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CONTENTS/EXECUTIVE SUMMARY [2] MARKET OVERVIEW [3] ALL CLO DEALS TABLE H1 2014 [6,7]SPREADS ON AAAS [8] TOP MANAGERS & ARRANGERS [9]FOCUS ON EUROPE [10]OUTLOOK [11]

/INSIGHT INTO THE GLOBAL CLO MARKET/

JANUARY - JUNE 2014CLO INSIDER

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2010 H1

196397

AVERAGEAAA SPREAD

AVERAGEDEAL VALUE

4

1,586

2010 H2

188400

4

1,600

2011 H1

132480

12

5,761

2011 H2

157425

17

7,229

2012 H1

147422

39

16,466

2012 H2

150462

36,037

78

TOTAL DEALS

TOTAL VALUE (US$m)36,037

78

2013 H1

124481

47,611

99

2014 H1

1495312013 H2

143465

41,356

89

63,246

119

EXECUTIVE SUMMARY

Welcome to our latest Appleby report which provides data, insight and analysis on the global Collateralised Loan

Obligation (CLO) market.

This CLO report principally focuses on US CLO deal activity during the first six months of 2014, and reflects how this compares and contrasts with previous periods. 119 deals priced during the period, with issuance pushing well ahead of even last year’s busy first half.

There are a number of key themes that emerge from the statistics:

■ There was USD63.2bn of issuance in the first six months of 2014, surpassing the previous half year period by USD22bn.

■ Average deal size was USD531m, an increase of 14% over the second half of 2013, and 12% more than the full year average for 2013 (USD473m).

■ The top ten deals by value for the first half of the year represented 15% of the value for all deals for the period. Average deal size for this group was USD927m.

■ The average AAA spread for deals closed between January and June 2014 was 149bps, compared to 143bps for the previous period.

■ A core set of Arrangers continue to dominate the CLO market, with Citigroup leading the ranking for the six month period, closing 18 deals valued at USD9bn.

We do hope that you find our analysis on the following pages useful. Certainly we continue to see robust issuance for CLOs going forward; the market is flourishing and the Appleby pipeline is well fuelled through to 2015.

George BashforthHead of Directorship Services Appleby Trust (Cayman) Ltd.

Julian BlackPartner Global Head of Structured Finance, Appleby

2010 H1

196397

AVERAGEAAA SPREAD

AVERAGEDEAL VALUE

4

1,586

2010 H2

188400

4

1,600

2011 H1

132480

12

5,761

2011 H2

157425

17

7,229

2012 H1

147422

39

16,466

2012 H2

150462

36,037

78

TOTAL DEALS

TOTAL VALUE (US$m)36,037

78

2013 H1

124481

47,611

99

2014 H1

1495312013 H2

143465

41,356

89

63,246

119

US CLO MARKET BY VALUE (US$M) 2010-2014

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VOLUME OF ALL CLO DEALS BY HALF YEAR 2010-2014

2014 got off to a strong start for new US CLO issuance, and European CLO activity is also doing well on a relative basis. For the remainder of 2014 we expect new issue CLO activity to remain robust with a continued diversification across the Managers.

A total of 119 CLO deals priced in between January and June 2014, compared to 89 in the preceding six months. This figure reveals a flourishing market in terms of the volume of deals priced, with the month of June showing significant issuance levels in the US. It will be interesting to see if there is any tail off over the summer period, but certainly Appleby’s pipeline is well fuelled through to the end of 2014 and beyond.

Investors continue to recognise that CLOs are unlike ABS CDOs in that they are diversified, have strong performance history and a reassuring level of transparency and oversight. If the current rate continues for the next six month period, there would be USD126bn issued across the full year. This would exceed recent forecasts by Wells Fargo (USD80bn) and J.P. Morgan (USD100bn).(1)

MARKET OVERVIEW

VOLCKER RULE

The Volcker Rule, included in the Dodd-Frank Act, prohibits banks from proprietary trading and restricts investment in hedge funds and private equity by commercial banks and their affiliates. Specifically, in relation to CLOs, it doesn’t permit banks to own positions in CLOs that hold bonds, and it comes into force in July 2017.

