Default MonitorHigh Yield and Leveraged Loan Research

Peter D. AcciavattiAC

(1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen, CFA(1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

Rahul Sharma J.P. Morgan India Private Limited

rahul.z.sharma@jpmorgan.com

J.P. Morgan Securities LLC.

Default activity was somewhat modest in June, as two companies defaulted,

affecting $804mn in high-yield bonds and institutional loans. This followed a

downwardly revised three defaults totaling $592mn in high-yield bonds in May;

the downward revision the result of Milagro Oil & Gas making their missed May

interest payment within their 30-day grace period. Default activity during the

quarter was very light, as nine companies defaulted totaling $2.5bn in bonds and

loans, the lightest quarterly volume since $949mn defaulted in 2Q11. By

comparison, $6.8bn defaulted in both 1Q13 and 4Q12. Year to date, 19

companies have defaulted for $9.3bn ($4.4bn bonds and $4.9bn loans),

compared with 19 defaults and $11.7bn ($6.4bn bonds and $5.3bn loans)

during the first half last year and 18 defaults and $10.9bn ($7.7bn bonds and

$3.2bn loans) during the second half of 2012.

The breakdown of this month’s defaults includes one bond-only issuer and one

loan-only borrower, both companies filing Chapter 11 during the month. The

largest issuer was Exide Technologies, a worldwide producer and recycler of

stored energy products and services in the transportation and industrial markets

(lead batteries), which filed Chapter 11 on June 10 affecting $675mn in high-yield

bonds, the largest bond-only default YTD. Also filing for bankruptcy this month

was hardware operator Orchard Supply Hardware, whose default affected

$129mn in institutional loans.

The par-weighted high-yield default rate increased to 1.09% from a

downwardly revised 1.02% in May, the lowest level for the default rate since

August 2011. The issuer weighted high-yield default rate increased to an 8-month-

high 2.50% from 2.31% last month. For loans, the par-weighted default rate

decreased to 1.33% from 1.41% in May. The issuer-weighted loan default rate

is now 1.72%, down from 1.91% last month. The leveraged credit default rate,

See page 18 for analyst certification and important disclosures.

JPMorgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm mayhave a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making theirinvestment decision.

High Yield andLeveraged Loan Research

July 1, 2013

www.jpmorganmarkets.com

Default volume in the second quarter was a two-year low

0.1 1.8 1.9 0.7

9.2 9.2 7.6

23.2

76.6

55.0

15.2

37.9

5.8 1.9

5.2 6.91.6 1.0

6.511.8

5.3 6.4 4.1 6.8 6.82.5

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

Def

aults

($b

n)

Leveraged loans

High-yield bonds

Default volume:

1Q and 2Q 2012 = $11.7bn

3Q and 4Q 2012 = $10.9bn

1Q and 2Q 2013 = $9.3bn

Source: J.P. Morgan

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

2

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

The par weighted average price for US high-yield bonds decreased to $101.86 from

$105.24 month-over-month, similarly the median bond price for high-yield bonds fell

to $103.50 from $106.25. Meanwhile, the volume of distressed bonds slightly

increased after decreasing seven consecutive months. Specifically, bonds that trade at

or below 50% of par now total $8.4bn, accounting for 0.74% of the total US high-yield

bond market, and up from $8.1bn and 0.71% last month. Of this $8.4bn, Texas

Competitive Electric ($6.4bn) and Cengage Learning ($1.2bn) account for 91% of the

distressed universe. Meanwhile, bonds trading at or below 70% of par increased to

$18.7bn from $16.7bn and now account for 1.64% of the market. For loans, the par

weighted average price according to our J.P. Morgan Leveraged Loan Index decreased

$0.88 to $97.66, while the median loan price decreased $0.75 to $99.75. Excluding

Texas Competitive Electric’s two loans in the index, the par weighted average price

was $98.71. From a distressed perspective, 5.66% of the institutional loan market

traded below $80 as of June 28, down from 5.70% at the end of May. Here again,

Texas Competitive ($19.2bn) and Cengage ($3.4bn) are the two largest distressed

companies, accounting for 61% of the distressed loan universe. Meanwhile, 0.92% of

the institutional loan market traded below $60, down from 1.10%.

which combines bonds and loans, increased marginally to 1.17% from 1.16% last

month. As a reminder, we expect high-yield bond and loan default rates to remain

below 2% in both 2013 and 2014, well below their 4.0% and 3.5% long-term

averages.

Leveraged credit default rate remains low

Nov-09

12.1%

Jun-13

1.17%

0%

2%

4%

6%

8%

10%

12%

14%

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Par

-wei

ghte

d de

faul

t rat

e (%

)

13-year average: 3.8%

Source: J.P. Morgan

3

4

5

6

des

and

dow

ngra

des

Recovery rates during the year’s first few months are in line, to slightly higher, with

historical averages for both high-yield bonds and loans. For high-yield bonds,

recoveries of 54.08% are well above the 25-year annual average of 40.2%, the result

of more senior secured defaults than anything else, as the recovery rate by seniority is

in line with long-term averages. More specifically, senior secured bonds have

recovered 59%, which is in line with their long term average recovery of 54.5%, while

senior unsecured bonds have recovered 41%, versus the long-term average of 42%.

For senior subordinated bonds, recoveries are 46% versus the long-term average of

33.2%. Meanwhile for loans, 1st-lien recoveries of 67.4% are in line with their 15-

year annual average of 68.0%, while second-lien recoveries of 60.0% are well above

their 19.5% average.

In June, the number and volume of downgrades outpaced upgrades. Specifically, 41

companies totaling $35.8bn received downgrades and 22 companies totaling $26.4bn

received upgrades, which translates to an upgrade-to-downgrade ratio by issuer of

0.54:1 and by dollar volume of 0.74:1. The rolling twelve month ratio by issuer fell

slightly to 0.93:1, the lowest level since February 2010, while the ratio by volume fell

to 0.87:1, the lowest level since January 2010. Year-to-date, 192 issuers have been

upgraded totaling $199bn, compared with 191 issuers and $200bn of downgrades. By

comparison, there were 206 upgrades totaling $251bn and 185 downgrades totaling

$152mn over the first half last year. Meanwhile, there were four rising stars totaling

$6.8bn, following last month’s three rising stars totaling $2.8bn, and there were four

fallen angels totaling $6.7bn, following one fallen angel totaling $7.3bn last month.

Year-to-date, there have been 18 rising stars and 7 fallen angels totaling $29.9bn and

$17.1bn, respectively.

3

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

Source: J.P. Morgan

Note: Distrssed debt includes bonds trading at or below 50% of par.

Despite weakness, distressed high-yield bond debt remains extremely low

Oct-02 $84.7 bn

Nov-08 $233.1 bn

28-Jun-13

$8.4bn

0.0

50.0

100.0

150.0

200.0

250.0

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Dis

tres

sed

bond

s ($

bn)

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

4

LTM default ratebased on par amount

Source: J.P. Morgan

Jan-02 10.24%

Jun-13

1.09%

Nov-09 10.98%

Nov-09 16.32%(incl. dist.exch.)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Par

-wei

ghte

d de

faul

t rat

e

Default rate

Default rate including distressed exchanges

LTM default ratebased on number of issuers

Source: J.P. Morgan

Jun-13

2.50%

Mar-02 12.24%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Def

ault

rate

Default volume

Sources: J.P. Morgan; Moody’s Investors Service

15.1

22.922.0

8.24.7 3.4

7.2 4.8 5.28.0

22.028.3

56.0 55.6

24.9

8.6

22.9

7.33.2

19.4

94.6

7.9

18.514.1

4.4

0

10

20

30

40

50

60

70

80

90

100

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

($bn

)

Number of defaults

Sources: J.P. Morgan; Moody’s Investors Service

49 5162

3120 16

37

1826

47

86

116

138

87

61

2921 18

11

42

70

21 21 2014

0

20

40

60

80

100

120

140

160

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Default rate vs high-yield spreads

Note: Default rate is par-weighted.

Sources: J.P. Morgan; Moody’s Investors Service

High-yield spreads

561bp

High-yield defaults

1.09%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Dec

-86

Dec

-88

Dec

-90

Dec

-92

Dec

-94

Dec

-96

Dec

-98

Dec

-00

Dec

-02

Dec

-04

Dec

-06

Dec

-08

Dec

-10

Dec

-12

Def

ault

rate

0

250

500

750

1000

1250

1500

1750

2000

Spread to w

orst

High-yield default rate High-yield spreads

25-year average= 588bp

25-year average= 4.0%

High-yield bond defaults

Recent default activity

Volume LTM default rates($ mn) Number by dollar by issuer

April 2013 795.3 3 1.03% 2.21%

May 2013 592.0 4 1.02% 2.41%

June 2013 675.0 1 1.09% 2.50%

Monthly average

3-year 1,220.1 2 1.50% 2.30%

5-year 2,530.8 3 3.22% 3.99%

10-year 1,762.4 2 2.47% 3.43%

25-year 1,637.6 4 3.97% 5.06%

Sources: J.P. Morgan; Moody’s Investors Service

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

5

Average number of years to default

Source: J.P. Morgan

Note: The average number of years to default is the number of years since a defaulted issuer

last issued new debt in the primary market.

