1 Investment Views Thursday, July 25, 2013

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 Pertinent Revision Summary

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 Edge at a Glance

Industry Comments

Kevin R. Choquette & 17 Chilean Banks Exposure to SMU   Claudia Benavente A.

Company Comments

Q2/13 - Impacted by Pricing 19

Agnico Eagle Mines Limited Tanya Jakusconek   Adjustments Drilling Complete for Q3/13 21

Belo Sun Mining Corp. Ovais Habib   Resource Update

Another Delay with no Deadline 24

Bombardier Inc. Turan Quettawala   this Time Building a Better Future One 25 Brookfield Office Properties Mario Saric   Place at a Time Upgrading to SO - Bumping 27

Canadian Pacific Railway Limited Turan Quettawala   Target Price to $148 Enough Is Enough; Upgrading 30

Cenovus Energy Inc. Mark Polak   to Outperform Weaker South American 38 Currencies Inhibiting Top-Line Coca-Cola FEMSA, S.A.B. de C.V. Rodrigo Echagaray   Growth

Modest Q2 EBITDA Beat, No Ezequiel Fernández 40

Empresa Nacional de Electricidad SA   Material Surprises López Liquids Miss Offsets Cash Flow 42 Encana Corporation Mark Polak   Beat Q2/13 In Line; Should Benefit 47

Fibria Celulose S.A. Benoit Laprade   from Stronger US$ Grupo Aeroportuario Centro Norte, Another Strong Report as ROE 50

Rodrigo Echagaray   S.A.B. de C.V. Continues Rising

L Q2 Shows Stars Becoming 53

Loblaw Companies Limited Patricia A. Baker   Aligned as Momentum Evident 59 Mixed Results at Tenke Lundin Mining Corporation Orest Wowkodaw  

Government Resolution Brings 62

Lydian International Ltd. Leily Omoumi   Delays 66 Strong Beat on Q2 Results Mullen Group Ltd. Turan Quettawala  

Potash Corporation of Saskatchewan, 5% Buyback Right On Time - 68

Ben Isaacson   Inc. Neutral 69 QUALCOMM Incorporated Q3 Beats -- Guidance in Line Gus Papageorgiou  

Cost Control Offset 74

Rogers Communications Inc. Jeff Fan   Subscriber/ARPU Pressure

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

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Investment Views Thursday, July 25, 2013 Same Story: Quality Has a 81 Telefonica Brasil SA Andres Coello   Price...and a Reward Reported EPS in Line but Sales 84

Torchmark Corporation Joanne Smith   Still Sluggish

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Pertinent Revision Summary Thursday, July 25, 2013

Pertinent Revision Summary (For Rating Changes: 24-Hour SC Pro Personal Trading Restriction Applies)

1-Yr Key Data

Rating Risk Target Year 1 Year 2 Year 3 Valuation

Canadian Pacific Railway Limited (SO) (CP-T C$127.44) Upgrading to SO - Bumping Target Price to $148 New SO -- $148.00 EPS13E: $6.13 EPS14E: $8.26 -- -- Old SP -- $145.00 EPS13E: $6.27 EPS14E: $8.30 -- -- Valuation: Equally wtd. DCF and 17x NTM EPS (one-year fwd.) Key Risks to Price Target: Slower economic growth and regulatory changes. Cenovus Energy Inc. (SO) (CVE-T C$30.49) Enough Is Enough; Upgrading to Outperform New SO -- -- CFPS13E: $4.74 CFPS14E: $4.68 -- -- Old SP -- -- CFPS13E: $4.87 CFPS14E: $4.70 -- --

Valuation: Midpoint of risked and unrisked 2P+2C NAV Key Risks to Price Target: Commodity prices, crack spreads, timing of projects, and project execution. Encana Corporation (SP) (ECA-N US$17.22) Liquids Miss Offsets Cash Flow Beat New ------CFPS13E: $3.42 CFPS14E: $3.81 -- -- Old ------CFPS13E: $3.41 CFPS14E: $4.02 -- --

Valuation: 1.0x our risked 2P+2C NAV less annual dividends Key Risks to Price Target: Commodity prices, timing of projects, and project execution. Fibria Celulose S.A. (SU) (FBR-N US$11.34) Q2/13 In Line; Should Benefit from Stronger US$ New -- -- $11.75 EBITDA13E: BRL 2,658 EBITDA14E: BRL 2,698 -- 8.0x NTM EV/EBITDA 1-Year Forward Old -- -- $11.00 EBITDA13E: BRL 2,549 EBITDA14E: BRL 2,548 -- 7.5x NTM EV/EBITDA 1-Year Forward

Valuation: 8.0x NTM EV/EBITDA 1-Year Forward Key Risks to Price Target: Lower-than-expected pulp prices and demand, FX Grupo Aeroportuario Centro Norte, S.A.B. de C.V. (SO) (OMAB-Q US$27.17) Another Strong Report as ROE Continues Rising New -- -- $31.00 EBITDA13E: MXN 1,747 EBITDA14E: MXN 1,990 -- -- Old -- -- $30.00 EBITDA13E: MXN 1,717 EBITDA14E: MXN 1,945 -- --

Valuation: 2014-2020 50% -DCF w/ 8% WACC & 50% -9x EV/EBITDA Key Risks to Price Target: Govmnt. regulation, troubled domestic airlines

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S. 4

Pertinent Revision Summary Thursday, July 25, 2013

Loblaw Companies Limited (SO) (L-T C$49.46) L Q2 Shows Stars Becoming Aligned as Momentum Evident New ------EPS13E: $2.49 EPS14E: $2.68 -- 5% F14 FCF Yield Old ------EPS13E: $2.45 EPS14E: $2.64 -- FCF Yield

Valuation: 5% F14 FCF Yield

Key Risks to Price Target: Heightened competitive pricing pressures, prolonged deflation, disruption to ops from Supply Chain and IT overhaul Lundin Mining Corporation (SO) (LUN-T C$4.20) Mixed Results at Tenke New ------Adj. EPS13E: US$0.23 ------Old ------Adj. EPS13E: US$0.24 ------

Valuation: 50% of 7.0x 2014E EV/EBITDA + 50% of 10% NAV

Key Risks to Price Target: Commodity, operating, financing, development, political Lydian International Ltd. (SO) (LYD-T C$0.98) Government Resolution Brings Delays New -- -- $1.75 ------0.70x NAV Old -- -- $2.75 ------0.91x NAV

Valuation: 0.70x NAV

Key Risks to Price Target: Multiple contraction, commodity prices, technical and operational risks, and geopolitical risks QUALCOMM Incorporated (FS) (QCOM-Q US$61.39) Q3 Beats -- Guidance in Line New -- -- $80.00 EPS13E: $4.60 EPS14E: $5.30 -- 14x forward P/E one year out (Q4/14E - Q3/15E) Old -- -- $75.60 EPS13E: $4.50 EPS14E: $5.06 -- 14x forward P/E one year out (Q3/14E - Q2/15E) Valuation: 14x forward P/E one year out (Q4/14E - Q3/15E) Key Risks to Price Target: P/E Multiple could remain lower than normal Rogers Communications Inc. (SO) (RCI.B-T C$41.95) Cost Control Offset Subscriber/ARPU Pressure New ------Adj. EPS13E: $3.61 Adj. EPS14E: $3.73 -- 7.3x NTM EBITDA 1-yr fwd Old ------Adj. EPS13E: $3.54 Adj. EPS14E: $3.62 -- 7.4x NTM EBITDA 1-yr fwd

Valuation: 7.3x NTM EBITDA 1-yr fwd Key Risks to Price Target: Wireless competition (from both incumbents and new entrants) Telefonica Brasil SA (SO) (VIV-N US$21.82) Same Story: Quality Has a Price...and a Reward New -- -- $25.00 Revenues13E: $15,962 Revenues14E: $16,603 Revenues15E: $17,723 -- Old -- -- $28.00 Revenues13E: $17,528 Revenues14E: $17,741 Revenues15E: $17,349 --

Valuation: DCF - 5 years results, 9.01% WACC, terminal growth rate of 3.0% Key Risks to Price Target: Economy/FX; weakness in landline; competition in mobile

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Pertinent Revision Summary Thursday, July 25, 2013

Torchmark Corporation (SP) (TMK-N US$69.76) Reported EPS in Line but Sales Still Sluggish New ------Operating EPS13E: Operating EPS14E: -- -- $5.71 $6.26 Old ------Operating EPS13E: Operating EPS14E: -- -- $5.68 $6.18 Valuation: Target P/E of 12x using 2014E (60% weight); Target P/BV of 1.8x using 2013E (40% weight)

Key Risks to Price Target: Interest rate risk; Credit losses; Rating downgrades; Regulatory risk

Source: Reuters; Scotiabank GBM estimates. Table of Contents

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Edge at a Glance Thursday, July 25, 2013

Edge at a Glance Kevin R. Choquette, CFA - (416) 863-2874 Chilean Banks (Scotia Capital Inc. - Canada) Exposure to SMU Claudia Benavente A. - +562 2692 6568 (Scotia Corredores de Bolsa Chile) Event ■ The retail company SMU, owned by CorpBanca's controller, Alvaro Saieh, was not meeting the terms of a covenant on its long-term debt. SMU's debt is with Banco Santander Chile, Banco Estado (Chilean state bank), Banco de Chile, BCI, BBVA, and Scotiabank, among others. Nevertheless, involved banks have temporarily agreed to suspend SMU's covenant. Implications ■ SMU was not meeting the terms of a covenant that required it to have a rating above investment grade on its long-term debt until its IPO is executed. The latter was a result of the downgrading to BB+, down from BBB-, from credit rating agency Feller Rate. ■ Total lending to SMU as % of total loans and as % of common equity stands at 0.70% and 6.4% for BCI; 0.27% and 2.4% for Banco de Chile; and 0.21% and 1.8% for Banco Santander Chile as at March 2013. CorpBanca stands at 0.2% and 1.7% as at June 2013. ■ On the other hand, CorpBanca disclosed further information of loans given to Synergia and to private banking clients related to SMU. Recommendation ■ We are waiting to see the execution and timeline of SMU's IPO to determine if banks could eventually downgrade SMU's credit rating within its credit scorecard models reflecting an Full Story increase in provisions. For the moment, involved banks have temporarily agreed to suspend ScotiaView Analyst Link SMU's requirement of having investment grade rating on its long term debt. ■ We maintain our SO rating on CHILE, and SP rating on BSANTANDER, BCI and Table of Contents CORPBANC.

Tanya Jakusconek, MSc, Applied - (416) 945-4083 Agnico Eagle Mines Limited (AEM-N US$28.17) (Scotia Capital Inc. - Canada) Q2/13 - Impacted by Pricing Adjustments

Event Pertinent Data ■ AEM reported a Q2/13 loss of $0.14 and an adjusted loss of $0.03. Rating: SP Implications Risk: High ■ Earnings - Adjusted loss per share of $0.03 vs. our estimate of $0.07 and the consensus Target: range of $0.07-$0.08. The main reason for the miss versus our estimate was higher 1-Yr US$35.00 operating costs and depreciation. AEM was hit with $13.2M or $0.08/sh (pre-tax) or Adj. EPS13E: $0.40 $0.05/sh (after tax, SC estimate) on pricing adjustments in the quarter. Adj. EPS14E: $0.33 ■ Q2/13 Operating Results - Gold production was 224 koz at total cash costs of $785/oz vs. Adj. EPS15E: $1.05 our estimate of 212 koz at $755/oz. Better production came from Pinos with higher costs at Valuation: La Ronde and Pinos. 1.50x NAV ■ 2013 Operating Guidance Maintained; Capital and Exploration Spend Reduced - Production Key Risks to Target: guidance was maintained at 970-1,010 koz at total cash costs of $735-$785/oz. Capital cost Commodity prices; technical and operational risk; foreign exchange risk. guidance was reduced to $597M (from $621M) and exploration was reduced to $72M (from 92M). 2014 also saw cuts in exploration and capital spend. Full Story ■ Development Pipeline - La India is expected to start commissioning in Q4/13, and Goldex production expected in Q4/13. On track. ScotiaView Analyst Link Table of Contents Recommendation ■ Q2 was significantly ($0.05/sh) impacted by pricing adjustments, in addition to $35/oz higher cash cost and higher depreciation than our modelling. Operating performance is expected to be stronger in 2H/13 as planned. Capital and exploration spend have been cut (not a surprise) in this lower price environment. Sector Perform.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S. 7

Edge at a Glance Thursday, July 25, 2013

Ovais Habib - (416) 863-7141 Belo Sun Mining Corp. (BSX-T C$0.52) (Scotia Capital Inc. - Canada) Drilling Complete for Q3/13 Resource Update

Event Pertinent Data ■ Belo Sun released assay results for 74 additional drill holes (15,813m) from its 100%- Rating: SO owned Volta Grande gold project in Brazil. Risk: Speculative Implications Target: ■ These results conclude Belo Sun's 2013 drill program designed to both upgrade inferred 1-Yr C$1.25 resources to the measured and indicated categories, and also to expand the current resource EPS13E: $-0.09 estimate. EPS14E: $-0.06 ■ We estimate a length-weighted average grade for the 35 holes released from the South EPS15E: $-0.05 Block (SB) area of 3.80 g/t Au, above the current inferred resource grade for SB of 2.73 g/t Valuation: Au. Shallow high-grade intervals from SB included 8.02 g/t Au over 5.88m (from 119m) in 0.90x NAVPS hole 693, and 11.99 g/t Au over 4.4m (from 27m) in hole 656, both at Itata. Key Risks to Target: ■ Results from 23 holes at the Ouro Verde deposit, mainly from the Ouro Verde/Grota Seca Multiple contraction, commodity prices, "junction" area, returned good grades and widths. We continue to view the potential technical and operational risks, and geopolitical risks merging of the two deposits as a source of exploration upside for Belo Sun. ■ Volta Grande currently hosts an M&I&I pit-constrained resource of 7.0 Moz of gold (125.5 Full Story Mt at 1.73 g/t Au) including the South Block pit-constrained resource of 471 koz (5.4 Mt at 2.73 g/t Au). ScotiaView Analyst Link Table of Contents ■ Upcoming catalysts for Belo Sun include an updated resource estimate (Q3/13), possible receipt of the Preliminary Licence (Q3/13E), and results of the definitive feasibility study (expected before year-end). Recommendation ■ We rate Belo Sun Sector Outperform with a $1.25 one-year target price.

Turan Quettawala, MBA, CFA - (416) 863-7065 Bombardier Inc. (BBD.B-T C$5.01) (Scotia Capital Inc. - Canada) Another Delay with no Deadline this Time

Event Pertinent Data ■ BBD announced another delay in the CSeries first flight. Rating: SP Implications Risk: High ■ BBD's press release suggests that software upgrades are still ongoing, as is gauntlet testing, Target: and this is taking longer than the company had anticipated. BBD has now indefinitely 1-Yr C$4.75 delayed the first flight as the company is no longer providing an official deadline. Our EPS13E: $0.38 conversation with management suggests that it is not months but weeks. EPS14E: $0.50 ■ While we had been concerned that the end-July date was hard to meet, it seems to us that EPS15E: $0.59 this delay announcement is worse than our expectations. While the company is still Valuation: suggesting that many of the issues are relatively minor, we are concerned that there may Equally wtd DCF & Sum-of-the-parts still be issues with the software as it seems that the pilots and Transport Canada may have Valuation requested further upgrades. Key Risks to Target: ■ BBD is still maintaining that the flight test program will last about 12 months; however, we Slower contract flow at BT; slower recovery in commercial and business continue to believe that is aggressive. We are currently looking for first deliveries in Q4/14 aircraft but there is a risk that first deliveries are now moved to 2015 based on continued delays in first flight. We estimate that every month of delays will result in cost overruns of $30M- Full Story $40M. ScotiaView Analyst Link Recommendation Table of Contents ■ We rate BBD shares SP with a $4.75 one-year target.

