1% 94 2.7% -20 1% 37 -0.2% 2 98% — -1.0% SXNP (Indust) 6.1% -0.1% 6% 9.1% 2% 0 14% 83 2.8% =| 6% 3.6 0.0% 2 100% 1.5% SXPP (Basic) 25.1% -04% 5% 8.5% 2.1% -3 6% 48 3.6% “I 9% 28 -0.2% -2 58% — -1.4% SXQP (Prsnl&HH Gds) 3.9% 3.2% 22% 64% 0.9% 34. 21% = 11.2 2.6% 53 25% 38 -0.5% 24 41% = 0.7% SXRP (Retail) 27% 0.1% 7% 78% 0.8% ] 5% 13.2 2.3% 3 6% 44 0.1% 3 96% -0.4% SXTP (Trvl&Lsre) 3.7% -13% 6% 85% 0.9% -18 6% 10.8 2.6% -14 6% 3.9 -0.2% -4 55% = 1.9% Source: BofA Merrill Lynch Global Research *Real vol = EWMA (Exponentially Weighted Moving Average) volatility, which measures historical price volatility but assigns greater importance to recent returns. Sigma(t)*2 = 0.94*Sigma(t- 1)*2+(1-0.94)*r(t}*2, where r(t) is the return on day t. “Indicative mid prices; strikes as % of forward ***Negative values indicate that the bullish risk reversal takes in a credit. Bankof America <> ariective Merrill Lynch Global Equity Volatility Insights | 06 June 2017 17 HOUSE_OVERSIGHT_023591

Volatility in Asia Use best-of puts to cheaply hedge a reversal in the rally BofAML global strategists note that the massive central bank liquidity supernova has allowed the Wall Street bull to flare higher, led by uber "growth" (EM internet stock returns annualizing 125%). In light of this, we feel that it is prudent that investors protect gains as we think today’s low volatility environment remains highly fragile, characterized by the below stats: « The MSCI Asia Pac index is up for the 5 consecutive month and is trading at multi- year highs, while equity foreign inflows year-to-date are at the highest since 2004. ¢ Option delta-adjusted open interest for KOSPI2 and HSI are near a 4-year highs. * The BofAML global Risk-Love investor sentiment measure is in euphoria, and China’s nominal GDP is likely peaking. The Asian/EM EPS upgrade cycle is likely rolling over. Volatility of equity indices remains at post-GFC lows while markets continue to trend higher. If the market were to realize a correction, we believe that indices would be highly correlated, and hence we recommend buying a 14-Sep-2017 95% strike best-of put on NKY/KOSPI2/HSI that costs 0.8%, a 45% discount to average vanilla puts. Indicative pricing (As of 5-Jun-17, ref: NKY: 20170, KOSPI2: 307.33, HSI: 25874) Buy a 14-Sep-2017 best-of 95% put on NKY/KOSPI2/HSI: 0.80% Chart 36: Option positioning on KOSPI2 and HSI is near a 4-year high Chart 37: The 3-month 95% best of put on HSI/NKY/KOSPI2 has significantly paid off during market corrections when correlation rose 120 35% 96 30% 100 in| 2 25% a0 20% 60 15% 4g 10% 29 50% 20 8 0% CTO DW DOT TT NN YOY TFT TOO WO OO O 0 soSeSSBRBSeESBESSEVSREST ro) = 3 38 ro) KOSPI2 HSI NKY ee eee ea Se . =" Se @ Option Delta Adjusted Ol (US$Bn) ‘4-year Percentile (%) — Historical Payoff of 3M 95% best of put on HSI/NKY/KOSPI2 Source: BofA Merrill Lynch Global Research Data as of 2-Jun-17 Source: BofA Merrill Lynch Global Research 18 Global Equity Volatility Insights | 06 June 2017 ate 2 HOUSE_OVERSIGHT_023592

Chart 38: YTD equity inflows into EM Asia are at the highest levels since Chart 39: Similar to that of global markets, Asian volatility is at its most 2004 depressed levels post-GFC 40 35% 30 30% 20 25% 10 20% 15% “10 10% ¢s>cdg¢4¢ 2564 4 S&B FE SH EROA ES BS -30 SESSSZFSSEFSSEZSSTZSSE => ire} ico} led foe} aD Q x7 N oO s+ wo ico} \aal Q Q Q Q Q Q ANRNRRKRKRKRKRKRKRKRA AN ; ; ; === Average 3M ATM Vol of HSI/KOSPI2/NKY ===Current (13.2%) m YTD Foreign Equity Inflow into EM (US$bn) Source: BofA Merrill Lynch Global Research, Bloomberg. Data as of 2-Jun-17 Source: BofA Merrill Lynch Global Research. Data from 2-Jan-12 to 2-Jun-17 Foreign inflows into Korea, Taiwan, India, Indonesia, the Philippines, and Malaysia Notable trends and dislocations (Asia) Asian equity markets saw modest gains last week, led by Japan’s NKY index, which increased 2.5% week-over-week. In fact, the index breached the 20,000 mark last Friday for the first time since December 2015. Gains were driven by foreign inflows from investors attracted to very strong corporate profits. Additionally, economic data from last week indicated that Japan’s unemployment rate held at a two-decade low, and capital spending during Q1 beat analyst estimates. The biggest contributor to last weeks’ return was Fast Retailing Co Ltd (9983 JT), which added 3.9% week-over-week. The company reported that same-store-sales for its Uniqlo stores rose 2.4% year-over- year in May due to successful strategies during the Golden Week and Mother’s Day holidays. After the NKY, last week’s second biggest gainer was Hong Kong’s HSI, which added 1.1%. The leading name in the index was Geely Automobile Holdings (175 Hk), which jumped 19.8% week-over-week in response to optimism over its recent acquisition of a 49.9% stake in Proton Holdings. Hong Kong’s HSCEI saw a similar return as the index added 0.8% last week. Next we turn to India, where the NIFTY gained 0.6% last week. The leading name in the index was Aurobindo Pharma (ARBP |S), which increased 11.4% week-over-week in response to an investor presentation which outlined the company’s plans to increase collaboration across its global customer business. Elsewhere in Asia, Korea’s KOSPI increased 0.3% week-over-week, Australia’s ASX added 0.6%, and Taiwan’s TWSE gained 0.5%. Asian term structures were unchanged week-over-week at 3.8% on average « Asian 3m ATM volatility increased on average 0.1 vol point to 12.6% last week, while 10 day realized vol fell on average 0.8 vol points to 8.6%. Notably, NIFTY’s implied vol increased 0.7 vol points, the biggest increase in the region. On the other hand, the HSCEI’s 10d realized vol saw the largest drop in the region, falling 5.1 vol points week-over-week to 9.2%. ¢ On average, term structures among Asian indices remained unchanged at 3.8% last week. The KOSPI 12M-1M term structure steepened the most, increasing 0.7 vol points to 2.9%. On the other hand, India’s NIFTY saw the largest flattening as its term structure flattened 0.5 vol point to 3.8%. e Asian 3M 90-110% skews narrowed 0.2 vol points on average to 3.0%. Japan’s NKY narrowed the most, decreasing 1.0 vol point to 5.0%. Bankof America <> ariective Merrill Lynch Global Equity Volatility Insights | 06 June 2017 19 HOUSE_OVERSIGHT_023593

Chart 40: Volatility measures of major Asian indices (data as of 02-Jun-17) 3Mth ATM Implied Volatility 10D Realized Volatility {2Mth-1Mth ATM Vol Spread 3Mth 90-110 Skew Spread Equity Market Weekly 4Yr Weekly 4Yr Weekly 4Yr Weekly 4Yr Weekly Current change percentile Current change percentile Current change percentile Current change percentile return HSI 124% 0.3% 14% D4% = -2:A% 0.3% 5.1% 0.4% 99.1% 2.3% 0.4% 19.9% 1.1% HSCEI 15.7% 0.3% 1.8% 92% -5.1% 1.6% 43% 0.2% 93.6% 0.4% 0.0% 20.4% 0.8% NKY 14.2% 0.2% 0.3% 10.7% 1.0% 13.4% 42% 0.4% 93.8% 5.0% -1.0% 59.4% 2.5% KOSPI 200 12.8% 0.3% 34.5% 9.8% 2.6% 36.9% 2.9% 0.7% 44 8% 3.0% 0.2% 15.8% 0.3% ASX 200 11.5% 0.1% 12.8% 85% -0.7% 20.5% 3.5% 0.3% 86.5% 6.3% 0.2% 20.1% 0.6% NIFTY 10.5% 0.7% 0.7% 97% -2.2% 18.9% 3.8% -0.5% 14.0% 5.5% 0.1% 53.0% 0.6% TWSE 10.7% 0.3% 8.2% 1.2% 1.5% 14.1% 2.9% 0.4% 12.6% -1.5% 0.1% 0.0% 0.5% Source: BofA Merrill Lynch Global Research Chart 41: Index correlation is generally further away from their 10-year Except for the ASX200, Asian stock and index vols are more lows while index and stock vols are near their lows, except for ASX200 depressed than index correlation 9, 20% ; 22% Today’s ultra-low Asian index realized volatility is largely driven 2 20% a by depressed single stock realized volatility and low realized = correlation. Stock and index volatilities are generally more 3 tex depressed than index correlation. For instance, the KOSPI2 3- f= 15% 13% month realized correlation (0.13) is the highest relative to its 2 ga 10° history (at its 22"¢ percentile since 2008) as foreign inflows = 10% ; have pushed the index to an all-time high and have driven 5 ei OY eo, correlation up. Korean market activities used to be dominated ~ 5% dil 30, by domestic sector rotation trades. 0% hs i On the other hand, ASX200 correlation is relatively depressed as HSI HSCEI NKY KOSPI2 ASSI the correlation between the banks and materials sectors has ™3M Stock Vol = 3M Index Vol mi Index Correlation broken down in recent months. Source: BofA Merrill Lynch Global Research US53.6bn Korean auto-callable issuance in May-17, down 21% MoM ¢ Korean issuance fell 21% MoM to US$3.6bn in May-17, which is close to the average monthly issuance of USS3.8bn since 2014. Products issued in Oct-16 (US$3.1bn) and Nov-2016 (USS3.4bn) have knocked out recently and rolled into new products. However, the legacy HSCEl-linked products issued in May-15 were struck at a very high HSCEI spot level and were not able to knock-out this month. We think issuance may pick up in July and August as ~US$4.0bn of legacy products may knock-out in Jul-17 with an average HSCEI knock-out level of 9665 (Chart 43). e — Issuance in KOSPI2-linked products (up from US$840mn to US$846mn) remained steady in May-17; HSI-linked products fell 66% from US$360mn to US$120mn as investors prefered HSCEl-linked products (which only fell from USS760mn to USS700mpn). e §X5E-linked (US$1.0bn)}, KOSPI2-linked (US$846mn), HSCEl-linked (US$700mn), and SPX-linked products (US$550mn) accounted for 86% of the May-17 issuance. We estimate that structured product issuers are currently long US$10mn of KOSPI2 vega and USS89mn HSCEI vega respectively. The majority of the US$89mn HSCE| outstanding vega came from the US$14bn of HSCEI-linked legacy products issued between Apr-15 and Jul-15 that have not knocked-out. deg oes Bankof America 20 Global Equity Volatility Insights | 06 June 2017 Merrill Lynch HOUSE_OVERSIGHT_023594

