Global and U.S. High Yield: Evaluating the Current Opportunity Andrew Feltus, CFA, Director of High Yield and Bank Loans

For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

U.S. High Yield Has Never Had Consecutive Negative Years U.S. High Yield Returns 60 50 40

Total Return

30 20 10

0 -10 -20 -30

Source: Bloomberg and BOAML Data as of 18 March 2016

Page 2 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

U.S. High Yield Levels Yields Have Risen 25

Percent (%)

20

15

10

5

0

Source: BofAML and Pioneer Investments. Data as of 29 February 2016

Page 3 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

U.S. High Yield Industry Sector Spreads January 1997 – February 2016 2,500

Spreads

2,000 ENERGY

1,500

1,000

INDEX TECHNOLOGY 500

HEALTHCARE

Energy

HY Index

Technology

Healthcare

Source: Bloomberg and BOAML. Data as of 29 February 2016.

Page 4 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

29/02/2016

31/01/2016

31/12/2015

30/11/2015

31/10/2015

30/09/2015

31/08/2015

31/07/2015

30/06/2015

31/05/2015

30/04/2015

31/03/2015

28/02/2015

31/01/2015

31/12/2014

30/11/2014

31/10/2014

30/09/2014

31/08/2014

31/07/2014

30/06/2014

31/05/2014

30/04/2014

31/03/2014

28/02/2014

31/01/2014

31/12/2013

0

U.S. High Yield: BB Versus CCC Sector Spreads January 1997 – February 2016 4,500 4,120 4,000 3,500

Spreads

3,000 2,500 1,932

2,000 1,500 1,000

480

500 0

BB

CCC

Source: Bloomberg and BOAML. Data as of 26 February 2016.

Page 5 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

Recession Does Not Necessarily Follow Spreads Reaching 800 bps BofA Merrill Lynch High Yield Index 2400 2000

Spreads

1600 1200 800 400 0

Option Adjusted Spread Source: Bloomberg as at 31 December 2015.

Page 6 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

U.S. High Yield Performance When Breaching 800 OAS

1 Year Return

2 Year Return

3 Year Return

Recession Yes/No

30/09/1990

31.15%

26.63%

22.40%

Yes

20/11/2000

4.00%

-0.55%

8.30%

Yes

21/06/2002

15.93%

12.60%

11.89%

No

17/01/2003

27.30%

17.22%

12.63%

No

10/03/2008

-25.46%

11.49%

12.68%

Yes

01/08/2008

4.45%

13.96%

13.61%

Yes

29/09/2011

17.97%

12.52%

10.52%

No

Date

Source: Bloomberg

Page 7 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

U.S. High Yield Spreads and Defaults 25.00 Average: 20.00

562 bp Spread 4.56% Default Rate

Percent

15.00

Current OAS 817 bp Current Default Rate: 3.2%

10.00

5.00

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

0.00

OAS

Defaults

Source: Moody’s and BofA ML High Yield Master II Index and as of 24 February 2016. BofA High Yield Master II Index is a commonly accepted measure of the performance of U.S. High Yield bonds. Default rate is calculated as the amount defaulted over the last twelve months divided by the amount outstanding at the beginning of the twelve-month period.

Page 8 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

U.S. High Yield and Default Premiums As at 29 February 2016 Ten Year Treasury: 1.98% Yield-to-Worst OAS (over Govt.) Risk Premium

HY Index

HY Index ex-Energy

HY Energy Index

HY Energy Index

9.08%

7.83%

17.45%

17.45%

775

645

1,609

1,609

200 bps

200 bps

300 bps

200 bps

Implied Default Rate = Spread/Default loss •

Current market price

$86.64

$93.18

$58.55

$58.55

•

Estimated recovery price*

41.53

41.53

41.53

60.00

•

Implied default loss rate

58.47%

58.47%

58.47%

40.00%

•

Current spread (less risk premium)

575

445

1309

1409

•

Spread/default loss

4.45%/58.47% =

13.09%/58.47% =

14.09%/40.00% =

5.75%/58.47% =

Implied Annual Default Rate

9.8%

7.6%

22.4%

35.2%

Cumulative 5-Year Default Rate

40%

32%

71%

89%

1.7%

1.7%

Moody's Highest Default Rate Last 25 Years

13.8% (Nov.2009)

22 Year Average Ann. Default Rate (12/31/15, JP Morgan)

3.1%

Current Moody's HY Default Rate (2/16)

3.6%

Source: Merrill Lynch Master II High Yield Index, Pioneer Investments Research and J.P. Morgan. Moody’s Investors as of 29 February 2016. *Average recovery price $41.53 or $60.00. Data displayed has been calculated by Pioneer Investments as at 29 February 2016 and is based on information from the sources provided above assuming normal market conditions. All rates given can be exceeded or undershot and should not be construed as an assurance or guarantee. The application and results of the analysis will depend upon the particular circumstances involved, which may change at any time based on market and other conditions. There can be no assurances that countries, markets or sectors will perform as expected.

