Asia Credit Report

2013 Q4 Prepared in partnership with and

TABLE OF CONTENTS

1.G3 Asia ex Developed Market Asia (Japan, Australia and New Zealand) ...................................................................................2 Market Highlights and Commentary ................................................................................................................................. 21.1. G3 ex DM Asia: Total Issuance ................................................................................................................................. 51.2. G3 ex DM Asia: Total Outstanding ............................................................................................................................ 51.3. G3 ex DM Asia: HG Issuance ................................................................................................................................... 51.4. G3 ex DM Asia: HG Outstanding .............................................................................................................................. 51.5. G3 ex DM Asia: HY Issuance .................................................................................................................................... 51.6. G3 ex DM Asia: HY Outstanding ............................................................................................................................... 51.7. G3 ex DM Asia: Total Issuance by Country............................................................................................................... 61.8. G3 ex DM Asia: Total Outstanding by Country .......................................................................................................... 61.9. G3 ex DM Asia: Total Issuance by Sector ................................................................................................................. 61.10. G3 ex DM Asia: Total Outstanding by Sector .......................................................................................................... 61.11. G3 ex DM Asia: HG Issuance by Rating ................................................................................................................. 61.12. G3 ex DM Asia: HG Outstanding by Rating ............................................................................................................ 61.13. G3 ex DM Asia: HY Issuance by Rating .................................................................................................................. 71.14. G3 ex DM Asia: HY Outstanding by Rating ............................................................................................................. 71.15. G3 ex DM Asia: Total Issuance by Tenor ................................................................................................................ 71.16. G3 ex DM Asia: Outstanding by Remaining Tenor .................................................................................................. 7

2.LCY Asia ex Developed Market Asia (Japan, Australia and New Zealand) ..............................................................................8 2.1. LCY ex DM Asia: Total Issuance ............................................................................................................................... 82.2. LCY ex DM Asia: Total Outstanding .......................................................................................................................... 82.3. LCY ex DM Asia: Issuance by Currency ................................................................................................................... 82.4. LCY ex DM Asia: Issuance by Sector ....................................................................................................................... 82.5. LCY ex DM Asia: Outstanding by Country ................................................................................................................ 8

3.All Asia .............................................................................................................................................................................................................9 Market Highlights and Commentary ................................................................................................................................. 93.1. G3 All: Total Issuance ............................................................................................................................................... 93.2. G3 All: Total Outstanding .......................................................................................................................................... 93.3. G3 All: HG Issuance .................................................................................................................................................. 93.4. G3 All: HG Outstanding ............................................................................................................................................. 93.5. G3 All: HY Issuance .................................................................................................................................................. 103.6. G3 All: HY Outstanding ............................................................................................................................................. 103.7. LCY All: Total Issuance ............................................................................................................................................. 10

4.CNH ...................................................................................................................................................................................................................11 Market Highlights and Commentary ................................................................................................................................. 114.1. CNH All: Total CNH Issuance ................................................................................................................................... 114.2. CNH All: Total Outstanding ....................................................................................................................................... 114.3. CNH All: Issuance by Rating ..................................................................................................................................... 124.4. CNH All: Outstanding by Rating ................................................................................................................................ 124.5. CNH All: Issuance by Tenor ...................................................................................................................................... 124.6. CNH All: Outstanding by Remaining Tenor ............................................................................................................... 124.7. CNH All: Issuance by Sector ..................................................................................................................................... 124.8. CNH All: Outstanding by Sector ................................................................................................................................ 12

5.Spreads, Credit & Total Return ................................................................................................................................................................13 Market Highlights and Commentary ................................................................................................................................. 135.1. Global HG Corporate Spreads .................................................................................................................................. 145.2. Global HY Corporate Spreads ................................................................................................................................... 145.3. Global Returns, Quarter-End ..................................................................................................................................... 145.4. Global Returns, 2013 ................................................................................................................................................ 145.5. Asia Upgrades / Downgrades ex DM Asia ................................................................................................................ 145.6. Asia Upgrades / Downgrades, DM Asia .................................................................................................................... 145.7. Asian Upgrades & Downgrades, Standard & Poor's, 2013 ....................................................................................... 155.8. Asian Defaults, Standard & Poor's, 2013 .................................................................................................................. 16

Annex ...................................................................................................................................................................................................................17

Disclaimer ...........................................................................................................................................................................................................22

2

ASIFMA

Fourth Quarter 2013

G3 ASIA EX JAPAN, AUSTRALIA & NEW ZEALAND

1.G3 Asia ex Developed Market Asia (Japan, Australia and New Zealand)

Market Overview and highlights of Asia (ex-Japan, Australia and New Zealand) debt issuance in Q4

Besides being a most eventful year with several ups and downs, 2013 has nonetheless turned out to be yet another record year for Asia ex-Japan G3 bond issuance. With total is-suance this year currently at USD 141.40 billion (bn) (as of December 31, 2013), this figure is ahead of full year (FY) 2012 issuance numbers of USD 134.04bn (inclusive of high grade (HG), high yield (HY), and unrated deals) and a new high in G3 issuance. The key driver of issuance through much of 2013 centered on the timing of tapering of the the Fed’s purchase of US Treasuries, something that was first flagged mid-year and was immediately accompanied by both a sharp fall in emerging market (EM) currencies and equities and, more significantly for the credit universe, by a sharp backup in US treasury yields.

However, the surprise decision of the US Federal Reserve (Fed) not to institute the much heralded taper in September resulted in a drop Asia ex-Japan G3 bond issuance in Q3 (USD 23.60bn, a 44.8% decline quarter-over-quarter), only to pick up again in Q4 with USD 29.07bn in deals priced. However, in a somewhat paradoxical twist, the actual tapering an-nouncement was greeted much more favorably by the markets, which reacted very positively to the announcement of the reduction in monthly bond purchases by the Fed to USD 75bn from USD 85bn in the waning days of 2013.

With markets adopting a “risk-on” posture, deal flow has started 2014 on a very constructive note, as spreads continue to tighten (although total returns continue to be muted, on ac-count of US Treasury weakness). Additionally, tentative signs of a bottoming out in the Chi-nese economy (despite concerns around the country’s shadow banking system and mixed signals with respect to Chinese manufacturing indices), coupled with the continued emphasis on economic reforms agreed at the third Chinese plenum, has also helped underpin Asian credit market sentiment.

