RBC Dominion Securities Inc. Canadian Focus List

March 1, 2017 | Quarterly Report Portfolio Advisory Group – Equities

What’s inside 3 Portfolio positions Waiting for the baton to be passed 4 Sector commentary The Canadian Focus List delivered a solid return amid a search for clarity on U.S. policy direction. 8 Alimentation Couche-Tard Inc. Portfolio increase

9 Canadian National Railway Improved global economic data helped Markets were surprisingly calm during Portfolio increase set the market on an upward trajectory the Portfolio’s winter 2017 quarter with 10 Canadian Pacific Railway Ltd. in early 2016. Despite initial trepidation, volatility holding at historically low the election of a U.S. president set on levels. We believe it is reasonable to Portfolio decrease slashing tax rates, increasing fiscal expect moments of market anxiety in 11 Cott Corporation spending, and cutting regulatory red the months to come as policy-related Portfolio removal tape stoked investor enthusiasm for headlines influence expectations for 12 Dollarama Inc. higher potential corporate earnings future tax rates, fiscal spending levels, and set the stage for the market’s next and regulatory oversight. In such an Portfolio increase leg higher late last year. We have now environment, we believe clients are well 13 Imperial Oil Ltd. entered a period where investors are served by the Focus List’s prudent mix Portfolio removal looking for signs that the baton is in of economically sensitive and defensive 14 Magna International Inc. the process of being passed from policy positions in addition to adherence to Portfolio increase rhetoric to tangible action. the Portfolio’s core tenet of emphasizing high-quality, well-managed businesses. 15 Metro Inc. Portfolio removal 16 Waste Connections, Inc. Sector weightings: Canadian Focus List vs. the S&P TSX/Composite Portfolio increase Canadian Focus List S&P TSX/Composite 17 Portfolio companies Financials, 32.5% Financials, 35.2% Industrials, 20.0% Energy, 21.3% 24 Portfolio companies risks Energy, 17.5% Materials, 12.0% 26 Methodology Consumer Discr., 15.0% Industrials, 8.8% Consumer Staples, 5.0% Consumer Discr., 5.0%

For an overview of the Portfolio, Materials, 5.0% Telecom Srvcs., 4.8% please click here. Telecom Srvcs., 2.5% Consumer Staples, 3.7% Click here for authors’ contact Real Estate, 2.5% Real Estate, 3.0% information. Information Tech., 0.0% Utilities, 2.8% For required disclosures, see page 27. All values in Canadian dollars and Utilities, 0.0% Information Tech., 2.7% priced as of February 28, 2017, market Health Care, 0.0% Health Care, 0.6% close, unless otherwise noted. Disseminated: Mar 1, 2017 7:00ET Source - RBC Dominion Securities, Bloomberg Produced: Feb 28, 2017 19:00ET NOT FOR DISTRIBUTION IN THE U.S. 2 | Canadian Focus List

Over the past quarter, the Focus List experienced broad-based strength in its non-Energy holdings. The Portfolio enjoyed strong gains in National Bank of Canada (NA), Restaurant Brands International (QSR), Royal Bank of Canada (RY), and Waste Connections (WCN). After strong gains in 2016, share prices across the Energy sector have lagged year to date. With that, the ranks of the Portfolio’s laggards included Cenovus Energy (CVE), Canadian Natural Resources (CNQ), and Imperial Oil (IMO).

Overall, the Canadian Focus List delivered a total return of 2.29% during the winter The Focus List’s long- 2017 quarter relative to the 2.74% posted by the S&P/TSX Composite. Amongst term focus, balance, and the detractors from performance relative to the benchmark were the Portfolio’s predilection towards owning underweight allocation to gold producers and poor performance from a pair of high-quality businesses Consumer Staples positions, namely Metro (MRU) and Cott (BCB). leave it in good stead to With U.S. policy direction in the headlines and a number of geopolitical hurdles on navigate a wide range of track for 2017, we believe the Focus List’s long-term focus, balance, and predilection economic environments. towards owning high-quality businesses leave it in good stead to navigate a wide range of economic environments.

Total return for the winter quarter (12/1/16 – 2/28/17) Canadian Focus List 2.29% S&P/TSX Composite Index 2.74% Relative -0.45%

Source - FactSet

March 1, 2017 | RBC Wealth Management 3 | Canadian Focus List

Price Market 52-wk EPS (Calendar) P/E Dividend Symbol Company name Weight (2/28/17) cap (B) range 2017E 2018E 2017E 2018E yield

Interest sensitive

NA NATIONAL BANK OF CANADA 2.50% $56.68 $19.31 $ 59 - $36 $5.39 $5.96 10.5x 9.5x 4.0%

TD TORONTO DOMINION BANK 7.50% $68.46 $127.21 $71 - $52 $5.56 $6.24 12.3x 11.0x 3.2%

RY ROYAL BANK OF CANADA 5.00% $96.48 $143.34 $100 - $68 NA NA NA NA 3.6%

BNS BANK OF NOVA SCOTIA (THE) 5.00% $77.04 $93.18 $82 - $54 $6.86 $7.38 11.2x 10.4x 3.8%

BAM'A BROOKFIELD ASSET MANAGEMENT INC 5.00% $47.84 $47.19 $49 - $41 $1.92 $0.00 24.9x NA 1.5%

REF.UN CANADIAN REALESTATE INVT TRS 2.50% $49.80 $3.65 $51 - $41 $3.53 $0.00 14.1x NA 3.7%

ONEX ONEX CORP 2.50% $93.47 $9.61 $96 - $74 $0.40 NA NMF NA 0.0%

IFC INTACT FINANCIAL CORP 5.00% $94.16 $12.34 $98 - $84 $7.39 $8.11 12.7x 11.6x 2.7%

Consumer

MG MAGNA INTERNATIONAL INCORPORATED 5.00% $56.79 $21.71 $62 - $43 $8.52 $9.46 6.7x 6.0x 2.5%

ATD'B ALIMENTATION COUCHE TARD 5.00% $59.06 $24.81 $69 - $51 $3.80 $4.15 15.5x 14.2x 0.6%

DOL DOLLARAMA INC 5.00% $102.28 $11.77 $105 - $74 $4.10 $4.74 24.9x 21.6x 0.4%

QSR RESTAURANT BRANDS INTERNATIONAL INC 5.00% $72.46 $17.00 $76 - $46 $3.16 $3.35 22.9x 21.6x 1.3%

Industrial

AC AIR CANADA 2.50% $13.38 $3.66 $15 - $7 $3.42 $4.06 3.9x 3.3x 0.0%

WCN WASTE CONNECTIONS INC 5.00% $115.75 $20.31 $115 - $77 $4.60 $5.15 25.2x 22.5x 0.8%

CP CANADIAN PACIFIC RAILWAY LTD 2.50% $195.43 $28.60 $209 - $156 $12.94 $14.49 15.1x 13.5x 1.0%

CNR CANADIAN NATIONAL RAILWAY 5.00% $92.36 $70.40 $96 - $73 $5.42 $5.91 17.0x 15.6x 1.8%

TIH TOROMONT INDS LTD 5.00% $46.33 $3.63 $49 - $31 $2.32 NA 20.0x NA 1.6%

Telecom

RCI'B ROGERS COMMUNICATIONS INC 2.50% $55.76 $22.44 $59 - $48 $3.42 $3.77 16.3x 14.8x 3.4%

Resources

TRP TRANSCANADA CORP 5.00% $61.06 $52.74 $65 - $47 $3.09 $3.23 19.8x 18.9x 4.1%

FNV FRANCO-NEVADA CORP 2.50% $85.61 $15.28 $106 - $71 $1.23 $1.52 NMF NMF 1.3%

CNQ CANADIAN NATURAL RESOURCES LIMITED 5.00% $38.09 $42.32 $47 - $28 $1.30 $2.40 29.3x 15.9x 2.6%

SU SUNCOR ENERGY INC 2.50% $41.35 $68.99 $45 - $32 $2.17 $2.61 19.1x 15.8x 3.1%

CVE CENOVUS ENERGY INC 2.50% $16.80 $14.00 $22 - $15 $0.65 $1.03 25.8x 16.3x 1.2%

PPL PEMBINA PIPELINE CORPORATION 2.50% $42.92 $17.03 $43 - $33 $2.04 $2.32 21.0x 18.5x 4.5%

AGU AGRIUM INC 2.50% $128.05 $17.69 $147 - $105 $8.22 $9.15 15.6x 14.0x 3.6%

Source - Thomson One In all jurisdictions where RBC Capital Markets conducts business, we do not offer investment advice on Royal Bank of Canada. Certain regulations prohibit member firms from soliciting orders and offering investment advice or opinions on their own stock. References to Royal Bank are for informational purposes only and not intended as a direct or implied recommendation for investing in Royal Bank and all related securities.

