Economic and Markets Update
Economic and Markets Update prepared for:
Let's Talk Coffee October 30, 2013
Mark Williams
Senior Vice President 212.493.7827 [email protected]
Economic Linkages
Housing Market
Wealth Effect
Personal ConsumpSon
Labor Market
Income Effect
Deleveraging
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GDP
Savings
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Housing Market
An Important Part of Household Balance Sheets $70
$ Trillions
$60
$50
All Other Assets $40
$30
Stocks and Mutual Funds
1Q 2013 Value
Change from Pre-‐Crisis Peak
$32.6 trillion
+16%
$17.0 trillion
+6%
$20.8 trillion
-‐17%
$20
Residential Real Estate
$10
$0 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: F ederal R eserve, B BH Analysis
•
•
The net worth of American households hit a peak of $68.1 trillion in the third quarter 2007 before twin bear markets in equiSes and housing destroyed $16 trillion of household wealth. At the end of the first quarter of 2013, the net worth of American households had recovered to a new high of $70.3 trillion In spite of the decline in the value of housing over the past five years, residenSal real estate sSll accounts for 29% of the total net worth of U.S. households.
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Housing Market Housing Prices U.S. Housing Prices (Absolute Level and Annual Change) $250
$ Thousands
Y-‐O-‐Y % Change
U.S. Existing Home Sales Median Price (Left Hand Scale)
$200
25% 20% 15% 10%
$150
5%
0%
$100 Year-‐Over-‐Year Percent Change (Right Hand Scale)
$50
-‐5% -‐10% -‐15%
$-‐
Source: N ational Association of Realtors, BBH Analysis
-‐20%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
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Housing Market Housing Prices U.S. Housing Prices (Year-‐over-‐Year Change) 15%
10%
5%
• An alternaSve home price index from the Federal Housing Finance Agency (FHFA) uses sale data from conforming, convenSonal Fannie Mae and Freddie Mac mortgages as its inputs. In June, the index rose for the 23rd Sme in the past 27 months. • The FHFA HPI shows a clear market boiom in March 2011 and is currently up 7.7% year over year, and 12.3% since this trough price.
0%
-‐5%
-‐10%
Source: Federal Housing Finance Agency, BBH Analysis
-‐15% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
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Housing Market Mortgage Rates • 30-‐year conforming fixed mortgage rates increased 8 basis points (bps) during August to finish the month at 4.61%, or 1.1% above the all-‐Sme lows seen in April of this year.
30-‐Year Fixed Mortgage Rates (Conforming Loans, Nationwide Average) 9%
8%
• Mortgage rates have risen in tandem with Treasuries in response to the market’s anScipaSon of a tapering and eventual end to quanStaSve easing by the Fed.
7%
6%
5%
4%
Source: BanxQuote, BBH Analysis
3%
2000
2001
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2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
• Though mortgage rates have risen, they are sSll at historically low levels and home affordability is high. Data on new and exisSng home sales indicate that acSvity is slowly starSng to pick up.
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Economic Linkages
Housing Market
Wealth Effect
Personal ConsumpSon
Labor Market
Income Effect
Deleveraging
WM-‐2013-‐08-‐08-‐0432
GDP
Savings
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Employment and Wages
Narrow and Broad Unemployment Rates • The economy added a below consensus 169,000 jobs in August, while revisions to prior months subtracted an addiSonal 74,000 jobs from the data series.
Measures of Unemployment 18%
Unemployment Rate
16% 14%
13.7%
12%
Broad Unemployment Rate
10% 8%
7.3%
6% 4%
Narrow Unemployment Rate 2% Source: Bureau of L abor Statistics, BBH Analysis
0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
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• The unemployment rate decreased to 7.3% due to a decrease in the size of the labor force. A broader measure of unemployment, which includes long-‐ term discouraged job seekers and involuntary part-‐Sme employees, decreased 0.3% to 13.7%. • Overall, the private sector has been more resilient, adding over 2.2 million jobs to the economy over the past year, while the government sector has accounted for a net loss of 94,000 jobs over the same period.
