Credit Quality in Emerging Markets: A Case for Real Returns

Transcription

1 Credit Quality in Emerging Markets: A Case for Real Returns Giles Bedford, Client Portfolio Manager For Broker/Dealer Use Only and Not to be Distributed to the Public.

2 Bank of America Corporation ( Bank of America ) is a financial holding company that, through its subsidiaries and affiliated companies, provides banking and investment products and other financial services. Merrill Lynch, Pierce, Fenner & Smith Incorporated is a wholly-owned subsidiary of Bank of America Corporation, and a registered broker-dealer and member of FINRA and SIPC. Investment products provided by Merrill Lynch, Pierce, Fenner & Smith, Incorporated: The views and opinions expressed in this presentation are not necessarily those of Bank of America Corporation; Merrill Lynch, Pierce, Fenner & Smith Incorporated; or any affiliates. Nothing discussed or suggested in these materials should be construed as permission to supersede or circumvent any Bank of America, Merrill Lynch, Pierce, Fenner & Smith Incorporated policies, procedures, rules, and guidelines. Merrill Lynch, Pierce, Fenner & Smith Incorporated are not tax or legal advisors. Clients should consult a personal tax or legal advisor prior to making any tax or legal related investment decisions. Page 2 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

3 Section One: From Here to Where? EMERGING MARKET BONDS Page 3 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

4 From Here to Where: the Evolution of Bond Markets High Yield Approaching the Next Stage? US HY EM HY Euro HY Index Value (USD Bn) Months Since Inception Source: Merrill Lynch as at 28 February Page 4 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

5 How Bond Markets Transform: New Issuance Credit the Primary Building Block of the Current Marketplace US$ billion Corporates Sovereigns Source: JPMorgan as at 31 January Page 5 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

6 Optimal Credit Conditions Lead to Rapid Growth Investment Grade Dominates Net New Issuance EM Corporate Issuance Quantitative Easing Tapering US$bn Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 EM IG Corporates EM HY Corporates NR Source: Bank Of America as at 31 January Page 6 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

7 From Here to Where: Emerging Market Bonds Scale of New Issuance Widens Benchmark Variance EMBI Global and CEMBI offer investors very different exposures Index Weights % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Asia EM Europe Latin America Middle East CEMBI EMBI 70% 60% 50% Rating Weights % 40% 30% 20% 10% 0% Source: JPMorgan 31 December 2013 Ratings used are as rated by Moody's Investor Service or the Standard & Poor's. A BBB BB B CEMBI EMBI Page 7 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

8 From Here to Where: Comparing Risk Profiles Emerging Markets Map Favourably Against Global Peers Historical Sharpe Ratios ( ) EM IG EM Sovs EU IG TIPs US IG EM HY CMBS Munis US HY US Loans 10yr Trsy EU HY EM Eqty Preferreds US Eqty ABS Source: Bank of America 1999 March Page 8 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

9 Comparing Risk Factors Market Deepening Diversifies Potential Portfolio Composition Gross Leverage Emerging Market HY and IG (3Q 2013) Argentina HY Utilities Mexico HY Real Estate Brazil HY Real Estate Brazil HY Food Brazil HY Materials Peru HY Food Russia HY Materials Russia HY Energy Chile IG Materials Mexico HY Telecommunications Chile IG Utilities Brazil IG Materials South Africa HY Materials Mexico IG Food Russia IG Energy 0.8x 2.5x 2.4x 2.4x 2.3x 2.1x 1.9x 1.8x 1.8x 4.7x 5.5x 5.4x 5.4x 6.4x 7.1x Source: Bank of America as at September Page 9 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

10 Credit Metrics: Emerging Markets versus U.S. High Yield Emerging Markets Compare Favourably to U.S. Credit % % % Basis Points Source: Bank of America as at 31 December 2013 Page 10 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

11 Emerging Markets Credit Fundamentals Margins Not at Danger Levels EBITDA MARGIN: Emerging Markets Investment Grade vs. High Yield Percentage Margin Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Emerging Market Investment Grade Emerging Market High Yield Source: Bank of America as at 31 July Page 11 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

12 From Here to Where: Comparing Risk Factors High Yield Default Risk in Line with Global Peers LTM Issuer Default Rate, Pct BofA-ML US HY EU HY EM HY Source: Bank of America as at 28 February Page 12 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

