RESEARCH

MMG BANK

January 20, 2012

AHEAD OF THE CURVE:

A Primer on Panamas Debt Capital Markets

Introduction Market Overview Government Debt Market Corporate Debt Market Issuers Sector Distribution Credit Ratings Yield Trends League Tables Corporate Debt Market Government Debt Market Other Charts & Figures

Pg. 1 Pg. 2 Pg. 3 Pg. 4 Pg. 5 Pg. 7 Pg. 8 Pg. 9 Pg. 10 Pg. 11

MMG Bank Corporation MMG Tower, Piso 10 Urbanizacin Marbella Panam, Republica de Panam +507 2657600 www.mmgbank.com

Noe Munoz, CFA +507 2657750 noe.munoz@mmgbank.com

See End of Document for Important Disclosures

INTRODUCTION
The primary objective of this report is to serve as an introduction to many of the important facets of Panamas debt capital markets in order to provide a context for evaluating investments. This report answers fundamental questions regarding the composition of the corporate debt primary market, its issuers, maturities, sector distribution, credit ratings, and yields as well as discusses recent trends in those factors. It also includes information on the domestic government debt primary market as an added source for context. In drafting this report we gathered data on corporate debt primary market transactions since 2010. Rather than using registration information provided by the local securities commission (Superintendencia del Mercado de Valores de Panama), we gathered data on individual transactions as provided by the exchange (Bolsa de Valores de Panama). Because companies typically register their issues in shelf format, issues may be placed over very long periods, including several years, and therefore registration amounts are unreliable indicators of market composition as they may differ signicantly from actual placements. In addition issues must be placed through the exchange in order for interest income and capital gains to be completely exonerated from taxation. Consequently, we believe the data provided by the exchange provides a comprehensive and accurate picture of the primary market. In various segments of our analysis, we present the effects of excluding the ENA Sur Trust bonds issued in 2011 in order to provide a more comparable analysis with historical information. Because of ENA Surs government ownership and the issues larger issue size, the bonds should be arguably considered in a category of their own. We also frequently cite the preponderance of the nancial sector in issuance activity, which undoubtedly presents a challenge for diversication. We focus our report on the primary market, because it has historically presented the most relevant investment universe. Volume in the secondary market has been negligible with 80% of all volume occurring in the primary market. In the corporate debt market, there are several factors which have inhibited liquidity including the small size of issues, a problem augmented by companies utilizing shelf registrations to issue debt at many different maturities. Another important factor has been the absence of callability protection for investors. Whereas some issues have included a two year call protection, many issues have been callable at any time, a factor which has prevented prices to reach levels that may have incentivized trading. In the domestic government bond market, factors have included a concentration of issuance in short term maturities which were generally purchased as hold to maturity investments. We believe potential investors should continue to view the primary market as the investable universe, particularly for corporate debt. In the government debt universe, however, there have been important developments which have now created a secondary market. The establishment of a market makers program combined with longer term issuance has been very successful in enhancing liquidity. We believe this program to be a signicant rst step that will aid in the transition of a market dominated by a buy and hold approach to a more risk-oriented, portfolio management focus that is an essential component for improved liquidity in our markets.

MMG BANK
A Primer on Panamas Debt Capital Markets January 20, 2012 Page 1

MARKET OVERVIEW
Market Commentary Total debt issuance for 2011 recorded an increase of 19% ($391 million) reaching $2.44 billion in total placements. Though government issuance remained at for the year, total corporate debt issuance increased 44% driven primarily by the $395 million placement of the public thoroughfare issues of ENA Sur Trust. In terms of the composition of the primary issue market, corporate debt remains the primary source of issuance with a market share of 65% versus 41% in 2010. However, a reclassication of bonds issued by ENA Sur, an entity whose government ownership warrants investors consider its bond at the very least government related, would split issuance evenly between corporate and government debt. Mortgage-backed securities were absent in 2011 as commercial and residential mortgage markets are predominantly nanced with traditional on balance sheet bank lending. Consequently, investors desiring exposure to real estate related issues are limited to various corporate issues, which include real estate collateral or guarantees, and real estate development bonds.