2.73

3.04

3.16

3.50

4.36

4.56

4.56

5.12

3.693.71

3.74

3.853.92

4.14

6.18

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00

1999

2001

1998

2009

2010

2002

2008

2005

2000

2003

2012

2011

2007

2004

2006

Seasoning period (years)

22-year average = 3.9 years

High-yield bond defaults (cont’d)

Default rates by industry

2010 2011 2012 LTM 18-yr Avg.

Automotive 0.00% 0.00% 0.00% 1.56% 4.86%

Broadcasting 0.00% 0.00% 0.00% 0.00% 0.90%

Cable and Satellite 2.27% 0.00% 0.88% 0.00% 4.59%

Chemicals 0.00% 0.00% 0.00% 0.54% 1.28%

Consumer Products 0.00% 0.00% 3.80% 0.00% 3.61%

Diversified Media 8.36% 0.00% 1.21% 3.07% 7.03%

Energy 0.00% 1.94% 0.87% 1.35% 1.53%

Financial 1.49% 0.45% 2.95% 0.22% 7.36%

Food and Beverages 0.43% 2.14% 1.18% 0.00% 3.91%

Gaming Lodging Leisure 0.81% 0.35% 0.24% 1.06% 2.37%

Healthcare 1.32% 0.00% 0.36% 1.38% 1.76%

Housing 0.73% 0.78% 0.00% 0.00% 2.20%

Industrials 0.24% 0.00% 1.40% 0.00% 1.84%

Metals and Mining 0.61% 0.00% 0.52% 0.51% 3.09%

Paper and Packaging 0.00% 8.80% 0.00% 0.00% 2.53%

Retail 2.72% 0.96% 0.68% 0.00% 3.96%

Services 0.46% 0.48% 0.00% 0.00% 1.97%

Technology 0.00% 0.00% 0.00% 0.29% 2.19%

Telecommunications 0.00% 0.00% 0.76% 0.81% 4.96%

Transportation 0.00% 24.55% 3.01% 2.88% 6.39%

Utility 0.00% 10.00% 11.97% 12.63% 3.25%

HY Default Rate 0.80% 1.73% 1.26% 1.09% 3.26%

Source: J.P. Morgan

Note: Eighteen-year average is as of December 31, 2012.

June high-yield bond defaults

Source: J.P. Morgan

Note: Includes only US dollar-denominated debt from domestic high-yield issuers.

10-Jun-13 Exide Technologies 675.0 Automotive B2 B2

Avg. rating Rating atDate Issuer Debt ($ mn) Industry 12 mo. prior last issuance

Default rate: by rating 12 months prior to default

2010 2011 2012 LTM 18-yr Avg.

BB 0.00% 0.13% 0.05% 0.00% 0.93%

B 0.39% 1.87% 0.60% 0.49% 2.70%

CCC/Split CCC 1.54% 4.22% 4.84% 6.21% 6.06%

HY Default rate 0.80% 1.73% 1.26% 1.09% 3.26%

Source: J.P. Morgan

Note: Eighteen-year average is as of December 31, 2012.

Default rate: by rating at issuance

Fallen angel volume and default rates

Fallen Fallen angel Cumulative Avg. annualangels defaults default rate default rate

Number of companies 503 43 8.55% 0.46%

Volume ($ bn) 984.6 119.8 12.16% 0.66%

Source: J.P. Morgan

Note: Based on fallen angel and default data from January 1995.

2010 2011 2012 LTM 18-yr Avg.

BB 0.00% 0.16% 0.22% 0.18% 1.29%

B 0.86% 3.74% 1.33% 1.40% 3.08%

CCC/Split CCC 0.40% 0.10% 2.66% 1.08% 6.30%

HY Default rate 0.80% 1.73% 1.26% 1.09% 3.26%

Source: J.P. Morgan

Note: Eighteen-year average is as of December 31, 2012.

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

6

LTM default ratebased on par amount

Sources: J.P. Morgan; S&P LCD

Jun-13

1.33%

Jun-00 7.50%

Nov-09 14.18%

Nov-09 14.61%(including dist.exch.)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Def

ault

rate

Default rate

Default rate including distressed exchanges

LTM default ratebased on number of issuers

Sources: J.P. Morgan; S&P LCD

Jun-13

1.72%

Dec-00 8.23%

0.0%

1.5%

3.0%

4.5%

6.0%

7.5%

9.0%

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Issu

er-w

eigh

ted

defa

ult r

ate

Default volume

Sources: J.P. Morgan; S&P LCD

0.6 3.27.1 8.1 7.9

3.0 1.55.9

1.2 1.2

29.7

90.1

11.9

2.48.4

4.9

0

10

20

30

40

50

60

70

80

90

100

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

($bn

)

Number of defaults

Sources: J.P. Morgan; S&P LCD

49

3326 23

126

115 3

60

93

10

22

7

31

0

10

20

30

40

50

60

70

80

90

100

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Default rate vs leveraged loan spreads

Notes: Default rate is par-weighted. Spreads from 2007 through current are based on our J.P.

Morgan Leveraged Loan Index’s spread to 3-year takeout and from 1998 through 2006 are

based on an estimated 3-year average life spread on the S&P/LSTA Performing Loans Index.

Sources: J.P. Morgan; Markit; S&P LCD

0bp

400bp

800bp

1200bp

1600bp

2000bp

2400bp

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Spr

ead

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Default rate by volum

e

Loan spread

Def. rate by volume

Leveraged loan defaults

Recent default activity

Volume LTM default rates($ mn) Number by dollar by issuer

April 2013 346.1 1 1.70% 2.02%

May 2013 0.0 0 1.41% 1.91%

June 2013 129.0 1 1.33% 1.72%

Monthly average

3-year 581.9 1 1.46% 1.88%

5-year 2,270.8 3 4.01% 3.47%

7-year 1,442.5 2 3.09% 2.76%

15-year 974.9 2 3.54% 3.18%

Sources: J.P. Morgan; S&P LCD

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

Bond issuer-weighted recovery rates

Note: Recoveries in 2009 were 22.4 based on prices 30-days post default and were 35.7

based on year-end prices.

Sources: Moody’s Investors Service; J.P. Morgan

35

45 46 4447

51

39

32

26

36

4643

4643

42

49

3834

2522

30

40

5956 55 55

27

36

41

4953 54

0

10

20

30

40

50

60

70

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Rec

over

y (c

ents

on

the

dolla

r)

25-year average = 40.23%

First-lien leveraged loan issuer-weighted recovery rates

Note: Recoveries in 2009 were 48.3 based on prices 30-days post default and were 61.4

based on year-end prices.

Sources: Moody’s Investors Service; J.P. Morgan; Markit

7268

61

53

68

75

8679

57

7469

65

59

73

8884 84

69

58 61

7167

55

67

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Rec

over

y (c

ents

on

the

dolla

r)

15-year average = 68.0%

Recovery rates

High-yield bond default and issuer-weighted recovery rates

Recovery rates

Def. rate All bonds Snr. sec. Snr. unsec. Snr. Sub. Sub.