Some exhibits in the report may not add to 100% due to rounding.

March 1, 2017 | RBC Wealth Management 4 | Canadian Focus List Sector commentary

Financials & Real Estate A solid foundation Our 35% weighting in Financials and Real Estate remains intact and we have made no changes to our stock-specific allocations in the space. We remain content that the Portfolio’s current positioning leaves it with the right balance of economically sensitive and defensive positions.

While we continue to have a positive outlook on the Canadian banks, we must acknowledge that valuation multiples have enjoyed considerable expansion. The price-to-earnings (P/E) multiple for the Canadian bank index troughed at just under 10x at this time last year as crude oil prices swooned below US$30 per barrel. Crude oil prices have improved dramatically since then and, with their rise, tail risks related to bank energy loan exposure have dissipated. Further propelled by a brighter economic outlook and higher interest rates, the P/E multiple for the bank index has risen to roughly 13x; a significant premium to its historical average. We believe that bank valuation multiples are sustainable in light of our expectations for a relatively benign credit environment, improved operating leverage, and strong capital positions. However, the case for further multiple expansion is difficult to make in the absence of higher interest rates. As such, our expectations for total returns from the group is moderated relative to those experienced in 2016 when valuation expansion played such a large role.

We have maintained the 7.5% and 5% positions in Toronto-Dominion Bank (TD) and Royal Bank of Canada (RY), respectively, which give the Portfolio leverage to higher potential economic growth in the U.S. We believe National Bank (NA) has further scope for improvement in its relative trading multiple as its capital position improves. We maintain our 2.5% weighting in that name while a 5% position in Bank of Nova Scotia (BNS) rounds out the Focus List’s 20% allocation to the Canadian banks.

Canadian banks enjoyed considerable valuation expansion in 2016 We believe current bank 15x valuations are supported 14x 13x by improved credit, cost 12x containment, and strong 11x capital positions. 10x 9x 8x 7x 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 Jan '14 Jan '15 Jan '16 Jan '17 Canadian Bank Index forward P/E Avg. +1/-1 Std. Dev.

Note: February 21, 2017 data point is imputted based on consensus EPS as of January 31, 2017. Source - IMF, RBC Quantitative Research, Bloomberg, RBC Capital Markets

March 1, 2017 | RBC Wealth Management 5 | Canadian Focus List

We continue to like the prospects for Onex (ONEX) in the current environment as well as the unique asset class and U.S. exposure offered by the name. The private equity manager has been deploying capital in new investment opportunities while at the same time current conditions make for an attractive environment in which to monetize mature investments. We believe the 2.5% position in ONEX and the 5% position in Brookfield Asset Management (BAM.A) give the Focus List attractive exposure to highly differentiated asset management platforms and upside from economically sensitive portfolio investments.

Providing ballast to the Portfolio’s allocation to the Financials and Real Estate sectors are the 5% weighting in Intact Financial (IFC) and the 2.5% allocation to Canadian Real Estate Investment Trust (REF.UN).

Telecom Continuing to be receptive We maintain the 2.5% position in Rogers Communications (RCI.B). The company continues to make progress in finding the right balance between pricing and subscriber acquisition in its wireless business. In cable, the company’s deployment of X1 next year should improve the positioning of its offering. Over the long term, the company should be able to leverage its wireless-centric business mix and network advantage.

Consumer Consolidating in high-conviction names The Focus List’s 20% allocation to the Consumer Staples and Consumer Discretionary sectors remains unchanged. However, the composition of this allocation has changed considerably as we have elected to consolidate the Portfolio’s positions in our highest-conviction opportunities.

We have increased the weights in Alimentation Couche-Tard (ATD.B), Dollarama We see more upside (DOL), and Magna (MG) to full 5% positions. We see considerable scope for opportunity by moving to earnings growth at Couche-Tard and believe excessive concern around fuel margins 5% weights in Couche-Tard, and renewable fuel blending credits have afforded us a timely opportunity to Dollarama, and Magna. increase our weighting. Dollarama demands a premium valuation but execution continues to be excellent while the growth algorithm of unit growth, higher price points, operating leverage, and share buybacks appears to be firmly in place. Finally, we believe concerns around the auto cycle and U.S. trade policy have been overly discounted in Magna’s valuation while the outlook for earnings growth appears robust even in a slower growth environment for auto sales.

To accommodate the aforementioned increases, we have removed both Cott (BCB) and Metro (MRU) from the Portfolio. Cott has struggled to profitably onboard new customers while managing the integration of two large acquisitions. Our original investment thesis focused on the consolidation opportunity present in the company’s home and office beverage delivery business. In the event that element of the thesis is fundamentally compromised, the company’s high financial leverage affords little room for error. With respect to Metro, the company’s valuation has been under pressure due to concerns over the impact of food price deflation on profitability and a general flow of funds into more cyclical names. While we continue to view the name as a core holding in grocery, we fail to identify near-term catalysts for the company’s shares. At this juncture, we have more conviction in the upside opportunity presented by moving to 5% weights in Couche-Tard, Dollarama, and Magna.

March 1, 2017 | RBC Wealth Management 6 | Canadian Focus List

Our final position in the Consumer sectors, Restaurant Brands International (QSR), remains unchanged at a 5% weighting. We believe the fairway for value creation at Restaurant Brands has been extended by the planned acquisition of Popeyes Louisiana Kitchen (PLKI). While the size of the acquisition may be smaller than some investors had hoped, the scope of cost reduction and unit growth is considerable and well within the proven expertise of the 3G Capital-led management team.

Industrials & Technology Switching tracks We have increased the Portfolio’s allocation to the Industrials and Technology sectors to 20% from 17.5% previously. This is achieved by increasing our position in Waste Connections (WCN) to a 5% weighting. We have also elected to reduce our position in Canadian Pacific Railway (CP) to 2.5% and increase our position in Canadian National Railway (CNR) to 5%.

We maintain a high degree of conviction in the quality of the franchise and management at Waste Connections. Recent results continue to exceed expectations and we see further potential for earnings upside tied to better-than-expected synergies related to last year’s acquisition of Progressive Waste and growth in oil & gas waste treatment volumes. We are content to increase our position in what we believe to be a high-quality company at a fair price.

While we maintain the Portfolio’s 7.5% weighting in the rails, we have made the decision to switch the allocations in Canadian National and Canadian Pacific as outlined above. We see a return to volume growth for the industry in 2017 after two years of declines. We think the Canadian rails are well positioned to complement carload growth with pricing gains and operating leverage. Our decision to increase our weighting in Canadian National is predicated on the standout volume trends the company has experienced year to date.

The Portfolio’s 2.5% allocation to Air Canada and 5% position in Toromont Industries (TIH) remain unchanged.

Rail industry pricing growth contracted in 2016 4.0% Despite excess 3.5% transportation capacity, 3.0% 0.5% Canadian rails remain 1.6% 2.5% 2.4% relatively well positioned for 1.2% 2.0% 1.9% 0.4% pricing growth. 3.6% 0.7% 1.5% 1.8% 2.4% 1.0% 0.5% Pricing growthPricing (%, Y/Y) 0.0% Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Pricing to infl. spread Rail sector infl. (ex. fuel) Rail sector pricing

Note: Core pricing is quarterly average for CNR, CP, CSX, and UNP; CP does not provide a breakdown between core price and mix Source - Association of American Railroads, RBC Capital Markets

March 1, 2017 | RBC Wealth Management 7 | Canadian Focus List

Energy Trimming at the edges We have reduced our allocation to the Energy sector to 17.5% from 20% previously. While we continue to believe there is a reasonable line of sight to a more balanced market for crude oil, we believe it is reasonable to expect commodity and share price gains over the balance of 2017 will be more muted than those experienced in 2016.

We have removed the Portfolio’s 2.5% position in Imperial Oil (IMO) in favour of what we believe to be higher potential return opportunities elsewhere in the Portfolio. We maintain direct leverage to higher crude oil prices through the Focus List’s 5% weighting in Canadian Natural Resources (CNQ) as well as the 2.5% positions in Suncor (SU) and Cenovus Energy (CVE). With respect to the pipeline companies, we maintain the Portfolio’s 5% allocation to TransCanada (TRP) and 2.5% position in Pembina Pipeline (PPL).

Materials Existing allocation makes the grade We maintain the Focus List’s 5% allocation to the Materials sector with 2.5% positions in both Agrium (AGU) and Franco-Nevada (FNV).

In the event the transaction is approved by regulators, we believe the proposed merger with PotashCorp (POT) will allow Agrium to accelerate its retail acquisition strategy as well as provide material cost synergies and strategic benefits. In Franco-Nevada, the Portfolio keeps some exposure to gold prices in the event that geopolitical risks manifest in increased investor demand for the precious metal.

