RBC Dominion Securities Inc. Canadian Focus List

September 3, 2019 | Quarterly Report Portfolio Advisory Group – Equities

What’s inside 2 Focus List delivers a decent Positioning for potentially third quarter tougher times ahead 3 Portfolio changes

4 Portfolio positions We would characterize 2019, thus far, Our view that a recession is not highly as a year in which investors have had to likely in the near term is predicated on 5 Finning International Inc. reconcile deteriorating global economic a belief that global monetary and fiscal Portfolio removal fundamentals and a meaningful pivot policy easing is set to foster further 6 Canadian Natural Resources Ltd. by central banks globally towards the improvement in financial and liquidity Portfolio decrease easing of monetary conditions, all conditions, and this should soon help while oscillating between optimism brighten the global growth outlook. 7 Fortis Inc. Portfolio increase and pessimism concerning a possible Meanwhile, the overall message resolution of the U.S.-China trade spat. from RBC Wealth Management’s 8 Franco-Nevada Corporation Despite a lacklustre macroeconomic U.S. economic indicator scorecard Portfolio increase outlook marked by downward trends (see following page) continues to 9 Methodology in a number of key indicators, our corroborate our view that the U.S. assessment of Canadian and U.S. expansion, while likely in late innings, recession risks remains relatively remains intact. If the Fed’s proactive benign. However, the deterioration in dovish pivot helps breathe new life economic data leaves us tilting toward into the maturing cycle, then we caution within our equity portfolios. believe the bull market in equities

Sector weightings: Canadian Focus List vs. the S&P/TSX Composite Canadian Focus List S&P/TSX Composite

Financials, 27.5% Financials, 31.1% Industrials, 17.5% Energy, 16.1% Materials, 12.1% Energy, 15.0% Industrials, 11.3% Materials, 12.5% Information Tech., 5.7% For an overview of the Portfolio, Consumer Discr., 7.5% please click here. Comm. Svcs., 5.6% Consumer Staples, 5.0% Click here for authors’ contact Utilities, 4.6% information. Comm. Svcs., 5.0% Consumer Discr., 4.3% All values in Canadian dollars and Utilities, 5.0% priced as of August 28, 2019, market Consumer Staples, 4.1% close, unless otherwise noted. Real Estate, 2.5% Real Estate, 3.6% Disseminated: Sept. 3, 2019 07:00ET Information Tech., 2.5% Health Care, 1.5% Produced: Aug. 30, 2019 16:53ET

For required disclosures, see Source - RBC Dominion Securities, Bloomberg; data as of market close 8/28/19 page 10. NOT FOR DISTRIBUTION IN THE U.S. 2 | Canadian Focus List

should also remain intact. Our rationale for this view is that corporate earnings, the fundamental driver of the stock market, almost always trend upwards during economic expansions. As Canadian investors, it is important to remember the While we view the near-term strong link between the prosperity of the U.S. economy and our own. probability of a full-blown recession as relatively small, RBC Wealth Management U.S. economic indicator scorecard we also acknowledge that Indicator Status we are likely in the latter Yield Curve (12-month to 10-year) stages of the economic ‒ ‒  cycle. Unemployment Claims  ‒ ‒ Unemployment Rate  ‒ ‒ Conference Board Leading Index  ‒ ‒ ISM New Orders Minus Inventories  ‒ ‒ Fed Funds vs. Nominal GDP Growth  ‒ ‒ Source - RBC Wealth Management, Bloomberg, FRED Economic Data St. Louis Fed

While we view the near-term probability of a full-blown recession as relatively small, we also acknowledge that we are likely in the latter stages of the economic cycle. We therefore believe that a degree of conservatism in portfolio positioning is likely warranted at the present time. We have constructed the Canadian Focus List with a relatively heavy tilt towards businesses that should do well in a pro-growth environment. While it is our view that the Focus List should remain positioned for continued economic expansion, we are taking the opportunity this quarter to modestly reduce some of the cyclical exposure in the Focus List in favour of increased defensive positioning. To that end, we are removing our 2.5% position in Finning International (FTT), and reducing our exposure to Canadian Natural Resources (CNQ) to 2.5% from 5%. At the same time, we are increasing our exposure to the Utilities sector, increasing our weight in Fortis (FTS) to 5% from 2.5%. We are also increasing our exposure to gold by increasing our existing position in Franco- Nevada (FNV) to 5% from 2.5%. See below, and the subsequent pages, for a more robust discussion of this quarter’s additions and removals.