After coming to a near-standstill for a short period when the final version of the Volcker Rule was released in mid-December 2013, the primary CLO market has picked up pace again in 2014. The latest indication is that the FederalReserve is to allow banks an additional two years to complywith Volcker Rule standards for treatment of CLOs. This move minimises the impact of the rule for 1.0 CLOs, as the vast majority of the current USD135bn CLO 1.0 universe is expected to have amortized or been repaid by then. However, banks holding CLO 2.0 deals will still need to comply with the Rule.

US CLO 2.0s issued during 2014 have generally been structured as Volcker compliant. But there is some restructuring required around the pre-2014 CLO 2.0’s and this process has got underway. The most viable Volcker solution for this batch of CLOs is around amendments to exclude bond buckets from the deals, and these changes are well underway.

4 4 12 17

39

78

99 89

119

2010 H1

2010 H2

2011 H1

2011 H2

2012 H1

2012 H2

2013 H1

2013 H2

2014 H1

No. of Deals

(1) As reported in Asset Securitization Report (2 April 2014) and the Financial Times, (18 May 2014) respectively.

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“ …if this level of investment continues… we could see overall issuance increasing by around 42% over issuance in 2013.”

RISK RETENTION

The timing of the emergence of Volcker has pushed the proposed US Risk Retention Rules to one side for the time being, but the question could re-emerge at any time. The proposed rules, which are part of broader Dodd-Frank banking legislation, would require CLO Managers to hold capital equal to five percent of each CLO issued, either held as a vertical slice across the full capital stack, or as a horizontal equity slice. During the review period a number of agencies, including the US Chamber of Commerce, have publicly expressed how damaging to the CLO market the proposed changes would be. Due to the potentially large capital requirements needed, a number of smaller Managers could be squeezed out from the market, hampering the future formation of CLOs, and consequently raising financing costs for businesses. According to a study commissioned by the Loan Syndications and Trading Association that was conducted by Oliver Wyman(2), CLO market contraction could raise financing margins for businesses by more than one-third, thereby increasing aggregate annual interest costs by approximately USD3.2 billion.

MARKET OVERVIEW CONT’D

TOTAL VALUE OF ALL CLO DEALS BY HALF YEAR 2010-2014

Looking at values, we see a significant increase in total CLO issuance during the period, compared to the previous six months. Between January and June 2014 there was USD63.2bn of issuance, surpassing the total for the previous period by USD22bn. If this level of issuance continues for the second six months of the year we could see overall issuance increasing by around 42% over the issuance in 2013.

DEAL VALUES

(2) ‘Risk Retention for CLOs: A square peg in a round hole?’, Oliver Wyman (Nov 2013)

$1.6 $1.6 $5.8 $7.2

$16.5

$36.0

$47.6 $41.4

$63.2

2010 H1

2010 H2

2011 H1

2011 H2

2012 H1

2012 H2

2013 H1

2013 H2

2014 H1

Deal Value (US$bn)

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Rank Value US$m Pricing date Issuer Manager Arranger

1 1,542 06 Jun 14 ALM XIV Apollo J.P. Morgan

2 1,050 03 Apr 14 CIFC Funding 2014-II CIFC RBS Securities

3 1,002 22 May 14 OCP CLO 2014-6 Onex Credit Partners Merrill Lynch

4 838 07 May 14 Symphony CLO XIV Symphony Morgan Stanley

5 824 16 Jun 14 OZLM VII Och-Ziff Deutsche Bank

6 820 20 Jun 14 AMMC CLO XIV AMMC RBS Securities

7 817 09 May 14 Madison Park Funding XII Credit Suisse Wells Fargo

8 811 06 May 14 Dryden 33 Senior Loan Fund Prudential Goldman Sachs

9 800 15 Apr 14 Fortress Credit Opportunities III CLO Fortress Natixis Securities

10 770 18 Jun 14 OHA Credit Partners X Oak Hill Morgan Stanley

TOP TEN DEALS BY VALUE (JANUARY-JUNE 2014)

The table below looks at the largest deals priced by value between January and June 2014. The data shows that this group represented 14% of the value for all deals for the period, with average deal size at USD927m, which is significantly more than the average for all deals.

Three deals worth more than USD1bn have been arranged, a deal level only previously reached twice before in the period 2010-2013.