13 It s a Vlad, Vlad World: What Does the Market Really Care About? Case Study: Asymmetric Risk Russia: 5-Year CDS U.S. Banking Crises Cyprus Ukraine Basis Points Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Source: Bloomberg, Pioneer Investments, as at March 2014 Page 13 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

14 Credit Spreads: Emerging Markets vs. U.S. High Yield Emerging Markets Trade Widen 1,200 1,100 1,000 Spread, Bps Oct 09 Apr 10 Oct 10 Apr 11 Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 US HY EM HY Source: Bank of America as at 28 February Page 14 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

15 From Here to There: Recent Performance Where to From Here? EM Fixed Income Indexed Price Performance: The Taper Tantrum Market Discounts Fed Tapering 99 Indexed Performance Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Hard Currency Sovereign (EMBI GD) Local Currency Sovereign (GBI-EM) Hard Currency Corporate (CEMBI) Source: JPMorgan, Bloomberg, March CEMBI refers to JPMorgan Corporate EMBI Broad Index; EMBI GD refers to JPMorgan Emerging Markets Bond Index and GBI - EM refers to JPMorgan GBI-EM Broad Diversified Index. Page 15 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

16 2013 Emerging Market Fixed Income Portfolio Flows Sovereign Flows More Severe than Credit Monthly Flows by Benchmark Strategy $ billion Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 CEMBI Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 EMBI Source: JPMorgan as at 31 January, Page 16 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

17 Valuation: What s in the Price? Yield Cushion Reduces Rate Sensitivity Yield (%) Spreads (bps) Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 US Treasury 10 Year (LHS) EMBI Spread (RHS) CEMBI High Yield Spread (RHS) EMBI refers to the JPMorgan EMBI Global Diversified Blended Spread. CEMBI refers to the JPMorgan Corporate EMBI Global Diversified Blended Spread. Source: Bloomberg as at 28 February 2014 Page 17 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

18 Section Two: The Cool Stuff BUILDING PORTFOLIOS Page 18 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

19 Why Deploy an Aggregated Strategy in Emerging Markets Debt? We believe that there are long-term growth opportunities for active managers in under researched, semi-efficient, non-homogenous markets. Our strategy aims to reflect what we believe to be the best value that can be found among issuers within countries that we view as strategically advantaged. We offer a flexible approach staffed by 10 portfolio managers and 10 career analysts, averaging 13 years' experience. We construct flexible portfolios focused on managing the risk of permanent capital impairment. Source: Pioneer Investments as at 28 February Page 19 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

20 Who Builds the Portfolios? Mauro Ratto (left) is the Head of Emerging Markets at Pioneer Investments, and has 26 years of investment experience in Emerging Markets. Lead Portfolio Manager Yerlan Syzdykov (right) has been involved in the Pioneer Funds - Emerging Markets Bond family since its inception in Individual Role Years of Industry Experience Yerlan Syzdykov Head of Emerging Markets Bond & High Yield Portfolio Manager Aggregate Colm D Rosario Portfolio Manager High Yield 9 Desmond English Portfolio Manager Loans 16 Hakan Aksoy Portfolio Manager Local Currencies 14 Esther Law Portfolio Manager Local Currencies 15 Stefan Benedetti Portfolio Manager Distressed Credit 23 Alejandro Arevalo Portfolio Manager Credit 12 Paul Nash Portfolio Manager Institutional 15 Paolo Pennatti Portfolio Manager Institutional 6 Giles Bedford Client Portfolio Manager 19 Average Source: Pioneer Investments, 14 March 2014 Page 20 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

21 Portfolio Construction Challenge: Reflect the Full Opportunity Benchmark Middle East - HEDGE OTHER QUASI SOVEREIGN DEBT HIGH YIELD RELATIVE VALUE EUROPE MOMENTUM LOCAL CURRENCY ASIA CORPORATE HIGH YIELD SOVEREIGN DEBT AFRICA INVESTMENT GRADE CORPORATE IG LATIN AMERICA QUASI SOVEREIGN SOVEREIGN ISSUERS RATING REGION MSCI EMERGING MARKET BOND INDEX GLOBAL DIVERSIFIED MARKET Page 21 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