NKY Uridashi monthly issuance slightly picked-up in May-17 With NKY breaking above 19,500 in May and triggering some early knock-outs, Japanese Uridashi issuance picked up towards the end of May to US$630mn. We estimate there is now around US$7.9bn (vs. $8.1bn last month) in product outstanding and over 50% of it will be knocked out if the NKY rallies above 20,500. We estimate issuers are currently long US$44mn vega in NKY. The peak of the vega profile is around the 17,500 level and we expect issuers to lose USS2mn of vega for every 1% rally in the NKY. Chart 42: Korean auto-callable issuance fell 21% to US$3.6bn in May-17; Issuance in KOSPI2-linked products (rose from US$840mn to US$846mn) remained steady; HSI-linked products fell 66% from US$360mn to US$120mn as investors prefered HSCEI-linked products (which only fell from US$760mn to USS700mn) mmm KOSP|2 oom HSCEl mmmmSXSE mame SPX HS| mm NKY =Total issuance (RHS) 3,000 8,000 2.500 7,000 6,000 = 2,000 5,000 = a 1,500 4,000 a > 1,000 3,000 5 2,000 ano 1,000 WwW Ww WwW WwW WwW WwW Ww WwW io) io) io) i<o) io) io) io) io) i<o) io) io) io) NM MN MN MN MN : SSSR 588 SP ERSESTSRSERERERSE Source: BofA Merrill Lynch Global Research. From May-15 to May-17 Chart 43: Knock-out schedule for legacy HSCEI-linked products issued in Chart 44: In May-17, there was $630mn of Uridashi products issued 2015; we expect more knock-outs in Jul-17 if HSCEI stays above 9,600 which were NKY linked 1.6 22,000 14,000 14 mame New NKY Linked Uridashi issuance 31.000 42,000 411,024 1401 14,341 ———NKY Ind = 12 20,000 10,000 % 10 19,000 8,000 y 08 18,000 . 6,000 S 06 | uf 17,000 | 4,000 = 04 mY 16,000 2,000 02 5,000 14,000 = = = 2 2 ad Pe re Jun-17 Jul-17~—Aug-17.- Sep-17 Oct-17“ Nov-17 S ® 8 S§ &® & §& ® ™ = Y ™ = Y ™ = m Average HSCEI Knock-Out Level — = Notional (US$mn) Source: BofA Merrill Lynch Global Research. Data as of 2-Jun-17 Source: BofA Merrill Lynch Global Research. Monthly data from Jan-15 through May-17 orice a Global Equity Volatility Insights | 06 June 2017.21 HOUSE_OVERSIGHT_023595

Chart 45: We estimate that structured product issuers are currently long Chart 46: Structured product issuers are currently long ~US$89mn of USS$10mn of KOSPI2 vega HSCEI vega 90 ‘ KOSPI2 Autocall Vega Outstanding Profile 110 HSCEI Autocall Vega Outstanding Profile g 80 3, 100 ® ® 90 2 70 2 80 B= 50 $e 50 © & 40 BE 40 ag BS 30 o —30 a 20 L 4 = 10 £ Ss 7 S10 aeensreunsnnnaneesssenseneaeennesoeaesenenneaemesennaeeneeaesenans = -10 | na a iri) -20 PRNNKRAAKAARAR BH SD SB eoFrFF BSBSESESSLSLARA SB KOSPI2 Spot Level HSCEI Spot Level Source: BofA Merrill Lynch Global Research. Source: BofA Merrill Lynch Global Research. KOSPI2 3M ATM IV over SPX is at its 4-year high Table5 lists Asian index pairs with the highest IV ratio vs their 4-year histories. For instance, the ratio of KOSPI2 3M ATM IV over SPX is at its 4-year high. Chart 47: The ratio of KOSPI2 3M ATM IV over SPX is at its 4-yr high Table 5: Index pairs* with the highest implied vol ratio vs their histories (Daily data from 1-Oct-12 through 02-Jun-17) (data as of 02-Jun-17) ——KOSPI2 3MATMvol «=-—==SPX3MATM vol —=—=Vol ratio Index A Index B A/B Implied Ratio 4-yr 25% 60 (Implied vol} (Implied Vol} Volratio —_ percentile ° 3M ATM KOSPI2 (12.8%) SPX (9.4%) 36 100% 50 6M ATM KOSPI2 (13.6%) NIFTY (11.8% 16 99% 20% 40 2M ATM KOSPI2 (14.8%) NIFTY (13.8% 07 99% ; ; s 30 3M 25d-Put KOSPI2 (13.6%) HSCEI (16.4%) 0.83 99% > 209 6M 25d-Put KOSPI2 (14.7%) NIFTY (12.5% AT 99% B 15% 3 2M 25d-Put — KOSPI2 (16.0%) NIFTY (14.4% 1 99% 2 A100 ~ .00 3M 25d-Call KOSPI2 (12.6%) SX5E (11.6%) 09 100% 10% 0.90 6M 25d-Call KOSPI2 (13.4%) NIFTY (10.8% 25 100% ; 2M 25d-Call = KOSPI2 (14.6%) NIFTY (12.0% 21 100% 0.80 Source: BofA Merrill Lynch Global Research 5% 0.70 * Index universe includes the ASX200, HSCEI, HSI, KOSPI2, NIFTY, NKY, TWSE, SPX and SX5E oOo 7m Oo + +t TO OW MH OO OK Re * mid level implied vol eé s» & &¢ wae eF Hee HH EGE BH so ST os SOG PK OG SO GB S > BY 7 BH > BH FEY 78 Source: BofA Merrill Lynch Global Research Bankof America 22 Global Equity Volatility Insights | 06 June 2017 Merrill Lynch HOUSE_OVERSIGHT_023596