Qualitative highlights with respect to Asia ex-Japan debt (structures, credit quality)

Propelled largely by the Chinese property sector, Asian high yield (HY) debt has developed in-to an asset class in its own right (USD 2.75bn in property sector deals were priced in Q4 alone, accounting for the largest share of HY G3 issuance in the quarter). Significantly, one key development in 2013 has been the provision of innovative onshore credit support by People’s Republic of China (PRC) entities for offshore issuance by their subsidiaries, through “Keepwell” agreements, Equity Interest Purchase Undertakings (EIPUs) and Standby Letters of Credit (SBLCs). While these forms of credit support fall short of onshore credit guarantees,

they nevertheless provide a level of comfort for investors.

Another trend has been the surge of perpetual bond issuance, as structures with features aimed to enhance yield has attracted investors to this asset class. In 2013, USD 7.4bn in per-petual bonds were issued, nearly a threefold increase from 2012 (USD 2.85bn).

Finally, in the banking space, Basel III capital compliant transactions (which could entail the bail-in of bondholders provided certain thresh-olds are met) have been priced. More such

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2006 2007 2008 2010 2011 2012 2013

$ millions

Source: Dealogic

G3 ex DM Asia: Perpetual Bond Issuance2006 - 2013

3

ASIFMA

Fourth Quarter 2013

G3 ASIA EX JAPAN, AUSTRALIA & NEW ZEALAND

transactions will likely be issued through the 2014-2015 period, as banks seek to refinance some of the maturing/callable subordinated debt issued in prior years.

Credit quality in Asia has generally been improving, with S&P upgrading a total of 17 Asia (ex-Japan, Australia and NZ) issuers in 2013. On the other hand, the agency has downgraded 14 issuers. Inclusive of Australia, Japan, and New Zealand, downgrades exceeded upgrades, with 33 downgrades in 2013, compared to 28 upgrades.

Finally, with just two defaults (Winsway Coking and PT Bakrie Telecom) in 2013, Moody’s has stated that the default rate for FY 2013 has dropped to just 1.6% (from the February 2013 forecast of 2%). This still compares favorably with the projected Moody’s US speculative grade default rate of 2.9% and the corresponding 2013 European default rate of 3.6%.

Key trends in Asia (ex-Japan, Australia and New Zealand) G3 & LCY bond issuance

China has been by far the largest issuing country in Q4, accounting for a total of USD 15.60 bn of the USD 29.07bn in G3 issuance seen so far in Q4, with USD 12.75bn and USD 2.65bn in HG and HY deals, respectively, priced from China alone. South Korea with USD 6.11bn in is-suance and India with USD 2.78bn in issuance accounted for the bulk of the remaining issu-ance. For the full year 2013, total G3 issuance stood at USD 141.40bn, with HG transactions accounting for USD 100.26bn, HY issues accounting for a total of USD 24.82bn, and unrated issues accounting for 16.32bn.

Overall G3 debt outstanding in the region stood at USD 548.6bn, with HG accounting for the bulk of total outstanding debt at USD 407.56bn. HY (USD 73.75bn) and NR (USD 67.3bn) ac-counted for the balance of debt outstanding. China with USD 124.7bn, South Korea with USD 117.5bn and Hong Kong with USD 77.1bn are the three countries with the largest shares of G3 debt outstanding. In terms of ratings, within the HG space, deals rated A+ (USD 105.7bn) accounted for the largest share of debt outstanding, while NR deals (USD 67.3bn) and BB+ transactions (USD 63.0bn) dominated the deals outstanding in the HY space. By sector, sov-ereigns with a total of USD 146.4 bn accounted for more than a third of outstanding G3 pa-per, with financials (USD 124.5bn) a distant second. Finally, deals with remaining tenors of 5 years or less (USD 227.9bn) accounted for the bulk of total Asia (ex-Japan, Australia and NZ) debt outstanding.

During Q4, three sectors between them accounted for the largest share of G3 issuance by sector: Finance (USD 9.00bn), Real Estate (USD 6.70bn – the bulk of which were Chinese HY property deals) and Oil & Gas (USD 3.81bn). Utility & energy, telecommunications, and the food & beverage sectors were also prominent.

In terms of ratings, within the HG space, AA- transactions accounted for the largest share of deals priced during the quarter, with USD 5.95bn in total issuance, followed by A+ transac-tions totaling USD 4.95bn and BBB+ issuance with USD 3.64bn. As for HY issuance, the B cat-egory was the sweet spot, with B+ transactions adding up to 2.0bn, and B and B- issuance accounting for USD 300mn and 250mn, respectively, of the USD $4.05bn in HY deals priced.

Finally, in terms of tenor, Asia ex-Japan, Australia and NZ G3 deals with tenors of 5 years or less accounted for the bulk of issuance in Q4 2013, with a total of USD 18.14bn in short tenor transactions being priced during the quarter. Of these, USD 14.08bn were HG deals while USD 3.25bn were HY transactions.

Finally, turning to the LCY debt markets, on a full year basis, USD 1.12tn in total LCY-denominated debt was issued in Asia (ex-Japan, Australia & NZ) with USD 226.47bn issued in Q4 2013 alone. The comparable figure for Q4 2012 was higher, at USD 294.13bn. Total LCY

4

ASIFMA

Fourth Quarter 2013

G3 ASIA EX JAPAN, AUSTRALIA & NEW ZEALAND

debt outstanding at the end of Q4 2013 in Asia (ex-Japan, Australia and NZ) stood at USD 8.8tn, with China accounting for the bulk of total outstanding LCY debt (at USD 4.58tn). Local currency debt markets have become progressively more important in the region and have presently outpaced the G3 debt markets in Asia (ex-Japan, Australia and NZ) by more than a 10-1 margin.