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Employment and Wages
Average Hourly Earnings Growth Average Hourly Wage Average Hourly Earnings (Year-‐Growth over-‐Year Change)
4.5% 4.0% 3.5% 3.0%
2.5% 2.0% 1.5% 1.0% 0.5% Source: Bureau of L abor Statistics
0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
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9
Economic Linkages
Housing Market
Wealth Effect
Personal ConsumpSon
Labor Market
Income Effect
Deleveraging
WM-‐2013-‐08-‐08-‐0432
GDP
Savings
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The Deleveraging of the American Consumer Household Debt as a Percentage of Disposable Income • As consumers conSnue deleveraging, household debt as a percentage of disposable income has been steadily declining since reaching a peak of almost 130% in the 3rd quarter of 2007.
Household Debt a % of Income Household Debt / Dasisposable Income
140%
129.4%
130% 120%
Household Debt as a % of Disposable Income 110%
106.7%
100% 90% 80%
1990s Average: 86.8%
70%
Source: Federal Reserve, BBH Analysis
60% 1992
1994
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1996
1998
2000
2002
2004
2006
2008
2010
2012
• At the end of the 1st quarter of 2013, the raSo stood at 106.7%, up 1.2% from the 4th quarter but down 2.3% over the past year. • Just how far the consumer deleveraging process must conSnue is uncertain, however, by one measure we are over halfway back to our 1990s average of 86.8%.
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The Deleveraging of the American Consumer Debt Payments as a Percentage of Disposable Income • The household debt service raSo has dropped sharply since reaching a high of 14.1% in the 3rd quarter of 2007. The combinaSon of unprecedentedly low interest rates and balance write-‐ offs has served to contract the raSo to the lowest level since the incepSon of the data series in 1980.
Household Debt Service Ratio Debt Payments as a Percentage of Disposable Income
15% 14.1%
14%
13%
12%
11% 10.5% 10%
9%
8%
Source: Federal Reserve, BBH Analysis
1982
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1987
1992
1997
2002
2007
2012
• The raSo increased 0.2% to 10.5% in the 1st quarter of 2013, but remains at historically low levels. • While this raSo is somewhat dependent on the Federal Reserve maintaining a low interest rate policy, to the extent that households divert some of these interest savings to repair their over-‐leveraged balance sheets, the currently low household debt service raSo should aid the overall deleveraging process.
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Consumer Credit
Credit Card Delinquency RaGos • This impressive improvement in credit card delinquencies is a product of deleveraging on the part of the consumers as well as the write-‐off of uncollecSble debts.
Credit Card Delinquency Rates (30-‐Plus Days Overdue) 9% American Express
Bank of America
Capital One
Citibank
Discover
8% 7%
• Delinquencies are at record low levels for most credit card providers.
6% 5% 4% 3% 2%
1% Source: Credit Card Companies, BBH Analysis
0%
2000
2001
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2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
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Personal Savings
A Return to Fiscal Prudence? • Personal savings declined steadily from the 1980s, before moving upward once again during the last recession.
Personal Savings as a Percentage of Disposable Income 18%
16%
Personal Savings Rate
14% 12%
3-‐Year Moving Average
10% 8%
6% 4%
2% Sources: Bureau of Economic Analysis, BBH A nalysis
0%
1963
1968
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1973
1978
1983
1988
1993
1998
2003
2008
• The savings rate so far in 2013 has dropped to levels not seen since before the financial crisis, as households are forced to spend a larger fracSon of their incomes to maintain their spending habits. Disposable incomes have been under pressure recently due to the hit from the payroll tax hike. • Structural changes, including the introducSon of IRAs, 401(k)s, unemployment insurance, and the growing prevalence of two-‐income households, have allowed for a secular decline in the savings rate.
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Energy Prices
A Constraint on Personal ConsumpGon Crude Oil and Retail Gasoline Prices $140
$ per gallon
$ per barrel
$4.50 $4.00
$120 Retail Gasoline Prices (right hand scale)
$3.50
$100
$3.00
$80
$2.50
$60
$2.00 $1.50
$40 West Texas Intermediate Crude (left hand scale)
$20
$1.00 $0.50
Sources: Bloomberg, NY Mercantile Exchange, BBH Analysis
$0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
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$0.00
• Crude oil and retail gasoline prices have been volaSle but have been range bound between $80 -‐110 per barrel and $3.50 -‐4.00 per gallon for the past two and a half years. • In August, crude was up 2.5%, seiling at $108, while retail gasoline prices (including taxes) were down 2.7% to $3.62. • The recent decline in gasoline prices has been a welcome development for consumers, who are struggling to maintain their spending in the face of declines in disposable incomes.