Summary of Open Trades (5-Jun-17) Price data for open level reflects the price on open date and does not necessarily reflect the price at which the trade could be executed at the date of this report. Our trades are structured to be executed on the open date and are not necessarily appropriate to execute as formulated beyond that date. Table 6: Summary of open trades as of 5-Jun-17 Trade Description Long SX5E vs short SPX Dec18 var swap Long NKY vs short SPX Dec18 var swap Long SX5E vs short SPX Dec18 put vs put Buy a 1Y ATM worst-of call on SPX & TLT Buy SPX>UKX Jun17 ATM outperformance call, conditioned on SPX lower at maturity (q{USD) Buy UKX Jun17 6650 put, sell SPX Jun17 1850 put Buy an EWZ Jun-17 40 call conditional on SPX<2200 at expiry Buy an SX5E Sep-17 95% put conditional on EUR 10Y CMS > 1.1% or < 0.3% in Mar-17 Buy 2823 HK Jun-17 90/110 strangle Buy ESTX50 Dect? 90% put contingent on EURGBP < 0.82 by Jun17 expiry 2-Dec-16 Buy SPX>UKX Jun17 5% outperformance call (qUSD) Long XLF vs SX7E Juni? ATM outperf call, contingent on SX7E higher at Jun expiry (qEUR) Buy SPX Jun17 95% put contingent on US 5Y CMS > 2.15 Buy 1x Jun-17 ATM XLF call, sell 1.8x Jun-17 ATM worst-of calls on XLP and XLU Buy Jun-17 ATM R2kK- value outperf call over EEM, contingent on EEM > 95% Buy NKY Jun17 110% Call Buy TPINSU Jun17 110-125% Call Spread Buy TPNBNK Jun17 110-125% Call Spread Buy 2823 HK Junt7 90/1 10% strangle Buy HSCEI Jun17 105-120% call spread contingent on $KRW >1200 Buy NKY-SPX Dec19 70/110% corridor variance Buy NKY Jun17-Jun18 18,500 strike FVA Long Russell 2000 vs. short S&P 500 Dec-18 var spread Buy 1x Jun17 64 call on Aug17 Brent futures, sell 1x SXEP Jun17 330 call Buy SPX 6m ATM call contingent on GLD 5% higher in 3m Long NKY - SPX Dec-18 corridor var replication Buy NDX Top20 volatility dispersion Long 1.8x vega on 1y single stock vols of UK Brexit exposed names, Short 1x vega on 1y FTSE index vol SPX Sep-17 95% puts conditional on the Syr CMS rate above 2.4% at maturity Buy QQQ Jun17 132 call , sell XLF Jun17 25 call Buy Buy-Rated MSCI A-shares stocks & hedge with puts Buy A-shares with highest MSCI impact & hedge with put Own Japan stock vol via gamma weighted vol dispersion Buy CNOOC Jul-17 95% puts vs. sell HSCEI 95% puts Buy CH Merchant Bk Jul-17 18.5/17 put spread vs 22 call Buy SX5E Dec17 3800 calls contingent on EURUSD > 1.1 at expiry Buy 1.5x KOSPI2 285 puts vs. short 1x $KRW 1160 call Buy EEM Aug17 39.5 put and sell EEM Aug17 37 put Buy Dec17 105% call on an equally weighted basket of SX7E, SXAP, SXPP & SXEP, sell Dec17 ATM worst-of call on the same Buy NKY Jul-17 19500 puts vs. short Dec-17 17500 puts Short GILD $55-$62.5-$67.5 put spread collar Open Date 5-Jul-16 5-Jul-16 5-Jul-16 18-Jul- 17-Oct- 17-Oct-16 24-Oct-16 14-Nov-16 21-Nov-16 2-Dec-16 2-Dec-16 5-Dec-16 5-Dec-16 5-Dec-16 02-Dec-16 02-Dec-16 02-Dec-16 02-Dec-16 02-Dec-16 02-Dec-16 02-Dec-16 5-Dec-16 9-Jan-17 23-Jan-17 13-Feb-17 27-Feb-17 14-Mar-17 14-Mar- 20-Mar- 23-Mar- 23-Mar- 10-Apr-17 24-Apr-17 24-Apr-17 8-May-17 8-May-17 15-May-17 15-May-17 15-May-17 16-May-17 AAS Open Level 6.1 vols 5.7 vols 0.00% 0.9% 2.0% 2.6% 1.7% 2.1% 5.55% 1.63% 2.05% 1.20% 1.04% 2.10% 2.30% 1.83% 3.30% 3.20% 5.90% 1.20% 1.50% 21.5% 3.9pts 00% 4.00% 1.0% 32.3vols 0.57% 44% 44% 5.8% 0.77% 0.10% 3% 0.3% 6% 6% 0.0% 3% Expected Trade Term Dec-18 expiry year Jun-17 expiry Jun-17 expiry Jun-17 expiry Sep-17 expiry Jun-17 expiry Dec-17 expiry -17 expiry -17 expiry -17 expiry -17 expiry -17 expiry -17 expiry -17 expiry -17 expiry -17 expiry -17 expiry -19 expiry -17 expiry -18 expiry -17 expiry Jul-17 expiry Dec-18 expiry 8 expiry van- 4-Mar-18 Sep-17, expiry Jun-17 expiry Jun-17 expiry Jun-17 expiry Mar18 expiry Jul? expiry Jul? expiry Dec? expiry Jul? expiry Aug17, expiry Dec? expiry Jul? expiry Sep-17 expiry Rationale Investors should re-assess attractiveness of popular and (typically) technically motivated longer- dated RV vol trades, given environment of structurally higher political & economic risks and increasingly limited policy options Cheap equity upside in a bond / equity melt-up Risks of a hard Brexit rising and (weak) currency tailwind likely to prove short-lived; position cheaply for FTSE 100 (UKX) underperformance Using derivatives to capture Brazil (EWZ) upside potential following start of easing cycle Remain long equities and cheapen hedges by conditioning on rates China risk premium rising but A-shares vol still at all-time lows Equity-FX correlation is not priced for a spillover of populism into the EU, which could cause EUR (0 fall against an already weakened GBP as equities fall UKX is heavily exposed to EU (50% revenues) and should underperform SPX if GBP tailwind fades. Volatility & correlation suit well for outperformance Cheapen long XLF upside to near 8y lows via selling upside on structurally challenged European banks & relatively more bearish outlook for US rates vs EU Still depressed equity-bond correlation (US 5Y bonds vs. SPX in the 37th%-ile since Jun-88) cheapens the cost of SPX puts conditioned on higher rates Participate in the continuation of the reflation trade. Cheapen Financials upside by selling rich Utilities and Staples vol & expensive correl. Higher US rates and stronger dollar are likely to hurt companies exposed to EM and help US DM. Trade the outperformance in a risk-controlled way, avoiding selling the record-low correlation USDJPY and NKY the biggest beneficiaries of a Trump win Banks and Insurances are the most leveraged sector Banks and Insurances are the most leveraged sector China risk premium rising but A-shares vol still at all-time lows Own contrarian EM upside at low cost & limited risk QE uncertainty and USDJPY vol support NKY vs SPX realized vol What if QE hits its limit’? Long NKY vol outright which is cheap to carry With fiscal stimulus and potential tax cuts, small caps revert to old normal generating higher vol on upside and downside relative to large caps Vol and price technicals are attractive. BofAML commodity strategists oil target is $70/bbl but this is already priced in SXEP levels according to BofAML Oil & Gas equity analysts Position for a near-term wobble followed by yet another equity melt up Cheaply access positive carry QE failure hedge Position for a pick-up in single stock realised vol on the 10 names (within FTSE’s top 30) where post EU referendum realised vol was the highest relative to current 1y ATMf vol. The 10 names are: Barclays, Aviva, Prudential, BT, Glencore, Tesco, CRH, BA, Standard Chartered & HSBC. Hedge portfolios against a buy-the-dip failure should a faster rate cycle ultimately jeopardize it Sell rich Financials vol to fund cheap Tech upside Market may trade on the MSCI inclusion theme; Hedge with 2823 HK Jun17 95% put Market may trade on the MSCI inclusion theme; Hedge with 2823 HK Jun17 95% put Historically attractive to own TOPIX Top 10 corridor gamma weighted volatility dispersion Hedge a rollover in China GDP and screen for cyclicals that could face pressure Hedge a rollover in China GDP and screen for cyclicals that could face pressure Benefit from low vol, flat correl, likely hawkish ECB & (FX un-hedged)} inflows into EU equities Leverage cheap equity vs. FX vols to own cheap tail protection Buy cheap EM equity puts on near-record performance gap to commodities Monetise low vol & high implied correl to position for greater sector dispersion in EU: long basket call, short worst-of call Own cheap NKY hedges into FOMC; Term structure is too steep is under-pricing risks Buy unloved and cheap biotech upside by levering depressed vol & skew Bankof America Merrill Lynch Global Equity Volatility Insights | O06 June 2017 = 23 HOUSE_OVERSIGHT_023597

Table 6: Summary of open trades as of 5-Jun-17 Trade Description Open Open Date Level Long 1x EEM 3m 97.5% put vs. short ~0.09x units each of 3m 97.5% puts on 15% 0.0% FXI, EWY, EW2Z, EPI, EWT, RSX, EZA, and EWW 7“ “e Buy Tencent Jul1? 250/300 strangle 22-May-17 2.45% Buy A-shares (2823 HK) Jul17 105% call 22-May-17 1.15% Buy 1x contract of ESTX50 Jun17 3525, sell 4x contracts of V2X Aug future 22-May-17 1.00% Buy SX5E Dec17 3450-3700 bullish risk reversal vs short IBOXX HY TRS . : _ 30-May-17 1.17% with equal notional sizing 6.9% (FB), 1.2% (AMZN), Buy 6m ATM calls on FB, AMZN, NFLX and GOOGL 30-May-17 9.40% 1/0 (NFLX), 6.2% (GOOGL) Buy a 6m outperformance call on FANG stocks vs. SPX conditional on SPX> current levels at expiry Buy HSI Sep17 90% put, sell ASX200 Sep-17 90% put 30-May-17 0.15% 30-May-17 3.4% Expected Trade Term 3m Jul-17 expiry Jul-17 expiry Jun-17 expiry Dec-17 expiry 6m Sep-17 expiry Rationale Buy EEM puts financed by a basket of EM puts to lever near record low correl Hedge the China tech bubble; Tencent unlikely to stand still after a 45% rally YTD Hedge the upside into MSCI announcement on 20-Jun Fundamental case to be long EU equities remains intact but stretched bullish positioning could lead to near-term consolidation BofAML Equity & Credit strategists highlight they favour equities over HY credit as div yields have surpassed HY credit yield & equities offer more gearing to rising PMI's, earnings and FCF Stock replace FANG stocks Lever extremely depressed FANG volatility and low correlation to buy upside HSl is unlikely to outperform if AS51 drops more than 10%; HSI vol below AS51 vol Source: BofA Merrill Lynch Global Research. Prices reflective of most recently available data which may be delayed in some cases. “Trade Value” represents current valuation of trades initiated on the “Open Date”. 24 Global Equity Volatility Insights | 06 June 2017 BankofAmerica Merrill Lynch HOUSE_OVERSIGHT_023598