1982 3.4% 35.3 72.5 35.8 48.1 30.0

1983 1.6% 44.5 40.0 52.7 43.5 41.1

1984 2.1% 45.5 na 49.4 67.9 44.3

1985 3.8% 43.6 83.6 60.2 29.6 39.7

1986 3.5% 47.4 59.2 51.1 46.8 41.4

1987 6.9% 51.3 71.0 63.8 46.5 46.9

1988 2.8% 38.8 55.4 45.2 33.4 33.8

1989 7.2% 32.3 46.5 45.1 34.6 26.4

1990 10.9% 25.5 33.8 37.0 25.6 19.1

1991 11.5% 35.5 48.4 36.7 41.8 24.4

1992 4.4% 45.9 62.1 49.2 49.4 38.0

1993 2.3% 43.1 na 37.1 51.9 44.1

1994 1.4% 45.6 69.3 53.7 29.6 38.0

1995 2.8% 43.3 62.0 47.6 34.3 41.5

1996 1.6% 41.5 47.6 62.8 43.8 22.6

1997 1.5% 48.8 75.5 56.1 44.7 33.1

1998 1.7% 38.3 46.8 39.5 45.0 18.2

1999 4.1% 33.8 36.0 38.0 26.9 35.6

2000 5.0% 25.3 38.7 24.2 20.8 31.9

2001 9.1% 21.8 35.0 21.5 19.8 15.9

2002 8.0% 29.7 49.0 29.5 21.4 24.5

2003 3.3% 40.4 66.3 41.9 37.2 12.3

2004 1.1% 58.5 73.3 52.1 42.3 94.0

2005 2.8% 56.0 71.9 54.9 26.1 51.3

2006 0.9% 55.0 74.6 55.0 41.4 56.1

2007 0.4% 54.7 80.5 53.3 54.5 na

2008 2.3% 26.85 28.27 33.70 18.32 10.25

2009 10.3% 22.41 30.07 23.39 22.75 5.38

2009 Adj. - 35.68 42.86 42.98 26.12 4.75

2010 0.8% 40.95 51.85 36.51 22.17 na

2011 1.7% 48.56 63.72 36.22 31.17 7.00

2012 1.3% 53.23 60.45 38.53 10.50 na

2013TD 1.1% 54.08 58.96 41.00 46.00 na

25-year ann. avg.4.0% 40.23 54.46 41.95 33.18 31.06Notes: Recovery rates are issuer-weighted and based on price 30 days after default date. 2009 Adj. recoveries

are based on year-end prices.

Sources: Moody’s Investors Service; J.P. Morgan

Leveraged loan default and recovery rates

Def. rate First-Lien Second-Lien

1991 - 67.9 -

1992 - 60.6 -

1993 - 53.4 -

1994 - 67.6 -

1995 - 75.4 -

1996 - 85.5 -

1997 - 78.8 -

1998 1.5% 56.7 -

1999 4.2% 73.5 -

2000 6.6% 68.8 -

2001 6.3% 64.9 -

2002 6.0% 58.8 -

2003 2.3% 73.4 -

2004 1.0% 87.7 -

2005 3.0% 83.8 -

2006 0.5% 83.6 -

2007 0.2% 68.6 -

2008 3.7% 58.09 32.78

2009 12.8% 48.33 31.90

2009 Adj. - 61.36 36.44

2010 1.8% 71.18 13.33

2011 0.4% 66.97 1.31

2012 1.4% 55.29 18.33

2013TD 1.3% 67.41 60.00

15-year ann. avg. 3.5% 67.98 19.53Notes: Recovery rates are issuer-weighted and based on price 30

days after default date. 2009 Adj. recoveries are based on year-end

prices.

Sources: Moody’s Investors Service; J.P. Morgan; S&P LCD; Markit

Leveraged loan issuer-weighted recovery rates

2013 Sr. Sec. Term Second-lien

All loans 67.41 60.00

Loan-only issuers 71.17 60.00

Loan & bond issuers 59.89 naSources: Moody’s Investors Service; J.P. Morgan; S&P LCD; Markit

7

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

8

Distressed debt

Source: J.P. MorganNote: Distressed debt is defined as bonds trading at or below 50% of par or accreted value.

28-Jun-13

$8.4bn

0.0

50.0

100.0

150.0

200.0

250.0

Jan-

94

Jan-

96

Jan-

98

Jan-

00

Jan-

02

Jan-

04

Jan-

06

Jan-

08

Jan-

10

Jan-

12

Par

am

ount

($

bn)

Distressed debt

Source: J.P. MorganNote: Distressed debt is defined as bonds trading at or below 50% of par or accreted value.

28-Jun-13

0.74%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Jan-

94

Jan-

96

Jan-

98

Jan-

00

Jan-

02

Jan-

04

Jan-

06

Jan-

08

Jan-

10

Jan-

12

Per

cent

of t

he h

igh-

yiel

d m

arke

t

Distressed debt vs default rate

Source: J.P. MorganNote: Distressed debt is defined as bonds trading at or below 50% of par or accreted value.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Per

cent

of d

istr

esse

d de

bt

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Default rate

Distressed debt Default rate

Distressed debtas of June 28, 2013

Source: J.P. Morgan

Notes: Includes only US dollar-denominated high-yield securities, and excludes defaulted debt.

Median market price = 103.50, down from 106.25 as of May 31, 2013.

Distressed debt (high-yield bonds)

Distressed debt by industryas of June 28, 2013

50% of par and below 70% of par and below($ bn) % of total ($ bn) % of total

Automotive - 0.0% - 0.0%

Broadcasting 0.05 0.6% 0.17 0.9%

Cable and Satellite - 0.0% - 0.0%

Chemicals - 0.0% - 0.0%

Consumer Products - 0.0% - 0.0%

Diversified Media 1.24 14.8% 1.84 9.8%

Energy - 0.0% 0.55 2.9%

Financial - 0.0% - 0.0%

Food and Beverages - 0.0% - 0.0%

Gaming Lodging Leisure - 0.0% 4.86 25.9%

Healthcare - 0.0% 0.56 3.0%

Housing - 0.0% - 0.0%

Industrials - 0.0% 0.52 2.8%

Metals and Mining 0.27 3.2% 0.64 3.4%

Paper and Packaging 0.40 4.7% 0.81 4.3%

Retail - 0.0% 0.26 1.4%

Services - 0.0% 0.53 2.8%

Technology - 0.0% 0.30 1.6%

Telecommunications - 0.0% - 0.0%

Transportation - 0.0% 0.29 1.5%

Utility 6.44 76.6% 7.43 39.6%

Total 8.41 18.74

Source: J.P. Morgan

Par No. Avg. Change in vol. Percent of par ($ bn) issuers price 1 mo. 6 mo. 12 mo.

<= 25% 6.1 0.5% 1 7.0 0.0 3.9 0.025% < par <= 50% 2.3 0.2% 2 34.2 0.3 -6.2 -5.050% < par <= 70% 10.3 0.9% 13 63.6 1.8 -1.7 -7.070% < par <= 100% 311.3 27.3% 268 94.1 161.7 175.4 82.7> 100% 812.2 71.1% 743 106.0 -174.1 -119.1 64.2Total 1,142.2 1,027 101.75 -10.4 52.3 134.9Distressed debt by rating

as of June 28, 2013

Source: J.P. Morgan

Note: Upper-tier includes bonds rated Split-BBB and BB; Middle-tier includes bonds rated

Split-BB and B; and Lower-tier includes bonds rated Split-B, CCC, D, and NR.

Upper-tier Middle-tier Lower-tier

Percent of Par ($bn) % ($bn) % ($bn) %

<= 25% - 0.0% - 0.0% 6.1 2.6%25% < par <= 50% - 0.0% - 0.0% 2.3 1.0%50% < par <= 70% - 0.0% - 0.0% 10.3 4.3%70% < par <= 100% 105.2 25.6% 121.6 25.0% 84.6 35.5%> 100% 305.6 74.4% 365.2 75.0% 134.6 56.6%Total 410.7 486.8 237.9

9

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

Distressed debt

Sources: S&P LCD; J.P. Morgan; MarkitNotes: Distressed debt is defined as bonds trading below $80. Data from May 2009 to presentis based on all priced institutional term loans in our database, while the distressed ratio prior tothat is the S&P LSTA Index Distress Ratio.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Per

cent

of i

nstit

utio

nal l

oan

mar

ket

28-Jun-13

5.66%

Nov-08

81.00%

Distressed debt vs default rate

Sources: S&P LCD; J.P. Morgan; MarkitNotes: Distressed debt is defined as bonds trading below $80. Data from May 2009 to presentis based on all priced institutional term loans in our database, while the distressed ratio prior tothat is the S&P LSTA Index Distress Ratio.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Feb

-99

Feb

-00

Feb

-01

Feb

-02

Feb

-03

Feb

-04

Feb

-05

Feb

-06

Feb

-07

Feb

-08

Feb

-09

Feb

-10

Feb

-11

Feb

-12

Feb

-13

Per

cent

of d

istr

esse

d lo

ans

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Default rate

Distress Ratio Default rate

Distressed debtas of June 28, 2013

Distressed debt (bank loans)

Distressed debt by industryas of June 28, 2013

Trading below $60 Trading below $80

($ bn) % of total ($ bn) % of total

Automotive - 0.0% - 0.0%

Broadcasting - 0.0% - 0.0%

Cable and Satellite - 0.0% - 0.0%

Chemicals - 0.0% - 0.0%

Consumer Products - 0.0% - 0.0%

Diversified Media 1.88 31.5% 7.43 20.2%

Energy 1.35 22.7% 2.37 6.4%

Financial - 0.0% 0.10 0.3%

Food and Beverages 0.08 1.3% 0.13 0.4%

Gaming Lodging Leisure 0.31 5.1% 0.31 0.8%

Healthcare 0.21 3.5% 0.42 1.1%

Housing - 0.0% - 0.0%

Industrials 0.15 2.5% 0.27 0.7%

Metals and Mining 0.05 0.9% 0.05 0.1%

Paper and Packaging - 0.0% - 0.0%

Retail - 0.0% 0.13 0.4%

Services 1.59 26.6% 2.53 6.9%

Technology - 0.0% 0.19 0.5%

Telecommunications - 0.0% - 0.0%

Transportation - 0.0% 2.39 6.5%

Utility 0.34 5.7% 20.49 55.7%

Total 5.96 36.79

Sources: J.P. Morgan; Markit

Note: Includes only US dollar-denominated, domestic institutional term loans, and excludes

defaulted debt.

