ca_fp - jpm062811

8/4/2019 CA_FP - JPM062811

1/18www.morganmarkets.co

Europe Equity Research29 June 2011

CarrefourOverweightCARR.PA, CA FP

Conclusions on Brazil: Positive for CarrefourPrice: 27.48

Price Target: 40.00

European Food Retail

Matthew TrumanAC

(44-20) 7325-0993

[email protected]

J.P. Morgan Securities Ltd.

Paul Diamond

(44-20) 7325-9972

[email protected]


Chiara Battistini

(44-20) 7155-6158

[email protected]


Latam Retail & Healthcare

Andrea Teixeira, CFA

(1-212) 622-6735

[email protected]

J.P. Morgan Securities LLC

For Specialist Sales advice, pleacontact:

Sophie L Warrick

(44-20) 7779-3409

[email protected]

YTD 1m 3m 12m

Abs -14.3% -12.8% -16.3% -30.2%Rel -9.1% -7.4% -11.8% -34.7%

Carrefour SA (CARR.PA;CA FP)

FYE Dec 2010A 2011E 2012E 2013EAdj. EPS FY () 1.18 1.75 2.19 2.54Revenue FY ( mn) 80,511 84,157 88,640 93,828EBITDA FY ( mn) 4,338 4,727 5,303 5,606

EBITA (Calc) FY ( mn) 2,687 2,644 3,128 3,543EV/Revenue FY 0.3 0.3 0.3 0.3EV/EBITDA FY 5.9 5.6 5.0 4.8

DPS (Net) FY () 1.08 1.60 2.00 2.32Adj P/E FY 23.2 15.7 12.6 10.8Source: Company data, Bloomberg, J.P. Morgan estimates.

Company DataPrice () 27.4Date Of Price 28 Jun 1Price Target () 40.0

Price Target End Date 31 Dec 152-week Range () 41.28 - 25.9Mkt Cap ( bn) 19.

Shares O/S (mn) 70

See page 15 for analyst certification and important disclosures, including non-US analyst 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 mahave a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making the

investment decision.

25

30

35

40

45

Jun-10 Sep-10 Dec-10 Mar-11 Jun-11

Price Performance

CARR.PA share price ()

MSCI-Eu (rebased)

Carrefour disclosed on Tuesday 28 June that it had received a proposal fromGama, a newly formed investor consortium, to merge the two largest Brazilianretail assets Cia. Brasileira de Distribuio (CBD) and Carrefour Brazil to

create a Brazilian market leader in the retail industry. At the same time, CBDhad received the same proposal. Our initial conclusions are as follows:

Assuming it is completed as planned this looks a strong deal forCarrefour. With a weaker business than CBD in both profit and marketshare terms Carrefour is effectively "selling" its Brazilian business into the"New Co" at 8.6x EV/EBITDA. By contrast, Carrefour is only physically

paying 5.4x pre synergies on the 17% incremental stake to be part of thegroup, offering strong value creation from the start we estimate 1.8bn or

2.67 per share on the whole deal. The implicit "New Co" multiple of 7.4x

is materially below established multiples for the market. Returning theimplied New Co to typical Brazilian food retail multiples of 9-11x wouldsee strong value creation over time.

The proposed deal creates a national champion with 33bn of sales, 2.1bnof EBITDA (6.4%) with a 28% market share in food. The asset will besupported both politically and financially by BTG Pactual and the Brazilian

National Development Bank, effectively the sovereign wealth fund ofBrazil. Potential political and anti-trust hurdles may be more easilynavigated on this basis.

For Carrefour, it presents an opportunity to materially shift the focus of thegroup towards emerging markets. Carrefour is buying joint control of amarket leader, placing it comfortably ahead of Wal-Mart (11%) and

Cencosud (3%). The deal may also alert Wal-Mart in Brazil, triggeringalternative offers. The deal should also remove concerns on managementslong term commitment to Brazil.

Casino has a choice. Agree to the deal and have its CBD stake diluted initially but be part of a growth story in a crucial market, participate in meaningfulsynergies whilst ensuring a political relationship remains. The medium termopportunity to own the group outright and the option to activate some of thematerial liquidity events in 2012 may be lost. Dont participate and sell theCBD stake would yield short term cash returns but meaningfully change theinvestment case for the business. Assuming Casino participates whilst near termvalue destruction occurs, a return to normalized LATAM multiples would alsosee value creation if synergies can be executed upon.

8/4/2019 CA_FP - JPM062811

2/18

2


Matthew Truman(44-20) [email protected]

Big Issues Our conclusionsCarrefour disclosed on Tuesday 28 June that it had received a proposal from Gama, a

newly formed investor consortium, to merge the two largest Brazilian retail assets

Cia. Brasileira de Distribuio (CBD, covered for J.P. Morgan by LatAm analyst

Andrea Teixeira, CFA) and Carrefour Brazil to create a Brazilian market leader in

the retail industry. At the same time, CBD had received the same proposal. Our

initial conclusions are as follows:

Assuming this deal is completed as planned this looks a strong deal for Carrefour.

With an undoubtedly weaker business than CBD in both profit and market share

terms Carrefour is effectively "selling" its Brazilian business into the "New Co"

at 8.6x EV/EBITDA pre synergies. By contrast, Carrefour is only physically

paying 5.4x pre synergies on the incremental 17% stake to be part of the NewCo, meaning value creation at least on this part from day 1. On a post synergy

basis at the EBITDA level, this equates to just 3.3x EV/EBITDA. The deal

multiples in totality are materially below established multiples for the Latin

American Food Retail stocks. As a combined entity the group will implicitly

trade at 7.4x EV/EBITDA. Returning to normalized EV/EBITDA multiples for

the region would yield multiples of 9-11x EV/EBITDA and strong value creation

for the new entity from the outset in arbitrage terms at least. CBD shareholders

appear to believe this is so, trading up 15% as we write this note.