Summary of Closed Trades (5-Jun-1 7) Table 7: Summary of closed trades as of 5-Jun-17 Trade Description Buy NKY Aug-16 105%-110% call spreads & sell 90% puts Replace FB long positions via Oct-16 ATM calls Replace AMZN long positions via Oct-16 ATM calls Buy AAPL Oct-16 ATM protective puts Buy 1.5x 5-Aug-16 2950-3000 strangles by selling 1x 19- Aug-16 2950-3000 strangles Sell NKY Aug16 15500 puts, Buy Sep16 15500-14500 put spreads Buy TLS 25-Aug16 95% puts Buy Newcrest 25-Aug-16 105/115% call spreads Buy CSL 25-Aug-16 95% puts Buy BHP 25-Aug-16 105/115% call spreads Buy HSCEI Aug16 9400 call, Short Oct16 10000 call Buy Tencent (700 HK} Sep16 105% call Sell 1x SX7E 1M 25d call to fully finance 1.85x SX5E 1M 25d calls Buy CMB (3968 HK} Sep16 105-115% call spread Buy ICBC (1398 HK) Sep16 105-115% call spread Buy BOC (3988 HK) Sep16 105-115% call spread Buy XLF Sep 24 strike call Buy XLU Sep 51 strike pu Buy a 6M ATM worst-of {XLF call, XLU put} Buy 0.85x SX5E Sep16 3000-3100 strangle, sell 1x SX5E Dec16 3000-3100 strangle Long 0.5x V2X Oct16 future, short 0.5x V2X Jan-17 future Sell VSTOXX Sep 21 puts VIX Sep 17/22 1x2 call ratios (short 2x} + 0.75x SPY Sep23 210 puts Buy NKY Oct 95/105 strangle outright Buy NKY Oct 95/105 strangle daily delta-hedging Long 3M 25d EFA put vs short 3M 25d UKX put Replace T long position via 3M ATM calls Replace LOW long position via 3M ATM calls Replace RTN long position via 3M ATM calls Replace CRM long position via 3M ATM calls Replace NEE long position via 3M ATM calls Overlay long WBA long position with 3M ATM calls Buy HKEx (388 HK) 1x2 105%-115% call ratio Buy NKY Oct16 17500 call, Sell 0.65x NKY Sep 17250 call Short VIX Oct 15 put vs. long VIX Nov 19/26 call spread Long 2x SPX Oct31 2125 puts vs. short 1x SPX Mar-17 1975 put DAX +2.31x Dec16/-1x Dect? put calendars Buy SX5E Dec16 2950/2750 put spread Buy 1.5x SX5E Dec16 3100 call, sell 1x SXSE Mar17 3100 call for an upfront credit of 56bps Buy a 6M ATM worst-of call on XLP & GLD Buy a 6M ATM worst-of {SPX put, GLD call} Buy GLD 124/130 Dec-16 call spread Buy GLD 116/124/130 Dec-16 call spread collar Buy TLT 123/132/137 Dec-16 call spread collar Buy Oct16 110%f calls on VIE FP, Al FP, IBE SQ, STAN LN 18-Jul- and MUV2 GY Buy an Oct16 110%F call on an equally weighted basket {quanto EUR) Buy 0.895x V2X Oct 21 puts, sell 1x VIX Oct 16 puts Sell SX7E Dec16 115 call Open Date 11-Jul- 25-Jul- 25-Jul- 25-Jul- ADD DD 25-Jul-16 25-Jul-16 18-Jul-16 18-Jul-16 18-Jul-16 18-Jul-16 1-Aug-16 15-Aug-16 25-Jul-16 5-Jul-16 5-Jul-16 5-Jul-16 25-Jul-16 25-Jul-16 25-Jul-16 15-Aug-16 11-Jul-16 30-Aug-16 15-Aug-16 ror 30-Aug- 30-Aug- 5-Jul-16 9-Jul- 9-Jul- 9-Jul- 9-Jul- 9-Jul- 9-Jul- 5-Aug-16 8-Aug- AWAD DD a a -Aug-16 6-Sep-16 30-Aug16 6-Sep-16 24-Oct-16 11-Jul- 11-Jul- 8-Nov- 8-Nov- 8-Nov- 18-Jul-16 19-Sep-16 6-Sep-16 Open Level 0.26% 5.9% 55% 4.6% 0.00% 0.24% 1.05% 2.64% 1.09% 2.22% 0.00% 1.70% 0.0% 2.32% 2.12% 2.10% 14% 1.3% 1.35% -5.07% 0.05 vols 1.20 vols $0.85 2.28% 2.28% 0.00% 2.12% 3.90% 3.16% 4.16% 2.32% 4.04% 0.60% 0.70% $0.45 0.0% 0.00% 1.48% -0.56% 1.05% 1.60% 0.9% 0.65% 0.67% 2.31% 0.81% 0.0 -0.88% Close Level 1.73% 6.1% 6.3% 1.2% -1.12% 0.28% 2.95% 1.18% 1.18% 0.77% 0.67% 2.10% 0.0% 6.12% 9.0% 6.28% 2.3% 2.6% 3.0% -5.73% -0.95 vols 1.77 vols $0.45 0.44% 0.56% 0.00% 0.04% 0.00% 0.41% 0.19% 0.08% 1.20% 0.00% 0% $0.88 -0.34% -2.60% 0.00% 1.62% 0.0% 0.0% 0.0% 1A -5.03% 3.30% 0.00% $1.3 -1.09% Close Date 25-Jul-16 1-Aug-16 1-Aug-16 1-Aug-16 5-Aug-16 Aug-16 expiry & Sep-16 expiry 15-Aug-16 15-Aug- 22-Aug- 22-Aug- 22-Aug- 22-Aug- ADA DD 25-Aug-16 30-Aug-16 30-Aug-16 30-Aug-16 6-Sep-16 6-Sep-16 6-Sep-16 Sep-16 expiry 19-Sep-16 Sep-16 expiry Sep VIX expiry 27-Sep-16 27-Sep-16 3 months 3 months 3 months 3 months 3 months 3 months 3 months 29-Sep-16 14-Oct-16 14-Oct-16 14-Oct-16 Dec-16 expiry Dec-16 expiry Dec-16 expiry 6 months 6 months Dec-16 Dec-16 Dec-16 Oct-16 expiry Oct-16 expiry Oct-16 expiry 24-Oct-16 Rationale Close position as the hurdle to surprise on the upside is high following a 5.8% NKY rally Close position as Facebook rallied on better-than expected Q2 results Close position as Amazon rallied on better-than expected Q2 results Remove protection as worries around disappointing Q4 guidance faded post earnings The BoJ, Fed & EU bank stress tests could move mkts sharply in the near term Unwinding before the Aug16 expiry; The NKY Sep put spread has carried well Telstra has announced earnings and the stock has corrected 5% over the period NCM has stayed unchanged over the period despite better than expected earnings CSL fell 5.4% over the period with weak earnings announcement BHP rose 3.6% over the period but the option remains out of the money Close position as the HSCEI rallies 5.2% and we are approaching the Aug16 expiry Tencent jumped post better than expected earnings SX7E 1M 25d call / SX5E 1M 25d call price ratio is in the 100" 2-yr percentile Close position and BofA ML turned neutral in EM in the short-term Close position and BofA ML turned neutral in EM in the short-term Close position and BofA ML turned neutral in EM in the short-term Close positions from trades that have benefited thus far from the rally in Financials and weakness in Utilities; monetize view that Fed will not hike in September Take advantage of low near term vol and a steep term structure Unwind Oct/Jan spread and maintain Nov/Jan spread given clarity around the Italian referendum date Global macro event risk likely to keep V2X supported going into Sep expiry Trade provided hedging benefits during the sudden Sep market shock & has expired Take a loss post an disappointing market reaction on the BoJ announcement Take a loss post an disappointing market reaction on the BoJ announcement Trade expired on 3-Oct Our analysts no longer expect impactful catalysts in the near term; stock replacement strategies proved useful in cushioning downside losses during the abrupt Sep-16 sell-off vs. long equity positions. HKEx failed to rally above the first call strike and expired worthless NKY Oct-16 call expired out of the money Close position as the Oct VIX future stayed well-supported as is typically the case in the weeks leading up to the US presidential election Provided hedging benefits in the sudden equity shock in early Sep-16; now being unwound to mitigate decay DAX outperformance & low short dated DAX vol make put calendars attractive A catalyst-strewn fall and a remarkably low volatility summer suggests that there could be headwinds to continued market upside on low volatility Monetise steep SX5E vol curve for tactical EU upside with an upfront credit Take a loss as safe-haven assets post a weak performance in H2-16 with fears over Trump's surprise victory easing and stock markets rallying Add exposure via inexpensive upside on single names where positioning appears particularly bearish and stocks have underperformed vs. their sectors Near term catalysts & curve differentials favour tactical long V2X, short VIX puts Close short SX7E call (part of SX5E put spread, short SX7E call trade) to limit potential risk from a “Yes” in the Italian referendum Bankof America Merrill Lynch Global Equity Volatility Insights |O6 June 2017. 25 HOUSE_OVERSIGHT_023599