Par No. Avg. Change in vol. Price ($ bn) issuers price 1 mo. 6 mo. 12 mo.

$ < 60 6.0 0.9% 19 33.7 -1.1 -1.3 -22.860 <= $ < 70 17.9 2.7% 7 65.4 15.9 -0.4 9.770 <= $ < 80 13.0 2.0% 13 75.4 -14.7 -0.6 -2.480 <= $ < 90 10.1 1.6% 22 85.5 -1.7 -17.9 -19.290 <= $ < 100 399.3 61.4% 508 98.7 268.8 226.3 -22.0$ >= 100 204.0 31.4% 424 100.6 -260.2 -151.1 139.2Total 650.3 993 97.1 7.0 55.0 82.5

Sources: J.P. Morgan; Markit

Notes: Includes only US dollar-denominated, domestic institutional term loans, and excludes

defaulted debt. Median market price = 99.75.

Distressed debt for second-lien loansas of June 28, 2013

Par No. Avg. Change in vol. Price ($ bn) issuers price 1 mo. 6 mo. 12 mo.

$ < 60 0.6 1.7% - 26.7 0.0 0.0 0.160 <= $ < 70 1.2 3.3% 2 63.7 0.1 0.1 -0.970 <= $ < 80 0.7 1.9% 2 74.1 0.0 -0.6 -0.380 <= $ < 90 0.5 1.4% 2 83.1 -0.2 -0.1 -2.990 <= $ < 100 13.3 38.0% 27 98.0 9.0 1.7 0.4$ >= 100 18.8 53.7% 95 101.1 -4.7 5.0 12.2Total 34.9 128 96.3 4.2 6.1 8.7

Sources: J.P. Morgan; Markit

Notes: Includes only US dollar-denominated, domestic second-lien loans, and excludes

defaulted debt. Median market price = 100.00.

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

10

Upgrade-to-downgrade ratioIssuer

Source: J.P. Morgan

28-Jun-13

0.93

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

Dec

-95

Dec

-96

Dec

-97

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

LTM

upg

rade

-to-

dow

ngra

de r

atio

Upgrade-to-downgrade ratioPar amount

Source: J.P. Morgan

28-Jun-13

0.87

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

Dec

-96

Dec

-97

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

LTM

upg

rade

-to-

dow

ngra

de r

atio

Upgrades and downgrades Issuer

Source: J.P. Morgan

301

387

330

481

72

147 135 139

259237 230

194 214

280

547

376

238 212

358 322

192

11495 93

223

425446

586 597

439

287

496

392

470

258 285326

191

0

100

200

300

400

500

600

700

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Upgrades

Downgrades

Upgrades and downgradesPar amount

Source: J.P. Morgan

46

408

127

245 227197

419

4080 98 95 97

73119

167

222

352

267

148

242

366 352

199

39 2569

109

391

268

446

334

507

216243

297

200

0.0

100.0

200.0

300.0

400.0

500.0

600.0

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

($ b

n)

Upgrades

Downgrades

Fallen angels and rising starsPar amount

Source: J.P. Morgan

16 1624

29 30 33 35

52

30

6 3

25

66

142

40

113

2838

271715 10

2416 13

3138

1927

1312 14 11

37 30

51 56

150

0.0

25.0

50.0

75.0

100.0

125.0

150.0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

($ b

n)

Rising stars Fallen angels

Credit trends

Fallen angels and rising starsIssuer

Source: J.P. Morgan

37

44

31

18

39

23

29

13 13

2724 25

1520

3028

1820

17

6

18

2723

49

63

43

2522

3027

58

13 1214

7

26

36

22

0

10

20

30

40

50

60

70

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Rising stars

Fallen angels

Peter D. Acciavatti (1-212) 270-9633

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Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

11

New issue volume vs defaulted debtrolling twelve months

Source: J.P. Morgan

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

Mar

-92

Mar

-93

Mar

-94

Mar

-95

Mar

-96

Mar

-97

Mar

-98

Mar

-99

Mar

-00

Mar

-01

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Ltm

new

issu

ance

($

bn)

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Ltm defaulted debt ($ bn)

Ltm lower rated new-issue volume

Ltm defaulted debt

Lower rated new-issue volume vs defaulted debt

Note: Lower rated issuance includes bonds rated Split B or lower.

Source: J.P. Morgan

5.9 7.9

17.7

31.0

7.6 7.63.4 2.3

31.1

53.6 54.4

43.2

7.2 4.8 5.28.0

22.028.3

56.0 55.6

24.9

8.6

22.9

7.33.2

94.6

7.94.4

15.3

32.6

18.513.7

19.4

63.7

36.8

19.418.5

14.1

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

($ b

n)

Lower rated new issuance

Defaulted debt

Increased lower

rated new issuance

Leads to

increased defaults

Lower rated new-issue volume as a percent of total issuance

Source: J.P. Morgan

20.5%

7.6%

16.1%

3.6%3.4%

10.1%

20.6%

17.4%

20.9%

36.3%

10.7%12.4%

10.7%

14.0%

26.0%

18.0%17.6%17.3%16.7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Low

er r

ated

issu

ance

% o

f tot

al is

suan

ce

17-year average= 15.9%

High-yield new-issue trends

Refinancing as a percent of lower rated issuance

Source: J.P. Morgan

13.5%16.0%

32.9%33.9%

26.3%

16.9%

72.2%

59.9%

71.7%

54.4%

33.8%

17.5%

9.0%8.1%

72.0%67.8%

59.2%55.3%

62.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Ref

inan

cing

as

a %

of l

ower

-rat

ed is

suan

ce

Lower rated new-issue volume, excluding refinancings

Source: J.P. Morgan

1.8%1.9%

2.7%

3.6%

0.9%1.0%

0.1%0.1%0.5%

1.7%1.3%

2.7%

5.1%

1.3%

0.5%

1.4% 1.4%

2.0%

0.9%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Per

cent

of t

he m

arke

t

Aggressive issuance from 1996 to

1999 accounted for 7.9% of 1998's

year-end market size Aggressive issuance from

2004 to 2007 accounts for

10.3% of 2007's year-end

market size

Lower rated new-issue volume

Source: J.P. Morgan

5.9 7.9

17.7

31.0

7.6 7.63.4 2.3

15.3

32.6

18.5

31.1

53.6

13.7

19.4

54.4

43.2

63.7

36.8

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

($ b

n)

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

12

Refinancing as a percent of total issuance

Source: J.P. Morgan

54%

41%

91%

73%

50%45%

53%

34%

57%50%

38%35%

41%

76%

66%

55%60%63%

46%50%

70%72%

44%50%48%

78%77%75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Acquisition financing/LBO as a percent of total issuance

Source: J.P. Morgan

39%37%

41%46%

0%3% 4% 3%

16%

26%29%

22%22%

28%27%

15%16%

38%

44%

52%

46%

5%

16%

22%

17%13%

30%

16%

0%

10%

20%

30%

40%

50%

60%

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Aggressive issuance

Source: J.P. Morgan

Note: Aggressive issuance includes lower rated securities, excluding refinancings, plus

Wireline Telecommunications issuance.

5.4 9.5

17.0

32.3

18.6

6.3

1.0 0.94.3

14.912.2

25.7

48.8

12.6

5.4

17.5 17.6

28.5

13.8

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

($ b

n)

Wireline Telecommunications

Lower rated, nonrefinancing issuance

Aggressive issuance

Source: J.P. Morgan

Note: Aggressive issuance includes lower rated securities, excluding refinancings, plus

Wireline Telecommunications issuance.

1.8%

2.7%

3.8%

5.7%

2.9%

1.0%

0.1%0.1%0.5%

1.7%1.3%

2.7%

5.1%

1.3%

0.5%

1.4%1.4%

2.0%

0.9%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Per

cent

of t

he m

arke

t

Wireline Telecommunications

Lower rated, nonrefinancing issuance

Number of new issues

Source: J.P. Morgan

Note: Includes only US dollar-denominated securities.

