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North America Equity Research 25 September 2009 Compass Minerals International, Inc. We Raise 2009 EPS Estimates We believe the current CMP stock price represents a reasonable entry point: the stock has underperformed the market by about (15%) year to date and underperformed Potash Corp. by (20%). Our 2010 EPS forecast of $5.50 could prove conservative because it assumes flat de-icing salt volumes despite a 14% rock salt capacity expansion planned for the 2010-2011 winter season. Our current model also assumes a milder than normal winter. Normal winter conditions and additional volumes from new salt capacity could add up to $0.50/sh to our current EPS projection. Closer to normal SOP demand in 2010 could assist EPS by $0.25 vs. our current estimate. We raised our 2009E pro forma EPS by $0.10 to $5.00 to reflect a lower expected tax rate in the second half of the year, partly offset by reduced SOP volume projection. • Our year-ahead Salt volume forecast may understate the segment's earnings power by $0.25-0.50 per share. Compass continues to expand its production capacity: it is planning to bring on an additional one million tons of rock salt in 2010. If only half of the new capacity is sold in the 2010-2011 winter season, this could benefit 2010 EPS by about $0.25. We note that 750,000 tons of new salt capacity for the 2009-2010 winter season appears to be fully committed as of now, reflecting unmet demand in the CMP’s core geographic areas. Moreover, in case of a normal winter, de-icing volumes could be 0.5 million tons higher in 2010, resulting in $25M additional profits (assuming $50/t price, and 50% incremental margin), or $0.25/sh benefit to EPS. More severe than normal weather could represent additional upside to our forecast. • The Fertilizer business remains the biggest unknown, and we err on the side of a slow volume rebound and conservative pricing for 2010 in our current projections. Our current SOP price forecast of $500/st reflects a conservative MOP price of $480/mt and a $65 premium to the MOP price (vs. the historical premium of $100-150/st). We estimate each $100 per ton price change in the SOP price is worth about $0.75/sh in EPS on 2010 volumes: accordingly, return to the average historical premium of $125/st could increase 2010 EPS by $0.45/sh. Our current SOP volume projection for 2010 is 355,000 st (vs. normalized sales of above 400,000 st). An additional 50,000 st would add $0.25/sh to 2010E EPS. • We rate Compass shares Overweight. The shares sell currently at 10.8 EPS and 6.7x EBITDA on our 2010 forecast compared to 13.0x and 8.9x for POT and 17.9x and 7.5x for the small/mid-cap specialty chemical peers. We expect the company to generate 11% of free cash flow yield in 2010. Compass Minerals International, Inc. (CMP;CMP US) 2008A 2009E (Old) Overweight CMP, CMP US Price: $59.35 Price Target: $66.00 Specialty and Major Chemicals Jeffrey J. Zekauskas AC (1-212) 622-6644 email@example.com Olga Guteneva (1-212) 622-6488 firstname.lastname@example.org J.P. Morgan Securities Inc. Price Performance 65 55 $ 45 35 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 YTD Abs 1.2% 1m 12.9% 3m 8.7% 12m 1.9% 2009E (New) 2010E EPS Reported ($) Q1 (Mar) Q2 (Jun) Q3 (Sep) Q4 (Dec) FY 1.48 0.05 0.87 2.41 4.81 1.85A 0.42A 0.61A 1.92A 4.81A 1.85A 0.42A 0.65A 1.99A 4.91A 5.50 Source: Company data, Reuters, J.P. Morgan estimates. Company Data Price ($) Date Of Price 52-week Range ($) Mkt Cap ($ mn) Fiscal Year End Shares O/S (mn) Div. Yield Price Target ($) Price Target End Date 59.35 24 Sep 09 65.74 - 36.42 1,970.48 Dec 33 2.4% 66.00 31 Dec 10 See page 8 for analyst certification and important disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Jeffrey J. Zekauskas (1-212) 622-6644 email@example.com North America Equity Research 25 September 2009 Details We are raising our 2009 pro forma EPS estimate for Compass Minerals to $5.00 from $4.90 to reflect lower tax rate of 30.5% in the second half of the year versus our prior estimate of a 37.4% rate (or +$0.25/sh), partly offset by lower operating income of $7M (or -$0.15/sh). Lower profits reflect reduced expectation for the SOP volumes in the second half of 2009 as a result of continuing weakness in the fertilizer markets. We maintain our 2010 EPS