Table 7: Summary of closed trades as of 5-Jun-17 Open Trade Description Date Buy HSI Oct-16 102% call, Sell HSP 105% call 19-Sep-16 Short 1x USO 3M 25d put, long 2.1x SXEP 3M 25d call 8-Aug-16 Sell Dec16 SXDP 635 puts, buy 0.6x Dec16 SX7E 110 calls 7-Nov-16 Long 0.5x V2X Nov16 future, short 0.5x V2X Jan-17 future 11-Jul-16 Buy NIFTY Nov16 95/105 strangle outright 6-Sep-16 Buy H-shares w/ SZ-A & buy HSCEI Dec'16 put 22-Aug-16 Buy HK small-cap & buy HSCEI Dec16 put 22-Aug-16 Buy 1.32x EFA US a 25d put, sell 1x SX5E 3M 25d put for 20-Aug-16 near 0 upfront premium Buy 2.6x SX5E 3M ite call, sell 1x SX5E 3M 90% put for 20-Aug-16 near 0 upfront premium Sell 1M 95%f SX5E put and buy 1M 105%f SX5E call 31-Oct-16 Buy KOSPI2 Dec16 95% put, sell SKRW 97.4% put 17-Oct-16 Buy HSCEI Dec16 95% put, sell 2822 HK 94.8% put 12-Sep-16 Buy HSCEI Dec-16 105-115% call spread 27-Sep-16 Buy CH Banks Dec-16 105-115% call spread 27-Sep-16 Buy Best-of TWSE,KOSPI2,HSCEI Dec16 95% put 10-Oct-16 Buy HSCEI Dec16 9800 call with a 10600 knock-out 7-Nov-16 Sell Samsung Jan17 90% put, buy KOSPI2 96% put 17-Oct-16 Buy an XOP Jan-17 45 call 22-Aug-16 Buy an XLE Jan-17 ATM call with 115% knock-in 22-Aug-16 Biya XLE over SPX euked ATM outperformance call 20-Aug-16 contingent on SPX up at expiry Buy XLP Jan-17 52 / 49 put spread 9-Sep-16 Buy a 6M ATM best-of put on SPX & TLT 8-Jul-16 Buy LLY Jan-17 80/90 1x2 CS 17-Oct-16 Buy LLY Jan-17 80/85 CS with 90 KI on upper leg 71-Oct-16 Buy ZTS Jan-17 46/50 bullish risk reversal 71-Oct-16 Buy ZTS Jan-17 46/50/55 call spread collar 17-Oct-16 Buy an EWZ Jan-17 40 call 24-Oct-16 Buy TPINSU 105-120% call spread, short 85% put 4-Nov-16 Buy TPNBNK 105-120% call spread, short 85% put 4-Nov-16 Buy HSBC Jan-17 105% call, Sell HSP 105% call 4-Nov-16 Buy SX5E +Dec19/-Dec'18 div future spread 4-Oct-16 Own Nifty Mar17 call to position for budget surprise 23-Jan-17 Buy HSI Feb17 23600 call 9-Jan-17 Buy AMP AU 23-Feb-17 95% puts 30-Jan-17 Buy SUN AU 23-Feb-17 95% puts 30-Jan-17 Buy 1x V2X Feb17 19 calls, sell 0.85x V2X Mar17 futures 17-Jan-17 Buy CBA AU 23-Feb-17 95% puts 30-Jan-17 Overwrite WES AU 23-Feb-17 103% calls 30-Jan-17 Long V2X Apr future, short V2X May future 9-Jan-17 Buy 1x ESTX50 Dec17 3250 calls, sell 1.23x EURJPY Dec- 17 115 puts 5-Dec- 16 Buy NKY Dec17 19500 call, short Mar17 18000 call 3-Oct-16 Buy NKY Mar17-Dec17 17000 strike FVA 3-Oct-16 Buy TPNBNK Mar17 1x1.5 180/170 put ratio 9-Jan-17 Buy ESTX50 17-Mar-17 3350-3450 strangle 6-Mar-17 Buy Volkswagen 2017 dividend future 47-Jan-17 Buy Mar17 UKX 6700 put cont. on GBPUSD<1.20 10-Oct-16 Buy Mar17 UKX<6700 / GBPUSD<1.20 dual digital 10-Oct-16 Mar17 UKX 6700 buy qUSD put, sell 0.9x vanilla put 10-Oct-16 Buy 6M ATM worst-of {XLF call, XLU put} 19-Sep-16 Buy an SPX Mar-17 97.5% put contingent on USO>105% at 3_oct.16 expiry Buy a USO Mar-17 105% call contingent on SPX<97.5% at 3_Oct.16 expiry Buy a Mar-17 SPX<97.5%, USO>105% dual digital Buy an IWM Mar-17 ATM call conditional on EEM<95% at expiry Buy an XLI Mar-17 ATM call conditional on EEM<95% at expiry 44-Nov-17 Buy GLD Mar-17 116 call, sell Jun-17 127 call 23-Jan-17 3-Oct-16 14-Nov-17 Open Level 0.60% 0.00% 0.00% 0.20 vols 1.63% 1.90% 1.90% 0.04% -0.04% -0.40% 0.00% 0.00% 1.82% 2.05% 0.90% 1.00% 0.00% 14% 2.5% 2.3% A% 0.8% 8% 2.4% 2.6% A% 3.1% 13% 85% 0.52% €7.0 0.67% 0.48% 1.85% 1.39% -16.1v 0.76% -0.87% 0.45 0.00% 0.58% 20.2% 0.60% 0.80% €1.3 0.81% 9.1% 0.44% 38% 08% 10% 1.80% 15% 0.89% % Close Level 0.00% 0.00% 1.23% -1.19 vols 6.36% 8.72% 6.76% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.0% 3.4% 0.00% 0.00% 0.00% 0.00% 14% 14% 0.00% 4.50% 10.60% 4.98% €4.2 2.15% 1.09% 0.27% 0.08% -14.32v 0.00% -1.20% 4.59 3.20% -1.82% 21.6% 0.00% 0.00% €2.0 0.0% 0.0% 0.0% 0% 0% 0% 0% 0% 0% 0.31% Close Date 28-Oct-16 4-Nov-16 11-Nov-16 Nov-16 expiry 21-Nov-16 5-Dec-16 5-Dec-16 22-Nov-16 22-Nov-16 1-Dec-16 8-Dec-16 29-Dec- 29-Dec- 29-Dec- 29-Dec- 29-Dec- 12-Jan-17 20-Jan-17 20-Jan-17 AAA 20-Jan-17 Jan-17 expiry 6 months Jan-17 expiry Jan-17 expiry Jan-17 expiry Jan-17 expiry Jan-17 expiry 3-Jan-17 3-Jan-17 26-Jan-17 6-Feb-17 6-Feb-17 13-Feb-17 13-Feb-17 13-Feb-17 Feb-17 expiry 21-Feb-17 21-Feb-17 24-Feb-17 24-Feb-17 3-Mar-17 3-Mar-17 0-Mar-17 71-Mar-17 4-Mar-17 71-Mar-17 7-Mar-17 71-Mar-17 7-Mar-17 7-Mar-17 71-Mar-17 71-Mar-17 71-Mar-17 71-Mar-17 71-Mar-17 Rationale HSP has under-performed HSI by 1.8% but both options expire out-of-the money The number of long SXEP calls per short USO put is historically high. Leverage commodity and equity strategists’ views on oil and the Oil & Gas sector Tactical option trade ahead of US elections Hedge further Brexit fallout, Italian bank & referendum risk. Close position as NIFTY has fallen 11.4% and we are approaching the expiry Close position as the Shenzhen HK connect has launched on 5-Dec-16 Close position as the Shenzhen HK connect has launched on 5-Dec-16 Own EFA puts vs ESTX50 puts to benefit from any increase in quantitative failure risk in Japan and post-Brexit uncertainty Low vol, high skew combo makes ESTX40 levered riskies attractive Generate income in range-bound markets, benefiting from high ESTX50 skew Both legs expire out-of-the money at expiry Both legs expire out-of-the money HSCEI call spread expires out-of-the money Chinese Banks call spread expires out-of-the money The best performing index (KOSPI2) fell less than 5% over the period HSCEI knock-out call expires out-of-the money Both legs expire out-of-the money. The relative value trade has a zero profit & loss Call expired out-of-the money at expiry Call expires in-the-money but the barrier was not breached at expiry Energy equity outperformed the overall equity market while both were up by the time the outperformance call expired Both legs expire out-of-the money Put expired out-of-the money as the S&P500 ended Both legs expire out-of-the money Both legs expire out-of-the money Both legs expire in-of-the money The 46 call and 50 call expire in-the-money Call expired out-of-the money at expiry Option expired and Topix Insurance rose 9.5% over the period Option expired and Topix Banks rose 15.6% over the period Option expired; HSBC out-performed HSP on the upside Close position given sudden SX5E rally and Dec18 div future will lose equity beta Nifty was up 4.9% over the period on the back of a positive budget announcement Close position. HSI was up 4.9% over the period Unwind the put option post the earnings result Unwind the put option post the earnings result Unwind as the Feb17 call expired Unwind the put option post the earnings result Unwind the put option post the earnings result The Apr future has already richened significantly vs. the May future. Prefer V2X May long May call spread, short Apr put as a French election hedge instead. Unwind ahead of French elections as political uncertainty can weigh on the EUR Unwind the option before the Mar-17 expiry Unwind the option before the Mar-17 expiry Option expired out-of-the money as the TPNBNK remained range-bounded Expired out-of-the-money Volkswagen announced a dividend of €2.05 on 14-Mar-17 UKX rallied making the hedges expire out-of-the-money While XLF has rallied ~30% since inception, XLU is higher by 4% and the XLU put is the worst performing option, expiring OTM The structure offered a deep discount for an SPX hedge and expires OTM as markets have rallied strongly The trade expires OTM due to the SPX rally and a sell off in oil over the past two weeks The trade expires OTM due to the SPX rally and a sell off in oil over the past two weeks EEM has rallied 15% over the period together with IWM EEM has rallied 15% over the period together with XLI While GLD rallied strongly earlier in the life of the trade, it recently retreated at the time of expiry with GLD 87bps above the lower strike, the short call is worth 56bps 26 Global Equity Volatility Insights | 06 June 2017 BankofAmerica Merrill Lynch HOUSE_OVERSIGHT_023600

