FOR PROFESSIONAL INVESTORS Nicosia , Conference June 4th 2014

Lessons from existing Life-Cycle offerings

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Target-Date «Life-Cycle» Funds Definition

Target date funds, which are also called lifecycle funds, are designed to offer a convenient way to invest for a person expecting to retire around a particular date. A target date fund pursues a long-term investment strategy, using a mix of asset classes (or asset allocation) that the fund provider adjusts to become more conservative over time. Research shows that asset allocation is one of the most important factors in long-term portfolio performance.

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Features

Diversification across asset classes

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Avoiding extreme asset allocations

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Automatic rebalancing

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Automatic adjustment for changing risk profile

Source: www.ici.org

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Target-Date «Life-Cycle» Funds US MARKET

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The target-date fund industry continues to have some of the most consistent cash flows among all open-end mutual funds

For the past five years, net flows into these funds have averaged about USD 48 billion per year • •

In 2013 target-date funds took in nearly USD 51 billion in net new assets, bringing the industry’s total net assets up to USD 621 billion Target date strategies is expected to capture 63.4% of 401(k) contributions in 2018

Source: Ibbotson; Global analytics firm Cerulli Associates

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Target-Date «Life-Cycle» Funds …and in Europe?

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European Life-Cycle funds are structurally different to US funds and take a far more aggressive approach.

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Some experiences:

Austria: first introduced lifecycle investing in 2004 as a “target risk fund”. Now almost all schemes to secure retirement for employees (Pensionskasse) offer a lifecycle option Netherland: lifecycle funds have grown to such an extent that in 2007, the Pension Act required all defined contribution schemed to have a lifecycle default. Sweden: in 1998, the government passed pension reforms increasing the use of lifecycle funds. Although lifecycle represent only a small segment of the market, their role has endured for over a decade

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With previous offers, risk of sacrificing protection or performance

Target date offers de-risking over time (“glide-path”) but no formal protection

 Risk of protection being insufficient for some investors

Target date offers with 100% max NAV formal protection

 environments  Risk of sacrificing upside potential in low interest rate Opportunity cost for investment occurring in high rate context Proportion in % 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Nov-20 Nov-30 Cash Bonds Equity Asset allocation at retirement date Nov-40 Nov-50 Nov-60 Nov-70 Years Euros 65 60 55 50 45 40 NAV Guaranteed value at maturity Years

Need to develop a new type of offering, combining protection and upside potential

Source: BNPP IP, for illustrative purposes only

7,00% 6,00% 5,00% 4,00% 3,00% 2,00% 1,00% 0,00%

Need for a solution adaptative to various interest rate regime

5Y IR 8Y IR 10Y IR 13Y IR 15Y IR 20Y IR 25Y IR 30Y IR Swap rates 7,00% 6,00% 5,00% 4,00% 3,00% 2,00% 1,00% 0,00%

Interest rates: currently low… and unpredictable over a long term savings horizon

5Y IR

?

10Y IR 13Y IR 15Y IR 20Y IR 25Y IR 30Y IR

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Our starting point to develop BNP Paribas Plan Easy Future

Source: BNPP IP

Easy Future: our answer, based on two innovations

Aiming to reconciliate

- Protection and upside potential reconciled - Adaptation to market changes - An offer built to remain relevant in the future - Potential good news to come

Innovation 1

Protection mechanism - Value formally protected at maturity - Protection adaptative to: - Interest rate - Time remaining to maturity

Innovation 2

Management of the risky assets - Reasonable sized cushion - High diversification - Risk-controlled leverage

A breakthrough approach documented in a white paper

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Easy Future for the investor in a nutshell

Range of 8 open-ended target dated sub-funds ranging from 2018 to 2043, allowing to invest at one’s own pace and respect one’s own horizon, well-adapted to progressive savings Aiming to offer a good balance between: capital growth potential:

a well-calibrated portion of funds invested in performance engines

& an adaptative Formal Protection:

a formally protected value at maturity for each fund which can only increase over time

A Cushion Portfolio Insurance range of funds with relevant value proposal whatever time left to maturity & interest rates, hence well-adapted to progressive savings 9

An adaptative protection mechanism

● A formally protected Value at maturity, which can only increase over time –

Common to all the investors of a given sub-fund

–

Formal protection given by the BNP Paribas Group

● A daily calculation to determine the protection –

Daily calculation of new potential value at maturity: Protected Value at maturity = Current NAV x Current Protection Ratio The best of 2

1. Linked to time remaining to maturity 2. Linked to interest rate conditions –

New value at maturity only taken into account if above previous one

Introducing a new approach: PIWAP =

Portfolio Insurance With Adaptative Protection

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2

nd

protection: highlighting the limits of traditional approaches

Traditional guaranteed funds = pre-determined protection ratios Here 100% of investor’s capital guaranteed in 25 years 1

Put aside assets ensuring protection

2

Deduct size of cushion investable in risky assets

Case 1: low interest rates (1.5%) Case 2: high interest rates (5%)

Cushion investable in risky assets

11 €*

Assets ensuring protection

89 € ? 100 €

NAV=100€ Protected NAV at maturity=100€ 

Protection excessively ambitious, upside potential sacrificed ?

