2016 was a very complicated and paradoxical year.

Complicated as the markets went into it with deep fears for the economy after feeling the anguish of a drastic Chinese economic slow- down and sharp devaluation of the yuan in the second half of 2015. The further collapse in oil and commodity prices was seen as a reflec- tion of Chinese economic weakness, and as a serious threat to high yield debt markets and banks.

Paradoxical too, as the markets concerns about the economic outlook soon gave way to a feeling of reassurance. Disaster did not strike. Oil and commodity prices rallied strongly and drove a firm recovery for energy, commodity and finan- cial stocks. Furthermore, the political scenarios dreaded by the markets came to pass without having any lasting impact. The Brexit shock was reabsorbed within a few weeks and, after an ini- tial brief dip, Donald Trump s election led to a bull run on the US equity market. At the end of the year, the no vote in Italy s constitutional referendum and subsequent resignation of the Prime Minister, Matteo Renzi, quickly gave way to a clear overall improvement in eurozone equity markets.

However, the most fundamental change during 2016 came on fixed income markets. Whereas economic jitters at the beginning of the year pushed sovereign bond yields down to new lows, and the situation worsened after the Brexit shock, these yields then picked up first modestly from the end of the summer, then dra- matically after the US presidential election.

Message from the Chairman of the Supervisory Board and Chairman of the Management Board

The FRR benefited from cautious

management of its interest rate positions.

Alain Vasselle Chairman of the Supervisory Board