The announced synergies available by virtue of the deal total 700m, of which

Carrefours 50% share equates to 350m. Discounting the full 2013 annualisation

at the WACC of 7% leads us to 296m post tax capitalised at 11x earnings this

would equate to value creation of 2.2bn for Carrefour. Ironically, this is

broadly equivalent to the dilution for the existing Carrefour shareholders by

virtue of the new issue of 11.7% of preferred ordinary stock.

The deal structure removes a number of the uncertainties weighing on Carrefours

share price in recent weeks. Whilst we have expected ongoing pressure due to the

selling of the ordinary share ahead of the DIA spinoff on July 5th, investors were

questioning the threat of margin calls on the largest shareholder, in turn creating an

overhang situation. If anything with Gama acting in concert with Blue Capital, it

appears Blue Capital have committed more strongly to the Carrefour share in the

near term to medium term. At these deflated share price levels it also raises the

possibility of further M&A for parts or all of Carrefours business.

The deal would create a national champion, supported politically and financially

by the largest independent investment bank in LATAM, BTG Pactual and theBrazilian Development Bank, effectively a sovereign wealth fund. Political

hurdles for any competition commission enquiry and any anti-trust CADE

decision could be jumped given the high profile Brazilian support for the deal.

We do however recognize that CADEs delay of its judgement on the food

company Brasil Foods for 2 years may offer an example of a barrier to a near

term anti-trust ruling.

For Casino, the company faces a stark choice. By not supporting the deal the

press release yesterday by Casino suggested it was unlikely Casino faces the

risk of not being part of the newly created national retail champion in Brazil. If

Casino loses the proposed legal case it also faces losing out on the proposed

8/4/2019 CA_FP - JPM062811

3/18

3



value creation made possible by the merger, being the 700m synergies

available to both companies as it may just choose to sell of course assuming

these are executed upon. If Casino agrees to the deal, it will face much higherdilution than is currently modeled in our sum of the parts. Currently we value

CBD at 7.8x EBITDA in our sum of the parts and post the implied dilution we

estimate a value destruction of 800m or 7.3 per share would occur. Most

important for Casino is that its opportunity to take control of the company

(exercising its call option and electing a chairman alone would be enough to give

Casino control in June 2012 for $1) would be lost and with it the long term reason

to buy the underlying Casino share. Although we would caution that Casino has

already agreed to nominate Mr Diniz for 2012 so it appears Mr Diniz would still

control the company under this arrangement anyway in the near term. One side

effect is Casino would effectively belongCarrefour if it stayed in the

agreement, which we would consider unlikely for any length of time.

Investors and analysts alike have been encouraged by the growth of CBD, the

synergies on offer following the merger of Ponto Frio and Casa Bahia. With the

loss of control, the upside for Casino and the ability to pitch Casino as a genuine

growth stock with sector leading emerging market exposure and control would be

diminished. Not only that but any sale would likely forego the "liquidity/capital

events" we expected in 2012. Both a partnership with a bank to capitalize the

credit division of Casa Bahia and the potential IPO of the electronics division

Globex and its ecommerce company Nova.com are under study at present,

according to Casino. As we discuss below, Casino is likely to come under some

pressure from Mr Diniz due to his private real estate ownership of CBD stores

and as a result Casino could be forced into a corner. Fighting the deal would incur

costs but would almost certainly provide an opportunity for other market players

(Wal-Mart is #3 in the market) to participate in any alternative, which could leave

Casino with a similar fate. In any event, Casino could sell its stake and this wouldyield 3.0bn on our latest numbers but again would materially damage the Casino

investment case. Doing nothing may leave Carrefour Brazil open to Wal-Mart

which may prove more expensive in the medium term for Casino.

For Casino, if as its press release states it believes the proposal to be a "long

standing illegal planned financial transaction", we wonder why Casino has not

taken this further soon. Whilst the International Court is now involved, long

standing to us suggests longer than a few weeks since the initial discussions

began. This could really mean Casino is jostling for position to secure a better

deal within this proposal. Alterations to the proposal cannot therefore be ruled out

and we find ourselves believing the deal is more likely than not.

Mr Diniz owns c2bn Reais in real estate (878m) which is leased to CBD,

assuming a high single digit yield would mean c.80m of real estate rents perannum. Our view is that if Mr Diniz wants to place pressure on Casino to support

the deal, then he could contemplate increasing these rentals, placing pressure on

CBD but maintaining his relative wealth by transferring the value to the prop co

instead at a 16x multiple. Perhaps a side-show but a point to be aware of.

The combined business would have 32bn of turnover, 2.1bn of EBITDA and at

the implicit price being paid by Carrefour for the 50% stake would be worth

7.1bn, according to the press release. Valuing it appropriately based on average

multiples for LATAM would imply the value is worth 12.0bn, an immediate

value opportunity of 4.9bn. The business will have an announced 1.5bn of net

8/4/2019 CA_FP - JPM062811

4/18

4



debt (0.75x net debt to EBITDA) and therefore should have significant strategic

flexibility for the future. Whilst execution risks abound, it is hard to ignore that

the combined New Co would have 28% market share in Food, 23% inHomewares and a market leading electronics business. This is well ahead of Wal-

Marts 11% and Cencosuds 3%. The retail industry in Brazil is growing at 5%

per annum and is expected to continue at this pace for the medium term. Being

the market leader in such a growing market across different industries is a

powerful proposition.