Total Issuance in 2011: $2.44 Billion

1,099

Figure 1:

Total Debt Issued ($ millions)

Corporate Mortgage Government
41% 2010

3,000 2,500 2,000 1,500 1,000 500 0 1,099 2010 2,049 853

2,440 861

54% 5% 2011

1,579

35% 65%

2011

Sources: BVP, MMG Bank

Issue Types Both the corporate and government sectors have increased issuance of medium term securities as record low rates have incentivized renancing to longer terms. Corporate bond issuance more than doubled while government bond issuance increased 15% for the year. In the government sector, the totality of bond issuance for the year occurred in the new 5% 2018 issue. For 2012 we expect a continued shift to longer duration issues from both the corporate sector taking advantage of historically low rates and the government sector which has indicated as a priority renancing external debt through the domestic markets.
Figure 2:

Record low interest rates have driven longer term issuance

Distribution by Issue Type ($ millions)

2011 Com. Paper/Bills Bonds 1,133 68% 538 32% 1,671 2010 Com. Paper/Bills Bonds 505 47% 96 1,067 9% 466 44% Perpetual/Pfds 207 207 Perpetual/Pfds 117 117

Corporate Issues Government Debt Total

330 51% 323 49% 653

Corporate Issues Mortgage Backed Government Debt

388 50% 387 50% 775

MMG BANK

Total

Sources: BVP, MMG Bank

A Primer on Panamas Debt Capital Markets

January 20, 2012

Page 2

GOVERNMENT DEBT MARKET

Market Commentary Though total government debt issuance was at year on year, the duration of domestic government debt was extended. During 2011 the Ministry of Finance issued $538 million of a 7 year bond as part of its plan to reduce dependence on external funding through increased domestic issuance. The plan also established a market maker program to provide liquidity to government debt issues (the program is currently limited to the 2013 & 2018 bond issues only). The market maker program was launched in June 2011 with Citibank, HSBC, and MMG Bank participating as lead market makers, and initial results have been very successful. Total volume in the secondary market registered $265 million in the six months after the programs inception versus a combined $73 million in the 18 months prior.
Figure 3:

Government Debt Issuance ($ millions)

Bills (Letras) 853 466 Bonds (Notas) 861
55% 2010 45%

$267 million in volume in the six months since inception of market maker program

1,000 900 800 700 600 500 400 300 200 100 0 Year Issued 2010 2011

538
2011

387 2010 Issuer Republica de Panama Republica de Panama Maturity 5/30/13 6/15/18

323 2011 Amt. Issued 466,245,000

63%

37%

Yield Range 3.5% to 4.68%

Price Range 108.90 to 101.90 102.44 to 100

537,970,000 2.51% to 3.50%

Sources: BVP, MMG Bank

Yield Trends Alongside global interest rate trends, Panamas domestic short term yields have trended to record lows over the past year. Because domestic bills (Letras del Tesoro) are rarely traded in the secondary market, we observe yields on new issues in order to view trends in the short-term rate market. Albeit issues placed in the last quarter, short term rates have generally trended lower since 2010. Beginning in October we observed a signicant increase in short term rates that partially reected lower demand rather than an inection point as investors likely extended the duration of their portfolios by purchasing the new 7 year issue. The new 7 year issue has been very active in the secondary market where the yield has trended lower since inception. We did, however, experience an uptick last October which may have been spurred by a reopening of the issue that was largely unexpected by investors.
Figure 4:

Yields on government debt continue to trend lower

2.50% 2.00% 1.50% 1.00% 0.50% 0.00%

Short Term Yields

4.50% 4.00% 3.50%

Yield: Panama 5% 2018

Oct-10

Jul-10

Dec-10

Apr-11

Jul-11

Dec-11

Sep-11

Apr-10

Jan-10

Aug-11

Oct-11

Jul-11

MMG BANK

6 Month Yield

1 Yr Yield

Sources: MMG Bank

A Primer on Panamas Debt Capital Markets

January 20, 2012

Page 3

Dec-11

Jun-11

Nov-11

Sep-11

3.00%

CORPORATE DEBT MARKET

Market Commentary Corporate debt issuance reached record levels during 2011. Though the increase was driven primarily by the $395 million ENA Sur Trust issues, overall issuance excluding ENA Sur Trust was strong as most companies have been very successful in renancing maturing issues into longer terms and lower rates. In the commercial paper segment total issuance decreased over the year. Though we expect companies to continue to extend duration likely lowering total issuance of commercial paper, an analysis of trends in this segment would require further insight into the funding needs of the nancial sector, which has constituted more than 70% of issuance. Going forward we expect medium term bond issuance to continue to grow even absent the expected placement of the ENA Norte issue with an estimated size of $650 million.
Figure 5:

Corporate Debt Issuance in $ Millions

1,579 117 1,099 207 1,133
46% 19%

2010 35%

Corporate bond issuance more than doubled to $1,133 million

1,600 1,200 800 400 0

505 388 2010 Bonds 330 2011 Pfds/Perpetual

7%

2011 21%

72%

Commercial Paper (VCNs)

Figure 6:

Sources: BVP, MMG Bank

Issuer Information
2011 395 182 137 65 65 60 57 45 41 40 37 36 35 35 30 29 25 20 20 < 1 Yr 2 - 3 Yr 4 - 6 Yr 7 - 14 Yr >15 Yr 7% 6% 7% 20% 18% 22% 17% 45% # of Issuers # of Issues Avg. Size* 2011 45 223 $5,359,686 2010 38 236 $4,658,293
*Excludes ENA Sur Figure 7:

(In $ Millions)

Total Debt Issuance

ENA Sur Trust Banco Internacional de Costa Rica

Companies have been successful renancing into longer terms and lower interest rates

Global Bank Banco La Hipotecaria Petroleos Delta Real Estate Investment Thrust Cochez y Compaia Ideal Living Empresas Melo Corp. Andina de Fomento HSBC Leasing Sociedad Urbanizadora del Caribe Generadora Pedregalito Multibank Emp. de Dist. Electrica Metro-Este Inmobiliiaria Don Antonio, BBVA Panama Finanzas Generales Banesco

Maturity Distribution
2011 22% 2010

35%

MMG BANK
A Primer on Panamas Debt Capital Markets

Sources: BVP, MMG Bank

January 20, 2012

Page 4

Sector Issuance Though participation from the nancial sector decreased to 44% from 64% in 2010, excluding ENA Sur Trust the nancial sector continued to account for more than 60% of all issuance. The market share of the consumer cyclical sector remained relatively stable due to the recurring nature of some of the sectors predominant issuers such as Cochez y Compaia, Empresas Melo, and Sociedad Urbanizadora del Caribe. In other sectors issuance has been more volatile given the overall lack of non-nancial issuers in the market. Since 2010, there have been a total of 50 corporate issuers from which only 25 have been non-nancial.

Figure 8:

Distribution by Sector
(In Millions) 2011 2010 Financial Infrastructure Consumer Cyclical Real Estate Energy Cons. Non-Cyclical Utilities Basic Materials Communications Diversified Technology 0% 50% 100% Total 2011 700 395 149 135 108 51 30 12 0 1,579 2010 700 138 46 15 61 20 100 20 1,099

Financial sector leads issuance activity

Consumer Cyclical Real Estate Energy

Infrastructure

Financial

Cons. Non-Cyclical Basic Materials Utilities

Technology

Communications

Diversified

Sources: BVP, MMG Bank

In both the commercial paper and perpetual bond segments, the nancial and consumer cyclical sectors have accounted for more than 80% of all issuance. Though the bond market has been more diversied than both the commercial paper and perpetual bond markets, investment options outside of the nancial sector have been limited by the lack of issuers. Furthermore, many non-nancial issues have been fully subscribed by the lead manager of the deal and have remained on the banks balance sheet, never having been re-offered to the investment public. In 2011, excluding the ENA Sur Trust issues, there were 12 non-nancial issues larger than $10 million in size which combined to total $252 million. We estimate that only $122 million of that total was actively marketed, offered, or re-offered to the investment public.

MMG BANK
A Primer on Panamas Debt Capital Markets January 20, 2012 Page 5

Figure 9:

Sector Distribution by Issue Type

Commercial Paper (VCNS) 2010

Energy 3% Real Estate 1% Consumer NonCyclical 1% Utilities 5% Consumer Cyclical 16% Energy 1% Real Estate 1%

2011
Consumer NonCyclical 2% Utilities 9%

Financial 74%

Financial 71%

Consumer Cyclical 16%

2010
Other 5% Financial 41% Real Estate 8%

Bonds

2011
Others 5% Consumer Cyclical 5% Energy 9% Real Estate 12% Financial 34%

Consumer NonCyclical 11% Consumer Cyclical 15%

Infrastructure 35%

Communications 20%

Pfds/Perpetual Bonds 2010 2011

Consumer Cyclical 31%

Financial 99% Financial 69%

Sources: BVP, MMG Bank

MMG BANK
A Primer on Panamas Debt Capital Markets January 20, 2012 Page 6

Credit Ratings

For this segment of our analysis we used the domestic issuer rating assigned by one of the two local credit rating agencies, Fitch Central America or Equilibrium, as a proxy for the investable universe of rated debt. Furthermore, we excluded the ENA Sur Trust issues in order to more accurately reect the recurring universe of corporate debt issuers. After employing the previous assumptions, we nd that nancial sector issuance has accounted for the vast majority of total rated issuance. The results are not surprising given that local regulations require banks to obtain a credit rating while the securities commission does not require public debt issues or issuers to obtain a credit rating. In the commercial paper market, the universe of rated debt has remained relatively stable registering 74% of total issuance in 2011 versus 72% in 2010. Excluding the nancial sector, however, short term issuance by rated institutions is marginal accounting for only $43 million in 2011, a slight increase from $33 million in 2010. In the bond market, total rated issuance has accounted for 38% of total corporate debt placed since 2010. The preponderance of the nancial sector also holds for this segment of the market where we nd only two non-nancial, rated issuers, Empresas Melo and Inmobiliaria Don Antonio, which have combined for only 7% of total issuance since 2010. The lack of rated issuers presents a challenge for institutional investors such as insurance companies and pension funds whose investment policies limit investments in unrated debt. Consequently, we would expect the rated universe of issuers to grow as companies take advantage of excess liquidity and pent-up demand from this investor base.
Figure 10:

Segmentation of Issues by Rating

Lack of rated issuers presents a challenge for institutional investors

Commercial Paper (VCNs):

2010 Total # of Issues # of issues by a rated issuer % issues by a rated issuer Total $ Amount Issued (in millions) $ issued by a rated issuer % issued by a rated issuer $ issued by a non-financial, rated issuer % Issued by a non-financial, rated issuer 176 82 47% 388 277 72% 33 9% 2011 103 62 60% 330 246 74% 43 13% TOTAL 279 144 52% 718 523 73% 76 11%

Bond Issues (excluding ENA Sur Trust Issuance):

2010 Total # of Issues # of rated issues % of rated issues Total $ Amount Issued (in millions) $ issued by a rated issuer % issued by a rated issuer $ issued by a non-financial, rated issuer % Issued by a non-financial, rated issuer 55 19 35% 505 147 29% 23 5% 2011 127 64 50% 738 328 44% 65 9% TOTAL 182 83 46% 1,242 475 38% 88 7%

Sources: BVP, MMG Bank

MMG BANK
A Primer on Panamas Debt Capital Markets January 20, 2012 Page 7

Yield Trends In observing yield trends among issuers we limit our analysis to the 1 year and 5 year maturity segments where the majority of xed rate corporate debt issuance occurs. Beyond the 5 year segment several issuers have been successful issuing longer maturity debt including 10 year issues. These issues typically include features such amortization, step-up coupons, or oating-rate coupons with oors that make a comparative yield analysis un-insightful given the small universe of longer term issues. In the commercial paper market (VCNs) corporate issuers have been very successful renancing issues into lower rates and have driven yields lower throughout most of 2010 and 2011. Yields fell sharply during 2010 but have remained near their lows of 3% throughout 2011. A few issuers including Empresas Melo, Global Bank, and Sociedad Urbanizadora del Caribe were able to issue 1 year commercial paper at yields in the range of 2.75% to 2.90%, levels where we experienced reduced appetite from many of our clients. Going forward we expect 1 year yields to remain near their low range of 3% and view minimal risk of a rise in short term yields. In the 5 year maturity segment the decrease in rates has been more gradual with higher dispersion in issuer yields. Among recurring issuers Banco Internacional de Costa Rica, BBVA Panama, Banco La Hipotecaria, and Empresas Melo were all able to place 5 year debt at yields below 5%. Consumer nance companies and lower tier banks were also able to reduce their rate on 5 year issues, though at the higher range of 6% to 8%.
Figure 11:

Historical Issue Yields

6.00% 5.00% 4.00% 3.00% Oct-10 Jul-10 Dec-10 Apr-11 Jul-11 Dec-11 Dec-11
Sources: BVP, MMG Bank

1 year yields have remained near their lows of 3%

1 Yr Issue Yield

*Excludes consumer finance companies

9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00%

5 Yr Issue Yield

Oct-10

Jul-10

Dec-10

Apr-11

Jul-11

*4.5 to 5.5 yr, non-amortizing, fixed rate, issues

MMG BANK
A Primer on Panamas Debt Capital Markets January 20, 2012 Page 8

Sep-11

Apr-10

Jan-10

Sep-11

Apr-10

Jan-10

2.00%

LEAGUE TABLES
Corporate Debt The top four placement agents and underwriters of securities have accounted for more than 80% of all corporate debt issued in the primary market since 2010. For the year 2011 MMG Bank doubled its volume to lead the league table with $371 million in debt placements. HSBC Securities and Global Valores also posted a very strong year increasing their market share through their participation as lead managers in the largest issue of the year (ENA Sur). Banco General fell in both its market share and volume versus 2010 though would have registered second place after excluding the ENA Sur Trust bonds.
Figure 12:

Corporate Debt Primary Market Volume

(In $ Millions) 2011 2010 Volume 183 83 161 432 38 64 8 29 Mkt Share Rank 17% 8% 15% 39% 3% 6% 1% 3% 2 4 3 1 7 6 10 8 1 2 3 4 5 6 7 8 9