504

583

375335321

115

653

510

750

456

95

175 189

131

48

402

250238

389

667694

378

139

300260

408

0

100

200

300

400

500

600

700

800

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

High-yield new-issue trends (cont’d)

New-issue volume

Source: J.P. Morgan

Note: Includes only US dollar-denominated securities.

148

246

368

220

31 291 10

4669

43 4773

126151

100

47

9568

152 158

106

149

53

181

302

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

($ b

n)

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

13

Ramp up in loan issuance reminiscent of late 90s bond market

Sources: J.P. Morgan; S&P LCD

10

4669

43 4774

126151

100

47

9568

152

53

220

4734

183

321

387

71

38

399

158

106

149 148181

302

246

368

6046

59

91

153 155

229

300

0

50

100

150

200

250

300

350

400

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

High-Yield Issuance

Institutional Loan Volume

Easy credit availability leads to an increase in defaults

Sources: J.P. Morgan; S&P LCD

0

20

40

60

80

100

120

140

160

180

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2012

Num

ber o

f bon

d an

d lo

an d

efau

lts

0

100

200

300

400

500

600

700

800

900

1000

Num

ber of deals

Number of Loan Deals Number of Bond Deals

Total Bond and Loan defaults

Deals by use of proceeds (as a percent of total volume)

Note: LBO issuance from 2005 through 2007 accounts for more than 50% of the institutional

leveraged loan market, compared with 10% in the bond market.

Sources: J.P. Morgan; S&P LCD

45%40%

29%

14%

52% 50%

59%

42%

35%

63%

69%65%

56%

32%29%

41%47%

56%

64%

74%

29%32%

22%

15% 16%

25%

42%

35%

27%

19% 19%

11%

45%

35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Acquisition Refinancing

Leveraged loan new-issue trends

Second-lien loan new-issue volume

Sources: J.P. Morgan; S&P LCD

0.3 0.7 0.4 0.1 0.1 0.63.1

12.0

16.3

28.330.1

3.01.5

4.26.8

14.316.7

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Still 50% off

from prior peak

levels

Covenant-lite loan new-issue volume

Sources: J.P. Morgan; S&P LCD

1.3 2.9 0.3 0.3 0.0 0.0 0.5 0.1 2.4

24.0

99.1

2.5 2.5 7.2

55.7

100.4

189.1

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Lower rated loan new-issue volume(as a percent of total volume)

Note: Lower rated issuance includes loans rated Split B or CCC.

Sources: J.P. Morgan; S&P LCD

0.0%

1.8%

0.0% 0.0% 0.0% 0.2%

2.0% 1.8% 1.9%

2.9%

6.2%

1.3%

8.2%

0.9%

1.8% 1.6%

2.3%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

YT

D

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

14

Default data by new-issue year

Default rate (per new-issue year)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010New issue volume $126.0 $150.8 $99.8 $47.3 $94.7 $67.9 $151.6 $158.2 $106.1 $149.1 $147.9 $52.9 $180.7 $302.0Defaulted debt $45.6 $56.0 $34.7 $21.9 $16.8 $6.0 $13.5 $15.9 $7.1 $19.0 $13.9 $3.1 $4.9 $4.5Default rate 36.2% 37.1% 34.8% 46.2% 17.8% 8.9% 8.9% 10.1% 6.7% 12.7% 9.4% 5.9% 2.7% 1.5%

Number of issuers 555 548 324 114 252 238 421 432 302 250 321 115 323 512Number of defaulted issuers 199 223 103 44 32 19 35 48 29 29 20 7 11 10Default rate 35.9% 40.7% 31.8% 38.6% 12.7% 8.0% 8.3% 11.1% 9.6% 11.6% 6.2% 6.1% 3.4% 2.0%

Default rate by industry (per new-issue year)by par amount

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Automotive 53.9% 68.1% 42.1% 0.0% 47.4% 37.5% 13.4% 23.1% 0.0% 6.7% 2.5% 15.8% 0.0% 0.0%Broadcasting 1.8% 13.0% 0.0% 0.0% 0.0% 0.0% 19.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Cable and Satellite 48.5% 59.2% 56.3% 73.7% 35.7% 36.0% 0.0% 14.4% 0.0% 4.8% 27.8% 3.6% 0.0% 0.0%Chemicals 53.0% 47.8% 7.5% 0.0% 0.0% 10.3% 1.2% 0.0% 16.8% 14.8% 14.8% 0.0% 0.0% 0.0%Consumer Products 48.5% 44.8% 44.7% 47.1% 0.0% 8.5% 16.4% 2.7% 1.5% 0.0% 0.0% 0.0% 0.0% 6.8%Diversified Media 14.2% 20.2% 0.0% 0.0% 9.7% 0.0% 45.5% 28.3% 61.3% 71.8% 50.1% 0.0% 8.4% 9.0%Energy 24.3% 18.2% 9.4% 19.8% 1.7% 6.8% 0.0% 0.0% 2.8% 0.0% 8.4% 0.0% 3.3% 4.7%Financial 28.6% 12.8% 32.3% 0.0% 34.7% 0.0% 5.2% 16.0% 7.4% 25.6% 0.0% 0.0% 0.0% 0.8%Food and Beverages 49.5% 45.4% 26.2% 100.0% 9.6% 12.5% 8.7% 12.8% 13.9% 0.0% 12.9% 0.0% 1.6% 2.5%Gaming Lodging and Leisure14.9% 24.7% 8.0% 0.0% 4.3% 7.7% 16.2% 14.5% 16.2% 23.6% 12.4% 0.0% 0.0% 0.0%Healthcare 35.2% 24.1% 0.0% 0.0% 6.2% 2.8% 0.0% 2.7% 4.6% 5.4% 0.0% 0.0% 0.0% 0.0%Housing 24.0% 2.9% 7.8% 13.9% 0.0% 14.6% 5.9% 20.2% 11.7% 8.6% 0.0% 26.3% 0.0% 0.0%Industrials 29.0% 34.1% 34.4% 0.0% 0.0% 6.8% 0.9% 5.5% 0.0% 9.9% 14.8% 0.0% 3.1% 0.0%Metals and Mining 69.2% 63.5% 54.9% 0.0% 0.0% 8.3% 0.0% 0.0% 0.0% 27.4% 0.0% 0.0% 0.0% 1.4%Paper and Packaging 40.2% 4.5% 27.4% 58.1% 16.7% 22.6% 15.4% 19.5% 33.1% 0.0% 42.7% 31.9% 13.0% 0.0%Retail 21.2% 10.0% 46.7% 0.0% 50.2% 0.0% 0.0% 29.3% 7.3% 12.4% 0.0% 0.0% 15.5% 0.0%Services 18.4% 24.5% 26.2% 100.0% 7.2% 0.0% 3.4% 0.0% 3.2% 2.4% 3.4% 0.0% 0.0% 0.0%Technology 42.0% 41.3% 8.2% 0.0% 0.0% 0.0% 0.0% 10.5% 3.2% 12.2% 8.7% 31.0% 0.0% 3.5%Telecommunications 52.4% 55.9% 53.6% 72.3% 17.4% 0.0% 0.0% 0.0% 7.0% 2.1% 3.4% 64.7% 0.0% 0.0%Transportation 41.6% 59.9% 10.6% 0.0% 44.4% 27.8% 0.0% 25.0% 23.0% 6.1% 0.0% 0.0% 9.0% 4.1%Utility 8.8% 7.3% 19.1% 19.0% 58.0% 0.0% 24.9% 19.4% 0.0% 22.6% 19.0% 0.0% 2.9% 0.0%

Default rate by rating (per new-issue year)by par amount

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Split BBB 34.7% 2.2% 32.2% 22.2% 16.8% 0.0% 0.0% 4.6% 4.5% 0.0% 0.0% 0.0% 0.0% 0.0%BB 25.5% 13.6% 28.4% 11.1% 17.6% 4.8% 3.2% 3.7% 2.0% 4.9% 0.0% 0.0% 0.4% 0.5%Split BB 11.0% 22.0% 45.5% 19.2% 24.0% 2.1% 2.9% 5.9% 2.7% 6.1% 29.6% 0.0% 0.0% 1.6%B 39.1% 45.1% 35.0% 56.5% 17.7% 13.9% 12.5% 14.0% 7.4% 19.3% 12.5% 17.0% 3.9% 1.5%Split B 37.0% 39.8% 31.5% 87.1% 0.0% 15.3% 19.9% 5.0% 13.1% 17.5% 6.6% 5.2% 13.6% 5.0%CCC 40.7% 60.4% 46.3% 81.0% 35.8% 0.0% 4.3% 10.1% 11.2% 13.5% 8.3% 0.0% 5.0% 0.0%Not rated 61.3% 74.8% 44.1% 57.6% 0.0% 0.0% 5.0% 75.2% 31.0% 4.7% 31.0% 0.0% 51.6% 4.6%