Focus List delivers a decent third quarter Largely in line with the benchmark last quarter The Canadian Focus List delivered positive absolute performance of 3.5%, largely in line with the S&P/TSX Composite benchmark, which returned 3.3% last quarter.

Total return for the summer quarter (6/1/19 – 8/31/19) Canadian Focus List 3.5% S&P/TSX Composite Index 3.3% Relative 0.2%

Note: Past performance is no guarantee of future results and should not be viewed as an indicator of future results Source - FactSet

September 3, 2019 | RBC Wealth Management 3 | Canadian Focus List

The largest detractor from performance was the Focus List’s position in the Materials sector—specifically, the lack of exposure to the gold mining subsector, which returned over 40% as a group last quarter and makes up nearly 7% of the TSX Given our previously stated benchmark compared to the Focus List’s 2.5% exposure. We have written repeatedly view of the macro backdrop, about the difficulty of identifying high-quality companies in the gold industry, the Investment Committee and as a result, have been structurally Underweight the mining complex for years. This past quarter was one of those instances when our decision to be materially believes it is prudent to Underweight Metals & Mining was detrimental to overall performance. We continue reduce exposure to cyclical to expect that, from time to time, our relative positioning in the mining complex sectors in the Canadian will be a source of underperformance. We are comfortable with this approach, Focus List. preferring when possible to allocate clients’ capital towards businesses with proven long-term track records and strong competitive advantages.

Turning to the positive side of quarterly performance, the Focus List benefited from stock selection in the Consumer Discretionary sector. The strong performance of both Restaurant Brands International (QSR) and (DOL) resulted in nearly 100 basis points (bps) of positive contribution to active returns.

Portfolio changes Reducing cyclical exposure Given our previously stated view of the macro backdrop, the Investment Committee believes it is prudent to reduce exposure to cyclical sectors in the Canadian Focus List. Accordingly, we are removing our 2.5% position in Finning International Corporation (FTT) within the Industrials sector. Finning’s business model is highly sensitive to the global economy. Finning was added in late 2018, partially on the basis of our view that the company would provide some exposure to commodities while avoiding the project-specific risks associated with many mining businesses. But due to a number of company-specific execution issues, as well as fears of a global economic slowdown, our positive investment thesis on FTT never materialized.

We are also reducing our position in Canadian Natural Resources (CNQ) to 2.5% from 5%. The decision to reduce our position is due in part to the lack of optimism for energy prices in the short term against a backdrop of deteriorating economic fundamentals, and to our view of risks around global trade. Further, CNQ recently completed a significant purchase of complementary assets from Devon Energy; while we like the strategic fit of the transaction and view the price paid as reasonable, we believe investors are likely to reward companies that prioritize returning shareholder capital in the near term.

We are using the proceeds from the removals of Finning and Canadian Natural Resources to increase our positions in both Fortis (FTS) and Franco-Nevada (FNV) to 5% from 2.5%. In Fortis, we see a high-quality regulated utility business with highly visible cash flows, a strong balance sheet, and desirable exposure to some of the highest regulated-rate environments in the United States. Moving Franco- Nevada up to 5% allows us to reduce our underweighting of gold companies while continuing to invest in a company that has exhibited more consistently positive returns at lower levels of volatility than pure-play gold producers. Additionally, we believe a small allocation to gold is desirable at this stage of the economic cycle, given the potential for more challenging economic times ahead.