22 Deep Research Coverage Drives the Bond Selection Process 10 dedicated career analysts with 13 years average experience Individual Sector Years Industry Experience Garrett Walsh Head of Team Financials 19 Brian Farrell Industrials 20 Gavin McKeown TMT / Basic Industries 17 Andriy Boychuk Autos/Retail 10 Conor McCarrick Chemicals, Gaming, IG Telco 13 Alison Harvey Building Materials, Pharma 9 Suzanne Keane Utilities 18 Marina Vlasenko Financials 14 Paul Cheung Real Estate 7 Ray Jian Industrials 7 Average 13 Source: Pioneer Investments as at 23 January Page 22 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

23 Why Do We Deploy Credit Research? The Process Key Factors Preliminary View Fundamental Analysis Peer Review of Case Formal Meetings Rating Assignment Business Analysis Industry Dynamics / Corporate Environment Corporate Benchmarking Management / Corporate Governance Corporate Structure Financial Analysis Accounting & Financial Disclosure FCF History and Credit Metrics Profit and cashflow drivers FCF Forecast Capital Structure Key Covenants Asset Coverage over an Economic Cycle Page 23 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

24 A Six-Stage Process Drives our Investment Decisions Anchored by Integrated Risk Management 01. Macro Analysis 02. Idea Generation 03. Sector Analysis INTEGRATED RISK MANAGEMENT 06. Position Sizing 05. Ex Ante Risk Analysis 04. Credit Analysis & Valuation Page 24 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

25 Proprietary Portfolio Construction Tools Strategies Risk Analysis Detailed Performance Analysis Pioneer Investments, For illustrative purposes only. Page 25 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

26 Pioneer Funds Emerging Markets Bond Asset Allocation: Benchmark Aware, Not Constrained Our active process drives allocations aiming for optimal returns. Pioneer Funds Emerging Markets Bond vs. Benchmark 80% 70% 60% 50% 40% 30% 20% 10% 0% Corporate Quasi Sovereign Sovereign Fund Benchmark Source: Pioneer Investments as at 31 December Benchmark refers to the JPMorgan Emerging Markets Bond Index EMBI (95%) and JPMorgan Cash 1 Month Euro (5%). Asset allocation will change over time and does not reflect a commitment to an investment strategy or sector. Page 26 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

27 Pioneer Funds Emerging Markets Bond Active Positioning vs. Benchmark Asset Allocation Components: Benchmark vs. Fund 6% 5% 4% 3% 2% 1% 0% Benchmark Fund Benchmark Fund Benchmark Fund Turkey Indonesia Brazil Sovereign Corporate Source: Pioneer Investments as at 31 December Benchmark refers to the JPMorgan Emerging Markets Bond Index EMBI (95%) and JPMorgan Cash 1 Month Euro (5%). Asset allocation will change over time and does not reflect a commitment to an investment strategy or sector. Page 27 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

28 Seeking Strategic Advantage through Positioning Key Over and Underweights: Pioneer Funds Emerging Markets Bond % % 8.00 % 6.00 % 4.00 % 2.00 % 0.00 % % Invested Asset Weight BMK Weight Delta Asset Weight Source: Pioneer Investments as at 28 February Benchmark refers to the JPMorgan Emerging Markets Bond Index EMBI (95%) and JPMorgan Cash 1 Month Euro (5%). Asset allocation will change over time and does not reflect a commitment to an investment strategy or sector. Page 28 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

29 Portfolio Construction Challenge Benchmark Sample Ideas - HEDGE ITRAXX CROSSOVER OTHER QUASI SOVEREIGN DEBT RELATIVE VALUE LONG/SHORT STRATEGIES MOMENTUM LOCAL CURRENCY TURKISH TREASURIES SOVEREIGN DEBT CORPORATE HIGH YIELD RUSSIAN BANKS INDONESIAN COAL CHINESE REAL ESTATE MEXICAN CELLULAR SERVICES CORPORATE IG QUASI SOVEREIGN SOVEREIGN QATAR TELECOM RUSSIAN ENERGY KINGDOM OF THAILAND INTERNATIONAL BONDS BRAZILIAN GOVERNMENT BONDS BENCHMARK STRATEGY SAMPLE IDEAS *The benchmark is the JP Morgan Emerging Markets Bond Index Global Diversified (95%) and JPM Cash 1 Month Euro (5%) Page 29 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

