Banks

India I Equities

Result Update
Change in Estimates Target Reco

5 August 2013

Canara Bank
Core earnings, asset quality weak; Sell
Key takeaways Weak credit growth; CASA share and NIM decline. While Canara Banks advances rose 10.8% yoy (3.2% qoq), deposits grew faster, at 14.2% yoy, thereby decreasing credit-deposit 199bps yoy to 65.4%. Advances growth was driven by the priority sector (27.3% yoy) and farm loans (38% yoy). While NIM fell 17bps yoy (3bps qoq) to 2.2%, the proportion of CASA decreased 16bps yoy (106bps qoq) to 23.1%. Modest fee income, robust trading profits, declining productivity. While fee income grew 16.2% yoy (3% qoq), trading profits rose 349% yoy to `4.4bn and comprised 23.4% of pre-provisioning profits (7.1% in 1QFY13). Productivity worsened, with core cost-to-income increasing 92bps yoy to 47.8%. With modest business growth prospects, fee income and operating leverage are unlikely to improve substantially. Over FY13-15, we expect fees to post a 15.7% CAGR, with cost-to-assets at ~1.3%. Asset quality worsens, large loan restructuring, low NPA coverage. Gross NPA grew 17.1% qoq, with fresh slippages of `26.9bn (annualised, 4.5% of loans). NPA coverage fell 41bps qoq to 15.3% and is still the lowest of peers. In 1QFY14, `16.8bn of loans were restructured, with total restructured loans at `199bn (8% of loans). Our take. Due to lower credit growth and higher NPA assumptions, we slash our FY14 and FY15 net profit estimates 33.1% and 28.4% respectively. Hence, we lower our target from `405 to `239. We maintain our Sell rating, since we expect near-term profitability to be constrained by sluggish business and weak asset quality. Also, the RBI's recent liquidity-tightening measures are a valuation overhang. While the present valuation appears to price in assetquality concerns, persisting perceptions of default risk would restrict a valuation re-rating. At our Mar14 target, the stock would quote at PABV of 0.6x FY14e and 0.5x FY15e. Our target is based on the two-stage DDM (CoE: 14.5%; beta: 0.9; Rf: 8%). Risks. Faster credit growth, sharp decline in defaults.
Quarterly results (YE: Mar) 1QFY13 1QFY14 % yoy FY12 FY13 % yoy Key data

Rating: Sell Target Price: `239 Share Price: `242

CBK IN / CNBK.BO

52-week high / low Sensex / Nifty 3-m average volume Market cap Shares outstanding
Shareholding pattern (%)

`550 / `237 19164 / 5678 US$7.3m `107bn / US$1.8bn 443m

Jun 13 Mar 13 Dec 12

Promoters - of which, Pledged Free Float - Foreign Institutions - Domestic Institutions - Public
Estimates revision (%)

67.7 32.3 12.7 13.3 6.3

67.7 32.3 12.2 13.3 6.8

FY14e

67.7 32.3 12.8 13.2 6.3

FY15e

NII PPP PAT EPS

Financials (YE: Mar)

(13.1) (15.9) (33.1) (33.1)

FY14e

(18.0) (18.5) (28.4) (28.4)

FY15e

Net interest income (`m) Net profit (`m) EPS (`) Growth (%) PE (x) PABV (x) RoE (%) RoA (%) Dividend yield (%) Net NPA (%)
Source: Anand Rathi Research

83,895 28,907 65.3 0.6 3.7 0.6 11.1 0.7 5.4 2.5

97,104 37,504 84.7 29.7 2.9 0.5 13.1 0.8 7.0 2.4

Net interest income (`m) Non-interest income (`m) Operating expenses (`m) Cost-to-income (%) Pre-provisioning profit (`m) Provisions (`m) PBT (`m) Tax (`m) PAT (`m) EPS (`)
Source: Company, Anand Rathi Research

18,435 6,926 11,424 45.0 13,938 4,185 9,752 2,000 7,752 17.5

19,911 12,383 13,311 41.2 18,983 9,162 9,821 1,900 7,921 17.9

8.0 78.8 16.5 (382)bps 36.2 118.9 0.7 (5.0) 2.2 2.2

76,893 29,276 46,737 44.0 59,432 18,550 40,882 8,000 32,882 74.1

78,790 31,530 51,420 46.6 58,900 22,179 36,721 8,000 28,721 64.8

2.5 7.7 10.0 259bps (0.9) 19.6 (10.2) (12.7) (12.5)

