0000000 Bank Loans are Trading Cheap to Historic Levels Average - - PowerPoint PPT Presentation

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I nvesco’s Senior Loan Platform May 2 0 1 2

Presented by:

Scott Baskind Senior Portfolio Manager

Bank Loans are Trading Cheap to Historic Levels

1 Excludes Oct. 2008-Mar.2009 Source: Standard & Poor’s LCD and S&P/ LSTA Leveraged Loan I ndex. I ncludes all loans. Jan. 1997 through May 1, 2012. % Par

Market is attractive vs. historic norms, especially when “normalized” for Oct’08-Mar’09

• Current STM: L+ 563
• Historical STM: L+ 4021

Average Bank Loan Bid

Source: S&P LCD January 1997- April 2012

Historical Price Data

Date Price Discount Margin Average 95.18 L+ 437 High 3/ 2005 101.01 L+ 251 Low 12/ 2008 63.08 L+ 1641 Current 4/ 2012 95.48 L+ 563 2

Technicals and Headline Risk Creating Mini Cycles

1 S&P LCD 4/ 1/ 2012 2 J.P. Morgan. Pre-Lehman includes Jan 1997- Sept 1997, Post-Lehman includes Oct 2008-Oct 2011 3 LCD Quarterly Q4 2011 and Q2 2007

• Correlation pre-Lehman of 0.21 has increased to 0.59 post-Lehman2 because of a broader investor base

– Decline in CLO participation from 60% of the market in 2007 to 40% in 20113

• Creating opportunity around full cycle bottom up value driven security selection

Source: Standard & Poor’s LCD and Bloomberg, April 2012.

• Q1’11: Japanese Earthquake/ Tsunami
• Q2’11: US Fed Pledges to Keep Rates Low
• Q3’11: Escalation European/ US Debt
• Q4’11: European Credit Crisis Continues
• Q1’12: Europe Fears Subside

Headline

• Q1’11: $15.4bn of inflows
• Q2’11: Neutral
• Q3’11: $6.9bn of outflows
• Q4’11: Lack of new issue
• Q1’12: $5.8bn of CLO issuance1

Supply and Dem and

Q3: Risk on / Risk off

S&P 5 0 0 vs. S&P/ LSTA I ndex

Q1: Risk on 3

Loan Market Technicals

I nstitutional Loan Market Size

Source: Standard & Poor’s LCD 1 Source: S&P’s LCD 3/ 29/ 2012 2 Estimated based on I SSM’s year to date institutional inflows.

Relative Yield

Yield to Maturity Spread to W orst At Forw ard Libor Duration ( Years) 5 Year Treasuries 0.83% 4.90 10 Year Treasuries 1.95% 8.90 Barclays US Agg 2.07% T + 1.24% 5.07 ML US HY I ndex 7.56% T + 6.16% 4.29 S&P LSTA I ndex L + 5 .6 3 % T + 5 .9 0 % 6 .5 6 % 4 5 -6 0 Days

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Sources of I nflow s1

CLO Issuance $5.42bn Retail Inflows $0.29bn Estimated Institutional Inflows2 $6.5bn Total Inflows $12.21bn Net New Issue Supply $-3.66bn Inflows Net of Available Supply $15.87bn

Solid Fundam ental Credit Perform ance

1 Source: I SSM issuer database- median year over year growth stats 2 Source: LCD, April 1, 2012 3 Source: JPM 2011 HY Annual Review — December 2011

Bank Loan Default Rate Bank Loan Maturity Schedule I m proving Fundam entals1

Revenue Growth EBITDA Growth Q1 2011 5.99% 8.16% Q2 2011 7.27% 8.14% Q3 2011 6.62% 5.83% Q4 2011 4.59% 8.07%

• Good earnings performance going

back to Q3’09. Issuers with public filings have demonstrated 10 consecutive quarters of EBITDA growth2

• Average quarterly EBITDA growth of

15.5% from Q3’09 to Q4’11 may be difficult to sustain, but with 2012 GDP growth forecasted to be 2% 3, we expect trends to remain positive

• Corporate issuers in the senior

secured loan market have benefited from robust capital markets during the last two years and have strengthened their balance sheets, improved liquidity and addressed near term maturities