30 What Has Driven Performance? 2013 Contribution Analysis 2013: Pioneer Funds Emerging Markets Bond: Positioning and Contribution Analysis Relative Weight (Basis Points) Russia China Phillipines Poland Contribution (Basis Points) Source: Pioneer Investments, as at January Russia China Phillipines Poland Selection Allocation Shift Page 30 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

31 Drawdown Management Credit/Market Event Case Studies Pioneer Funds Emerging Markets Bond: Performance (rebased to 100) Around Major Market Dislocations FED Taper: Performance Fund Benchmark Trading Days Financial Crisis: 2008 Euro Crisis: 2011 Performance Fund Benchmark Trading Days Performance Fund Benchmark Trading Days 2008 refers to the Global Financial Crises 8th August 2008, 2011 refers to the Eurozone Crises in 2 August 2011 and 2013 refers to the first Fed Tapering communication on 22 May The benchmark is JPMorgan EMBI Global Diversified 95% and JPMorgan Cash 5%. Source: Pioneer Investments, January Performance is based on the A Unit Cass EUR non distributing share class Net of fees. Past performance does not guarantee and is not indicative of future results. Page 31 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

32 Section Three: Products ACCESSING OUR VIEWS Page 32 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

33 Pioneer Funds Emerging Markets Bond An Aggregate of Our Best Ideas in Emerging Markets Debt Portfolio aims to reflect the best value that can be found among issuers within countries that we view as strategically advantaged. Active Asset Allocation and bottom-up security selection are key drivers of Alpha Portfolios are benchmark aware, but not constrained, designed to reflect the full market opportunity. Risk profile can be adapted to suit economic and market conditions AUM: USD 1.6 Billion Inception: 4 July 2000 Portfolio Details Benchmark: JPM EMBI Global Diversified (95%) JPM Cash (5%) Universe: Sovereign & Quasi Sovereign Corporate Local Currency Credit Quality: Investment Grade & High Yield Source: Pioneer Investments as at 28 February 2014 Page 33 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

34 Pioneer Funds Emerging Markets Bond Key Characteristics CURRENTLY ON THIS SLIDE Key Details Yield To Maturity (%) 7.23 Spread Duration 4.01 Effective Duration 4.72 Average Quality BB- AUM (USD bn) 1.6 Currency Exposure Term Exposure 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Cash FRN Rating Allocation Weight % 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% ARS BRL CNY CZK EUR GBP HKD NOK MXN HUF Weight NZD PLN RUB SEK TRY USD ZAR AAA AA+ AA A+ A A- BBB+ BBB Weight BB+ BB B+ Benchmark B B- CCC+ CCC AA- BBB- BB- CCC- CC C D Data Source: Pioneer Investments, 28 February The benchmark of the fund is JPM EMBI Global Diversified 95% andjpm Cash 5%. Ratings are as rated by Moody's Investor Service, the Standard & Poor's or Fitch's as applicable Page 34 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

35 Pioneer Funds Emerging Markets Bond Calendar Year Returns (USD, Net of Fees) 28 February 2014 Fund % Benchmark % Relative % 2014 (YTD) Source: Pioneer Investments as at 28 February Performance figures are in USD and have been converted from the sub-fund's base currency, the euro. Performance data provided refers to Class A ND units only, and is based upon NAV net of fees. The benchmark of the fund is JPM EMBI Global Diversified 95% andjpm Cash 5%. For details of other unit Classes available, please refer to the prospectus. Past performance does not guarantee and is not indicative of future results. Page 35 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

36 Pioneer Funds Emerging Markets Bond Contributions Analysis: How Did We Generate Returns? Basis Points Selection Allocation FX Curve Performance refers to Class A USD Non Distributing Units, Net of Fees. Source: Pioneer Investments, 31 January Past performance does not guarantee and is not indicative of future results. Page 36 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

37 Pioneer Funds - Emerging Markets Bond Trailing Returns (USD, Net) 28 February % 21.8% 20.0% 15.0% 10.0% 7.0% 6.7% 11.7% 10.1% 5.0% 0.0% 3.0% 1.8% 2.2% 1.2% 0.5% 1.5% 0.3% -1.2% -1.0% -1.1% -5.0% QTD YTD 1 Year (Ann.) 3 Year (Ann.) 5 Year (Ann.) Portfolio Benchmark Relative Source: Pioneer Investments as at 28 February Performance is based on Class A USD non-distributing units net of fees. The benchmark is the JPMorgan EMBI Global Diversified (95%) and JPMorgan Cash (5%). Past performance does not guarantee and is not indicative of future results. Page 37 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