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Edge at a Glance Thursday, July 25, 2013

Mario Saric, CPA, CA, CFA - (416) 863-7824 Brookfield Office Properties (BPO-N US$16.91) (Scotia Capital Inc. - Canada) Building a Better Future One Place at a Time

Event Pertinent Data ■ BPO is launching Brookfield Place Calgary (BPC, was 225 6th St.), a 2.4Msf two-tower Rating: FS complex. Cenovus has agreed to lease 1Msf in the 1.4Msf East Tower, equating to 42% pre- Risk: Med leasing (71% of East Tower). Target: Implications 1-Yr US$19.75 ■ BPO is creating an attractive development pipeline. We view the announcement as a FFOPS13E: $1.11 positive for BPO. Ex 1 and 3 highlight an attractive continuous pipeline of new product FFOPS14E: $0.98 through 2018. Factor in a big mark-to-market opportunity on expiring leases and occupancy upside, and we think BPO may transition from a value to growth stock in 2015. Valuation: ■ Development may start some musical chairs. Cenovus' departure from The Bow and other NAVPS locations may see Encana consolidate space it currently leases in other buildings (i.e., Telus Key Risks to Target: Tower, Bankers Hall, others) back into The Bow. BPO noted many large tenants in the Protracted economic recovery, lack of market with 2015-2020 expiries, none of which we think are existing BOX tenants; BOX credit availability top tenant list shows Imperial Oil (going to Quarry Park; 0.72Msf expiring in 2016) and Encana (0.24Msf expiring at Bankers Hall in 2015) as the bigger expiring leases through Full Story 2018. ScotiaView Analyst Link ■ Sufficient liquidity to fund near-term construction, in our view. We estimate BPO cash sits Table of Contents at $700M+. A Bay-Adelaide East-type deal (i.e., BPO sells BPC to BOX ahead of completion with BOX up-financing Bankers Hall & Suncor Centre) is another potential source of cash. Recommendation ■ Maintain FS rating. BPO reports Q2 results this Friday at ~7:00am ET

Turan Quettawala, MBA, CFA - (416) 863-7065 Canadian Pacific Railway Limited (CP-T C$127.44) (Scotia Capital Inc. - Canada) Upgrading to SO - Bumping Target Price to $148

Event Pertinent Data ■ We are upgrading CP to SO post its Q2 results. New Old Implications Rating: SO SP ■ In our opinion, Q2 was a strong operational quarter for CP and provided further evidence Risk: -- Med that its metamorphosis is on-track with a significant improvement in operating metrics and Target: OR. While the reported OR improved by 750 bps to 71.9%, we estimate that it would have 1-Yr $148.00 $145.00 been closer to 69% had it not been for the floods and extraordinarily high derailments in EPS13E $6.13 $6.27 Q2. We adjusted our model slightly which drove a 2% reduction in our 2013 EPS estimate EPS14E $8.26 $8.30 mainly due to a more conservative revenue forecast and higher tax rate. We continue to look for OR improvement of 560 bps & 530 bps in 2013 & 2014, respectively. New Valuation: -- Recommendation Old Valuation: ■ We are raising our target price to $148 due to roll-forward of our valuation period by one Equally wtd. DCF and 17x NTM EPS quarter. CP is now trading at 15.4x 2014 EPS which is a ~1x premium to CNR but its (one-year fwd.) earnings CAGR is likely to be significantly higher based on margin improvement. The Key Risks to Target: increase in the target and 10% fall in the shares in the last two months have resulted in an Slower economic growth and regulatory changes. expanded ROR of 17.3%, which supports our more bullish view. We believe 2014 consensus estimates have room to rise and there are likely to be other positive catalysts with Full Story regard to dividend increases and share buybacks. While sale of the Pershing block could pressure the shares, we think that downside is limited to around 15x 2014 EPS, which would ScotiaView Analyst Link imply a ~7% fall in share price. As such, we believe investors should be building positions Table of Contents at current levels.

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Edge at a Glance Thursday, July 25, 2013

Mark Polak, CFA - (403) 213-7349 Cenovus Energy Inc. (CVE-T C$30.49) (Scotia Capital Inc. - Canada) Enough Is Enough; Upgrading to Outperform

Event Pertinent Data ■ Cenovus reported Q2/13 CFPS of $1.15, in line with our estimate of $1.16 and consensus of New Old $1.19 (range of $1.01-$1.34 from 21 analysts). Rating: SO SP Implications Risk: -- Med ■ Production of 260.5 Mboe/d was below our assumption of 268.8 Mboe/d due to a longer- Target: than-expected turnaround at Christina Lake. 1-Yr -- $40.00 ■ Management lowered production guidance 5% for Foster Creek and 7% for Pelican Lake, CFPS13E $4.74 $4.87 while increasing operating cost guidance 16% at Foster Creek, 7% at Christina Lake, and CFPS14E $4.68 $4.70 10% at Pelican Lake. Even if one assumes these changes are all recurring, which we don't, New Valuation: we believe that yesterday's drop in market cap of 10x the 2013E cash flow impact is -- excessive, especially for a stock trading at 6.4x 2013E cash flow. Old Valuation: ■ CVE investors today are paying for all of the refining business, all of the conventional Midpoint of risked and unrisked 2P+2C production, 85% of Foster Creek, 75% of Christina Lake, and none of Narrows Lake, Grand NAV Rapids, or Borealis. We feel these discounts to the two most successful SAGD projects and Key Risks to Target: a free call option on 8.6 billion barrels of resource in the hands of the industry's top operator Commodity prices, crack spreads, timing are very compelling propositions. of projects, and project execution.

Recommendation Full Story ■ We are maintaining our $40 target price but upgrading our rating from Sector Perform to ScotiaView Analyst Link Sector Outperform. CVE shares have underperformed peers by an average of 14% YTD and are now trading at a very attractive discount of 24% to our risked NAV. We believe this is Table of Contents unwarranted for what we view as the highest-quality, lowest-risk name in the sector.

Rodrigo Echagaray, MBA, CFA - (416) 945-4405 Coca-Cola FEMSA, S.A.B. de C.V. (KOF-N US$141.03) (Scotia Inverlat Casa de Bolsa) Weaker South American Currencies Inhibiting Top-Line Growth

Event Pertinent Data ■ KOF reported Q2 earnings that came in slightly below estimates. Rating: SU Implications Risk: Med ■ On a currency neutral basis and even if excluding M&A, revenues grew ~13% in MXN. Target: However, weaker currencies across the board more than offset the benefit of new volumes 1-Yr US$155.00 from the recent acquisitions in Mexico; hence, total revenues were flat YOY in MXN EBITDA13E: 29200.00 during Q2. EBITDA14E: 31958.00 ■ On an organic basis, volumes grew only 1.1% (3.5% once including FOQUE and Yoli) - ArcaContal reported exactly the same volume growth in Q2. Non-carbonated drinks (Jugos Valuation: del Valle, Powerade, etc.) grew 7% while carbonated drinks grew only 1%. KOF reported 2013E-2020E DCF w/ 8.3% WACC slight market share losses at its Mexico operations and mentioned on the conference call Key Risks to Target: that the competition is pricing at a sizable discount to KOF, which could limit KOF's ability Operating performance, consumer to increase prices further. behaviour, FX Exposure

■ Gross margin increased 140 bps due to a stronger peso (i.e., lower US sugar costs) but Full Story EBITDA margin increased only 100 bps due to higher SG&A in the South America division. EBITDA grew ~6% (1% below our estimates) while EPS came 5% below our ScotiaView Analyst Link estimates at MXN1.37. Table of Contents Recommendation ■ Revenues, EBITDA, and net income were 0%, 4%, and -4% vs. last year YTD, while multiples remain rich, in our view. We maintain our Sector Underperform rating but will be reviewing our price target and estimates in the coming days.

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Edge at a Glance Thursday, July 25, 2013

Ezequiel Fernández López - +562 2692 6251 Empresa Nacional de Electricidad SA (ENDESA-SN CLP 702.36) (Scotia Corredores de Bolsa Chile) Modest Q2 EBITDA Beat, No Material Surprises

Event Pertinent Data ■ Yesterday ENDESA reported Q2/13 numbers. Earnings call to take place today at 10am Rating: SP EST (+1-857-244-7309, passcode 85083200). Risk: Med Implications Target: ■ Quarterly physical sales at 13,325GW were virtually in line with our estimate (+3%). Core 1-Yr CLP 840.00 profit per MW at US$45.40 was also marginally higher, another +3%. EPS13E: $0.08 ■ EBITDA of US$384M came in 7% higher than expected, as a result of both factors. Results EPS14E: $0.09 were somewhat better than anticipated across all Andean countries. Despite the modest beat, we see no fundamental updates that would grant material changes to longer-term estimates. Valuation: ■ Quarterly net income of US$75M was 15% below our forecast, mainly on abnormally DCF explicit period 2020, 8.8% WACC higher effective tax rate (38.9%, one timer). Uneventful earnings release, in our view. and 2.5% LT growth Key Risks to Target: ■ During the earnings call, we will look for clues on regional capacity expansion plans, 2H/13 Potential capital increase, hydrology, Chilean dam levels outlook, and comments on the upcoming energy auctions planned by the commodity exposure. Chilean government. Recommendation Full Story ■ We believe that eventual ramifications of the ENERSIS deal will keep shares somewhat ScotiaView Analyst Link pressured, despite attractive forward-looking valuation. Our 2014 ownership-adjusted Table of Contents EV/EBITDA stands at 8.7x, while we calculate record low EV/MW at US$1.1M. We rate ENDESA Sector Perform with a CLP 840 one-year price target.

Mark Polak, CFA - (403) 213-7349 Encana Corporation (ECA-N US$17.22) (Scotia Capital Inc. - Canada) Liquids Miss Offsets Cash Flow Beat

Event Pertinent Data ■ Encana reported Q2/13 CFPS of $0.90, above our estimate and consensus of $0.79 (range of New Old $0.71-$0.87 from 20 analysts). Rating: -- SP Implications Risk: -- Med ■ Liquids production of 47.6 Mbbl/d was below our estimate of 52.2 Mbbl/d and consensus of Target: 50 Mbbl/d. Downtime at the Musreau facility was noted as having resulted in a 3 Mbbl/d 1-Yr -- $23.00 impact to the quarter. Gas production of 2.8 Bcf/d was in line with our estimate and CFPS13E $3.42 $3.41 consensus. Underlying declines should be offset in 2H/13 through well completions and CFPS14E $3.81 $4.02 tie-ins in the Haynesville, as well as initial production from Deep Panuke where first gas is expected shortly. New Valuation: -- ■ Cash flow was above our estimates due to a larger than expected cash tax recovery Old Valuation: ($0.05/share), as well as better than expected realized prices and operating costs for natural 1.0x our risked 2P+2C NAV less annual gas in the U.S. dividends ■ The strategy review implemented by the new CEO is underway though it may take until Key Risks to Target: year end before the process is finalized. In the meantime, Encana will take a cautious Commodity prices, timing of projects, approach to achieving its prior goals of increasing liquids production while larger scale and project execution. A&D has been shelved. Full Story Recommendation ScotiaView Analyst Link ■ We maintain our Sector Perform rating and $23 per share one-year target. Table of Contents

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Edge at a Glance Thursday, July 25, 2013

Benoit Laprade, CPA, CA, CFA - (514) 287-3627 Fibria Celulose S.A. (FBR-N US$11.34) (Scotia Capital Inc. - Canada) Q2/13 In Line; Should Benefit from Stronger US$

Event Pertinent Data ■ Fibria reported adjusted EBITDA of R$647M, compared to our R$656M estimate and New Old consensus of R$649M. Rating: -- SU Implications Risk: -- High ■ The R$9M variance stems from stronger-than-expected pulp prices (R$79M), more than Target: offset by higher-than-expected unit cash costs (R$45M), Other Manufacturing Costs 1-Yr $11.75 $11.00 (R$38M), and SG&A (R$5M). EBITDA13E BRL 2,658 BRL 2,549 ■ Net debt was R$8.3B (3.3x EBITDA in R$ terms and 3.0x in US$ for covenant purposes, EBITDA14E BRL 2,698 BRL 2,548 down from 3.1x at the previous quarter). Free cash flow in the quarter was R$234M. New Valuation: ■ While we continue to be cautious on Eucalyptus pricing given the significant amount of net 8.0x NTM EV/EBITDA 1-Year Forward new capacity coming on stream, the ramp-up of Eldorado last quarter did not have any Old Valuation: meaningful impact given demand increases and closures/conversions. In addition, a stronger 7.5x NTM EV/EBITDA 1-Year Forward US$ should significantly impact EBITDA in coming quarters while the balance sheet Key Risks to Target: already felt the full impact of the recent FX move. Lower-than-expected pulp prices and ■ We revised our R$/US$ forecast to 2.1064 in 2013 (from 2.0564) and to 2.17 (from 2.0925) demand, FX in 2014. Full Story Recommendation ScotiaView Analyst Link ■ We maintain our Sector Underperform rating. However, we raised our target to US$11.75 Table of Contents using an 8.0x EV/EBITDA multiple, up from 7.5x. This reflects both a revised EBITDA forecast and a multiple more in line with FBR's historical multiple as it is making progress on deleveraging.

Rodrigo Echagaray, MBA, CFA - (416) 945-4405 Grupo Aeroportuario Centro Norte, S.A.B. de C.V. (OMAB-Q US$27.17) (Scotia Inverlat Casa de Bolsa) Another Strong Report as ROE Continues Rising

Event Pertinent Data ■ Oma reported positive figures for Q2 with EBITDA growing 15% (2% ahead of estimates). New Old ROE LTM reached ~16%, the highest ever. Rating: -- SO Implications Risk: -- Med ■ Revenues grew 11% due to passenger growth of 5.6% and a remarkable ~10% YOY growth Target: in commercial revenues per PAX, driven by 10% revenue growth in the Mexico City airport 1-Yr $31.00 $30.00 hotel, the opening of 24 new commercial spaces (i.e., shops, restaurants), and higher EBITDA13E MXN 1,747 MXN 1,717 baggage screening revenues. Oma has reported growth in commercial revenues per PAX for EBITDA14E MXN 1,990 MXN 1,945 the past 21 consecutive quarters, and we expect this to continue due to upcoming initiatives such as the Industrial Park and new Hotel at the Monterey airport. New Valuation: -- ■ Prospects for PAX growth also look promising as airlines are expecting aircrafts in the Old Valuation: coming months (i.e., Interjet may add one Sukoi aircraft per month) and 8 new routes were 2014-2020 50%-DCF w/ 8% WACC & opened at Oma airports during Q2. 50%-9x EV/EBITDA ■ EBITDA margin increased 160 basis points for EBITDA growth of 15% and EPS growth of Key Risks to Target: 35% (due to lower taxes). We expect the company to finish the year ahead of guidance with Govmnt. regulation, troubled domestic an EBITDA margin of ~55%. Also, we have slightly increased our commercial revenue airlines estimates slightly (and CAPEX) to account for the new initiatives. Full Story Recommendation ScotiaView Analyst Link ■ We maintain our Outperform rating as we increase our price target to MXN49 (from Table of Contents MXN47) and US$31 (from US$30).

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Edge at a Glance Thursday, July 25, 2013

Patricia A. Baker, MBA, PhD - (514) 287-4535 Loblaw Companies Limited (L-T C$49.46) (Scotia Capital Inc. - Canada) L Q2 Shows Stars Becoming Aligned as Momentum Evident

Event Pertinent Data ■ While market focus on L is on strategic actions (i.e., REIT creation and a bold M&A move New Old on Shoppers Drug Mart), core grocery ops are overshadowed. Long standing lack of Rating: -- SO performance and a string of disappointments fostered concern and skepticism on an eventual turn. Solid Q2 results though underscore underlying momentum, owed to efforts Risk: -- Low led by operationally driven V.Trius. Continued momentum, following on the first real signs Target: in Q1, suggests timing on major strategic moves to set a path for L's longer-term growth is 1-Yr -- $60.00 very much related to the improved trends. As such, this is a fine orchestration. EPS13E $2.49 $2.45 Implications EPS14E $2.68 $2.64 ■ L Q2 EPS $0.63, beating consensus ($0.58) and forecast ($0.60). Top line momentum New Valuation: continues, with SSS +1.1% with nil inflation. L efforts in store and investments in customer 5% F14 FCF Yield proposition are delivering sales, share and volume growth, an absolute imperative. The Q2 Old Valuation: results see L up guidance for the FY to one of "mid-single digit growth in operating FCF Yield income" from a prior outlook calling for "low single digit growth in operating income." Key Risks to Target: Heightened competitive pricing Recommendation pressures, prolonged deflation, ■ EPS forecasts move higher to $2.49 and $2.68 for F13 and F14. We stay SO and hold our disruption to ops from Supply Chain and IT overhaul target price at $60. We view proposed purchase of SC as a solid strategic move to drive a far better positioning for L over the next decade. Improved momentum in core business is not Full Story only welcome, but fundamental to execution of the broader strategy. ScotiaView Analyst Link Table of Contents

Orest Wowkodaw, CPA, CA, CFA - (416) 945-4526 Lundin Mining Corporation (LUN-T C$4.20) (Scotia Capital Inc. - Canada) Mixed Results at Tenke

Event Pertinent Data ■ Freeport McMoRan reported Q2/13 results, including the operating results for Tenke New Old Fungurume (24% owned by Lundin Mining). Rating: -- SO Implications Risk: -- High ■ Overall, Q2/13 operating performance at Tenke was mixed. While copper production of Target: 122m lbs was 7% above our forecast of 114m lbs, cobalt production of 5m lbs was 29% 1-Yr -- $5.75 below our forecast of 7m lbs. Cash operating costs of $1.23/lb Cu were slightly higher than Adj. EPS13E US$0.23 US$0.24 our forecast of $1.17/lb. Adj. EPS14E -- US$0.25 ■ Based on the 1H/13 performance, Freeport revised its 2013 Tenke sales guidance to 450m Adj. EPS15E -- US$0.43 lbs of copper (up from 435m lbs) and 24m lbs of cobalt (down from 28m lbs) at a cash cost New Valuation: of $1.24/lb Cu (previously $1.18/lb). The revised guidance compares with our previous -- estimates of 441m lbs of Cu, 28m lbs of Co, and unit costs of $1.19/lb Cu. Old Valuation: ■ We estimate Tenke net cash flow to Lundin of $29.4 million in Q2/13, and $101 million for 50% of 7.0x 2014E EV/EBITDA + 50% 2013, versus previous guidance of $130 million. The net impact to our estimates was of 10% NAV negligible, although we have lowered our Q2/13 EPS estimate to $0.03 (from $0.04). Key Risks to Target: Recommendation Commodity, operating, financing, development, political ■ Despite the relatively mixed results at Tenke, we reiterate our Sector Outperform rating and our C$5.75 target price on Lundin. Our target price remains based on a 50/50 weighting of Full Story 7x our 2014 EBITDA estimate (C$4.86) and 1x our 10% NAVPS estimate (C$6.55). ScotiaView Analyst Link Table of Contents

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Edge at a Glance Thursday, July 25, 2013

Leily Omoumi, MBA - (416) 945-4527 Lydian International Ltd. (LYD-T C$0.98) (Scotia Capital Inc. - Canada) Government Resolution Brings Delays

Event Pertinent Data ■ The government of Armenia has passed a resolution that extends the boundaries of the New Old "catchment basin" for Lake Sevan in Armenia. Rating: -- SO Implications Risk: -- Speculative ■ The new boundaries include LYD's proposed location for its heap leach pads. Mineral Target: processing activities are not allowed in the "Immediate Impact Zone." The borders of the 1-Yr $1.75 $2.75 "catchment basin" expand to include a horizontal zone 3000m on each side of the Vorotan- EPS13E -- US$-0.08 Sevan tunnel. New Valuation: ■ The UG tunnel has never been used. It was built to transfer water from Spandaryan to 0.70x NAV Kechut (Kechut is connected to Lake Sevan) to increase the Lake's water levels. This was Old Valuation: meant to be used for irrigation water. 0.91x NAV ■ The government had approved the location of the heap leach in Jan. 2013 and an updated FS Key Risks to Target: was set to be released in Q3/13. However, the timing of the FS is now unclear, pending Multiple contraction, commodity prices, LYD's discussion with gov't. technical and operational risks, and geopolitical risks ■ We have delayed production start-up to 2018 from 2016 to allow for a potentially drawn-out permitting process, but recognize that if permits are secured before late 2015, production Full Story would start earlier. Our NAVPS is now C$2.52 (C$2.93 previously). Our 1-yr target is C$1.75. ScotiaView Analyst Link Recommendation Table of Contents

■ It is difficult to understand the government's true motives; however, we believe lack of information and miscommunication between various ministries have played a part. We believe there are solutions to this including relocation of the heap leach pad. Further, we believe the sell-off is overdone based on the delays this may bring on. Maintain SO.