Top four placement agents account for more than 80% of all corporate debt issuance

Underwriter/Agent MMG Bank HSBC Securities Global Valores BG Valores/ BG Investment Prival Securities Multi Securities Tower Securities Geneva Asset Management CitiValores Total

Volume 371 352 305 283 139 59 21 18 14

Mkt Share Rank 23% 22% 19% 18% 9% 4% 1% 1% 1%

Other Seats

17 1,579

1% 100%

101 1,099

9% 100%

Sources: BVP, MMG Bank

By analyzing the counterparties involved in primary market transactions we obtained data on total volumes sold to other seats on the exchange, which either purchased the issues for their own books or acted as agents for their clients. We nd that 35% of all corporate debt issued in 2011 was sold to other seats, a slight increase from 34% in 2010. Though we understand that this metric does not represent a complete measure of the degree to which issues are offered and actively marketed throughout the country, we do believe it holds some correlation and would view a further increase as a favorable indicator of improved market integration and cooperation.
Figure 13:

Debt Placements with other Seats on Exchange

(In $ Millions) 2011 2010 % 53% 53% 17% 16% 57% 23% 95% 30% 14% 35% Total Volume 183 161 83 432 64 38 8 26 1,099 Sold to Other Seat 130 72 22 67 40 7 3 3 365 % 71% 44% 27% 15% 62% 19% 32% 10% 34%

Underwriter/Agent MMG Bank Global Valores HSBC Securities BG Valores/BG Investment Multi Securities Prival Securities Tower Securities Lafise Valores CitiValores Total*

Total Volume 371 305 352 283 59 139 21 11 14 1,579

Sold to Other Seat 197 161 61 47 34 32 20 3 2 558

MMG BANK

* Includes other seats not listed

Sources: BVP, MMG Bank

A Primer on Panamas Debt Capital Markets

January 20, 2012

Page 9

LEAGUE TABLES
In the government debt primary market CitiValores (Citibank Panama), HSBC Securities, and MMG Bank lead the table with a combined market share of 75% and total placements of $644 million for 2011. More importantly, with the creation of the market maker program for government debt, a secondary market has nally been created. Volume in the secondary market increased signicantly from $27 million in 2010 to $342 million in 2011. Moreover, the majority of the volume traded occurred in the newly issued 2018 bond making volume heavily skewed towards the latter half of the year. Consequently, we would expect total volume to be higher on an annualized basis. Evidently the creation of the market maker program has been an important rst step in increasing liquidity for government debt. This program combined with increased issuance of longer duration bonds should continue to signicantly increase secondary market volume and the overall liquidity of the government debt market.
Figure 14:

Government Debt

Government Debt Primary Market Volume

(In $ Millions) 2011 2010 Volume 169 310 71 12 45 152 68 Mkt Share Rank 20% 36% 8% 1% 5% 0% 18% 8% 2 1 4 7 6 3 5 1 2 3 4 5 6 7 8 9

Placement Agent CitiValores HSBC Securities MMG Bank Corporation Geneva Asset Management Prival Securities Multi Securities Banco Nacional de Panama BG Valores/BG Investment Interbolsa Total

Volume 317 196 131 70 40 37 30 19 10

Mkt Share Rank 37% 23% 15% 8% 5% 4% 3% 2% 1%

Others Agents

11
861

1%
100%

27
853

3%
100%

Figure 15:

Government Debt Secondary Market Volume

(In $ Millions) 2011 Total 280 147 75 65 40 21 16 12 7 7 6 6 3 685 % 41% 22% 11% 10% 6% 3% 2% 2% 1% 1% 1% 1% 0% 100% Bought 20 0 4 3 27 2010 Sold 20 0 4 3 27 Total 40 0 7 6 % 75% 1% 13% 11%

Placement Agent MMG Bank CitiValores Multi Securities HSBC Securities Geneva Asset Management Banco Nacional de Panama BG Valores/BG Investment Lafise Valores Interbolsa Bridge Capital Prival Securities Credicorp Securities SFC Investment Total*

Bought 145 84 23 44 14 5 9 3 1 5 1 6 3 342

Sold 136 63 52 21 27 16 6 9 7 1 5 342

Market maker program successfully increased trading in secondary markets

53 100%

MMG BANK

*Includes all government debt traded including bills (Letras del Tesoro) Sources: BVP, MMG Bank