Clyton Fernandes
+9122 6626 6744 clytonfernandes@rathi.com

Kaitav Shah
+9122 6626 6545 kaitavshah@rathi.com

Anand Rathi Shares and Stock Brokers Limited (hereinafter ARSSBL) is a full service brokerage and equities research firm and the views expressed therein are solely of ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only within India and to no countries outside India. Disclosures and analyst certifications are present in Appendix. Anand Rathi Research India Equities

5 August 2013

Canara Bank Core earnings, asset quality weak; Sell

Quick Glance Financials and Valuations

Fig 1 Income statement (`m)
Year-end: Mar FY12 FY13 FY14e FY15e FY16e
1050 900 750 600 450 300 2x 150 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Jan-13

Fig 4 PE band
83,895 6.5 35,229 119,124 8.0 54,559 64,565 9.6 27,741 36,825 7,917 28,907 0.6 65.3 13.1 97,104 117,012 15.7 20.5 39,374 45,032 136,477 162,044 14.6 18.7 61,551 71,462 74,926 90,583 16.0 20.9 27,150 32,122 47,776 58,461 10,272 12,569 37,504 45,892 29.7 22.4 84.7 103.6 16.9 20.7

Net interest income NII growth (%) Non-interest inc Total income Total Inc growth (%) Op. expenses Operating profit Op profit growth (%) Provisions PBT Tax PAT PAT growth (%) FDEPS (`/share) DPS (`/share)

76,893 (0.1) 29,276 106,169 1.0 46,737 59,432 (2.4) 18,605 40,827 8,000 32,827 (18.5) 74.1 11.0

78,790 2.5 31,530 110,320 3.9 51,420 58,900 (0.9) 22,179 36,721 8,000 28,721 (12.5) 64.8 13.0

8x Canara 6x

4x

Jul-06

Jul-07

Jul-08

Jul-09

Jul-10

Jul-11

Jul-12

Source: Company, Anand Rathi Research

Source: Bloomberg, Anand Rathi Research

Fig 2 Balance sheet (`m)

Year-end: Mar FY12 FY13 FY14e FY15e FY16e

Fig 5 Price-to-book band

900 1.3x 750 600 450 0.7x Canara 1.0x

Share capital Reserves & surplus Deposits Borrowings Minority interests Total liabilities Advances Investments Cash & bank bal Fixed & other assets Total assets No. of shares (m) Deposits growth (%) Advances growth (%)

4,430 4,430 4,430 4,430 4,430 222,470 244,348 266,491 295,219 330,372 3,270,537 3,558,560 4,036,277 4,654,981 5,377,642 244,165 316,088 228,734 246,400 265,572 3,741,602 4,123,426 4,535,932 5,201,029 5,978,016 2,324,898 2,421,766 2,785,031 3,258,486 3,845,014 1,020,574 1,211,328 1,251,246 1,396,494 1,586,404 281,794 347,147 354,505 379,616 355,301 114,335 143,185 145,150 166,433 191,297 3,741,602 4,123,426 4,535,932 5,201,029 5,978,016 443 443 443 443 443 11.5 8.8 13.4 15.3 15.5 10.0 4.2 15.0 17.0 18.0

300 150 0 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Source: Company, Anand Rathi Research

Source: Bloomberg, Anand Rathi Research

Fig 3 Key ratios

Year-end: Mar FY12 FY13 FY14e FY15e FY16e

Fig 6 Canara Bank vs. Bankex

2.2 27.6 44.0 16.0 14.8 71.1 31.2 1.7 1.5 512.2 389.1 13.8 10.4 15.4 0.9 2.1 28.6 46.6 15.7 20.1 68.1 34.0 2.6 2.2 561.6 396.5 12.4 9.8 12.1 0.7 2.0 29.6 45.8 15.6 20.0 69.0 31.0 2.9 2.5 611.6 411.3 11.9 9.3 11.1 0.7 2.1 28.8 45.1 16.6 20.0 70.0 30.0 2.9 2.4 676.4 454.2 11.2 8.9 13.1 0.8 2.2 27.8 44.1 17.5 20.0 71.5 29.5 2.8 2.3 755.8 509.6 10.6 8.4 14.5 0.8
550 500 450 400 350 300 250 200 Aug-12 Sep-12 Apr-13 May-13 Aug-13 Jan-13 Jun-13 Oct-12 Nov-12 Dec-12 Mar-13 Feb-13 Jul-13 Canara Bankex

NIM (%) Other inc / total inc (%) Cost-income (%) Provision coverage (%) Dividend payout (%) Credit-deposit (%) Investment-deposit (%) Gross NPA (%) Net NPA (%) BV (`) Adj BV (`) CAR (%) - Tier 1 (%) RoE (%) RoA (%)