For Carrefour, if fully consolidated, we estimate Brazil would represent 37% of

the group's sales whilst emerging markets as a whole would represent 47bn of

sales compared to the new group's sales of 115bn. As a consequence combining

Asia and the other 3-4bn of LATAM sales would mean 41% (47bn) of sales

would come from emerging markets compared to just 27% now. The deal also

removes the longer term investors concern that the Brazilian business would be

sold for the sake of short term value gain.

The structure of the deal leaves Carrrefour with 50% of the combined entity with

a stake valued at 7.1bn at these deflated merger multiples. Returning to long

term multiples indicates a stake worth 12.0bn vs. our prior estimate of 4.9bn.

Post dilution from the new issue this would offer estimated value creation of

6.7bn or 9.86 per share for the Carrefour group.

For Casino, the final 15.2% stake could be worth 3.7bn when a "normalised"

multiple is applied. Versus our current estimates, this would mean value creation

of 684m or 6.2 per Casino share. The initial value destruction is equivalent to

7.29 per share.

It is of course unclear at what price this deal will close. For the purpose of our

analysis, we assume immediate closure so take yesterdays prices for our working

assumptions.

Worth noting that new shareholders will likely bring more governance and

visibility for minority shareholders given the old preference shareholders with no

voting rights are being converted to ordinary shareholders. This will also bring a

more balanced ownership structure.

We like most have plenty of other questions, the big 5 for us are:

Most importantly, given control of CBD is run through Wilkes, why inject 1.5bn

into CBD prior to the merger as it is unlikely to dilute Casino's voting rights?

Secondly, why did Carrefour buy the remaining 21.4% to bring the holding to

50% in the vehicle when it could have just given the shares (c.33%% of New

Co) like DIA to its shareholders? Is there a legal loophole allowing Mr Diniz to complete this deal without

Casinos say-so? (One suspects not judging by Casinos press release and news

reports yesterday.)

What is the level of adjustment required to keep voting rights under 30% and

how will this be structured moving forwards?

Finally, what is the purpose of the 6% notification presumably the world is free

to buy shares on the open market? Does this suggest a more sizeable block of

shares is available for purchase?

8/4/2019 CA_FP - JPM062811

5/18

5



The Deal Laid Bare

Table 1: The deal summary (m unless otherwise stated)

CBD Shareholder structure Ordinaryshares (m)

Preferred shares(m)

Totalshares (m)

Casino 82.0 16.198.1

Diniz family 17.7 35.2 52.9Other 0.0 108.1

108.1Total 99.7 159.4 259.1

Implied stake pre capital injectionCasino 82.2% 10.1% 37.9%Diniz family 17.8% 22.1% 20.4%Other 0.0% 67.8% 41.7%Voting rights dictated as 50:50 as per share agreement in Wilkes, which is a partnership 50:50 owned by Casino and the Diniz family. Wilkes owns 65.6% of the ordinary shares

Capital injection (EURm) from Gama 1,500New shares (Assumed Ordinary shares issued with vot ing r ights) 51.8New share count (m) 310.9Diniz ownership (total shares) 17.0%Other 34.8%BTG Pactual & BNDS 16.7%Casino ownership (total shares) 31.6%

Total 100.0%

Pre Capital Injection

Gama valuation of CBD (BRLm) 17,100Implied price per share (BRL) 66Gama valuation of CBD (EURm) 7,506Implied price per share (EUR) 29.0Implied valuation of CO stake (BRLm) 6,474Implied valuation of CO stake (EURm) 2,842

Post Capital injection

Capital injection (EURm) 1,500Share count post capital injection (m) 310.9New valuation (EURm) 9,006Implied price per share (EUR) 29.0Implied CO stake 31.6%Implied Diniz stake 17.0%Implicit Casino and Dinizd ilution post capital injection -16.7%

Stage 1: Gama merger with CBD post E1.5bn capital injection

Gama share countOrdinary shares ratio 1.00Preferred shares ratio 0.95Total shares (m) 302.9Implied Casino stake in Gama 32.1%Implied Diniz stake in Gama 16.9%Implied Others stake in Gama 33.9%Implied BTG Pactual & BNDS stake in Gama 17.1%Original CBD shareholders stake in Gama (Stage 1) 78.6%

N.b Original CBD shareholders stake in Gama (Stage 2) 39.3%

Gama valuationBTG Pactual + BNDESPAR stake 21.4%O/W BTG 3.2%O/W BNDESPAR 18.0%Casino 30.5%Diniz Family and Controlling Interests 16.0%Other 32.1%Investment from BTG 1,000Implied Gama valuation (EURm) 10,006

8/4/2019 CA_FP - JPM062811

6/18

6



Stage 2: Gama merger with Carrefour BrazilEURm CBD Carrefour Combined

Sales 20,200 12,500 32,700

% share of combined 61.8% 38.2%

EBITDA 1,500 600 2,100% margin 7.4% 4.8% 6.4%% share of combined 71.4% 28.6%

Current Carrefour share price 27.0Shares issued (m) 90.0Implied value 2,430

Carrefour EBITDA at 50% 1,050Carrefour current EBITDA 600

New "Profit" created by Carrefour 450

Implied EV/EBITDA pre-synergies for CA's "buy in" 5.4x

Synergies 700Carrefour's stake of synergies 350

Discounted Carrefour's stake of synergies 296Theoretical EBITDA 746

Implied EV/EBITDA post-synergies 3.3x

Implicit valuation of the entire combined group based on BTG's in price not CA's share price

Em ShareGama 10,006 71.4%Carrefour Brazil 4,002 28.6%Total 14,009 100.0%Debt 1,500Total EV 15,509

Implied EV/EBITDA as a Group 7.39x

Carrefour's effective price realisation for its Brazilian business based on yesterday's CA closing price