A Primer on Panamas Debt Capital Markets

January 20, 2012

Page 10

OTHER CHARTS
2011 Debt Issuance by Rated Issuers (in millions):
Issuer ENA Sur Trust Banco Internacional de Costa Rica Global Bank Banco La Hipotecaria Empresas Melo Corporacion Andina de Fomento Emp. de Distribucion Electrica Metro-Este Inmobiliaria Don Antonio BBVA Panama Multibank Central American Bank for Economic Int. Banco Delta Banco Aliado Saltos de Francoli Capital Bank Sector Infrastructure Financial Financial Financial Consumer Cyclical Financial Utilities Consumer Non-Cyc. Financial Financial Financial Financial Financial Energy Financial Com. Paper 0 97 72 31 13 0 30 0 0 0 0 3 0 0 0 Bonds 395 86 32 28 29 40 0 29 25 20 14 9 8 8 2 Total $ Issued 395 182 104 60 41 40 30 29 25 20 14 13 8 8 2 Local Issuer Rating AAA AAA A A+ AA+ AA AAA A+ Int. Rating BBB BB+ A+

BB A BBBBBB

BBBBB A

Sources: BVP, MMG Bank

2010 Debt Issuance by Rated Issuers (in millions):

Issuer Global Bank Banco Internacional de Costa Rica Banco Nacional de Panama Banco La Hipotecaria Empresas Melo Multibank Emp. de Distribucion Electrica Metro-Este Banco Delta Saltos de Francoli Banco Aliado Sector Financial Financial Financial Financial Consumer Cyclical Financial Utilities Financial Energy Financial Com. Paper 83 89 0 68 13 0 20 5 0 0 Bonds 10 0 75 0 20 29 0 6 3 3 Total $ Issued 93 89 75 66 33 29 20 10 3 3 Local Issuer Rating A AAAA+ A A+ A+ AA+ BB BBBA Int. Rating BB+ BBB BB

Sources: BVP, MMG Bank

MMG BANK
A Primer on Panamas Debt Capital Markets January 20, 2012 Page 11

OTHER CHARTS
2011 Bond Issuers:
Issuer ENA Sur Trust Banco Internacional de Costa Rica Petroleos Delta Real Estate Investment Thrust Ideal Living Corp. Andina de Fomento HSBC Leasing Generadora Pedregalito Global Bank Empresas Melo Inmobiliaria Don Antonio Banco La Hipotecaria Total $ Issued 395,000,000 85,500,000 60,000,000 60,000,000 45,000,000 40,000,000 37,000,000 35,000,000 32,000,000 28,680,000 28,500,000 28,373,000 25,150,000 20,000,000 19,509,000 18,000,000 16,042,000 16,000,000 15,994,000 15,500,000 15,000,000 14,000,000 11,955,000 10,500,000 9,488,000 8,000,000 7,943,043 7,579,000 7,500,000 4,990,000 4,910,000

2010 Bond Issuers:

Issuer Cable Onda Banco Nacional de Panama Comp. Azucarera la Estrella Desarrollo Inmobiliario del Este Multibank HSBC Leasing Empresas Melo MHC Holding Tropical Resorts International Franquicias Panameas Finanziera Cash Solution Cochez y Compaia Total $ Issued 100,000,000 75,000,000 50,000,000 32,500,000 29,228,000 23,800,000 20,000,000 20,000,000 20,000,000 17,000,000 16,241,000 12,013,000 11,804,000 10,000,000 9,234,000 8,568,000 8,063,000 7,111,000 6,000,000 5,624,000 5,000,000 3,500,000 3,371,000 3,347,000 3,000,000 2,957,000 1,333,000 504,694,000

BBVA Panama Finanzas Generales Multibank Metro Leasing Cochez y Compaia Almacenaje Seco y Frio Sociedad Urbanizadora del Caribe Aliado Leasing Aliado Factoring Banco Centroamericano de Int. Econ. Bahia las Minas Los Castillos Real Estate Banco Delta Banco Aliado Promotora Torre Aseguradora Ancon Saltos de Francoli Desarrollo Inmobiliario del Este Hipotecaria Metrocredit Corp. Finanzas del Pais Finanzas y Creditos del Hogar Multi Financiamientos Capital Bank Colfinanzas First Factoring R.G. Inmobiliaria Smart Solutions Marketing Panama Total

First Factoring Global Bank Indesa Capital Colfinanzas Promotora Torre Aseguradora Ancn Sociedad Urbanizadora del Caribe Aliado Factoring Banco Delta Empresas Tagaropulos Corp. Finanzas del Pais Saltos de Francoli Banco Aliado Aliado Leasing Hipotecaria Metrocredit R.G. Inmobiliaria Total