Turan Quettawala, MBA, CFA - (416) 863-7065 Mullen Group Ltd. (MTL-T C$23.08) (Scotia Capital Inc. - Canada) Strong Beat on Q2 Results

Event Pertinent Data ■ MTL reported adjusted EPS of $0.23, above our Street high of $0.19 and consensus of Rating: SO $0.14. Consolidated EBITDA came in at $56M (up 5.5% YOY) as margins expanded 140 Risk: High bps YOY to 18% (see Exhibit 1). Target: Implications 1-Yr C$24.00 ■ The beat vs. our estimates came mainly from Oilfield Services where margins expanded 280 EPS13E: $1.46 bps YOY to 19% due to absence of the TFT project that hurt margins last year and EPS14E: $1.65 increased activity in pipeline construction and specialised transportation services. In our opinion, despite 8% decline in revenue, O&S segment performance was impressive Valuation: considering a slowdown in western Canada drilling activity and unfavourable weather Equally wtd. DCF and 7.5x NTM EBITDA conditions, including Alberta flooding. (one-year fwd.) ■ Trucking and Logistics revenue of $137M was up 3% YOY with flat EBITDA of $24M Key Risks to Target: (17.6% margin). The growth in revenue was mainly due to the acquisition of Jay's Moving Slower-than-expected economic growth, and Storage in mid-May as organic growth was relatively weak. acquisition integration issues and oil prices. ■ MTL raised 2013 capex by 25% to $100M predominantly to purchase specialized equipment for O&S, including fluid hauling equipment. In our opinion, this is a positive Full Story sign as it signals management's confidence that the environment is slowly getting better which could lead to a stronger drilling season. ScotiaView Analyst Link Table of Contents Recommendation ■ We rate MTL SO with $24 one-year target. We will review our estimates and targets after the conf. call at 11AM EST on July 25 (888-231-8191).

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Edge at a Glance Thursday, July 25, 2013

Ben Isaacson, MBA, CFA - (416) 945-5310 Potash Corporation of Saskatchewan, Inc. (POT-N US$37.94) (Scotia Capital Inc. - Canada) 5% Buyback Right On Time - Neutral

Event Pertinent Data ■ Unless you've been hiding in a potash mine for the past six months, it should come as no Rating: SP surprise to the market that a 5% share repurchase program was just announced by POT - Risk: High right on schedule. Target: ■ We view the announcement as a neutral event, as it was widely anticipated, and therefore it 1-Yr US$42.00 should already be priced into the stock. Adj. EPS13E: $2.81 Implications Adj. EPS14E: $3.22 ■ Specifically, POT will spend up to $2B over the next year repurchasing up to 5% of its outstanding stock. If POT were to spend the full $2B buying the full 5% of its stock back, Valuation: the implied average repurchase price would equate to $46. 7.5x 2014E EBITDA, 12x 2014E EPS, DCF @ 10%, 65% RCN ■ Had POT not announced a buyback during earnings, we think its shares should have fallen - all else equal. Management needed to provide a signal that its shares may be undervalued. Key Risks to Target: This move is also consistent with its peers like MOS, URKA, CF, AGU, YAR etc, which Fertilizer supply/demand, crop and energy prices, weather are all involved in meaningful programs (MOS expected shortly). ■ Why didn't POT repurchase more, especially given its immense fire power? This is the more Full Story interesting question, in our view. We believe the answer is that POT is still very determined to gain a controlling stake of ICL in the mid-term. To move from 13.8% to 51% would ScotiaView Analyst Link require an outlay of $4.5B to $6.5B, depending on several factors. Table of Contents

Recommendation ■ We will review our POT recommendation following the call on Thursday.

Gus Papageorgiou, MBA, CFA - (416) 863-7552 QUALCOMM Incorporated (QCOM-Q US$61.39) (Scotia Capital Inc. - Canada) Q3 Beats -- Guidance in Line

Event Pertinent Data ■ Qualcomm reported Q3/13 results last night. New Old Implications Rating: -- FS ■ Quarter beats with all key variables better than expected. Revenue of $6.24B and EPS of Risk: -- Med $1.09 were 4% and 6% better than our expectations, respectively. Versus our expectations Target: chip volumes of 172M were 2% better, chip ASPs of $24.55 were 2% better, device ASPs 1-Yr $80.00 $75.60 of $230 were 3% better and device volumes of 246M were 3% better. Profitability was also EPS13E $4.60 $4.50 better than expected thanks to slightly better gross margins and slightly lower opex. EPS14E $5.30 $5.06 ■ Guidance in line - timing of new phone releases may impact quarter. The company is New Valuation: guiding for roughly $6.25B in revenue and EPS of $1.06. The Street was looking for $6.3B 14x forward P/E one year out (Q4/14E - and $1.08, and we were at $6.2B and $1.04. The timing of certain product releases by Q3/15E) QCOM's customers will likely impact the quarter. Old Valuation: ■ QCOM's business continues to fire on all cylinders. Sales were up 35% YOY and EPS 14x forward P/E one year out (Q3/14E - increased 29%. At the same time the company bought back shares and increased the Q2/15E) dividend 40% YOY. The only sore spot is that despite the company's repeated share Key Risks to Target: buybacks the share count keeps rising. P/E Multiple could remain lower than normal Recommendation ■ Maintain Focus Stock rating. QCOM maintains a superior competitive position in its Full Story industry with great cash flow and reasonable valuation. In fact we argue investors are buying ScotiaView Analyst Link the chip business for under 5x EPS. Table of Contents

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Edge at a Glance Thursday, July 25, 2013

Jeff Fan, CPA, CA, CFA - (416) 863-7780 Rogers Communications Inc. (RCI.B-T C$41.95) (Scotia Capital Inc. - Canada) Cost Control Offset Subscriber/ARPU Pressure

Event Pertinent Data ■ We updated our forecast post RCI Q2/13 results. New Old Implications Rating: -- SO ■ We believe the strong cost control will continue to more than offset the weaker wireless Risk: -- Med ARPU and cable subscriber additions. Due to lower cost estimates, we increased our Target: consolidated EBITDA estimates by approximately 1.5% and our margin estimates by 40- 1-Yr -- $52.00 50bp in 2013 and 2014. Adj. EPS13E $3.61 $3.54 ■ Wireless ARPU was weak at a -1.6% decline, but we believe higher roaming usage and Adj. EPS14E $3.73 $3.62 higher ARPUs of the two-year plans should start to absorb some of the re-pricing impact in New Valuation: Q3 and Q4. Furthermore, we believe this will be more than offset by wireless cost control to 7.3x NTM EBITDA 1-yr fwd maintain the wireless margin expansion trend. Old Valuation: ■ Although cable RGU additions were weak, we believe the focus on ARPU and margin will 7.4x NTM EBITDA 1-yr fwd also sustain stable margin improvement. Key Risks to Target: Recommendation Wireless competition (from both incumbents and new entrants) ■ We maintain our SO rating and our one-year target at $52. Trading at NTM 11.2x EV/cash EBIT, 6.3x EBITDA, and 6.8% FCF yield, we believe the shares are attractively valued and Full Story provide a good risk-reward profile. Even if Verizon enters the market, we believe the impact ScotiaView Analyst Link will take time to materialize. And if VZ decides to not enter, we believe the reward for shareholders will be significant. Table of Contents

Andres Coello - +52 (55) 5123 2852 Telefonica Brasil SA (VIV-N US$21.82) (Scotiabank Inverlat) Same Story: Quality Has a Price...and a Reward Jeff Fan, CPA, CA, CFA - (416) 863-7780 (Scotia Capital Inc. - Canada)

Event Pertinent Data ■ We have updated our model after the Q2/13 results, including higher capex from the New Old realignment of spectrum and a tougher FX outlook. We are cutting our target to Rating: -- SO US$25/ADR from US$28/ADR. Risk: -- Med Implications Target: ■ In Q2/13, Vivo delivered 118% and 24% more postpaid adds than AT&T and Verizon in the 1-Yr $25.00 $28.00 U.S., respectively, a significant achievement for a wireless operator in LatAm. We also saw Revenues13E $15,962 $17,528 signs of improvement in its wireline division, like yearly broadband adds doubling. Revenues14E $16,603 $17,741 ■ However, these achievements came at a cost to profitability, with the adjusted EBITDA Revenues15E $17,723 $17,349 margin of the company falling 370 bp YOY. New Valuation: ■ On the Q2/13 call, Vivo clarified that the pressure in costs observed in the quarter was -- related to its efforts to enhance quality, accelerate growth in postpaid, and turning around Old Valuation: the wireline segment (FTTH). DCF - 5 years results, 9.01% WACC, ■ The company said that it expects improvements in cost trends in 2H/13. VIV also made it terminal growth rate of 3.0% clear that it doesn't foresee changes to its commitment to dividends (net debt to EBITDA is Key Risks to Target: at its lowest point). Economy/FX; weakness in landline; competition in mobile Recommendation Full Story ■ Reflecting the lower-than-expected Q2/13 EBITDA, we are cutting our 2013 EPS projection by 10.2% in local currency (20% for the ADR to reflect the tougher FX outlook.) However, ScotiaView Analyst Link we continue to see in VIV a combination of solid fundamentals, attractive valuation (4.3x Table of Contents 2014 EV/EBITDA and 11.9x P/E), and the highest dividend yield in the LatAm sector (7.8% 2013E.) Telefonica Brasil remains one of our top picks.

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Edge at a Glance Thursday, July 25, 2013

Joanne Smith, CFA - (212) 225-5071 Torchmark Corporation (TMK-N US$69.76) (Scotia Capital (USA) Inc.) Reported EPS in Line but Sales Still Sluggish

Event Pertinent Data ■ Operating EPS of $1.42, an increase of 9% YOY, matched our forecast and was $0.02 New Old ahead of the consensus estimate of $1.40. However, results benefited from a revised Rating: -- SP accounting treatment for marketing expenses in the Direct Response business, adding $0.03 to results. Risk: -- Low ■ While life insurance sales increased 2% YOY, an improvement versus a 4% decline in Target: Q1/13, they were short of our expectations with the American Income (AI) distribution 1-Yr -- $72.00 system accounting for most of the shortfall. Given sluggish life sales in 1H/13, we expect Operating $5.71 $5.68 management to reduce the current full-year sales outlook for AI of +10% to +14%. EPS13E Operating $6.26 $6.18 Implications EPS14E ■ We increased our 2013E and 2014E EPS estimates to $5.71 and $6.26 from our prior New Valuation: estimates of $5.68 and $6.18; the increase primarily to account for the revised accounting. -- ■ BVPS, excluding AOCI, increased 10% YOY to $36.73 and operating ROE came in at Old Valuation: 15.6%, both in line with our expectations. Share repurchases in the quarter of 1.4M ($90M) Target P/E of 12x using 2014E (60% were also in line. weight); Target P/BV of 1.8x using 2013E (40% weight) Recommendation Key Risks to Target: ■ While we expect TMK to post strong EPS growth, solid returns, and believe the company Interest rate risk; Credit losses; Rating has a competitive advantage in middle-market insurance sales and distribution, we see only downgrades; Regulatory risk limited upside from the current stock price given the current valuation of 1.8x 2013E BVPS and 11.1x 2014E EPS. We maintain our Sector Perform rating. Full Story ScotiaView Analyst Link Table of Contents

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Industry Comment Wednesday, July 24, 2013, Pre-Market

Chilean Banks Kevin R. Choquette, CFA - (416) 863-2874 (Scotia Capital Inc. - Canada) Exposure to SMU [email protected] Claudia Benavente A. - +562 2692 6568 (Scotia Corredores de Bolsa Chile) [email protected] Event ScotiaView Analyst Link ■ The retail company SMU, owned by CorpBanca's controller, Alvaro Saieh, was not meeting the terms of a covenant on its long-term debt. SMU's debt is with Banco Santander Chile, Banco Estado (Chilean state bank), Banco de Chile, BCI, BBVA, and Scotiabank, among others. Nevertheless, involved banks have temporarily agreed to suspend SMU's covenant. Implications ■ SMU was not meeting the terms of a covenant that required it to have a rating above investment grade on its long-term debt until its IPO is executed. The latter was a result of the downgrading to BB+, down from BBB-, from credit rating agency Feller Rate. ■ Total lending to SMU as % of total loans and as % of common equity stands at 0.70% and 6.4% for BCI; 0.27% and 2.4% for Banco de Chile; and 0.21% and 1.8% for Banco Santander Chile as at March 2013. CorpBanca stands at 0.2% and 1.7% as at June 2013. ■ On the other hand, CorpBanca disclosed further information of loans given to Synergia and to private banking clients related to SMU. Recommendation ■ We are waiting to see the execution and timeline of SMU's IPO to determine if banks could eventually downgrade SMU's credit rating within its credit scorecard models reflecting an increase in provisions. For the moment, involved banks have temporarily agreed to suspend SMU's requirement of having investment grade rating on its long term debt. ■ We maintain our SO rating on CHILE, and SP rating on BSANTANDER, BCI and CORPBANC. Universe of Coverage Price Rating Risk 1-Yr ROR BCI-SN CLP 29950.00 SP Medium 34000.00 16.3% BSANTANDER-SN CLP 29.88 SP Medium 32.00 11.2% CHILE-SN CLP 72.52 SO Medium 80.00 14.8%

CORPBANCA -SN CLP 5.18 SP High 6.00 20.2%

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

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Items of Note ■ On the other hand, CorpBanca disclosed further information on loans given to Synergia, an investment fund, not related to the bank or controller and are guaranteed with SMU’s shares. These are 5.4% of the bank’s common equity or 0.6% of its total loans. The fund invested in SMU shares and its payment would be derived from SMU’s IPO proceeds, the sale of the stock package to institutional investor with long term investment horizon, to family offices, among others. According to management the coverage of the guarantee as % of total debt is above 1.5x under the most conservative scenario. Finally, CLP 44.4 billion or 3.5% of its common equity or 0.4% of its total loans were lent to private banking clients of the bank and that have been guaranteed by its clients with SMU shares.

Pertinent Data 1-Yr Key Data Rating Risk Target Year 1 Year 2 Year 3 Valuation

Banco de Crédito e Inversiones SA (BCI-SN) Valuation: 12.3x 2014 EPS estimate Key Risks to Price Target: Economic, systemic, interest rate, regulatory, and counterparty failures Banco Santander-Chile SA (BSANTANDER-SN) Valuation: 14.4x 2014 EPS estimate Key Risks to Price Target: Economic, systemic, interest rate, regulatory, and counterparty failures Banco de Chile SA (CHILE-SN) Valuation: 15.3x 2014 EPS estimate Key Risks to Price Target: Economic, systemic, interest rate, regulatory, and counterparty failures CorpBanca SA (CORPBANCA-SN) Valuation: 11.5x 2014 EPS estimate Key Risks to Price Target: Economic, systemic, interest rate, regulatory, and counterparty failures

Source: Scotiabank GBM estimates.

ScotiaView Analyst Link

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Company Comment Wednesday, July 24, 2013, After Close

(AEM-N US$28.17) Agnico Eagle Mines Limited (AEM-T C$29.04) Q2/13 - Impacted by Pricing Adjustments Tanya Jakusconek, MSc, Applied - (416) 945-4083 Joanne van Ballegooie - (416) 863-7431 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] James Bender, CPA, CA - (416) 945-4648 (Scotia Capital Inc. - Canada) Rating: Sector Perform Target 1-Yr: US$35.00 ROR 1-Yr: 27.4% Div. (NTM) $0.88 Risk Ranking: High Div. (Curr.) $0.88 Valuation: 1.50x NAV Yield (Curr.) 3.1% Commodity prices; technical and operational risk; foreign exchange Key Risks to Target:

Event ■ AEM reported a Q2/13 loss of $0.14 and an adjusted loss of $0.03.