Carrefour additional stake to get to 50-50% 17.04%Consideration paid 2,430Implied market cap. 14,29450% implied market cap. 7,147Less cash paid to obtain incremental stake (2,430)Carrefour Brazil Net debt (proportionally consolidated) 429Implied EV 5,146Carrefour exiting Brazilian EBITDA 600

EV/EBITDA achieved for CA's Brazilian business 8.6x

Post Merger Share Capital Stake Currentvaluation

Value atnorm.

multiples

Currentvalue in

our SOP

Initial valuecreation

(destruction)

Initial value creation(destruction) /share

Valuecreation

based onnorm

multiples

Per sharebased on norm

LATAMmultiples

BTG Pactual + BNDESPAR stake 10.7% 1,529 2,575

Casino 15.2%2,176

3,664 2,980 (804) (7.29)684

6.20

Diniz Family and Controlling Interests 8.0% 1,144 1,926Other 16.1% 2,297 3,867Carrefour 50.0% 7,147 12,033 5,331 1,816 2.67 6,701 9.86

Total 100.0% 14,294 24,065

Source: J.P. Morgan estimates, Company data.

8/4/2019 CA_FP - JPM062811

7/18

7



The Structure and mechanics of the

Proposed DealWe break the structure down into essentially two stages. Stage 1 is the Gama merger

with CBD and stage 2 is the merger of CBD with Carrefour's Brazilian business.

Below we lay out the shareholder structure, it is important to note that through the

Wilkes shareholding Casino and Diniz has joint control of the company.

Table 2: CBD's current shareholder structure

Ordinary shares Stake Preferred shares Stake otal shares Stake

Casino 82.0 82.2% 16.1 10.1% 98.1 37.9%

Diniz family 17.7 17.8% 35.2 22.1% 52.9 20.4%

Other 0.0 0.0% 108.1 67.8% 108.1 41.7%

Total 99.7 100.0% 159.4 100.0% 259.1 100.0%


Stage 1- Gama merger with CBD

Before the official merger can be completed, it is the stated intention of the existing

Gama shareholders, BTG Pactual and the Brazilian National Development Bank

(BNDS) to inject 1.5bn (pro rata) into the existing CBD business. As a result of this

capital injection the following shareholdings are created in CBD.

Figure 1: CBD's shareholder structure post 1.5bn capital injection

Our view is that this capital injection which we assume to be in ordinary shares

would effectively dilute all shareholdings thereby theoretically allowing acombination of the Diniz family and the new Gama vehicle to vote through the

proposed merger strategy. What is immediately problematic for Diniz is that the

voting rights are solely attributed to the Wilkes vehicle where Casino and Diniz

have a 50% share. Therefore issuing ordinary non Wilkes shares will be unlikely to

change this arrangement unless there is a loophole for new capital. The biggest

stumbling point of this deal in our view remains Casino and its legal position given

its current joint voting rights. Casino sits in a difficult position regarding this

proposal. On one hand, it appears from Casino's press release yesterday that it

believes the approach is illegal...

31.6%

17.0%16.7%

34.8%

Casino ownership (total shares) Diniz onnership (total shares) BTG Pactual & BNDS Other

8/4/2019 CA_FP - JPM062811

8/18

8



"contrary to the terms of the press release, it (the approach) is not a spontaneous

proposal from Gama, a financial investment vehicle but a long standing illegal

planned financial transaction between Carrefour and Abilio Diniz. Casino pressrelease June 28, 2011

If Casino believes its legal position is strong, winning would safeguard its upcoming

call options and its planned strategy liquidity events in 2012 such as Novo.com. It

would also safeguard Casinos future ability to control and fully consolidate a key

growth asset which has become the key to many peoples appreciation of the stock.

On the flipside it would ignore the synergies of 700m, which capitalized could be

worth an estimated 646m to Casino in value creation" terms, and the chance to be

part of the undisputed market leader in a structurally growing market such as Brazil.

It would of course potentially forsake political support from the Government and

leading banks over time. If Casino agreed to the deal, it would face dilution at a

much higher level than is currently modeled in our sum of the parts. Currently we

value CBD at 7.8x EBITDA in our sum of the parts which equates to near termvalue destruction of 7.3 per share with the potential for creation once normalized

LATAM multiples are applied to the tune of 6.2 per share.

Investors and analysts alike have been encouraged by the growth of CBD, the

synergies on offer following the merger of Ponto Frio and Casa Bahia and with the

ability to pitch Casino as a genuine growth stock with sector leading emerging

market exposure. Clearly a loss of control would see this investment case diminish.

Any sale would likely forego the "liquidity/capital events" we expected in 2012.

Both a partnership with a bank to capitalize the credit division of Casa Bahia and the

potential IPO of the electronics division Globex and its ecommerce company

Nova.com are under study at present, according to Casino. As we discuss below,

Casino is likely to come under some pressure from Diniz due to Diniz's real estate

ownership and as a result Casino could be forced into a corner. Fighting the dealwould incur costs but would almost certainly provide an opportunity for other market

players (Wal-Mart is #3 in the market) to participate in any alternative which could

leave Casino with a similar fate. In any event, Casino could sell its stake and this

would yield 3.0bn on our latest numbers but again would materially change the

Casino investment case and achieve little but short term cash in hand. Doing nothing

may leave Carrefour Brazil open to Wal-Mart which may prove more expensive in

the medium term for Casino.

It is worth noting that Diniz owns c2bn Reais in real estate (878m) which is leased

to CBD, assuming a high single digit yield would mean c.80m of real estate rents

per annum. Our view is that if Diniz wants to place pressure on Casino to support the

deal, then he could contemplate increasing these rentals placing pressure on CBD butmaintaining his relative wealth by transferring the value to the prop co instead.