We remain content without an allocation to base metals and bulk commodities. Supply and demand fundamentals for many of these commodities continue to look challenged and in many cases do not justify higher prices, in our opinion. Moreover, the sustainability of Chinese stimulus measures and the widespread adoption of fiscal spending initiatives are difficult to ascertain. With stocks in these industries priced at a significant premium to net asset value, we remain on the sidelines.

Base metal stocks are trading at a significant premium to net asset value We believe base metal 60% stocks are reflecting further 40% strength in commodity 20% prices. 0% (20%) (40%) (60%)

Prem/(Disc) to NAV (%) to NAV Prem/(Disc) (80%) Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16

Source - Bloomberg, RBC Capital Markets

March 1, 2017 | RBC Wealth Management 8 | Canadian Focus List Alimentation Couche-Tard Inc. (TSX: ATD.B, $59.06)

We are increasing our position in Alimentation Couche-Tard by 2.5% Couche-Tard is one of the largest Rationale for increase convenience store retailers in We are increasing our position in Alimentation Couche-Tard to 5% for the following North America. It operates a net- reasons: work of more than 7,800 stores located across Canada and the • Proven consolidator with further scope for value-creating acquisitions: U.S. The company also operates Couche-Tard management has proven adept at identifying attractive acquisition a network of approximately 2,700 candidates, executing on reasonable terms and managing business integration stores in Europe. on multiple fronts. Moreover, the company has also developed a track record for exceeding initial synergy targets. We believe the pending acquisition of CST Brands presents considerable upside to initial targets as an undermanaged asset with considerable scope for operational improvement and merchandising upside. We expect Couche-Tard to continue to source attractive acquisition opportunities in North America and Europe. • Underappreciated organic growth story: While the consolidation story demands considerable attention, we believe Couche-Tard also boasts an attractive organic growth story. The company has succeeded in converting increased miles driven into higher in-store sales. With roughly two-thirds of the company’s sales generated in the U.S., we expect the company’s organic growth to benefit from higher relative economic growth and strong employment trends. • A timely opportunity to increase the Portfolio’s weighting: Couche-Tard’s equity valuation has contracted in part due to concerns regarding lower fuel margins and potential changes to the U.S. renewable fuel blending credit regime. Large and rapid increases in crude oil prices, such as that experienced in late 2016, typically lead to lower retail fuel margins in the near term. While fuel margins dipped in November and December, they have since stabilized. Moreover, the long-term trajectory of retail fuel margins has been higher as distribution has consolidated outside the ownership of fuel refiners. The issue of renewable fuel blending credits is complex but we feel the ultimate impact to Couche-Tard’s profitability is not material. These concerns, which we feel are overblown, have created a timely opportunity to increase the Focus List’s weighting in Couche- Tard.

Risks 1-year pricing chart

Alimentation Couche-Tard Inc. Class B Daily Risks include, but are not limited 59.77 -0.39 -0.65% 12:45:02 PM VWAP:59.89 High: 68.63 Low: 51.21 Chg: 0.05% 70 Alimentation Couche-Tard Inc. Class B - Price

to, fluctuations in gas margins, an 68

inability to execute acquisitions 66 on economic terms and realize 64 62 forecast synergies, and risks related 60 to operations spanning numerous 58

geographies and currencies. 56

54

52

50 Cv ol: 464,022 Av g: 902,826 Alimentation Couche-Tard Inc. Class B - Volume 1.6

1.2

0.8 RBC Capital Outperform 0.4 0.0 Markets: Mar Apr May J un J ul Aug Sep Oct Nov Dec J an Feb Source - FactSet; data intraday 2/27/17

March 1, 2017 | RBC Wealth Management 9 | Canadian Focus List Canadian National Railway (TSX: CNR, $92.36)

We are increasing our position in Canadian National Railway by 2.5% Canadian National Railway Rationale for increase transports about $250B worth We are increasing our position in Canadian National Railway to 5% for the following of goods per year over a network reasons: that connects three coasts: the Atlantic, the Pacific, and the Gulf • The company is the long-standing operational leader among North American of Mexico. rails: We consider Canadian National Railway to be a core holding for investors seeking exposure to the rail industry, in part due to its consistent operational excellence. The company’s network advantage coupled with strong management has resulted in the industry’s lowest operating ratio year in and year out. • The company is exhibiting strong volume trends to start the year: We are anticipating a positive inflection in North American rail volumes in 2017 following two years of declines. While peers have posted mixed volume trends to start the year, Canadian National Railway has delivered strong growth. We believe this is evidence that the company’s operating and service strategy is resonating well with customers. Furthermore, we believe the strong start to the year positions the company well to generate operating leverage and exceed management’s full-year earnings guidance. • Current valuation levels are reasonable to switch part of our rail allocation into CNR: We are switching 2.5% of the Portfolio’s weighting in Canadian Pacific Railway into Canadian National Railway, in part to take advantage of the latter’s strong volume trends and what we believe could be correspondingly higher earnings growth this year. We believe the modest premium afforded Canadian National Railway is a reasonable level to make the switch.

Risks 1-year pricing chart

Canadian National Railw ay Company Daily Risks include, but are not limited 93.11 0.75 0.81% 12:46:04 PM VWAP:92.64 High: 95.71 Low: 72.78 Chg: 17.10% Canadian National Railway Company - Price

to, extreme fluctuations in fuel 95 prices, unusual weather conditions 90 that could impact grain crops or

railway operating efficiencies, and 85 weaker-than-anticipated economic conditions. 80

75

Cv ol: 797,395 Av g: 1,129,593 Canadian National Railway Company - Volume 2.0

1.5

1.0

0.5

0.0 Mar Apr May J un J ul Aug Sep Oct Nov Dec J an Feb

Source - FactSet; data intraday 2/27/17

RBC Capital Outperform Markets:

March 1, 2017 | RBC Wealth Management 10 | Canadian Focus List Canadian Pacific Railway Ltd. (TSX: CP, $195.43)

We are decreasing our position in Canadian Pacific Railway by 2.5% Canadian Pacific Railway oper- Rationale for decrease ates a rail network from Montreal We are decreasing our position in Canadian Pacific Railway to 2.5% for the following to Vancouver and across the U.S. reasons: Northeast and Midwest regions. CP transports bulk commodities, • Volume growth has started 2017 on a soft note: While we expect volumes to merchandise freight, and inter- pick up for the company as the year develops, Canadian Pacific Railway’s carload modal traffic. growth has lagged peers year to date. With the industry having relied on cost cutting to sustain earnings through the past two years of volume declines, a return to top-line growth is essential to reignite meaningful earnings growth, in our view. • Current valuation levels are reasonable to switch part of our rail allocation into CNR: We are switching 2.5% of the Portfolio’s weighting in Canadian Pacific Railway into Canadian National Railway, in part to take advantage of the latter’s strong volume trends and what we believe could be correspondingly higher earnings growth this year. We believe the modest premium afforded Canadian National Railway is a reasonable level to make the switch.

Risks 1-year pricing chart

Canadian Pacific Railw ay Lim ite d Daily Risks include, but are not limited 195.26 1.19 0.61% 12:45:10 PM VWAP:193.73 High: 209.12 Low: 156.01 Chg: 17.77% Canadian Pacific Railway Limited - Price to, extreme fluctuations in fuel 210

prices, unusual weather conditions 200 that could impact grain crops or 190 railway operating efficiencies, and weaker-than-anticipated economic 180 conditions. 170

160

Cv ol: 296,411 Av g: 359,010 Canadian Pacific Railway Limited - Volume 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 Mar Apr May J un J ul Aug Sep Oct Nov Dec J an Feb

Source - FactSet; data intraday 2/27/17

RBC Capital Outperform Markets:

March 1, 2017 | RBC Wealth Management 11 | Canadian Focus List Cott Corporation (TSX: BCB, $14.15)

We are removing the 2.5% position in Cott from the List Cott is one of the world’s largest Rationale for removal producers of beverages on behalf We are removing the 2.5% position in Cott from the Canadian Focus List for the of retailers, brand owners, and following reasons: distributors. The company also has one of the broadest home • Cost pressures and integration challenges: Cott’s transformation from a and office bottled water and cof- carbonated soft drink company to a more diversified beverage distribution fee services distribution networks business that includes water and coffee continues to unfold, yet challenges in the U.S., with the ability to ser- around the integration of recent acquisitions have surfaced over the past few vice approximately 90% of U.S. quarters. Cost pressures driven by rising commodity prices and expenses households, as well as national, related to new customer acquisition have been particularly challenging. While regional, and local offices. management should successfully manage through these issues over time, short- term visibility has been reduced while relatively elevated debt levels leave little room for error. • Private label beverage business remains challenging: While Cott management continues to work hard on the integration of the water and coffee distribution businesses, the carbonated soft drink market continues to experience steady decline. Coupled with an uptick in commodity costs and the corresponding impact on margins, the legacy private label beverage business faces persistent pressure.