Table 7: Summary of closed trades as of 5-Jun-17 Open Trade Description Date Long 2x SPX Aug-17 2200 puts, short 1x SPX Aug-17 2350 94 _Feh.47 Ee Nifty Mar17 strangle heading into 5 events 23-Jan-17 Long XLF Jun17 24 call, short SX7E Jun17 120 call 2-Dec-16 Buy Tencent Mar-17 105% calls 27-Feb-17 Buy HSCEI Mar17 105% call contingent SPX <2200 24-Oct-16 Buy HSCEI Mar17 9600 put vs short Sep 17 8200 put 47-Jan-17 Buy HSCEI Mar-17 1x1.5 10800-11200 call ratio 21-Feb-17 Long SXSE Apr? 3300 call, short SXSE Dec17 3450 call 30-Jan-17 Short 1x SX5E May17 3350 calls, long 2x SX5E May17 21-Feb-17 3450 calls Buy an SPX Apr-17 95% put conditional on US 10Y CMS> 44-Nov-16 2.5% at maturity Long SPX Apr17 2300 call, short SPX Dec17 2400 call 30-Jan-17 Long VIX May 16 / 22 call spread vs. short VIX Apr 13 put 91-Feb-17 Short SPX 21-Apr-17 vs. long 28-Apr-17 2325 straddle pair 6-Mar-17 Buy SXSE 28-Apr-17 3600 call 3-Apr-17 Buy Unicom Apr17 105-115% call spread 21-Feb-17 Buy Sands China Apr17 105-115% call spread 21-Feb-17 Buy Galaxy Apr17 105-115% call spread 21-Feb-17 Buy SX5E Dec19 2500 put, sell SXSE Dec18 2500 put 27-Sep-16 Buy KOSPI2 May17 103% calls 13-Mar-17 Buy KOSPI2 May17 97/103% strangle 13-Mar-17 Buy NKY Jun17 20750 call, sell 1-1.3x 18750-17750 put at 06-Mar-17 Long V2X May 26-32.5 call spread and short Apr 22 put 24 -Feb-17 Buy 1x contract of SX5E May17 3550 call, sell 5x contracts of V2X May17 16 puts 3-Apr-17 Long GLD May 123 call vs. short May 130 call 24 -Feb-17 Buy 1.5x EFA Jun1? 103% calll, sell 1x EFA May17 ATM call g nigp-47 Buy SPX Top50 volatility dispersion 27-Feb-16 Long HSI vs. SPX May-17 90% put switch 06-Feb-17 Buy the Nifty May17 95/105% strangle outright 20-Mar-17 Long HSBC May-17 65/70 call spread 3-Apr-17 Source: BofA Open Level 0.10% 1.50% 0.74% 1.15% 1.20% -0.05% 0.57% -0.60% 0.00% 0.78% -0.80% $0.35 0.50% 0.26% 1.65% 2.00% 2.10% 3.97% 0.63% 1.38% 0.00% €0.20 0.0% 0.8% -0.15% 14.7% 0.07% 1.20% 0.95% Close Level 0.01% 3.96% -5.88% 2.31% 0.00% -0.78% 0.00% -0.18% 0.60% 0% -0.71% 0.75 06% 0% 4.25% 6.97% 0.0% 9% 5.37% 5.37% 0.00% €0.00 1.63% 0.00% 0.20% 11.5% 0.00% 0.00% 4.33% Close Date 17-Mar- 20-Mar- 27-Mar- 27-Mar- 30-Mar- 30-Mar- 30-Mar- 21-Apr- 24-Apr- 21-Apr- 21-Apr- 19-Apr- 21-Apr- 28-Apr- 27-Apr- 27-Apr- 7 7 a 27-Apr- i i | 7 7 7 7 7 8-May-17 8-May-17 8-May-17 15-May- 19-May- 19-May- 19-May- 19-May- 30-May- 29-May- 25-May- 29-May- Aa ON NNSA NN Rationale SPX has traded range bound since inception of the trade, still the carry has been minimal, close out or roll the position nwind the option post the state election event and Close position The call vs call relative value trade is now riskier given the potential reversal in US reflation trades and the potential for European equities to rally in a French election market-favourable outcome. Unwind the position for the Tencent earnings Option expired; HSCEI was up 5.1% but the SPX ended above 2200 Unwind post Mar-17 expiry; the short Sep 17 put helped reduce the hedging cost Option expired; HSCEI stayed flat and failed to rally above the 10800 call strike Apr17 option expired so we unwind the entire trade as planned Unwind before May expiry following the large 4% SX5E move on 24-Apr, given lack of near term catalysts In Nov-16, we recommended remaining long equities with cheap hedges. The hedge expires out of the money, while SPX has returned 8.7% for the period The reflation trade has slowed down and the market is in a holding pattern. The long Apr-17 call expires in-the-money, and the short Dec-17 call still has time value The call spread still has value due to elevated vol and vol-of-vol and we collect the premium on the expired short OTM put The trade benefited from the rise in post-event volatility relative to pre-event volatility The option expired Single stock option expired in-the-money despite a 1.4% decline in the HSCEI Single stock option expired in-the-money despite a 1.4% decline in the HSCEI Single stock option expired in-the-money despite a 1.4% decline in the HSCEI SX5E has rallied 23.3% since we entered the trade and European political risk abated for now Option expired; KOSPI2 rallied 8.37% over the period Option expired; KOSPI2 rallied 8.37% over the period Closing the trade post French election; option strikes remain far from the spot level Expired Expired The hedge expired out-of-the-money as S&P 500 remained supported EFA rallied strongly leading into the second round of the French elections but subsequently stalled Expired Option expired; Both HSI and SPX puts expire out-of-the-money Option expired; Nifty failed to move more than the straddle huddle (5%) Option expired; HSBC is up 6.75% on the back of a strong seasonal rally errill Lynch Global Research. Prices reflective of most recently available data which may be delayed in some cases. “Trade Value” represents current valuation of trades initiated on the “Open Date’. Bankof America Merrill Lynch Global Equity Volatility Insights | O06 June 2017 27 HOUSE_OVERSIGHT_023601

Volatility in Numbers (02-Jun-17) Table 8: Statistics on implied, realised, skew and term structure for 3-month and 12-month vols (developed markets) 3-month {2-month S&P500 ESTX50 FTSE DAX NKY HSI KOSPI S&P500 ESTX50 FTSE DAX NKY HSI KOSPI Implied 9.5% 13.0% 10.6% 12.2% 14.2% 12.4% 12.8% 13.8% 16.5% 13.4% 16.1% 17.3% 15.9% 14.8% %atile (2yr) 0.2% 0.0% 3.8% 0.0% 0.8% 2.6% 37.9% 2.6% 2.9% 5.7% 0.8% 3.9% 63% 32.4% Week Change -0.1% -0.4% 0.4% -0.7% -0.2% 0.3% -0.3% -0.1% 0.1% 0.3% -0.3% 0.0% 0.2% 0.1% 1MthChange ss -0.6% = 1.4% = 0.1% == 1.3% 0.7% 0.0% 0.9% 03% 0.0% 05% 0.4% —--0.2% = 0.7% 1.6% Realised 73% 11.1% = 9.1% =~ 10.0% »~=— 12.5% = 103% ~©= 11.0% «§=©96% = 16.8% 12.7% 158% 198% 13.7% 11.5% %etile (2yr) 13.9% 11.8% 10.3% 1.0% 2.4% 0.6% 24.3% 1.6% 0.0% 0.0% 0.2% 14.7% 0.2% 24.5% Week Change -0.4% -0.7% -0.6% -0.7% 0.1% -0.2% 0.1% 0.0% -0.3% 0.0% -0.1% 0.0% 0.1% 0.0% {MthChange st 04% 0.7% 0.2% = 14% = 04% = 0.4% = 2.4% = 0.2% 0.7% 0.3% = 05% 0.6% 0.4% 0.4% Imp-real spread 2.3% 19% = 14% 23% 17% 22% 18% 4.1% 02% 08% 03% -25% 22% 3.3% Spread %tile (2yr) 51.4% 53.4% 61.9% 63.3% 67.8% 69.9% 64.4% 81.5% 79.8% 73.3% 796% 61.2% 88.0% 72.9% Week Change 0.3% 0.3% 1.0% 0.0% -0.3% 0.5% -0.4% -0.2% 0.3% 0.3% -0.2% 0.0% 0.3% 0.1% (Mth Change 1.0% 0.6% 0.3% 0.1% -0.4% 04% 14% == 0.5% 0.6% 09% 0.1% 04% 1.1% 1.2% 90-110skew 79% 7.1% = 53%) 71% 50% 23% 3.0% %atile (2yr) 4.6% 16.9% 1.1% 21.5% 19.0% 6.5% 2.7% Week Change -0.9% -0.4% 0.4% -0.6% -1.0% -0.4% 0.2% Mth Change 0.3% 0.8% 1.5% -0.4% -0.4% -0.7% -1.4% 10-day realised 12M - 3M term vol spread S&P500 ESTX50 FTSE DAX NKY HSI KOSPI S&P500 ESTX50 FTSE DAX NKY HSI KOSPI Current Level 6.6% 5.8% 4.6% 7.1% 11.1% 7.1% 10.6% 4.2% 3.6% 2.8% 3.8% 3.2% 3.5% 2.0% %atile (2yr) 21.8% 2.1% 0.6% 6.7% 16.3% 0.4% 46.2% 99.6% 100.0% 86.2% 100.0% 99.6% 98.9% 53.1% 1Week Change -4.3% -4.1% -3.2% -0.6% 1.9% -0.9% 2.4% 0.0% 0.4% -0.1% 0.4% 0.2% 0.1% 0.4% 1Mth Change -1.0% -14.4% 12.7% -10.5% -14% -4.8% 0.3% 0.9% 1.3% 0.4% 0.9% 0.5% 0.7% 0.6% Cash index Current Level 2,439.07 3,591.82 7,547.63 12,822.94 20,177.28 25,924.05 307.83 1Wk Change 0.96% 0.36% 0.00% 1.75% 2.49% 1.11% 0.28% 1Mth Change 2.00% 0.38% 4.10% 2.52% 3.76% 497% 6.28% Source: BofA Merrill Lynch Global Research Table 9: Statistics on implied, realised, skew and term structure for 3-month and 12-month vols (emerging markets) 3-month {2-month EEM US IBOV RDXUSD TOP40 EEM US IBOV RDXUSD TOP40 Implied 15.4% 25.3% 24.7% 15.1% 19.0% 24.4% 26.1% 17.4% %atile (2yr) 4.0% 52.5% 13.4% 4.2% 6.9% 41.4% 12.1% 1.4% Wk Change -0.1% 0.5% 1.2% 0% 0.3% 0.6% 0.2% 0.6% Mth Change 0.8% 4.5% 1.0% 0.2% 1.6% 1.6% 0.3% -0.6% Realised 133% 263% 218% 109% 180% | 229% 214% 14.9% %atile (2yr) 8.1% 70.19% 31.4% 0% 13.3% 9.7% 2.0% 0.6% Wk Change -0.8% -0.2% 0.0% 0.1% 0.0% 0.1% 0.0% 0.0% Mth Change 0.8% 7.6% 2.1% 1.2% -0.3% 1.6% 0.0% -0.4% Imp-realspread ss (i(itiHC(iti‘iS™S 1.0% ————«~O MH ss Ht—~—<=~Ssti‘“—s«~«~iMHSSC~<“<‘<‘“‘CSOC;é«*d*SSOCOC”!;”*”*;*;*C«!! OC Spread %tile (2yr) 65.3% 24.4% 37.2% 76.4% 58.9% 67.9% 96.4% 44.1% Wk Change 0.6% 0.8% 1.2% 0.9% 0.3% 0.5% 0.2% 0.6% {MthChange 0.1% 3.0% -1.1% A% 1.9% 0.0% 03% 0.2% 90-110 skew 60% 49% BE %tile (2yr) 1.1% 287% 188% 14.6% Wk Change -0.5% 0.5% 0.1% 0.5% Mth Change -0.4% -0.9% 0.4% 0.7% 10-day realised 12M - 3M term vol spread EEM US IBOV RDXUSD TOP40 EEM US IBOV RDXUSD TOP40 Current Level 13.1% 17.7% 21.2% 10.0% 3.6% -0.9% 1.4% 2.3% %atile (2yr) 23.0% 24.4% 31.8% 9.8% 98.7% 24.7% 79.9% 64.8% 1Wk Change 4.1% -32.0% -6.4% 5.0% 0.5% 0.0% -1.0% -0.4% 1Mth Change 1.2% -1.9% 8.2% -3.2% 0.7% -2.9% -0.8% -0.8% Cash index Current Level 41.76 62,510.70 1,189.17 46,522.53 1Wk Change 0.05% -2.46% -3.33% -2.13% 1Mth Change 2.91% -6.31% -6.17% -1.31% Source: BofA Merrill Lynch Global Research 28 Global Equity Volatility Insights | 06 June 2017 ome orale HOUSE_OVERSIGHT_023602