AVERAGE DEAL SIZE 2010-2014

As documented in our previous CLO Insider reports, average deal size for the last two years has been moving steadily upwards and for the first half of 2014 this trend has continued. The data shows an increase of 14% over the second half of 2013, and 12% more than the full year average for 2013 (USD473m). The average deal size for this period (at USD531m) is larger than it has been across the last four years.

397 400

480

425 422

462 481

465

531

2010 H1

2010 H2

2011 H1

2011 H2

2012 H1

2012 H2

2013 H1

2013 H2

2014 H1

Deal Size (US$m)

MARKET OVERVIEW CONT’D

6Ja

nuar

y

MidOcean Credit CLO II MidOcean Jefferies 414 158

Oaktree CLO 2014-1 Oaktree Citigroup 517 150

KKR Financial CLO 2013-2 KKR GreensLedge 383 155

ACIS 2014-3 ACIS Jefferies 416 151

LCM XV LCM Morgan Stanley 624 150

Arrowpoint CLO 2014-2 Arrowpoint Jefferies 419 150

JFIN CLO 2014 Jefferies BNP Paribas 522 150

Febr

uary

ICG US CLO 2014-1 ICG Citigroup 368 115

CIFC Funding 2014 CIFC Credit Suisse 623 150

Madison Park Funding XIII CSAM BAML 746 145

OFSI Fund VI OFS Capital Management Natixis Securities 400 103

Dryden 31 Senior Loan Fund Prudential Deutsche Bank 621 135

Neuberger Berman CLO XVI Neuberger Berman Morgan Stanley 572 147

Halycon Loan Advisors Funding 2014-1 Halycon BAML 416 145

Venture XVI CLO MJX RBS Securities 512 150

ING IM CLO 2014-1 ING Citigroup 412 150

Anchorage Capital CLO 3 Anchorage BAML 517 150

Carlyle Global Market Strategies CLO 2014-1 Carlyle Morgan Stanley 730 152

Zais CLO 1 Zais J.P. Morgan 536 140

Golub Capital Partners CLO 18(M) Golub Wells Fargo 453 185

Mountain Hawk III Western Asset Management Deutsche Bank 589 150

Mar

ch

GoldenTree Loan Opportunities VIII GoldenTree J.P. Morgan 614 145

Limerock CLO II Invesco Credit Suisse 669 150

KVK CLO 2014-1 Kramer Van Kirk Goldman Sachs 526 159

OZLM VI Och-Ziff BAML 621 155

Octagon Investment Partners XIX Octagon Wells Fargo 566 152

COA Summit CLO 3i GreensLedge 416 135

BNPP IP CLO 2014-1 BNP Investment Partners Natixis Securities 400 145

Greywolf CLO III Greywolf J.P. Morgan 640 154

JFIN MM CLO 2014 Jefferies Jefferies 309 160

Battalion CLO V Brigade BAML 416 150

OCP CLO 2014-5 Onex Citigroup 622 100

TICP CLO I TPG Citigroup 479 150

Canyon Capital CLO 2014-1 Canyon Capital Citigroup 414 158

Saranac CLO II Saranac Advisory Jefferies 350 148

Staniford Street CLO Feingold O'Keeffe StormHarbour 414 152

Apidos CLO XVII CVC Credit Partners BAML 500 150

BlueMountain CLO 2014-1 BlueMountain Credit Suisse 513 152

Regatta III Funding Napier Park Citigroup 492 152

CFIP CLO 2014-1 Chicago Fundamental Wells Fargo 412 155

NewStar Commercial Loan Funding 2014-1 NewStar Wells Fargo 348 180

Sound Point CLO V Sound Point Morgan Stanley 628 157

Apr

il

Trinitas CLO I Triumph Capital Nomura Securities 400 153

Ares XXIX CLO Ares Citigroup 514 152

Pinnacle Park CLO GSO/Blackstone Wells Fargo 510 150

CIFC Funding 2014-II CIFC RBS Securities 1050 148

Golub Capital Partners CLO 19(B) Golub Citigroup 410 150

THL Credit Wind River 2014-1 CLO TH Lee Deutsche Bank 620 152

Shackleton 2014-V CLO Alcentra Morgan Stanley 627 150

B&M CLO 2014-1 Bradford & Marzec Credit Suisse 421 140

Catamaran CLO 2014-1 Trimaran Citigroup 467 155

Halycon Loan Advisors Funding 2014-2 Halycon Citigroup 569 160

Marathon CLO VI Marathon J.P. Morgan 413 155

Cedar Funding III Aegon USA Jefferies 389 153

Tuolumne Grove CLO Tall Tree Guggenheim 408 150

Northwoods Capital XI Angelo Gordon Goldman Sachs 621 160

TELOS CLO 2014-5 Telos BNP Paribas 412 155

WhiteHorse VIII H.I.G. WhiteHorse Morgan Stanley 573 150

Washington Mill Shenkman BAML 520 150

Avery Point IV CLO Sankaty Morgan Stanley 727 152

ALL CLO DEALS PRICED JANUARY - JUNE 2014Issuer Manager Arranger Value US$m AAA bps