5

ASIFMA

Fourth Quarter 2013

G3 ASIA EX JAPAN, AUSTRALIA & NEW ZEALAND

1.1. G3 ex DM Asia: Total Issuance 1.2. G3 ex DM Asia: Total Outstanding

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2012 2013

2006 2007 2008 2009 2010 2011 2012 2013 Q4

$ millions

Source: Dealogic

G3 ex DM Asia: Total Issuance2006 - 2013:Q4

NR

HY

HG

0

100

200

300

400

500

600

Q3 Q4

2013

$ billions

Source: Bloomberg

G3 ex DM Asia: Total Outstanding 2013:Q3 - 2013:Q4

NA/NR

HY

HG

1.3. G3 ex DM Asia: HG Issuance 1.4. G3 ex DM Asia: HG Outstanding

0

20,000

40,000

60,000

80,000

100,000

120,000

2012 2013

2006 2007 2008 2009 2010 2011 2012 2013 Q4

$ millions

Source: Dealogic

G3 ex DM Asia: HG Issuance2006 - 2013:Q4

0

50

100

150

200

250

300

350

400

450

Q3 Q4

2013

$ billions

Source: Bloomberg

G3 ex DM Asia: HG Outstanding 2013:Q3 - 2013:Q4

1.5. G3 ex DM Asia: HY Issuance 1.6. G3 ex DM Asia: HY Outstanding

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2012 2013

2006 2007 2008 2009 2010 2011 2012 2013 Q4

$ millions

Source: Dealogic

G3 ex DM Asia: HY Issuance2006 - 2013:Q4

Corp HYand NR

SovereignHY and NR

0

50

100

150

200

250

300

350

Q3 Q4

2013

$ billions

Source: Bloomberg

G3 ex DM Asia: HY Outstanding 2013:Q3 - 2013:Q4

NR

HY

6

ASIFMA

Fourth Quarter 2013

G3 ASIA EX JAPAN, AUSTRALIA & NEW ZEALAND

1.7. G3 ex DM Asia: Total Issuance by Country 1.8. G3 ex DM Asia: Total Outstanding by Country

$15,596.6

$6,114.2

$2,777.9

$1,374.0 $1,350.5 $600.0 $310.5 $300.0 $200.0 $200.0 $150.0 $100.0

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000 $ millions

Source: Dealogic

G3 ex DM Asia: Total Issuance by Country2013:Q4

NR

HG

HY

0 20 40 60 80 100 120 140

PITCAIRN IS.

MARSHALL ISLAND

FIJI

PAKISTAN

MACAU

VIETNAM

MONGOLIA

TAIWAN

SRI LANKA

THAILAND

MALAYSIA

PHILIPPINES

SINGAPORE

INDIA

INDONESIA

HONG KONG

SOUTH KOREA

CHINA

$ b

illio

ns

Source: Bloomberg

G3 ex DM Asia: Total Outstanding by Country2013:Q4

1.9. G3 ex DM Asia: Total Issuance by Sector 1.10. G3 ex DM Asia: Total Outstanding by Sector

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

Finance

Real Estate/Property

Oil & Gas

Utility & Energy

Telecommunications

Food & Beverage

Metal & Steel

Transportation

Leisure & Recreation

Consumer Products

Computers & Electronics

Insurance

Construction/Building

$ m

illio

ns

Source: Dealogic

G3 ex DM Asia: Total ssuance by Sector 2013:Q4

HY

HG

NR

0 20 40 60 80 100 120 140 160

Financials

Government

Energy

Consumer Discretionary

Materials

Industrials

Utilities

Technology

Communications

Consumer Staples

Health Care

Real Estate

$ b

illio

ns

Source: Bloomberg

G3 ex DM Asia: Outstanding by Sector2013:Q4

HY

HG

NR

1.11. G3 ex DM Asia: HG Issuance by Rating 1.12. G3 ex DM Asia: HG Outstanding by Rat-ing

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

AA-

A+

BBB+

A-

BBB-

BBB

A

AAA

AA

$ m

illio

ns

Source: Dealogic

G3 ex DM Asia: HG Issuance by Rating 2013:Q4

0 10 20 30 40 50 60 70 80 90 100

Financials

Government

Energy

Consumer Discretionary

Materials

Industrials

Utilities

Technology

Communications

Consumer Staples

Health Care

Real Estate

$ b

illio

ns

Source: Bloomberg

G3 ex DM Asia: HG Outstanding by Sector 2013:Q4

7

ASIFMA

Fourth Quarter 2013

G3 ASIA EX JAPAN, AUSTRALIA & NEW ZEALAND

1.13. G3 ex DM Asia: HY Issuance by Rating 1.14. G3 ex DM Asia: HY Outstanding by Rat-ing

0 500 1,000 1,500 2,000 2,500

Notrated

B+

BB

BB-

BB+

B

B-

$ m

illio

ns

Source: Dealogic

G3 ex DM Asia: HY Issuance by Rating 2013:Q4

Sovereign

Corp

0 10 20 30 40 50 60 70 80

NR

DDD

DD+

CCC+

CCC

CC+

CC

BB-

BB+

BB

B-

B+

B

$ b

illio

ns

Source: Bloomberg

G3 ex DM Asia: HY Outstanding by Rating2013:Q4

Corp

Sovereign

1.15. G3 ex DM Asia: Total Issuance by Tenor 1.16. G3 ex DM Asia: Outstanding by Remain-ing Tenor

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

Other

10+ Years

7 - 10 Years

5 - 7 Years

13 Months - 5 Years

$ m

illio

ns

Source: Dealogic

G3 ex DM Asia: Total Issuance by Tenor2013:Q4

HY

HG

NR

0 50 100 150 200 250

<5

5 - 7 Years

8 - 10 Years

10 +

$ b

illio

ns

Source: Bloomberg

G3 ex DM Asia: Outstanding by Remaining Tenor 2013:Q4

HY

HG

NR

8

ASIFMA

Fourth Quarter 2013

LCY ASIA EX JAPAN, AUSTRALIA & NEW ZEALAND

2.LCY Asia ex Developed Market Asia (Japan, Australia and New Zealand)2.1. LCY ex DM Asia: Total Issuance 2.2. LCY ex DM Asia: Total Outstanding

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2012 2013

2006 2007 2008 2009 2010 2011 2012 2013 Q4

$ millions

Source: Dealogic

LCY ex DM Asia: Total Issuance2006 - 2013:Q4

$1,384.9 $1,526.6

$7.1 $29.0

$7,296.9 $7,244.7

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Q3 Q4

2013

$ billions

Source: Bloomberg

LCY ex DM Asia: Total Outstanding 2013:Q3 - 2013:Q4

NR

HY

HG

2.3. LCY ex DM Asia: Issuance by Currency 2.4. LCY ex DM Asia: Issuance by Sector

$169,594.3

$18,382.6

$10,677.3

$7,877.1

$5,824.4

$4,831.8

$4,702.0

$3,372.0

$489.3

$393.6

$325.7

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000

CNY

KRW

MYR

INR

CNH

TWD

THB

SGD

PHP

IDR

HKD

$ m

illio

ns

Source: Dealogic

LCY ex DM Asia: Issuance by Currency2013:Q4

$81,314.3 $63,316.0

$17,494.1 $16,217.1

$9,516.3 $6,524.8

$5,514.3 $4,622.4

$3,764.5 $3,633.9

$2,531.1 $2,139.7 $1,552.4 $1,516.2 $1,356.6 $1,112.6 $906.2 $839.7 $634.8 $556.2 $447.4 $307.2 $244.6 $217.2 $77.0 $64.7 $49.0