Risks 1-year pricing chart

Cott Corporation Daily 14.14 -0.16 -1.12% 12:44:59 PM VWAP:14.14 High: 22.66 Low: 13.42 Chg: -11.40% Risks include, but are not limited to, 24 Cott Corporation - Price increased competitive intensity and 22 promotional activity in the beverage industry, inability to acquire new 20 home office delivery and contract 18 manufacturing customers, and

changes in input costs. 16

14

Cv ol: 786,132 Av g: 328,558 Cott Corporation - Volume 0.8

0.6

0.4

0.2

0.0 Mar Apr May J un J ul Aug Sep Oct Nov Dec J an Feb

Source - FactSet; data intraday 2/27/17

RBC Capital Outperform Markets:

March 1, 2017 | RBC Wealth Management 12 | Canadian Focus List Dollarama Inc. (TSX: DOL, $102.28)

We are increasing our position in Dollarama by 2.5% Dollarama is Canada’s leading Rationale for increase fixed-price point retailer. With We are increasing our position in Dollarama to 5% for the following reasons: over 1,000 stores across the country, Dollarama is four times • Dollarama’s earnings growth algorithm remains firmly intact: The combination larger than its closest competitor. of unit growth, operating leverage, and share buybacks has helped Dollarama deliver exceptional earnings growth. While we see several years of growth before the company achieves its stated goal of 1,400 stores, we believe there is additional room for unit growth above and beyond this target. At 1,400 stores, the level of dollar store penetration domestically would still lag that in the U.S. market. • Value proposition to consumers remains attractive regardless of economic backdrop: We believe Dollarama can continue to grow its share of wallet regardless of economic conditions. The value proposition that it delivers to its customers continues to compare favourably with similar baskets from competing discount retailers. The introduction of higher price points has been a win-win as it has helped fuel top-line growth for the company while also offering a new assortment of items to its customers. • Strong execution continues to justify the company’s premium equity valuation: The company continues to deliver the operational execution and earnings growth needed to sustain its premium valuation. Merchandising expertise has allowed the company to navigate fluctuations in the Canadian dollar without issue. In light of the long fairway of potential growth and strong returns on capital, we feel the current valuation is well supported.

Risks 1-year pricing chart

Risks include, but are not limited Dollaram a Inc. Daily 103.17 -0.62 -0.60% 12:45:37 PM VWAP:102.88 High: 104.94 Low: 74.38 Chg: 32.00% Dollarama Inc. - Price to, increased competition, wage 105

pressures, margin erosion prompted 100

by weakness in the Canadian dollar, 95 and an inability to source attractive 90 real estate for unit growth.

85

80

75

Cv ol: 209,434 Av g: 343,047 Dollarama Inc. - Volume 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 Mar Apr May J un J ul Aug Sep Oct Nov Dec J an Feb

Source - FactSet; data intraday 2/27/17

RBC Capital Outperform Markets:

March 1, 2017 | RBC Wealth Management 13 | Canadian Focus List Imperial Oil Ltd. (TSX: IMO, $41.49)

We are removing the 2.5% position in Imperial Oil from the List Imperial Oil is Canada’s largest Rationale for removal petroleum refiner and a major We are removing the 2.5% position in Imperial Oil from the Canadian Focus List for producer of crude oil and natural the following reasons: gas. Imperial’s project portfo- lio includes the flagship Cold • We expect moderated returns from energy producers relative to 2016: Lake property, a 25% interest in Coincident with the 45% rise in the price of crude oil, the S&P/TSX Energy Index Syncrude, and a 71% interest in returned over 30% in 2016. With current prices trending very close to RBC Capital Kearl. In addition to its upstream Markets’ expectation for an average North American benchmark crude oil price operations, Imperial is the largest of US$56 per barrel in 2017, we believe returns from this group are likely to be refiner and a significant marketer somewhat moderated this year. of petroleum products in Canada. • We maintain direct exposure to energy producers elsewhere in the Portfolio: We have maintained the Focus List’s 5% position in Canadian Natural Resources (CNQ) and the 2.5% positions in Suncor (SU) and Cenovus (CVE). With its significant downstream operations and well-capitalized balance sheet, we believe Imperial Oil offers less sensitivity to higher oil prices relative to the Portfolio’s remaining energy producer allocations. In removing Imperial Oil, we are also selling the most expensive name amongst Canadian integrated oil producers on a price-to-cash flow basis.

Risks 1-year pricing chart

Im perial Oil Lim ited Daily Risks include, but are not limited 41.58 0.33 0.80% 12:47:07 PM VWAP:41.49 High: 48.72 Low: 38.41 Chg: -3.91% 50 Imperial Oil Limited - Price to, changes in energy prices and refining margins, the ability to 48 replace production and reserves on 46

an economic basis, and government 44 legislation relating to royalties, 42 taxes, and environmental policy.

40

38

Cv ol: 303,878 Av g: 584,581 Imperial Oil Limited - Volume 1.0 0.8

0.6 0.4 0.2

0.0 Mar Apr May J un J ul Aug Sep Oct Nov Dec J an Feb

Source - FactSet; data intraday 2/27/17

RBC Capital Sector Perform Markets:

March 1, 2017 | RBC Wealth Management 14 | Canadian Focus List Magna International Inc. (TSX: MG, $56.79)

We are increasing our position in Magna International by 2.5% Magna is one of the world’s Rationale for increase leading auto parts suppliers with We are increasing our position in Magna International to 5% for the following a diversified product suite. It also reasons: has the capability to design and integrate complete systems, in- • Attractive earnings growth despite a flat outlook for North American auto cluding the assembly of an entire sales: RBC Capital Markets forecasts double-digit earnings per share (EPS) vehicle. Magna operates over 300 growth over the forecast horizon despite a plateau in North American auto plants in 28 countries. sales. New business launches, corresponding growth in content per vehicle, and international expansion are expected to propel earnings growth despite the flat auto sales backdrop. Moreover, the company’s initiative to return cash to shareholders remains in place, which RBC Capital Markets expects will result in ongoing share repurchases and double-digit dividend increases in each of the next two years. • Trade policy concerns are overdone and contribute to an attractive valuation: While implementation of a border adjustment tax would have negative implications for the auto supply industry as a whole, it is our base case assumption that it does not come to pass. The consequences of a border adjustment tax would be severe for U.S. consumers with higher prices to be expected across a range of import-dependent goods. As such, we feel that share price weakness in the auto supply industry related to tax policy uncertainty has created an attractive entry point. Furthermore, Magna trades at what we feel is an unwarranted discount to the peer group in light of its high-quality and diversified business platform. We feel the deployment of additional capital into this position is timely.

Risks 1-year pricing chart

Magna International Inc. Daily Risks include, but are not limited to, 56.97 0.54 0.96% 12:46:25 PM VWAP:57.14 High: 62.10 Low: 42.73 Chg: 18.50% Magna International Inc. - Price deterioration in the outlook for auto 60 sales, the financial performance of

key customers, and pricing pressure. 55

50

45

Cv ol: 713,168 Av g: 933,235 Magna International Inc. - Volume 2.0

1.5

1.0

0.5

0.0 Mar Apr May J un J ul Aug Sep Oct Nov Dec J an Feb

Source - FactSet; data intraday 2/27/17

RBC Capital Outperform Markets:

March 1, 2017 | RBC Wealth Management 15 | Canadian Focus List Metro Inc. (TSX: MRU, $38.73)

We are removing the 5% position in Metro from the List Metro is a leading Canadian Rationale for removal food retailer and distributor with We are removing the 5% position in Metro from the Canadian Focus List for the operations in Ontario and Que- following reasons: bec. Additionally, the company is the franchisor for Brunet and • The macro environment may continue to weigh on Metro’s valuation: Improved Clini-Plus drugstores. global economic data coupled with expectations for increased fiscal stimulus and reduced tax rates in the U.S. has prompted investors to demonstrate increased appetite for cyclical equity exposure. A consequence of this shift in sentiment has been a reduced appetite for defensive, low-volatility equities such as Metro. We believe this flow of funds dynamic could not only limit Metro’s ability to regain its premium valuation, but could also result in further downward pressure. • Food price deflation has removed an industry earnings tailwind: While we believe that grocers can continue to deliver positive earnings growth in the current environment, food price deflation has removed an earnings tailwind that has been in place for the past three years. Should it persist, grocers could find it more difficult to generate gross margin gains in dollar terms. • Metro lacks visible growth catalysts: Metro’s consistent execution and shareholder-friendly capital allocation has served the Portfolio well over the past few years. However, the company lacks visible growth catalysts on either an organic or acquisition basis. We continue to consider the name a core high- quality and relatively defensive position within the Consumer Staples sector. With what we believe is a timely opportunity to deploy additional capital into some of the Portfolio’s existing positions in the Consumer sectors, we have elected to use Metro as a source of funds.