38 Pioneer Funds Emerging Markets Bond (A Unit Class USD ND) Performance vs. Peers Source: Morningstar Direct as at 31 January Copyright 2014 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Data refers to Class A USD non-distributing units net of fees. The correct legal name of the sub-fund mentioned in this chart is Pioneer Funds Emerging Markets Bond. Page 38 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

39 Pioneer Funds Emerging Markets Corporate High Yield Bond Our Best Ideas in Emerging Markets Corporate High Yield Debt The strategy aims to reflect the best value that can be found among issuers within countries that we view as strategically advantaged. Active Asset Allocation and bottom-up security selection are key drivers of Alpha Portfolios are benchmark aware, but not constrained, designed to reflect the full market opportunity. Risk profile can be adapted to suit economic and market conditions AUM: $80.7 Million Inception: 11 July 2012 Strategy Details Benchmark: JPMorgan CEMBI Broad Diversified High Yield Universe: Hard Currency Corporate Local Currency Corporate Credit Quality: Investment Grade & High Yield Source: Pioneer Investments as at 28 February Page 39 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

40 Pioneer Funds - Emerging Markets Corporate High Yield Bond Key Characteristics Key Details Term Exposure Yield To Maturity (%) 7.54 Spread Duration 4.05 Effective Duration 4.02 Average Quality BB- AUM ($, million)* % 60.0% 40.0% 20.0% 0.0% Liq Cash FRN Currency Exposure Rating Allocation Weight 90.0% 24.0% 60.0% 18.0% 12.0% 30.0% 6.0% 0.0% BRL EUR GBP USD 0.0% AAA AA BBB BB+ BB B+ B B- CCC+ CCC BBB- BB- CCC- CC D NR Data Source: Pioneer Investments, 28 February Ratings are as rated by Moody's Investor Service, the Standard & Poor's or Fitch's as applicable. Page 40 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

41 Pioneer Funds Emerging Markets Bond Corporate High Yield 2013 Contributions Analysis: How Did We Generate Returns? Portfolio Attribution: Pioneer Funds Emerging Markets Bond Corporate High Yield Basis Points Curve - Shift Curve - Twist Allocation Selection Currency Total 1st Half 2nd Half* Performance refers to Class A USD Non Distributing Units, Net of Fees. Source: Pioneer Investments, 31 January * 2 nd Half refers to the period 28 June November Past performance does not guarantee and is not indicative of future results. Page 41 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

42 Pioneer Funds - Emerging Markets Corporate High Yield Bond Trailing Returns (USD, Net) 28 February % 3.0% 0.0% 2.2% 2.1% 1.8% 1.6% 1.4% 1.3% 0.2% 0.1% 0.1% 2.7% 0.6% 2.1% -3.0% 1 Month QTD YTD 1 Year Portfolio Benchmark Relative Source: Pioneer Investments as at 28 February Performance for USD Non Distributing Units net of fees. The benchmark against which we measure strategy performance is the JP Morgan Corporate Emerging Markets Bond Index Broad Diversified Non Investment Grade. Composite Inception 31 July Past performance does not guarantee and is not indicative of future results. Page 42 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

43 ONE LAST THING Page 43 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

44 Love Will Tear Us Apart Emerging Markets Credit Has Performed Well vs. EM Equity on Lower Volatility Emerging Markets: Equities vs. Corporate High Yield Equity Index Level Debt Index Level Source: Bloomberg, March 2014 MSCI Emerging Markets (Equity) JP Morgan CEMBI HY 5-Year Historic Volatility: MSCI Emerging Markets (Orange) vs. CEMBI (Green) Source: Bloomberg as at March Page 44 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