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The DomesSc Economy
Retail Sales and Personal ConsumpGon • In July, real personal consumpSon was flat and real retail sales were up 0.1% versus the prior month.
Personal Consumption Expenditures and Retail Sales (Year-‐over-‐Year Growth) Shaded Periods Indicate Recessions 15%
• Nominal Retail sales were up 5.4% year-‐over-‐year in June, while nominal Personal ConsumpEon Expenditures (PCE) rose 3.1%.
10%
5% Personal Consumption Expenditures
• While the month to month data is volaSle, personal consumpSon has been growing steadily and this month’s data confirm that trend is sSll in place.
0%
-‐5%
-‐10%
Retail Sales Sources: Bureau of Economic Analysis, U.S. Census Bureau, BBH Analysis
-‐15% 1960
1964
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1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
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Consumer Confidence
Current and Future ExpectaGons • In August, the current aotudes survey decreased slightly from its highest level in six years, while the future expectaSons survey was down modestly for the second month in a row.
University of Michigan Consumer Sentiment Surveys 120
Index
110 100
Current Attitudes
• The recent rise in current aotudes is due in large part to the relaSvely strong performance of the labor, equity, and housing markets.
90 80 70 60
Future Expectations
50 40
Source: University of Michigan Survey Research
2002
2003
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2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
• The cause and effect between consumer spending and consumer senSment is unclear and widely debated, but improving confidence is a key element in the transiSon to a consumer-‐led economic expansion.
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The DomesSc Economy
Purchasing SenGment and Industrial ProducGon Purchasing Managers Index and Industrial Production Growth 10%
% Change Year-‐over-‐Year
Diffusion Index
70
ISM Purchasing Managers Index (right hand scale)
60
5%
50 0%
40 -‐5% 30 -‐10% 20 Industrial Production Growth (left hand scale)
-‐15%
10 Sources: Institute o f Supply Management, Federal Reserve
-‐20% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
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0
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The DomesSc Economy Real GDP Growth
• The second GDP esSmate for the second quarter shows that the economy expanded at an annual pace of 2.5%, an increase from the advance esSmate of 1.7% and first quarter growth of 1.1%.
U.S. Real Gross Domestic Product (Quarter-‐over-‐Quarter Growth, Annualized) 6%
4%
2%
0%
-‐2%
Consensus Expectations
-‐4%
-‐6%
-‐8%
-‐10%
Source: Bureau of Economic Analysis, BBH A nalysis
2006
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2007
2008
2009
2010
2011
2012
2013
2014
• Personal consumpSon contributed 1.2%, and investment added 1.5% while net exports were flat. • The biggest surprise in this report is that government spending only subtracted 0.2% from growth, as opposed to -‐0.8% in the prior quarter and -‐1.3% the quarter before that. This argues that governments are holding up well despite sequester-‐ induced budget cuts. Overall, this report is consistent with conSnued, modest economic growth.
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The DomesSc Economy
Index of Leading Economic Indicators Index of Leading Economic Indicators Shaded Periods Indicate Recessions 120
20% 15%
YOY % Change (right hand scale) 100
10% 80
5% 0%
60 -‐5%
40
-‐10% LEI Index (left hand scale)
-‐15%
20
-‐20% 0 1962
Source: Conference Board, BBH & Co. Analysis
1967
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1972
1977
1982
-‐25% 1987
1992
1997
2002
2007
2012
• The Index of Leading Economic Indicators (LEI) aggregates a variety of measures of economic acSvity, including average weekly hours, jobless claims, new manufacturing orders, vendor performance, building permits, stock prices, a leading credit index, consumer expectaSons, and the shape of the yield curve. • In July, the LEI was flat versus the prior month, and is up 3.1% year over year. • These measures are not consistent with an imminent downturn in economic acSvity.