Default rate by use of proceeds (per new-issue year)by par amount

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Acquisition Finance 31.2% 34.9% 27.2% 50.4% 12.1% 1.7% 12.1% 6.9% 7.1% 14.8% 4.1% 2.3% 0.0% 0.0%General Corporate 50.3% 46.5% 44.4% 55.8% 31.6% 5.5% 7.0% 4.9% 10.3% 3.7% 8.3% 0.0% 1.6% 0.6%Refinancing 31.5% 32.8% 34.3% 31.6% 17.2% 10.7% 8.4% 12.8% 5.6% 14.5% 17.8% 12.0% 3.2% 2.1%

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

15

Appendix A

2012 and 2013 bond distressed exchanges/tenders

19-Apr-12 Dex One 98.2 Distressed buyback Diversified Media01-May-12 Reichhold Industries 195.0 Distressed exchange Chemicals30-May-12 Chukchansi Economic Dev. Authority 60.0 Distressed exchange Gaming Lodging and Leisure03-Jul-12 Bon-Ton Stores 330.0 Distressed exchange Retail1-Dec-12 Energy Futures Holdings 1,100.0 Distressed exchange Energy1-Dec-12 LBI Media 206.0 Distressed exchange Diversified Media

Date Issuer Debt ($ mn) Transaction Industry

Sources: J.P. Morgan; Moody’s Investors Service.

2012 high-yield defaults

Source: J.P. Morgan

Note: Recovery rate is the weighted average price of all bonds in the capital structure 30 days after default.

19-Jan-12 Eastman Kodak 1,000.0 Consumer Products B1 74.6301-Feb-12 DirectBuy Holdings 335.0 Retail B2 20.0006-Feb-12 Global Aviation 149.5 Industrials Ba3 27.0010-Feb-12 LSP Energy 211.0 Utility Caa2 83.5001-Mar-12 Circus & Eldorado 142.8 Gaming Lodging and Leisure B1 78.0030-Mar-12 Hawker Beechcraft 630.6 Industrials B3 11.6612-Apr-12 Reddy Ice 451.3 Food and Beverages B1 73.0217-Apr-12 Residential Capital Corp. 2,786.1 Financial Caa3 77.3514-May-12 LightSquared 400.0 Cable and Satellite NR na21-May-12 Houghton Mifflin Harcourt Publishing Co. 300.0 Diversified Media Caa1 54.2509-Jul-12 Patriot Coal 250.0 Metals and Mining B3 45.5017-Jul-12 FiberTower 131.8 Telecommunications NR 25.0004-Aug-12 KV Pharmacuetical 225.0 Healthcare NR 30.0015-Aug-12 Lifecare Holdings 119.3 Healthcare Caa1 20.5017-Aug-12 ATP Oil & Gas Corporation 1,500.0 Energy Caa2 24.7522-Aug-12 Broadview Networks Holdings 300.0 Telecommunications B3 71.7506-Nov-12 Homer City Funding LLC 640.0 Utility NR 110.1614-Nov-12 Overseas Shipholding 509.6 Transportation Ba3 37.1215-Nov-12 Edison Mission Energy 3,700.0 Utility B1 49.0317-Dec-12 Midwest Generation 345.2 Financial Baa3 98.13

Date Issuer Debt ($ mn) Industry Moody’s rating at last issue WA recov.

2013 high-yield defaults

Source: J.P. Morgan

Note: Recovery rate is the weighted average price of all bonds in the capital structure 30 days after default.

11-Jan-13 Penson Worldwide 200.0 Financial B1 24.0015-Jan-13 Geokinetics 300.0 Energy B2 54.0018-Feb-13 Reader's Digest 525.0 Diversified Media B1 38.0028-Feb-13 Conexant Systems 175.0 Technology NR 105.7515-Mar-13 Rotech Healthcare 520.0 Healthcare B3 na18-Mar-13 Dex One 212.3 Diversified Media NR 46.0025-Mar-13 Revel Entertainment 365.7 Gaming Lodging and Leisure NR 7.001-Apr-13 GMX Resources 377.8 Energy NR 91.001-Apr-13 Platinum Energy Solutions 173.1 Energy NR 48.0029-Apr-13 Chukchansi 244.4 Gaming Lodging and Leisure Caa2 52.001-May-13 Physiotherapy Associates 210.0 Healthcare B3 75.0015-May-13 AGY Holdings 172.0 Chemicals B2 na15-May-13 Oncure Holdings 210.0 Healthcare B2 na10-Jun-13 Exide Technologies 675.0 Automotive B2 na

Date Issuer Debt ($ mn) Industry Moody’s rating at last issue WA recov.

Peter D. Acciavatti (1-212) 270-9633

peter.acciavatti@jpmorgan.com

Tony Linares (1-212) 270-3285

tony.linares@jpmorgan.com

Nelson Jantzen (1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

High Yield and Leveraged Loan Research

Default Monitor

July 1, 2013

16

Appendix B

2012 and 2013 leveraged loan distressed exchanges/tenders

13-Jan-12 Hanley-Wood 385.9 Recapitilization/distressed exchange Diversified Media20-Mar-12 Dex One Corp 143.0 Distressed buyback Diversified Media24-Apr-12 DS Waters 465.0 Distressed exchange Food and Beverages07-May-12 Barney's 540.0 Distressed exchange Retail28-Jun-12 Culligan International 530.0 Distressed exchange Food and Beverages

Date Issuer Debt ($ mn) Transaction Industry

Sources: J.P. Morgan; Moody’s Investors Service.

2012 leveraged loan defaults

03-Jan-12 Vertrue 551.5 Services 28.0003-Jan-12 Coach America 267.4 Transportation 35.5011-Jan-12 IBC Sales Corp (Hostess) 163.9 Food and Beverages na18-Jan-12 Buffets 244.5 Food and Beverages 44.3006-Feb-12 Global Aviation 98.1 Industrials na03-Feb-12 TCO Funding (Tensar) 245.7 Industrials 96.9230-Mar-12 Hawker Beechcraft 1212.9 Industrials 58.4224-Apr-12 Bicent Power 245.5 Utility 58.5014-May-12 LightSquared 1,674.9 Cable and Satellites 65.3811-Jun-12 Allied Holdings 164.8 Transportation na20-Jun-12 ATI Acquisition 158.0 Services 3.0025-Jun-12 Cinram International 250.2 Diversified Media 31.6331-Jul-12 Aventine Renewable Energy 200.0 Energy 51.6331-Jul-12 Legends Gaming 239.6 Gaming, Lodging and Leisure 63.2515-Aug-12 Lifecare Holdings 324.9 Healthcare 92.0817-Aug-12 ATP Oil & Gas Corporation 360.4 Energy 96.6730-Aug-12 Contec 177.9 Diversified Media 16.8328-Sep-12 Southern Air 238.3 Transportation 21.3310-Oct-12 Vertis, Inc. 386.5 Diversified Media 28.0025-Oct-12 AMF Bowling Worldwide 294.9 Gaming, Lodging and Leisure 90.0022-Dec-12 Merrill Corporation 594.8 Financial 100.1931-Dec-12 LodgeNet Entertainment 345.6 Cable and Satellite 68.89

Date Issuer Debt ($ mn) Industry WA Recov.

Sources: J.P. Morgan; Markit

Notes: 1)Recovery rate is the weighted average price of all senior secured loans 30 days after default (second-liens are excluded)

2013 leveraged loan defaults

07-Jan-13 Evergreen International Aviation 284.8 Transportation 95.0501-Mar-13 Yellow Book USA 1,099.4 Diversified Media 18.0018-Mar-13 Dex One 746.7 Diversified Media 71.0818-Mar-13 SuperMedia 1,442.0 Diversified Media 73.5325-Mar-13 Revel Entertainment 895.5 Gaming Lodging and Leisure 48.7024-Apr-13 Synagro Technologies 346.1 Services 81.2717-Jun-13 Orchard Supply Hardware 129.0 Retail na

Date Issuer Debt ($ mn) Industry WA Recov.