September 3, 2019 | RBC Wealth Management 4 | Canadian Focus List

Price 52-wk EPS (calendar) P/E Div. Market Symbol Company name Weight 8/28/19 range 2018A 2019E 2020E 2019E2020E yield cap. (B) Communication Services T Corporation 5.00% $47.42 51 - 44 $2.68 $2.92 $3.11 16.3x 15.2x 4.7% $28.55 Consumer Discretionary DOL Dollarama Inc. 2.50% $51.44 52 - 31 $1.67 $1.84 $2.14 27.9x 24.1x 0.3% $16.19 QSR Restaurant Brands International Inc. 5.00% $103.23 104 - 68 $3.19 $3.60 $3.96 28.7x 26.1x 2.6% $28.88 Consumer Staples ATD.B Alimentation Couche-Tard Inc. Class B 5.00% $81.95 88 - 60 $4.39 $4.31 $4.52 19.0x 18.1x 0.6% $35.83 Energy CNQ Canadian Natural Resources Limited 2.50% $31.24 46 - 30 $2.13 $3.33 $2.79 9.4x 11.2x 4.8% $37.06 PPL Corporation 2.50% $47.83 51 - 39 $2.28 $3.05 $2.54 15.7x 18.8x 5.0% $24.47 SU Inc. 5.00% $37.90 55 - 36 $2.03 $3.39 $3.23 11.2x 11.7x 4.4% $59.03 TRP TC Energy Corporation 5.00% $66.71 67 - 48 $3.92 $4.11 $4.05 16.2x 16.5x 4.5% $61.97 Financials BMO 5.00% $89.36 109 - 86 $8.77 $9.52 $9.94 9.4x 9.0x 4.6% $57.09 BNS Bank of Nova Scotia 2.50% $69.33 78 - 66 $6.79 $7.21 $7.60 9.6x 9.1x 5.2% $84.61 BAM.A Brookfield Asset Mgmt. Inc. Class A 5.00% $68.13 69 - 50 $4.65 $2.92 $3.05 23.3x 22.3x 1.2% $67.76 IFC Intact Financial Corporation 2.50% $129.98 130 - 96 $4.79 $6.09 $8.08 21.3x 16.1x 2.3% $18.09 NA National Bank of 2.50% $60.90 65 - 54 $6.03 $6.29 $6.65 9.7x 9.2x 4.5% $20.44 RY 5.00% $98.30 108 - 90 $8.47 NA NA NA NA 4.3% $140.96 TD -Dominion Bank 5.00% $71.51 80 - 66 $6.04 $6.92 $7.39 10.3x 9.7x 4.1% $130.82 Industrials CNR Canadian National Railway Company 2.50% $120.39 128 - 96 $5.89 $6.23 $6.96 19.3x 17.3x 1.8% $86.45 CP Limited 5.00% $313.28 324 - 228 $13.65 $16.67 $18.77 18.8x 16.7x 1.1% $43.41 TIH Toromont Industries Ltd. 5.00% $62.73 71 - 51 $3.10 $3.48 $3.92 18.0x 16.0x 1.7% $5.12 WCN Waste Connections Inc. 5.00% $121.43 129 - 94 $2.69 $3.54 $4.01 34.3x 30.3x 0.7% $32.02 Information Technology CSU Inc. 2.50% $1,284.70 1320 - 814 $23.20 $38.60 $48.69 33.3x 26.4x 0.4% $27.23 Materials CCL.B CCL Industries Inc. Class B 5.00% $59.02 68 - 47 $2.64 $2.83 $3.08 20.9x 19.2x 1.2% $9.82 FNV Franco-Nevada Corporation 5.00% $130.56 132 - 77 $0.97 $2.07 $2.44 NMF NMF 1.0% $24.47 NTR Ltd. 2.50% $65.53 76 - 60 $0.18 $3.75 $4.53 17.5x 14.5x 3.7% $37.54 Real Estate FCR First Capital Realty Inc. 2.50% $22.11 22 - 18 $1.38 $1.38 $1.87 16.0x 11.8x 3.9% $4.84 Utilities FTS Fortis Inc. 5.00% $54.65 55 - 41 $2.59 $2.57 $2.77 21.3x 19.8x 3.3% $23.86

Source - FactSet 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.

