ing investment management

0 ING (L) Renta Fund Asian Debt (Hard Currency)For professional investors use only and not for use in public

Asian Hard Currency Bonds

ING Investment Management Asia Pacific (Singapore) Limited November 2012

Joep Huntjens, Head of Asian Credit


Agenda

1. What is Asian Debt?

2. Why Asian Debt?

3. Investing in Asian Debt

4. What lies on the road ahead?

5. Summary

6. Appendix


Variety of Bonds in Emerging Markets

Sovereign Bonds Quasi-Sovereign Bonds

Bond issuance

Sovereign Entity

Corporate Bonds

bondholders

100% government ownership or explicit

guarantee

Sovereign Entity

Quasi Sovereign Entity

Corporate issuer

bondholders

Bond issuance

bondholders

Bond issuance

All types of Asian bonds typically denominated in:1. Asian currencies2. US dollar


Primary Asian Debt strategies

FX and interest rate risk dominant

Direct link to domestic macro cycle

Mainly government debt: corporate debt markets still developing

Asian Debt Local Currency

Credit risk dominant

Asia risk remuneration in form of credit spread

Increasingly a corporate asset class

Asian Debt Hard Currency

Hard-currency sovereigns and corporates

LC Money Market

Local-currency government bonds

Dedicated track record since 1996 Dedicated track record since 2008 Co-manage global LC EMD strategy

since 1998


Asian HC Bonds: JPMorgan Asia Credit Index

Country Sector Rating

Duration: 5.63 yearsYield: 4.14%Market Cap: $360bn

Outstanding issues: 505Outstanding issuers: 226Average Rating: Baa3/BBB-#

Source: JPMorgan as of end of September 2012.In the Country pie chart, “Other IG” includes Taiwan and Macau, “Other Sub-IG” includes Mongolia, Sri Lanka, Vietnam and Pakistan.# The average rating of the Fund is determined by calculating the portfolio’s weighted average security rating factors. Security rating factors are based on the security’s Moody’s rating or, if not available, the security’s S&P rating.

Singapore7%

Hong Kong15%

Other IG0%

China15%

Korea21%

Malaysia5%

Thailand2%

India8%

Indonesia13%

Philippines12%

Other Sub-IG2%

Financials18%

Industrials25%

Media & Telecom

3%Oil & Gas

6%

Products & Retail1%

Quasi-Sov21%

Sovereign21%

Utilities5%

AAA2%

AA14%

A26%

BBB29%

BB18%B

6%CCC & Below

1%

NR4%


Growing asset class

Source: JP Morgan Asia Credit Index (JACI) - Sovereign, JP Morgan Asia Credit Index (JACI) - Quasi Sovereign, JP Morgan Asia Credit Index (JACI) - Corporates. Data as of end September 2012.


Asian Debt: complementary to global EMD

Pakistan1.9%

Vietnam3.6%

China12.9%

Sri Lanka4.8%

Philippines32.7%

Malaysia13.1%

Indonesia31.1%

Source: JPMorgan, as of 30 April 2012.

Asia18.7%

Europe31.6%

Africa6.0%

Middle East4.7%

Latin39.1%

JPM EMBI Global Diversified: Small Asian weight

Most of Asia solid investment grade: Hong Kong, Singapore, South Korea and Taiwan not ‘emerging’; Malaysia soon to follow.

No corporate debt in JPM Emerging Market Bond Index.


Agenda


2. Why Asian Debt?



5. Summary

6. Appendix


Global middle class in 2009 and prediction for 2030

Sources: OECD, Standard Chartered Research 2011


Asia vs other EM: faster economic growth

Source: ING IM, estimates completed in September 2012


Sovereign Foreign-Currency Ratings

Investment grade

High yield

Baa3

Ba1

Ba2

Ba3

B1

B2

B3

Caa1

Source: Moody’s Foreign Currency Ratings as of end September 2012.

While developed- market sovereign issuers face significant challenges as reflected by downgrades, the rating trend for Asian sovereign issuers continues to develop positively.

AaaAa1Aa2Aa3

A1A2A3

Baa1Baa2Baa3

Ba1Ba2Ba3

B1B2B3


Asia: Corporate debt levels

Asian corporate leverage multiples, especially for HY issuers, are low compared to other developed regions

Source: Bloomberg, data based on listed companies only, data as of end September 2012.


High Yield Default Rate Comparison

Source: S&P, Moody's (for AxJ 2012 value only), as of end July 2012 (latest available data).

Asian HY default rates compare favorably to US/EU default rates

In 2012, Asia saw 3 issuers default: Davomas ($3.9m bond issue), Berlian Laju Tanker and Sino Forest


Best prospects for loan substitution

Source: Morgan Stanley, Data as of March 2012.

Loan to deposit ratios of Asian banking systems (%)

0

20

40

60

80

100

120

140

160

Korea Thailand Indonesia Taiwan MalaysiaSingapore India China HongKong

Philippine Europe

End 2007

End 2009

Mar 2012


Credit dependence on Euro area banks small

Euro area banks’ share of total credit (%)

0

20

40

60

80

100

120

Pol

and

Rus

sia

Turk

ey

Hun

gary

Rom

ania

Bra

zil

Mex

ico

Chi

le

Per

u

Arg

entin

a

Chi

naS

outh

Kor

eaIn

dia

Taiw

an

Indo

nesi

a

UAE

Sau

diAr

abia

Qat

ar

Libe

riaS

outh

Afri

ca

Source: BIS Quarterly Review (December 2011), data as of end Q2, 2011.


Relatively low share of exports to Eurozone

Exports to EU (% of total exports)

0%

10%

20%

30%

40%

50%

60%

70%V

enez

uela

Mex

ico

Taiw

anIn

done

sia

Thai

land

Sin

gapo

reK

orea

Mal

aysi

aH

ong

Kon

gP

hilip

pine

sP

anam

aP

eru

Arg

entin

aIn

dia

Vie

tnam

Col

ombi

aC

hile

Chi

naB

razi

lTu

rkey

Rus

sia

Kaz

akst

anS

lova

kia/

Slo

vak

Rep

ublic

Rom

ania

Pol

and

Hun

gary

Cze

ch R

epub

lic

Source: Citi, IMF, data as of March 2012.


Asian premium by credit rating

Source: INGIM calculations based on JP Morgan Asia Credit Index (JACI), JP Morgan US Liquid Index (JULI), Barclays US HY Corporate index. Data as of end September 2012.

Note: Bonds issued by Sovereign/Quasi-sovereigns issuers and by financial institutions have been excluded from average z-spread calculations. Z- spread calculations based on bid pricing.


Agenda


2. Why Asian Debt?



5. Summary

6. Appendix


Integration with EMD teams and Credit teams in other regions

Asia (Singapore) Europe (The Hague) Americas (NYC/ATL)

1 Portfolio Manager2 Credit AnalystsJoep Huntjens

Wee Lee ChengSean Jutahkiti

Clement ChongYuan Xing PekDesmond Lim

Co-Head Global EMD1 Portfolio Manager

Co-Head Global EMD5 Portfolio Managers

1 Economist1 Strategist 3 Traders

Prashant SinghMichael Reyes

Puay Yeong GohIan Chong

ING IM Asian Debt Team

Asia Focus

1 Portfolio Manager2 Credit Analysts

EMEA Focus LATAM Focus

Asia Focus CEEMEA Focus LATAM Focus

Head of Global HY8 Portfolio Managers

6 Credit Analysts

Head of Global IG3 Portfolio Managers

6 Credit Analysts

Europe Focus US Focus

Cor

pora

te C

redi

t Foc

us

Emer

ging

M

arke

ts

Sove

reig

n,

Rat

es &

FX

Focu

s

3 Client Portfolio Mgrs2 Portfolio SpecialistsPeter Sengelmann

Clie

nt

Focu

s

Data as of November 2012.


Positioning & fundamental analysis

Analysis

Assess economic momentum, liquidity conditions

Ratings trends, earnings outlook & leverage cycle

Investor positioning, supply & demand balance, risk appetite

Spread levels, absolute & relative to other asset classes

Focus

2. Rating allocation and spread duration positioningGlobal markets, technicals, valuations

3. Sector positioning Attractiveness and operating momentum of corporate sectors

1. Issuer/ Issue selection Driven by bottom up, in depth analysis which leads to an internal credit rating assigned to each credit

Decision making

Portfolio Managers

Credit Analysts & Portfolio Managers

Credit analysts, process overseen by portfolio manager

Sector research and scoring

Relative value analysis of each sector vs other sectors and vs similar sector on other regions

4. Country positioning Pan Asia ex Japan

Country research and scoring

Robust relative value analysis of each country

Industry – Key drivers, competitive landscape

Issuer – Financial strength & outlook, business model, management assessment, event risk

Issue – capital structure, pricing & relative value, liquidity, documentation

Portfolio Managers


Analytical tools and models

Analytical tools and models:

Corporate credit analysis: Credit Score Card

Sector score card

Sovereign risk analysis & scoring

Local Rates score card

FX score card

Valuation tools

Tracking error analysis

Performance attribution

In order to ensure that attractiveness of instruments and segments within our universe are assessed in a consistent way, we use scoring sheets where possibleFor illustration purpose only.