Page 9 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

While Leverage Has Increased, Coverage Levels Have Remained Strong HY Gross Leverage

HY Interest Coverage

8.00

5.0

Forecast

7.00

4.5

6.00 4.0

(X)

(X)

5.00 3.5

4.00 3.0 3.00 2.5

2.00

1.00 1998

2002 Energy

2006

2010

High Yield (All)

2015

2.0 2000

2002

2004

Ex-Energy

Source: Morgan Stanley Leveraged Finance Research. Data as of 29 February 2016. Data from 31 December 2015 is a forecast.

Page 10 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

2006

2008

2010

2012

2014

Credit Upgrades and Downgrades Rising Stars and Fallen Angels (Issuer) 70 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD

Rising Stars

Fallen Angels

Source: JPMorgan. Data as of 29 February 2016.

Page 11 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

Defaults and Distress Ratios Across Regions Default activity remains low, distressed issuers are increasing LTM Issuer Based Default Rate (%) 30

Distress Ratio (%) 100

25

80

20 60 15 40 10

5

20

0

0

BofA-ML US HY

EM HY

EU HY

US HY

EM HY

Source: Bloomberg and BOAML. Data as of 29 February 2016. The distress ratio represents the percentage of bonds trading with spreads wider than 1,000bps.

Page 12 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

EU HY

High Yield Market Comparisons U.S. High Yield OAS Less Europe High Yield (GBP & EUR)

U.S. High Yield OAS Less EM Corporate OAS 1000

450 +3 SD 155

250

+2 SD

-2 SD

-350

400 +1 SD 200 Mean = 146 191

-3 SD

Source: Bloomberg and BOAML Data as of 18 March 2016.

Page 13 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

2014

2013

2012

2011

2010

2009

2008

-2 SD

2007

-200

2006

-750

-1 SD

2005

0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

-550

2016

-1 SD

+2 SD

2015

-150

Basis Points

Mean = -64

+3 SD

600

+1 SD

50

Basis Points

800

Global High Yield Sector Weights Vary by Market High Yield Sector Weights Comparison 30

25

% of Index

20

15

10

5

0

BofAML High Yield Master II Index

BofAML Euro High Yield Index

BofAML High Yield Emerging Corporate Plus

Source: Bloomberg and BOAML Data as of 22 March 2016.

Page 14 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

High Yield Corporations Issue Bonds Globally, Creating Opportunity

Darling Ingredients Inc., Food and Beverage Industry USD

EUR

Coupon

5 3/8

4 3/4

Maturity

15/01/2022

30/05/2022

Price

102.00

99.68

Yield to Worst

4.79%

4.81%

Option Adjusted Spread

314 bps

475 bps

Rating

Ba3/BB+

Ba3/BB+

Source: Bloomberg. OAS and YTW computed using the 22 March 2016 end of day price for each issue.

Page 15 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

U.S. High Yield Sector Relative Value 5.0 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 -3.0

-4.0

Source: Bloomberg as at 22 March 2016 and 31 December 2015.

Page 16 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

Consumer Goods

Services

Retail

Media

Leisure

Automotive

12/31/2015

Technology & Electronics

Current Relative Value (22/03/2016)

Real Estate

Banking

Financial Services

Healthcare

Insurance

Capital Goods

Transportation

Utility

Basic Industry

Telecommunications

Energy

-5.0

Conclusion U.S. High Yield: – Fundamentals remain OK – Default rate outside of commodity related debt expected to remain relatively low – Spreads are still at attractive levels Eurozone High Yield: – OK fundamentals and relatively tight valuations – ECB’s bond purchasing program distorting valuations

– Euro currency improving Emerging Markets: – Fed policy improving outlook for EM

– Remaining selective due to stress from commodity prices, slowing global growth and political risks – Sector mix remains a focus

Page 17 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

Investment Process

Macro Themes & Outlook

Asset Allocation

Blending top-down and bottom-up

PORTFOLIO CONSTRUCTION & RISK ASSESSMENT

Security Selection

Security Research & Analysis

Page 18 I For Boston Investment Conference 2016 Attendees Only and Not to be Distributed to the Public

Fundamental and quantitative inputs

Pioneer Funds – U.S. High Yield Portfolio Characteristics – 29 February 2016 US High Yield Corp. 63.52 Convertible Bonds

14.18

Intl High Yield

6.02

TSY/Agency

5.35

Event-linked Catastrophe Bonds

3.21

CMBS

2.43

US Invest. Grade Corp.

1.88

Cash

1.42

Preferred/Common Stock

1.36

Asset Backed Securities

0.44

Emerging Mkts

0.17

Non-Agency MBS

0.02

Effective Duration Distribution

%

Quality Distribution 1, 2

%