September 3, 2019 | RBC Wealth Management 5 | Canadian Focus List Finning International Inc. (TSX: FTT, $22.45)

We are removing the 2.5% position in Finning International from the Finning provides sales, rental, Focus List parts and support services • Addressing cyclical exposure by reducing our Overweight in equipment dealers. for Caterpillar equipment We believe management changes and the ensuing operational transformation and engines as well as have positioned Finning to better manage the elements of its business that are complementary equipment across within its control and to produce more resilient financial results through a cycle. various industries including mining, agriculture, forestry, However, we are cognisant that the company operates in a cyclical industry. construction, power systems, Moreover, we believe Finning is more directly impacted by economic externalities paving, and government. It than its closest domestic peer. Given the nature of Finning’s geographic operates as an authorized dealer positioning (Western Canada, South America, and the U.K.) and certain of its of Caterpillar products in Western end-market exposures (copper and oil production), the company is directly and Northern Canada, the U.K., impacted by externalities including Brexit and the U.S.-China trade battle. We Ireland, and the Southern Cone believe investors are unlikely to impute a higher multiple to Finning’s equity region of South America. given the uncertainty associated with these externalities and the late stage of the economic cycle.

Risks 1-year pricing chart

Risks include, but are not limited Finning International Inc. Daily 22.45 High: 33.05 Low: 21.21 34 to, cyclicality in customer demand, Finning International Inc. - Price competition from unaffiliated 32 equipment manufacturers, the 30

emergence of non-traditional 28 distribution platforms, labour 26 relations, and volatility in foreign

exchange rates. 24

22

20

Avg: 502,178 Finning International Inc. - Volume 1.6 1.2 0.8 0.4 0.0 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Source - FactSet; data as of market close 8/28/19

September 3, 2019 | RBC Wealth Management 6 | Canadian Focus List Canadian Natural Resources Ltd. (TSX: CNQ, $31.24)

We are decreasing our position in Canadian Natural Resources to 2.5% Canadian Natural Resources (from 5%) owns and operates a diversified • Addressing cyclical exposure by reducing leverage to energy prices. With fixed portfolio of oil and gas assets income markets signalling weak economic prospects and certain other economic in North America, the U.K. indicators trending downwards, we are moving to lessen cyclical exposure by North Sea, and Offshore Africa. reducing the Focus List’s weighting in energy producers. We believe OPEC faces The company’s production is approximately 80% weighted a tough task in balancing a global oil market defined by slowing demand growth, towards crude oil and natural gas and therefore oil prices could remain in a lower trading range. By reducing our liquids. In addition to its status weighting in Canadian Natural Resources, the Focus List’s allocation to oil and gas as one of Canada’s largest energy producing companies will more closely reflect that of the benchmark. producers, CNQ also owns one • Investors likely to reward companies that prioritize dividends and buybacks of the largest undeveloped land in the near term. Acquisitions have featured prominently as a capital allocation bases in Western Canada. priority for Canadian Natural Resources in recent years, including the $12.5B purchase of a 70% stake in the Athabasca Oil Sands Project in 2017 and the $3.8B purchase of Devon Energy’s Canadian assets this year. We believe these acquisitions make long-term strategic sense and were struck at attractive valuations. While this may prove to be the most value-accretive capital allocation strategy in the long term, we believe investors may be more focused on the prioritisation of dividend growth and buybacks in the near term given the uncertain macro environment.

Risks 1-year pricing chart Risks include, but are not limited Canadian Natural Resources Limited Daily 31.24 High: 46.39 Low: 30.01 48 Canadian Natural Resources Limited - Price to, unexpected changes in energy 46

prices, the ability to replace 44

production and reserves on an 42

economic basis, and government 40

legislation relating to royalties, taxes, 38

and environmental policy. 36

34

32

30

Avg: 3,471,402 Canadian Natural Resources Limited - Volume 6

4

2

0 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Source - FactSet; data as of market close 8/28/19

September 3, 2019 | RBC Wealth Management 7 | Canadian Focus List Fortis Inc. (TSX: FTS, $54.65)