Issue/Issuer selection – Increasingly important

10.375% 2016

5.4% 20224.5% 2020

9.375% 20268.25% 2027

6.25% 2040

10.5% 2046 Reliance industries

Among the world’s largest integrated oil & gas companies

World class refineries (No. 2 & 3 ranking)

Among world’s top 10 petrochemical producers

Relative value trade in Reliance Industries

Source: Nomura Singapore Limited, indicative prices as of 10 August 2012


Issuer Profile: Guangzhou R&F Properties (GZRFPR)

Top 10 Chinese developer in terms of contract sales.

Large-scale national developer with leading positions in 14 cities, including tier 1 and 2 cities.

Good project execution and prudent financial management.

August USD bond retap has led to improved bond liquidity and increased investors participation in the bond.

(FY2011 figures included) Guangzhou R&F Shimao Agile Country Garden LongforUSD Bond Outstanding (US$ mn) 3881 1,200 2,150 2,225 750Company Ratings (Moody's/S&P) B12 Ba3/BB- Ba2/BB Ba3/BB- Ba2/BBBond Yield (%)3 11.4% 8.7% 8.0% 8.1% 9.2%Contract Sales (RMB bn) 28.5 30.7 31.5 43.2 38.3Land Bank Size (Mn sqm) 28.0 39.5 31.4 54.9 33.8EBITDA/Interest (times) 5.1x 2.6x 6.0x 4.0x 5.5xNet Debt/Capitalisation (%) 38% 37% 33% 28% 20%1 GZRFPR re-tapped its April 2016 issue in August 2012, raising an additional US$238mn.2 ING internal rating only, GZRFPR is not rated by Moody's or S&P.3 Comparison of bonds with 2016 maturities, except Country Garden where 2017 bond is used. Based on bid yield as of 29 August, 2012.


Recent Awards – Asian Debt ING (L) Renta Fund Asian Debt (Hard Currency)

1 Lipper Fund Awards 2012 Germany reflect fund’s performance as at 31 December 2011 2 Lipper Fund Awards 2012 Singapore reflect fund’s performance as at 31 December 2011; Lipper Fund Awards 2011 Singapore reflect fund’s performance as at 31 December 2010.3 Lipper Fund Awards 2012 Hong Kong reflect fund’s performance as at 31 December 2011; Lipper Fund Awards 2011 Hong Kong reflect fund’s performance as at 31 December 2010.4 Benchmark 100 Funds of the Year 2011 is based on the performance as of 31 December 2011; Benchmark 100 Funds of the Year 2010 is based on the performance as of 31 December 2010.5 AsianInvestor 2012 Investment Performance Awards is based on the performance as of 31 December 2011; AsianInvestor 2011 Investment Performance Awards is based on the performance as of 31 December 2010.

2 Best Bond Asia Pacific Fund over 10 years

4 Winner of AsianInvestor 2011 Investment

Performance Awards - Asia Fixed Income Category


4 Winner of AsianInvestor 2012 Investment

Performance Awards - Hard currency Category

3 Best-in-Class Fund for the Asia Bond category

2 Best Bond Asia Pacific Fund over 3 & 10 years

3 Best Bond Asia Pacific Fund over 3 & 5 years

3 Best-in-Class Fund for the Asia Bond category



Agenda


2. Why Asian Debt?



5. Summary

6. Appendix


Market review: 2011 to September 2012

Source: Bloomberg. Data as of dates indicated above.

Asian credit has benefited from tighter spreads and lower US treasury yields in 2012 helping it outperform its peers in US and Europe


Asia Corporate Credit – relative valuations are solid

Source: JP Morgan Data Query. Data as of end September 2012.

Note: Asia IG Corp premium based on spread over treasuries differential between JP Morgan Asia Credit Index (JACI) - Corporates Inv Grade and JP Morgan US Liquid Index (JULI). Asia HY Corp premium based on spread-to-worst differential JP Morgan Asia Credit Index (JACI) - Corporates Inv Grade and JP Morgan Domestic HY.

Asia underperforming US: extremely low market liquidity and no buyers of risk, global financial crisis.


Review/Outlook – Risks impacting Asia

Theme Impact on Asia

European Sovereign crisis global investor risk appetite

China property/economy risk of property collapse and/or sharp slowdown in economic growth (“hard landing”)

Developed world growth low DM yields; drag on Asian exports


China: Government policies vs GDP growth

Source: Bloomberg, data to 2Q12

• RRR (9.5%) & Rate (1.71%) hikes• Restriction on foreign investment• Raised land taxes• New property measures such as higher down payments on 2nd homes

• RRR (2%) and Rate (1.89%) cuts• RMB4tn stimulus

• RRR (6%) and Rate (1.11%) hikes• 46 cities adopt House Purchase Restrictions

• RRR (1.5%) cuts• (Post 2Q: additional rate cuts and fiscal stimuli at regional/local government level)

Government policies react to economic conditions


China: Property market

Source: Soufun, Citigroup, as of end August 2012.

Property sector has shown resilience in the face of tough housing policies.

No new housing policy restrictions expected in the near term.

But dramatic average price increases will not be tolerated by the government.


Outlook - Summary

Eurozone & US fiscal burden will keep risk sentiment muted; positive surprises should result in strong demand for Asian debt

Asian sovereigns fundamentals and fiscal flexibility are strong: superior debt fundamentals vs developed markets

Regional inflation touching lows, though prices likely to increase as economies gain momentum into year end.

Average policymaker bias mixed, any steps in either direction to be careful and measured

We do not expect hard landing in China; slowdown related to China’s attempt to generate more balanced growth

Corporates and Banks are in healthy shape, fundamentally stronger than peers in US and Europe. However, fundamentals are not improving anymore.

Capital inflows into Asia will be reasonably strong over time, though inconsistent depending on risk sentiment, given regional fundamentals and relatively attractive valuations

As of 30 September 2012. Subject to change without notice.


Positioning

Neutral US Treasury interest-rate duration

Overweight spread duration

Overweight corporate bonds

Issuer/issue positioning:

Avoid smaller, vulnerable companies with near-term funding needs or regulatory risk

Exploit opportunities in “busted” convertibles

Capitalize on inverse-spread opportunities

Sector positioning:

Overweight subordinated bonds issued by Asia’s strongest banks

Overweight Oil & Gas sector

Bias to Asian issuers which depend on Asian demand

Underweight (quasi-) sovereigns

Country positioning: Underweight Korea, Singapore, Philippines; Overweight China, Hong Kong, Indonesia, Malaysia, Taiwan, Thailand

FX: gradually increasing exposure as tail risks from US/EU decline

As of end September 2012. Subject to change without notice.


Agenda


2. Why Asian Debt?



5. Summary

6. Appendix


Summary


Asian or USD, Sovereign/Quasi-Sovereign/Corporate, complementary to global EMD

2. Why Asian Debt?

Fast growing; Strong fundamentals; Attractive valuations


Rigorous research: Consistent & disciplined


Macro sentiment dominates in short term; regardless, Asia to outperform given strong fundamentals, attractive valuations and supportive technicals


Agenda


2. Why Asian Debt?



5. Summary

6. Appendix


ING (L) Renta Fund Asian Debt (Hard Currency) Characteristics

For illustration purposes only and the information is not an indicator of future performance.

Objectives

Investment objective : Outperform the JP Morgan Asia Credit Composite Index over a 3 year period, with a target information ratio of 0.5

Benchmark : JP Morgan Asia Credit Composite Index

Target tracking error : 1% to 3%

Other characteristics

Investment universe : Debt instruments denominated mainly in USD, issued by issuers from Asian countries, such as China, Hong Kong, India, Indonesia, Malaysia, South Korea, Philippines, Singapore, Taiwan and Thailand.

Investment style : Multi-alpha, fundamental, bottom-up driven

Currency exposure : Up to 1/3rd of the portfolio can be invested in debt issued in Asian currencies (off-benchmark), Yen or Euro. Currency risk is actively managed.

Single holding exposure : Maximum single holding 10%

Assets under management :Total assets approx USD 543m (as of 30 June 2012)Mutual fund assets approx USD 209m (as of end September 2012)

Effective yield : 4.48% (as of end September 2012)

Weighted average duration : 5.49 years (as of end September 2012)

Benefits :

Attractive risk - return characteristics for Asian debt market

Diversification benefits

International investors underinvested, although this may not change soon

Capitalise on Asian debt market inefficiencies via multi-alpha strategy


Strong track record in Asian Debt (Hard Currency) Performance as of end September 2012

Source: ING Investment Management Europe. Gross performance in USD with dividend reinvested. All data are expressed as of date stated above. Periods greater than one year annualized.*Benchmark of this strategy changed from JP Morgan EMBI Global Diversified – Asia to JPMorgan Asia Credit Index (JACI) - Sovereign & Quasi-sovereign on March 1, 2004. On June 1, 2005, benchmark changed from JACI - Sovereign & Quasi sovereign to JPMorgan Asia Credit Composite Index, representing a better diversified index with less concentration to individual issuers such as the Philippines government. The benchmark is using gross series in USD.Performance quoted above is historical and does not guarantee future results.