Risks 1-year pricing chart

Metro Inc. Daily Risks include, but are not limited to, 39.12 -0.59 -1.49% 12:37:01 PM VWAP:39.31 High: 48.19 Low: 38.00 Chg: -6.52% Metro Inc. - Price price competition in the company’s 48

Quebec and Ontario markets, and 46 an inability to pass food price 44 inflation on to consumers.

42

40

38

Cv ol: 237,883 Av g: 550,752 Metro Inc. - Volume 1.0

0.8

0.6

0.4

0.2

0.0 Mar Apr May J un J ul Aug Sep Oct Nov Dec J an Feb

Source - FactSet; data intraday 2/27/17

RBC Capital Outperform Markets:

March 1, 2017 | RBC Wealth Management 16 | Canadian Focus List Waste Connections, Inc. (TSX: WCN, $115.75)

We are increasing our position in Waste Connections by 2.5% Waste Connections is an integrat- Rationale for increase ed solid waste services company We are increasing our position in Waste Connections to 5% for the following serving residential, commercial, reasons: industrial, and energy-producing customers across the U.S. and • Focus on market selection fosters the conditions for financial success: Canada. Management believes that if market selection and asset positioning are wrong, even flawless operational execution will fail to yield industry-leading financial results. That notion has led the company to focus on markets where it operates on an exclusive basis or in secondary markets where it can command a dominant market share. This strategy avoids direct competition with rivals where the ability to influence pricing is negligible. The positioning of the company’s landfill assets serves as a considerable competitive moat in attractive markets due to the onerous regulatory hurdles facing landfill development. • Proven management team and differentiated corporate culture: Top management espouses a decentralized culture. Corporate headquarters provides oversight and makes capital allocation decisions while district-level managers operate with a high degree of autonomy. The company’s culture is further enhanced by broad-based equity ownership. The positive effects of the culture are evidenced in the company’s low turnover and leading safety record. • Multiple avenues for potential earnings upside: As an amalgamation of businesses that were never properly integrated, the acquisition of Progressive Waste Solutions offers the company’s proven management team considerable potential to exceed synergy expectations. Legacy Progressive Waste assets that do not align with management’s market selection criteria are in the process of being swapped or divested and ultimately could be a source of additional upside. Finally, the company’s U.S.-based oilfield waste services division provides upside optionality to higher drilling activity.

Risks 1-year pricing chart

Waste Connections, Inc. Daily Risks include, but are not limited 114.53 0.12 0.10% 12:46:42 PM VWAP:113.96 High: 114.68 Low: 76.84 Chg: 36.22% Waste Connections, Inc. - Price to, economic weakness, a failure to 115 110 successfully integrate acquisitions, 105 adverse regulatory changes, and 100 volatility in commodity prices. 95

90

85

80

75 Cv ol: 78,512 Av g: 193,716 Waste Connections, Inc. - Volume 1.0

0.8

0.6

0.4

0.2

0.0 Mar Apr May J un J ul Aug Sep Oct Nov Dec J an Feb

Source - FactSet; data intraday 2/27/17

RBC Capital Outperform Markets:

March 1, 2017 | RBC Wealth Management 17 | Canadian Focus List Portfolio companies

Agrium Inc. (AGU) – 2.5% Alimentation Couche-Tard Inc. (ATD.B) – 5.0% • Agrium is a major producer and distributor of agricultural • Couche-Tard is one of the largest convenience store products and services in North America, South America, retailers in North America. It operates a network of more Australia, and Egypt through its agricultural retail- than 7,800 stores located across Canada and the U.S. The distribution and wholesale nutrient businesses. company also operates a network of approximately 2,700 stores in Europe. • With major capital projects completed, Agrium is positioned for a step-up in free cash flow generation • The company is geographically diversified with nearly 90% that we expect will result in enhanced capital return to of its earnings generated outside of Canada. shareholders. • Management has a proven track record of adding value • The company expects its merger with PotashCorp to close through the successful integration of accretive acquisitions. in mid-2017 pending regulatory approval.

AGU 2016 revenue mix ATD.B 2016 gross profit mix

Retail 4% Merchandise 19% 81% 56% Wholesale 40% Motor Fuel Other

Source - Bloomberg, Company reports Source - Bloomberg, Company reports

Air Canada (AC) – 2.5% The Bank of Nova Scotia (BNS) – 5.0% • Air Canada is the largest provider of scheduled passenger • We believe that the Bank of Nova Scotia’s international services in the Canadian market, the Canada-U.S. banking division should grow faster than domestic transborder market, and the international market to and franchises over time. We expect earnings in this division from Canada. to improve once restructuring initiatives have run their • The company is in the midst of a fleet and cost course. transformation that we believe will result in a more • We believe there is scope for Bank of Nova Scotia’s historical competitive operator and de-risked business profile. valuation premium relative to peers to reassert itself with improved international performance.

AC 2016 revenue mix BNS 2016 net revenue mix

3% 7% 90% Passenger 17% 46% Cargo Canadian Banking Other International Banking Global Banking & Markets

37%

Source - Bloomberg, Company reports Source - Bloomberg, Company reports

March 1, 2017 | RBC Wealth Management 18 | Canadian Focus List

Brookfield Asset Management Inc. (BAM.A) – 5.0% Canadian Natural Resources Ltd. (CNQ) – 5.0% • Brookfield Asset Management is a global alternative asset • Canadian Natural Resources is a senior oil and natural gas manager focused on property, power, and infrastructure producer with operations in Western Canada, the North assets with approximately $250B of assets under Sea, and Offshore Africa. The company’s main growth driver management ($110B of which is fee-bearing). is its Horizon oil sands project. • Given its solid track record of identifying long-term • The company’s approach of dividing its oil sands opportunities, we believe BAM should be able to generate development into smaller, more manageable phases significant returns over and above what is currently provides greater expansion flexibility and control over costs. reflected in company cash flows. • In addition, CNQ has a large natural gas portfolio that • The company continues to grow its asset management could see further investment should the commodity stage a business, which we believe will provide the company with a recovery. steady source of earnings.

BAM.A fee-bearing capital (in USD billions) CNQ 2015 revenue mix 7% $110 Oil & Gas 20% 72% $86 $94 $77 Horizon Project $60 Midstream & Other

2012 2013 2014 2015 2016

Source - Company reports Source - Bloomberg, Company reports

Canadian National Railway (CNR) – 5.0% Canadian Pacific Railway Ltd. (CP) – 2.5% • CN Rail transports about $250B worth of goods per year • CP Rail operates a network from Montreal to Vancouver over a network that connects three coasts: the Atlantic, the and across the U.S. Northeast and Midwest regions. CP Pacific, and the Gulf of Mexico. transports bulk commodities, merchandise freight, and • The company benefits from a diversified portfolio of goods intermodal traffic. with no category accounting for more than 23% of revenue. • The company’s business mix leaves it well positioned to • With 18% of revenue related to U.S. domestic traffic and capitalize on a recovery in bulk commodity shipments. an additional 33% transborder traffic, the company is well • Cost containment initiatives implemented during the positioned to benefit from U.S. economic growth. downturn in carloads set the stage for margin expansion. • We believe North American rails could be a secular revaluation story as returns on invested capital push higher.

CNR 2016 revenue mix CP 2016 revenue mix 6% Intermodal 4% 3% Industrial & Consumer 6% 24% 6% 23% Grain 4% Petrochem Grain and Fertilizers 10% Intermodal 10% Forest Products Coal Metals & Minerals 10% Sulfur & Ferts Coal Auto Forest Products 15% 18% Other 21% 24% 17% Automotive Other

Source - Bloomberg, Company reports Source - Bloomberg, Company reports

March 1, 2017 | RBC Wealth Management 19 | Canadian Focus List

Canadian REIT (REF.UN) – 2.5% Dollarama Inc. (DOL) – 5.0% • Canadian REIT holds a diversified portfolio of retail, office, • Dollarama is Canada’s leading fixed-price point retailer. and industrial real estate located in nine provinces and one With over 1,000 stores across the country, DOL is four times U.S. state. The tenant base is also highly diversified as no larger than its closest competitor. tenant accounts for more than 7% of total revenues. • The dollar store format remains underpenetrated relative • The REIT has a significant development pipeline that to the U.S. market, which provides a significant fairway for supports a solid growth outlook while management has a square-footage growth over the next three to five years. successful track record of creating value for unitholders. • The company has a proven ability to engineer its gross • Relative to peers, the REIT has an underleveraged balance margin despite fluctuations in the Canadian dollar. sheet and a low payout ratio, which provide flexibility to • It is well positioned to benefit from low gas prices and fund growth internally and increase distributions. CREIT defensively positioned in the case of weak GDP growth. has increased its distribution for the past 15 years.