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000

FinanceGovernment

Construction/BuildingTransportation

Utility & EnergyReal Estate/PropertyHolding Companies

MiningMetal & Steel

TelecommunicationsRetail

Oil & GasComputers & Electronics

ChemicalsConsumer Products

Auto/TruckInsurance

TextileDining & LodgingFood & Beverage

Professional ServicesMachinery

AgribusinessHealthcare

Leisure & RecreationForestry & Paper

Publishing

$ m

illio

ns

Source: Dealogic

LCY ex DM Asia: Issuance by Sector2013:Q4

2.5. LCY ex DM Asia: Outstanding by Country

$4,579.0 $1,329.8

$1,255.1 $313.8 $276.0 $271.1

$226.1 $164.2 $142.2

$101.8 $60.0 $32.8 $29.2 $18.3 $0.4 $0.2 $0.2 $0.1 $0.1 $0.0 $0.0

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

CHINAINDIA

SOUTH KOREAMALAYSIATHAILANDTAIWAN

SINGAPOREHONG KONG

INDONESIAPHILIPPINESPAKISTANSRI LANKAVIETNAM

BANGLADESHBRUNEI

AFGHANISTANPAPUA N.GUINEA

LAOSFIJI

MONGOLIATONGA

$ m

illio

ns

Source: Bloomberg

LCY ex DM Asia: Outstanding by Country2013:Q4

9

ASIFMA

Fourth Quarter 2013

ALL ASIA

3.All Asia

Total Issuance & Outstanding – G3 and LCY for Asia (including Japan, Australia and New Zealand)

Total HG G3 issuance in Asia (including Japan, Australia and New Zealand) stood at USD 355.75bn on a full year basis for all of 2013, with Q4 2013 issuance of USD 74.08bn coming in slightly higher than Q4 2012 issuance of USD 63.73bn. Total HY G3 issuance in Asia (includ-ing Japan, Australia and New Zealand) was USD 33.14bn on a full year basis; Q4 2013 HY is-suance of USD 8.61bn was slightly lower than comparable figures for Q4 2012, when issu-ance stood at USD 8.68bn. Unrated G3 issuance in Asia was USD 88.46bnfor 2013, while Q4 2013 was 21.70bn came in much lower than in Q4 2012, when 33.36bn was issued. In terms of total G3 debt outstanding in all of Asia, HG debt outstanding stood at USD 8.1tn at the end of Q4, while the comparable figure for HY bonds, including NR deals, was USD 3.51tn.

Finally, turning to LCY debt issuance, total HG issuance stood at USD 1.95tn on a full year ba-sis, while HY issuance and unrated issuance was USD 12.35bn and 826.51bn, respectively, over the same period.

3.1. G3 All: Total Issuance 3.2. G3 All: Total Outstanding

0

100,000

200,000

300,000

400,000

500,000

600,000

2012 2013

2006 2007 2008 2009 2010 2011 2012 2013 Q4

$ millions

Source: Dealogic

G3 All: Issuance2006 - 2013:Q4

NR

HG

HY

$11,666.0

$11,648.0

11,635

11,640

11,645

11,650

11,655

11,660

11,665

11,670

Q3 Q4

2013

$ billions

Source: Bloomberg

G3 All: Outstanding in Asia 2013:Q3 - 2013:Q4

3.3. G3 All: HG Issuance 3.4. G3 All: HG Outstanding

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2012 2013

2006 2007 2008 2009 2010 2011 2012 2013 Q4

$ millions

Source: Dealogic

G3 All: HG Issuance2006 - 2013:Q4

HG

8,050

8,100

8,150

8,200

8,250

8,300

8,350

Q3 Q4

2013

$ billions

Source: Bloomberg

G3 All: HG Outstanding2013:Q3 - 2013:Q4

HG

10

ASIFMA

Fourth Quarter 2013

ALL ASIA

3.5. G3 All: HY Issuance 3.6. G3 All: HY Outstanding

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2012 2013

2006 2007 2008 2009 2010 2011 2012 2013 Q4

$ millions

Source: Dealogic

G3 All: HY Issuance2006 - 2013:Q4

Corp HY & NR

Sovereign HY& NR

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Q3 Q4

2013

$ billions

Source: Bloomberg

G3 All: HY Outstanding 2013:Q3 - 2013:Q4

NR

HY

3.7. LCY All: Total Issuance

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2012 2013

2006 2007 2008 2009 2010 2011 2012 2013 Q4

$ millions

Source: Dealogic

LCY All: Total Issuance in Asia2006 - 2013:Q4

HY

HG

NR

11

ASIFMA

Fourth Quarter 2013

CNH

4.CNH

Key trends in offshore renminbi (CNH) and the dim sum bond markets The CNH, or “dim sum”, bond market has grown rapidly over the last three years, as issuers from across the world have tapped this market to meet their financing needs, even as finan-cial market liberalization in China continues apace. On a full year basis in 2013, an equivalent of USD 33.96bn in CNH bonds have been issued, higher than FY 2012 issuance of USD 29.33bn and a new record high. In Q4 2013 alone, USD 10.58bn equivalent in dim sum bonds have been issued, more than double Q4 2012’s pace of USD 4.78bn.

In terms of tenor, over half (54.0%) of 2013 issuance (USD 18.3bn) was accounted for by short-term transactions with tenors of 1.13 years or less, while HG deals rated A+ totaling USD 4.52bn had the highest share among rated deals. In Q4 2013, Finance sector transac-tions totaling USD 7.35bn accounted for the largest volume of deals by sector, while sover-eigns totaling USD 1.63bn had the second largest share.

The total of dim sum bonds outstanding stands at USD 82.4bn and this figure is set to grow, as the CNH deposit base in Hong Kong continues to expand. In terms of sector, financial is-sues, excluding real estate, totaling USD 48.86 n in CNH equivalent dominate total CNH bonds outstanding while deals with tenors of 5 years or less (USD 74.43bn) account for all dim sum bond issues that have yet to mature.

Looking at other important developments in the renminbi markets (both offshore and on-shore), the PRC regulatory authorities have gradually liberalized market access by granting increased QFII and RQFII quotas to international investors in domestic renminbi instruments. As far as the offshore markets are concerned, Singapore, Taiwan and London are gradually developing offshore renminbi capability, to complement Hong Kong. Also, while the Shanghai Free Trade Zone (FTZ) is in its infancy, we keenly await developments there for further signs of Chinese currency market liberalization.