Perhaps a side-show but a point to be aware of nevertheless.

For Casino, if as its press release states it believes the proposal to be a "long standing

illegal planned financial transaction", we wonder why Casino has not taken this

further sooner. Whilst the International Court is now involved, long standing to us

suggests longer than a few weeks. This could really mean Casino is jostling for

position to secure a better deal within this proposal. Alterations to the proposal

cannot therefore be ruled out. Finding a better tool with which to enhance

perceived value over the longer term is difficult to see also. We find ourselves

8/4/2019 CA_FP - JPM062811

9/18

9



believing that Casino will agree to this proposal for the sake of long term value

creation and the ability to remain in play in a key growth market.

A summary of the future call options is included below:

Casino today has over 37% interest in GPA through a combination of a directholding and an indirect holding through a holding company above GPA (Wilkes),where ownership is split equally between Casino and the Diniz family. Casino hasthe option to elect the chairman of GPA and effectively take control of this holdingcompany for a symbolic $1 in 2012. This holding company controls GPA, thereforetaking control of the holding gives control of GPA. However, this action wouldtrigger a put option which the Diniz family could exercise on part of their stake. Thefirst put option would be in 2012 on 0.4% of GPA and the second option would lastfor eight years starting June 2014 for 7.6% stake of GPA. With 42% stake in GPA in2012 Casino would consolidate GPA globally compared to the current method of

proportional consolidation. Exercising their call option and electing a chairman alonewould be enough to give Casino control and therefore under IFRS full consolidationwould be required. What has become apparent is that Casino had consented to votingDiniz in as Chairman during 2012 meaning very little change in control. Whetherthat has been ratified is another question we have.

Table 3: Stage 1 summary (m unless otherwise stated)

Stage 1: Gama merger with CBD post 1.5bn capital injection

Gama share countOrdinary shares ratio 1.00Preferred shares ratio 0.95

Total shares (m) 302.9Implied Casino stake in Gama 32.1%Implied Diniz Family and Controlling Interests stake in Gama 16.9%Implied Others stake in Gama 33.9%

Implied BTG Pactual & BNDS stake in Gama 17.1%Original CBD shareholders stake in Gama (Stage 1) 78.6%N.b Original CBD shareholders stake in Gama (stage 2) 39.3%

Gama valuationBTG Pactual + BNDESPAR stake 21.4%

O/W BTG 3.2%O/W BNDESPAR 18.2%Casino 30.5%Diniz Family and Controlling Interests 16.0%

Other 32.1%Investment from BTG 1,000Implied Gama valuation (EURm) 10,006Containing CBD (EURm) 7,506

Cash in the Vehicle (EURm) 1,000 Capital Injection (EURm) 1,500


Stage 2: Merging Carrefour Brazil with CBD

Assuming Casino agrees to the deal, stage 2 is to integrate Carrefour Brazil and CBD

and below we lay out our analysis to achieve that. We conclude that the multiples

look attractive for Carrefour on both a pre and post synergy basis given Carrefour

effectively sells its business to "New Co" for 8.6x EBITDA but then buys into the

business at implicitly 5.4x EBITDA pre synergies and 3.3x post synergies. For

8/4/2019 CA_FP - JPM062811

10/18

10



Carrefour it leaves it with a 50% stake worth 7.1bn which has cost it 2.4bn to

facilitate alongside the merger. Comparing this to our prior Brazilian valuation in our

sum of the parts suggests initial value creation of 1.8bn, normalising multiples tolong term averages suggests value creation of 6.7bn or 9.86 per share. Bottom line,

Carrefour is merging a weak asset with low profitability at present with the market

leader that is growing much faster. It is doing so at a lower than expected multiple,

the synergies are offsetting the dilution and so longer term this should create value.

As a side effect, such a proposed transaction may "prick the ears of Wal-Mart and

further bids could be expected driving the price up further. For Carrefour we believe

it offers long term opportunity cost, an attractive in price and operational synergies

unavailable elsewhere and an almost unassailable market leading position in an

attractive growth market.

For Diniz, BTG Pactual and the Brazilian National Bank, it provides a significant

holding (11.7%) in a lowly valued but Global asset and an experienced strategic

shareholder as a Partner in Blue Capital whilst also diversifying their collectivewealth away from purely Brazil at the same time. It creates a National Champion

which the Brazilian Government can protect and protects Diniz from ultimately

ceding control to Casino, a company that is much smaller with much less financial

clout.

For Casino, it provides further dilution on entry price, the somewhat awkward effect

that it will be long Carrefour as a consequence, the loss of call options to buy the

whole company alongside the cancellation of likely liquidity events. It does

ultimately enable it to stay at the table as regards long term value creation, and it

does enable it to create 0.6bn of synergies, we estimate. It also protects its

immediate interest in CBD.

8/4/2019 CA_FP - JPM062811

11/18

11



Table 4: Stage 2 summary (m unless otherwise stated)

Stage 2: Gama merger with Carrefour BrazilEURm CBD Carrefour Combined

Sales 20,200 12,500 32,700% share of combined 61.8% 38.2%

EBITDA 1,500 600 2,100% margin 7.4% 4.8% 6.4%% share of combined 71.4% 28.6%

Current Carrefour share price 27.0Shares issued (m) 90.0Implied value 2,430

Carrefour EBITDA at 50% 1,050Carrefour current EBITDA 600

New "Profit" created by Carrefour 450

Implied EV/EBITDA pre-synergies for CA's "buy in" 5.4x

Synergies 700Carrefour's stake of synergies 350Discounted Carrefour's stake of synergies 296Theoretical EBITDA 746

Implied EV/EBITDA post-synergies 3.3x

Implicit valuation of the entire combined group based on BTG's in price not CA's share price