Implications ■ Earnings - Adjusted loss per share of $0.03 vs. our estimate of $0.07 and the consensus range of $0.07-$0.08. The main reason for the miss versus our estimate was higher operating costs and depreciation. AEM was hit with $13.2M or $0.08/sh (pre-tax) or $0.05/sh (after tax, SC estimate) on pricing adjustments in the quarter. ■ Q2/13 Operating Results - Gold production was 224 koz at total cash costs of $785/oz vs. our estimate of 212 koz at $755/oz. Better production came from Pinos with higher costs at La Ronde and Pinos. ■ 2013 Operating Guidance Maintained; Capital and Exploration Spend Reduced - Production guidance was maintained at 970-1,010 koz at total cash costs of $735-$785/oz. Capital cost guidance was reduced to $597M (from $621M) and exploration was reduced to $72M (from 92M). 2014 also saw cuts in exploration and capital spend. ■ Development Pipeline - La India is expected to start commissioning in Q4/13, and Goldex production expected in Q4/13. On track. Recommendation ■ Q2 was significantly ($0.05/sh) impacted by pricing adjustments, in addition to $35/oz higher cash cost and higher depreciation than our modelling. Operating performance is expected to be stronger in 2H/13 as planned. Capital and exploration spend have been cut (not a surprise) in this lower price environment. Sector Perform. Qtly Adj. EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2012A $0.52 A $0.35 A $0.73 A $0.41 A $2.01 26.1x Shares O/S (M) 173.4 2013E $0.31 A $-0.03 $0.40 71.2x Market Cap (M) $4,886 2014E $0.33 85.8x Float O/S (M) 173.4 2015E $1.05 26.9x Float Value (M) $4,886 TSX Weight 0.10% (FY-Dec.) 2011A 2012A 2013E 2014E 2015E Gold Prod (oz) (000) 985 1,044 993 1,126 1,208 Total Cash Cost ($/oz) $580 $640 $770 $737 $704 Gold Price (/oz) $1,572 $1,669 $1,400 $1,300 $1,400 Reserves (2P) (oz) (M) 18.8 18.7 Adj Earnings/Share $1.96 $2.01 $0.40 $0.33 $1.05 Cash Flow/Share $4.03 $4.18 $2.11 $2.28 $3.11 Price/Earnings 18.5x 26.1x 71.2x 85.8x 26.9x Price/Cash Flow 9.0x 12.6x 13.3x 12.4x 9.1x

IBES EPS 2013E: $0.57 NAV: $23.40 ScotiaView Analyst Link IBES EPS 2014E: $0.76 P/NAV: 1.20x

Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in US$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

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Q2/13 Results – Hit With Pricing Adjustments ■ Earnings - AEM reported a Q2/13 loss of $0.14 per share compared to earnings of $0.25 per share in Q2/12. Adjusting for unusual items, the operating loss was $0.03 (vs. $0.35 in Q2/12). This compares to our estimate for earnings $0.07 and the consensus range of $0.07- $0.08 (which excludes an amount for stock option expense). The main discrepancy versus our estimate was higher operating costs and higher depreciation. However, we do want to flag that AEM was hit with $13.2M ($0.08/sh) pre-tax or $0.05/sh (after-tax, SC estimate) on pricing adjustments in the quarter. ■ Q2/13 Operating Results - Gold production was 224 koz (sold 230 koz) at total cash costs of $785/oz. We were looking for 212 koz at total cash costs $755/oz. Turning to other metal production, the company produced 1.066 Moz of silver (SC forecast of 1 Moz), 7.6 Mlb of zinc (SC forecast of 12 Mlb) and 2.8 Mlb of copper (SC forecast of 2 Mlb). In short, gold production and sales were higher than our modelling. The main difference in production was a strong quarter at Pinos Altos. Costs were higher mainly at La Ronde (due to less zinc produced as mining occurred in area which did not have zinc) and Pinos Altos (where costs were impacted $65/oz on a decline in silver price and also lower contribution from lower cost heap leach tonnes) relative to our modelling. ■ Realized Prices - AEM realized a gold price of $1,336/oz, $18.72/oz for silver, $0.80/lb for zinc and $2.97/lb for copper vs. the average spot prices of $1,415/oz, $23.22/oz, $0.84/lb and $3.25/lb, respectively. ■ 2013 Operating Guidance Maintained; Capital and Exploration Cut – Production guidance was maintained at 970-1,010 koz of gold at total cash costs of $735-$785/oz. Capital for 2013 is estimated at $597M, this is down $24M from previous guidance. AEM reduced its 2013 exploration budget from $92M to $72M. ■ 2014/2015 Guidance - AEM is currently reviewing its future capital requirements. It had previously estimated capital of ~$600M for the next five to six years; however the current estimate for 2014 is ~$400M. Most of this reduction relates to spending at Meliadine. AEM expects production in 2014 to reach 1.1-1.14 Moz and is on track to meet its 2015 production guidance of 1.2 Moz. Exploration budget for 2014 is set at $50M ($20M will be capitalized). ■ Optimization of Mine Plans and Strategy – AEM is currently reviewing all mine plans with a goal of reducing capital and operating costs. The review will include metal price assumptions used to calculate its cut-off grade (at lower prices cut-off grades generally rise). As at Q2, using a ~$1,400/oz gold price (close to reserve price), no impairments were required. However, a 10% change in gold price assumption impacts reserves by 4%. A further decline in pricing (where it remains low and future price expectations are lowered) could result in a reduction to reserves and impairment of mining asset carrying values. ■ Development Pipeline- At Goldex, development activities continue on schedule at the mine and production is expected in Q4/13. Gold production is expected at 15 koz in Q4. At La India, the project is on track to start commissioning by year-end and commercial production is anticipated for Q1/14. Work advanced with the installation of the plant, crushing system and leach pads. Additionally, power generators were installed and are operational. At Meliadine, the capital budget was reduced for both 2013 and 2014. The original budget for 2013 was ~$90M, which has now been reduced by $10M. For 2014, the budget has been reduced by ~$80M to $45M. Timing of capital expenditures beyond 2014 will be subject to Board approval and the market conditions. ■ Kittila – The autoclave restarted after completion of an extended maintenance program and throughput and recoveries are now at normal steady state. ■ Conference Call Details - AEM will be hosting a conference call at 11:00am ET on July 25. The dial-in numbers are 416-644-3414 or 800-814-4859. ■ Conclusion & Recommendation – Q2 was significantly impacted by pricing adjustments (~$0.05/sh after-tax; SC Est.), in addition to $35/oz higher operating cost and higher depreciation than our modelling. Performance is expected to be stronger in 2H/13 with additional production coming online from Creston Mascota, Goldex, La Ronde ramp-up and higher grades at Meadowbank. AEM maintained operating guidance. Capital and exploration

spend have been cut (not a surprise) in this lower price environment. Sector Perform.

21

Company Comment Wednesday, July 24, 2013, After Close

(BSX-T C$0.52) Belo Sun Mining Corp. Drilling Complete for Q3/13 Resource Update Ovais Habib - (416) 863-7141 Ciara Sawicki - (416) 862-3738 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] [email protected]

Rating: Sector Outperform Target 1-Yr: C$1.25 ROR 1-Yr: 140.4% Div. (NTM) $0.00 Risk Ranking: Speculative Div. (Curr.) $0.00 Valuation: 0.90x NAVPS Yield (Curr.) 0.0% Key Risks to Target: Multiple contraction, commodity prices, technical and operational risks, and geopolitical risks

Event ■ Belo Sun released assay results for 74 additional drill holes (15,813m) from its 100%-owned Volta Grande gold project in Brazil. Implications ■ These results conclude Belo Sun's 2013 drill program designed to both upgrade inferred resources to the measured and indicated categories, and also to expand the current resource estimate. ■ We estimate a length-weighted average grade for the 35 holes released from the South Block (SB) area of 3.80 g/t Au, above the current inferred resource grade for SB of 2.73 g/t Au. Shallow high-grade intervals from SB included 8.02 g/t Au over 5.88m (from 119m) in hole 693, and 11.99 g/t Au over 4.4m (from 27m) in hole 656, both at Itata. ■ Results from 23 holes at the Ouro Verde deposit, mainly from the Ouro Verde/Grota Seca "junction" area, returned good grades and widths. We continue to view the potential merging of the two deposits as a source of exploration upside for Belo Sun. ■ Volta Grande currently hosts an M&I&I pit-constrained resource of 7.0 Moz of gold (125.5 Mt at 1.73 g/t Au) including the South Block pit- constrained resource of 471 koz (5.4 Mt at 2.73 g/t Au). ■ Upcoming catalysts for Belo Sun include an updated resource estimate (Q3/13), possible receipt of the Preliminary Licence (Q3/13E), and results of the definitive feasibility study (expected before year-end). Recommendation ■ We rate Belo Sun Sector Outperform with a $1.25 one-year target price. Qtly EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2012A $-0.05 A $-0.07 A $-0.06 A $-0.03 A $-0.21 n.m. Shares O/S (M) 285.7 2013E $-0.04 $-0.02 $-0.02 $-0.02 $-0.09 n.m. Market Cap (M) $148.6 2014E $-0.02 $-0.02 $-0.02 $-0.01 $-0.06 n.m. Float O/S (M) 278.7 2015E $-0.05 n.m. Float Value (M) $144.9

(FY-Dec.) 2013E 2014E 2015E 2016E 2017E Earnings/Share $-0.09 $-0.06 $-0.05 $0.41 $0.30 Price/Earnings n.m. n.m. n.m. 1.3x 1.8x Cash Flow/Share $-0.07 $-0.03 $-0.03 $0.56 $0.42 Price/Cash Flow n.m. n.m. n.m. 0.9x 1.2x EBITDA (M) $-24 $-17 $-17 $291 $291 Production (oz) (000) 0.0 0.0 0.0 330.9 330.9 Tot. Cash Cost ($/oz) (US$) $0 $0 $0 $648 $648

Rlzd. Gold Price ($/oz) (US$) $1,399 $1,300 $1,400 $1,500 $1,300 IBES EPS 2013E: $-0.11 BVPS13E: $0.12 NAV: $1.45 ScotiaView Analyst Link IBES EPS 2014E: $-0.05 P/NAV: 0.36x Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in C$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

22

Plan Views of Drill Collar Locations

Exhibit 1 - Ouro Verde and Grota Seca Geological Map Showing Drill Collar Locations

Source: Company reports.

23

Exhibit 2 – South Block Geological Map Showing Drill Collar Locations

Source: Company reports.

ScotiaView Analyst Link

24

Intraday Flash Wednesday, July 24, 2013 @ 10:11:16 AM (ET)

(BBD.B-T C$5.03) Bombardier Inc. Another Delay with no Deadline this Time Turan Quettawala, MBA, CFA - (416) 863-7065 Milan Posarac - (416) 863-7532 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] [email protected]

Rating: Sector Perform Target 1-Yr: C$4.75 ROR 1-Yr: -3.5% Div. (NTM) C$0.10 Risk Ranking: High Div. (Curr.) C$0.10 Valuation: Equally wtd DCF & Sum-of-the-parts Valuation Yield (Curr.) 2.0% Key Risks to Target: Slower contract flow at BT; slower recovery in commercial and business aircraft

Event ■ BBD announced another delay in the CSeries first flight.

Implications ■ BBD's press release suggests that software upgrades are still ongoing, as is gauntlet testing, and this is taking longer than the company had anticipated. BBD has now indefinitely delayed the first flight as the company is no longer providing an official deadline. Our conversation with management suggests that it is not months but weeks. ■ While we had been concerned that the end-July date was hard to meet, it seems to us that this delay announcement is worse than our expectations. While the company is still suggesting that many of the issues are relatively minor, we are concerned that there may still be issues with the software as it seems that the pilots and Transport Canada may have requested further upgrades. ■ BBD is still maintaining that the flight test program will last about 12 months; however, we continue to believe that is aggressive. We are currently looking for first deliveries in Q4/14 but there is a risk that first deliveries are now moved to 2015 based on continued delays in first flight. We estimate that every month of delays will result in cost overruns of $30M-$40M. Recommendation ■ We rate BBD shares SP with a $4.75 one-year target. Qtly EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2012A $0.06 A $0.10 A $0.12 A $0.11 A $0.38 9.8x Shares O/S (M) 1,739.4 2013E $0.08 A $0.08 $0.09 $0.12 $0.38 12.9x Market Cap (M) C$8,740 2014E $0.13 $0.14 $0.12 $0.12 $0.50 9.7x Float O/S (M) 1,478.5 2015E $0.11 $0.13 $0.17 $0.18 $0.59 8.3x Float Value (M) C$7,429

(FY-Dec.) 2011A 2012A 2013E 2014E 2015E Revenues (M) $18,347 $16,744 $18,105 $20,475 $25,124 Adj EBIT (BT) (M) $700 $451 $587 $693 $652 Adj EBIT (BA) (M) $502 $380 $470 $676 $989 Current Ratio 1.1x 1.1x 1.1x 1.1x 1.2x IBES EPS 2013E: $0.40 BVPS13E: $1.05 IBES EPS 2014E: $0.52 ROE13E: 42.51% Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates.

All values in US$ unless otherwise indicated. ^ Subordinate Voting ScotiaView Analyst Link

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

25

Company Comment Thursday, July 25, 2013, Pre-Market

(BPO-N US$16.91) Brookfield Office Properties (BPO-T C$17.45) Building a Better Future One Place at a Time Mario Saric, CPA, CA, CFA - (416) 863-7824 Trevor Thompson-Harry - (416) 863-7986 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] [email protected]

Rating: Focus Stock Target 1-Yr: US$19.75 ROR 1-Yr: 20.1% Div. (NTM) $0.56 Risk Ranking: Medium Div. (Curr.) $0.56 Valuation: NAVPS Yield (Curr.) 3.3% Protracted economic recovery, lack of credit availability Key Risks to Target: Event ■ BPO is launching Brookfield Place Calgary (BPC, was 225 6th St.), a 2.4Msf two-tower complex. Cenovus has agreed to lease 1Msf in the 1.4Msf East Tower, equating to 42% pre-leasing (71% of East Tower). Implications ■ BPO is creating an attractive development pipeline. We view the announcement as a positive for BPO. Ex 1 and 3 highlight an attractive continuous pipeline of new product through 2018. Factor in a big mark- to-market opportunity on expiring leases and occupancy upside, and we think BPO may transition from a value to growth stock in 2015. ■ Development may start some musical chairs. Cenovus' departure from The Bow and other locations may see Encana consolidate space it currently leases in other buildings (i.e., Telus Tower, Bankers Hall, others) back into The Bow. BPO noted many large tenants in the market with 2015-2020 expiries, none of which we think are existing BOX tenants; BOX top tenant list shows Imperial Oil (going to Quarry Park; 0.72Msf expiring in 2016) and Encana (0.24Msf expiring at Bankers Hall in 2015) as the bigger expiring leases through 2018. ■ Sufficient liquidity to fund near-term construction, in our view. We estimate BPO cash sits at $700M+. A Bay-Adelaide East-type deal (i.e., BPO sells BPC to BOX ahead of completion with BOX up-financing Bankers Hall & Suncor Centre) is another potential source of cash. Recommendation ■ Maintain FS rating. BPO reports Q2 results this Friday at ~7:00am ET Qtly FFOPS (FD) Q1 Q2 Q3 Q4 Year P/FFOPS Capitalization 2011A $0.28 A $0.30 A $0.30 A $0.26 A $1.15 13.6x Shares O/S (M) 504.9 2012A $0.27 A $0.28 A $0.30 A $0.30 A $1.14 14.9x Market Cap (M) $8,538 2013E $0.29 A $0.29 $0.30 $0.23 $1.11 15.2x Float O/S (M) 249.9 2014E $0.24 $0.24 $0.25 $0.25 $0.98 17.3x Float Value (M) $4,226 TSX Weight 0.20% (FY-Dec.) 2010A 2011A 2012A 2013E 2014E Funds from Ops $1.38 $1.15 $1.14 $1.11 $0.98 Adj. Funds from Ops $1.16 $0.87 $0.75 $0.75 $0.61 Price/AFFO 15.1x 18.0x 22.6x 22.5x 27.6x EV/EBITDA 18.7x 17.1x 16.4x 16.4x 17.4x EBITDA (M) $1,228 $1,296 $1,385 $1,390 $1,319 EBITDA Margin 48.6% 53.4% 55.5% 54.9% 53.2% EBITDA/Int. Exp 2.5x 2.2x 2.1x 2.2x 2.0x

IBES FFOPS 2013E: $1.18 BVPS13E: $20.52 NAV: $19.75 IBES FFOPS 2014E: $1.02 ROE13E: 5.84% P/NAV: 0.86x ScotiaView Analyst Link Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in US$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

26

Building a Better Future One Place at a Time

Exhibit 1 – BPO Setting the Stage for Very Attractive Growth Post 2015, In Our View Exhibit 2 – Attractive Development Consolidates Brookfield Grip on Market

GLA (SF - 000's) - Bars % of 2013E NOI - 24,000 Diamonds 40% 37% 22,000 Brookfield 35% Place Calgary* 30% 20,000 100 Bishopsgate 25% 18,000 5,000 sf Brookfield 2,400 sf Bay Adelaide 20% 16,000 Place South* Principal 17% Centre East* Place 15% 14,000 950 sf 362 sf 625 sf 10% Q1/13 7% 12,000 980 sf 4% GLA = 5% 11,796k sf 10,000 0% 2015 2016 2017 Manhattan West * Indicates development has a lead tenant.

Source: Company reports; Scotiabank GBM estimates.

Source: Company reports; Scotiabank GBM.