Options Risk Statement Potential Risk at Expiry & Options Limited Duration Risk Unlike owning or shorting a stock, employing any listed options strategy is by definition governed by a finite duration. The most severe risks associated with general options trading are total loss of capital invested and delivery/assignment risk, all of which can occur in a short period. Investor suitability The use of standardized options and other related derivatives instruments are considered unsuitable for many investors. Investors considering such strategies are encouraged to become familiar with the "Characteristics and Risks of Standardized Options" (an OCC authored white paper on options risks). U.S. investors should consult with a FINRA Registered Options Principal. For detailed information regarding the risks involved with investing in listed options: http:/Avww.theocc.com/about/publications/character-risks.jsp Price objective basis & risk Deutsche Telekom (DTEGF / DTEGY, B-2-7, EUR17.42/US$19.45) Our price objective for DT is EUR18.0/sh (US$19.62) and is derived from our Sum-of- the-Parts analysis. Each business is valued via DCF (except MtM for TMUS and OTE }) using a 7.0% WACC and 1.00% terminal growth rate for Domestic and Western Europe assets (and 8.0% WACC/1% term growth for Eastern Europe assets) and cross-checked using implied valuation multiple analysis. Our Domestic business valuation reflects DT's solid positioning in both fixed (FTTC rollout) and mobile (superior network quality, integrated business model). Upside risks to our PO are any asset sales (US, non-integrated assets in Austria or NL) and revenue upside from T-Home's TV push. Downside risks to our PO are higher than expected mobile impact coming from new Drillisch tariffs or failure to turnaround good US operational trends into more profitable revenue streams. Analyst Certification We, Benjamin Bowler, Clovis Couasnon and Frederic Boulan, CFA, hereby certify that the views each of us has expressed in this research report accurately reflect each of our respective personal views about the subject securities and issuers. We also certify that no part of our respective compensation was, is, or will be, directly or indirectly, related to the specific recommendations or view expressed in this research report. Special Disclosures BofA Merrill Lynch is currently acting as Financial Advisor to Royal Dutch Shell PLC in connection with its proposed sale of its UK North Sea assets to Chrysaor LTD, which was announced on January 31, 2017. Bankof America Merrill Lynch Global Equity Volatility Insights |O6 June 2017. 29 HOUSE_OVERSIGHT_023603

EMEA - Telecoms Coverage Cluster BofA Merrill Lynch Investment rating Company ticker Bloomberg symbol Analyst BUY BT BT BT US Sunil P. Pate BT BIGOF BT/A LN Sunil P. Pate’ DNA Oyj XDNAF DNA FH Sunil P. Pate lliad ILIAF ILD FP Frederic Boulan, CFA Inwit XISWF INW IM Parin Shah, CFA KPN KKPNF KPN NA Frederic Boulan, CFA Orange FNCTF ORA FP Frederic Boulan, CFA Orange ORAN ORAN US Frederic Boulan, CFA TDC A/S TDCAF TDC DC Sunil P. Pate Tele Columbus XBTLF TC1 GR Sunil P. Pate Telecom Italia -RSP TIAJF TITR IM David Wright Telecom Italia SPA Tl TIUS David Wright Telecom Italia SPA TIAOF TIT IM David Wright Telefonica SA TEFOF TEF SM David Wright Telefonica SA TEF TEF US David Wright Telenet Group Holding NV TLGHF TNET BB David Wright Telenor TELNF TEL NO Sunil P. Pate Telenor TELNY TELNY US Sunil P. Pate NEUTRAL Bouygues BOUYF EN FP Frederic Boulan, CFA Deutsche Telekom DTEGY DTEGY US Frederic Boulan, CFA Deutsche Telekom DTEGF DTE GR Frederic Boulan, CFA Liberty Global LBTYA LBTYA US David Wright Orange Belgium MBSRF OBEL BB David Wright SFR Group SA NUMCF SFR FP Frederic Boulan, CFA Swisscom SWZCF SCMN VX Frederic Boulan, CFA Swisscom SCMWY SCMWY US Frederic Boulan, CFA Telia Company TLSNF TELIA SS Sunil P. Pate Vodafone Group VOD VOD US David Wright Vodafone Group VODPF VOD LN David Wright UNDERPERFORM Cellnex XWHXF CLNX SM Parin Shah, CFA Ei Towers EITOF EIT IM Parin Shah, CFA Elisa ELMUF ELISA FH Sunil P. Pate Proximus BGAOF PROX BB David Wright RAI Way XRWSF RWAY IM Parin Shah, CFA TalkTalk TLKTF TALK LN Sunil P. Pate Tele2 AB TLTZF TEL2B SS Sunil P. Pate Telefonica Deutschland TELDF 02D GR Frederic Boulan, CFA RSTR Altice NV -A ALLVF ATC NA Frederic Boulan, CFA Altice NV -B ALVVF ATCBNA Frederic Boulan, CFA Drillisch AG DRHKF DRI GY Frederic Boulan, CFA RVW United Internet AG UDIRF UTDI GY Frederic Boulan, CFA 30 Global Equity Volatility Insights | 06 June 2017 Bankof America > Merrill Lynch HOUSE_OVERSIGHT_023604

EMEA - Utilities Coverage Cluster BofA Merrill Lynch Investment rating Company ticker Bloomberg symbol Analyst BUY EDF ECIFF EDF FP Peter Bisztyga EDP EDPFY EDPFY US Harry Wyburd EDP ELCPF EDP PL Harry Wyburd EDP Renovaveis EDRVF EDPR PL Pinaki Das Enel ESOCF ENEL IM Harry Wyburd Engie ENGQF ENGI FP Peter Bisztyga Gamesa GCTAF GAM SM Pinaki Das lberdrola IBDSF IBE SM Peter Bisztyga Innogy XISAF IGY GR Peter Bisztyga National Grid NGGTF NG/LN Fraser McLaren National Grid NGG NGG US Fraser McLaren Red Electrica RDEIF REE SM Harry Wyburd Saeta Yield XSTAF SAY SM Pinaki Das Senvion SA XSHVF SEN GR Pinaki Das Suez SZEVF SEV FP Pinaki Das Terna TERRF TRN IM Harry Wyburd Veolia VEOEF VIE FP Pinaki Das Veolia VEOEY VEOEY US Pinaki Das Vestas VWSYF VWS DC Pinaki Das NEUTRAL Acciona ACXIF ANA SM Pinaki Das Drax Group Ltd DRXGF DRX LN Fraser McLaren E.ON ENAKF EOAN GR Peter Bisztyga E.ON EONGY EONGY US Peter Bisztyga Gas Natural Fenosa GASNF GAS SM Harry Wyburd ltalgas XXYZF IG IM Harry Wyburd Nordex NRDXF NDX1 GR Pinaki Das RWE RWNFF RWE GR Peter Bisztyga RWE RWEOY RWEOY US Peter Bisztyga SSE SSEZF SSE LN Fraser McLaren SSE SSEZY SSEZY US Fraser McLaren Uniper XUIKF UN01 GY Peter Bisztyga UNDERPERFORM Centrica CPYYF CNALN Fraser McLaren Centrica CPYYY CPYYY US Fraser McLaren DONG Energy XDJBF DENERG DC Pinaki Das Enagas ENGGF ENG SM Harry Wyburd Endesa ELEZF ELE SM Harry Wyburd Fortum FOJCF FORTUM FH Peter Bisztyga Pennon PEGRF PNN LN Fraser McLaren Severn Trent SVTRF SVT LN Fraser McLaren Snam SNMRF SRG IM Harry Wyburd United Utilities UUGWEF UU/ LN Fraser McLaren RSTR Abengoa B AGOAF ABG/P SM Pinaki Das rial Global Equity Volatility Insights | 06 June 201731 HOUSE_OVERSIGHT_023605

EMEA - Integrated & Refiners Coverage Cluster BofA Merrill Lynch Investment rating Company ticker Bloomberg symbol Analyst BUY Eni E EUS Hamish Clegg Eni EIPAF ENI IM Hamish Clegg Galp Energia GLPEF GALP PL Hamish Clegg Royal Dutch Shell B RDSB RDS/B US Christopher Kuplent Royal Dutch Shell B RYDBF RDSB LN Christopher Kuplent Royal Dutch Shell PLC Shs A RDSA RDS/A US Christopher Kuplent Royal Dutch Shell PLC Shs A RYDAF RDSA LN Christopher Kuplent Statoil STOHF STL NO Hamish Clegg Statoil STO STO US Hamish Clegg NEUTRAL BP plc BP BP US Christopher Kuplent BP ple BPAQF BP/ LN Christopher Kuplent Repsol REPYY REPYY US Hamish Clegg Repsol REPYF REP SM Hamish Clegg Total TTFNF FP FP Christopher Kuplent Total TOT TOT US Christopher Kuplent UNDERPERFORM Neste NTOIF NESTE FH Georgia Harris OMV OMVJF OMV AV Hamish Clegg OMV OMVKY OMVKY US Hamish Clegg Disclosures Important Disclosures DTEGF Price Chart 1-Jun N 4-Nov B 7-Dec 13-Dec Ristimaki Boulan PO:EUR19 PO:EUR20 PO:EUR12 PO:EUR13 9-DB 23-Heb 12-Jan N 1 PO:BUR15 PO:EUR18 PO:EUR19 18 29-Jan 5-Mpy 6-Mpr | PO:FURAS PO-EYR19 PREURLB 15 12 | : | | 3 p tJan-15 ‘-Jan-16 t-Jan-17 DTEGF Wu Review Restricted a No Coverage B: Buy, N: Neutral, U: Underperform, PO: Price Objective, NA: No longer valid, NR: No Rating The Investment Opinion System is contained at the end of the report under the heading "Fundamental Equity Opinion Key’. Dark grey shading indicates the security is restricted with the opinion suspended. Medium grey shading indicates the security is under review with the opinion withdrawn. Light grey shading indicates the security is not covered. Chart is current as of May 31,2017 or such later date as indicated. deg oes Bankof America 32 Global Equity Volatility Insights | 06 June 2017 Merrill Lynch HOUSE_OVERSIGHT_023606