Em ShareGama 10,006 71.4%Carrefour Brazil 4,002 28.6%Total 14,009 100.0%Debt 1,500Total EV 15,509

Implied EV/EBITDA as a Group 7.39x

Carrefour's effective price realisation for its Brazilian business based on yesterday's CA closingprice

Carrefour additional stake to get to 50-50% 17.04%Consideration paid 2,430Implied market cap. 14,29450% implied market cap. 7,147Less cash paid to obtain incremental stake (2,430)Carrefour Brazil Net debt (proportionally consolidated) 429Implied EV 5,146Carrefour exiting Brazilian EBITDA 600

EV/EBITDA achieved for CA's Brazilian business 8.6x

Post Merger Share Capital Stake Currentvaluation

Value atnorm.

multiple

s

Currentvalue in

our

SOP


(destruction)


(destruction)

/share

Valuecreation

based on

normLATAM

multiples

Per sharebased on

norm LATAM

multiples

BTG Pactual + BNDESPAR stake 10.7% 1,529 2,575Casino 15.2% 2,176 3,664 2,980 (804) (7.29) 684 6.20Diniz Family and Controlling Interests 8.0% 1,144 1,926Other 16.1% 2,297 3,867Carrefour 50.0% 7,147 12,033 5,331 1,816 2.67 6,701 9.86

Total 100.0% 14,29424,065


8/4/2019 CA_FP - JPM062811

12/18

12



Valuation Methodology and Risks

Carrefour(Overweight Price Target: 40.00)

Valuation Methodology :

We value Carrefour on a sum of the parts basis indicating a value to 40 per share,which excludes DIA and Thailand, (despite our multiples in emerging marketsmaterially lagging current valuations and recent transactions).

Risks to Our View :

We believe the key risk to our target price being achieved is that management fails toexecute the Transformation Plan and the new 'Planet' hypers are not well received by

customers. We could see more margin pressure than expected as the company isforced to reduce prices further as the competitive environment sharpens in its keymarkets and cost savings do not come through as expected.

8/4/2019 CA_FP - JPM062811

13/18

13



JPM Q-ProfileCarrefour S.A. (FRANCE / Consumer Staples)As Of: 23-Jun-2011 [email protected]

Local Share Price Current: 27.16 12 Mth Forward EPS Current: 2.39

Earnings Yield (& local bond Yield) Current: 9% Implied Value Of Growth* Current: -5.35%

PE (1Yr Forward) Current: 11.4x Price/Book Value Current: 1.9x

ROE (Trailing) Current: 3.89 Dividend Yield (Trailing) Current: 3.51

Summary

Carrefour S.A. 26517.32 As Of:

FRANCE 145.54 SEDOL 5641567 Local Price: 27.16

Consumer Staples Food & Staples Retailing EPS: 2.39

Latest Min Max Median Average 2 S.D.+ 2 S.D. - % to Min % to Max % to Med % to Avg

12mth Forward PE 11.36x 9.79 52.33 17.77 22.56 42.99 2.12 -14% 361% 56% 99%

P/BV (Trailing) 1.91x 1.83 9.92 4.38 4.66 8.26 1.07 -4% 418% 129% 144%

Dividend Yield (Trailing) 3.51 0.47 4.03 1.77 1.76 3.77 -0.25 -87% 15% -49% -50%

ROE (Trailing) 3.89 3.41 27.40 17.84 17.37 30.38 4.35 -12% 605% 359% 347%

Implied Value of Growth -5.3% -0.21 0.81 0.38 0.41 0.95 -0.12 -299% 1622% 813% 873%

Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs * Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)

23-Jun-11

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

May/96

May/97

May/98

May/99

May/00

May/01

May/02

May/03

May/04

May/05

May/06

May/07

May/08

May/09

May/10

May/11

0%

2%

4%

6%

8%

10%

12%

May/96

May/97

May/98

May/99

May/00

May/01

May/02

May/03

May/04

May/05

May/06

May/07

May/08

May/09

May/10

May/11

12Mth fwd EY France BY Proxy

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

M

ay/96

M

ay/97

M

ay/98

M

ay/99

M

ay/00

M

ay/01

M

ay/02

M

ay/03

M

ay/04

M

ay/05

M

ay/06

M

ay/07

M

ay/08

M

ay/09

M

ay/10

M

ay/11

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20

M

ay/96

M

ay/97

M

ay/98

M

ay/99

M

ay/00

M

ay/01

M

ay/02

M

ay/03

M

ay/04

M

ay/05

M

ay/06

M

ay/07

M

ay/08

M

ay/09

M

ay/10

M

ay/11

0.0x

10.0x

20.0x

30.0x

40.0x

50.0x

60.0x

May/96

May/97

May/98

May/99

May/00

May/01

May/02

May/03

May/04

May/05

May/06

May/07

May/08

May/09

May/10

May/11

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

M

ay/96

M

ay/97

M

ay/98

M

ay/99

M

ay/00

M

ay/01

M

ay/02

M

ay/03

M

ay/04

M

ay/05

M

ay/06

M

ay/07

M

ay/08

M

ay/09

M

ay/10

M

ay/11

PBV hist PBV Forward

0.00

5.00

10.00

15.00

20.00

25.00

30.00

May/96

May/97

May/98

May/99

May/00

May/01

May/02

May/03

May/04

May/05

May/06

May/07

May/08

May/09

May/10

May/11 0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

M

ay/96

M

ay/97

M

ay/98

M

ay/99

M

ay/00

M

ay/01

M

ay/02

M

ay/03

M

ay/04

M

ay/05

M

ay/06

M

ay/07

M

ay/08

M

ay/09

M

ay/10

M

ay/11

8/4/2019 CA_FP - JPM062811

14/18

14



Carrefour: Summary of FinancialsProfit and Loss Statement Cash flow statement

in millions, year end Dec FY09 FY10 FY11E FY12E FY13E in millions, year end Dec FY09 FY10 FY11E FY12E FY13E