REF.UN 2016 revenue mix DOL EBITDA (millions) & EBITDA margin $500 25% 21% 53% Retail EBITDA $400 23% Office $300 21% EBITDA margin Industrial $200 19% $100 17% $0 15% 25% 2011 2012 2013 2014 2015

Source - Bloomberg, Company reports Source - Company reports

Cenovus Energy Inc. (CVE) – 2.5% Franco-Nevada Corp. (FNV) – 2.5% • Cenovus benefits from a very large oil sands resource base • Franco-Nevada is a diversified resource royalty and metal and is well positioned to re-establish growth via deferred streams company with ongoing revenues from 46 active phases at Foster Creek and Christina Lake. precious and base metal royalties/streams, and 137 active • Cenovus’ balance sheet has been fortified with considerable oil and gas royalties. cash resources and undrawn credit capacity. • Franco-Nevada’s royalty and metal streams business model offers leverage to commodity prices but largely shields the company from operating risks, cost escalation, and environmental liabilities. • The company possesses considerable liquidity with which to pursue additional investment opportunities.

CVE 2016 revenue mix FNV 2015 revenue mix 6% 68% 23% Oil Sands 2% Gold Conventional 91% Oil & Gas Downstream Nickel 9%

Source - Company reports Source - Company reports

March 1, 2017 | RBC Wealth Management 20 | Canadian Focus List

Intact Financial Corp. (IFC) – 5.0% National Bank of Canada (NA) – 2.5% • Intact Financial is the largest property and casualty (P&C) • National Bank is a Montreal-based, fully integrated insurance company in Canada with a roughly 17% market financial services company, and the smallest of the Big share of premiums written. Six Canadian banks. Earnings are typically split between • Intact’s scale provides it with competitive advantages in personal and commercial (50%), wealth management the form of operating leverage, underwriting expertise, (15%), and capital markets (35%). diversification, and consolidation potential. • National Bank’s current valuation leaves further scope • The company’s P&C operations are not typically correlated for expansion in the event that business performance to the performance of the broader economy. normalizes and the bank’s capital position improves.

IFC 2016 net premiums earned NA 2015 revenue mix 9% Personal Auto 24% 47% Personal & Commercial 21% 47% Personal Property Financial Markets Commercial Other Wealth Management Commercial Auto 24% 29%

Source - Bloomberg, Company reports Source - Bloomberg, Company reports

Magna International Inc. (MG) – 5.0% Onex Corp. (ONEX) – 2.5% • MG is one of the world’s leading auto parts suppliers with a • Onex manages a portfolio of private equity investments as diversified product suite. It also has the capability to design well as various public and private companies and targets and integrate complete systems, including the assembly a long-term internal rate of return of 15%. OCX has an of an entire vehicle. MG operates over 300 plants in 28 excellent long-term investment track record. countries. • Onex currently has approximately 25% of its net asset value • North American auto sales have approached the long- in cash, which provides higher visibility should macro term trend line while RBC Capital Markets projects global conditions deteriorate and valuation support through production to grow at a 1% CAGR through the end of the potential share buybacks should the share price weaken. decade. We expect higher utilization rates to drive higher Most of the company’s investments are in the U.S. margins. • The company continues to deploy excess free cash flow via a combination of acquisitions, buybacks, and dividend hikes. MG 2015 revenue mix ONEX fee generating assets under management (in billions) 14% 16% Exterior/Interior Body & Chassis $13.5 $14.3 7% $12.0 Powertrain $8.7 $8.0 $8.8 8% Assembly Tooling/Engineering 8% Display 24% Closure 2010 2011 2012 2013 2014 2015 7% 15% Seating

Source - Bloomberg, Company reports Source - Company reports

March 1, 2017 | RBC Wealth Management 21 | Canadian Focus List

Pembina Pipeline Corp. (PPL) – 2.5% Rogers Communications Inc. (RCI.B) – 2.5% • Pembina Pipeline is a pipeline and midstream company • Rogers Communications consists of cable, wireless, that operates oil and natural gas liquids (NGL) pipelines, business service, and media businesses. Rogers Wireless is gas gathering and processing facilities, and oil and NGL Canada’s largest wireless company. infrastructure and logistics businesses. • The speed and capacity of Rogers’ cable infrastructure • Its significant pipeline of committed growth projects should coupled with a business mix tilted towards wireless leave underpin significant EBITDA and dividend growth. the company well positioned for industry trends. • The company’s premium valuation is supported by quality • The company’s free cash flow profile should benefit from a assets and mostly fee-for-service/cost-of-service cash flows. combination of EBITDA growth and lower capital intensity.

PPL 2015 revenue mix RCI.B 2016 revenue mix 10% 47% Midstream & Marketing Business 28% 57% 14% Wireless Conventional Infrastructure Media Heavy Oil Infrastructure Wireline

Gas Services 30% 15%

Source - Bloomberg, Company reports Source - Bloomberg, Company reports

Restaurant Brands International Inc. (QSR) – 5.0% Royal Bank of Canada (RY) – 5.0% • Restaurant Brands is one of the largest global quick service • Royal Bank is Canada’s largest bank by assets and market restaurant franchisors. Its two brands, Burger King and Tim capitalization, offering a full range of personal, commercial, Hortons, operate across more than 19,000 units in over 100 and corporate banking services. countries. • Earnings are diversified across Personal & Commercial • 3G Capital, QSR’s majority shareholder, has a demonstrated Banking, Capital Markets, Wealth Management, Insurance, track record of generating efficiencies and returns on and Investor & Treasury Services. capital. • The franchise model offers relatively stable revenue and cash flow, which should help in rapidly repaying acquisition debt. • We expect continued cost rationalization at Tim Hortons complemented by unit growth.

QSR 2016 adjusted EBITDA mix RY 2016 net revenue mix 6% 43% 57% Tim Hortons 38% Personal & Commercial 13% Burger King Wealth Management Capital Markets Insurance Investor & Treasury 20% 23%

Source - Bloomberg, Company reports Source - Bloomberg, Company reports

March 1, 2017 | RBC Wealth Management 22 | Canadian Focus List

Suncor Energy Inc. (SU) – 2.5% Toromont Industries Ltd. (TIH) – 5.0% • As an integrated oil company, Suncor’s upstream portfolio • Toromont sells, rents, and services a broad range of has shifted from a 100% oil sands focus to one considerably Caterpillar mobile equipment and industrial engines across more diverse in nature. The company’s portfolio also one of CAT’s largest global dealer territories. It also runs includes refining and product marketing. Cimco, its industrial and recreational refrigeration unit. • RBC Capital Markets believes that growth initiatives at • We believe Toromont is positioned to continue to generate Fort Hills and Hebron will add significant sources of new solid growth in product support and rental revenues. production when they are brought online in late 2017. • TIH continues to generate very strong free cash flow and can use its solid balance sheet to make acquisitions, grow the dividend, and opportunistically buy back shares. • The acquisition of Ag West offers a potential platform for consolidation in the agricultural equipment space.

SU 2016 revenue mix TIH 2016 revenue mix 8% 1% 28% New Equipment 60% Refining & Marketing 13% 32% Oil Sands Product Support 15% International & Offshore Rentals Refrigeration Used Equipment 12% 32% Power Generation

Source - Bloomberg, Company reports Source - Bloomberg, Company reports

TD Bank (TD) – 7.5% TransCanada Corp. (TRP) – 5.0% • TD Bank is well positioned to deliver quality earnings • TransCanada has more than 90,000 kilometres of wholly growth with a business mix weighted to the North American owned pipelines in North America, owns or has interests in retail market. about 10,500 megawatts of power generation in operation • TD’s diversification outside of Canada should be viewed or under development, and 664 billion cubic feet of natural more positively, in our opinion, with U.S. economic growth gas storage. poised to outperform Canada. • The successful acquisition of Columbia Pipeline Group adds to the company’s footprint in the Marcellus and Utica gas plays. • The company’s assets provide a competitive advantage in winning new projects, such as Energy East, that lever off existing “steel in the ground”.

TD 2016 net revenue mix TRP 2016 revenue mix

9% P&C - Canada 62% 14% 53% Nat Gas Pipelines 29% P&C - United States Energy Wholesale Oil Pipelines

33%

Source - Bloomberg, Company reports Source - Bloomberg, Company reports

March 1, 2017 | RBC Wealth Management 23 | Canadian Focus List

Waste Connections, Inc. (WCN) – 5.0% • Waste Connections is an integrated solid waste services company serving residential, commercial, industrial, and energy-producing customers across the U.S. and Canada. • The company’s focus on market selection and its operational expertise have resulted in a track record of peer-leading margins and cash flow conversion. • The acquisition of Progressive Waste offers the potential for synergies and value-creating asset swaps.