DTEGY Price Chart 1-Jun N 4-Nov B 2-Mar 7-Dec 13-Dec Ristimaki Boulan PO:US$20 PO:US$21 PO:US$21 PO:US$15 PO:US$16 9-DB 23-Heb 12-JanN 1 Po:[Bs18 PO:US$20 PO:US$20 9-Jan VB 18 ba: (13817 Poss 15 | P9-dan 31-Aug 12 | HO-US$41 PO:US$22 ° | | ; | D tdan-15 4-Jan-16 tJan-17 DTEGY Review Restricted mummy «2S No Coverage B: Buy, N: Neutral, U: Underperform, PO: Price Objective, NA: No longer valid, NR: No Rating The Investment Opinion System is contained at the end of the report under the heading "Fundamental Equity Opinion Key’. Dark grey shading indicates the security is restricted with the opinion suspended. Medium grey shading indicates the security is under review with the opinion withdrawn. Light grey shading indicates the security is not covered. Chart is current as of May 31,2017 or such later date as indicated. ESOCF Price Chart 13-Jan B 3-Sep 26-Jan Wyburd PO:EUR4.95 PO:EUR4.75 PO:EUR4.35 4.90 4.20 3.50 2.80 2.10 1.40 0.70 an 1-Jan-15 1-Jan-16 {-Jan-17 ESOCF Review Restricted a No Coverage B: Buy, N: Neutral, U: Underperform, PO: Price Objective, NA: No longer valid, NR: No Rating The Investment Opinion System is contained at the end of the report under the heading "Fundamental Equity Opinion Key’. Dark grey shading indicates the security is restricted with the opinion suspended. Medium grey shading indicates the security is under review with the opinion withdrawn. Light grey shading indicates the security is not covered. Chart is current as of May 31,2017 or such later date as indicated. IBDSF Price Chart 26-Nov B 15-Dec 15-Dec Franco PO:EUR7.40 PO:EUR6.80 PO:EUR6.60 0.00 {-Jan-15 1-Jan-16 1-Jan-17 IBDSF __ Review Restricted Muy «=O No Coverage B: Buy, N: Neutral, U: Underperform, PO: Price Objective, NA: No longer valid, NR: No Rating The Investment Opinion System is contained at the end of the report under the heading "Fundamental Equity Opinion Key’. Dark grey shading indicates the security is restricted with the opinion suspended. Medium grey shading indicates the security is under review with the opinion withdrawn. Light grey shading indicates the security is not covered. Chart is current as of May 31,2017 or such later date as indicated. Bankof America <> ariective Merrill Lynch Global Equity Volatility Insights | O06 June 2017 33 HOUSE_OVERSIGHT_023607

RYDAF Price Chart 1-Jun N 31-Oct 16-Jan 16-Feb B 15-Jul 24-Jan 11-May Kuplent PO:2550p PO:2180p PO:2135p PO:2350p PO:2420p PO:2400p PO:2420p 21-Jul P5-Nid 5-May p-Jul 3-Feb 98 PO:P460p PO:P4P0p PO:p00Dg —_ PID:P230p PQ:2490n 24 O.Gan 54 47-Mlay 19-Oct 10-Mar PO:2550h yy? PO:950p PQ:P380p PO-P500p 20 | 15-Dcq] 1/1 {Dec : hh 9-Dec o-MAY 16 PO:P5OP{OrP315p ~ : PD:p050p PO:p400p PO:1530p 12 8 4 D {-Jan-15 1-Jan-16 {-Jan-17 RYDAF Review Restricted mummy «2S No Coverage B: Buy, N: Neutral, U: Underperform, PO: Price Objective, NA: No longer valid, NR: No Rating The Investment Opinion System is contained at the end of the report under the heading "Fundamental Equity Opinion Key’. Dark grey shading indicates the security is restricted with the opinion suspended. Medium grey shading indicates the security is under review with the opinion withdrawn. Light grey shading indicates the security is not covered. Chart is current as of May 31,2017 or such later date as indicated. Equity Investment Rating Distribution: Energy Group (as of 31 Mar 2017) Coverage Universe Count Percent Inv. Banking Relationships* Count Percent Buy 109 49.77% Buy 84 17.06% Hold 52 23.14% Hold 43 82.69% Sell 58 26.48% Sell 34 58.62% Equity Investment Rating Distribution: Telecommunications Group (as of 31 Mar 2017) Coverage Universe Count Percent Inv. Banking Relationships* Count Percent Buy 18 52.00% Buy 53 67.95% Hold 30 20.00% Hold 20 66.67% Sell 42 28.00% Sell 14 33.33% Equity Investment Rating Distribution: Utilities Group (as of 31 Mar 2017) Coverage Universe Count Percent Inv. Banking Relationships* Count Percent Buy 60 48.39% Buy 39 65.00% Hold 35 28.23% Hold 26 14.29% Sell 29 23.39% Sell 7 58.62% Equity Investment Rating Distribution: Global Group (as of 31 Mar 2017) Coverage Universe Count Percent Inv. Banking Relationships* Count Percent Buy 1578 51.33% Buy 979 62.04% Hold 690 22.45% Hold 434 62.90% Sell 806 26.22% Sell 381 47.27% * Issuers that were investment banking clients of BofA Merrill Lynch or one of its affiliates within the past 12 months. For purposes of this Investment Rating Distribution, the coverage universe includes only stocks. A stock rated Neutral is included as a Hold, and a stock rated Underperform is included as a Sell. FUNDAMENTAL EQUITY OPINION KEY: Opinions include a Volatility Risk Rating, an Investment Rating and an Income Rating. VOLATILITY RISK RATINGS, indicators of potential price fluctuation, are: A - Low, B - Medium and C - High. INVESTMENT RATINGS reflect the analyst’s assessment of a stock’s: (i) absolute total return potential and (ii) attractiveness for investment relative to other stocks within its Coverage Cluster (defined below). There are three investment ratings: 1 - Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster; 2 - Neutral stocks are expected to remain flat or increase in value and are less attractive than Buy rated stocks and 3 - Underperform stocks are the least attractive stocks in a coverage cluster. Analysts assign investment ratings considering, among other things, the 0-12 month total return expectation for a stock and the firm’s guidelines for ratings dispersions (shown in the table below). The current price objective for a stock should be referenced to better understand the total return expectation at any given time. The price objective reflects the analyst’s view of the potential price appreciation (depreciation). Investment rating Total return expectation (within 12-month period of date of initial rating) Ratings dispersion guidelines for coverage cluster* Buy = 10% < 10% Neutral 20% = 30% Underperform NIA = 20% *Ratings dispersions may vary from time to time where BofA Merrill Lynch Research believes it better reflects the investment prospects of stocks in a Coverage Cluster. INCOME RATINGS, indicators of potential cash dividends, are: 7 - same/higher (dividend considered to be secure), 8 - same/lower (dividend not considered to be secure) and 9 - pays no cash dividend. Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region or other classification(s). A stock’s coverage cluster is included in the most recent BofA Merrill Lynch report referencing the stock. Price charts for the securities referenced in this research report are available at http://pricecharts.baml.com, or call 1-800-MERRILL to have them mailed. One or more analysts responsible for covering the securities in this report owns options on the financial instrument The issuer is or was, within the last 12 months, an investment banking client of MLPF&S and/or one or more of its affiliates: Deutsche Telekom, Enel SpA, Iberdrola, Royal Dtch Shell. LPF&S or an affiliate has received compensation from the issuer for non-investment banking services or products within the past 12 months: Deutsche Telekom, Enel SpA, Iberdrola, Royal Dtch Shell. The issuer is or was, within the last 12 months, a non-securities business client of MLPF&S and/or one or more of its affiliates: Deutsche Telekom, Enel SpA, Iberdrola, Royal Dtch Shell. nthe US, retail sales and/or distribution of this report may be made only in states where these securities are exempt from registration or have been qualified for sale: Deutsche Telekom, Enel SpA, Iberdrola. LPF&S or an affiliate has received compensation for investment banking services from this issuer within the past 12 months: Deutsche Telekom, Enel SpA, Iberdrola. deg oes Bankof America 34 Global Equity Volatility Insights | 06 June 2017 Merrill Lynch HOUSE_OVERSIGHT_023608

LPF&S or an L he U Cor pro = a | Dtch Shell. of its affiliates is wil he Bank’s sales and Other Important Disclosures Prices are indicative and for information purposes only. Except as otherwise stated in the report, for the purpose of any recommendation in relation to: (i) an equity security, the price referenced is the publicly traded price of the security as of close of business on the day prior to the date of the report or, if the report is published during intraday trading, the price referenced is indicative of the traded price as of the date and time of the report; or (ii) adebt security (including equity preferred and CDS), prices are indicative as of the date and time of the report and are rom various sources including Bank of America Merrill Lynch trading desks. filiate expects to receive or intends to seek compensation for investment banking services from Telekom, Enel SpA, Iberdrola, Royal Dtch Shell. 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Research Analysts Benjamin Bowler Equity-Linked Analyst MLPF&S +1 415 676 3595 [email protected] Abhinandan Deb >> Equity-Linked Analyst MLI (UK) +44 20 7995 7148 [email protected] Anshul Gupta >> Equity-Linked Analyst MLI (UK) +44 20 7996 7062 aguptal [email protected] William Chan, CFA >> Equity-Linked Analyst Merrill Lynch (Hong Kong) +852 3508 3921 [email protected] Nitin Saksena Equity-Linked Analyst MLPF&S +1 646 855 5480 [email protected] Clovis Couasnon >> Equity-Linked Analyst MLI (UK) +44 20 7995 0303 [email protected] Jason Galazidis >> Equity-Linked Analyst MLI (UK) +44 20 7996 5713 [email protected] Chintan Kotecha Equity-Linked Analyst MLPF&S +1 646 855 5478 [email protected] Stefano Pascale Equity-Linked Analyst MLPF&S +1 646 855 2631 [email protected] >> Employed by a non-US affiliate of MLPF&S and is not registered/qualified as a research analyst under the FINRA rules. Refer to “Other Important Disclosures’ for information on certain BofA Merrill Lynch entities that take responsibility for this report in particular jurisdictions. Bankof America Merrill Lynch Global Equity Volatility Insights | O06 June 2017 = 37 HOUSE_OVERSIGHT_02361 1