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Monetary Policy The Fed Funds Rate Fed Funds Rate 7%
6%
Futures Market
5%
4%
3%
2%
1%
0%
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Source: Federal Reserve, BBH Analysis
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
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21
Monetary SSmulus
Expansion of the Fed’s Balance Sheet Assets of the Federal Reserve (Pro Forma from Sep. 2013 -‐ Jun. 2014) $4,500
$ Billions
$4.1T
$4,000
$3.6T
$3,500 $3,000 $2,500 $2,000
$1,500 $1,000 QE1
$500
QEx (Estimated)
QE2
Source: Federal Reserve, BBH Analysis
$-‐ 2007
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2008
2009
2010
2011
2012
2013
2014
• In a surprise move, the Fed decided to maintain its asset purchase program of $85 billion per month at the September FOMC meeSng. • The commiiee recognized that “the Sghtening of financial condiSons observed in recent months, if sustained, could slow the pace of improvement in the economy and labor markets.” • Since the third quarter of 2008, the Fed’s balance sheet has grown by almost $2.7 trillion. If the Fed’s base case scenario is realized, under one tapering scenario the balance sheet might expand by an addiSonal $540 million by June 2014.
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22
InflaSon • The Consumer Price Index (CPI) decelerated to an annual rate of 1.5% in August. • Core CPI (ex food and energy), the Federal Reserve’s preferred measure of inflaSon, was up 0.1% to 1.8%. • As inflaSon has waned, policymakers have had to again consider then risks of deflaSon as well as inflaSon. Before it starts moderaSng its asset purchase program, the FOMC would like to see core inflaSon trending back towards its long run goal of 2%.
WM-‐2013-‐09-‐20-‐0453
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23
Corporate Balance Sheets Cash and Cash Equivalents • Corporate balance sheets are in much beier shape and have far greater liquidity than even before the Great Recession.
Corporate Cash Balances Nonfarm Nonfinancial Corporate Cash $1,600
$ Billions
$1,400
• Non-‐financial companies held over $1.4 trillion in cash and cash equivalents as of March 2013, up 24% from year end 2008.
$1,200
$1,000
$800
$600
$400
Sources: Federal Reserve Z.1 Report, BBH Analysis 1999
2000
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2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
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InflaSon
Impact on Purchasing Power Purchasing Power of $1,000,000 (At Various Rates of Inflation) $1,000,000 $900,000 $800,000
$700,000
2%
• Over a 25-‐year period, a 2% rate of inflaSon results in a near 40% loss of purchasing power.
$600,000 $500,000
4%
$400,000
6%
$300,000
• In spite of current low levels, inflaSon remains the single biggest threat facing longer-‐ term investors. Even low rates of inflaSon inexorably eat away at the purchasing power of the dollar.
8%
$200,000
10%
$100,000 Source: BBH Analysis
$0
1 Year
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5 Years
10 Years
15 Years
20 Years
25 Years
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Yield Curves
3.70%
4.0% 2.79%
3.0% 1.64%
2.0%
1.0%
0.0%
Nominal Yield Curve
1.70%
0.40%
0.79% 0.02%
0.02%
0.05%
-0.36%
-‐1.0% -1.60%
-‐2.0% -1.98%
-1.98%
Real Yield Curve
-1.95%
Source: B loomberg, Bureau of Labor Statistics, B BH Analysis
-‐3.0% 1 Month
3 Month
6 Month
2 Year
5 Year
10 Year
30 Year
Past performance does not guarantee future results.
WM-‐2013-‐09-‐20-‐0453
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Yield Curves U.S. Treasury Yield Curves 5.0%
4.0%
3.70%
2.79%
3.0%
2.67%
2.0%
1.64% 30 August 2013
0.40% 0.02%
0.02%
0.05%
0.08%
0.07%
0.13%
0.59%
31 August 2012
0.22% Source: B loomberg, B BH Analysis
-‐1.0%
1 Month
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3 Month
6 Month
2 Year
• 10-‐year Treasury yields are up 1.16% since May lows and 0.2% over the past month.
1.55%
1.0%
0.0%
• While shorter term rates have remained anchored due to Fed policy, medium and longer term interest rates have risen sharply in response to the market’s expectaSon of an unwinding of quanStaSve easing.