WCN 2016 revenue mix

2% Collection 7% 70% 21% Disposal/Transfer Recycling Other

Source - Bloomberg, Company reports

March 1, 2017 | RBC Wealth Management 24 | Canadian Focus List Portfolio companies risks

Agrium: Risks include, but are not limited to, regulatory Cenovus Energy: Risks include, but are not limited to, approval of the pending PotashCorp merger, unpredictable unexpected changes in energy prices and refining margins, weather affecting agricultural inputs, foreign exchange impact the ability to replace production and reserves on an economic on earnings and cash flows, volatile nature of input costs and basis, and government legislation relating to royalties, taxes, realized prices, and fluctuations in sales of its retail division. and environmental policy.

Air Canada: Risks include, but are not limited to, high Dollarama: Risks include, but are not limited to, increased operating and financial leverage, above-average sensitivity to competition, wage pressures, margin erosion prompted by economic conditions, exposure to volatility in fuel prices, and weakness in the Canadian dollar, and an inability to source the risk of terrorism and epidemics. attractive real estate for unit growth.

Alimentation Couche-Tard: Risks include, but are not Franco-Nevada: Risks include, but are not limited to, limited to, fluctuations in gas margins, an inability to variability in commodity prices, the ability to source and execute acquisitions on economic terms and realize forecast execute on accretive royalty/stream acquisition opportunities, synergies, and risks related to operations spanning numerous and the financial health and operational execution of project geographies and currencies. partners.

The Bank of Nova Scotia: Risks include, but are not limited Intact Financial: Risks include, but are not limited to, to, the health of the overall economy, sustained deterioration catastrophe-related losses, variable profitability, political in Latin America and the capital markets environment, uncertainty (especially in Ontario), acquisition and greater-than-anticipated impact from off-balance sheet integration risk, reserve adequacy, and volatility in its commitments, rising Canadian dollar, and increasing investment portfolio. business loan losses. Magna International: Risks include, but are not limited Brookfield Asset Management: Risks include, but are not to, deterioration in the outlook for auto sales, the financial limited to, rising interest rates, hard cyclical downturn in the performance of key customers, and pricing pressure. commercial property sector, and any economic shock that could cause lending spreads to widen and/or loan value ratios National Bank of Canada: Risks include, but are not limited to decline. to, the health of the overall economy and that of Quebec in particular, sustained deterioration in the capital markets Canadian National Railway: Risks include, but are not limited environment, a turndown in the Canadian housing market, to, extreme fluctuations in fuel prices, unusual weather and deterioration in the outlook for energy-related credit. conditions that could impact grain crops or railway operating efficiencies, and weaker-than-anticipated economic Onex: Risks include, but are not limited to, an inability to conditions. generate positive fund performance, operating and financial risks of owned investments, departure of key personnel, Canadian Natural Resources: Risks include, but are not changes in the tax code, and fluctuations in foreign exchange limited to, unexpected changes in energy prices, the ability risk. to replace production and reserves on an economic basis, and government legislation relating to royalties, taxes, and Pembina Pipeline: Risks include, but are not limited to, environmental policy. volumes shipped on the company’s pipelines, regulatory risk, an inability to complete projects on time and on budget, Canadian Pacific Railway: Risks include, but are not limited operational issues, reduced margins in the midstream and to, extreme fluctuations in fuel prices, unusual weather marketing segment, and an increase in long-term interest conditions that could impact grain crops or railway operating rates. efficiencies, and weaker-than-anticipated economic conditions. Restaurant Brands International: Risks include, but are not limited to, slower-than-expected economic growth, food Canadian REIT: Risks include, but are not limited to, those safety issues, input and labour cost inflation, fluctuations in associated with the ownership of real property including foreign exchange rates, and execution risks. general economic conditions, local real estate markets, credit risk of tenants, and changes in interest rates. Rogers Communications: Risks include, but are not limited to, increased wireless competition from new entrants

March 1, 2017 | RBC Wealth Management 25 | Canadian Focus List resulting in higher churn and/or renewed declines in post- Toromont Industries: Risks include, but are not limited to, paid ARPU, greater-than-expected market share gains from lower demand for large equipment required for infrastructure, IPTV and FTTH across Rogers’ footprint, greater-than- construction, or mining operations in Eastern Canada, expected telephony and TV substitution, pricing war among replacement risks from new competitors in their area of incumbent Canadian telco companies, and regulatory operations, lower demand for its refrigeration division, changes that allow more foreign competition. negative macroeconomic trends, lower commodity prices, as well as strategy execution and labour relations. Royal Bank of Canada: NA TransCanada: Risks include, but are not limited to, reduced Suncor Energy: Risks include, but are not limited to, volumes on the Canadian Mainline, an inability to secure unexpected changes in energy prices and refining margins, approvals for key projects, and variability in power and gas the ability to replace production and reserves on an economic prices. basis, and government legislation relating to royalties, taxes, and environmental policy. Waste Connections: Risks include, but are not limited to, economic weakness, a failure to successfully integrate TD Bank: Risks include, but are not limited to, the health of acquisitions, adverse regulatory changes, and volatility in the overall economy, sustained deterioration in the capital commodity prices. markets environment, a turndown in the Canadian and U.S. housing markets, failure of government programs, and greater-than-anticipated impact from off-balance sheet commitments.

March 1, 2017 | RBC Wealth Management 26 | Canadian Focus List Methodology The Canadian Focus List is produced by RBC Capital Markets and RBC Wealth Management’s Portfolio Advisory Group. The List was launched in the mid-1980s and has a long-term track record of strong performance versus the S&P/TSX. The Canadian Focus List serves as a core Canadian equity portfolio and may be suitable for investors with a moderate risk tolerance in relation to an equity market investment.

Investment Process:

• The Portfolio is diversified across a minimum of 20 stocks with representation from each of the major sectors of the Canadian market. • On a quarterly basis, a top-down analysis incorporating RBC Capital Markets’ outlook for the economy, the markets, and various economic sectors is brought to bear on the sector composition of a diversified portfolio of securities. • A “three-discipline” (3D) approach combining fundamental analysis of the firm’s equity analysts with RBC Capital Markets’ proprietary technical and quantitative disciplines screens stocks for inclusion on the List. • On a quarterly basis, all stocks that prescreen well under the 3D process are considered for inclusion. Furthermore, the Committee considers each stock in relation to: strength of management, the robustness of its business model, and its potential to pay and grow dividends.

The foundation of our process is to try to find good businesses trading at reasonable valuations. Within the context of this, we focus on businesses with high returns on invested capital (in other words, every dollar the company puts into the business generates a significant return for the business), strong balance sheets, high cash generation, non-nebulous accounting, credible management teams that have demonstrated track records of success, and the willingness to return some capital to shareholders through share buybacks and dividends. Further, when possible, we try to find businesses that are at a positive inflection point in their evolution, which would be marked by things such as a gradual expansion of margins, a transition to positive free cash flow, or the roll-off of a significant capex cycle.

Against this, we overlay the 3D process, which helps us to filter out much of the noise generated by the day-to-day fluctuations of the market. We believe that an approach such as this will be rewarded over time. However, from time to time, the market will choose to focus its attention and goodwill on those businesses that lack many of the attributes that we look for and thus we expect to experience quarters in which we significantly underperform. Rather than view this as an opportunity to chase what is working, we view this as an opportunity to look for the types of businesses outlined above and, perhaps, capitalize on opportunities that the market has chosen to ignore in favour of short-term performance.

March 1, 2017 | RBC Wealth Management 27 | Canadian Focus List Disclosures and disclaimers