Source: Company, Anand Rathi Research

Source: Bloomberg

Anand Rathi Research

Jul-13

Jul-13
0.4x

5 August 2013

Canara Bank Core earnings, asset quality weak; Sell

Result highlights
Fig 7 1QFY14 results vs expectations
(`m)
Net interest income Non-interest income Pre-provisioning profits PAT
1QFY13 1QFY14e Var % 1QFY13 YoY % 4QFY13 QoQ %

19,911 12,383 18,983 7,921

22,161 8,036 16,504 8,799

(10.2) 54.1 15.0 (10.0)

18,435 6,926 13,938 7,752

8.0 78.8 36.2 2.2

20,906 10,065 16,977 7,254

(4.8) 23.0 11.8 9.2

Source: Company, Anand Rathi Research

Fig 8 1QFY14 results

(`m) 1QFY14 1QFY13 YoY 4QFY13 QoQ

Credit Deposits Credit-to-deposits CASA % Gross NPA Net NPA Gross NPA % Net NPA % NPA coverage % Capital adequacy % Tier-1 %
Source: Company, Anand Rathi Research

2,498,914 3,819,715 65.4 23.1 73,289 62,092 2.9 2.5 15.3 11.4 9.0

2,255,835 3,346,192 67.4 23.3 44,966 37,556 2.0 1.7 16.5 13.2 10.1

10.8 14.2 (199)bps (16)bps 63.0 65.3 93bps 82bps (120)bps (185)bps (103)bps

2,421,766 3,558,560 68.1 24.2 62,602 52,781 2.6 2.2 15.7 12.4 9.8

3.2 7.3 (263)bps (106)bps 17.1 17.6 34 bps 30 bps (41)bps (105)bps (74)bps

Modest credit growth, CASA share and NIM decline Canara Banks credit grew 10.8% yoy, much faster than the past fourquarter average of 2.1%. Deposits grew faster, at 14.2% yoy, shrinking the credit-deposit 199bps yoy to 65.4%. The proportion of the banks CASA in total deposits fell 16bps yoy (106bps qoq) to 23.1%, resulting in NIM declining 19bps yoy to 2.2%. In absolute terms, CASA grew a modest 13.4% yoy. While current deposits grew 26.1% yoy, savings deposits grew 11.2% yoy. Average CASA per branch, at `225m, was flat yoy; it has been on a continuous downtrend since Mar11. We expect the proportion of CASA, at ~25%, to be stagnant over FY13-15. A low CASA share and credit-todeposits is likely to keep NIM constrained at 2% in FY14 and 2.1% in FY15. We expect both advances and deposits to register CAGRs of 16% and 14.4% respectively over FY13-15.
Fig 9 Credit-deposit, at 65.4%, has gradually declined since Mar12
(`bn) 2,600 2,500 2,400 2,300 2,200 2,100 2,000 1,900 1,800 1,700 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 (%) 73 72 71 70 69 68 67 66 65 64

Advances
Source: Company

Credit-deposit (RHS)

Anand Rathi Research

5 August 2013

Canara Bank Core earnings, asset quality weak; Sell

Fig 10 Weak net interest income growth persists

(`bn) 21.5 21.0 20.5 20.0 19.5 19.0 18.5 18.0 17.5 17.0 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 (%) 56 48 40 32 24 16 8 (8) (16)

Fig 11 CASA share remains low at 23.1%

(`bn) 885 860 835 810 785 760 735 710 685 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 (%) 30 29 28 27 26 25 24 23 22

NII
Source: Company

NII growth (RHS)

Source: Company

CASA

CASA share (RHS)

Weak fee income, declining productivity

While fee-income grew 16.2% yoy (3% qoq), trading profits rose 349% yoy to `4.4bn and comprised 23.4% of pre-provisioning profits (7.1% in 1QFY13). Productivity worsened, with core cost-to-income increasing 92bps yoy to 47.8%. Average operating profit per branch is now `4.5m.
Fig 12 Weak fee-income progression
(`m) 3,900 3,700 3,500 3,300 3,100 2,900 2,700 2,500 2,300 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 (%) 51.0 3.0 2.4 1.8 1.2 0.6 0.0 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 49.0 47.0 45.0 43.0 41.0 (%) 54 51 48 45 42 39 36 33 30

Fees & commissions

Source: Company

% of non-interest income

Fig 13 Core cost-income rises yoy, profit per branch flat

(`m) 3.6

Avg. profit per branch

Source: Company

Core cost-income (RHS)