projection of $5.50. Earnings could be up to $0.50/sh higher should Compass be able to sell an additional 0.5 million tons of rock salt (of one million new capacity expected in 2010) and if winter weather conditions are close to normal. In addition, closer to normal SOP demand could add up to $0.25/sh to our current estimate. Table: Compass Minerals: Earnings Review and Outlook $ in millions, except EPS 3Q:09E Previous $179.3 41.0 66.6 71.7 21.8 49.8 10.6 $29.9 18.9 (9.5) $39.2 21.9% (6.9) 0.0 32.3 (12.1) 37% 20.2 $0.61 0.00 $0.61 33.3 3Q:09E Current $174.9 40.6 63.6 70.7 21.8 48.9 10.6 $32.0 15.8 (9.5) $38.3 21.9% (6.9) 0.0 31.3 (9.7) 31% 21.6 $0.65 0.00 $0.65 33.3 4Q:09E Previous $341.8 89.3 107.7 144.8 25.3 119.5 10.6 $92.6 22.7 (6.4) $108.9 31.9% (6.7) 0.0 102.2 (38.2) 37% 64.0 $1.92 0.00 $1.92 33.3 4Q:09E Current $326.6 84.1 105.4 137.0 25.3 111.7 10.6 $84.8 22.7 (6.4) $101.1 31.0% (6.5) 0.0 94.5 (28.4) 30% 66.2 $1.99 0.00 $1.99 33.3 2008 $1,167.7 341.1 470.4 397.6 82.0 315.6 41.4 $191.7 117.7 (35.2) $274.2 23.5% (41.6) 0.9 233.5 (70.0) 30% 159.5 $4.93 (0.12) $4.81 33.2 2009E Previous $989.7 258.7 344.1 407.6 87.9 319.6 42.0 $219.2 93.4 (35.0) $277.6 28.0% (27.7) 0.2 250.0 (87.1) 35% 163.0 $4.90 (0.09) $4.81 33.3 2009E Current $970.0 253.2 338.8 398.8 87.9 310.8 42.0 $213.5 90.3 (35.0) $268.8 27.7% (27.6) 0.2 241.4 (74.9) 31% 166.5 $5.00 (0.09) $4.91 33.3 2010E Previous $1,040.9 254.7 362.7 423.4 90.6 332.8 42.4 $225.0 97.4 (32.0) $290.4 27.9% (24.7) 0.0 265.7 (81.1) 31% 184.5 $5.50 0.00 $5.50 33.5 2010E Current $1,046.2 261.0 362.4 422.8 90.6 332.3 42.4 $227.6 94.2 (32.0) $289.9 27.7% (24.1) 0.0 265.7 (81.2) 31% 184.6 $5.50 0.00 $5.50 33.5 Net sales Shipping and handling Operating costs and expenses Gross profit Selling, development & administrative EBITDA D&A Operating Income By Segment Salt Specialty Potash Eliminations Operating income Operating Margin Interest expense - net Net other income (expense) Pretax income Taxes (accrual)/ benefit Tax Rate Net Income Diluted EPS, adjusted Non-recurring items EPS, GAAP Diluted Common Shares Source: Company reports and J. P. Morgan estimates. EPS excludes all non-recurring items. 2 Jeffrey J. Zekauskas (1-212) 622-6644 firstname.lastname@example.org North America Equity Research 25 September 2009 Table: Compass Minerals: Key Segment Operating Data Shipments in -000 short tons Selling prices in dollars per short ton Shipments and Selling Prices Salt (000 tons) Highway Deicing General Trade Total % change y-o-y Average Price ($/st) Highway Deicing % change y-o-y General Trade % change y-o-y Total Shipments ($/st) % change y-o-y Specialty Potash (000 tons) Shipments % change y-o-y Average Price ($/st) % change y-o-y 3Q:09E Previous 1,286 582 1,868 (24.8%) 3Q:09E Current 1,286 582 1,868 (24.8%) 4Q:09E Previous 3,406 789 4,196 (16.6%) 4Q:09E Current 3,157 789 3,946 (21.6%) 2008 2009E Previous 9,646 2,501 12,147 (19.5%) 2009E Current 9,397 2,501 11,898 (21.2%) 2010E Previous 9,164 2,551 11,714 (3.6%) 2010E Current 9,524 2,551 12,075 1.5% 12,237 2,852 15,089 18.0% $45.00 13.3% $145.00 6.4% $76.17 17.4% $45.00 13.3% $147.00 7.8% $76.79 18.3% $51.50 8.4% $155.00 4.0% $70.97 8.9% $50.75 6.8% $155.00 4.0% $71.60 9.8% $43.57 11.8% $136.81 7.7% $62.14 8.7% $47.08 8.0% $149.23 9.1% $69.37 11.6% $46.71 7.2% $149.70 9.4% $69.68 12.1% $49.74 5.7% $152.22 2.0% $73.17 5.5% $49.17 5.3% $152.69 2.0% $72.55 4.1% 49 (50.0%) $700.0 (7.0%) 41 (58.0%) $700.0 (7.0%) 59 0.0% $700.0 (28.2%) 59 0.0% $700.0 (28.2%) 391 (7.6%) $595.6 84.6% 186 (52.4%) $817.4 37.3% 178 (54.5%) $822.7 38.1% 372 100.0% $500.0 (38.8%) 355 99.6% $500.0 (39.2%) Source: Company reports and J. P. Morgan estimates. Salt Volumes Our current salt volume assumptions may prove to be conservative. We assume 2009-2010 winter season (Q4:09 and Q1:10) shipments of 6.9 million tons, which includes 0.6 million tons from the Goderich mine expansion (new added capacity 0.75 m tons). The base sales volumes of 6.3 million tons compare with weatheradjusted sales of 7.1 and 7.5 million tons for the previous two seasons. We note that 2008-2009 season shipments of 7.1 million tons are probably understated because of the early buying, which fell under the third quarter. The 2010-2011 winter season volumes of 7.2 million tons include 0.8 million tons of additional capacity (total capacity