Sources: J.P. Morgan; Markit

Notes: 1)Recovery rate is the weighted average price of all senior secured loans 30 days after default (second-liens are excluded)

J.P. Morgan North American Credit Research 383 Madison Avenue, 3rd Floor, New York, NY 10179

JOYCE CHANGHead of Global Credit and Emerging Markets Research

(212) 834-4203

NORTH AMERICAN HIGH GRADE RESEARCH NORTH AMERICAN HIGH YIELD RESEARCHAUTOMOTIVEeric.j.selle@jpmorgan.com . . . . . . . . . . (212) 270-9624, yao.li@jpmorgan.com . . . . . . . . . . . (212) 270-9455

BASIC INDUSTRIESChemicals and Metals & Miningsvetlana.x.goldenberg@jpmorgan.com . . (212) 270-9453

Home Builderssusan.berliner@jpmorgan.com . . . . .(212) 270-3085, wade.m.pontius@jpmorgan.com . . . (212) 834-8341

Paper/Forest Products, Packagingtarek.x.hamid@jpmorgan.com . . . . . (212) 834-5468, jonathan.j.mann@jpmorgan.com . . . (212) 834-7239

BANKS, FINANCE AND SECURITIES COMPANIESkabir.x.caprihan@jpmorgan.com . . . (212) 834-5613, julie.g.fitzpatrick@jpmorgan.com . . . (212) 270-4584

CONSUMER PRODUCTSvirginia.chambless@jpmorgan.com . . (212) 834-5481

ELECTRIC UTILITIES AND POWER GENERATIONsusan.voorhees@jpmorgan.com . . . (212) 834-5200, larry.liou@jpmorgan.com . . . . . . . . . (212) 834-9455

ENERGY, PIPELINES, MLPSsvetlana.x.goldenberg@jpmorgan.com . . (212) 270-9453

HEALTHCAREarun.n.kumar@jpmorgan.com . . . . . (212) 834-5423, brett.g.gibson@jpmorgan.com . . . . . (212) 270-7484

INSURANCEarun.n.kumar@jpmorgan.com . . . . . (212) 834-5423, brett.g.gibson@jpmorgan.com . . . . . (212) 270-7484

MANUFACTURING, SERVICESAerospace/Defensevirginia.chambless@jpmorgan.com . . (212) 834-5481Manufacturing and Industrialsvirginia.chambless@jpmorgan.com . . (212) 834-5481

REITSmark.streeter@jpmorgan.com . . . . . (212) 834-5086,, jonathan.d.rau@jpmorgan.com . . . . . .(212) 834-5237

RETAILvirginia.chambless@jpmorgan.com . . (212) 834-5481

TECHNOLOGY/TELECOMMUNICATION, CABLE AND MEDIA

Technologybrian.m.turner@jpmorgan.com . . . . (212) 834-4035, calvin.chan@jpmorgan.com . . . . . . . (212) 834-4079Telecommunication Servicesbrian.m.turner@jpmorgan.com . . . . (212) 834-4035, calvin.chan@jpmorgan.com . . . . . . . (212) 834-4079Media & Entertainmentmichael.pace@jpmorgan.com . . . . . (212) 270-6530, maxx.d.kauffman@jpmorgan.com . . (212) 270-6797

TRANSPORTATIONAirlines/EETCs/Aircraft/Rails/Freightmark.streeter@jpmorgan.com . . . . . (212) 834-5086, jonathan.d.rau@jpmorgan.com . . . . . .(212) 834-5237

AUTOMOTIVE, SHIPPINGeric.j.selle@jpmorgan.com . . . . . . . . . . (212) 270-9624, yao.li@jpmorgan.com . . . . . . . . . . . (212) 270-9455

BASIC INDUSTRIESChemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .tarek.x.hamid@jpmorgan.com . . . . . (212) 834-5468, jonathan.j.mann@jpmorgan.com . . . (212) 834-7239

Homebuildingsusan.berliner@jpmorgan.com . . . . .(212) 270-3085, wade.m.pontius@jpmorgan.com . . . (212) 834-8341

Metals & Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .dave.adam.katz@jpmorgan.com . . . (212) 270-4593, bayina.bashtaeva@jpmorgan.com . (212) 270-1372

Paper/Forest Products, Packagingtarek.x.hamid@jpmorgan.com . . . . . (212) 834-5468, jonathan.j.mann@jpmorgan.com . . . (212) 834-7239

FINANCE AND SECURITIES COMPANIESdave.adam.katz@jpmorgan.com . . . (212) 270-4593, bayina.bashtaeva@jpmorgan.com . (212) 270-1372

CONSUMER PRODUCTS, FOOD AND RESTAURANTScarla.casella@jpmorgan.com . . . . . . (212) 270-6798, paul.a.simenauer@jpmorgan.com . . (212) 270-6861

ELECTRIC UTILITIES AND POWER GENERATIONdave.adam.katz@jpmorgan.com . . . (212) 270-4593, bayina.bashtaeva@jpmorgan.com . (212) 270-1372

ENERGYgregg.w.brody@jpmorgan.com . . . . (212) 834-5997, andrew.aziz@jpmorgan.com . . . . . . (212) 834-9405

HEALTHCAREdavid.common@jpmorgan.com . . . . (212) 270-5260, jared.a.feeney@jpmorgan.com . . . . .(212) 270-0699

MANUFACTURING, SERVICESAerospace/Defense, Industrials, Servicesyilma.abebe@jpmorgan.com . . . . . . (212) 270-3265

GAMING, LODGING, LEISUREGaming, Lodgingsusan.berliner@jpmorgan.com . . . . .(212) 270-3085, wade.m.pontius@jpmorgan.com . . . (212) 834-8341Leisuremichael.pace@jpmorgan.com . . . . . (212) 270-6530, maxx.d.kauffman@jpmorgan.com . . (212) 270-6797

RETAILcarla.casella@jpmorgan.com . . . . . . (212) 270-6798, paul.a.simenauer@jpmorgan.com . . (212) 270-6861

TECHNOLOGY/TELECOMMUNICATION, CABLE AND MEDIA

Technology/Telecommunication Servicesthomas.j.egan@jpmorgan.com . . . . . (212) 270-2149, lina.p.kabaria@jpmorgan.com . . . . . (212) 834-5669Cable/Mediamichael.pace@jpmorgan.com . . . . . (212) 270-6530, maxx.d.kauffman@jpmorgan.com . . (212) 270-6797Broadcasting/Publishingavi.a.steiner@jpmorgan.com . . . . . . (212) 270-5512, daniel.k.kenny@jpmorgan.com . . . . (212) 834-8285

TRANSPORTATIONAirlines/EETCs/Aircraft/Rails/Freightmark.streeter@jpmorgan.com . . . . . (212) 834-5086, jonathan.d.rau@jpmorgan.com . . . . . .(212) 834-5237

ARUN N. KUMARHead of High Grade Research

DAVID COMMONHead of High Yield Research

HIGH GRADE STRATEGY AND CREDIT DERIVAT IVE RESEARCH GLOBAL HIGH YIELD AND LEVERAGED LOAN STRATEGY

peter.acciavatti@jpmorgan.com . . . . (212) 270-9633, tony.linares@jpmorgan.com . . . . . . (212) 270-3285 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . nelson.r.jantzen@jpmorgan.com . . . (212) 270-1169 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . chuanxin.li@jpmorgan.com . . . . . . (212) 270-1813

PETER D. ACCIAVATTIERIC BEINSTEINeric.beinstein@jpmorgan.com . . . . . . . (212) 834-4211, dominique.d.toublan@jpmorgan.com . (212) 834-2370

miroslav.j.skovajsa@jpmorgan.com . (212) 834-5154harpreet.x.singh@jpmorgan.com . . . (212) 834-7591meghana.j.chugani@jpmorgan.com . (212) 834-3220

JOYCE CHANGHead of Global Credit and Emerging Markets Research

(212) 834-4203

Conflict of Interest:  This research contains the views, opinions and recommendations of J.P. Morgan research analysts. J.P. Morgan has adopted researchconflict of interest policies, including prohibitions on non-research personnel influencing the content of research. Research analysts stillmay speak to J.P. Morgan trading desk personnel in formulating views, opinions and recommendations. Trading desks may trade, orhave traded, as principal on the basis of the research analysts’ views and research. Therefore, this research may not be independentfrom the proprietary interests of J.P. Morgan trading desks which may conflict with your interests. As a general matter, J.P. Morganand/or its affiliates trade as principal in connection with making markets in fixed income securities discussed in research reports.Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsiblefor this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each securityor issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personalviews 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 bedirectly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

Important Disclosures Company-Specific Disclosures: J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail research.disclosure.inquiries@jpmorgan.com.Explanation of Credit Research Ratings: Ratings System: J.P. Morgan uses the following sector/issuer portfolio weightings: Overweight (over the next three months, the recommendedrisk position is expected to outperform the relevant index, sector, or benchmark), Neutral (over the next three months, the recommended riskposition is expected to perform in line with the relevant index, sector, or benchmark), and Underweight (over the next three months, therecommended risk position is expected to underperform the relevant index, sector, or benchmark). J.P. Morgan's Emerging Market research usesa rating of Marketweight, which is equivalent to a Neutral rating. NR is Not Rated. In this case, J.P. Morgan has removed the rating for thissecurity because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating no longer shouldbe relied upon. An NR designation is not a recommendation or a rating. Valuation & Methodology: In J.P. Morgan's credit research, we assign a rating to each issuer (Overweight, Underweight or Neutral) based onour credit view of the issuer and the relative value of its securities, taking into account the ratings assigned to the issuer by credit rating agenciesand the market prices for the issuer's securities. Our credit view of an issuer is based upon our opinion as to whether the issuer will be ableservice its debt obligations when they become due and payable. We assess this by analyzing, among other things, the issuer's credit positionusing standard credit ratios such as cash flow to debt and fixed charge coverage (including and excluding capital investment). We also analyzethe issuer's ability to generate cash flow by reviewing standard operational measures for comparable companies in the sector, such as revenueand earnings growth rates, margins, and the composition of the issuer's balance sheet relative to the operational leverage in its business.