Anand Rathi Research

5 August 2013

Canara Bank Core earnings, asset quality weak; Sell

Asset quality worsens, low NPA coverage Gross NPA grew 17.1% qoq, with fresh slippages of `26.9bn (4.5% of loans). NPA coverage fell 41bps qoq to 15.3% and is still the lowest of peers. In 1QFY14, `16.8bn of loans were restructured, resulting in this pool growing 9.8% qoq to `199bn (8% of loans). With likely weak asset quality, higher levels of restructured assets and low NPA coverage, credit costs are likely to constrain earnings growth over FY13-15. We expect NPA coverage (excl. technical write-offs) to be low (~16%) over FY13-15, led by the frail asset quality and a 12.8% CAGR in pre-provisioning profits over the same period. Perceptions of default risk would persist until the economic environment improves, restricting a sharp short-term valuation re-rating.
Fig 14 Asset quality and NPA coverage have deteriorated considerably
(`bn) 75.0 67.5 60.0 52.5 45.0 37.5 30.0 22.5 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 (%) 32.5 30.0 27.5 25.0 22.5 20.0 17.5 15.0

Gross NPAs
Source: Company

NPA coverage (RHS)

Anand Rathi Research

5 August 2013

Canara Bank Core earnings, asset quality weak; Sell

Valuations
Due to lower credit growth and higher NPA assumptions, we slash our FY14 and FY15 net profit estimates 33.1% and 28.4% respectively. Hence, we lower our target from `405 to `239. We maintain our Sell rating, since we expect near-term profitability to be constrained by sluggish business and weak asset quality. Also, the RBI's recent liquidity-tightening measures are a valuation overhang. While the present valuation appears to price in asset-quality concerns, persisting perceptions of default risk would restrict a valuation re-rating. At our Mar14 target, the stock would trade at PABV of 0.6x FY14e and 0.5x FY15e. Our target is based on the two-stage DDM (CoE: 14.5%; beta: 0.9; Rf: 8%).
Fig 15 Past one-year forward-P/BV
1.8 1.6 1.4 1.2 +1SD 1.0 Mean 0.8 -1SD 0.6 0.4 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 -2SD Canara +2SD

Source: Bloomberg, Anand Rathi Research

Risks

Faster credit growth may improve profitability and, subsequently, our earnings estimates. Less dependence on bulk deposits and faster accretion in low-cost deposits could lead to NIM being better than we estimate. A more-than-expected increase in restructured bad loans.

Anand Rathi Research

5 August 2013

Canara Bank Core earnings, asset quality weak; Sell

Financials
We introduce FY16 estimates and expect the bank to register a 15.5% CAGR in business over FY13-15, with advances and deposit CAGRs of 16.7% and 14.8% respectively. We expect a 16.9% CAGR in net profit over the same period.
Fig 16 Income Statement
Year-end: Mar (`m) FY12 FY13 FY14e FY15e FY16e

Interest Income Interest Expended Net Interest Income Growth (%) Non-interest Income Total Income Non-interest income / Total Inc (%) Operating Expenses Employee Expenses Other Expenses Pre-provisioning profit Growth (%) Provisions Profit Before Tax Taxes Tax Rate (%) Profit After Tax Growth (%) Number of Shares (m) Earnings Per Share (`)
Source : Company, Anand Rathi Research

308,506 231,613 76,893 (0.1) 29,276 106,169 27.6 46,737 29,731 17,007 59,432 (2.4) 18,605 40,827 8,000 19.6 32,827 (18.5) 443 74.1

340,779 261,989 78,790 2.5 31,530 110,320 28.6 51,420 32,536 18,884 58,900 (0.9) 22,179 36,721 8,000 21.8 28,721 (12.5) 443 64.8

364,205 280,310 83,895 6.5 35,229 119,124 29.6 54,559 35,463 19,096 64,565 9.6 27,741 36,825 7,917 21.5 28,907 0.6 443 65.3

428,726 331,623 97,104 15.7 39,374 136,477 28.8 61,551 38,777 22,774 74,926 16.0 27,150 47,776 10,272 21.5 37,504 29.7 443 84.7

510,101 393,089 117,012 20.5 45,032 162,044 27.8 71,462 45,021 26,441 90,583 20.9 32,122 58,461 12,569 21.5 45,892 22.4 443 103.6

Fig 17 Balance Sheet

Year-end: Mar (`m) FY11 FY12 FY13e FY14e FY15e

Share Capital Reserves and Surplus Net Worth Deposits Other Liabilities & Provisions Total Loans Total Liabilities Advances Investments Cash & Bank Balances Fixed & Other Assets Total Assets
Source : Company, Anand Rathi Research