Performance (%)Rolling Annualized

3 Months 6 Months 1 Year 3 Years 5 Years 10 Years

ING (L) Renta Fund Asian Debt (HC) – P Cap 5.45 7.99 18.16 12.05 10.44 9.26

JP Morgan Asia Credit Composite Index* 4.77 7.49 17.05 9.58 8.67 7.59

Value Added +0.68 +0.50 +1.11 +2.47 +1.77 +1.67

1 © 2012 Morningstar, Inc. All right reserved Morningstar RatingTM as of end September 2012.Source: Morningstar, NAV to NAV in USD gross performance annualized. All data are expressed as of date stated above.Sector Peer: Peers are funds in the “Asian Bond universe” and are Offshore and International Funds. Performance of sector peer is determined based on the average return of the funds in the peer sector.

Peer group comparison

Quartile ranking 1 1 1 1 1

13-year Morningstar Rating™

1Overall Morningstar Rating™


ING (L) Renta Asian Debt Hard Currency Fund Portfolio positioning as of end September 2012

Source: ING IM, as of indicated date.

ING (L) Renta Fund Asian Debt

JPMorgan Asia Credit Index

Average rating# Ba1/BB+ Baa3/BBB-

Effective yield 4.5% 3.8%

Weighted average duration 5.57 years 5.36 years

Non-USD Exposure 5.40% 0.00%

Fund characteristics

# The average rating of the Fund is determined by calculating the portfolio’s weighted average security rating factors. Security rating factors are based on the security’s Moody’s rating or, if not available, the security’s S&P rating.


Asian Debt: 5-year historical returns and volatility

Source: JPMorgan, HSBC, BarclaysBased on annualized USD monthly returns for 5 years as of end September 2012, monthly returns are based on local currency returns of the various asset classes.

Asian Debt has provided investors with relatively high returns

In times of financial market stress, Asian Debt market volatility has been relatively high due to the relatively illiquid nature of its corporate segment

Relative inefficiency of Asian Debt market (under-researched) provides opportunity for alpha generation

Asset Category Return Std DevAsia USD Bonds 8.67% 9.78%US Treasuries 6.43% 5.26%European Govt Bonds 5.42% 4.33%UK Gilts 8.60% 6.60%Global EM Debt 10.07% 10.96%Asian LC Bonds 6.64% 8.27%Asian IG Corp 7.77% 9.14%Asian HY Corp 9.89% 21.02%US IG Corp 8.06% 7.49%US HY Corp 9.34% 14.13%European IG Corp (Unhedged) 5.46% 4.94%European HY Corp (Unhedged) 10.07% 16.88%World Equities -1.58% 21.01%EM Equities -2.39% 22.12%Asian Equities -0.51% 28.17%European Equities -6.97% 18.57%eq

uities

-0.08-0.11-0.02-0.38

0.47

0.60

1.080.66

0.85

sov. deb

tcorporate de

bt

1.11

Return per Risk0.891.221.251.300.920.80


Correlation of Asian Debt with other asset classes

Source: Barclays, HSBC, JP MorganBased on annualized USD monthly returns for 5 years as of end September 2012. Monthly returns are based on local currency returns of the various asset classes.

Inclusion of Asian Debt aids diversification

Asset CategoryAsian USD

BondsAsian LC

Bonds

Asian USD IG

Corp

Asian USD HY

CorpUS Treasuries 0.11 0.17 0.17 -0.14European Govt Bonds 0.09 0.14 0.12 -0.08UK Gilts 0.09 0.12 0.11 -0.11Global EM Debt 0.96 0.67 0.92 0.89Asian LC Bonds 0.59 1.00 0.51 0.54US IG Corp 0.79 0.59 0.81 0.69US HY Corp 0.74 0.57 0.68 0.82European IG Corp (Unhedged) 0.63 0.48 0.62 0.65European HY Corp (Unhedged) 0.66 0.34 0.62 0.78World Equities 0.66 0.63 0.59 0.74EM Equities 0.71 0.59 0.64 0.80Asian Equities 0.71 0.70 0.63 0.79European Equities 0.58 0.51 0.51 0.67

sov. deb

tcorporate

debt

equities


Asian Investment Grade Gross Issuance

Source: Bloomberg, JP Morgan estimates, data as of end September 2012. Data includes Corporate and Quasi-Sovereign bonds (no Sovereigns).

2012 has been a record-setting year

South Korea dominates IG issuance given large issuance from quasi-sovereigns


Asian High Yield Gross Issuance

Issuance is impacted by market sentiment/volatility

Issuance tends to be seasonal with more bonds coming to market in the first half of the year

Source: Bloomberg, JP Morgan estimates, data as of end September 2012. Data includes Corporate bonds only (no Sovereigns nor Quasi-Sovereigns).


Potential demand

Pension fund allocation to EM by region

Source: Morgan Stanley Research, Asset Pool data as of end 2010, report dated 2 May 2012. EM universe estimated at US$10.5 trillion of which approximately US$2.5 trillion is considered liquid and investable.

Asset Pool in US$ billion

0.5% increasein EMD allocation

Asian share of global EMD (25%)

Pension & Endowments 29,900 149.5 37.4

Insurance 22,500 112.5 28.1

Investment Funds 24,400 122.0 30.5

Other* 12,000 60.0 15.0

88,800 444.0 111.0

Region EM Bonds

United States 1.7%

United Kingdom 4.1%

Europe 3.9%

DM pension funds are largely underinvested in EMD

A small increase in demand for EMD could result in strong demand for Asian bonds

Analysis does not factor in demand from non-G-4 markets

G-4 Asset pool

* “Other” includes Hedge Funds, ETFs, Private Equity, Sovereign Wealth Funds, and investable FX Reserves.


Sample sheet: Fundamental credit analysis

Source: ING IMFor illustration purpose only.

Issuer Score Card Company Financial ModelSTRENGTH OUTLOOK

B1 STABLECREDIT STRENGTH & SIX MONTH OUTLOOK Neutral NeutralFINANCIAL RISK 40% Neutral StrongBUSINESS RISK 20% Neutral Strong

MANAGEMENT & STRATEGY 40% Neutral Neutral

COMPANY DESCRIPTION

FINANCIAL SUMMARY (in THB million) SECTOR 2007 2008 2009 2010 P2011 P2012 Neutral StrongREVENUES n.a 33,420 31,577 33,172 31,417 31,560 31,460EBITDAR n.a 9,804 8,192 9,426 8,693 8,575 8,391EBITDA n.a 7,410 5,601 7,040 6,433 6,305 6,127EBIT n.a 2,485 642 3,029 2,108 2,136 2,095NET INCOME n.a -1,576 -4,925 621 -463 -274 -301 WeightingEBITDAR MARGIN n.a 29.3% 25.9% 28.4% 27.7% 27.2% 26.7% 15%

EBITDA MARGIN n.a 22.2% 17.7% 21.2% 20.5% 20.0% 19.5%

EBIT MARGIN n.a 7.4% 2.0% 9.1% 6.7% 6.8% 6.7% 5%NET DEBT (on balance sheet) n.a 26,125 26,859 23,049 22,146 21,191 20,406NET DEBT + OFF BALANCE LEASE LIABILITIES n.a 26,818 27,552 23,742 22,839 21,884 21,099 10%FUNDS AVAILABLE n.a 3,309 2,445 3,226 2,761 2,365 3,037 15%

CASH FLOW before CAPEX n.a -947 -602 1,395 2,535 2,604 2,425 15%FREE CASH FLOW n.a -4,161 758 496 903 955 785

CAPEX/DEPRECIATION n.a 103% 0% 66% 71% 73% 76% 15%

NET DEBT / EBITDA n.a 3.5 4.8 3.3 3.4 3.4 3.3(NET DEBT+ OFF. BAL. LEASE LIABILITIES) / EBITDAR n.a 2.7 3.4 2.5 2.6 2.6 2.5 10%

EBITDAR / (NET INTEREST + OFF. BAL. LEASE OBL.) n.a 1.7 1.3 1.6 1.8 1.8 1.8 15%

Additional financial stats & ratios SECTOR 2007 2008 2009 2010 P2011 P2012Free cash flow position incl. op + rent (THB 'mil) n.a -1,112 3,921 4,005 3,474 3,364 3,180Financing payments excl. op lease + rent (THB 'mil) n.a -5,089 -4,844 -5,281 -3,939 -3,760 -3,755Tangible assets/sales n.a 1.2 1.1 1.0 1.0 1.0 1.0 Gross debt/capital (%) n.a 90% 110% 98% 100% 101% 102%Gross debt/EBITDA (x) n.a 3.9 5.1 3.6 3.8 3.6 3.7