being added in 2010 is one million tons), implying lower than normal base shipments of 6.4 million tons. There is a potential $0.50/sh upside to our 2010 projections should winter season sales volumes be at a normalized level of ~7.5 million tons versus our current base volume forecast of 6.4 million tons. The additional one million tons would generate about $50M in revenues at a $50/t selling price. Assuming 50% incremental operating margin, 30% tax rate, and 33.5 share count, 2010 EPS could benefit by $0.50/sh. 3 Jeffrey J. Zekauskas (1-212) 622-6644 email@example.com North America Equity Research 25 September 2009 Table: Compass Minerals: Historical and Forecast Annual Winter De-icing Salt Shipments In -000 short tons Fourth Quarter Winter 2010-11E 2009-10E 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 3,410 3,157 4,154 4,034 2,601 4,579 3,589 3,308 2,699 3,047 First Quarter 3,804 3,729 3.729 5,138 4,112 3,584 4,861 4,679 4,378 3,298 Full Winter 7,214 6,886 7,883 9,172 6,713 8,163 8,450 7,987 7,077 6,345 Weather Effect 0 0 764 1,602 New Capacity 800 600 Implied Base Shipments 6,414 6,286 7,119 7,570 Source: Company reports and J. P. Morgan estimates. SOP Volume and Price Our 2010 EPS forecast may be underestimated by ~$0.45/sh as a result of overly conservative SOP price assumptions. SOP has historically traded at a premium to MOP: average premium for the 1999-2007 period was $133/st. Our current 2010 projections assume $64/sh premium. Should the premium stay at historical $125 level, this could benefit 2010 EPS by $0.45/sh on 2010 volumes. Table: MOP and SOP Producer Realized prices Product prices, $/st MOP, N.A. (POT) SOP, average (CMP) SOP Premium 1999 $80 $172 $92 2000 $73 $179 $106 2001 $73 $203 $131 2002 $70 $207 $137 2003 $73 $220 $147 2004 $97 $227 $130 2005 $143 $260 $116 2006 $153 $292 $139 2007 $171 $323 $151 2008 $401 $596 $195 2009E $447 $817 $370 2010E $436 $500 $64 Source: Company reports. Note: MOP price for Potash Corp; SOP price for Compass Minerals. Return to normal SOP volumes in 2010 could add $0.25/sh to our EPS estimate at the projected price of $500/st. Our current 2010 SOP volume projection is 355,000 st versus normalized sales of above 400,000 st. An extra 50,000 st would result in $25M of additional operating income: assuming 50% incremental operating margin, 30% tax rate and 33.5 share count, 2010 EPS could benefit by $0.25/sh. Valuation and Rating Analysis We rate CMP shares Overweight. We view the stock as inexpensive at the current price: CMP trades at 6.7x our 2010 EV/EBITDA estimate compared to 8.9x for Potash Corp and to a range of 5.2-10.2x (an average of 7.5x) for many small/mid-cap specialty chemical companies with strong balance sheets and favorable growth prospects. We expect Compass to generate 10.7% of its stock price in free cash flow in 2010 before payment of an annual dividend of $1.42 per share (2.4% yield). Our December 2010 price target for Compass Minerals is $66.00, which represents a P/E multiple of 12.0x and an EV/EBITDA multiple of 7.4x based on our 2010 EBITDA estimate. We believe that these multiples reflect a fair value of CMP shares, given multiples of 17.9x and 7.5x respectively for the small/mid-cap specialty peer group, and 13.0x and 8.9x respectively for Potash Corp. We believe 4 Jeffrey J. Zekauskas (1-212) 622-6644 firstname.lastname@example.org North America Equity Research 25 September 2009 that a 1-1.5x discount to Potash Corp. is justified because of CMP’s much smaller potash business and weather-dependent Salt business. Risks to Our Rating Sales and profitability in the highway de-icing salt business are seasonal and weather dependent. Timing issues as well as the duration and severity of the de-icing season weather could cause results in the Salt segment to differ significantly from our expectations. Accordingly, a short or warm winter period could lead to Salt operating profits below our forecast and the shares could trade lower. Should SOP volumes rebound slower than we project, profits would be lower then we expect and the share price could come under pressure. Company Description Figure: 2008 Sales by Segment Source: Company data. Compass Minerals is one of the largest producers of salt in North America and the United Kingdom and a leading producer of specialty potash