• No catalyst for a liquidity event:

limited near term maturities support

• ur 2% default outlook
• Low growth environment favors debt
• vs. equity

Long-term average default rate Leveraged loans: 3.8%

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Attractive Risk Return Equation

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Senior Secured Loan Market I m plied Default Rate New I ssue

This should not be considered a recommendation to buy or sell any particular holding. 1 Historical spread, price and yield reflect pre-credit crisis average from Jan. 31, 1997-Dec. 28, 2007 2 Date: 11/30/2009 3 Estimated Default: JP Morgan 2011 HY Annual Review- Dec. 2011 4 Source: S&P LCD April 30, 2012

• New deals coming at premiums to historic

levels

• Good blend of current income and yield
• Mostly proven issuers with above average

credit profiles

• US$18.5 billion of New Issue Activity over the

past 30 days

• New Issue Economics Attractive
• Spread = L + 482.5 bp
• LIBOR Floor = 137.2 bp
• OID = 133 bp
• Current Forward Calendar at US$31.8 billion4

Historical STM1 L+ 331 Less Credit Loss 108 Historical Risk Prem ium L+ 2 2 3 STM April 2012 L+ 563 Less Historical Risk Premium L+ 223 Excess Spread 3 4 0 bps Implied Default Rate (30% LGD) 11.33% Peak Default Rate2 10.81%

• Est. 2012 Default Rate3

2.00%

I nvesco’s Senior Loan Capabilities

Invesco Senior Secured Management, Inc. (“ISSM”), with US$16.5 billion of senior loan assets under management, is one of the largest institutional and retail managers in the asset class. Invesco’s “full cycle” approach to managing senior loan credit risk is grounded in active, bottom-up research and has enabled our strategies to add value over the long term. Our senior loan platform is also supported by global resources of Invesco, Ltd., one of the world’s largest asset management companies.

1 Based on eVestment assets under management as of Dec. 1, 2011. Source: I nvesco. Data as of March 31, 2012.

Size Product Scope Tenure/ Experience I nvestm ent Style Attribute

• US$16.5 billion

senior loan assets under management

• One of the largest

retail and institutional managers of senior loans1

• Manage 30+ funds,

encompassing a variety of strategies

• Global platform with

U.S. and European senior loan expertise

• Ability to deliver

customized

• pportunities
• Top position in all 3

major sectors- Retail, Institutional, CLO

• Team of 39 professionals

including 29 investment professionals

• Five-person Senior

Investment Committee with average 23 years experience

• Experience spans

multiple credit cycles

• Disciplined,

fundamental approach to investing

• Focused on credit

selection

• Designed to optimize

portfolio return and minimize downside risk through full cycle

Benefit

• ACCESS,

EXECUTION AND ALLOCATION

• ACTIVE MANAGEMENT

THROUGHOUT ALL MARKET CYCLES

• LARGE CREDIT TEAM

MONITORING SENIOR LOANS TO MINIMIZE DOWNSIDE RISK

• DEDICATED LOAN

PLATFORM SINGULARLY FOCUSED ON THE UNIQUE ASSET CLASS 7

Senior Loans at I nvesco

One of the largest managers of senior secured bank loans for both retail and institutional senior loan investors

US$16.5 billion in bank loan assets under management I nvesco Bank Loan Key Strategies:

• US CLOs
• European CLOs
• Cross-over CLOs
• Separate Accounts
• Commingled Institutional
• Opportunistic Offerings
• Retail
• ETF

Source: I nvesco as of December 31, 2011. Strategies listed are not all available in all jurisdictions or to all investors. Please consult your local I nvesco representative for more information.

Based on assets under management on 3/ 31/ 2012

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About Risk

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Current tax levels and reliefs may change. Depending on individual circumstances, this may affect investment returns. As with all investments, there are associated inherent risks. Neither Invesco Senior Secured Management, Inc. nor any affiliate of Invesco Ltd. guarantee the return of capital, distribution of income or the performance of any investment. This document is by way of information only. Asset management services are provided by Invesco in accordance with appropriate local legislation and

• regulations. Where Invesco has expressed views and opinions, these may change.