Exhibit 3 – Significant Development Pipeline Delivering New Product to Market at Reasonable Yields, In Our View

GLA Expected Project Location ('000's sf) Completion Cost ($M) Stable NOI Yield on Cost Pre-Leasing Tenants Active Bay Adelaide Centre East Toronto 980 2015 $480 $33 7.0% 60% Deloitte, Borden Ladner Gervais LLP Brookfield Place South Perth 362 2015 $330 $30 9.1% 40% Deloitte, Corrs Chambers Westgarth, Brookfield Multiplex Brookfiled Place Calgary^ Calgary 2,400 2H/2017 $800 $55 7.0% 42% Cenovus Energy Inc. Manhattan West New York 5,000 n/a¹ $4,300 $305 7.1% Pending Principal Place London 625 2016 $560 $45 8.0% 100 Bishopsgate London 950 Q1 2017 $1,150 $80 7.0% Total 10,317 $7,620 $548 7.2% 46%

¹Expected delivery for first building is 2016/2017. Source: Company reports; Scotiabank GBM. ^We believe the figures provided by BPO may reflect economics for the East Tower (i.e. 1.4Msf), as opposed to the full 2.4Msf projected for the site.

ScotiaView Analyst Link

27

Company Comment Thursday, July 25, 2013, Pre-Market

(CP-T C$127.44) Canadian Pacific Railway Limited (CP-N US$123.58) Upgrading to SO - Bumping Target Price to $148 Turan Quettawala, MBA, CFA - (416) 863-7065 Milan Posarac - (416) 863-7532 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] [email protected]

Rating: Sector Outperform Target 1-Yr: C$148.00 ROR 1-Yr: 17.3% Div. (NTM) $1.46 Risk Ranking: Medium Div. (Curr.) $1.40 Valuation: Equally wtd. DCF and 17x NTM EPS (one-year fwd.) Yield (Curr.) 1.1% Slower economic growth and regulatory changes. Key Risks to Target:

Event Pertinent Revisions ■ We are upgrading CP to SO post its Q2 results. New Old Implications Rating: SO SP Target: ■ In our opinion, Q2 was a strong operational quarter for CP and provided 1-Yr $148.00 $145.00 further evidence that its metamorphosis is on-track with a significant improvement in operating metrics and OR. While the reported OR EPS13E $6.13 $6.27

EPS14E $8.26 $8.30 improved by 750 bps to 71.9%, we estimate that it would have been closer to 69% had it not been for the floods and extraordinarily high derailments in Q2. We adjusted our model slightly which drove a 2% reduction in our 2013 EPS estimate mainly due to a more conservative revenue forecast and higher tax rate. We continue to look for OR improvement of 560 bps & 530 bps in 2013 & 2014, respectively. Recommendation ■ We are raising our target price to $148 due to roll-forward of our valuation period by one quarter. CP is now trading at 15.4x 2014 EPS which is a ~1x premium to CNR but its earnings CAGR is likely to be significantly higher based on margin improvement. The increase in the target and 10% fall in the shares in the last two months have resulted in an expanded ROR of 17.3%, which supports our more bullish view. We believe 2014 consensus estimates have room to rise and there are likely to be other positive catalysts with regard to dividend increases and share buybacks. While sale of the Pershing block could pressure the shares, we think that downside is limited to around 15x 2014 EPS, which would imply a ~7% fall in share price. As such, we believe investors should be building positions at current levels. Qtly EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2011A $0.20 A $0.75 A $1.14 A $1.08 A $3.17 21.7x Shares O/S (M) 176.3 2012A $0.82 A $0.83 A $1.29 A $1.28 A $4.23 23.9x Market Cap (M) $22,468 2013E $1.24 A $1.43 A $1.80 $1.65 $6.13 20.8x Float O/S (M) 176.3 2014E $1.59 $2.02 $2.36 $2.29 $8.26 15.4x Float Value (M) $22,468 TSX Weight 0.82% (FY-Dec.) 2010A 2011A 2012A 2013E 2014E Earnings/Share $3.86 $3.17 $4.23 $6.13 $8.26 Revenues (M) $4,982 $5,178 $5,695 $6,123 $6,621 EBITDA (M) $1,606 $1,457 $1,848 $2,319 $2,834 Operating Profit (M) $1,116 $967 $1,309 $1,754 $2,243 Operating Ratio 77.6% 81.3% 77.0% 71.4% 66.1% ROIC/Share 10.3% 8.8% 11.1% 13.6% 15.8% EBITDA/Int. Exp 6.4x 5.6x 5.9x 8.0x 10.3x

IBES EPS 2013E: $6.26 BVPS13E: $36.65 IBES EPS 2014E: $7.82 ROE13E: 18.57% ScotiaView Analyst Link Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in C$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

28

Q3 Volume Guidance was in Line with Expectations

■ Expecting weakness in short-haul coal to be offset by growth in fertilizer and CBR. Management guidance suggests that coal will be down low single Exhibit 1 - CP - Q3TD Carloads digits in 2H/2013 driven by weakness in US-based thermal coal and flattish YOY Change volume for met based on Teck’s forecast. We reduced our coal carload forecasts by 4% in 2H/13 and 5% in 2014 – coal volumes are now CP Total Carloads Week 29 Q3TD contracting by 2.5% YOY in 2H/13 and growing 1% YOY in 2014. CP Automotive -20.3% -15.8% management is relatively more bullish (than us) on fertilizer and expects Coal -8.7% -7.7% double-digit growth during the 2H. Sulphur and fertilizer carloads are up Forest Products -1.9% 2.5% 12.1% Q3TD as CP is benefiting from growth in its domestic business and Grain 5.6% 3.1% easier lap periods. Industrial products, which includes crude by rail (CBR), is up marginally by 1.6% Q3TD, however management still believes that Industrial Products 3.8% 1.6% CBR’s long term prospects remain bright particularly as the spread is Sulphur and Fertilizers 13.1% 12.1% expected to widen again during the fall. We are looking for 9% growth in Intermodal -2.7% -3.5% industrial products during 2H/2013 (unchanged) which is mainly driven by Grand Total -1.0% -1.8% CBR. CP is forecasting mid-single digit YOY carload growth in its grain franchise during 2H/2013 – we are currently at 7.5%. Source: Company reports; Scotiabank GBM estimates. ■ Intermodal rationalisation continues - volumes have declined so far in Q3, down 3.5% YOY. This rationalisation is expected to last at least till the end of 2013 which should lead to mid-single digit declines in IM – we are forecasting 5% declines in both Q3 and Q4. However, what we found heartening is that CP is quickly redefining its IM service which is expected to help its domestic IM franchise. Mr. Creel noted that this franchise is single-driver truck competitive which suggests to us that there is a significant opportunity to pick up market share from trucks. Furthermore, the large shipping contract due for renegotiation in Q4 will be an important driver of volume in 2014 – we are currently looking for 2% growth off the low base in 2013. Q2 EPS Missed but Operational Improvements Are Solid

■ EPS was $1.43 (up 73% YOY), slightly below our $1.49 and cons. of $1.50. As shown in Exhibit 2, revenues grew 10% YOY to $1.5B on the back of carload growth of 3.4% YOY. RTMs were up 11% due to positive mix shift as gains were made in longer haul CBR and losses were in short-haul thermal coal. Yields were down slightly by 1% despite the fact that freight revenue per carload was up 6% YOY. Once again, the decline in yield was due to mix shift and we continue to look for ~1% decline in yields for the balance of 2013. Management noted that price renewals are continuing at about 3%-4%. The tax rate was at 26.7% vs. our estimate of 25% which negatively impacted EPS by 3.5¢. We have raised our tax rate assumption slightly to 27% for 2H/2013 based on guidance. ■ Continued restructuring resulted in a strong 750 bps reduction in OR to 71.9%. CP pointed out ~$74M in efficiency gains across various cost items. Significant improvements were seen on compensation and benefits, down 7% to $342M. Total workforce was reduced 18% from 19,505 to 16,053. CP expects this number to be reduced even further to ~15,500 by the end of 2013. Equipment rents also improved by 21% YOY mainly due to continued improvement in car turnover which has resulted in more returns. Management noted that they expect car returns to hit 10,000 by the end of 2013. The impact on equipment rents will start to moderate in 2H/2013 as CP is lapping tougher comps. We are looking for 17% improvement in equipment rent expenses during 2H/2013. Purchased services and other decreased by 9% YOY to $246M. There were many moving parts here as 2012 was impacted by management transition costs and casualty costs were about $15M higher than normal in Q2/2013 due to the derailments and flood. We are looking for purchased services to remain at around $225M per quarter in 2H/2013. Efficiencies totalled $74M: $40M from compensation & benefits, $24M in fuel, and $10M in equipment rents. ■ The improvement is on-track despite the slight miss on EPS. There were significant improvements in fuel efficiency (8%), locomotive productivity (32%), and labour productivity (24%) despite relatively tough operating conditions with the flooding in Calgary. Mr. Creel mentioned that he expects another $100M in savings from the

29

whiteboarding exercises that are now complete. Various stakeholders have commented that they were impressed by CP’s ability to recoup from the Calgary floods in a very short period of time.

Exhibit 2 - CP - Results and Estimates ScotiaView Analyst Link

Source: Company reports; Scotiabank GBM estimates.

30

Company Comment Thursday, July 25, 2013, Pre-Market

(CVE-T C$30.49) Cenovus Energy Inc. (CVE-N US$29.57) Enough Is Enough; Upgrading to Outperform Mark Polak, CFA - (403) 213-7349 Eugene Vath, CA, CFA - (403) 213-7768 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] [email protected]

Rating: Sector Outperform Target 1-Yr: C$40.00 ROR 1-Yr: 34.4% Div. (NTM) $0.97 Risk Ranking: Medium Div. (Curr.) $0.97 Valuation: Midpoint of risked and unrisked 2P+2C NAV Yield (Curr.) 3.2% Commodity prices, crack spreads, timing of projects, and project execution. Key Risks to Target:

Event Pertinent Revisions ■ Cenovus reported Q2/13 CFPS of $1.15, in line with our estimate of New Old $1.16 and consensus of $1.19 (range of $1.01-$1.34 from 21 analysts). Rating: SO SP Implications CFPS13E $4.74 $4.87

■ Production of 260.5 Mboe/d was below our assumption of 268.8 CFPS14E $4.68 $4.70 Mboe/d due to a longer-than-expected turnaround at Christina Lake. ■ Management lowered production guidance 5% for Foster Creek and 7% for Pelican Lake, while increasing operating cost guidance 16% at Foster Creek, 7% at Christina Lake, and 10% at Pelican Lake. Even if one assumes these changes are all recurring, which we don't, we believe that yesterday's drop in market cap of 10x the 2013E cash flow impact is excessive, especially for a stock trading at 6.4x 2013E cash flow. ■ CVE investors today are paying for all of the refining business, all of the conventional production, 85% of Foster Creek, 75% of Christina Lake, and none of Narrows Lake, Grand Rapids, or Borealis. We feel these discounts to the two most successful SAGD projects and a free call option on 8.6 billion barrels of resource in the hands of the industry's top operator are very compelling propositions. Recommendation ■ We are maintaining our $40 target price but upgrading our rating from Sector Perform to Sector Outperform. CVE shares have underperformed peers by an average of 14% YTD and are now trading at a very attractive discount of 24% to our risked NAV. We believe this is unwarranted for what we view as the highest-quality, lowest-risk name in the sector. Qtly CFPS Q1 Q2 Q3 Q4 Year P/CFPS Capitalization 2010A $0.96 A $0.71 A $0.68 A $0.86 A $3.21 10.4x Shares O/S (M) 755.8 2011A $0.92 A $1.25 A $1.05 A $1.13 A $4.34 7.8x Market Cap (M) $23,045 2012A $1.20 A $1.22 A $1.48 A $0.92 A $4.82 6.9x Float O/S (M) 755.8 2013E $1.28 A $1.15 A $1.12 $1.19 $4.74 6.4x Float Value (M) $23,045 TSX Weight (FD) 1.52% (FY-Dec.) 2010A 2011A 2012A 2013E 2014E Prod-Equiv (mboe/d) 252 243 264 268 294 Natural Gas 49% 45% 37% 32% 27% Cash Flow (M) $2,415 $3,276 $3,643 $3,583 $3,535 Net Cap Exp (M) $-2,208 $-2,792 $-3,449 $-3,314 $-3,380 Free Cash Flow (M) $207 $484 $194 $269 $155 Net Debt/Cash Flow/Share 1.3x 0.9x 0.9x 1.1x 1.3x Earnings/Share $1.06 $1.64 $1.15 $1.72 $1.67 Price/Earnings 31.5x 20.6x 29.0x 17.7x 18.3x

IBES CFPS 2013E: US$4.29 ScotiaView Analyst Link IBES CFPS 2014E: US$4.53 Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in C$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

31

Lower Christina Lake Volumes Offset by FIFO Refining & Cash Taxes

■ Christina Lake Bouncing Back. As shown in Exhibit 1, production of 260.5 Mboe/d was slightly below our assumption of 268.8 Mboe/d and consensus of 265.3 Mboe/d. All areas were essentially in line, except for Christina Lake, which was down 13% from Q1 due to a scheduled turnaround that took longer than expected due to an expanded scope of work. On the Q1/13 call, management said they expected a 5 Mbbl/d impact but this turned out to be 7.6 Mbbl/d. We had also expected a larger contribution from Phase D ramping up as all four phases averaged 92 Mbbl/d in April then fell to 68 Mbbl/d in May, which we assumed was the full extent of the turnaround impact. Today’s reported volumes imply gross production of 71 Mbbl/d in June. We are not concerned about the project, however, as it has been running over 100 Mbbl/d for the past few weeks, above design capacity of 98 Mbbl/d, and despite the lower volumes, it remained the lowest steam oil ratio (SOR) in the industry, matching the Q2/12 record of 1.8. ■ Lots of Work at Foster Creek. Foster Creek volumes remain 8% below design capacity as the company continues to perform workover activity on wells that were deferred from last year since production was running above design rates in a favourable pricing environment. This workover activity is scheduled to be completed in Q3/13. In addition, a planned turnaround is expected to reduce Q3/13 volumes by 5 Mbbl/d and Q4/13 volumes by 2 Mbbl/d, net to CVE. ■ Refinery utilization was very strong at 96%, resulting in $320 million of cash flow, although this would have been $33 million lower using LIFO accounting. ■ Cash taxes of $61 million were $40 million lower than our assumption.

Exhibit 1 - Q2/13 Results vs. Estimates and Q1/13

Reported Q2/13 Analyst Estimates (21) Q2/13 Variance to: Q2/13 Q1/13 Scotia Low Avg. High Q1/13 Scotia Low Avg. High Production Foster Creek bbl/d 55,338 55,996 56,000 54,000 56,381 59,000 -1% -1% 2% -2% -6% Christina Lake bbl/d 38,459 44,351 43,615 38,000 41,269 45,840 -13% -12% 1% -7% -16% Pelican Lake, conventional oil & liquids bbl/d 77,330 79,878 79,377 75,629 79,479 82,059 -3% -3% 2% -3% -6% Natural gas MMcf/d 536 545 539 515 529 542 -2% -1% 4% 1% -1% Total boe/d 260,460 271,058 268,796 253,462 265,296 277,232 -4% -3% 3% -2% -6%

Upstream Cash Flow $MM $799 $683 $798 $622 $899 $807 17% 0% 28% -11% -1% Upstream Cash Flow $/boe $33.71 $28.00 $32.62 n/a $37.24 n/a 20% 3% n/a -9% n/a

Refining Cash Flow (FIFO) $MM $320 $528 $304 $261 $336 $477 -39% 5% 23% -5% -33% Refining Cash Flow (LIFO) $MM $287 $508 $304 $261 $336 $477 -44% -6% 10% -15% -40%

Consolidated Cash Flow $/share $1.15 $1.28 $1.16 $1.01 $1.19 $1.34 -10% -1% 14% -3% -14% Source: Company reports; Scotiabank GBM estimates.

32

Overreaction to Lower Production & Higher Operating Cost Guidance

■ Guidance Reduced but Mostly Non-recurring. As shown in Exhibit 2, management lowered production guidance 5% for Foster Creek and 7% for Pelican Lake, while increasing operating cost guidance 16% at Foster Creek, 7% at Christina Lake and 10% at Pelican Lake. ■ Pelican Taking It Slow with Polymer. One item that is recurring, although not surprising, is the reduced guidance at Pelican Lake. Similar to CNQ, Cenovus’ Pelican Lake continues to experience slower-than-expected response to polymer flooding. This has been a recurring theme over the past several quarters for both companies and we had already reduced 2013 production to 25-26 Mbbl/d in our cash flow and NAV models. Pelican Lake represents approximately 9% of 2013E production and of our risked NAV. ■ One-Time Issues at FCCL. Most of the guidance changes for Foster Creek and Christina Lake can be classified as non-recurring. At Christina Lake, the operating cost increase is only about $15 million in aggregate and due mostly to the longer-than-expected turnaround, but was also affected by higher electricity prices as well as waste fluid handling and trucking. We expect Christina Lake costs will fall to ~$12/bbl in 2H/13. ■ At Foster Creek, the 5% production decrease is due a larger-than-expected impact from well workovers. This could be considered recurring although likely spread over a couple years as some of this work was scheduled for 2012 but was deferred due to very strong production rates amid favourable heavy oil pricing. In terms of the operating cost increase, $1.00/bbl is due to higher workover costs, $0.40/bbl due to natural gas, $0.60/bbl was higher power prices, as well as volumes due to cogen units being down for maintenance. The remainder is the effect of spreading fixed costs over lower volumes.