Sources: BVP, MMG Bank

2,669,000 2,000,000 1,505,000 1,432,000 1,001,000 634,000 412,000 1,132,766,043

Sources: BVP, MMG Bank

MMG BANK
A Primer on Panamas Debt Capital Markets January 20, 2012 Page 12

OTHER CHARTS
2011 Commercial Paper (VCNs) Issuers:
Issuer Banco Internacional de Costa Rica Global Bank Banco La Hipotecaria Emp. de Dist. Electrica Metro-Este Sociedad Urbanizadora del Caribe Panamea de Motores Hipotecaria Metrocredit Empresas Melo Empresas Tagaropulos Cochez y Compaia Corp. Finanzas del Pais Helefactor Petroleos Delta Finanzas y Creditos del Hogar Banco Delta R.G. Inmobiliaria First Factoring Total Total $ Issued 96,686,000 71,828,000 31,310,000 30,000,000 20,252,000 15,000,000 14,000,000 12,643,000 6,000,000

2010 Commercial Paper (VCNs) Issuers:

Issuer Banco Internacional de Costa Rica Global Bank Banco La Hipotecaria Sociedad Urbanizadora del Caribe Econo-Finanzas Emp. de Dist. Electrica Metro-Este Panamea de Motores Empresas Melo Petroleos Delta Hipotecaria Metrocredit Empresas Tagaropulos Cochez y Compaia Corp. Finanzas del Pais Banco Delta Finanzas y Creditos del Hogar R.G. Inmobiliaria Helefactor Total Total $ Issued 88,859,000 83,004,000 67,531,000 23740000 20,751,000 20,000,000 20,000,000 13,000,000 10,000,000 9,000,000 6,000,000 5,000,000 5,000,000 4,811,000 4,000,000 3959000 3,000,000 387,655,000
Sources: BVP, MMG Bank

5,000,000 5,000,000 5,000,000 5,000,000 4,000,000 3,216,000 3,000,000 2,076,000 330,011,000

Sources: BVP, MMG Bank

Pfd/Perpetual Bond Issuers for 2011:

Issuer Cochez y Compaia Global Bank Banesco Multibank Banco La Hipotecaria Corp. Finanzas del Pais Credicorp Bank Grupo Banco Delta Banco General Odin Energy Total Total $ Issued 35,720,000 32,757,000 20,000,000 15,027,500 5,374,000 5,000,000 1,606,000 964,000 250,000 15,000 116,713,500
Sources: BVP, MMG Bank

Pfd/Perpetual Bond Issuers for 2011:

Issuer Banco General Global Bank Banco Aliado Towerbank Multibank Odin Energy Grupo Banco Delta Credicorp Bank Total Total $ Issued 118,839,000 57,263,000 20,000,000 5,000,000 3,759,300 1,152,867 659,000 326000 206,999,167
Sources: BVP, MMG Bank

MMG BANK
A Primer on Panamas Debt Capital Markets January 20, 2012 Page 13

OTHER CHARTS
2011 Bond Issues (=>10 million in size):
ISIN USP3716WAB74 USP3716WAA91 PAL0600221A9 PAL0736322A2 XS0623817797 PAL3600321A1 PAL3904926B8 PAL3104131B3 PAL3108113A9 PAL312371DD6 PAL0600221B7 PAL3904926A0 PAL312371DE4 PAL3001011A3 XS0669881715 PAL3003711F5 PAL1800721A4 PAL3003812F1 PAL0848222A9 Issuer ENA Sur Trust ENA Sur Trust Real Estate Investment Thrust Ideal Living Corp. Andina de Fomento Generadora Pedregalito Petroleos Delta BBVA Panama Finanzas Generales Global Bank Real Estate Investment Thrust Industry Infrastructure Infrastructure Real Estate Real Estate Financial Energy Energy Financial Financial Financial Real Estate Coupon 5.25% 5.75% 6.50% 6.50% 3.63% 7.00% 5.00% 3.75% 5.75% 5.25% 12.00% 4.75% 5.25% 6.00% 2.00% 8.50% 6.75% 8.50% 4.25% 5.88% 3.75% 5.00% 5.50% 2.61% 6.50% Maturity Total $ Issued 5/25/25 225,000,000 5/25/25 170,000,000 4/30/18 45,000,000 2/10/14 45,000,000 5/11/16 40,000,000 6/30/18 35,000,000 5/9/21 35,000,000 5/31/16 20,000,000 11/20/14 20,000,000 2/7/18 17,500,000 4/30/23 15,000,000 5/9/18 2/23/18 8/16/21 8/29/21 11/9/16 11/30/18 12/28/16 12/22/26 8/24/15 9/12/16 10/17/17 10/17/18 9/2/16 5/9/23 15,000,000 14,500,000 14,000,000 14,000,000 13,000,000 11,500,000 11,000,000 10,500,000 10,052,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000