7Apr

il

Fortress Credit Opportunities III CLO Fortress Natixis Securities 800 190

Magnetite VIII BlackRock Wells Fargo 612 148

PFP III 2014-1 Deutsche Bank Wells Fargo 524 117

NXT Capital CLO 2014-1 NXT Capital Wells Fargo 357 175

Great Lakes CLO 2014-1 BMO Deutsche Bank 359 185

Babson CLO Ltd. 2014-I Babson J.P. Morgan 514 149

May

Voya CLO 2014-2 ING J.P. Morgan 516 145

Palmer Square CLO 2014-1 Palmer Square BAML 457 127

Anchorage Capital CLO 4 Anchorage BAML 621 145

Venture XVII CLO MJX RBC Capital 716 148

Dryden 33 Senior Loan Fund Prudential Goldman Sachs 811 148

Symphony CLO XIV Symphony Morgan Stanley 838 137

Seneca Park GSO/Blackstone Credit Suisse 717 148

Madison Park Funding XII Credit Suisse Wells Fargo 817 150

LCM XVI LCM Deutsche Bank 619 150

Hildene CLO II Hildene BAML 412 145

Golub Capital BDC CLO 2014 Golub Wells Fargo 401 175

ACIS 2014-4 ACIS Jefferies 504 142

Atlas Senior Loan Fund V Crescent Capital Barclays 457 155

Jamestown CLO IV 3i Citigroup 515 155

Silvermore CLO Silvermine Citigroup 516 145

Carlyle Global Market Strategies CLO 2014-2 Carlyle Mitsubishi UFJ 616 147

OCP CLO 2014-6 Onex BAML 1002 145

NewMark Capital Funding 2014-2 NewMark Jefferies 400 144

Gallatin CLO VII 2014-1 MP Senior Credit Partners GreensLedge 355 127

AIMCO CLO Series 2014-A AIMCO Goldman Sachs 570 154

Regatta IV Funding Napier Park Morgan Stanley 626 141

Benefit Street Partners CLO IV Benefit Street Partners Deutsche Bank 512 149

June

KVK CLO 2014-2 Kramer Van Kirk Credit Suisse 619 155

Kingsland VII Kingsland GreensLedge 481 150

Ares XXX Ares Deutsche Bank 360 85

BlueMountain CLO 2014-2 BlueMountain J.P. Morgan 540 146

NewStar Arlington Senior Loan Program NewStar Wells Fargo 409 175

ALM XIV Apollo J.P. Morgan 1542 143

CIFC Funding 2014-III CIFC BNP Paribas 620 149

Peaks CLO 1 Arrowpoint Guggenheim 127 175

Apidos CLO XVIII CVC Credit Partners J.P. Morgan 514 141

Galaxy XVII PineBridge Goldman Sachs 414 148

ACAS CLO 2014-1 American Capital Deutsche Bank 445 151

A Voce CLO Invesco Citigroup 617 145

Neuberger Berman CLO XVII Neuberger Berman Morgan Stanley 569 150

Shackleton 2014-VI CLO Alcentra BAML 518 148

OZLM VII Och-Ziff Deutsche Bank 824 142

Magnetite IX Blackrock Citigroup 408 143

West CLO 2014-1 Allianz Citigroup 462 148

Covenant Credit Partners CLO I Covenant Capital Morgan Stanley 527 148

THL Credit Wind River 2014-2 CLO TH Lee GreensLedge 280 125

A10 Term Asset Financing 2014-1 A10 Capital Deutsche Bank 132 172

Flatiron CLO 2014-1 NYL Investors BAML 412 138

OHA Credit Partners X Oak Hill Morgan Stanley 770 147

Cent CLO 21 Columbia Citigroup 621 149

AMMC CLO XIV AMMC RBS Securities 820 145

MidOcean Credit CLO III MidOcean Credit Suisse 517 146

Trinitas CLO II Triumph Capital Nomura Securities 416 127

Highbridge Loan Management 4-2014 Highbridge BAML 469 143