We are increasing our position in Fortis to 5% (from 2.5%) Fortis is a utility holding company • High-quality regulated utility with highly diversified operations. Fortis with regulated utilities in Canada, possesses a diversified portfolio of power transmission and distribution assets the U.S., and the Caribbean. The across Canada, the U.S., and the Caribbean. Nearly 100% of the company’s company also has non-regulated earnings come from regulated or long-term contracted utility infrastructure, operations in power and real providing a high degree of visibility on the company’s cash flows. The stability estate. of the business combined with a strong financial track record has allowed Fortis management to deliver 45 years of consistent dividend growth. • Sizable exposure to the U.S. market. Roughly 60% of Fortis’s earnings are generated in the U.S. We view this as desirable given that the allowable return on equity in the company’s U.S. operations is nearly 2% higher than in its Canadian assets. In addition, we expect Fortis to benefit from the long runway of U.S. transmission investment opportunities. Management’s capital plan is focused predominately on growth in the U.S. • Adding defensive ballast to the Focus List. Fixed income markets have signalled weaker economic prospects through an inverted U.S. yield curve and persistently low (or negative) yields on sovereign debt. Certain other indicators that we monitor (e.g., the U.S. ISM Manufacturing Index) have recently trended downwards, while trade policy uncertainty further clouds the economic outlook. The increased weighting in Fortis should provide additional defensive ballast, which we view as prudent in the context of the global economic backdrop.

Risks 1-year pricing chart

Risks include, but are not limited to, Fortis Inc. Daily 54.65 High: 54.94 Low: 40.71 56 punitive regulatory or government Fortis Inc. - Price decisions, deteriorating economic 54 conditions in the company’s service 52

territories, and a rapid rise in 50

government bond yields. 48

46

44

42

40

Avg: 1,113,756 Fortis Inc. - Volume 2.0 1.5 1.0 0.5 0.0 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Source - FactSet; data as of market close 8/28/19

September 3, 2019 | RBC Wealth Management 8 | Canadian Focus List Franco-Nevada Corporation (TSX: FNV, $130.56)

We are increasing our position in Franco-Nevada to 5% (from 2.5%) Franco-Nevada is a diversified • Diversified portfolio of royalty and streaming assets. Franco-Nevada owns resource royalty and metal an extensive portfolio of 377 royalty and streaming assets, including 53 active streams company with ongoing precious metals assets. This portfolio gives the company leverage to precious revenues from 53 active precious metals prices but leaves it relatively immune to the operating, cost escalation, and base metal royalties/ and environmental risk borne by operating mining companies. The company’s streams, and 56 active oil and gas royalties. portfolio includes long-life mines in regions with low geopolitical risk, and assets undergoing active exploration programs. • Adding gold exposure as defensive ballast in uncertain times. We believe the price of gold bullion could remain elevated as investors seek out its diversifying properties in this uncertain late-cycle economic environment. Persistently low (or negative) sovereign bond yields and accommodative central bank policy should provide further support for gold prices. According to RBC Capital Markets’ 2019 forecast, roughly 75% of Franco-Nevada’s revenue is derived from gold and silver assets.

Risks 1-year pricing chart

Risks include, but are not limited Franco-Nevada Corporation Daily 130.56 High: 131.65 Low: 76.53 to, variability in commodity prices, Franco-Nevada Corporation - Price 130 the ability to source and execute on accretive royalty/stream acquisition 120

opportunities, and the financial 110 health and operational execution of project partners. 100

90

80

Avg: 528,370 1.0 Franco-Nevada Corporation - Volume 0.8 0.6 0.4 0.2 0.0 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Source - FactSet; data as of market close 8/28/19

September 3, 2019 | RBC Wealth Management 9 | 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.

NOTE: Past performance is no guarantee of future results and should not be viewed as an indicator of future results.

September 3, 2019 | RBC Wealth Management 10 | Canadian Focus List Disclosures and disclaimers