4.1. CNH All: Total CNH Issuance 4.2. CNH All: Total Outstanding

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2012 2013

2007 2008 2009 2010 2011 2012 2013 Q4

$ millions

Source: Dealogic

CNH All: Total CNH Issuance2007 - 2013:Q4

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2013Q3 2013Q4

$ millions

Source: Bloomberg

CNH All: Total Outstanding2013:Q3 - 2013:Q4

12

ASIFMA

Fourth Quarter 2013

CNH

4.3. CNH All: Issuance by Rating 4.4. CNH All: Outstanding by Rating

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013

2007 2008 2009 2010 2011 2012 2013 Q4

Source: Dealogic

CNH All: Issuance by Rating2006 - 2013:Q4

Not rated B

BB BBB

A AA

AAA

$583.9

$1,349.5

$8,836.1

$694.6

$260.6

$1,089.0

$475.8

$835.7

$102.2

$1,350.6

$297.5

$119.1

$66,452.1

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

A

A-

A+

AA-

B

B+

BB

BB-

BB+

BBB

BBB-

BBB+

NA/NR

$ m

illio

ns

Source: Bloomberg

CNH All: Outstanding By Rating2013:Q4

4.5. CNH All: Issuance by Tenor 4.6. CNH All: Outstanding by Remaining Tenor

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013

2007 2008 2009 2010 2011 2012 2013 Q4

Source: Dealogic

CNH All: Total Issuance by Tenor 2006 - 2013:Q4

Short Term

10+ Years

7 - 10 Years

5 - 7 Years

13 Months - 5 Years

$39,989.9

$34,439.3

$4,437.2

$837.5 $2,742.8

0

10,000

20,000

30,000

40,000

50,000

Short Term 13 Months - 5Years

5 - Y Years 7 - 10 Years 10+ Years

$ millions

Source: Bloomberg

CNH All: Outstanding By Remaining Tenor2013:Q4

4.7. CNH All: Issuance by Sector 4.8. CNH All: Outstanding by Sector

$7,353.5

$1,631.7

$587.6

$685.5

$325.8

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Finance

Government

Insurance

Real Estate/Property

Utility & Energy

$ m

illio

ns

Source: Dealogic

CNH All: Total Issuance by Sector2013:Q4

$161.0

$3,030.5

$899.7

$286.4

$48,864.4

$5,240.8

$16,154.7

$2,150.5

$2,779.0

$366.6

$2,513.2

0 10,000 20,000 30,000 40,000 50,000 60,000

Communications

Consumer Discretionary

Consumer Staples

Energy

Financials

Real Estate

Governments

Industrials

Materials

Technology

Utilities

$ m

illio

ns

Source: Bloomberg

CNH All: Total Outstanding By Sector 2013:Q4

13

ASIFMA

Fourth Quarter 2013

CREDIT QUALITY

5.Spreads, Credit & Total Return

Relative Value and returns (Asia ex-Japan, Australia & New Zealand G3) It is significant that despite the strong YTD performance, both Asian HG and HY bonds offer value relative to similar bonds issued in Europe and the US. At the end of Q4 2013, Asian HG bonds on a composite basis were quoted at an average spread of 196 basis points (bps), while US and European HG bond issues were quoted at average spreads of 129 bps and 118 bps respectively. Likewise, in the HY space, while spread convergence has been more pro-nounced than in the HG sector, Asian HY corporates were quoted at a composite spread of 476bps, but US and European HY bonds were tighter at 396 bps and 359 bps respectively.

In terms of total returns, credit has clearly underperformed both developed market and EM equities – as for Asian USD HY and HG indices, total returns of 3.16% and 1.05% in Q4 2013, were well inside the double digit percentage returns recorded during the quarter by UK and European benchmark equity indices. Besides, while benchmark Japan and US equity indices recorded positive single digit percentage returns during the quarter, they were still well ahead of Asian credit index returns. Within the credit space, Asian HG and HY returns were comparable to European and US returns, with the developed country HY benchmarks out-performing Asia marginally. However, Asia ex-Japan credit indices outperformed the BAML Japan Corporate index, which returned only 0.30% in Q4.

The key to credit underperformance in general (and Asian credit underperformance in par-ticular) has been the steep sell-off in US Treasuries (UST), which has steadily widened more than 100 bps from its tightest levels in May 2013, as continued expectations of a strengthen-ing US economy and a continuation of the gradual tapering in UST purchases by the Fed has undermined sentiment. Thus, while credit spread compression has been quite pronounced, the bulk of the gains have been offset by the weakness in US Treasuries.

14

ASIFMA

Fourth Quarter 2013

CREDIT QUALITY

5.1. Global HG Corporate Spreads 5.2. Global HY Corporate Spreads

0

100

200

300

400

500

600

700

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Basis Points

Source: BAML, JP Morgan

Global HG Corporate SpreadsJan. 2006 - Dec. 2013

US

Asia

Europe

0

500

1,000

1,500

2,000

2,500

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Basis Points

Source: BAML, JP Morgan

Global HY Corporate SpreadsJan. 2006 - Dec. 2013

US

Asia

Europe

5.3. Global Returns, Quarter-End 5.4. Global Returns, 2013

-15 -10 -5 0 5 10 15

BAML US High Yield Index

BAML Euro Corporate

BAML Australia Corporate

BAML Global Credit

Asian Dollar HG Corporate

Asian Dollar IG

S&P

Euro Stoxx 50

Australian All-Ordinaries

MSCI EM LatAm

MSCI EM Europe

S&P GSCI Gold Official

S&P GSCI Copper

Pe

rce

nt

Source: S&P, BAML, MSCI

Total Return (Global)2013:Q4

-8 -6 -4 -2 0 2 4 6 8 10 12

BAML US High Yield Index

BAML Euro Corporate

BAML Australia Corporate

BAML Global Credit

Asian Dollar HG Corporate

Asian Dollar IG

S&P

Euro Stoxx 50

Australian All-Ordinaries

MSCI EM LatAm

MSCI EM Europe

S&P GSCI Gold Official

S&P GSCI Copper

Pe

rce

nt

Source: S&P, BAML, MSCI

Total Return (Global)2013

5.5. Asia Upgrades / Downgrades ex DM Asia 5.6. Asia Upgrades / Downgrades, DM Asia

0

2

4

6

8

10

12

14

16

18

20

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012 2013Source: Standard & Poor's