True Corp Financials (THB'million) SECTOR 2007 2008 2009 2010 P2011 P2012Revenue n.a 61,641 61,265 62,474 60,912 61,522 62,137EBITDA n.a 18,196 18,472 21,322 20,493 20,387 20,277Net Income n.a 1,712 -2,355 1,228 946 590 567Gross debt n.a 83,326 83,006 79,986 78,472 77,858 81,027Net Debt n.a 76,862 77,249 73,722 65,799 63,767 56,114Funds available n.a 4,305 5,094 5,600 12,009 13,427 24,249Free cash flow n.a 10,717 6,792 12,808 14,357 10,004 14,003EBITDA interest coverage n.a 2.6 2.5 2.9 3.2 3.0 3.0Gross debt/EBITDA - True Corp n.a 4.6 4.5 3.8 3.8 3.8 4.0Gross debt/EBITDA - True Corp excl. True Move n.a 5.1 4.2 3.8 3.9 3.8 4.2Net debt/EBITDA n.a 4.2 4.2 3.5 3.2 3.1 2.8Gross debt/capital (%) n.a 88% 93% 88% 87% 87% 87%

Following aggressive campaigns and significant promotions, True Move has become a viable 3rd mobile operator with more than 15 million subscribers, or about 24.6% market share, as of 31-Dec-09, within 7 years of full commercial launch. It has also expanded its network coverage to >92% of the Thai population. The Thai cellular market is competitive as wireless penetration rate has reached more than 96% by end-2009. True Corp's indirect ownership (via a new rights issue) in True Move has been reduced to 75.3% from 98.2% in early 2008 with an almost corresponding increase in ownership by CP Group to 23.9% from 0.8% in early 2008. After obtaining shareholders approval in April 2008, True Corp bought back its stake in True move back to 96.43% (98.91 if including BITCO) by June 2009 by injecting THB2.6 bil into True Move in 12 March 2009.

True Move Co. Ltd. 1 YE Dec YE Dec YE Dec YE Dec YE Dec YE Dec YE Dec YE Dec YE Dec YE DecBase Case 2002 2003 2004 2005 2006 2007 2008 2009 2010 P2011 P2012PROFIT & LOSS ACCOUNT(THB 'million)

Population (millions) 64 64 64 64 66 66 66 67 71 72 73USD/THB exchange rate 37.94 32.00 35.00 34.00 32.50 31.00 31.00GDP/capita (US$) 3,070 3,697 3,882 4,076 4,280 4,494 4,718Mobile penetration 27.3% 33.8% 41.3% 46.1% 59.5% 80.3% 91.5% 96.0% 98.0% 99.5% 101.0%Subscribers total (millions) 17.5 21.6 26.4 29.5 39.3 53.0 60.8 64.2 69.9 71.6 73.4

Subs growth% 23.4% 22.2% 11.7% 33.2% 34.9% 14.7% 5.7% 8.7% 2.5% 2.5%Market share - True Move 8.0% 8.0% 12.9% 15.1% 19.1% 22.8% 24.3% 24.6% 24.6% 24.6% 24.6%Market share - AIS 61.0% 61.0% 58.0% 56.0% 50.0% 45.3% 44.9% 44.8% 44.8% 44.8% 44.8%Market share - DTAC 31.0% 30.0% 30.0% 29.0% 32.0% 31.9% 30.8% 30.6% 30.6% 30.6% 30.6%Market share - others (Hutch)

True Move subscribers total (mln.) 1.62 3.40 4.45 7.50 12.08 14.80 15.80 17.18 17.62 18.07%growth 109.9% 30.9% 68.5% 61.1% 22.5% 6.8% 8.7% 2.5% 2.5%Prepaid 1.27 2.90 4.00 7.00 11.36 13.83 14.58 15.96 16.40 16.84Postpaid 0.35 0.50 0.45 0.50 0.72 0.97 1.23 1.23 1.23 1.23

of which 2.5G/3G (est imated) - - - 1.76 3.61

Prepaid ARPU (THB per month) 368 348 321 250 158 105 90 80 76 74Postpaid ARPU (THB per month) 1,016 1,030 911 772 676 510 428 420 420 420Blended ARPU (THB per month) 523 437 393 292 164 128 124 110 108 105

%growth -16.4% -10.1% -25.7% -43.7% -21.9% -3.1% -11.6% -2.0% -2.7%

Capital expenditure per subscriber (THB) 1,225 1,626 686 413 0 163 175 170 166

Revenues prepaid 8,707 13,289 16,500 17,407 16,803 15,390 14,656 14,753 14,700Revenues postpaid 6,180 4,919 4,632 5,824 5,633 6,297 6,179 6,179 6,179Roaming + Non-Voice incl. mobile internet 940 1,267 2,101 604 360 1,888 1,814 1,840 1,836Interconnect 8,656 8,173 7,066 6,789 6,820 6,803Product sales 2,823 2,181 1,350 928 608 2,532 1,979 1,968 1,942Total revenues est. 18,650 21,657 24,583 33,420 31,577 33,172 31,417 31,560 31,460Roam/pre & postpaid sales% 6.3% 7.0% 9.9% 2.6% 1.6% 8.7% 8.7% 8.8% 8.8%Interconnect/pre & postpaid sales% 0.0% 0.0% 0.0% 37.3% 36.4% 32.6% 32.6% 32.6% 32.6%Product sales/pre & post sales% 19.0% 12.0% 6.4% 4.0% 2.7% 11.7% 9.5% 9.4% 9.3%

Service revenue + roaming 10,166 13,071 19,530 22,309 23,836 22,796 23,574 22,649 22,772 22,715Interconnect 8,656 8,173 7,066 6,789 6,820 6,803Product sales 1,434 2,823 2,181 1,350 928 608 2,532 1,979 1,968 1,942 Total sales 11,600 15,895 21,711 23,659 33,420 31,577 33,172 31,417 31,560 31,460Sales growth% 37.0% 36.6% 9.0% 41.3% -5.5% 5.1% -5.3% 0.5% -0.3%

Cost of services (incl. rev share 25% + access 15% + interconnec 6,537 7,636 10,058 13,260 20,409 19,545 17,609 17,262 17,517 17,636Cost of sales 1,350 2,468 1,955 965 717 569 2,249 1,781 1,771 1,748Total cost of goods sold 7,887 10,104 12,013 14,225 21,126 20,114 19,859 19,043 19,288 19,384COGS/sales% 68.0% 63.6% 55.3% 60.1% 63.2% 63.7% 59.9% 60.6% 61.1% 61.6%

Gross income 3,713 5,791 9,698 9,434 12,294 11,463 13,314 12,373 12,272 12,076

Gross margin mobile revenues 35.7% 41.6% 48.5% 40.6% 14.4% 14.3% 25.3% 23.8% 23.1% 22.4%Gross margin product sales 5.9% 12.6% 10.4% 28.5% 22.7% 6.4% 11.2% 10.0% 10.0% 10.0%Gross margin 32.0% 36.4% 44.7% 39.9% 36.8% 36.3% 40.1% 39.4% 38.9% 38.4%

Other income 53 62 137 362 117 234 26 26 26 26Net Income 3,766 5,853 9,835 9,796 12,411 11,697 13,340 12,400 12,298 12,102

S&A expenses 3,352 2,815 2,662 2,312 2,607 3,505 3,913 3,706 3,723 3,711

Operational expenses to sales% 29% 18% 12% 10% 8% 11% 12% 12% 12% 12%

EBITDAR 414 3,038 7,173 7,484 9,804 8,192 9,426 8,693 8,575 8,391

Operational lease payments & rent 950 621 1,580 2,394 2,394 2,591 2,386 2,260 2,270 2,263Pension costslease & rent to sales% 8% 4% 7% 10% 7% 8% 7% 7% 7% 7%

EBITDA 0 -536 2,417 5,593 5,090 7,410 5,601 7,040 6,433 6,305 6,127EBITDA margin -4.6% 15.2% 25.8% 21.5% 22.2% 17.7% 21.2% 20.5% 20.0% 19.5%

Depreciat ion rate 13% 15% 16% 12% 13% 13% 13% 13% 13%Depreciat ion 4,037 4,533 5,327 6,086 4,835 4,874 3,925 4,240 4,084 3,947Amortization (only mobile licence) 15 187 59 90 85 85 85 85 85EBIT -4,588 -2,303 207 -996 2,485 642 3,029 2,108 2,136 2,095EBIT margin -39.6% -14.5% 1.0% -4.2% 7.4% 2.0% 9.1% 6.7% 6.8% 6.7%


Sample sheet: Relative value analysis


Reliance Industries - RILIN adj to 10 yr tenor

26 Sep 2011 RatingBid Px

AskPx

Bid Yield

Ask Yield

Bid Z-spd

Ask Z-spd

Bid Trsy

Ask Trsy

Bid Z-spd

Ask Z-spd

Key RILIN NotesRILIN 4 1/2 10/19/20 Baa2 94.0 95.3 5.35 5.15 357 336 405 385 361 341 RILIN 6 1/4 10/19/40 Baa2 95.7 98.9 6.58 6.33 418 392 480 455 323 297 RILIN 9 3/8 06/24/26 Baa2 132.0 134.0 6.06 5.89 395 377 428 411 371 354 RILIN 8 1/4 01/15/27 Baa2 120.5 122.5 6.16 5.98 401 383 438 420 374 356 RILIN 10 1/2 08/06/46 Baa2 142.0 147.0 7.20 6.91 484 455 542 513 360 331