Sales 85,365 80,511 84,157 88,640 93,828 Net cashflow 3,420 2,209 2,879 3,516 3,989

Growth -1.8% -5.7% 4.5% 5.3% 5.9% Capex (2,137) (1,825) (2,465) (3,075) (3,300)

EBITDAR 5,236 5,277 5,708 6,336 6,700 Acquisitions 0 21 0 0 0

% of sales 6.1% 6.6% 6.8% 7.1% 7.1% Working capital change 320 (664) 722 637 834

EBITDA 4,079 4,338 4,727 5,303 5,606 Capital increase/ treasury - - - - -

% of sales 4.8% 5.4% 5.6% 6.0% 6.0% Dividends (894) (315) (734) (1,086) (1,356)

Depreciation (1,848) (1,651) (2,082) (2,175) (2,063) Other (394) (346) 369 (0) (0)

EBITA 2,231 2,687 2,644 3,128 3,543

% of sales 2.6% 3.3% 3.1% 3.5% 3.8% Net debt (increase)/ decrease - - - - -

Net Interest (610) (606) (590) (580) (580)

Pre- ax profit 549 1,082 1,554 2,398 2,963 Net (debt)/ cash (6,461) (7,854) (7,662) (8,343) (8,249)

Tax (638) (610) (575) (887) (1,096)

Associates - - - - -

Minority interests (110) (139) (153) (175) (196)

Reported Net Att. Profit (161) 368 874 1,391 1,729Adjusted Net Att. Profit 911 804 1,189 1,485 1,729

No of shares (diluted) - - - - -

EPS (diluted) - - - - -

Balance sheet

in millions, year end Dec FY FY FYE FYE FYE

Total fixed assets - - - - -

Inventories 6,670 6,455 6,347 6,568 6,834

Debtors 2,238 2,376 2,398 2,428 2,571

Short term investments - - - - -

Cash and banks 3,301 2,954 2,954 2,954 2,954

Current assets 21,274 21,211 20,653 20,906 21,315

OTAL ASSETS 51,556 50,397 50,452 51,830 53,475

Total Shareholders' funds - - - - -

Minority interests - - - - -

Provisions (3,016) (3,564) (3,564) (3,564) (3,564)Debt - - - - -

Trade creditors (16,436) (14,562) (15,154) (15,982) (16,939)

Other short term creditors - - - - -

OTAL LIABILITIES - - - - -

Source: Company reports and J.P. Morgan estimates.

8/4/2019 CA_FP - JPM062811

15/18

15



Other Companies Recommended in This Report (all prices in this report as of market close on 28 June 2011)Casino (CASP.PA/62.29/Overweight), Companhia Brasileira de Distribuicao (CBD) (PCAR4.SA/R$74.62/Underweight)

Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple researchanalysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the documentindividually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the viewsexpressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part ofany of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or viewsexpressed by the research analyst(s) in this report.

Important Disclosures

Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Carrefour,Casino within the past 12 months.

Client:J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Carrefour, Casino,Companhia Brasileira de Distribuicao (CBD).

Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investmentbanking clients: Carrefour, Casino.

Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the followingcompany(ies) as clients, and the services provided were non-investment-banking, securities-related: Carrefour, Casino.

Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients,and the services provided were non-securities-related: Carrefour, Casino.

Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking Carrefour,Casino.

Investment Banking (next 3 months): J.P. Morgan expect to receive, or intend to seek, compensation for investment bankingservices in the next three months from Carrefour, Casino.

Non-Investment Banking Compensation:J.P. Morgan has received compensation in the past 12 months for products or servicesother than investment banking from Carrefour, Casino.

Date Rating Share Price()

Price Target()

02-Jan-07 N 45.94 46.00

12-Jan-07 UW 44.20 43.00

04-Feb-07 UW 46.31 48.00

05-Feb-07 N 46.31 48.00

28-Mar-07 N 54.18 50.00

11-Apr-07 N 56.12 55.00

03-Aug-07 N 52.14 60.00

05-Aug-07 OW 51.03 60.00

13-May-08 OW 46.25 54.00

26-Jun-08 N 37.88 42.00

09-Jul-08 N 34.45 39.00

01-Sep-08 UW 36.13 37.00

16-Oct-08 UW 24.68 28.00

26-Feb-09 N 26.32 28.00

22-May-09 N 30.52 33.00

24-Nov-09 OW 31.55 40.00

12-Oct-10 OW 38.94 56.40

17-Jun-11 OW 27.74 45.00

20-Jun-11 OW 26.86 40.00

0

16

32

48

64

80

96

Price()

Sep

06

Jun

07

Mar

08

Dec

08

Sep

09

Jun

10

Mar

11

Carrefour (CARR.PA) Price Chart

UW 48N 55 N 39

UW 43N 50 OW 60 N 42UW 28 N 33 OW 4

N 46N 48 N 60 OW 54UW 37 N 28 OW 40 OW 56.4 OW 4

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jan 02, 2007.