Canadian Focus List Investment Committee Distribution of Ratings - RBC Capital Markets, LLC Equity Research Jim Allworth, Investment Strategist As of June 30, 2019 Investment Banking Services [email protected]; RBC Dominion Securities Inc. Provided During Past 12 Months Patrick McAllister, CFA, Portfolio Advisor Rating Count Percent Count Percent Buy [Top Pick & Outperform] 772 53.57 215 27.85 [email protected]; RBC Dominion Securities Inc. Hold [Sector Perform] 588 40.80 114 19.39 Dominick Hardy, CA, CFA, CPA, Portfolio Advisor Sell [Underperform] 81 5.62 2 2.47 [email protected]; RBC Dominion Securities Inc. Explanation of RBC Capital Markets, LLC Tim Corney, CFA, Portfolio Advisor Equity Rating System [email protected]; RBC Dominion Securities Inc. An analyst’s “sector” is the universe of companies for Analyst Certification which the analyst provides research coverage. Accordingly, All of the views expressed in this report accurately reflect the rating assigned to a particular stock represents solely the personal views of the responsible analyst(s) about any the analyst’s view of how that stock will perform over the and all of the subject securities or issuers. No part of the next 12 months relative to the analyst’s sector average. compensation of the responsible analyst(s) named herein Ratings: is, or will be, directly or indirectly, related to the specific Top Pick (TP): Represents analyst’s best idea in the sector; recommendations or views expressed by the responsible expected to provide significant absolute total return over 12 analyst(s) in this report. months with a favorable risk-reward ratio. Outperform (O): This report is issued by the Portfolio Advisory Group Expected to materially outperform sector average over 12 (“PAG”) which is part of the retail division of RBC Dominion months. Sector Perform (SP): Returns expected to be in line Securities Inc. (“RBC DS”). The PAG provides portfolio with sector average over 12 months. Underperform (U): Re- advisory services to RBC DS Investment Advisors. Reports turns expected to be materially below sector average over published by the PAG may be made available to clients 12 months. Restricted (R): RBC policy precludes certain of RBC DS through its Investment Advisors. The PAG types of communications, including an investment recom- relies on a number of different sources when preparing mendation, when RBC is acting as an advisor in certain its reports including, without limitation, research reports merger or other strategic transactions and in certain other published by RBC Capital Markets (“RBC CM”). RBC CM circumstances. Not Rated (NR): The rating, price targets and is not independent of RBC DS or the PAG. RBC CM is a estimates have been removed due to applicable legal, reg- business name used by Royal Bank of Canada and certain ulatory or policy constraints which may include when RBC of its affiliates, including RBC DS, in connection with its Capital Markets is acting in an advisory capacity involving corporate and investment banking activities. As a result the company. of the relationship between RBC DS, the PAG and RBC CM, Risk Rating: there may be conflicts of interest relating to the RBC CM The Speculative risk rating reflects a security’s lower level analyst that is responsible for publishing research on a of financial or operating predictability, illiquid share trading company referred to in a report issued by the PAG. volumes, high balance sheet leverage, or limited operating Required Disclosures history that result in a higher expectation of financial and/ or stock price volatility. RBC Capital Markets Distribution of Ratings RBC Capital Markets has fundamental research of the fol- For purposes of ratings distributions, regulatory rules lowing companies: require member firms to assign ratings to one of three Alimentation Couche-Tard Inc. (ATD.B; Outperform; $81.95) rating categories − Buy, Hold/Neutral, or Sell − regardless of a firm’s own rating categories. Although RBC Capital Bank of Montreal (BMO; Outperform; $89.36) Markets’ ratings of Top Pick/Outperform, Sector Perform Bank of Nova Scotia (BNS; Sector Perform; $69.33) and Underperform most closely correspond to Buy, Hold/ Brookfield Asset Mgmt. Inc. (BAM.A; Outperform; $68.13) Neutral and Sell, respectively, the meanings are not the Canadian National Railway Co. (CNR; Sector Perform; same because our ratings are determined on a relative $120.39) basis. Canadian Natural Resources Ltd. (CNQ; Outperform; $31.24) Canadian Pacific Railway Ltd. (CP; Outperform; $313.28)