Cushion investable in risky assets Assets ensuring protection

62 €* 38 €

NAV=100€

100 €

Protected NAV at maturity = 100€ 

Protection sacrificed, excessive risk taking

Risk taking (protection/return couple) depends on rates and residual maturity Source: BNPP IP; for illustrative purpose only ; Management fees assumption: 1% - * Level of the cushion if a new protection is given

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2

nd

protection: paradigm change by linking it to interest rates

Our proposition = adapt protection to interest rate conditions 1

Invest a reasonably-sized cushion in risky assets

2

Deduct the relevant protection given interest rates

Case 1: low interest rates (1.5%) Case 2: high interest rates (5%) ?

Cushion investable in risky assets Assets ensuring protection

25 75 ? 85

Cushion investable in risky assets Assets ensuring protection

25 75

NAV=100€

200

NAV=100€ Protected NAV at maturity=85€ Protected NAV at maturity = 200€ Protection and upside potential combined ; value proposition aiming at being relevant whatever interest rates Source: BNPP IP; for illustrative purpose only ; Management fees assumption: 1% - * Level of the cushion if a new protection is given

Historical illustration of the protection ratios

Swap rates 7,00% 6,00% 5,00% 4,00% 3,00% 2,00% 1,00% 0,00%

Illustration of the backtested protection ratio for 25 year target date fund in various interest rate regimes

Protection ratio of 25 y @ 256% Protection ratio of 25 y @ 189% Protection ratio of 25 y @ 110%

Yield curves

5Y IR 8Y IR 10Y IR 13Y IR 15Y IR 20Y IR 25Y IR 30Y IR Protection ratios significantly above 100% for longer-dated funds in high interest rate contexts Source: BNPP IP & Bloomberg, au 01/10/13

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Protection at maturity ensured by low risk fixed income assets

Cushion invested in risky asset Low risk Fixed income

● ● ● ● A synthetic fixed income portfolio specific to each BNP Paribas Easy Future fund with a maturity matching the fund’s maturity A zero coupon behavior A synthetic exposure replication to a BNP Paribas collateralized bond – BNP Paribas ratings (4 April 2014): A+ (S&P), A1 (Moody’s), A+ (Fitch) – – Maturity of the synthetic BNP Paribas bond matching the fund’s maturity Funding level reflecting BNP Paribas rating and BNP Paribas UCI funding vehicles An active duration management to optimize rebalancing between the Low risk fixed income portfolio and the cushion invested in risky asset

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Fixed income assets following strict guidelines

Risky asset portfolio specifically designed for CPPI structure

Cushion invested in Risky asset Low risk Fixed income

● ● ● Designed and managed to be used in CPPI structures with a controlled downside risk to minimize monetization: – – Global diversification aiming at reducing downside risk Leverage to boost returns but a flexible leverage aiming at reducing drawdown risk A model portfolio based on risk budgeting approach to ensure diversification over time – – 80 % of the risk budget allocated to directional exposure on traditional asset classes 20% of the risk budget allocated to a largely diversified portfolio of absolute return strategies An active management that can deviate from the model portfolio to benefit from market opportunities or protect from market threats – risk budget allocated to directional exposure can vary from 50% and 100% – risk budget allocated to absolute return leeway can vary from 0% and 50%

Combination aiming at being well-prepared to face different market conditions

Source: BNPP IP; for illustrative purpose only

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Backtested benefit of the directional risky asset construction

1

Diversification benefit: sharpe ratio improved: similar long term returns with lower volatility

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Flexible leverage benefit: increasing the sharpe ratio and minimizing drawdowns

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Leverage benefit: increasing risk and, hence, return potential

Significant value brought by each of the three layers

Source: THEAM as of 30/09/13

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Fund behavior: risky assets flat ; interest rates up

Example on BNPP Plan Easy Future 2038 : risky assets flat ; interest rates up Source: BNPP IP as of 16/09/13 for illustrative purpose only