5 Year
10 Year
30 Year
• Despite recent increases, Treasury rates sSll remain well below historical averages. Yields now equal the current rate of CPI inflaSon between 6 and 7 year maturiSes.
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27
Financial Markets
Fixed Income Returns • In August, the yield curve steepened by 20-‐25 basis points (bps) in the 3-‐10 year maturity range. This gave rise to losses of 0.6% in Treasuries, which brought trailing 12 month returns to -‐3.6%. TIPS lost 1.5% during the month.
Fixed Fixed Income Income CClass lass RReturns eturns TThrough hrough AM ugust arch 370, , 22012 013 10% YTD 2013
Trailing 12 Months
7.4%
5%
2.7%
0%
-‐1.4% -‐3.2% -‐5%
-‐3.6%
-‐3.3% -‐4.3%
-‐5.5% -‐7.6% -‐8.7%
-‐10% Govt. Treasuries
Corporate Bonds
High Yield Bonds
TIPS
Municipals Source: Bloomberg
• During the month, credit spreads widened by 2 bps in corporates and 6 bps in high yield. When coupled with the steepening of the yield curve, this led to losses of 0.7% in corporates and 0.6% in high yield. For the past 12 months corporates have lost 1.4% and high yield bonds have gained 7.4%.
Past performance does not guarantee future results.
WM-‐2013-‐09-‐20-‐0453
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28
Financial Markets
Long-‐Term Equity Returns S&P 500 Annual Total Returns (1926 Through August 30, 2013) 60%
40%
Average 9.8% 20%
0%
-‐20%
2013 ytd 16.1% -‐40%
Source: Ibbotson Associates
-‐60% 1926 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Past performance does not guarantee future results.
WM-‐2013-‐09-‐20-‐0453
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29
Financial Markets Outlook S&P 500 Price-‐to-‐Earnings RaGo Equity PE Ratios (1946-‐2013) ± 1 and 2 Standard Deviations 30
Updated through August 30, 2013 + 2 standard deviations
25.4x
25 + 1 standard deviation
20.4x
20
16.4x
average
15.3x
15
10
-‐ 1 standard deviation
5
0
-‐ 2 standard deviations
• Since boioming in September of 2011 at 12.1x, the P/E raSo on the S&P 500 has advanced to 16.4x, as increases in the index price have outpaced earnings growth. • On the basis of P/E raSos alone, at 16.4x trailing earnings, the S&P 500 is fairly valued relaSve to its long term average of 15.3x.
10.3x
5.2x
Sources: Standard and Poor's, Robert Shiller, BBH Analysis
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013
WM-‐2013-‐09-‐20-‐0453
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Corporate Earnings S&P 500 Profit Growth • With results in for 99% of the S&P 500’s market cap, operaSng earnings* for the second quarter of 2013 are expected to increase 3.7% year over year.
S&P 500 Earnings Growth 100%
% Change Year-‐over-‐Year
80%
60%
• With margins near all Sme high levels, the market has become more concerned with top line growth, which again looks weaker this quarter.
40%
20% na
0%
na
-‐20%
Consensus Expectations
-‐40% Source: Standard and Poor's, BBH Analysis
-‐60%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
* OperaSng earnings as calculated by Standard & Poor’s. Includes income from product (goods and services, excludes corporate (M&A, financing, layoffs), and unusual items
WM-‐2013-‐09-‐20-‐0453
• The primary threats to corporate earnings in 2013 are a more robust labor market that will increase unit labor costs (and thus hurt margins), and a tepid global economic expansion that makes top line growth harder to achieve.
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Corporate Earnings
NaGonal Income and Product Accounts National Income and Profit Accounts (NIPA) Corporate Profits Nominal $ $ Billions
$2,250 $2,000
$1,750
• The NaSonal Income and Product Accounts (NIPA) capture corporate profits for a broader range of companies than just the large capitalizaSon firms in the S&P 500. This data shows a similar rebound in earnings ater the credit crisis of 2008
$1,500
• NIPA profits have almost doubled from the lows of late 2008, and are 24% ahead of the previous peak.
$1,250 $1,000
$750
• In the first quarter of 2013, NIPA profits were up 5.0% year over year.