September 3, 2019 | RBC Wealth Management 11 | Canadian Focus List

CCL Industries Inc. (CCL.B; Outperform; $59.02) RBC Capital Markets Conflicts Policy Constellation Software Inc. (CSU; Outperform; $1,284.70) RBC Capital Markets Policy for Managing Conflicts of Inter- Dollarama Inc. (DOL; Outperform; $51.44) est in Relation to Investment Research is available from us on request. To access our current policy, clients should refer Finning International Inc. (FTT; Outperform; $22.45) to https://www.rbccm.com/global/file-414164.pdf or send First Capital Realty Inc. (FCR; Top Pick; $22.11) a request to RBC Capital Markets Research Publishing, P.O. Fortis Inc. (FTS; Outperform; $54.65) Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Franco-Nevada Corporation (FNV; Sector Perform; $130.56) Tower, Toronto, M5J 2W7. We reserve the right to Intact Financial Corporation (IFC; Sector Perform; $129.98) amend or supplement this policy at any time. (NA; Outperform; $60.90) Dissemination of Research & Short Term Ideas Nutrien Ltd. (NTR; Outperform; $65.53) RBC Capital Markets endeavours to make all reasonable efforts to provide research simultaneously to all eligible cli- Pembina Pipeline Corporation (PPL; Outperform; $47.83) ents, having regard to local time zones in overseas jurisdic- Suncor Energy Inc. (SU; Outperform; $37.90) tions. Subject to any applicable regulatory considerations, TC Energy Corporation (TRP; Outperform; $66.71) “eligible clients” may include RBC Capital Markets institu- TELUS Corporation (T; Outperform; $47.42) tional clients globally, the retail divisions of RBC Dominion Toromont Industries Ltd. (TIH; Sector Perform; $62.73) Securities Inc. and RBC Capital Markets LLC, and affiliates. RBC Capital Markets’ equity research is posted to our pro- Toronto-Dominion Bank (TD; Sector Perform; $71.51) prietary websites to ensure eligible clients receive coverage Waste Connections Inc. (WCN; Outperform; $121.43) initiations and changes in rating, targets and opinions in a Our third-party research providers have fundamental timely manner. Additional distribution may be done by the research of: sales personnel via email, fax or regular mail. Clients may Restaurant Brands International Inc. (QSR; Hold; $103.23) also receive our research via third party vendors. Please RBC Capital Markets analysts have received (or will receive) contact your investment advisor or institutional salesper- compensation based in part upon the investment banking son for more information regarding RBC Capital Markets revenues of RBC Capital Markets. research. RBC Capital Markets also provides eligible clients with access to SPARC on its proprietary INSIGHT website. Portfolio Advisory Group personnel, including the SPARC contains market color and commentary, and may portfolio advisor or any individuals directly involved also contain Short-Term Trade Ideas regarding the securities in the preparation of the report hold(s) or exercise(s) of subject companies discussed in this or other research investment discretion over a long position in the common reports. A Short-Term Trade Idea reflects the research shares of Alimentation Couche-Tard Inc., Brookfield Asset analyst’s directional view regarding the price of the security Management Inc., Canadian National Railway Company, of a subject company in the coming days or weeks, based Canadian Natural Resources Limited, Canadian Pacific on market and trading events. A Short-Term Trade Idea may Railway Limited, CCL Industries Inc, Dollarama Inc., differ from the price targets and/or recommendations in our First Capital Realty Inc., Nutrien Ltd., Restaurant Brands published research reports reflecting the research ana- International Inc., Royal Bank of Canada, Suncor Energy lyst’s views of the longer-term (one year) prospects of the Inc., TC Energy Corporation, TELUS Corporation, The Bank subject company, as a result of the differing time horizons, of Nova Scotia, The Toronto-Dominion Bank, Toromont methodologies and/or other factors. Thus, it is possible Industries Ltd., and Waste Connections, Inc. that the security of a subject company that is considered a A household member or members of the Portfolio Advisory long-term ‘Sector Perform’ or even an ‘Underperform’ might Group hold(s) or exercise(s) investment discretion over be a short-term buying opportunity as a result of temporary a long position in the common shares of Alimentation selling pressure in the market; conversely, the security of Couche-Tard Inc., Canadian National Railway Company, a subject company that is rated a long-term ‘Outperform’ Nutrien Ltd., and Restaurant Brands International Inc. could be considered susceptible to a short-term downward The portfolio advisor responsible for this report or a price correction. Short-Term Trade Ideas are not ratings, member of his/her team hold(s) or exercise(s) investment nor are they part of any ratings system, and RBC Capital discretion or control over a long position in the non- Markets generally does not intend, nor undertakes any convertible fixed income securities of Royal Bank of obligation, to maintain or update Short-Term Trade Ideas. Canada. Short-Term Trade Ideas discussed in SPARC may not be suitable for all investors and have not been tailored to indi- vidual investor circumstances and objectives, and investors should make their own independent decisions regarding any Short-Term Trade Ideas discussed therein.

September 3, 2019 | RBC Wealth Management 12 | Canadian Focus List

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September 3, 2019 | RBC Wealth Management