8/4/2019 CA_FP - JPM062811

16/18

16



Date Rating Share Price()

Price Target()

13-Dec-06 N 62.89 71.00

25-Jan-07 N 60.23 66.00

15-Mar-07 N 59.41 72.00

04-Jun-07 N 71.42 80.00

07-Jul-08 UW 63.21 76.00

29-Aug-08 N 58.50 68.00

17-Oct-08 N 42.62 50.00

12-Dec-08 OW 43.84 55.00

22-Apr-09 OW 41.14 52.00

14-May-09 N 44.06 50.00

28-Aug-09 N 52.15 52.00

20-Nov-09 N 57.23 62.00

12-Oct-10 OW 66.75 82.00

Date Rating Share Price(R$)

Price Target(R$)

04-Apr-07 OW 30.97 75.00

05-Oct-07 N 26.79 32.00

10-Jun-08 N 37.46 44.00

13-Nov-08 N 34.81 39.00

24-Sep-09 OW 49.24 63.00

19-Jan-10 OW 67.99 81.00

21-Jan-10 OW 64.60 83.00

07-Jul-10 OW 64.18 81.00

30-Jul-10 N 58.45 64.00

10-Sep-10 N 59.38 72.00

21-Jun-11 UW 66.00 75.00

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entireperiod.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 theaverage 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) coverageuniverse.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocksin 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 countryshown on the cover of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe.

Coverage Universe: Truman, Matthew: Ahold (AHLN.AS), Carrefour (CARR.PA), Metro (MEOG.DE), Migros Ticaret (MGROS.IS),Morrison (MRW.L), Sainsbury (SBRY.L), Tesco (TSCO.L)

0

18

36

54

72

90

108

126

Price()

Sep

06

Jun

07

Mar

08

Dec

08

Sep

09

Jun

10

Mar

11

Casino (CASP.PA) Price Chart

N 72 N 50

N 66 N 68 N 50 N 62

N 71 N 80 UW 76 OW 55OW 52 N 52 OW 82


Initiated coverage Dec 13, 2006.

0

21

42

63

84

105

126

Price(R$)

Oct

06

Jul

07

Apr

08

Jan

09

Oct

09

Jul

10

Apr

11

Companhia Brasileira de Distribuicao (CBD) (PCAR4.SA) Price Chart

N R$72

OW R$83 N R$64

OW R$75 N R$32 N R$44 N R$39 OW R$63OW R$81 OW R$81 UW R$7


Initiated coverage Apr 04, 2007.

8/4/2019 CA_FP - JPM062811

17/18

17



J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2011

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 47% 42% 11%IB clients* 50% 45% 33%

JPMS Equity Research Coverage 43% 49% 8%

IB clients* 70% 62% 56%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold

rating category; and our Underweight rating falls into a sell rating category.

Equity Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology andrisks on any securities recommended herein. Research is available athttp://www.morganmarkets.com , or you can contact the analystnamed on the front of this note or your J.P. Morgan representative.

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation basedupon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues,

which include revenues from, among other business units, Institutional Equities and Investment Banking.Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-USaffiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS,and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, publicappearances, and trading securities held by a research analyst account.

Other Disclosures

J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing

name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries.

Options related research: If the information contained herein regards options related research, such information is available only to persons who havereceived the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options,

please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf

Legal Entities Disclosures

U.S.: JPMS is a member of NYSE, FINRA,SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC and is authorized and regulated in the

UK by the Financial Services Authority. U.K.: J.P. Morgan Securities Ltd. (JPMSL) is a member of the London Stock Exchange and is authorized andregulated by the Financial Services Authority. Registered in England & Wales No. 2711006. Registered Office 125 London Wall, London EC2Y 5AJ.

South Africa: J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. Hong Kong: J.P. MorganSecurities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission inHong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan

Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (ABN 61 003 245234/AFS Licence No: 238066) is a Market Participant with the ASX and regulated by ASIC. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a

participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private

Limited, having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National StockExchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBIRegistration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities

(Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and ExchangeCommission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK.Philippines: J.P. Morgan Securities Philippines Inc. is a member of the Philippine Stock Exchange and is regulated by the Securities and Exchange

Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P.Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer

by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan SecuritiesSingapore Private Limited (JPMSS) [MICA (P) 025/01/2011 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange SecuritiesTrading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCBSingapore) which is regulated by the MAS. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd

(18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the SecuritiesCommission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securitiesand Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of

Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai:JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai

International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.

Country and Region Specific DisclosuresU.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
http://www.morganmarkets.com/http://www.morganmarkets.com/http://www.morganmarkets.com/http://www.optionsclearing.com/publications/risks/riskstoc.pdfhttp://www.optionsclearing.com/publications/risks/riskstoc.pdfhttp://www.morganmarkets.com/http://www.optionsclearing.com/publications/risks/riskstoc.pdf

8/4/2019 CA_FP - JPM062811

18/18



publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. Thisreport 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"). This document must not be acted on or relied on by persons

who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will beengaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in

their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. JPMSAL does not issue ordistribute this material to "retail clients". The recipient of this material must not distribute it to any third party or outside Australia without the prior writtenconsent of JPMSAL. For the purposes of this paragraph the terms "wholesale client" and "retail client" have the meanings given to them in section 761G of

the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities Ltd., Frankfurt Branch and J.P.Morgan ChaseBank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt fr Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as ofthe previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered withthe Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end datafrom two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bearcontracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk.

Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to theexchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee andconsumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan

Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau(kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan. Korea: This report may have

been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates

may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in theImportant Disclosures section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand:This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the

course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" asdetermined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside NewZealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as,

a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, inCanada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from therequirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws

or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer orsale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and isnot tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or

created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered inCanada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, theinformation contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has

been issued to persons regarded as professional clients as defined under the DFSA rules.

General: Additional information is available upon request. 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 toJPMS 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 changewithout 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 anyfinancial 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 ownindependent decisions regarding any securities or financial instruments mentioned herein. JPMS 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 June 13, 2011.

Copyright 2011 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold orredistributed without the written consent of J.P. Morgan. #$J&098$#*P

ca_fp - jpm062811

Documents