Asia - Oil & Gas SectorPTTTB 5 7/8 08/03/35 Baa1 101.0 107.8 5.80 5.30 341 289 402 352 272 220 PTTEPT 4.152 07/19/15 Baa1 102.4 103.5 3.47 3.17 265 235 311 281 296 266 TOPTB 5.1 06/09/15 Baa1 105.3 106.3 3.57 3.27 278 248 321 291 309 279 PTTCH 5 1/2 06/24/15 Baa3 /*+ 106.7 107.4 3.57 3.37 277 256 321 301 308 288 PTTAR 5 1/2 07/20/12 Baa2 102.4 102.7 2.43 2.13 170 140 234 204 216 186 IRPCTB 6 3/8 05/25/17 Baa3 108.9 110.5 4.57 4.27 334 304 373 343 356 326 SKENER 7 06/19/13 Baa3 107.7 108.1 2.41 2.20 179 159 220 199 220 200 GSCCOR 5 1/2 10/15/15 Baa2 106.8 107.4 3.67 3.52 280 265 331 316 310 295 IOCLIN 4 3/4 01/22/15 Baa3 101.8 102.7 4.17 3.87 346 316 381 351 379 349 IOCLIN 5 5/8 08/02/21 Baa3 97.8 100.0 5.92 5.62 407 377 462 432 408 378

EM - Oil & Gas SectorPEMEX 6 03/05/20 Baa1 109.0 110.0 4.70 4.56 300 286 338 324 308 294 PEMEX 5 1/2 01/21/21 Baa1 105.5 106.0 4.76 4.70 295 289 345 338 299 292 PEMEX 6 5/8 06/15/38 Baa1 106.3 107.3 6.15 6.07 374 367 435 428 291 283 PETBRA 5 3/8 01/27/21 A3 101.2 102.3 5.21 5.06 340 325 389 374 343 328 PETBRA 6 3/4 01/27/41 A3 106.7 109.5 6.25 6.05 384 363 446 426 287 266

Asia - Baa2 creditsPCCW 4 1/4 02/24/16 Baa2 /*- 100.1 100.9 4.23 4.03 327 307 338 318 355 335 HYNMTR 4 1/2 04/15/15 Baa2 101.9 102.9 3.92 3.62 316 286 356 326 348 318 HYNMTR 3 3/4 04/06/16 Baa2 98.7 99.9 4.08 3.78 309 279 323 293 336 306 Average Asia BBB 330


Sample sheet: Analyst model portfolio

Analyst model Portfolio Investment Grade CorporatesOwner CSC Issuer Country Sector Bond S&P Moody's 2/28/2010 3/30/2010 4/30/2010 5/31/2010 6/30/2010 2/28/2010 3/30/2010 4/30/2010 5/31/2010 6/30/2010

WL Yes Shinsegae Co. Ltd Korea Retail SHINSG 6.75% 06/11 A- A3 196 135 58 102 158 104.2 104.5 105.0 104.1 103.2SY Yes Sun Hung Kai Hong Kong Property SUNHUN 5.375% 3/8/2017 A A1 126 121 118 144 136 105.8 105.3 106.1 106.4 109.2HN Yes CLP POWER HK FINANCINGHong Kong Utilities CHINLP4 3/4 03/20 A A1 102 92 97 98 99.6 101.3 103.7 106.8WL Yes PTT Chemical Thailand Industrials PTTCH 5 1/2 06/15 BBB Baa3 203 208 193 220 214 103.8 103.0 104.0 104.0 106.0HN Yes Misc Capital Ltd Malaysia Industrials MISCMK 6 1/8 07/14 A- A3 151 136 113 165 158 109.3 109.2 110.3 109.0 110.6WL Yes Li & Fung Hong Kong Industrials LIFUNG 5 1/5 05/20 A- A3 181 154 101.2 106.2SY Yes Hong Kong Land Finance Hong Kong Industrials HKLAND 5 1/2 04/14 A- A3 117 112 110 146 139 108.1 107.7 108.0 107.4 108.8SY Yes CNOOC Finance 2002 Ltd Hong Kong Oil CNOOC 5 1/2 05/33 A+ A1 98 102 103 121 117 102.8 100.9 103.3 105.4 110.6WL Yes SK Telecom Co Ltd. Korea Telecom *SKM 4 1/4 04/01/11 A A2 122 103 134 122 139 102.3 102.2 101.8 101.6 101.4WL Yes SK Energy Korea Oil&Gas SKENER 7.0% 6/19/2013 BBB Baa3 191 149 146 208 218 110.1 110.8 110.9 109.3 109.7HN N Yes Posco Korea Industrials *POHANG 8 3/4 03/14 A A1 /*- 165 140 132 182 164 118.5 118.7 119.0 117.5 119.2SY Yes Hysan (MTN) Ltd. Hong Kong Industrials HYSAN 7 02/01/12 BBB Baa1 112 82 60 70 66 109.0 108.9 108.9 108.2 108.1HN Yes Hong Kong China & Gas Hong Kong Oil HKCGAS 18 - A1 156 127 109 116 112 108.9 110.1 112.0 113.8 116.9WL N Yes Aromatics Thailand Thailand Industrials PTTAR 5 1/2 07/12 BBB- Baa2 238 220 189 188 194 104.1 104.1 104.8 104.8 105.0WL Yes Telekom Malaysia Bhd Malaysia Telecom TELMAL 5.25 9/22/2014 A- A3 135 123 98 121 145 106.3 106.2 107.5 107.5 107.9HN Yes China Merchants Hong Kong Industrials CHINAM 5.375% 3/9/2015 BBB Baa2 153 137 141 161 155 105.8 105.8 106.0 106.3 108.1HN O Yes Korea Electric Power Korea Utilities *KORELE 5 1/2 07/14 A A1 148 128 133 188 176 106.9 107.1 107.1 105.8 107.6WL Yes Axiata Group Malaysia Telecom AXIATA 5 3/8 04/20 BBB- Baa2 160 203 203 101.0 100.3 103.2WL Yes KT Corp Korea Telecom KOREAT 5 7/8 06/14 A- A3 181 161 124 190 189 107.0 107.2 108.9 107.1 108.4SY Yes New World Hong Kong Property NWDEVL7 02/10/20 - - 295 319 391 410 102.7 101.7 99.1 100.4WL Yes LG-Caltex Oil Corp Korea Oil GSCCOR 5 1/2 10/15 BBB Baa2 193 168 156 228 223 104.0 104.6 105.6 103.4 105.5HN U Yes Korea Midland Power Korea Utilities KOMIPO 13 A A1 176 126 121 151 180 105.5 106.4 106.6 106.0 105.9HN Yes Tenaga Nasional Berhad Malaysia Utilities TENAGA 7 1/2 11/25 BBB+ Baa1 185 177 170 210 201 116.2 115.9 118.5 117.9 122.8SY Yes IOI Ventures Malaysia Industrials IOIVEN 5 1/4 03/15 BBB+ Baa1 192 167 165 185 185 103.4 103.9 104.4 104.6 106.3HN U Yes Panva Gas China Oil&Gas PANVA 8 1/4 09/11 BBB- /*+ Baa3 188 116 94 152 223 108.1 108.6 108.4 107.0 105.7HN Yes Swire Pacific Hong Kong Industrials SWIRE 5 1/2 08/19 A- A3 164 152 137 191 162 102.2 102.2 104.1 102.7 107.7SY O Yes WHARF Hong Kong Industrials WHARF 6.125% 11/6/2017 BBBu - 195 180 167 199 185 105.8 105.9 107.4 107.3 110.7WL Yes Thail Oil Ltd Thailand Industrials THAOIL5.1 06/09/15 BBB Baa1 154 173 165 192 208 104.3 102.7 103.5 103.5 104.5SY Yes Kerry Properties Hong Kong Industrials KERPRO6 3/8 08/16 BBB- - 205 170 174 227 221 107.3 108.5 108.8 107.4 109.8SY Yes Henderson Land Hong Kong Property HENLND 5 1/2 09/19 - - 243 219 225 281 261 96.4 97.3 97.7 96.2 100.3HN N Yes Korea Southern Power Korea Utilities KOSPO 13 A A1 192 121 114 184 194 105.1 106.7 106.9 105.2 105.7SY Yes Korea National Oil Corp Korea Oil KOROIL 5 3/8 07/14 A A1 152 140 138 207 201 106.2 106.1 106.4 104.6 106.2HN Yes Korea Gas Corp Korea Utilities KORGAS 6 07/15/14 A A1 154 142 144 209 202 108.6 108.5 108.6 106.9 108.4WL Yes Hyundai Motor Korea Industrials HYNMTR 41/2 04/15 BBB- Baa3 167 271 267 100.9 97.6 99.5HN Yes Korea Hydro & Nuclear Korea Utilities KOHNPW6 1/4 06/14 A A1 147 137 145 202 205 109.9 109.6 109.5 108.0 109.2WL N Yes IRPC Thailand Industrials THAIPI 6 3/8 05/17 BBB- Baa3 300 260 242 273 294 101.3 102.9 104.5 104.5 105.5WL Yes PCCW Hong Kong Telecom PCCW5 1/4 07/20/15 BBB Baa2 200 180 178 224 259 102.7 103.0 103.5 102.6 102.8HN Yes Noble Group Hong Kong Industrials NOBGRP 6 3/4 20 BBB- Baa3 290 259 269 396 427 102.0 103.4 103.5 97.0 97.5SY Yes Capital Mall Trust Singapore Property CAPITA 4.321 15 - A3 164 141 238 201 99.9 101.3 98.2 101.5HN Yes Thoresen Thai Agencies Thailand Industrials THORES 2 1/2 09/12 - - 515 506 490 611 679 104.8 105.1 106.0 103.7 103.4HN Yes Alumina Finance Ltd Australia Industrials AWCAU 2 05/13-11 BBB- - 293 279 222 468 397 97.9 98.1 98.8 96.5 97.5HN Yes Hutchison Wham Int Hong Kong Industrials HUWHY7.45 11/24/33 A- A3 217 194 190 228 214 112.9 114.3 117.4 116.8 123.4WL Yes Hanaro Telecom Korea Telecom HATELE 7 02/01/12 BBB- Baa3 359 256 192 323 276 104.3 105.7 106.5 104.0 104.8WL Yes PTT Public Co Ltd Thailand Oil&Gas PTTTB 5 7/8 08/35 BBB+ A2 212 173 191 224 266 93.6 96.8 97.0 97.0 96.0SY Yes Genting Malaysia Industrials GENTMK 5 3/8% due 14 - AsBBB Baa1 214 176 159 211 201 103.5 104.5 105.5 104.3 106.2