45 Section Five: APPENDIX Page 45 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

46 Broad Capability in Emerging Market Fixed Income Aggregate Debt Local Currencies Corporate & High Yield Portfolio Name Pioneer Funds - Emerging Markets Bond Pioneer Funds - Emerging Markets Bond Local Currencies Pioneer Funds - Emerging Markets Corporate Bond 2016 (Buy and Hold) Pioneer Funds - Emerging Markets Corporate Bond Pioneer Funds - Emerging Markets Corporate High Yield Bond Inception Date 4 July November June December July 2012 AUM $1,614 million $304 million $416 million $13 million $81 million Investment Universe Sovereign Hard and Local Currency plus Corporate Emerging Markets Hard and Local Currency Debts EM Debt Instruments denominated in Local Currencies Corporate Emerging Markets Hard Currency Debts Corporate Emerging Markets Hard and Local Currency Debts Corporate Emerging Markets, High Yield Debts Benchmark JPM EMBI Global Diversified 95% JPM Cash 5% JP Morgan GBI EM Broad Diversified EUR Unhedged JP Morgan GBI EM Investable EUR Unhedged N/A JPMorgan CEMBI Broad Diversified JPM CEMBI Broad Diversified Non Investment Grade Source: Pioneer Investments as at 31 January 2014 Page 46 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

47 Pioneer Funds - Emerging Markets Bond Risk Analysis (USD, Net) 28 February 2014 Reward & Risk Statistics 3-Year Standard Deviation % 6.40% Sharpe Ratio 1.24 Alpha % 3.27% Beta 0.84 R-Squared 0.69 Tracking Error % 3.69 Information Ratio 0.55 Source: Pioneer as at 28 February Analysis is based on Class A USD non-distributing units net of fees. Page 47 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

48 Portfolio Construction Key Details: Pioneer Funds - Emerging Markets Bond Holdings Benchmark Tracking Error Corporate limit* Credit quality* Single corp issuer* Approx holdings JPMorgan EMBI Global Diversified (95%) JPMorgan Euro 1 Month Cash (5%) 1-6% ex-ante Flexible Cash holding* Up to 20% Duration* Country* Local currency* Up to 25% Investment Grade & High Yield Max. 5% (IG), Max 3% (HY) +/- 1.5 years relative to benchmark +/- 6% relative to benchmark *Note: Unless otherwise stated the investment guidelines referred to in this document are internal guidelines only and may be subject to change over time. They should not be considered as a restriction on the investment process as long as there is a valid investment rationale. Page 48 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

49 Active Volatility Management Tools Instrument itraxx Corporate CDS Sovereign CDS FX Forwards Rate Futures Typical Usage Broad Credit Hedge and Liquidity Management Tool Individual Credit Exposure Sovereign Risk and Hedges Currency Risk Interest Rate Risk Page 49 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

50 Pioneer Funds Emerging Markets Bond Trailing Returns v JPM EMBI Global Diversified & Morningstar Peers (USD, Net) 31 January 2014 Source: Morningstar Direct as at 31 January Copyright 2014 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Data refers to Class A USD non-distributing units net of fees. The correct legal name of the sub-fund mentioned in this chart is Pioneer Funds Emerging Markets Bond. Page 50 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

51 Pioneer Funds Emerging Markets Bond Excess Return v JPM EMBI Global Diversified & Morningstar Peers (USD, Net) 31 January 2014 Source: Morningstar Direct as at 31 January Copyright 2014 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Data refers to Class A USD non-distributing units net of fees. The correct legal name of the sub-fund mentioned in this chart is Pioneer Funds Emerging Markets Bond. Page 51 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

52 Pioneer Funds Emerging Markets Bond Information Ratio v Morningstar Peers (USD, Net) 31 January 2014 Source: Morningstar Direct as at 31 January Copyright 2014 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Data refers to Class A USD non-distributing units net of fees. The correct legal name of the sub-fund mentioned in this chart is Pioneer Funds Emerging Markets Bond. Page 52 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

53 Mauro Ratto Head of Emerging Markets Mauro Ratto is Head of Emerging Markets. In this role, he is responsible for leading a highly-skilled investment team working on debt and equity strategies that covers Asia, Latin America, Emerging Europe, the Middle East and Africa. Mauro is also Lead Portfolio Manager of Pioneer Funds Euro Strategic Bond and a Co- Portfolio Manager on our Global Emerging Market Equity mandates together with Marco Mencini, Head of Equities Emerging Markets and Andrea Salvatori, Head of Global EM & LatAM Equities. In this capacity, Mauro is responsible for ensuring the integration of the research and portfolio construction, as well as heading the macro overlay and actively managing the foreign exchange components of the investment process. Prior to his current appointment, Mauro was Head of Investment Management Europe and Asia. In this role, he was responsible for Portfolio Management and Trading teams across emerging as well as developed markets concentrating on fixed income, equity, absolute return, balanced and fundamental research, as well as single strategy hedge funds. He is a member of the Global Investment Committee and is a director of Pioneer Investment Management Limited. A guest lecturer at the faculty of Political Economy of University of Genoa and an Economics graduate of the same university, Mauro has been part of UniCredit S.p.A., which owns Pioneer Investments, since In 1998, he moved to Dublin to join Pioneer Investments as Head of Global Portfolios, later adding Fixed Income to his title. He was Head of Portfolio Management, Europe ( ), before taking on the role of Head of Investment Management Europe and Asia. Page 53 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