Canadian Focus List Investment Committee Risk Rating: Jean-François Dion, CFA, Head, Equity Portfolio Management As of March 31, 2013, RBC Capital Markets, LLC suspends its Average and Above Average risk ratings. The Speculative risk rating reflects a security’s [email protected]; RBC Dominion Securities Inc. lower level of financial or operating predictability, illiquid share trading vol- Patrick McAllister, CFA, Portfolio Advisor umes, high balance sheet leverage, or limited operating history that result in [email protected]; RBC Dominion Securities Inc. a higher expectation of financial and/or stock price volatility. Dominick Hardy, CA, CFA, Portfolio Advisor RBC Capital Markets has fundamental research of the following companies: [email protected]; RBC Dominion Securities Inc. National Bank of Canada (NA; Outperform; $56.68) This report is issued by the Portfolio Advisory Group (“PAG”) which is part of Toronto-Dominion Bank (TD; Outperform; $68.46) the retail division of RBC Dominion Securities Inc. (“RBC DS”). The PAG provides The Bank of Nova Scotia (BNS; Outperform; $77.04) portfolio advisory services to RBC DS Investment Advisors. Reports published Brookfield Asset Management Inc. (BAM.A; Outperform; $47.84) by the PAG may be made available to clients of RBC DS through its Investment Advisors. The PAG relies on a number of different sources when preparing its Canadian Real Estate Investment Trust (REF.UN; Outperform; $49.80) reports including, without limitation, research reports published by RBC Capital Onex Corporation (ONEX; Outperform; $93.47) Markets (“RBC CM”). RBC CM is not independent of RBC DS or the PAG. RBC CM Intact Financial Corp. (IFC; Sector Perform; $94.16) is a business name used by Royal Bank of Canada and certain of its affiliates, Magna International Inc. (MG; Outperform; $56.79) including RBC DS, in connection with its corporate and investment banking Metro Inc. (MRU; Outperform; $38.73) activities. As a result of the relationship between RBC DS, the PAG and RBC CM, there may be conflicts of interest relating to the RBC CM analyst that is Alimentation Couche-Tard Inc. (ATD.B; Outperform; $59.06) responsible for publishing research on a company referred to in a report issued Dollarama Inc. (DOL; Outperform; $102.28) by the PAG. Restaurant Brands International Inc. (QSR; Outperform; $72.46) Required Disclosures Cott Corporation (BCB; Outperform; $14.15) Air Canada (AC; Top Pick, Speculative Risk; $13.38) RBC Capital Markets Distribution of Ratings Waste Connections, Inc. (WCN; Outperform; $115.75) For purposes of ratings distributions, regulatory rules require member firms Canadian Pacific Railway Ltd. (CP; Outperform; $195.43) to assign ratings to one of three rating categories −Buy, Hold/Neutral, or Sell− regardless of a firm’s own rating categories. Although RBC Capital Canadian National Railway Company (CNR; Outperform; $92.36) Markets’ ratings of Top Pick/Outperform, Sector Perform and Underperform Toromont Industries Ltd. (TIH; Outperform; $46.33) most closely correspond to Buy, Hold/Neutral and Sell, respectively, the Rogers Communications Inc. (RCI.B; Sector Perform; $55.76) meanings are not the same because our ratings are determined on a relative TransCanada Corporation (TRP; Outperform; $61.06) basis (as described below). Franco-Nevada Corporation (FNV; Outperform, $85.61) Distribution of Ratings - RBC Capital Markets, LLC Equity Research Canadian Natural Resources Limited (CNQ; Top Pick; $38.09) As of December 31, 2016 Investment Banking Services Suncor Energy Inc. (SU; Outperform; $41.35) Provided During Past 12 Months Cenovus Energy Inc. (CVE; Outperform; $16.80) Rating Count Percent Count Percent Imperial Oil Ltd. (IMO; Sector Perform; $41.49) Buy [Top Pick & Outperform] 834 52.32 279 33.45 Pembina Pipeline Corporation (PPL; Outperform; $42.92) Hold [Sector Perform] 657 41.22 132 20.09 Sell [Underperform] 103 6.46 9 8.74 Agrium Inc. (AGU; Outperform; $128.05) RBC Capital Markets analysts have received (or will receive) compensation Explanation of RBC Capital Markets, LLC based in part upon the investment banking revenues of RBC Capital Markets. Equity Rating System Portfolio Advisory Group personnel, including the portfolio advisor or An analyst’s “sector” is the universe of companies for which the analyst any individuals directly involved in the preparation of the report hold(s) provides research coverage. Accordingly, the rating assigned to a particular or exercise(s) investment discretion over a long position in the common stock represents solely the analyst’s view of how that stock will perform over shares of Agrium Inc., Alimentation Couche-Tard Inc., The Bank of Nova the next 12 months relative to the analyst’s sector average. Although RBC Scotia, Brookfield Asset Management Inc., Canadian National Railway Capital Markets, LLC ratings of Top Pick (TP)/Outperform (O), Sector Perform Company, Canadian Natural Resources Limited, Canadian Pacific Railway (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral Ltd., Canadian Real Estate Investment Trust, Cott Corporation, Magna and Sell, respectively, the meanings are not the same because our ratings International Inc., Metro Inc., National Bank of Canada, Onex Corp., are determined on a relative basis (as described below). Restaurant Brands International Inc., Royal Bank of Canada, Suncor Energy Ratings Inc., Toromont Industries Ltd., Toronto-Dominion Bank, TransCanada Corp, Top Pick (TP): Represents analyst’s best idea in the sector; expected to and Waste Connections, Inc. provide significant absolute total return over 12 months with a favorable The portfolio advisor responsible for this report or a member of his/her team risk-reward ratio. Outperform (O): Expected to materially outperform sector hold(s) or exercise(s) investment discretion or control over a long position in average over 12 months. Sector Perform (SP): Returns expected to be in line the non-convertible fixed income securities of Agrium Inc., National Bank of with sector average over 12 months. Underperform (U): Returns expected to Canada, and Royal Bank of Canada. be materially below sector average over 12 months.

March 1, 2017 | RBC Wealth Management 28 | Canadian Focus List

A household member or members of the Portfolio Advisory Group hold(s) or broker-dealer with principal offices located in Toronto, Canada. exercise(s) investment discretion over a long position in the common shares The Global Industry Classification Standard (“GICS”) was developed by and of Agrium Inc., Canadian National Railway Company, and Restaurant Brands is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Stand- International Inc. ard & Poor’s Financial Services LLC (“S&P”) and is licensed for use by RBC. RBC Capital Markets Conflicts Policy Neither MSCI, S&P, nor any other party involved in making or compiling the RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to GICS or any GICS classifications makes any express or implied warranties or Investment Research is available from us on request. 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RBC Capital Markets’ equity research is but no representations or warranty, express or implied, are made by RBC posted to our proprietary websites to ensure eligible clients receive coverage DS or any other person as to its accuracy, completeness or correctness. All initiations and changes in rating, targets and opinions in a timely manner. opinions and estimates contained in this report constitute RBC DS’ judgment Additional distribution may be done by the sales personnel via email, fax or as of the date of this report, are subject to change without notice and are regular mail. Clients may also receive our research via third party vendors. provided in good faith but without legal responsibility. This report is not an Please contact your investment advisor or institutional salesperson for more offer to sell or a solicitation of an offer to buy any securities. Additionally, information regarding RBC Capital Markets research. RBC Capital Markets this report is not, and under no circumstances should be construed as, a also provides eligible clients with access to SPARC on its proprietary INSIGHT solicitation to act as securities broker or dealer in any jurisdiction by any website. SPARC contains market color and commentary, and may also person or company that is not legally permitted to carry on the business of contain Short-Term Trade Ideas regarding the securities of subject companies a securities broker or dealer in that jurisdiction. This material is prepared discussed in this or other research reports. A Short-Term Trade Idea reflects for general circulation to Investment Advisors and does not have regard the research analyst’s directional view regarding the price of the security of a to the particular circumstances or needs of any specific person who may subject company in the coming days or weeks, based on market and trading read it. 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Neither RBC DS nor any of be a short-term buying opportunity as a result of temporary selling pressure its affiliates, nor any other person, accepts any liability whatsoever for any in the market; conversely, the security of a subject company that is rated direct or consequential loss arising from any use of this report or the infor- a long-term ‘Outperform’ could be considered susceptible to a short-term mation contained herein. This report may not be reproduced, distributed or downward price correction. Short-Term Trade Ideas are not ratings, nor are published by any recipient hereof for any purpose. they part of any ratings system, and RBC Capital Markets generally does not In all jurisdictions where RBC Capital Markets conducts business, we do intend, nor undertakes any obligation, to maintain or update Short-Term not offer investment advice on Royal Bank of Canada. Certain regulations Trade Ideas. Short-Term Trade Ideas discussed in SPARC may not be suitable prohibit member firms from soliciting orders and offering investment advice for all investors and have not been tailored to individual investor circum- or opinions on their own stock. References to Royal Bank are for information- stances and objectives, and investors should make their own independent al purposes only and not intended as a direct or implied recommendation for decisions regarding any Short-Term Trade Ideas discussed therein. investing in Royal Bank and all related securities. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate cor- Conflict Disclosures porate entities which are affiliated. *Member-Canadian Investor Protection In the event that this is a compendium report (covers six or more subject Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth companies), RBC DS may choose to provide specific disclosures for the sub- Management, a business segment of Royal Bank of Canada. ®Registered ject companies by reference. To access RBC CM’s current disclosures of these trademarks of Royal Bank of Canada. Used under licence. ©2017 Royal Bank companies, please go to https://www.rbccm.com/GLDisclosure/PublicWeb/ of Canada. All rights reserved. DisclosureLookup.aspx?EntityID=1. Such information is also available upon request to RBC Dominion Securities, Attention: Manager, Portfolio Advisory Group, 155 Wellington Street West, 17th Floor, Toronto, ON M5V 3K7. The authors are employed by RBC Dominion Securities Inc., a securities

March 1, 2017 | RBC Wealth Management