UN

DER

WEI

GH

TN

EUTR

AL

OVE

RW

EIG

HT

Change from last month



Sample sheet: Asian HC top down scoring sheet - 1


ASIA USD BOND MARKET CONDITION SCORING SHEET – September 2011

COMMENTS NEW OLD TOTAL SCORE 0 +0.5 Global Market Environment 25% weight – score: 0 0 Global liquidity conditions

Stock of excess FX reserves and global liquidity remain supportive from a structural perspective; central banks providing additional swap lines for USD funding;

0 0

US interest rate outlook IIM forecast: Accommodative mon policy. Fed Funds unchanged until mid 2013. 'Low for longer' US monetary policy stance on sluggish economic recovery, need for a fiscal adjustment and global systemic risks. IIM: UST10Y 2.0% Q311, 2.5% Q411

0.5 0

Global equity market outlook GTAA: neutral FI, u/w REIT, Equity, neutral Comm. Global equity positioning: Region: o/w GEM, JPN neutral Asia, US u/w Europe. Sector: o/w Hlth, IT, Staples, Telco, neutral Energy, Util, u/w Indus, Mats, Finls, Discret. Size: o/w Large, u/w Small. Style: o/w Growth, u/w Value per Sep 15

-0.5 -0.5

Global EMD outlook EMD HC Top-down Score: 0.2 (21 Sep), 0.2 (24 Aug) 0.5 0.5 US HY/IG outlook Pos in HY & UW in IGC 0 0

US & EU economic outlook IIM forecast: In the US, base case for a positive but below potential growth. Economy remains in need of policy support during the deleveraging process. Double-dip scenario has a 30-40% prob and reasons for holding on to the base case are: (1) more supportive recent data suggesting the impact of the oil and Japan shocks are abating: (2) employment and spending on capital/consumer durables still below pre-recession levels, suggesting limited space to additionally reduce spending on above; (3) policymakers can still suprrise on the upside with a comprehensive solution. '11 and '12 growth forecasts below consensus, 1.6% (2.8% CPI yoy) and 1.9% (2.0% CPI yoy), respectively per Sep 15 IIM forecast: Elevated peripheral sovereign stress triggers market uncertainty and increases contagion risk for other credits and the real economy. The dual speed recovery story losing momentum. ECB is is now expected to stay on hold and ease monetary policy if economy slows down further. '11 and '12 growth forecasts at consensus: +1.7% (2.6% CPI yoy), and +1.0% (1.9% CPI yoy) per Sep 15

-1 -0.5

Asia economic outlook Above potential growth generally, although starting to moderate. In China, monetary policy normalization close to completed. Headline inflation moderates as does growth momentum (exp lower in 2H11). Open economies (Singapore, HK, Korea) exposed to global economic slowdown.

0.5 0.5


Sample sheet: Asian HC Top down scoring sheet - 2


Fundamental Outlook 25% weight – score: 0 0.5 Sovereign credit outlook Asian economic growth strong. Sovereign outlook positive, despite some fiscal pressure in the weaker sovereigns 0.5 0.5 Profitability trends Earnings momentum of Asian players on global platform mostly peaked and starting to decelerate. Domestic market and

commodities-based Asian companies are reaching peak profitability. Companies are showing more mixed results. 0 0.5

M&A activity M&A activities mostly in (a) Oil & Gas where E&P players acquiring offshore companies for declining domestic production (some are unconventional assets acquiring technical knowledge) and (b) commodities mid-stream producers acquiring upstream for input supply [e.g. steel producers acquiring coal and iron ore mines]. Expect some sectors (indon telco, china cement, china property developers, shipping) to enter consolidation phase in the medium term.

0 0

Trends in corp. credit ratings/ leverage trends

Asian corporates’ leverage trend starting to deteriorated (although improved in 2011 versus 2010). Moody’s/S&P/Fitch 12-month rolling upgrade/downgrade ratio for Asia at 2.00x for Sep 2011 compared to average 2.7x for 7 months to Aug 2011 (JPM monthly). Over the past 3 months downgrades (11) outweigh upgrades (3), centered on Chinese properties and Sino Forest.

0 1

Market Tech Conditions 25% weight – score: 0 0 Net issuance outlook 2011 issuance volume USD 70 (JPM). As per JPM, Asian ex Jap net supply is expected to be USD 27bn (USD 70bn minus USD

43bn now). Buybacks/tenders totaled USD1.28bil so far (all in HY). YTD Jul 11 new issuance totaled $47.2 bln compared to $40.5 bln YTD Aug 10 (16.5% increase). New issuances may pick up in 2H 11 if markets reopen.

0 -0.5

Investor positioning Dedicated Asia investors continue to hold large cash positions. Broker inventories are light and not prepared to add positions to trade in the current environment.

0.5 0.5

Flows/liquidity MS. AXJ dedicated USD bond fund continue to see inflows, 8 consecutive weeks. Anecdotal evidence of forced selling from PB a/cs and some global funds (facing outflows). Trading liquidity is extremely low.

0 0.5

External risk indicators VIX at 41.3 at 22 Sep, which is above average. -1 -0.5 Valuations 25% weight – score: 1 0.5 Absolute spread levels (JACI) Spread levels widened significantly (HY corps now 940bp HY Corp, 328bp IG Corp) which is a generous compensation for

expected defaults. The expected default for Asian HY is forecasted at below 2% for the next couple of years by Moodys. 1 1

Relative: JPMorgan Asia Credit Index v.s. US Corporate IG/HY + CEMBI Indices

Asian HY / HG corps still attractive by rating category. Asian HY outperformed those of US, over Jul.

(23-09) (31-08) (29-07) JACI IG 328 267 222 US corps 231 208 153 CEMBI Broad IG 368 300 233 Asia HY sov. 317 236 174 Asia HY corp. 940 752 585 U.S. HY corp. 767 708 540 CEMBI Broad HY 863 715 548

1 0.5


Sample sheet: Sector analysis


Sector Analyst Actual position

Profitability / asset quality

Leverage / Capitalisation

Liquidity Cash Flow Technicals Valuations Overall score

Commodities / Resources HN Neutral + = + = + - =Properties WL Neutral = - = - = + =Gaming WL Neutral + = = = = - =Petrochem / Oil& Gas WL Neutral = = = - = (-) + =Transportation/ Ports HN Neutral = - = - = = - Telecom & Media WL Neutral = = = = + - (=) =Technology WL Neutral - (=) = = = = - (=) =Utilities HN UW + = = = = = (-) =Conglo HN Neutral = = = (+) = (+) = = = (+)Consumers & manufacturing WL Neutral = = = = = + (=) = Banks YX OW = (+) = = N/A - + +

Overall WL Neutral = (+) = = = = + =

Sector Analyst Actual position

Comment

Commodities / Resources HN Neutral

Properties WL Neutral

Gaming WL Neutral

Petrochem / Oil& Gas WL Neutral

Holdings – CITIC RESOURES, NOBGRP, VED, ADAIND, BERAUC, BUMIIJ, POHANG, WINSWY. Positive technicals is supported by bullishness in the commodity market. Base metals and coal price continue to be strong but expect peaking soon. M&A risk is the red flag to look for, as illustrated by Indika, Bumi & Berau recent corporate actions.