54 EM Fixed Income Team Biographies Yerlan Syzdykov, Head of Emerging Markets Bond & High Yield Yerlan Syzdykov is Head of Emerging Markets - Bond & High Yield at Pioneer Investments. In this role, he has overall performance responsibility for investment strategies managed by our team of Emerging Markets and High Yield Portfolio Managers. Yerlan is Lead Portfolio Manager for our Aggregate Emerging Market Debt strategies, including Pioneer Funds Emerging Markets Bond. Yerlan has been involved in the managing of our Emerging Market Debt strategies since 2000 and has played a key role in evolving our investment capability in this area over the last 14 years. Yerlan has worked on emerging markets throughout his career. He joined Pioneer Investments in 2000 from Bancroft in Paris where he had been working as an Investment Analyst. Before this, he was employed by various companies in London and Paris within the emerging markets area. Yerlan started his career as an Equity Analyst with Renaissance Capital in Moscow upon completion of his MBA in Colm D Rosario, Senior Portfolio Manager High Yield Colm D Rosario is the Lead Portfolio Manager for our Emerging Market High Yield and Euro High Yield investment strategies. Colm has been a member of the team since 2007 and was previously a Co-Portfolio Manager on our High Yield investment strategies. He has over 10 years of investment experience. Before joining Pioneer Investments, Colm worked as a Credit Analyst with WGZ Bank ( ), where he was primarily responsible for the research and analysis of Asset-Backed Securities and Banks. Colm has an MA in Economics and Finance, an MSc in Mathematics and a BA in Double Mathematics/Economics. He was awarded the Financial Risk Manager (FRM ) designation by the Global Association of Risk Professionals (GARP) in April Alejandro Arevalo, Emerging Markets Portfolio Manager Alejandro Arevalo is an Emerging Markets Portfolio Manager within the Emerging Markets & High Yield Debt team in London. Alejandro is a credit specialist with over 15 years industry experience. He is Lead Portfolio Manager of our Emerging Markets Corporate Debt strategy and he also co-manages Pioneer Obbligazionario Paesi Emergenti a distribuzione. Before joining Pioneer Investments, Alejandro was an Emerging Markets Corporate Portfolio Manager for Standard Bank Asset Management with specific responsibility for marketing, structuring and managing new Emerging Markets Portfolios, focusing on Latin America, CIS and Asia. Alejandro has an MBA with concentration in Finance from Florida International University, Miami. Page 54 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

55 EM Fixed Income Team Biographies Esther Law, Emerging Markets Portfolio Manager Esther Law is an Emerging Markets Portfolio Manager within the Emerging Markets and High Yield Debt team in London. Esther has 15 years of experience in emerging markets and is a Portfolio Manager on our Emerging Markets Debt Local Currencies strategy with a focus on local currency debt and relative value strategies. Prior to joining Pioneer Investments, she worked as a Director in Emerging Markets Strategy for Societe Generale, responsible for CEEMA local currency markets. Esther generated trading ideas for relative value, local currency, curve trades and cross country trades, conducting analysis for all local markets within CEEMEA, and designing quantitative and derivative based emerging market models. Esther has an MSc in Mathematical Trading and Finance from CASS Business School in London and a BSc degree from the London school of Economics & Political Science. Hakan Aksoy, Emerging Markets Portfolio Manager Hakan Aksoy is an Emerging Markets Portfolio Manager within the Emerging Markets & High Yield Debt team in London. Hakan is a local currency specialist with over 16 years industry experience. He is Lead Portfolio Manager of our Emerging Market Debt Local Currencies strategy. Hakan also covers the local currency bond and the emerging markets FX trades with the other funds at the desk. Prior to joining Pioneer Investments, Hakan held the position of Senior Fund Manager for five years in Koc Portfolio Management, Turkey. Before this, he worked as a Portfolio Manager in Iktisat Asset Management and as an Economist in Iktisat Investment Securities. Desmond English, Loan Portfolio Manager Desmond is a Portfolio Manager on our Euro High Yield strategy. He has over 22 years industry experience, 12 of which spent in the leveraged finance arena. He has experience across the full range of senior and subordinated debt financing products. Prior to joining Pioneer Investments, Desmond was a Director at Commerzbank with responsibility for Loan Transaction Management. Previously, he was Director of Clerkenwell Limited, London, which provided investment and advisory support to businesses. Within this role, he utilised his expertise in credit analysis and debt restructuring to advise clients of the firm. Desmond holds a BA (Hons) degree in Modern History and Political Science and a Masters in Development Finance from the University of Birmingham. Page 55 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