Standard & Poor's Asia Upgrades/Downgrades ex DM Asia2011:Q3 - 2013:Q4

Upgrades

Downgrades

0

2

4

6

8

10

12

14

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012 2013Source: Standard & Poor's

Standard & Poor's Asia Upgrades/Downgrades, DM Asia Only2011:Q3 - 2013:Q4

Upgrades

Downgrades

15

ASIFMA

Fourth Quarter 2013

CREDIT QUALITY

5.7. Asian Upgrades & Downgrades, Standard & Poor's, 2013 Upgrades Country Date Rating

MagnaChip Semiconductor Corp Korea, Republic of 4/15/2013 BB-

China Overseas Land & Investment Ltd. Hong Kong 4/22/2013 BBB+

Philippine Long Distance Telephone Co. Philippines 5/2/2013 BBB

Republic of the Phillippines Philippines 5/2/2013 BBB-

Development Bank of the Philippines (Republic of the Philippines) Philippines 5/3/2013 BBB-

Envestra Ltd. Australia 5/23/2013 BBB

Reliance Industries Ltd. India 5/29/2013 BBB+

GlobalFoundries Singapore Pte. Ltd. Singapore 6/4/2013 BB

China Taiping Insurance Holdings Co. Ltd. (China Taiping Insurance Group (HK) Co. Ltd) Hong Kong 6/10/2013 BBB

Japan Tobacco Inc. Japan 7/4/2013 AA-

Starhill Global Real Estate Investment Trust Singapore 7/11/2013 BBB+

Hitachi Ltd. Japan 8/2/2013 A-

Samsung Electronics Co. Ltd Korea, Republic of 8/8/2013 A+

Industrial Bank of Korea Korea, Republic of 8/28/2013 A+

China Taiping Insurance Holdings Co. Ltd. (China Taiping Insurance Group (HK) Co. Ltd) Hong Kong 9/26/2013 BBB+

Axiata Group Berhad Malaysia 9/30/2013 BBB+

Members Equity Bank Pty Ltd. Australia 10/10/2013 BBB+

Fortescue Metals Group Ltd. Australia 11/6/2013 BB

SK Hynix Inc. Korea, Republic of 12/5/2013 BB+

Mitsui Fudosan Co. Ltd Japan 12/10/2013 A-

Genting Bhd. Malaysia 12/10/2013 A-

Transurban Finance Co. Pty Ltd. Australia 12/12/2013 A-

ATCO Gas Australia LP Australia 12/18/2013 A-

Franshion Properties (China) Ltd. Hong Kong 12/18/2013 BBB-

Sinochem Hong Kong (Group) Co. Ltd. (Sinochem Corp.) Hong Kong 12/18/2013 BBB+

SP AusNet Group (Singapore Power Ltd.) Australia 12/19/2013 A-

Jemena Ltd. (Singapore Power Ltd) Australia 12/19/2013 BBB+

SPI (Australia) Assets Pty Ltd. (Singapore Power Ltd.) Australia 12/19/2013 BBB+

Downgrades Country Date Rating

Sony Corp Japan 2/8/2013 BBB+

Aeon Co. Ltd. Japan 4/22/2013 BBB+

PT Bakrie Telecom Tbk. Indonesia 5/6/2013 CCC

Shiseido Co. Ltd. Japan 5/8/2013 A-

Mongolian Mining Corp. Mongolia 5/14/2013 B

IOI Corp. Berhad Malaysia 5/15/2013 BBB

Jemena Ltd. (Singapore Power Ltd) Australia 5/17/2013 BBB

SPI (Australia) Assets Pty Ltd. (Singapore Power Ltd.) Australia 5/17/2013 BBB

SP AusNet Group (Singapore Power Ltd.) Australia 5/17/2013 BBB+

QBE Insurance Group Ltd. Australia 5/22/2013 A-

Insurance Australia Group Ltd. Australia 5/28/2013 A

China Metallurgical Group Corp. China 5/28/2013 BB+

Hoyts Group Holdings LLC Australia 6/4/2013 B

PT Bumi Resources Tbk. Indonesia 6/6/2013 B-

Tabcorp Holdings Ltd. Australia 6/24/2013 BBB-

Korea Railroad Corp. (Republic of Korea) Korea, Republic of 7/8/2013 A

eAccess Ltd. Japan 7/8/2013 BB

Softbank Corp. Japan 7/8/2013 BB+

China Shanshui Cement Group Ltd. Hong Kong 7/31/2013 BB-

PT Bumi Resources Tbk. Indonesia 8/5/2013 CCC

CITIC Pacific Ltd (CITIC Group Corp) Hong Kong 8/21/2013 BB

Mongolian Mining Corp. Mongolia 8/30/2013 B-

Tata Power Co. Ltd. (Tata Sons Ltd.) India 9/6/2013 B+

Yanzhou Coal Minining Co. Ltd. China 9/30/2013 BB+

Mirabela Nickel Ltd. Australia 10/2/2013 CCC+

PT Bumi Resources Tbk. Indonesia 10/15/2013 CC

EnergyAustralia Holdings Ltd. (CLP Holdings Ltd.) Australia 10/17/2013 BBB-

Mirabela Nickel Ltd. Australia 10/23/2013 SD

Qantas Airways Ltd. Australia 12/5/2013 BB+

Orica Ltd. Australia 12/16/2013 BBB

Vector Ltd. New Zealand 12/18/2013 BBB

Powercor Australia, LLC (Cheung Kong (Holdings) Ltd.) Australia 12/18/2013 BBB+

Beijing Enterprises Holdings Ltd. Hong Kong 12/20/2013 BBB+

16

ASIFMA

Fourth Quarter 2013

CREDIT QUALITY

5.8. Asian Defaults, Standard & Poor's, 2013 Defaults Country Type

Winsway Coking Coal Holdings Ltd China Distressed Exchange

Mirabela Nickel Ltd. Australia Missed Interest Payment

PT Bakrie Telecom Tbk. Indonesia Missed Interest Payment

17

ASIFMA

Fourth Quarter 2013

ANNEX

Summary of the Methodologies Adopted for this Report

1. G3 Asia ex Developed Market Asia (Japan, Australia, and New Zealand)Issuance

Bond transactions are sourced primarily from Dealogic, with supplemental infor-mation sourced from Bloomberg. Unless otherwise noted, all issuance are long-term debt. High grade transactions are defined as transactions with a Dealogic “effective” rating of equal or greater than BBB-, and may include unrated transactions based on issuer and desk notes. High yield transactions are defined as transactions with a Dea-logic “effective” rating of equal or less than BB+, and may also include unrated trans-actions based on issuer and desk notes. Unrated deals are those deals with no effec-tive rating from Dealogic.