PAL352071AC1 PAL0756821E0 PAL1245026H6 PAL1245026I4 PAL3048211G1 PAL3904926C6

Petroleos Delta Global Bank Metro Leasing Banco Centroamericano de Int. Econ. Aliado Leasing Almacenaje Seco y Frio Aliado Factoring Los Castillos Real Estate Multibank Inmobiliaria Don Antonio Empresas Melo Empresas Melo HSBC Leasing Petroleos Delta

Energy Financial Financial Financial Financial Consumer Non-Cyclical Financial Real Estate Financial Consumer Non-Cyclical Consumer Cyclical Consumer Cyclical Financial Energy

Sources: BVP, MMG Bank

MMG BANK
A Primer on Panamas Debt Capital Markets January 20, 2012 Page 14

OTHER CHARTS
2011 Commercial Paper (VCNS, =>5 million in size):
ISIN Issuer Industry Coupon Maturity Total $ Issued

PAL2814431B0 PAL3520633J7 PAL3520633Q2 PAL3520633L3 PAL157732AA9 PAL312373FM8 PAL312373FO4 PAL312373FN6 PAL312373FP1 PAL312373FK2 PAL312373FQ9 PAL3520633R0 PAL3520633P4 PAL312373FL0 PAL0022134B2 PAL0302933D4 PAL0302933E2 PAL0302933F9 PAL312373FR7 PAL3151132A5 PAL3520633F5 PAL3520633G3 PAL3520633H1 PAL3904925A2

Emp. de Dist. Electrica Metro-Este Banco Internacional de Costa Rica Banco Internacional de Costa Rica Banco Internacional de Costa Rica Hipotecaria Metrocredit Global Bank Global Bank Global Bank Global Bank Global Bank Global Bank Banco Internacional de Costa Rica Banco Internacional de Costa Rica Global Bank Cochez y Compaia Panamea de Motores Panamea de Motores Panamea de Motores Global Bank Helefactor Banco Internacional de Costa Rica Banco Internacional de Costa Rica Banco Internacional de Costa Rica Petroleos Delta

Utilities Financial Financial Financial Financial Financial Financial Financial Financial Financial Financial Financial Financial

Financial Consumer Cyclical Consumer Cyclical Consumer Cyclical Consumer Cyclical Financial Financial Financial Financial Financial Energy

2.90% 3.00% 3.25% 3.00% 7.00% 3.00% 3.00% 3.00% 3.00% 2.75% 3.00% 3.25% 3.00% 2.75% 3.00% 3.00% 3.00% 3.00% 3.00% 5.00% 3.13% 3.13% 3.13% 3.50%

5/6/12 9/20/12 12/17/12 10/18/12 6/19/12 6/21/12 8/13/12 7/5/12 9/6/12 3/8/12 11/15/12 12/20/12 9/7/12 3/31/12 4/4/12 6/1/12 6/8/12 8/17/12 12/9/12 10/4/12 1/10/12 1/17/12 2/3/12 5/7/12

30,000,000 14,985,000 14,985,000 13,152,000 10,000,000 10,000,000 10,000,000 9,991,000 9,951,000 9,950,000 9,459,000 9,027,000 8,000,000 5,042,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000

Sources: BVP, MMG Bank

MMG BANK
A Primer on Panamas Debt Capital Markets January 20, 2012 Page 15

IMPORTANT DISCLOSURES
The material provided in this presentation is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy securities related to any of the products or services mentioned herein. This presentation does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is unauthorized; or to any person to whom it would be illegal to make such an offer or solicitation. It is the responsibility of the person(s) in possession of this material to verify the information and applicable laws and regulations of any relevant jurisdiction. Potential investors should verify the information and take the appropriate measures regarding legal requirements and tax and exchange control laws and regulations in their country of nationality, residence or domicile that might be relevant to the subscription, purchase, possession, exchange, amortization or disposition of any investment. Past results are not indicative of future results; the value of investments and capital derived from these investments may uctuate. Prospective yields are not guaranteed and a loss of principal may occur. This material contains current opinions of the author but not necessarily those of MMG Bank Corporation and such opinions are subject to change without notice. The opinions expressed herein are given on the date this material is presented. This material may not be 1) copied, photocopied or duplicated in any way or by any means; or 2)redistributed without the written consent of MMG Bank Corporation. This presentation may include forward-looking statements that reect the intentions, beliefs or expectations of the company. Forward-looking statements are subject to risk, uncertainty, assumptions and other factors that could lead to material differences between related markets and forward-look statements expressed or suggested herein.

MMG BANK
A Primer on Panamas Debt Capital Markets January 20, 2012 Page 16