The nature of this investment is different from traditional funds and the risks inherent in it are not typically encountered in traditional

• funds. The investment undertakes special risks which may lead to substantial loss. Investors are advised to consider their own financial

circumstances and the suitability of the investment as part of their investment portfolio, and investors are advised to obtain all information and professional advice before making the investment. Credit risk is the risk of loss on an investment due to the deterioration of an issuer’s financial health. Such a deterioration of financial health may result in a reduction of the credit rating of the issuer’s securities and may lead to the issuer’s inability to honor its contractual

• bligations, including making timely payment of interest and principal.

Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, relative lack of information, relatively low market liquidity, and the potential lack of strict financial and accounting controls and standards. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. A majority of the funds’ assets are likely to be invested in loans and securities that are less liquid than those rated on national exchanges. There is no guarantee that the investment techniques and risk analysis used by the funds’ portfolio managers will produce the desired results. The prices of securities held by the fund may decline in response to market risks. Nondiversification increases the risk that the value of the fund’s shares may vary more widely, and the fund may be subject to greater investment and credit risk than if it invested more broadly. The ability of an issuer of a floating rate loan or debt security to repay principal prior to maturity can limit the potential for gains by the fund. To the extent that the fund is concentrated in securities of issuers in the banking and financial services industries, the fund’s performance will depend to a greater extent on the overall condition of those industries. The value of these securities can be sensitive to changes in government regulation, interest rates and economic downturns in the U.S. and abroad. The fund may use enhanced investment techniques such as derivatives. The principal risk of derivatives is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Derivatives are subject to counterparty risk — the risk that the

• ther party will not complete the transaction with the fund.

Leveraging entails risks such as magnifying changes in the value of the portfolio’s securities.

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I m portant I nform ation

This docum ent is intended for one-on-one use only. I t is not intended for and should not be distributed, or relied upon, by other persons including m em bers of the public or retail investors. Please do not redistribute this docum ent.

Please consult each product’s offering document / prospectus for additional information about the portfolios. Consider the investment objectives, risks, charges and expenses of the product carefully before investing. The offering document / prospectus contains this and other information about each product. To obtain an offering document / prospectus, contact your Invesco representative and read offering document carefully before investing.

This document contains confidential information, is for informational purposes only and is not an offering. This document does not form part of any prospectus or any offering document. This is not an offer to buy or sell any security. This does not take into account individual objectives, taxation position or financial needs and should not be relied upon as the sole factor in an investment making decision. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. While great care has been taken to ensure that the information contained herein is accurate, no responsibility can be accepted for any errors, mistakes or omissions or for any action taken in reliance thereon. Past performance not indicative of future results. An investment cannot be made directly in an index. Where I nvesco has expressed views and opinions, these may change. I nvesco Senior Secured Management, I nc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. I nvesco Distributors, I nc. is the distributor for the I nvesco and I nvesco Van Kampen Funds. Both firms are indirect, wholly owned subsidiaries of I nvesco Ltd. All data provided by I nvesco unless otherwise noted. Additional Disclosure for AUM Sources: I nvesco, Morgan Stanley/ Van Kampen I nvestments. Assets under management and client-related data as of March 31, 2010; investment professional and employee data as of June 1, 2010. I ncludes U.S.-domiciled mutual funds, PowerShares ETFs and ETNs, UI Ts, subadvised, variable insurance funds, SMAs and money market funds distributed and overseen by I nvesco. I nvesco PowerShares Capital Management LLC is the sponsor for the PowerShares QQQ, BLDRS and DB products. I nvesco Distributors, I nc. and its affiliate, I nvesco PowerShares Capital Management LLC, have an agreement with Deutsche Bank to provide certain marketing services for the PowerShares DB products. Neither firm is affiliated with Deutsche Bank. I nvesco PowerShares Capital Management LLC is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. I nvesco Distributors, I nc. is the U.S. distributor for I nvesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of I nvesco Ltd. ALPS Distributors, I nc. is the distributor of PowerShares QQQ, BLDRS Funds and the PowerShares DB Funds. I nvesco Distributors, I nc. is not affiliated with ALPS Distributors, I nc.

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