4,430 222,470 226,900 3,270,537 244,165 3,514,702 3,741,602 2,324,898 1,020,574 281,794 114,335 3,741,602

4,430 244,348 248,778 3,558,560 316,088 3,874,648 4,123,426 2,421,766 1,211,328 347,147 143,185 4,123,426

4,430 266,491 270,921 4,036,277 228,734 4,265,011 4,535,932 2,785,031 1,251,246 354,505 145,150 4,535,932

4,430 295,219 299,649 4,654,981 246,400 4,901,380 5,201,029 3,258,486 1,396,494 379,616 166,433 5,201,029

4,430 330,372 334,802 5,377,642 265,572 5,643,214 5,978,016 3,845,014 1,586,404 355,301 191,297 5,978,016

Anand Rathi Research

Appendix
Analyst Certification The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter SEBI) and the analysts compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report. Important Disclosures on subject companies
Rating and Target Price History (as of 5 August 2013)

900 800 700 600 500 400 300 200 100 0 Jan-09 Jan-08 Oct-08 Jul-08 Apr-08 Apr-09 1 3 2 4 5

Canara Bank
6 7 8 9
1 2 3 4 5 6 7 8 9 10

10

Date 24-Mar-09 4-May-09 8-Jul-09 2-Feb-10 19-Jul-10 25-Oct-10 6-May-11 28-Jul-11 14-Dec-11 7-Nov-12

Rating Sell Sell Sell Sell Hold Buy Buy Buy Buy Sell

TP (`) 115 163 171 379 537 863 776 625 559 405

Share Price (`) 151 208 265 404 479 732 559 479 415 420

Jan-12

Jan-13

Oct-12

Jan-11

Oct-11

Oct-10

Jan-10

Oct-09

Jul-09

Jul-10

Jul-11

Jul-12

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues. Anand Rathi Ratings Definitions Analysts ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below: Ratings Guide Large Caps (>US$1bn) Mid/Small Caps (<US$1bn) Buy >15% >25% Hold 5-15% 5-25% Sell <5% <5%

Anand Rathi Research Ratings Distribution (as of 28 Feb 2013) Buy Anand Rathi Research stock coverage (184) 65% % who are investment banking clients 4%

Apr-10

Apr-11

Apr-12

Hold 27% 2%

Apr-13

Jul-13

Sell 8% 0%

Other Disclosures This report has been issued by ARSSBL which is a SEBI regulated entity, and which is in full compliance with all rules and regulations as are applicable to its functioning and governance. The investors should note that ARSSBL is one of the companies comprising within ANAND RATHI group, and ANAND RATHI as a group consists of various companies which may include (but is not limited to) its subsidiaries, its affiliates, its group companies who may hold positions, views, stakes and may service the companies covered in this report independent of ARSSBL. Investors are cautioned to be aware that there could arise a potential conflict of interest in the views held by ARSSBL and other companies of Anand Rathi who maybe affiliated, connected or catering to the companies mentioned in the Research Report; even though, ARSSBL and Anand Rathi are fully complaint with all procedural and operational regulatory requirements. Thus, investors should not use this as a sole basis for making their investment decision and should consider the recommendations mentioned in the Research Report bearing in mind the aforementioned. Further, the information herein has been obtained from various sources which we believe is reliable, and we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities (hereinafter referred to as Related Investments). ARSSBL and/or Anand Rathi may trade for their own accounts as market maker / jobber and/or arbitrageur in any securities of the companies mentioned in the Research Report or in related investments, and may be on taking a different position from the ones which haven been taken by the public orders. ARSSBL and/or Anand Rathi and its affiliates, directors, officers, and employees may have a long or short position in any securities of the companies mentioned in the Research Report or in Related Investments. ARSSBL and/or Anand Rathi, may from time to time, perform investment banking, investment management, financial advisory or any other services not explicitly mentioned herein, or solicit investment banking or other business from, any entity and/or company mentioned in this Research Report; however, the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the other companies of Anand Rathi, even though there might exist an inherent conflict of interest. Furthermore, this Research Report is prepared for private circulation and use only. It does not have regard to the specific investment objectives, financial situation and the specific financial needs or objectives of any specific person who may receive this Research Report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this Research Report, and, should understand that statements regarding future prospects may or may not be realized, and we can not guarantee the same as analysis and valuation is a tool to enable investors to make investment decisions but, is not an exact and/or a precise science. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Past performance is not necessarily a guide to future performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investments mentioned in this report.

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