JFIN CLO 2014-11 Jefferies Citigroup 562 150

Avery Point V CLO Sankaty GreensLedge 415 149

Silver Creek CLO 40/86 Advisors Goldman Sachs 362 149

CVP Cascade CLO-2 Credit Value Partners Credit Suisse 520 153

Issuer Manager Arranger Value US$m AAA bps

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SPREADS ON AAAs

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For the first half of 2014, the average US CLO AAA spread was 149 bps (ignoring the relevant discount margin). Looking forward, we expect that liability spreads might contract a little over the coming three to six months, with several investor surveys indicating AAA spread expectations in the L+135-155 range. However, if the issuance levels continue at the current pace this will prevent too much tightening, and any narrowing of spreads would create an easier environment for Managers trying to issue deals. Nonetheless, we see continued robust issuance over the coming months.

Rank AAA bps Pricing Date Issuer Manager Arranger Value

US$m

1 85 05 Jun 14 Ares XXX Ares Deutsche Bank 360

2 100 20 Mar 14 OCP CLO 2014-5 Onex Citigroup 622

3 103 06 Feb 14 OFSI Fund VI OFS Natixis Securities 400

4 115 03 Feb 14 ICG US CLO 2014-1 ICG Citigroup 368

5 117 22 Apr 14 PFP III 2014-1 Deutsche Bank Wells Fargo 524

6 125 17 Jun 14 THL Credit Wind River 2014-2 THL GreensLedge 280

7 127 23 Jun 14 Trinitas CLO II Triumph Capital Nomura Securities 457

7 127 01 May 14 Palmer Square CLO 2014-1 Palmer Square Merrill Lynch 457

9 127 23 May 14 Gallatin CLO VII 2014-1 MP Senior Credit Partners GreensLedge 355

10 135 07 Feb 14 Dryden 31 Senior Loan Fund Prudential Deutsche Bank 621

10 135 11 Mar 14 COA Summit CLO 3i GreensLedge 416

TOP TEN DEALS BY AAA SPREAD (JANUARY-JUNE 2014)

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Rank Arranger Value US$bn

Aggregate # of Deals

1 Citigroup 9.0 18

2 Morgan Stanley 7.8 12

3 BAML 7.6 14

4 J.P. Morgan 5.8 9

5 Wells Fargo 5.4 11

6 Deutsche Bank 5.1 10

7 Credit Suisse 4.6 8

8 Goldman Sachs 3.3 6

9 Jefferies 3.2 8

10 RBS Securities 2.4 3

Total 54.2 101

TOP TEN ARRANGERS BY DEAL VALUE H1 2014

TOP MANAGERS AND ARRANGERS

A core set of Arrangers continue to dominate the CLO market, with Citigroup taking the top position again for the six month period. The top ten arrangers account for 86% of the total for CLOs priced during January-June 2014.

The top ten Managers for the first half of 2014 have closed 18% of the total of 119 CLOs priced. As predicted, we have seen a number of new Managers emerge recently as some of the big private equity houses have done their debut deal during this period, including ICG, TPG and Och-Ziff.

Of the 119 CLOs issued so far in 2014, 87 individual Managers have participated, of which 58 have issued one deal, 26 have issued two deals, and three have issued three deals.