“All Asia” issuance are defined as being a corporate bond issue having a Dealogic “deal nationality” as within Asia, regardless of market, including domestic. Sovereign, sub-sovereign, and medium-term notes are also included from issuance, while su-pranational and ABS/MBS issuers are excluded from issuance. Loans are excluded from issuance as well.

“DM”, or Developed Market Asia, include those deals with a Dealogic deal nationality from Australia, Japan, and New Zealand. “Ex DM Asia” will refer to all deals excluding those deals with a Dealogic deal nationality from Australia, Japan, and New Zealand.

G3 deals are defined a subset of deals in “All Asia” that are rank eligible, according to Dealogic’s rank eligibility guidelines, with a tranche currency in US dollar (USD), Eu-ropean euro (EUR), or Japanese yen (JPY). There may exist deals within “All Asia” is-suance that are denominated in a G3 currency but are not rank eligible and therefore not included in G3 tables but may be included in all other non-G3 exclusive tables.

“LCY”, or local currency, are defined as a subset of deals in “All Asia” flagged by Dea-logic local currency flag. G3 and LCY deals are not mutually exclusive and may overlap (e.g, in the case of Japanese JPY deals).

All issuance are denoted in USD equivalents based on exchange rates as of the issue date of the bond.

Outstanding Outstanding figures are sourced from Bloomberg and contain all bonds from its cor-porate securities database, including private placements. Structured notes and debt secured by assets are excluded. All other critieria hew closely to the criteria for issu-ance.

All outstandings are denoted in USD equivalent based on exchange rates as of quar-ter-end.

Outstanding G3 deals are defined a subset of deals in “All Asia” that are rated with at least one rating by one of the four rating agencies: Fitch Ratings, Moody’s, Standard & Poor’s, or DBRS; and denominated in US dollar (USD), European euro (EUR), or Japanese yen (JPY). Deals that are not rated by one of the four rating agencies (those deals with a Bloomberg composite rating of “NA”) are excluded. The “NA” exclusion

18

ASIFMA

Fourth Quarter 2013

ANNEX

is due to overlap between rank ineligible deals and those deals with no rating; a close analysis of the data reveals that the figures for data excluding “rank ineligible” deals and the figures for data excluding data rated N.A. in Bloomberg are similar.

1.1., 1.3, 1.5., 1.7., 1.9., 1.11., 1.13., 1.15. Data are sourced from Dealogic.

Issuance by country is determined by Dealogic’s deal nationality.

Issuance by tenor is determined by years of maturity at issuance.

Issuance by sector is defined by Dealogic’s General Industry Group (“GIG”) groupings and are not analogous to Bloomberg’s Sector grouping.

1.2., 1.4., 1.6., 1.8., 1.10., 1.12. Data are sourced from Bloomberg.

Outstanding by rating are by current composite rating assigned by Bloomberg. Com-posite ratings by Bloomberg are the average of ratings assigned by Moody’s, Stand-ard & Poor’s, Fitch Ratings, and DBRS; a minimum of two ratings must be given to a bond before a composite rating is generated. “NR” denotes a bond with a single rat-ing assigned by the four rating agencies, whereas “NA” denotes a bond with no rating from any of the four.

Outstanding by tenor are based on current tenor as quarter-end. “Other” includes those bonds with no listed maturity date and perpetuals.

2. LCY Asia ex Developed Market Asia (Japan, Australia and New Zealand)2.1. - 2.4.

Issuance data are sourced from Dealogic according to the criteria outlined in Section 1. Outstanding data are sourced from Bloomberg according to the criteria outlined inSection 1.

3. All Asia3.1. – 3.9.

Issuance data are sourced from Dealogic according to the criteria outlined in Section 1. Outstanding data are sourced from Bloomberg according to the criteria outlined inSection 1.

4. CNHIssuance

Bond transactions for CNH are sourced from Dealogic and are defined as all debt de-nominated in renminbi (CNY) issued and in the euro, foreign, or international debt markets. CNY-denominated deals issued in the domestic market are excluded. There are no restrictions on deal type and will include supranationals, medium-term notes, money market notes, and commercial paper debt. Due to the lower restrictions in CNH issuance, CNH deals outside of Section 4 are a subset of the deals contained in Section 4.

All issuance are denoted in USD equivalents based on exchange rates as of the issue date of the bond.

19

ASIFMA

Fourth Quarter 2013

ANNEX

Outstanding Bond transactions for CNH are sourced from Bloomberg and are defined as debt de-nominated in CNY and issued in the euro, foreign, or international debt markets. CNY-denominated deals issued in the domestic market are excluded. Deals include corporate high grade bonds, high yield bonds, medium-term notes, money market and commercial paper debt.

All outstandings are denoted in USD equivalent based on exchange rates as of quar-ter-end.

4.1. – 4.8. Issuance data are sourced from Dealogic in accordance to the criteria specified in Section 4. Outstanding data are sourced from Bloomebrg in accordance to the crite-ria specified in Section 4.

5. Spreads, Credit Quality & Total Return

5.1. – 5.2. Global Corporate Spreads High grade and high yield US and European corporate spreads are sourced from Bank of America-Merrill Lynch (BAML) indices. Spreads are over government debt.

US high grade spreads are sourced from BAML’s US Corporate Index (C0A0) and tracks the performance of US dollar denominated investment grade corporate debt publicly issued in the US domestic market. Qualifying securities must have an in-vestment grade rating (based on an average of Moody’s, S&P and Fitch), at last 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $250 million. Original issue zero coupon bonds, 144a securi-ties (with and without registration rights), and pay-in-kind securities (including toggle notes) are included in the index. Fixed-to-floating rate securities are included provid-ed they are callable within the fixed rate period and are at least one year from the last call prior to the date the bond transitions from a fixed to a floating rate security. Contingent capital securiites, including those with automatic principal write-down provisions, are included in the index provided they do not have an automatic com-mon equity conversion, unless the conversion is activated by a regulatory authority in which case they are included. Other hybrid capital securiites, such as those that po-tentially convert into preference shares, those with both cumulative and non-cumulative coupon deferral provisions, and those with alternative coupon satisfac-tion mechanisms, are also included in the index. Securities issued or marketed pri-marily to retail investors, equity-linked securities, securities in legal default, hybrid securitized corporates, Eurodollar bonds (USD securities not issued in the US domes-tic market), taxable and tax-exempt US municipal securities and DRD eligible securi-ties are excluded from the index.