$500 $250 Sources: Bureau of Economic Analysis, BBH Analysis
$0 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012
WM-‐2013-‐09-‐20-‐0453
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32
Monetary Policy The Fed Funds Rate Fed Funds Rate 7%
6%
Futures Market
5%
4%
3%
2%
1%
0%
WM-‐2013-‐08-‐08-‐0432
Source: Federal Reserve, BBH Analysis
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
©2013 Brown Brothers Harriman & Co. ConfidenSal & Proprietary. Not to be reproduced without the explicit consent of BBH & Co. "BBH & Co." is a registered service mark of Brown Brothers Harriman & Co. "BBH" is a service mark of Brown Brothers Harriman & Co.
33
US Fiscal PosiSon US Total Public Debt Outstanding Absolute $ and % of GDP 18
$ t rillions (nominal)
% of GDP
120%
16 100% 14 Debt as % of GDP (right hand scale)
12
80%
10
60% 8 6
40% Total Public Debt Outstanding (left hand scale)
4 20% 2
0
WM-‐2013-‐08-‐08-‐0432
Source: U S Treasury, Bureau of Economic Analysis, BBH & Co. Analysis
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
0%
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34
Disclosures “BBH Guidelines” represent the strategic asset allocaSon as recommended by the BBH Asset AllocaSon Commiiee. “Client Targets” represent account holders’ asset allocaSon objecSves, reflecSng individual circumstances and restricSons. Investors should noSfy their RelaSonship Manager if there have been any changes in their financial situaSon, investment objecSves, requested restricSons or other circumstances which might affect the manner in which their assets should be invested. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Mutual funds are sold by prospectus. Investors should consider a Fund's investment objecBves, risks, charges and expenses carefully before invesBng. InformaBon about these and other important subjects is in the Fund's prospectus, which an investor should read carefully before invesBng. For more complete informaBon, contact RelaBonship Manager for prospectuses. If applicable to an individual’s account, credit raSngs are provided by Standard and Poor’s, which are independent third parSes. Issuers with credit raSngs of BBB or beier are considered of good credit quality, with adequate capacity to meet financial commitments. Issuers with credit raSngs below BBB are considered speculaSve in nature and are vulnerable to the possibility of issuer failure or business interrupSon. For addiSonal informaSon please go to the Understanding RaSngs secSon at www.standardandpoors.com. “Others” include fixed income products, including mutual funds, that are not subject to credit quality raSngs. Holdings may not equal 100% due to rounding. If applicable to an individual’s account, the Yield to Maturity (YTM) represents the yield that the Fixed Income porSon of the Poruolio would achieve if all bonds currently held in the Poruolio were held to maturity, assuming all coupon and principal payments are received as scheduled. Yield to maturity is only an esSmaSon of future return because the rate of return at which coupon payments can be reinvested upon receipt is unknown. This figure is subject to change and is not meant to represent the rate of return earned by any parScular client. If applicable to an individual’s account, the SEC 30-‐day yield, also referred to as the ‘standardized yield’, is a return figure based on the most recent 30-‐day period covered by a mutual fund's filings with the SEC. The yield figure reflects the dividends and interest earned during the period, ater the deducSon of the fund's expenses. This publicaSon is provided by Brown Brothers Harriman & Co. and its subsidiaries ("BBH") to recipients, who are classified as Professional Clients and Eligible CounterparSes if in the European Economic Area ("EEA"), solely for informaSonal purposes. This does not consStute legal, tax or investment advice and is not intended as an offer to sell or a solicitaSon to buy securiSes or investment products. Any reference to tax maiers is not intended to be used, and may not be used, for purposes of avoiding penalSes under the U.S. Internal Revenue Code or for promoSon, markeSng or recommendaSon to third parSes. This informaSon has been obtained from sources believed to be reliable that are available upon request. This material does not comprise an offer of services. Any opinions expressed are subject to change without noSce. Unauthorized use or distribuSon without the prior wriien permission of BBH is prohibited. This publicaSon is approved for distribuSon in member states of the EEA by Brown Brothers Harriman Investor Services Limited, authorized and regulated by the Financial Conduct Authority. BBH is a service mark of Brown Brothers Harriman & Co., registered in the United States and other countries. © Brown Brothers Harriman & Co. 2013. All rights reserved. 2013. SM-‐2010-‐0568
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