Exhibit 2 - Guidance Changes

FOSTER CREEK December 2012 July 2013 Change Low Mid High Low Mid High Low Mid High Production Mbbl/d 55 58 60 52 55 57 -5% -5% -5% Operating costs Fuel $/bbl $2.50 $2.65 $2.80 $3.00 $3.15 $3.30 20% 19% 18% Non-fuel $/bbl $10.00 $10.60 $11.20 $11.90 $12.25 $12.60 19% 16% 13% Total $/bbl $12.50 $13.25 $14.00 $14.90 $15.40 $15.90 19% 16% 14%

Steam to oil ratio bbl/bbl 2.0 2.1 2.2 2.3 2.4 2.5 15% 14% 14%

CHRISTINA LAKE December 2012 July 2013 Change Low Mid High Low Mid High Low Mid High Production Mbbl/d 47 50 52 47 50 52 0% 0% 0% Operating costs Fuel $/bbl $2.90 $3.05 $3.20 $3.10 $3.25 $3.40 7% 7% 6% Non-fuel $/bbl $8.80 $9.30 $9.80 $9.70 $9.95 $10.20 10% 7% 4% Total $/bbl $11.70 $12.35 $13.00 $12.80 $13.20 $13.60 9% 7% 5%

Steam to oil ratio bbl/bbl 1.9 2.0 2.1 1.9 2.0 2.1 0% 0% 0%

PELICAN LAKE December 2012 July 2013 Change Low Mid High Low Mid High Low Mid High Production Mbbl/d 26 27 28 24 25 26 -8% -7% -7% Operating costs $/bbl $16.80 $17.70 $18.60 $19.00 $19.50 $20.00 13% 10% 8% Capital Expenditures $MM $560 $590 $620 $480 $500 $520 -14% -15% -16% Source: Company reports

33

Expansions on Track

■ Christina Lake phase F (25 Mbbl/d net) is 30% complete and remains on track for first oil in Q3/14, while engineering work is progressing on phase G (25 Mbbl/d net), with a 2017 start- up planned. ■ The central plant for Foster Creek phase F (22.5 Mbbl/d net) is 78% complete and still on schedule for first oil in Q3/14. Phase G (20 Mbbl/d net) is 56% complete now that pipe rack and equipment module assembly, as well as piling work are finished. First production from G is targeted for 2015. Phase H (20 Mbbl/d net) site preparation, piling work, and major equipment procurement continue with first oil planned in 2016. ■ Site preparation, engineering, and procurement continue at Narrows Lake phase A (22.5 Mbbl/d net), with a 2017 start-up in mind. ■ The revised Telephone Lake application and environmental impact assessment (EIA) was submitted in December 2011, with approval anticipated in 2014. The dewatering pilot has been running as expected with positive results. Approximately 50% of the water has been displaced and replaced by air. The pilot is designed to remove a layer of non-potable water that is sitting on top of the oil sands deposit at Telephone Lake and should be completed in Q4/13. Dewatering is not essential to the development of Telephone Lake, but the company believes it could improve the SOR by up to 30%. ■ Both well pairs at the Grand Rapids pilot are operational and the company is planning minor facility upgrades in Q3/13 to increase production. A regulatory application and EIA for the 180 Mbbl/d commercial project has been submitted and regulatory approval is expected late this year. Selloff Is Overdone and NAV Discount Is Unwarranted

■ Cenovus’ market capitalization declined by $1.3 billion yesterday. Netting off $109 million in one-time exploration charges, the market effectively took out $1.2 billion of value for guidance changes that amount to a reduction in 2013E cash flow of ~$120 million. Even if one assumes these changes are all recurring, which we don’t, we believe that a value reduction of 10x is excessive, especially for a stock trading at 6.4x 2013E cash flow. ■ With a fall of 8.4%, Cenovus is the only senior Canadian oil producer whose shares are down YTD. Its Canadian peers (HSE, IMO, SU, CNQ, COS, and MEG) are up an average of 5.7% YTD (range of 0.6%-18.1%). ■ As shown in Exhibit 3, Cenovus is trading at a 24% discount to our risked NAV estimate of $40.02. Another way of looking at this is that investors today are paying for all of the refining business, all of the conventional production, 85% of Foster Creek, 75% of Christina Lake, and none of Narrows Lake, Grand Rapids, or Borealis. These three projects contain 8.6 billion barrels of contingent resources. ■ Given the reservoir quality and the company’s track record, we feel confident about its ability to continue executing on Foster Creek and Christina Lake expansions. ■ Narrows Lake (460 MMbbl) is the same reservoir as Christina Lake so should see similar success, albeit with slightly higher capital intensity but the opportunity to incorporate solvent aided process (SAP) from the beginning, reducing SOR by ~30%. ■ While there is less certainty and higher risk associated with Grand Rapids (1.7 Bbbl) and Borealis (6.5 Bbbl), we believe Cenovus will create value with these assets and a free call option on these resources is very compelling in the hands of the top SAGD operator.

34

Exhibit 3 – NAVPS Sensitivity by Asset

Borealis $85

$75 Grand Rapids

$65 Narrows Lake

$55 Refining & Marketing Target Price $45 Conv. Oil, Gas & NGL

$35 Pelican Lake $25 Share Price Christina Lake $15 Foster Creek $5

Net debt, Tax Pools, Other ($5) Unrisked Risked Unrisked Risked Unrisked Risked Low Case Scotiabank GBM High Case (US$70/bbl, US$3.50/Mcf) (US$90/bbl, US$4.50/Mcf) (US$110/bbl, US$5.50/Mcf)

Source: Scotiabank GBM estimates.

35

Exhibit 4 – Detailed NAV

Unrisked NAV Risked NAV $MM % $/share Factor $MM % $/share Bitumen Foster Creek A-E $5,662 10% $7.13 100% $5,662 16% $7.13 Foster Creek F $1,536 3% $1.94 85% $1,306 4% $1.64 Foster Creek G $1,166 2% $1.47 80% $933 3% $1.18 Foster Creek H $1,083 2% $1.36 65% $704 2% $0.89 Foster Creek J & Optimization $1,498 3% $1.89 40% $599 2% $0.75 Foster Creek $10,946 20% $13.79 84% $9,204 26% $11.60 Christina Lake A-D $4,176 8% $5.26 100% $4,176 12% $5.26 Christina Lake E $1,171 2% $1.48 90% $1,054 3% $1.33 Christina Lake CDE Optimization $784 1% $0.99 50% $392 1% $0.49 Christina Lake F $1,234 2% $1.55 70% $864 2% $1.09 Christina Lake G $1,149 2% $1.45 55% $632 2% $0.80 Christina Lake H $2,018 4% $2.54 40% $807 2% $1.02 Christina Lake $10,532 19% $13.27 75% $7,925 23% $9.98 Narrows Lake A $706 1% $0.89 60% $424 1% $0.53 Narrows Lake B $696 1% $0.88 50% $348 1% $0.44 Narrows Lake C $550 1% $0.69 50% $275 1% $0.35 Narrows Lake $1,952 4% $2.46 54% $1,047 3% $1.32 Grand Rapids A $1,632 3% $2.06 40% $653 2% $0.82 Grand Rapids B $1,895 3% $2.39 40% $758 2% $0.95 Grand Rapids C $1,646 3% $2.07 40% $659 2% $0.83 Grand Rapids $5,173 10% $6.52 40% $2,069 6% $2.61 Borealis $15,220 28% $19.17 30% $4,566 13% $5.75 Total Bitumen $43,823 81% $55.21 57% $24,811 71% $31.26 Total Refining $3,065 6% $3.86 100% $3,065 9% $3.86 Pelican Lake & Conventional Natural Gas $1,597 3% $2.01 100% $1,597 5% $2.01 Light Oil & NGL $2,349 4% $2.96 100% $2,349 7% $2.96 Heavy Oil $3,127 6% $3.94 100% $3,127 9% $3.94 Total Pelican & Conventional $7,072 13% $8.91 100% $7,072 20% $8.91 Tax Pools, G&A, Hedging $191 0% $0.24 100% $191 1% $0.24 Enterprise Value $54,152 100% $68.22 65% $35,139 100% $44.27 Net Debt ($3,370) (6%) ($4.25) 100% ($3,370) (10%) ($4.25) Equity Value $50,782 94% $63.98 63% $31,769 90% $40.02

Net Asset Value 1P $10,334 19% $13.02 99% $10,221 29% $12.88 2P $15,619 29% $19.68 99% $15,501 44% $19.53 2P + 2C $50,782 94% $63.98 63% $31,769 90% $40.02 Source: Company reports; Scotiabank GBM estimates.

36

Exhibit 5 – Operational Summary

Source: Company reports; Scotiabank GBM estimates.

37

Exhibit 6 – Financial Summary

Source: Company reports; Scotiabank GBM estimates.

38

Company Comment Thursday, July 25, 2013, Pre-Market

(KOF-N US$141.03) Coca-Cola FEMSA, S.A.B. de C.V. (KOF L-MX MXN 178.31) Weaker South American Currencies Inhibiting Top-Line Growth Rodrigo Echagaray, MBA, CFA - (416) 945-4405 Karla B. Peña - +52 (55) 9179 5211 (Scotia Inverlat Casa de Bolsa) (Scotiabank Inverlat) [email protected] [email protected]

Rating: Sector Underperform Target 1-Yr: US$155.00 ROR 1-Yr: 11.0% Div. (NTM) US$1.52 Risk Ranking: Medium 1-Yr:MXN 203.00 Div. (Curr.) US$2.96 Valuation: 2013E-2020E DCF w/ 8.3% WACC Yield (Curr.) 2.1% Operating performance, consumer behaviour, FX Exposure Key Risks to Target: Event ■ KOF reported Q2 earnings that came in slightly below estimates.

Implications ■ On a currency neutral basis and even if excluding M&A, revenues grew ~13% in MXN. However, weaker currencies across the board more than offset the benefit of new volumes from the recent acquisitions in Mexico; hence, total revenues were flat YOY in MXN during Q2. ■ On an organic basis, volumes grew only 1.1% (3.5% once including FOQUE and Yoli) - ArcaContal reported exactly the same volume growth in Q2. Non-carbonated drinks (Jugos del Valle, Powerade, etc.) grew 7% while carbonated drinks grew only 1%. KOF reported slight market share losses at its Mexico operations and mentioned on the conference call that the competition is pricing at a sizable discount to KOF, which could limit KOF's ability to increase prices further. ■ Gross margin increased 140 bps due to a stronger peso (i.e., lower US sugar costs) but EBITDA margin increased only 100 bps due to higher SG&A in the South America division. EBITDA grew ~6% (1% below our estimates) while EPS came 5% below our estimates at MXN1.37. Recommendation ■ Revenues, EBITDA, and net income were 0%, 4%, and -4% vs. last year YTD, while multiples remain rich, in our view. We maintain our Sector Underperform rating but will be reviewing our price target and estimates in the coming days. Qtly EBITDA (M) Q1 Q2 Q3 Q4 Year EV / Capitalization EBITDA Shares O/S (M) 203.1 2011A 4,737 A 5,384 A 5,498 A 7,222 A 22,841 12.1x (ADS) 2012A 5,677 A 6,309 A 6,990 A 8,673 A 27,649 14.4x Market Cap (M) US$28,637 2013E 5,745 A 6,675 A 7,487 9,551 29,200 13.7x Float O/S (M) (ADS) 40.6 2014E 7,339 7,886 8,541 10,040 31,958 11.8x Float Value (M) US$5,727 S&P Weight 0.04% (FY-Dec.) 2010A 2011A 2012A 2013E 2014E Earnings/Share 5.27 5.55 6.54 6.61 7.32 Price/Earnings 19.3x 23.9x 29.4x 27.0x 24.4x EV/EBITDA 9.4x 12.1x 14.4x 13.7x 11.8x Revenues (M) 102,438 120,505 145,890 149,552 162,616 EBITDA (M) 20,847 22,841 27,649 29,200 31,958 EBITDA Margin 20.4% 19.0% 19.0% 19.5% 19.7%

IBES EPS 2013E: US$5.48 BVPS13E: 54.90

IBES EPS 2014E: US$6.36 ROE13E: 12.69% ScotiaView Analyst Link Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in MXN unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

39

Exhibit 1 - Q2 Results

Source: Company reports; Scotiabank GBM estimates.

ScotiaView Analyst Link

40

Company Comment Thursday, July 25, 2013, Pre-Market

Empresa Nacional de Electricidad SA (ENDESA-SN CLP 702.36) (EOC-N US$41.59) Modest Q2 EBITDA Beat, No Material Surprises Ezequiel Fernández López - +562 2692 6251 (Scotia Corredores de Bolsa Chile) [email protected]

Rating: Sector Perform Target 1-Yr: CLP 840.00 ROR 1-Yr: 23.6% Div. (NTM) $0.06 Risk Ranking: Medium 1-Yr: US$53.68 Div. (Curr.) $0.09 Valuation: DCF explicit period 2020, 8.8% WACC and 2.5% LT growth Yield (Curr.) 6.7% Potential capital increase, hydrology, commodity exposure. Key Risks to Target: Event ■ Yesterday ENDESA reported Q2/13 numbers. Earnings call to take place today at 10am EST (+1-857-244-7309, passcode 85083200). Implications ■ Quarterly physical sales at 13,325GW were virtually in line with our estimate (+3%). Core profit per MW at US$45.40 was also marginally higher, another +3%. ■ EBITDA of US$384M came in 7% higher than expected, as a result of both factors. Results were somewhat better than anticipated across all Andean countries. Despite the modest beat, we see no fundamental updates that would grant material changes to longer-term estimates. ■ Quarterly net income of US$75M was 15% below our forecast, mainly on abnormally higher effective tax rate (38.9%, one timer). Uneventful earnings release, in our view. ■ During the earnings call, we will look for clues on regional capacity expansion plans, 2H/13 Chilean dam levels outlook, and comments on the upcoming energy auctions planned by the Chilean government. Recommendation ■ We believe that eventual ramifications of the ENERSIS deal will keep shares somewhat pressured, despite attractive forward-looking valuation. Our 2014 ownership-adjusted EV/EBITDA stands at 8.7x, while we calculate record low EV/MW at US$1.1M. We rate ENDESA Sector Perform with a CLP 840 one-year price target. Qtly EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2011A $0.02 A $0.02 A $0.03 A $0.04 A $0.11 13.1x Shares O/S (M) 8,201.8 2012A $0.02 A $0.01 A $0.02 A $0.02 A $0.06 27.7x Market Cap (B) CLP 5,761 2013E $0.02 A $0.01 A $0.02 $0.03 $0.08 17.9x Float O/S (M) 3,280.7 2014E $0.09 15.5x Float Value (B) CLP 2,304 S&P Weight 0.07% (FY-Dec.) 2010A 2011A 2012A 2013E 2014E Earnings/Share $0.13 $0.11 $0.06 $0.08 $0.09 Dividends/Share $0.04 $0.06 $0.06 $0.03 $0.05 EV/EBITDA 7.9x 10.2x 8.2x 7.8x Price/Earnings 14.7x 13.1x 27.7x 17.9x 15.5x Revenues (M) $4,775 $4,974 $4,871 $4,482 $4,627 EBITDA (M) $2,106 $2,021 $1,721 $1,858 $1,940 Free Cash Flow (M) $1,153 $1,016 $799 $898 $932 Capex (M) $551 $538 $504 $540

IBES EPS 2013E: $2.96 BVPS13E: $0.66 ScotiaView Analyst Link IBES EPS 2014E: $3.40 Curr. ROE: 13.17%

Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in US$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

41

ENDESA Modest Q2 EBITDA Beat, No Material Surprises

Exhibit 1 – Q2/13 Actual and Estimates

Q2/12A Q1/13A Q2/13E YoY vs. Scotia

Revs per MW, US$ 82.1 79.9 78.5 -3% 2% Fuel per MW, US$ -42.3 -34.5 -34.3 -18% 1% Profit per MW, US$ 39.9 45.4 44.2 14% 3% Sales, GW 14,566 13,325 12,883 -9% 3% Core Profit, US$m 581 605 569 4% 6%

Net Opex, US$m -121 -112 -103 -7% 9% SG&A, US$m -103 -108 -109 5% -1%

EBITDA, US$m 357 384 357 8% 7% EBITDA per MW, US$ 24.5 28.8 27.7 18% 4%

Net Income, US$m 70 75 88 8% -15% EPS x 1,000, US$ 8.51 9.15 10.69 8% -15%

Source: Company reports; Scotiabank GBM estimates.