56 EM Fixed Income Team Biographies Giles Bedford, Client Portfolio Manager Giles is a Client Portfolio Manager with 19 years of experience in Emerging Markets. Prior to joining Pioneer Investments, Giles was the managing partner of Beltone Financial UK, the European arm of the Egyptian investment bank. Prior to this, Giles was a partner at E2 Research, an independent research boutique. He previously held positions at Morgan Stanley, Goldman Sachs, Robert Fleming and ING Barings -all in the field of Emerging Markets. In 2006, The Financial News named Giles on their first Rising Stars "list of the 100 most influential people in the city under 40. Giles was educated at the University of St Andrews and the University of Pennsylvania. Page 56 I For Broker/Dealer Use Only and Not to be Distributed to the Public.

57 Important Information Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 30 March 2014 Pioneer Funds Emerging Markets Bond and Pioneer Funds Emerging Markets Corporate High Yield Bond are sub-funds (the Sub-Fund ) of Pioneer Funds (the Fund ), a fonds commun de placement with several separate sub-funds established under the laws of the Grand Duchy of Luxembourg. Past performance does not guarantee and is not indicative of future results. Unless otherwise stated, all views expressed are those of Pioneer Investments. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested. More recent returns may be different than those shown. Please contact your local sales representative for more current performance results. In the event this Sub-Fund holds derivatives, portfolio breakdown and allocation slides reflect such derivative exposure only where specifically noted. This material is not a prospectus and does not constitute an offer to buy or a solicitation to sell any units of the Fund or any services, by or to anyone in any jurisdiction in which such offer or solicitation would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. For additional information on the Fund, a free prospectus should be requested from Pioneer Global Investments Limited ( PGIL ), 1 George s Quay Plaza, George s Quay, Dublin 2, Ireland. Call Fax This information is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities or services in the United States or in any of its territories or possessions subject to its jurisdiction to or for the benefit of any United States person (being residents and citizens of the United States or partnerships or corporations organized under United States laws). The Fund has not been registered in the United States under the Investment Company Act of 1940 and units of the Fund are not registered in the United States under the Securities Act of This document is not intended for and no reliance can be placed on this document by retail clients, to whom the document should not be provided. This content of this document is approved by Pioneer Global Investments Limited. In the UK, it is directed at professional clients and not at retail clients and it is approved for distribution by Pioneer Global Investments Limited (London Branch), Portland House, 8th Floor, Bressenden Place, London SW1E 5BH. Pioneer Global Investments Limited is authorised and regulated by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority ( FCA ) are available from us on request. The Fund is an unregulated collective investment scheme under the UK Financial Services and Markets Act 2000 and therefore does not carry the protection provided by the UK regulatory system. Pioneer Funds Distributor, Inc., 60 State Street, Boston, MA ( PFD ), a U.S.-registered broker-dealer, provides marketing services in connection with the distribution of Pioneer Investments products. PFD markets these products to financial intermediaries, both within and outside of the U.S. (in jurisdictions where permitted to do so) for sale to clients who are not United States persons For Broker/Dealer Use Only and Not to be Distributed to the Public Pioneer Investments is a trading name of the Pioneer Global Asset Management S.p.A. group of companies. Date of First Use 30 April Page 57 I For Broker/Dealer Use Only and Not to be Distributed to the Public.