Holdings: GENTMK & MPEL. Relatively defensive revenue base with robust gaming demand in the Philippines underpinned by favorable regulations in opening up the industry in the Philippines with a second integrated resort, Resorts World Bayshore City, planned for 2013-14 (for GENTMK) and a well established gaming market in Macau (for MPEL). Current +ve FCF but may turn -ve if both GENTMK and MPEL becomes more aggressive on entering overseas gaming markets or other acquisitions.

Holdings: RILIN, BRPTIJ, GS Caltex, PTTTB, PETHAI, CNPC, Pertamina (QS). Expect on-stream oversupply to continue in 2H11: (a) ~1.2m bpd of new refining capacity translating to utilization rates hovering 82.7% and (b) 10.6mtpa of new ethylene capacity translating to utilization rates closer to 80% from 85% now, industry margins have been holding on back of some plant shutdowns and healthy demand. Refining margins have stablize to $19-$20 levels per bbl range in Jul/Aug 11. Seeing peak of profit margin growth now. Naphtha product-to-feed margins improved further to $500 levels for Aug 11 from $470 for Jun/Jul 11 [from disruptions in Taiwan]. Negative score on cashflow reflects large scale aquisitions and capex trend by the larger E&P players [liquidity score kept neutral because of strong cash position and funding sources. Postive score in valuation reflects compelling valuations on more E&P focus, integrated (RILIN) and refineries with higher Nelson complexity score. Technicals: New issues done (CNOOC, PTTEPT, CNPC, Pertamina, MIEHOL).

OW position in non chinese real estate (CRE) names: HENLND, KERPRO, Capitamall; +0.09 dur vs benchmark. Still cautious in CRE as tighter policy implementations with potential HPR bring extended to tier 2 and 3 cities. The negative signs for leverage and cash flow are due to CRE's still acquisitive stance on land. Given this increased risk, our exposure are only to BB (stronger) CRE names. CRE pipeline has lightened up lately. Valuation is still attractive given yields still north of 11% for BB- / B category in CRE.


Sample sheet: HC Sovereign analysis



Risk management is an integral component of our process

Diversification

Idiosyncratic risk is diversified through limits at the issuer level, based on exposure limits (e.g.: max. 3% in credit X, depending on its rating – lower rating means lower exposure limit). Especially for credit an effective way to control risk and avoid ‘make-or-break’ bets

Risk budgeting

Allocations (market weight, spread duration contribution) to rating categories, countries, sectors, ranking (subordination), and issuers are done in accordance with risk tolerance and limits

Risk measurement

Tracking error and its decomposition is regularly reviewed to identify risk concentrations and ensure portfolio exposures are within investment guidelines


Sample sheet: Tracking error decomposition

SourcePartial Tracking

error (bps)TE contribution

(bps) Previous MonthCurve 115 105 135

Interest rate 24 9 11Credit Spread 111 97 124

FX 57 33 32

Overall 139 139 167

Beta 1.07 1.11

VaR (%) 2.29 2.76

Summary - Country breakdown

Partial Tracking error (bps)

TE contribution (bps) Previous Month

Overall Tracking Error 0.0 139 139 168

HC positions

Cash 0 0 0Australia 0.1 20 7 8China -0.1 33 9 5Hong Kong 0.1 40 8 5India 0.0 22 4 4Indonesia 0.1 43 13 45Japan 0.0Korea -0.3 56 21 17Macau 0.1 13 3 5Malaysia 0.1 27 7 0Mongolia 0.0 1 0 0Pakistan 0.0 7 -1 -1Philippines 0.0 40 6 12Qatar 0.0 0 0 0Singapore 0.0 28 8 7Sri Lanka 0.0 24 7 5Taiwan 0.0 7 0 0Thailand 0.1 18 3 4Vietnam 0.0 16 0 -2Future -0.2 34 9 25Euro 0.0 9 -3 -4LC positions

KRW 0.0 0 0 0IDR 0.0 16 7 8INR 0.0 0 0 0CNY 0.0 9 2 2MYR 0.0 0 0 0PHP 0.1 35 18 12SGD 0.0 22 11 12

Summary - Currency breakdown

Size (%)Partial Tracking

error (bps)Tracking error

contribution (bps) Previous Month

Overall Tracking Error 139 139 168

USD 111 98 131EUR 16 3 4CNY 9 2 2IDR 16 7 8INR 0 0 0KRW 0 0 0MYR 0 0 0PHP 35 18 12SGD 22 11 12

Summary - Sector breakdown

Size (rel duration)Partial Tracking

error (bps)TE contribution

(bps) Previous Month

Financial Services 0.2 48 29 7Industrial 0.5 74 26 23Oil 0.0 27 9 11Products and Retail 0.0 0 0 0Quasi-Sovereign -0.4 59 16 17Sovereign -0.1 46 22 42Media & Telecom 0.0 23 4 11Utility -0.1 14 1 1Future 34 9 26Cash 0 0 0CCF 48 29 28

ING Rentafund Asian Debt - Tracking error decomposition

Size (rel duration in yrs)

Tracking error (bps)

Historical TEMonth TOTALJan-09 174Feb-09 169Mar-09 186Apr-09 156May-09 191Jun-09 239Jul-09 289Aug-09 298Sep-09 253Oct-09 250Nov-09 208Dec-09 202Jan-10 203Feb-10 286Mar-10 231Apr-10 277May-10 149Jun-10 156Jul-10 142Aug-10 135Sep-10 128Oct-10 228Nov-10 179Dec-10 113Jan-11 138Feb-11 167



Asian HC Bonds: JPMorgan Asia Credit Index


Duration: 5.63 yearsYield: 4.14%Market Cap: $360bn

Outstanding issues: 505Outstanding issuers: 226Average Rating: Baa3/BBB-#

Source: JPMorgan as of end of September 2012.In the Country pie chart, “Other IG” includes Taiwan and Macau, “Other Sub-IG” includes Mongolia, Sri Lanka, Vietnam and Pakistan.# The average rating of the Fund is determined by calculating the portfolio’s weighted average security rating factors. Security rating factors are based on the security’s Moody’s rating or, if not available, the security’s S&P rating.

Singapore7%

Hong Kong15%

Other IG0%

China15%

Korea21%

Malaysia5%

Thailand2%

India8%

Indonesia13%

Philippines12%

Other Sub-IG2%

Financials18%

Industrials25%

Media & Telecom

3%Oil & Gas

6%

Products & Retail1%

Quasi-Sov21%

Sovereign21%

Utilities5%

AAA2%

AA14%

A26%

BBB29%

BB18%B

6%CCC & Below

1%

NR4%


Asian LC Bonds: HSBC Asia Local Bond Index


Duration: 5.71 yearsYield: 3.64%Market Cap: US$1,329bn

Outstanding issues: 1032Outstanding issuers: 278Average Rating#: Baa2 / BBB

Source: HSBC Asian Local Bond Index as of end September 2012.Note: "Quasi-Sovereign" includes all Supranationals, Regional Governments and Agencies. "Corp Others" includes Communication, Consumer, Diversified and Energy Sectors.# The average rating of the Fund is determined by 1) average of the three or, if not available, 2) the lower rating of the available two rating agencies or 3) the ratings of the sole agency that is providing the rating for security. If they do not fall in the above options, they will be classified as not rated.

Singapore15%

Hong Kong13%

Taiwan3%

China11%

Korea17% Malaysia

10%

Thailand8%

India6%

Indonesia12%

Philippines5%

Sovereign85%

Quasi-Sovereign

3%Financial

6%

Utilities2%Industrial

2%Corp

Others2%

AAA14%

AA19%

A31%

BBB26%

BB5%

Not Rated5%


Favourable risk-return characteristics

Total Return Comparison: Asian USD debt vs. Asian equities

Source: Bloomberg, MSCI, JP Morgan, data expressed as of end September 2012.


ING IM Company Profile

2Q 2012


About ING Investment Management

5656

Profile

• EUR 293.2 bln* (USD 369.2 bln*) in Assets under Management

• Active in 25 countries across Europe, America, Asia and the Middle East

• More than 2800 employees

• Manage assets for:• Institutions including Sovereign Wealth Funds and Pension Funds (28% of AuM)

• Retail Investors (25% of AuM)

• ING Insurance (Proprietary) (47% of AuM)

• Applies its proprietary research and analysis, global resources and risk management to offer a wide variety of strategies, investment vehicles and advisory services in all major asset classes and investment styles

• Business line of ING Insurance and principal asset manager of ING Group, a global financial institution of Dutch origin

• Investment platform structured as a series of specialist skills-based investment boutiques united by shared global resources

*Figures as of 30 June 2012. The financial results of the Asian Investment Management (IM) business are now included under ‘Net result from discontinued operations’. In order to align with the reported results of the ‘ongoing’ operations, the total Assets under Management are reported excluding Asia.