ScotiaView Analyst Link

42

Company Comment Wednesday, July 24, 2013, After Close

(ECA-N US$17.22) Encana Corporation (ECA-T C$17.78) Liquids Miss Offsets Cash Flow Beat Mark Polak, CFA - (403) 213-7349 Eugene Vath, CA, CFA - (403) 213-7768 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] [email protected]

Rating: Sector Perform Target 1-Yr: US$23.00 ROR 1-Yr: 38.2% Div. (NTM) $0.80 Risk Ranking: Medium Div. (Curr.) $0.80 Valuation: 1.0x our risked 2P+2C NAV less annual dividends Yield (Curr.) 4.6% Commodity prices, timing of projects, and project execution. Key Risks to Target:

Event Pertinent Revisions ■ Encana reported Q2/13 CFPS of $0.90, above our estimate and New Old consensus of $0.79 (range of $0.71-$0.87 from 20 analysts). CFPS13E $3.42 $3.41

Implications CFPS14E $3.81 $4.02 ■ Liquids production of 47.6 Mbbl/d was below our estimate of 52.2 Mbbl/d and consensus of 50 Mbbl/d. Downtime at the Musreau facility was noted as having resulted in a 3 Mbbl/d impact to the quarter. Gas production of 2.8 Bcf/d was in line with our estimate and consensus. Underlying declines should be offset in 2H/13 through well completions and tie-ins in the Haynesville, as well as initial production from Deep Panuke where first gas is expected shortly. ■ Cash flow was above our estimates due to a larger than expected cash tax recovery ($0.05/share), as well as better than expected realized prices and operating costs for natural gas in the U.S. ■ The strategy review implemented by the new CEO is underway though it may take until year end before the process is finalized. In the meantime, Encana will take a cautious approach to achieving its prior goals of increasing liquids production while larger scale A&D has been shelved. Recommendation ■ We maintain our Sector Perform rating and $23 per share one-year target. Qtly CFPS Q1 Q2 Q3 Q4 Year P/CFPS Capitalization 2010A $1.57 A $1.65 A $1.54 A $1.25 A $6.00 4.9x Shares O/S (M) 737.9 2011A $1.29 A $1.47 A $1.57 A $1.32 A $5.67 3.3x Market Cap (M) $12,707 2012A $1.39 A $1.07 A $1.23 A $1.10 A $4.79 4.1x Float O/S (M) 737.9 2013E $0.78 A $0.89 A $0.79 $0.96 $3.42 5.0x Float Value (M) $12,707 TSX Weight (FD) 0.72% (FY-Dec.) 2010A 2011A 2012A 2013E 2014E Prod-Equiv (mboe/d) 535 583 528 534 574 Natural Gas 96% 95% 94% 90% 86% Cash Flow (M) $4,439 $4,175 $3,530 $2,522 $2,802 Net Cap Exp (M) $-4,773 $-4,578 $-3,476 $-3,154 $-3,056 Free Cash Flow (M) $-334 $-403 $54 $-632 $-255 Net Debt/Cash Flow/Share 1.6x 1.3x 1.2x 1.9x 2.0x Earnings/Share $0.90 $0.54 $1.35 $0.94 $0.92 Price/Earnings 32.4x 34.3x 14.6x 18.3x 18.7x

IBES CFPS 2013E: $3.33 ScotiaView Analyst Link IBES CFPS 2014E: $4.00 Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in US$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

43

Projects Advance While New Strategy Awaits

■ Liquids light on facility downtime. Liquids production of 47.6 Mbbl/d was 9% below our assumption of 52.2 and 5% below consensus of 50 Mbbl/d. Production was impacted by downtime at the Musreau facility early in the quarter which led to a loss of ~3 Mbbl/d. Increased drilling in the Rockies region on renegotiated separation contracts along with targeted drilling will drive liquids growth in the U.S. while a second Gordondale pad to come on late in the year will increase Canadian oil production with a corporate exit target of 70-75 Mbbl/d. ■ Gas in line; new projects to provide boost in 2H. Gas production of 2.8 Bcf/d was in line with our estimate and consensus. Quarterly declines were primarily driven out of the Greater Sierra region in Canada and the Haynesville in the U.S. The company has drilled 8 Haynesville wells YTD, with 3 wells completed and 1 tied-in and producing while the other 2 are currently being brought online and should arrest regional declines through the back half of the year. The Deep Panuke platform is currently undergoing final commissioning and should begin producing first gas shortly. ■ Cash flow beats estimates. Cash flow was above our estimates due to a larger than expected cash tax recovery ($0.05/share), as well as better than expected realized prices and operating costs for natural gas in the U.S. ■ Strategy still taking shape. The new CEO has assembled a strategy development team to review the asset base from the bottom up and assess competitive positions at the play level with the process expected to complete by year end. In the interim, while some smaller JV activity is possible, macro decisions on A&D will be put on hold. All options are on the table as part of the review process, including the dividend. Though the early DRIP participation is encouraging, we see a dividend cut as a logical source of funds to maintain sustainability while the business transitions toward core holdings and higher liquids content. ■ Capital discipline. Full year capital is expected to come in toward the low end of the guidance range of $3.0-$3.2 billion. During a mid-year capital review, $300 million of capital savings were brought forward with $90 million allocated (mostly in U.S.) and the remainder going to the balance sheet. ■ Prudent hedging. The company increased its 2013 hedge position from 1,515 MMcf/d at $4.39/Mcf to 2,255 Mmcf/d (~75% of H2/13 production) at $4.37/Mcf. In addition, the company has ~50% of its AECO basis exposed production hedged through either financial or physical contracts for 2013-2015 which will help bolster Canadian production economics through what we believe will be a multi-year wider basis gap. ■ Maintain neutral stance. We are increasingly encouraged at the potential upside from Encana’s Duvernay position, which we believe is the highest quality in the play. We also believe the TMS could offer significant upside but have less confidence given its earlier stage of development. Doug Suttles appears to be the right person for the job, although it is an admittedly challenging one to lower the cost structure of a company built in a higher gas price environment. At 5.3x 2014E EV/DACF, a 15% premium to 2P NAV and a 28% discount to risked 2P+2C NAV we believe Encana is fairly valued, particularly given the company’s funding gap. We remain neutral on the shares pending clarity on future strategy and the potential for a dividend cut as part of that new strategy.

44

Exhibit 1 – NAVPS Sensitivity By Asset

$50 Deep Panuke $45 Other Canada $40 Clearwater $35 Greater Sierra $30

$25 Target Price Bighorn

$20 Cutbank Ridge

$15 Peace River Arch Share Price $10 Other U.S. $5 Haynesville $0 Texas ($5) Piceance ($10) Unrisked Risked Unrisked Risked Unrisked Risked Jonah Low Case Scotiabank GBM High Case (US$70/bbl, US$3.50/Mcf) (US$90/bbl, US$4.50/Mcf) (US$110/bbl, US$5.50/Mcf) Net Debt

Source: Scotiabank GBM estimates.

45

Exhibit 2 – Detailed NAV

Net Volumes Unrisked NAV Risked NAV Bcfe % MMcfe/d % RLI $MM % $/share Factor $MM % $/share Piceance Proved Reserves 1,400 2% 459 14% 8.4 $1,196 4% $1.54 100% $1,196 5% $1.54 Probable Reserves 600 1% 0 0% n/a $145 1% $0.19 100% $145 1% $0.19 2C Resources 3,600 5% 0 0% n/a $46 0% $0.06 90% $41 0% $0.05 2P + 2C 5,600 8% 459 14% 33.4 $1,386 5% $1.79 100% $1,382 6% $1.78 Jonah Proved Reserves 1,600 2% 354 11% 12.4 $1,272 5% $1.64 100% $1,272 6% $1.64 Probable Reserves 600 1% 0 0% n/a $194 1% $0.25 100% $194 1% $0.25 2C Resources 300 0% 0 0% n/a $105 0% $0.14 75% $79 0% $0.10 2P + 2C 2,500 4% 354 11% 19.4 $1,571 6% $2.02 98% $1,545 7% $1.99 Haynesville Proved Reserves 2,000 3% 398 12% 13.8 $1,732 6% $2.23 100% $1,732 8% $2.23 Probable Reserves 2,000 3% 0 0% n/a $1,613 6% $2.08 100% $1,613 7% $2.08 2C Resources 3,900 6% 0 0% n/a $2,082 7% $2.68 60% $1,249 5% $1.61 2P + 2C 7,900 12% 398 12% 54.4 $5,427 20% $6.99 85% $4,594 20% $5.92 Texas Proved Reserves 400 1% 137 4% 8.0 $496 2% $0.64 100% $496 2% $0.64 Probable Reserves 400 1% 0 0% n/a $223 1% $0.29 100% $223 1% $0.29 2C Resources 4,000 6% 0 0% n/a $134 0% $0.17 40% $53 0% $0.07 2P + 2C 4,800 7% 137 4% 95.8 $853 3% $1.10 91% $772 3% $0.99 Other United States Proved Reserves 800 1% 299 9% 7.3 $1,000 4% $1.29 100% $1,000 4% $1.29 Probable Reserves 800 1% 0 0% n/a $193 1% $0.25 100% $193 1% $0.25 2C Resources 19,400 29% 0 0% n/a $2,254 8% $2.90 30% $676 3% $0.87 2P + 2C 21,000 31% 299 9% 192.6 $3,447 12% $4.44 54% $1,870 8% $2.41 Cutbank Ridge Proved Reserves 1,500 2% 465 14% 8.8 $935 3% $1.20 100% $935 4% $1.20 Probable Reserves 600 1% 0 0% n/a $123 0% $0.16 100% $123 1% $0.16 2C Resources 1,500 2% 0 0% n/a $248 1% $0.32 90% $223 1% $0.29 2P + 2C 3,600 5% 465 14% 21.2 $1,306 5% $1.68 98% $1,281 6% $1.65 Bighorn Proved Reserves 1,300 2% 272 8% 13.1 $997 4% $1.28 100% $997 4% $1.28 Probable Reserves 600 1% 0 0% n/a $32 0% $0.04 100% $32 0% $0.04 2C Resources 1,000 1% 0 0% n/a $22 0% $0.03 60% $13 0% $0.02 2P + 2C 2,900 4% 272 8% 29.2 $1,050 4% $1.35 99% $1,042 5% $1.34 Peace River Arch Proved Reserves 900 1% 141 4% 17.5 $1,061 4% $1.37 100% $1,061 5% $1.37 Probable Reserves 600 1% 0 0% n/a $561 2% $0.72 100% $561 2% $0.72 2C Resources 100 0% 0 0% n/a $78 0% $0.10 90% $70 0% $0.09 2P + 2C 1,600 2% 141 4% 31.2 $1,701 6% $2.19 100% $1,693 7% $2.18 Clearwater Proved Reserves 1,500 2% 377 12% 10.9 $1,042 4% $1.34 100% $1,042 5% $1.34 Probable Reserves 300 0% 0 0% n/a $0 0% $0.00 100% $0 0% $0.00 2C Resources 100 0% 0 0% n/a $0 0% $0.00 100% $0 0% $0.00 2P + 2C 1,900 3% 377 12% 13.8 $1,042 4% $1.34 100% $1,042 5% $1.34 Greater Sierra Proved Reserves 1,300 2% 223 7% 16.0 $606 2% $0.78 100% $606 3% $0.78 Probable Reserves 800 1% 0 0% n/a $252 1% $0.32 100% $252 1% $0.32 2C Resources 2,400 4% 0 0% n/a $1,765 6% $2.27 90% $1,589 7% $2.05 2P + 2C 4,500 7% 223 7% 55.3 $2,623 9% $3.38 93% $2,446 11% $3.15 Other Canada Proved Reserves 400 1% 5 0% 241.2 $137 0% $0.18 100% $137 1% $0.18 Probable Reserves 300 0% 0 0% n/a $90 0% $0.12 100% $90 0% $0.12 2C Resources 9,100 14% 0 0% n/a $3,097 11% $3.99 30% $929 4% $1.20 2P + 2C 9,800 15% 5 0% 5,909.9 $3,325 12% $4.28 35% $1,157 5% $1.49 Deep Panuke 679 1% 107 3% 17.4 $687 2% $0.88 85% $584 3% $0.75 Duvernay $1,877 7% $2.42 100% $1,877 8% $2.42 PetroChina Carry (Duvernay) $690 2% $0.89 100% $690 3% $0.89 Mitsubishi Carry (Cutbank Ridge) $848 3% $1.09 100% $848 4% $1.09 Tax Pools, G&A and Hedges ($62) (0%) ($0.08) 100% ($62) (0%) ($0.08) Enterprise Value 66,779 100% 3,235 100% 56.6 $27,771 91% $35.77 82% $22,761 89% $29.31 Net Debt ($4,310) (16%) ($5.55) 100% ($4,310) (19%) ($5.55) Equity Value 66,779 100% 3,235 100% 56.6 $23,461 84% $30.22 79% $18,451 81% $23.76

Net Asset Value 1P 13,779 21% 3,235 100% 11.7 $8,328 30% $10.73 99% $8,225 36% $10.59 2P 21,379 32% 3,235 100% 18.1 $11,754 42% $15.14 99% $11,651 51% $15.00 2P + 2C 66,779 100% 3,235 100% 56.6 $23,461 84% $30.22 79% $18,451 81% $23.76 Source: Scotiabank GBM estimates.

46

Exhibit 3 – Operational & Financial Summary

Source: Company reports; Scotiabank GBM estimates.

47

Intraday Flash Wednesday, July 24, 2013 @ 12:23:04 PM (ET)

(FBR-N US$11.33) Fibria Celulose S.A. Q2/13 In Line; Should Benefit from Stronger US$ Benoit Laprade, CPA, CA, CFA - (514) 287-3627 Cory Brumer, MBA, CFA - (514) 287-3613 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] [email protected]

Rating: Sector Underperform Target 1-Yr: US$11.75 ROR 1-Yr: 3.7% Div. (NTM) R$0.00 Risk Ranking: High Div. (Curr.) R$0.00 Valuation: 8.0x NTM EV/EBITDA 1-Year Forward Yield (Curr.) 0.0% Lower-than-expected pulp prices and demand, FX Key Risks to Target:

Event Pertinent Revisions ■ Fibria reported adjusted EBITDA of R$647M, compared to our New Old R$656M estimate and consensus of R$649M. Target: Implications 1-Yr $11.75 $11.00 ■ The R$9M variance stems from stronger-than-expected pulp prices EBITDA13E BRL 2,658 BRL 2,549 (R$79M), more than offset by higher-than-expected unit cash costs EBITDA14E BRL 2,698 BRL 2,548 (R$45M), Other Manufacturing Costs (R$38M), and SG&A (R$5M). New Valuation: 8.0x NTM EV/EBITDA 1-Year Forward ■ Net debt was R$8.3B (3.3x EBITDA in R$ terms and 3.0x in US$ for Old Valuation: covenant purposes, down from 3.1x at the previous quarter). Free cash

7.5x NTM EV/EBITDA 1-Year Forward flow in the quarter was R$234M. ■ While we continue to be cautious on Eucalyptus pricing given the significant amount of net new capacity coming on stream, the ramp-up of Eldorado last quarter did not have any meaningful impact given demand increases and closures/conversions. In addition, a stronger US$ should significantly impact EBITDA in coming quarters while the balance sheet already felt the full impact of the recent FX move. ■ We revised our R$/US$ forecast to 2.1064 in 2013 (from 2.0564) and to 2.17 (from 2.0925) in 2014. Recommendation ■ We maintain our Sector Underperform rating. However, we raised our target to US$11.75 using an 8.0x EV/EBITDA multiple, up from 7.5x. This reflects both a revised EBITDA forecast and a multiple more in line with FBR's historical multiple as it is making progress on deleveraging. Qtly EBITDA (M) Q1 Q2 Q3 Q4 Year EV / Capitalization EBITDA Shares O/S (M) 467.9 2011A R$624 A R$490 A R$476 A R$390 A R$1,980 8.1x Market Cap (M) US$5,302 2012A R$377 A R$550 A R$573 A R$753 A R$2,253 8.7x Float O/S (M) 188.6 2013E R$565 A R$647 A R$657 R$788 R$2,658 8.2x Float Value (M) US$2,137 2014E R$615 R$615 R$636 R$832 R$2,698 7.8x S&P Weight 0.04%

(FY-Dec.) 2010A 2011A 2012A 2013E 2014E Earnings/Share R$1.28 R$-2.38 R$-1.33 R$-1.21 R$0.27 Cash Flow/Share R$5.26 R$3.86 R$3.46 R$3.08 R$3.80 Price/Earnings 20.7x n.m. n.m. n.m. 92.3x Relative P/E 1.2x n.m. n.m. n.m. 5.6x Revenues (M) R$7,050 R$5,855 R$6,173 R$6,564 R$6,765 EBITDA (M) R$2,749 R$1,980 R$2,253 R$2,658 R$2,698 Current Ratio 1.5x 2.7x 2.5x 2.3x 2.7x

EBITDA/Int. Exp 7.5x 1.1x 1.3x 1.5x 5.1x ScotiaView Analyst Link IBES EPS 2013E: R$0.06 BVPS13E: R$26.19 IBES EPS 2014E: R$0.42 Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in BRL unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

48

Q2/13 In Line ■ Fibria reported adjusted EBITDA of R$647M, compared to our R$656M estimate and consensus of R$649M. This compares with adjusted EBITDA of R$565M in the previous quarter and R$550M last year. ■ The R$9M EBITDA variance stems from stronger-than-expected pulp prices (R$79M), more than offset by higher-than-expected unit cash costs (R$45M), Other Manufacturing Costs (R$38M), and SG&A (R$5M). ■ Pulp revenues were up 13% QOQ to R$1.65B primarily due to 7% higher volumes (Exhibit 1), as well as 8% higher prices (Exhibit 2). Pulp revenues were 5% above our expectations due to better-than-expected prices, as volumes were in line with our estimate. Exports represented 92% of sales volume in the quarter, with the largest demand coming from Europe at 43% of total volumes, followed by N.A. at 28% and Asia at 21%. ■ Pulp cash costs came in at R$546/t, compared to R$507/t in the previous quarter and R$505/t last year. The QOQ increase was largely due to maintenance downtime in the quarter; cash costs would have been R$488/t excluding the downtime. Cash costs were R$36/t, or 7% above our expectations.