European high grade spreads are sourced from BAML’s Euro Corporate Index (ER00) and tracks the performance of EUR denominated investment grade corporate debt publicly isused in the Eurobond or Euro member domestic markets. Qualifying securi-ties must have an investment grade rating (based on an average of Moody’s, S&P and Fitch), at last 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of EUR 250 million. Original issue zero coupon bonds and pay-in-kind securities, including toggle notes, are included in the index.

20

ASIFMA

Fourth Quarter 2013

ANNEX

Callable perpetual securities qualify provided they are at least one year from the first call date. Fixed-to-floating securities also qualify provided they are callable within the fixed rate period and are at least one year from the last call prior to the date the bond transitions from a fixed to a floating rate security. Contingent capital securities are included in the index provided they do not have an automatic common equity conversion feature; these securities with triggers activated by a regulatory authority, including conversions into equity, qualify for inclusion. Also qualifying for inclusion are contingent capital securities with principal write-down triggers. Hybrid capital se-curities qualify for the index, including those potentially converting into preference shares, those with both cumulative and non-cumulative coupon deferral provisions, and those with alternative coupon satisfaction mechanisms. Euro legacy currecy, eq-uity-linked and securities in legal default are excluded from the Index. Securities is-sued or marketed primarily to retail investments do not qualify for inclusion in the index.

US high yield spreads are sourced from BAML’s US High Yield Index (H0A0) and tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market. Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and Fitch), at last 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $100 million. In addition, qualifying securities must have risk exposure to countries that are members of the FX-G10, Western Europe or territories of the US and Western Europe. The FX-G10 includes all Euro members, the US, Japan, the UK, Canada, Australia, New Zealand, Switzerland, Norway and Sweden. Original issue zero coupon bonds, 144a securities (with and without registration rights), and pay-in-kind securities (including toggle notes) are included in the index. Callable per-petual securities are included provided they are at least one year from the first call date. Fixed-to-floating rate securities are included provided they are callable within the fixed rate period and are at least one year from the last call prior to the date the bond transitions from a fixed to a floating rate security. Contingent capital securities, including those with automatic principal write-down provisions, are included in the index provided they do not have an automatic common equity conversion, unless the conversion is activated by a regulatory authority in which case they are included. Other hybrid capital securities, such as those that potentially convert into preference shares, those with both cumulative and non-cumulative coupon deferral provisions, and those with alternative coupon satisfaction mechanisms, are also included in the index. Securities issued or marketed primarily to retail investors, equity-linked securi-ties, securities in legal default, hybrid securitized corporates, Eurodollar bonds (USD securities not issued in the US domestic market), taxable and tax-exempt US munici-pal securities and DRD eligible securities are excluded from the index.

European high yield spreads are sourced from BAML’s Euro High Yield Index (HE00) and tracks the performance of EUR denominated below investment grade corporate debt publicly issued in the euro domestic or eurobond markets. Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance. In addition, qualifying securities must have at least one year remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of EUR 100 million. Orig-inal issue zero coupon bonds, “Global” securities (debt issued simultaneously in the

21

ASIFMA

Fourth Quarter 2013

ANNEX

Eurobond and euro domestic markets), 144a securities and pay-in-kind securities, in-cluding toggle notes, qualify for inclusion in the index. Callable perpetual securities qualify provided they are at least one year from the first call date. Fixed-to-floating securities also qualify provided they are callable within the fixed rate period and are at least one year from the last call prior to the date the bond transitions from a fixed to a floating rate security. Contingent capital securities are included in the index pro-vided they do not have an automatic common equity conversion feature; these secu-rities with triggers activated by a regulatory authority, including conversions into eq-uity, qualify for inclusion. Also qualifying for inclusion are contingent capital securi-ties with principal write-down triggers. Hybrid capital securities qualify for the index, including those potentially converting into preference shares, those with both cumu-lative and non-cumulative coupon deferral provisions, and those with alternative coupon satisfaction mechanisms. Euro legacy currency, equity-linked and securities in legal default are excluded from the Index. Securities issued or marketed primarily to retail investments do not qualify for inclusion in the index.

Asian high grade and investment grade spreads are sourced from J.P. Morgan’s Asia Credit Index (JACI) and tracks the performance of USD-denominated Asian debt in the Asian ex-Japan region. Qualifying countries are those Asian region excluding Ja-pan, including: China, Hong Kong, Indonesia, India, South Korea, Sri Lanaka, Mongo-lia, Macao, Malaysis, the Phillipines, Pakistan, Singapore, Thailand, Taiwan and Vi-etnam. Minimum deal sizes are $150 million and at least 12 months to final maturity at time of issuance. Fixed and floating rate instruments, and debt issued by sover-eign, quasi-sovereign and corporate entities qualify for inclusion. Convertible bonds do not qualify for inclusion in the index.

5.3. – 5.4. Total Return (Quarter-End and YTD) Total return data are sourced from various global bond and equity, including, but not limited to: the Bank of America-Merrill Lynch, Standard & Poor’s, J.P. Morgan, and MSCI,

5.5. Asian Issuer Rating Actions European issuer upgrades and downgrades are sourced from S&P. and are a combi-nation of both emerging market, Japan, Australia, and New Zealand rating actions. Multiple upgrades or downgrades of a single issuer are counted separately. Rating ac-tions are inclusive of both corporate (both credit, policy, or merger-related) as well as sovereign ratings.

22

ASIFMA

Fourth Quarter 2013

DISCLAIMER

Disclaimer The information and opinion commentary in this High Yield and Leveraged Loan Re-port (Report) was prepared by the leveraged finance division of the Asian Securities Industry and Financial Markets Association (ASIFMA) and the Securities Industry and Financial Markets Association (SIFMA). ASIFMA and SIFMA believe that the infor-mation in the Report, which has been obtained from multiple sources believed to be reliable, is reliable as of the date of publication. In no event, however, does either of ASIFMA and SIFMA make any representation as to the accuracy or completeness of such information. ASIFMA and SIFMA have no obligation to update, modify or amend the information in this Report or to otherwise notify readers if any information in the Report becomes outdated or inaccurate. ASIFMA and SIFMA will make every effort to include updated information as it becomes available and in subsequent reports. As information is collected from multiple sources and estimates by the individual sources may differ from one another, estimates for similar types of data could vary within the Report.

www.asifma.org

ASIFMA

Vijay Chander, Executive Director, Fixed Income

www.asifma.org

SIFMA

Kyle Brandon, Managing Director, Director of Research

Sharon Sung, Assistant Vice President, Research

www.sifma.org