ING Investment Management – Assets and People

57

ING Investment Management has EUR 293.2 bln* (USD 369.2 bln*) in Assets under Management and employs over 2800 employees in 25 countries across Europe, America, Asia and the Middle East.

*Figures as of 30 June 2012. The financial results of the Asian Investment Management (IM) business are now included under ‘Net result from discontinued operations’. In order to align with the reported results of the ‘ongoing’ operations, the total Assets under Management are reported excluding Asia.


Strong and consistent Investment Performance

5858

1 Active returns:

• Enhanced by multiple distinct teams with their own unique investment approach

• Consistently delivered by state of the art diagnostics infrastructure and risk management culture

• Best supported by robust investment services and business management capabilities within the engine

2Unrecognized value ahead of consensus:

• Seeking original insights on markets / companies and a vision of investment potential that differs from the consensus view

• Proprietary research and analytics, global resources, portfolio diagnostics and risk management to serve client needs

Active returns are found by recognizing value ahead of consensus, which is best achieved by drawing from a multi-boutique philosophy to organize the team

3 A multi-boutique philosophy:

• Organizes experienced investment professionals into diverse, skills-based strategy teams, each employing a specialized investment process

• Provides proprietary fundamental research, portfolio analytics and operational support leveraging the worldwide scale and presence of the global platform


Divestment of Asian Insurance & IM on track

• Insurance Asia/Pacific posted another solid quarter with pre-tax results rising EUR 25 mln from the prior year

• Results down from a seasonally strong 1Q12 which included EUR 20 mln of non-recurring items

• Book value reflects YTD currency movements/bond revaluations (EUR 0.4 bln) and net results (EUR 0.3 bln) as well as the full write-off (EUR 180 mln) of goodwill at IIM Korea

• EUR 1.0 bln of additional capital is held in ING Re NL related to internally reinsured VA Japan guarantees

59

• The sales process for the Asian Insurance/IM businesses is on track and these businesses are now classified as Held For Sale/Discontinued Operations under IFRS

Multiple transactions possible

Key Figures – 2Q12 (in EUR bln)

Country2011 Pre-tax P/L

(EUR mln) IFRS Book Value Tangible BookJapan 263 2.1 2.1

Korea 243 2.5 2.3

SE Asia 124 1.5 1.5

JV’s 7 0.3 0.2

IIM Asia 3 0.2 0.2

Total 639 6.6 6.4

Continued strong performance

Pre-tax results (in EUR mln)

2Q12 2Q11 1Q12Insurance Asia/Pacific 160 135 248

Corporate Line Asia 5 62 -33

IIM Asia -2 2 1

Total 163 199 216


Global Investment Management Department

Global Investment Leadership Team Mark Weber – Global CIO

Jelle van der Giessen – Eric Siegloff – Hans Stoter

Investment Boutiques

CoreCredit

Emerging MarketsMoney Markets

Insurance

CoreValue

SpecialtiesStrategic

Local

Investment Services

Global Equity Research

Liquidity Management & Securities Lending

Central Dealing Desk

Business Management

Portfolio & Strategy Diagnostics

CEE (Czech Republic, Hungary, Romania)

PolandGreeceDubaiJapanIndiaKorea

MalaysiaThailandTaiwan

EquityFixed IncomeMulti Asset & Structured Solutions

Investment Support & Services

Strategy & Tactical Asset Allocation

Structured Investment Strategies (SIS)

Engineered Investment Strategies (EIS)


ING in a nutshell

61

Key figures 2Q2012

• Total Assets EUR 1,237 billion

• Shareholders Equity EUR 51 billion

• Clients Around 67 million*

• Countries Over 40 countries

• Employees Around 94, 000*

• ING Bank Core Tier 1 ratio 11.1%

• Insurance IGD ratio 240%

Results 2Q2012 underlying net result

• Group: EUR 1,045 million

• Bank: EUR 714 million

• Insurance: EUR 331 million

Ratings overview

S&P Moody’s Fitch

ING Group A A3 A

ING Bank A+ A2 A+

ING Insurance A- Baa2 A-

*including Insurance Asia & IM Asia


ING world wide presence Insurance/Investment Management

62

Insurance and Investment ManagementInsuranceInvestment Management


Management Board Insurance EurAsia

63

ING Group Executive Board

CEO – Jan Hommen

CFO – Patrick Flynn

CRO – Wilfred Nagel

Management Board Insurance EurAsia

Insurance Europe & Asia

FrieseCAO Rider

Investment Management

Europe & Asia Van Hassel

CEO Hommen

CRO Nagel

CFO Flynn


Ansprechpartner

Susanne HellmannManaging Director

Tel.: +49 69 / 50 95 49 – 21Fax: +49 69 / 50 95 49 – 31Email: [email protected]

- Niederlassung Deutschland -

Alexander Werani, CFASenior Sales Director

Tel.: +49 69 / 50 95 49 – 17Fax: +49 69 / 50 95 49 – 31Email: [email protected]

Westhafenplatz 1 60327 Frankfurt a. Main

Web: www.ingim.de

mailto:[email protected]

mailto:[email protected]


Rechtliche Hinweise

•Die in dieser Publikation enthaltenen Informationen dienen ausschließlich informativen Zwecken und stellen auf keinen Fall ein Angebot, insbesondere einen Prospekt oder eine Aufforderung zum Handel, Kauf oder Verkauf von Wertpapieren, bzw. zur Teilnahme an einer Handelsstrategie, dar. Diese Publikation ist ausschließlich für professionelle Anleger bestimmt. Obwohl der Inhalt dieser Publikation mit großer Sorgfalt zusammengestellt wurde, können wir keine - weder ausdrückliche noch stillschweigende - Gewähr für die Richtigkeit oder Vollständigkeit der Angaben übernehmen. Wir behalten uns das Recht vor, jederzeit und unangekündigt Änderungen oder Aktualisierungen der in dieser Publikation enthaltenen Informationen vorzunehmen. Weder ING Investment Management (die für diesen Zweck ING Asset Management (Europe) B.V. als Rechtsperson angibt) noch irgendeine andere zur ING-Gruppe gehörende Gesellschaft oder Körperschaft noch irgendwelche Vorstandsmitglieder, Geschäftsführer oder Mitarbeiter können direkt oder indirekt für irgendwelche in dieser Publikation enthaltenen Informationen und/oder Empfehlungen haftbar oder verantwortlich gemacht werden. Die in dieser Publikation enthaltenen Informationen sind auf keinen Fall als Erbringung einer Investmentdienstleistung zu verstehen. Die Verwendung der in dieser Publikation enthaltenen Informationen erfolgt ausschließlich auf eigene Gefahr. Wir sind weder direkt noch indirekt für irgendwelche Verluste oder Schäden, die dem Leser durch die Verwendung dieser Publikation oder durch eine darauf basierende Entscheidung entstehen, haftbar. Investitionen sind mit Risiken verbunden. Bitte beachten Sie, dass der Wert der Anlage steigen oder sinken kann und die Wertentwicklung in der Vergangenheit nicht notwendigerweise aussagekräftig für die Wertentwicklung in der Zukunft ist und in keinem Fall als aussagekräftig betrachtet wird. Diese Publikation und die darin enthaltenen Informationen sind streng vertraulich und dürfen zu keinem Zeitpunkt ohne unsere vorherige Zustimmung kopiert, vervielfältigt, verbreitet oder Dritten zugänglich gemacht werden. Jegliche Ansprüche, die sich aus oder im Zusammenhang mit den Bedingungen dieses Haftungsausschlusses ergeben, unterliegen niederländischem Recht. Für alle in dieser Publikation genannten Produkte oder Wertpapiere gelten andere Risiken und Geschäftsbedingungen, die von jedem Anleger vor einem Anlagegeschäft einzeln durchzulesen sind. Die in dieser Publikation enthaltenen Informationen stellen auf keinen Fall eine Werbung für den Kauf oder Verkauf von Kapitalanlagen bzw. für die Zeichnung von Wertpapieren dar. Bezüglich der in dieser Publikation genannten Produkte oder Wertpapiere sind möglicherweise weitere Informationen über bestimmte für diese Produkte oder Wertpapiere geltende Beschränkungen aufgrund der jeweiligen gesetzlichen Bestimmungen erforderlich. Diese Publikation ist nicht als Werbung für den Kauf oder Verkauf von Kapitalanlagen bzw. für die Zeichnung von Wertpapieren gedacht und auch nicht für Personen in Ländern bestimmt, in denen die Verbreitung solcher Materialien aufgrund geltender Vorschriften oder Gesetze verboten ist. Allein verbindliche Grundlage für den Erwerb von ING Investmentfonds sind die jeweiligen Verkaufsprospekte mit Risikohinweisen und ausführlichen Informationen, die Sie kostenlos bei ING Asset Management B.V., Niederlassung Deutschland, Westhafenplatz 1, 60327 Frankfurt am Main, oder unter [www.ingim.de] erhalten.

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