Starting point: 24.6€ 75.4€

24.6% in line with 20% to 25% objective 75.4% Protected Value at maturity = Current Protection Ratio x current NAV = 110.4% x 100.0€ = 110.4€

Protected Value = 110.4€ Current NAV = 100.0€ Risky assets flat, interest rates up +1%*:

29.6% > 20% to 25% objective

24.6€

Rebalancing**

58.5€

70.4% needed for protection

Current NAV = 83.2€



Current NAV down

* From 2.67% to 3.67%

20.8€ 62.4€

25.0% back in line with 20% to 25% objective Rebalancing into low risk Fixed income with higher rates 75.0% ** From risky assets to fixed income instruments Protected Value at maturity = Current Protection Ratio x current NAV = 141.5% x 83.2€ = 117.7€ > 110.4€

Protected Value = 117.7€



Protected Value at maturity increased

FOR PROFESSIONAL INVESTORS

An extensive Marketing kit

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All the material gathered on a dedicated website

http://easyfuture.bnpparibas-ip.lu/ Video Simulator Retail flyer, Q&A and protected values Redirection towards subfund pages Source: BNPP IP - For illustrative purpose only

FOR PROFESSIONAL INVESTORS

Conclusion

BNPP Plan Easy Future: main features & benefits

8 target date funds, dated 2018 to 2043 Upside potential thanks to well-calibrated risky asset exposure Capital formally protected at maturity Adaptative to market environment Benefits for end client Simple choice of relevant fund Benefits for distributor Comprehensive range, completed over time to remain consistent Room for capital to grow, even when interest rates are low Visibility at all times regarding minimum capital at maturity, which can only increase over time Adaptation to progressive investment; Higher protection ratios for investments occuring with higher rates Cash lock risk minimized, sustainable fees Differentiation vs. « glidepath » offerings A paradigm change vs. existing protected target date ones Contact opportunities with client: on NAV and/or protected value

A win-win value proposition, designed for the long term

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Disclaimer

This material is issued and has been prepared by BNP Paribas Asset Management S.A.S. (BNPP AM)* a member of BNP Paribas Investment Partners (BNPP IP)**.

This material is produced for information purposes only and does not constitute: an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or any investment advice .

This material makes reference to certain financial instruments (the “Financial Instrument(s)”) authorised and regulated in its/their jurisdiction(s) of incorporation. No action has been taken which would permit the public offering of the Financial Instrument(s) in any other jurisdiction, except as indicated in the most recent prospectus, offering document or any other information material, as applicable, of the relevant Financial Instrument(s) where such action would be required, in particular, in the United States, to US persons (as such term is defined in Regulation S of the United States Securities Act of 1933). Prior to any subscription in a country in which such Financial Instrument(s) is/are registered, investors should verify any legal constraints or restrictions there may be in connection with the subscription, purchase, possession or sale of the Financial Instrument(s).

Investors considering subscribing for the Financial Instrument(s) should read carefully the most recent prospectus, offering document or other information material and consult the Financial Instrument(s)’ most recent financial reports. The prospectus, offering document or other information of the Financial Instrument(s) are available from your local BNPP IP correspondents, if any, or from the entities marketing the Financial Instrument(s).

Opinions included in this material constitute the judgment of BNPP AM at the time specified and may be subject to change without notice. BNPP AM is not obliged to update or alter the information or opinions contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the Financial Instrument(s) in order to make an independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for a client or prospective client’s investment portfolio.

Given the economic and market risks, there can be no assurance that the Financial Instrument(s) will achieve its/their investment objectives. Returns may be affected by, amongst other things, investment strategies or objectives of the Financial Instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to the Financial Instruments may have a significant effect on the results portrayed in this material. Past performance is not a guide to future performance and the value of the investments in Financial Instrument(s) may go down as well as up. Investors may not get back the amount they originally invested.

The performance data, as applicable, reflected in this material, do not take into account the commissions, costs incurred on the issue and redemption and taxes.

*BNPP AM is an investment manager registered with the “Autorité des marchés financiers” in France under number 96-02, a simplified joint stock company with a capital of 64,931,168 euros with its registered office at 1, boulevard Haussmann 75009 Paris, France, RCS Paris 319 378 832. www.bnpparibas-am.com

.] ** “BNP Paribas Investment Partners” is the global brand name of the BNP Paribas group’s asset management services. The individual asset management entities within BNP Paribas Investment Partners if specified herein, are specified for information only and do not necessarily carry on business in your jurisdiction. For further information, please contact your locally licensed Investment Partner.

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