Analysts’ Compensation: The research analysts responsible for the preparation of this report receive compensation based upon various factors,including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

Other DisclosuresJ.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC (“JPMS”) and its affiliates worldwide. J.P. Morgan Cazenove is amarketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and itssubsidiaries. 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 theUK by the Financial Services Authority. U.K.: J.P. Morgan Securities plc (JPMS plc) 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 25 Bank Street, London, E14 5JP. SouthAfrica: J.P. Morgan Equities South Africa Proprietary Limited is a member of the Johannesburg Securities Exchange and is regulated by the FinancialServices Board. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authorityand the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the KoreaFinancial Supervisory Service. Australia: J.P. Morgan Australia Limited (JPMAL) (ABN 52 002 888 011/AFS Licence No: 238188) is regulated byASIC and J.P. Morgan Securities Australia Limited (JPMSAL) (ABN 61 003 245 234/AFS Licence No: 238066) is regulated by ASIC and is a Market,Clearing and Settlement Participant of ASX Limited and CHI-X. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan StockExchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited, having its registeredoffice at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock Exchange of India Limited(SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities (Thailand) Limited is amember of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. 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 SecuritiesPhilippines Inc. is a Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing Corporation of the Philippines and theSecurities Investor Protection Fund. It is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by theComissao 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 GrupoFinanciero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities ExchangeCommission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited (JPMSS) [MIC (P)049/04/2013 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the MonetaryAuthority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. Japan:JPMorgan Securities Japan Co., Ltd. is regulated by the Financial Services Agency in Japan. Malaysia: This material is issued and distributed inMalaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of CapitalMarkets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the

North America Credit Research

Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. isauthorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising andcustody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, KingFahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by theDubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box506551, Dubai, UAE.

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 byJPMS plc. Investment research issued by JPMS plc has been prepared in accordance with JPMS plc's policies for managing conflicts of interestarising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement andmaintain 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 FinancialServices and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document mustnot be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is onlyavailable to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to personsregarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL inAustralia to "wholesale clients" only. This material does not take into account the specific investment objectives, financial situation or particularneeds of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consentof JPMSAL. For the purposes of this paragraph the term "wholesale client" has the meaning given in section 761G of the Corporations Act 2001.Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt Branch and J.P.Morgan Chase Bank, N.A., FrankfurtBranch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previousmonth end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with theSecurities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month enddata from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callablebull bear contracts 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, andthat a loss may occur due to the exchange 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 and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate whichwas individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorganSecurities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, TheFinancial Futures Association of Japan, Type II Financial Instruments Firms Association and Japan Investment Advisers Association. Korea: Thisreport 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 the Important Disclosures section above. India: For private circulation only, not for sale. Pakistan: For privatecirculation only, not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principalbusiness is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does notissue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient ofthis material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: Theinformation contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer tosell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Anyoffer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with therelevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to anexemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. Theinformation contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is nottailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed orcreated under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registeredin Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials,the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: Thisreport has been issued to persons regarded as professional clients as defined under the DFSA rules. Brazil: Ombudsman J.P. Morgan: 0800-7700847 / ouvidoria.jp.morgan@jpmorgan.com. General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorganChase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to anydisclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is asof the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of thismaterial and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer orsolicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individualclient circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies toparticular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instrumentsmentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodicupdates may be provided on companies/industries based on company specific developments or announcements, market conditions or any otherpublicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in theirhome jurisdiction unless governing law permits otherwise.

“Other Disclosures” last revised May 4, 2013.

Copyright 2013 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.

Research DistributionTo amend research distribution please contact

Tanja Waters, Research Administration,

tanja.x.waters@jpmorgan.com

Conflict of Interest:This research contains the views, opinions and recommendations of J.P. Morgan research analysts. J.P. Morgan has adopted researchconflict of interest policies, including prohibitions on non-research personnel influencing the content of research. Research analysts stillmay speak to J.P. Morgan trading desk personnel in formulating views, opinions and recommendations. Trading desks may trade, orhave traded, as principal on the basis of the research analysts’ views and research. Therefore, this research may not be independentfrom the proprietary interests of J.P. Morgan trading desks which may conflict with your interests. As a general matter, J.P. Morganand/or its affiliates trade as principal in connection with making markets in fixed income securities discussed in research reports.

Analyst Certification:The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsiblefor this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each securityor issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personalviews 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 bedirectly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

Important Disclosures

Company-Specific Disclosures: J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P.

Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail research.disclosure.inquiries@jpmorgan.com.

Explanation of Credit Research Ratings:Ratings System: J.P. Morgan uses the following sector/issuer portfolio weightings: Overweight (over the next three months, the recommendedrisk position is expected to outperform the relevant index, sector, or benchmark), Neutral (over the next three months, the recommended riskposition is expected to perform in line with the relevant index, sector, or benchmark), and Underweight (over the next three months, therecommended risk position is expected to underperform the relevant index, sector, or benchmark). J.P. Morgan's Emerging Market research usesa rating of Marketweight, which is equivalent to a Neutral rating. NR is Not Rated. In this case, J.P. Morgan has removed the rating for thissecurity because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating no longer shouldbe relied upon. An NR designation is not a recommendation or a rating.

Valuation & Methodology: : In J.P. Morgan's credit research, we assign a rating to each issuer (Overweight, Underweight or Neutral) based onour credit view of the issuer and the relative value of its securities, taking into account the ratings assigned to the issuer by credit rating agenciesand the market prices for the issuer's securities. Our credit view of an issuer is based upon our opinion as to whether the issuer will be ableservice its debt obligations when they become due and payable. We assess this by analyzing, among other things, the issuer's credit positionusing standard credit ratios such as cash flow to debt and fixed charge coverage (including and excluding capital investment). We also analyzethe issuer's ability to generate cash flow by reviewing standard operational measures for comparable companies in the sector, such as revenueand earnings growth rates, margins, and the composition of the issuer's balance sheet relative to the operational leverage in its business.

Analysts’ Compensation: The research analysts responsible for the preparation of this report receive compensation based upon various factors,including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

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 have

received 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 plc (JPMS plc) is a member of the London Stock Exchange and is authorized and

regulated by the Financial Services Authority. Registered in England & Wales No. 2711006. Registered Office 25 Bank Street, London, E14 5JP. South

Africa: J.P. Morgan Equities South Africa Proprietary Limited is a member of the Johannesburg Securities Exchange and is regulated by the Financial

Services Board. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority

and the Securities and Futures Commission in Hong 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 (JPMAL) (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by

ASIC and J.P. Morgan Securities Australia Limited (JPMSAL) (ABN 61 003 245 234/AFS Licence No: 238066) is regulated by ASIC and is a Market,

Clearing and Settlement Participant of ASX Limited and CHI-X. 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 Stock Exchange of India Limited

(SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration 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 Exchange Commission. 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 Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing Corporation of the

Philippines and the Securities Investor Protection Fund. It 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 Securities Singapore Private Limited (JPMSS)

[MIC (P) 049/04/2013 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the

Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS.

Japan: JPMorgan Securities Japan Co., Ltd. is regulated by the Financial Services Agency in Japan. 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 Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the

Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is

North America Credit Research

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 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King

Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. 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 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

JPMS plc. Investment research issued by JPMS plc has been prepared in accordance with JPMS plc's policies for managing conflicts of interest

arising as a result of publication and distribution of investment research. Many European regulators require 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"). 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 be engaged 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. This material does not take into account the specific investment objectives, financial situation or particular

needs of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of

JPMSAL. For the purposes of this paragraph the term “wholesale client” has the meaning given in section 761G of the Corporations Act 2001.

Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt Branch and J.P.Morgan Chase Bank, N.A., Frankfurt

Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous

month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the

Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end

data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull

bear contracts 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 the exchange 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 and consumption 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, Type II Financial Instruments Firms Association and Japan Investment Advisers Association. 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

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