fertilizer, with 2008 revenues of $1.17 billion and operating income of $274 million. CMP operates in two main segments, (1) Salt and (2) Specialty Potash. The company’s Salt segment shipped 15.1 million short tons of products in 2008, accounting for approximately 80% of company revenues and approximately 62% of operating income (before corporate expenses). Specialty potash is the largest marketer of sulfate of potash (SOP) in the US. Compass became a public company in December 2003 via the sale of 16.7 million shares from existing shareholders at $13 per share. A group led by Apollo Management originally purchased the salt business in addition to the Great Salt Lake specialty potash assets from IMC Global in late 2001 for approximately $640 million. The Salt segment is the second-largest marketer of salt in the US and Canada and the largest in the UK, with 2008 shipments of 15.1 million short tons. Approximately 58% of 2008 revenues come from its high-margin highway de-icing business for state and local governments, where it is the largest marketer in both the US and UK. We believe CMP operates the largest and lowest-delivered cost rock salt mines in its prime markets in the US Midwest and UK. The remaining 42% of 2008 revenues come from sales into General Trade markets, including table salt, water softening, consumer de-icing, agricultural, and chemical feedstock. During 2008, total Salt revenues totaled $923 million with operating income of $192 million and EBITDA of $221 million. 5 Jeffrey J. Zekauskas (1-212) 622-6644 email@example.com North America Equity Research 25 September 2009 The Specialty Fertilizer segment is the largest marketer of sulfate of potash (SOP) in the US, with 2008 shipments of 391,000 short tons. SOP is a specialty fertilizer utilized instead of commodity potash (i.e., potassium chloride) in a number higher-value crops where chloride sensitivity is a concern, including nuts, vegetables and fruits, tea, tobacco, and turf grass. We estimate the global market for specialty potash fertilizer is approximately 8-9% of the 55 million short ton global potash market. Approximately 75% of 2008 sales were sold domestically to fertilizer distributors, manufacturers, and dealers with the balance sold offshore. Compass coproduces SOP along with salt at its low-cost Great Salt Lake (GSL) Minerals complex in Ogden, Utah, the largest in North America with production capacity of approximately 450,000 short tons. GSL production benefits from large-scale, use of solar evaporation, and manufacturing cost savings from extracting multiple products (i.e., salt, SOP, and magnesium chloride) from a single production process. In late 2003, CMP purchased the intangible assets of the SOP business of the former IMC Global, North America’s second largest SOP producer, for approximately $24.5 million, including customer lists and production rights (i.e., no production assets). The segment recorded 2008 revenues of $233 million with operating profit of $118 million and EBITDA of $128 million. 6 Jeffrey J. Zekauskas (1-212) 622-6644 firstname.lastname@example.org North America Equity Research 25 September 2009 Compass Minerals International, Inc.: Summary of Financials Income Statement - Annual Revenues Cost of products sold (ex. D&A) Gross profit SG&A D&A Operating Income EBITDA Net interest income / (expense) Other income / (expense) Pretax income Income taxes Net income - GAAP Net income - recurring Diluted shares outstanding EPS - GAAP EPS - recurring FY08A FY09E FY10E FY11E 1,168 812 356 82 41 274 316 (42) 1 234 (70) 160 164 33 4.81 4.93 970 592 378 88 42 269 311 (28) 0 241 (75) 167 167 33 4.91 5.00 5.50 5.50 - Income Statement - Quarterly Revenues Cost of products sold (ex. D&A) Gross profit SG&A D&A Operating Income EBITDA Net interest income / (expense) Other income / (expense) Pretax income Income taxes Net income - GAAP Net income - recurring Diluted shares outstanding EPS - GAAP EPS - recurring 1Q09A 2Q09A 3Q09E 4Q09E 1.85 1.85 0.42 0.51 0.65 0.65 1.99 1.99 Balance Sheet and Cash Flow Data Cash and cash equivalents Accounts receivable Inventories Other current assets Current assets PP&E Total assets Total debt Total liabilities Shareholders' equity Net Income (including charges) D&A Change in working capital Other Cash flow from operations Capex Free cash flow