Rank Manager Value US$bn

Aggregate # of Deals

1 CIFC 2.3 3

2 Onex Credit Partners 1.6 2

3 Apollo 1.5 1

4 Och-Ziff 1.4 2

4 Prudential 1.4 2

4 Jefferies 1.4 3

7 Carlyle 1.3 2

7 Invesco 1.3 2

9 Golub 1.3 3

9 LCM Asset Management 1.2 2

Total 14.9 22

TOP TEN MANAGERS BY DEAL VALUE H1 2014

“ The top ten Managers for the first half of 2014 have closed 18 percent of the total of 119 CLOs priced…”

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Pricing

date Issuer Manager Arranger Value EURm AAA bps

24 Jan 14 Jubilee CLO 2014- XI B.V. Alcentra BAML 422 140

24 Feb 14 Carlyle Global Market Strategies Euro CLO 2014-1 CELF Advisors Credit Suisse 375 140

04 Mar 14 Harvest CLO VIII 3i Deutsche Bank 425 154

17 Mar 14 Babson Euro CLO 2014-1 Babson Capital BAML 412 140

27 Mar 14 CVC Cordatus Loan Fund III CVC Goldman Sachs 450 140

27 Mar 14 St Paul's CLO IV ICG Deutsche Bank 435 140

03 Apr 14 Holland Park CLO GSO/Blackstone BNP Paribas 513 140

22 Apr 14 Jubilee CLO 2014-XII Alcentra J.P. Morgan 512 138

09 May 14 Avoca CLO XI Avoca Morgan Stanley 516 140

16 May 14 Arbour CLO Oaktree Barclays 371 145

05 Jun 14 Carlyle Global Market Strategies Euro CLO 2014-2 CELF Advisors Citigroup 391 135

06 Jun 14 Harvest CLO IX 3i Credit Suisse 507 135

09 Jun 14 ALME Loan Funding II Apollo J.P. Morgan 382 135

25 Jun 14 Dryden 32 Euro CLO 2014 Pramerica Barclays 416 140

26 Jun 14 Phoenix Park CLO GSO/Blackstone BAML 413 140

FOCUS ON EUROPE

We collate European CLO data separate to the US data. Between January and June 2014, a steady but small volume of deals continue to flow from the European market with stable ratings and strong performance.

In the past six months, 15 European CLOs priced with a total value of EUR6.5bn. Risk retention continues to constrict this market, together with a tighter supply of quality collateral.

EUROPEAN CLO DEALS CLOSED (JANUARY-JUNE 2014)

“ Risk retention continues to constrict this [European CLO] market…”

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Based on the first six months of the year and looking at our own robust pipeline of warehoused CLOs (at over 40 deals), our new issue CLO forecast remains strong and we expect the full year to round-out in the USD100-120bn range.

The market dynamics in some areas may change with more diversification in CLO investors, including additional non-bank AAA investors entering the market such as further pension funds and hedge funds, and some increased demand from insurance companies.

We will be watching further developments in relation to risk retention and the Volcker Rule carefully, for the time being the market continues to perform at a high level.

2014-15 Diary

IMN ABS East 2014: 21-23 September - The Fontainebleau, Miami Creditflux Investor Summit: 14 October - New York Opal Financial Group CLO Summit: 7-9 December - Dana Point, CaliforniaIMN ABS Vegas 2015: 8-11 February 2015 - The Cosmopolitan, Las Vegas

OUTLOOK

“ The market dynamics in some areas may change with more diversification in CLO investors…”

ABOUT APPLEBY

We are one of the world’s largest offshore law and fiduciary services groups. We have offices in all the major offshore jurisdictions.

Our Cayman-based CLO team provides offshore legal, directorship and registered office services to the CLO market. Our clients are amongst the biggest Collateral Managers in the world and they choose Appleby as their Cayman partner for our integrated team, superior service and enhanced relationship management.

For further information contact:

Julian BlackPartner, Global Head of Structured Finance, Applebyjblack@applebyglobal.com

George BashforthHead of Directorship Services, Appleby Trust (Cayman) Ltd.gbashforth@applebyglobal.com

© Appleby Global Group Services Ltd 2014. Published in the Isle of Man. All Rights Reserved.

RESEARCH METHODOLOGYThis report details Collateralised Loan Obligations (CLO) activity globally in the first half of 2014 using public information from a number of different sources including but not exclusively: LCD, Creditflux, Standard & Poors, Moodys, Fitch and Securitization Intelligence. The date range is 01/01/2014 - 30/06/2014 inclusive. Deal status is as priced within the time period covered. Not all deals are reported immediately, so the figures are subject to change as new information becomes available.