Cash flow from investing activities Cash flow from financing activities Dividends Dividend yield FY08A FY09E FY10E FY11E 35 210 123 22 390 383 823 496 758 64 160 41 18 246 (68) 178 (67) (154) 1.34 2.3% 51 161 231 35 478 448 981 493 767 213 164 42 (96) 152 (90) 62 (94) (48) 1.42 2.4% - Ratio Analysis Sales growth EBIT growth EPS growth Gross margin EBIT margin EBITDA margin Tax rate Net margin Net Debt / EBITDA Net Debt / Capital (book) Return on assets (ROA) Return on equity (ROE) Return on invested capital (ROIC) Enterprise value / Sales Enterprise value / EBITDA Free cash flow yield P/E FY08A FY09E FY10E FY11E 10.8 - 36.2% (16.9%) 90.0% (2.0%) 136.6% 1.5% 34.0% 23.5% 27.0% 30.0% 14.0% 1.5 87.7% 7.9 8.8% 12.3 41.1% 27.7% 32.0% 31.0% 17.2% 1.4 67.4% 7.9 3.0% 12.1 Source: Company reports and J.P. Morgan estimates. Note: $ in millions (except per-share data). Fiscal year ends Dec 7 Jeffrey J. Zekauskas (1-212) 622-6644 email@example.com North America Equity Research 25 September 2009 Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. Important Disclosures • • • • • Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a public offering of equity and/or debt securities for Compass Minerals International, Inc. within the past 12 months. Client of the Firm: Compass Minerals International, Inc. is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related service and nonsecurities-related services. Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment banking services from Compass Minerals International, Inc.. Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investment banking services in the next three months from Compass Minerals International, Inc.. Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other than investment banking from Compass Minerals International, Inc.. An affiliate of JPMSI has received compensation in the past 12 months for products or services other than investment banking from Compass Minerals International, Inc.. Compass Minerals International, Inc. (CMP) Price Chart 144 Date N $50 OW $70 OW N OW N $58 N $50 OW $66 Rating Share Price ($) 32.66 72.13 42.28 52.68 57.01 57.94 49.60 50.55 N OW OW N N N OW Price Target ($) 70.00 50.00 58.00 50.00 66.00 120 13-Aug-07 OW 18-Apr-08 03-Oct-08 30-Oct-08 15-Jan-09 11-Feb-09 29-Apr-09 31-Jul-09 96 Price($) 72 48 24 0 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Source: Reuters and J.P. Morgan; price data adjusted for stock splits and dividends. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight. Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] The analyst or analyst’s team’s coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe. Coverage Universe: Jeffrey J. Zekauskas: Agrium (AGU), Air Products and Chemicals (APD), Albemarle Corporation (ALB), Ashland Inc. (ASH), Avery Dennison (AVY), CF Industries Holdings, Inc. (CF), Cabot Corporation (CBT), Compass Minerals International, Inc. (CMP), Dow Chemical (DOW), DuPont (DD), Eastman Chemical Company (EMN), Ecolab Inc. (ECL), Georgia Gulf (GGC), H.B. Fuller (FUL), Huntsman Corporation (HUN), Innophos (IPHS), Innospec 8 Jeffrey J. Zekauskas (1-212) 622-6644 firstname.lastname@example.org North America Equity Research 25 September 2009 (IOSP), International Flavors & Fragrances (IFF), Lubrizol Corporation (LZ), Minerals Technologies (MTX), Monsanto (MON), Nalco (NLC), Novozymes (NZYMb.CO), Pall Corporation (PLL), Polypore International (PPO), Potash Corp. (POT), Praxair (PX), RPM International Inc. (RPM), Scotts Miracle-Gro Co. 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Zekauskas (1-212) 622-6644 email@example.com North America Equity Research 25 September 2009 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMSL. Investment research issued by JPMSL has been prepared in accordance with JPMSL's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require that a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). 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Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMSI and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMSI distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise. “Other Disclosures” last revised January 30, 2009. Copyright 2009 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. 10
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