Exhibit 1 - Shipments ('000 t) Exhibit 2 - Prices (R$/t)

Q2/13 Q1/13 Q2/12 Q2/13 Q1/13 Q2/12 Domestic Market Pulp 102 118 132 Domestic Market Pulp 1,063 1,045 913 Export Market Pulp 1,168 1,068 1,133 Export Market Pulp 1,322 1,225 1,196 Total Pulp 1,269 1,186 1,265 Total Pulp 1,301 1,207 1,166 Source: Company reports. Source: Company reports.

■ Net debt was R$8.3B (3.3x EBITDA in R$ terms and 3.0x in US$ for covenant purposes, down from 3.1x at the previous quarter). Free cash flow in the quarter was R$234M. ■ While we continue to be cautious on Eucalyptus pricing given the significant amount of net new capacity coming on stream, the ramp-up of Eldorado last quarter did not have any meaningful impact given demand increases and closures/conversions. In addition, a stronger US$ should significantly impact EBITDA in coming quarters while the balance sheet already felt the full impact of the recent FX move. Pricing is shown in Exhibit 3. ■ Fibria continues to fight a tax assessment notice from the Brazilian Federal Revenue Service for R$1.7B. The tax assessment relates to the swap transaction between the former VCP and International Paper in 2007. The company believes that it fully observed all applicable rules and regulations, and will defend itself (the company filed an appeal on January 9, 2013). Of the total amount, R$1.1B is for interest and penalties. No provision has been recorded for any potential penalties. ■ We revised our R$/US$ forecast to 2.1064 in 2013 (from 2.0564) and to 2.17 (from 2.0925) in 2014. ■ We maintain our Sector Underperform rating. However, we raised our target to US$11.75 using an 8.0x EV/EBITDA multiple, up from 7.5x. The new target reflects both a revised EBITDA forecast (benefitting from a stronger US$ as ~90% of FBR’s sales are denominated in US$) and a multiple more in line with FBR’s historical multiple as it is making progress on deleveraging the balance sheet. While debt, expressed in R$, increased as a result of the recent FX move (balance sheet is marked to market as of June 30, 2013), FBR should enjoy stronger EBITDA should the US$ remain strong (or strengthen further), which could be used to deleverage further.

49

Exhibit 3 - Eucalyptus Pulp Prices

$1,000

$900

$800

$700

$600 US$/t

$500

$400

$300

$200 00 01 02 03 04 05 06 07 08 09 10 11 12 13

N.A. Europe Chi na

Source: RISI; Company reports; Scotiabank GBM.

ScotiaView Analyst Link

50

Company Comment Thursday, July 25, 2013, Pre-Market

Grupo Aeroportuario Centro Norte, S.A.B. (OMAB-Q US$27.17) (OMA B-MX MXN 43.42) de C.V. Another Strong Report as ROE Continues Rising Rodrigo Echagaray, MBA, CFA - (416) 945-4405 Karla B. Peña - +52 (55) 9179 5211 (Scotia Inverlat Casa de Bolsa) (Scotiabank Inverlat) [email protected] [email protected]

Rating: Sector Outperform Target 1-Yr: US$31.00 ROR 1-Yr: 18.8% Div. (NTM) US$1.27 Risk Ranking: Medium 1-Yr: MXN 49.00 Div. (Curr.) US$1.08 Valuation: 2014-2020 50%-DCF w/ 8% WACC & 50%-9x EV/EBITDA Yield (Curr.) 4.0% Key Risks to Target: Govmnt. regulation, troubled domestic airlines

Event Pertinent Revisions ■ Oma reported positive figures for Q2 with EBITDA growing 15% (2% New Old ahead of estimates). ROE LTM reached ~16%, the highest ever. Target: Implications 1-Yr $31.00 $30.00 ■ Revenues grew 11% due to passenger growth of 5.6% and a remarkable EBITDA13E MXN 1,747 MXN 1,717 ~10% YOY growth in commercial revenues per PAX, driven by 10% EBITDA14E MXN 1,990 MXN 1,945 revenue growth in the Mexico City airport hotel, the opening of 24 new commercial spaces (i.e., shops, restaurants), and higher baggage screening revenues. Oma has reported growth in commercial revenues per PAX for the past 21 consecutive quarters, and we expect this to continue due to upcoming initiatives such as the Industrial Park and new Hotel at the Monterey airport. ■ Prospects for PAX growth also look promising as airlines are expecting aircrafts in the coming months (i.e., Interjet may add one Sukoi aircraft per month) and 8 new routes were opened at Oma airports during Q2. ■ EBITDA margin increased 160 basis points for EBITDA growth of 15% and EPS growth of 35% (due to lower taxes). We expect the company to finish the year ahead of guidance with an EBITDA margin of ~55%. Also, we have slightly increased our commercial revenue estimates slightly (and CAPEX) to account for the new initiatives. Recommendation ■ We maintain our Outperform rating as we increase our price target to MXN49 (from MXN47) and US$31 (from US$30). Qtly EBITDA (M) Q1 Q2 Q3 Q4 Year EV / Capitalization EBITDA Shares O/S (M) 49.9 2011A 273 A 297 A 339 A 342 A 1,250 7.8x (ADS) 2012A 350 A 353 A 425 A 382 A 1,511 9.9x Market Cap (M) US$1,356 2013E 393 A 405 A 499 450 1,747 10.7x Float O/S (M) 20.5 2014E 460 450 567 513 1,990 9.5x Float Value (M) US$555.8

(FY-Dec.) 2010A 2011A 2012A 2013E 2014E Earnings/Share 1.66 1.54 2.05 2.31 2.52 Passengers (M) 11.59 11.77 12.59 13.34 14.22 Price/Earnings 14.4x 14.1x 17.1x 18.4x 16.9x EV/EBITDA 10.7x 7.8x 9.9x 10.7x 9.5x Revenues (M) 2,144 2,459 2,820 3,154 3,530 EBITDA (M) 954 1,250 1,511 1,747 1,990 EBITDA Margin 44.5% 50.8% 53.6% 55.4% 56.4%

IBES EPS 2013E: US$1.49 BVPS13E: 14.65 IBES EPS 2014E: US$1.65 ROE13E: 15.02% ScotiaView Analyst Link Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in MXN unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

51

Exhibit 1 - Oma: Q2/13 results

Source: Company reports; Scotiabank GBM estimates.

Exhibit 2 – LTM ROE OMA

Source: Company reports; Scotiabank GBM.

52

Exhibit 3 – Oma Operating Assumptions

Source: Company reports; Scotiabank GBM estimates.

ScotiaView Analyst Link

53

Company Comment Thursday, July 25, 2013, Pre-Market

(L-T C$49.46) Loblaw Companies Limited L Q2 Shows Stars Becoming Aligned as Momentum Evident Patricia A. Baker, MBA, PhD - (514) 287-4535 James Allison - (416) 863-7996 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] Richard Gervais, CPA, CA - (416) 863-5927 (Scotia Capital Inc. - Canada) Rating: Sector Outperform Target 1-Yr: C$60.00 ROR 1-Yr: 23.3% Div. (NTM) $0.96 Risk Ranking: Low Div. (Curr.) $0.86 Valuation: 5% F14 FCF Yield Yield (Curr.) 1.7% Heightened competitive pricing pressures, prolonged deflation, disruption to ops from Supply Chain and IT overhaul Key Risks to Target:

Event Pertinent Revisions ■ While market focus on L is on strategic actions (i.e., REIT creation New Old and a bold M&A move on Shoppers Drug Mart), core grocery ops are EPS13E $2.49 $2.45 overshadowed. Long standing lack of performance and a string of EPS14E $2.68 $2.64 disappointments fostered concern and skepticism on an eventual turn. New Valuation: Solid Q2 results though underscore underlying momentum, owed to 5% F14 FCF Yield efforts led by operationally driven V.Trius. Continued momentum, following on the first real signs in Q1, suggests timing on major Old Valuation:

FCF Yield strategic moves to set a path for L's longer-term growth is very much related to the improved trends. As such, this is a fine orchestration. Implications ■ L Q2 EPS $0.63, beating consensus ($0.58) and forecast ($0.60). Top line momentum continues, with SSS +1.1% with nil inflation. L efforts in store and investments in customer proposition are delivering sales, share and volume growth, an absolute imperative. The Q2 results see L up guidance for the FY to one of "mid-single digit growth in operating income" from a prior outlook calling for "low single digit growth in operating income." Recommendation ■ EPS forecasts move higher to $2.49 and $2.68 for F13 and F14. We stay SO and hold our target price at $60. We view proposed purchase of SC as a solid strategic move to drive a far better positioning for L over the next decade. Improved momentum in core business is not only welcome, but fundamental to execution of the broader strategy. Qtly EPS Q1 Q2 Q3 Q4 Year P/E Capitalization 2011A $0.58 A $0.70 A $0.80 A $0.63 A $2.71 14.2x Shares O/S (M) 283.1 2012A $0.43 A $0.57 A $0.79 A $0.67 A $2.46 17.0x Market Cap (M) $14,002 2013E $0.48 A $0.63 $0.89 $0.49 $2.49 19.9x Float O/S (M) 98.1 2014E $2.68 18.4x Float Value (M) $4,854 TSX Weight (FD) 0.51% (FY-Dec.) 2010A 2011A 2012A 2013E 2014E Earnings/Share $2.42 $2.71 $2.46 $2.49 $2.68 Dividends/Share $0.84 $0.84 $0.85 $0.94 $1.06 Price/Earnings 16.7x 14.2x 17.0x 19.9x 18.4x Revenues (M) $30,836 $31,250 $31,604 $32,391 $33,843 EBITDA (M) $1,973 $2,074 $2,034 $2,130 $2,228 EBITDA Margin 6.4% 6.6% 6.4% 6.6% 6.6% IBES EPS 2013E: $2.57 BVPS13E: $27.18

IBES EPS 2014E: $2.82 ROE13E: 9.97% ScotiaView Analyst Link Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in C$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

54

Hard Work to Align the Stars, but Align They Have

■ A point made repeatedly by L management in discussion around the strategic rationale behind the proposed acquisition of health and wellness leader Shoppers Drug Mart is that this was indeed not a hasty move, as some have suggested, but rather this bold move has been a “Shoppers Drug Mart has long time in the making. Shoppers has been on the Loblaw strategic agenda for many been at the top of our strategic years. Reinforcing this very point, Executive Chairman Galen Weston noted on the Q2 acquisition list for several earnings call that “Shoppers has been at the top of the strategic acquisition list for several years.” years….but until now the timing wasn’t right.” It is, in our view, important to recognise that -Galen Weston, Executive the reference to the timing refers not only to currency, which has been discussed well in the Chairman context of the creation of the Choice REIT, but also to the state of the core Loblaw food distribution business. ■ An imperative to enable Loblaw to make such a bold and profound strategic move with any

real confidence rested in fixing the core. We have heard this company call to action on “fix the core” for seven plus years. It is our belief that the real commitment to actually to do so “Fixing the core an only commenced two years ago or so. Indeed, yes the massive spend and build out of a new imperative.…” infrastructure and supply chain have been underway far longer and were necessary, but at the same time in no way sufficient. Loblaw needed an operationally focused leadership and a serious commitment to put the consumer at the forefront of its market proposition. In the absence of just such a commitment and measured progress on a fix, taking on such a large strategic undertaking as Shoppers would have been, in our view, doomed to fail. We note that it was with the hire and arrival of Vicente Trius in the Fall of 2011 that the real work began. Granted, although reputed as a solid operator and as a food focused executive, investors did need to see evidence a sound plan would be undertaken and that the Board and family would wholly back his efforts. An important signal that L was about to embark on a strategy that would see them addressing the somewhat tarnished customer experience and commit to getting back to where they once were came with the announcement that there would be an investment on an ongoing basis in the customer proposition. This was flagged on the Q4 11 release that noted said investments would commence in Q1 F12. Certainly we believe that what we are seeing in improved store performance and the return to + comps rests in this particular strategy. ■ We would argue at the same time that the real evidence of underlying positive momentum in the core retail food operations that showed up first in the Q1 numbers and remained evident in Q2, 18 months more or less after deploying a customer first strategy speaks to a methodical and well-orchestrated plan to position LCL best to embark on such bold strategic move forward. Visibility on Loblaw getting back its “food groove” was very much an element that figured in the timing of the pursuit of Shoppers. This acquisition could prove to be one of the most profound strategic moves on the part of the Weston family and as such nothing could be left to chance, not the least the underlying health of the core business. ■ A sound strategic rationale exists for this particular business combination. As we indicated at the time of the announced deal, acquiring Shoppers “solves” for two pressing and “Solving for health & wellness important strategic agendas for Loblaw. How does Loblaw capitalize on the inherent and urbanization...” opportunities that rest in a Health & Wellness business model and how can Loblaw exploit a growing trend toward smaller, convenient and urban? Shoppers is the solution. It is the leading health and wellness player in Canada, bar none, with enviable scale and expertise. With the rollout of food to their stores coupled with a decade of strong square footage growth that saw Shoppers tie up the best urban locations in the country acted as a foil to grocers like Loblaw who for their own reasons were late to the urbanization party. Acquiring Shoppers gets Loblaw directly to its longer term dream of where it believed it should be aiming for in the Canadian landscape.

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And There Is a Food Revival in the Works

■ With the opening of the flagship Maple Leaf Garden store in Toronto on November 30, 2011, Loblaw signalled the potential to a return to food innovation and excitement. This 85,000 square foot store located in what was once the home of the Toronto Maple Leafs permitted Loblaw to play with and go after food in a manner it seemed up to that point to have forgotten. MLG offered to Toronto shoppers a vibrant and innovative urban shopping experience. It is an impressive box with many specialty markets and seriously differentiated food concepts. The customer experience is outstanding. At the time, management noted that this one-off flagship store would serve as a living lab for Loblaw to test product, merchandising and displays to inform new store concepts and to also provide for enhanced offers and experience across its existing conventional business across the country. Just last week the company opened two new stores, one in Vancouver-CityMarket and one in Sherbrooke QC –le Provigo marche that embody the learnings that have come from not only MLG but also touring the best in food retail around the world. Both efforts are impressive and indeed elevate substantially the experience. They speak to the fact there has been much work behind the scene at Loblaw in the last eighteen months focused on food, focused on delivering an exciting new format to Canadians. We choose here to let a series of photographs provided by the company to tell that story.

CityMarket store, Vancouver CityMarket store, Vancouver

CityMarket store, Vancouver CityMarket store, Vancouver

56

CityMarket store, Vancouver

Le Provigo Marche store, Sherbrooke Le Provigo Marche store, Sherbrooke

57

Operational Highlights

■ L reported adjusted Q2/F13 EPS of $0.63, up 14.5% from $0.55 last year and five cents higher than consensus at $0.58. Exhibit 1 – SSS Trends Show Traction Taking Place Results were above our forecast of $0.60. 4.0% ■ Consolidated revenue increased 2.0% to $7.52B compared SSS to $7.38B last year. Retail sales increased 1.9% to $7.37B 3.0% and Financial Services revenue increased 6.5% to $148M. 2.0% ■ Retail same store sales in the quarter were up 1.1% (+0.2% in Q2/F12), and was slightly below our estimate of +1.2%. 1.0% YOY SSS for the quarter was impacted negatively by 15- 0.0% store Sales Growth 20bp due to the loss of one week of pre-Easter shopping. - Both basket and traffic were up in the quarter, while tonnage -1.0% was flat. Growth was also helped by mix. Sales growth in Same -2.0% food was modest, while growth in fuel was strong. Sales Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 growth at the drugstore segment was flat YOY. Sales in general merchandise, excluding apparel, declined marginally F2010 F2011 F2012 F2013 and sales in apparel were strong, which saw a positive impact Source: Company reports. from the wholesale contract associated with the rollout of Joe Fresh to the JCP network in the US. The company saw no internal food price inflation (2012 saw modest inflation), Exhibit 2 – Two-Year SSS Stack Rate Trend lower than average food CPI in the quarter of 1.5%. ■ Q2 saw gross profit dollars up 2.0% to $1.64B, largely 3.0% 2 Yr SSS Stack Rate reflecting the impact of the higher revenue. The gross 2.0% margin was flat YOY at 22.3%. Margin improvements from lower transportation costs and improved shrink were offset by 1.0%

unfavourable sales mix and continued investments in price. 0.0% ■ Consolidated EBITDA increased 9.4% to $513M, ahead of our forecast of $490M. EBITDA margin expanded 46 bp to -1.0% 6.8%. Retail EBITDA grew 7.1% to $483M, while FS -2.0% EBITDA rose 67% to $30.0M. Consolidated operating Stack YearTwo Rate SSS income was up 11.0% YOY to $322M, on retail operating -3.0% income of $294M (+6.9% YOY) and FS operating income of Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 $28M (+86.7% YOY). F2010 F2011 F2012 F2013 ■ Management also revised their guidance upwards in the Source: Company reports. quarter for full F13 results, now expecting mid-single digit growth in operating income for the year from a prior expectation of modest or low-single digit growth in operating Exhibit 3 – Retail Drives YOY Operating Income Increases income. The revised guidance and Q2 results point to L continuing to see greater traction in the market. ■ F13 full year CAPEX guidance remains unchanged at $1B,

with CAPEX coming in at $190M for the quarter. 120 ■ SAP rollout continues to be on track, with management 100 indicating on the call it expects full rollout for the bulk of its 51 stores by the end of F14, in line with previous estimates. 80 Management indicated it expects SAP implementation across 60 32 300 stores by end of F13. 29 40 13 ■ L opened three new corporate and franchise stores and 20 19 22

closed one for the quarter, for a net addition of one, for net Increase in Adj. Operating Income sq. footage growth of 0.2M for the quarter. 0 ■ L did not repurchase any stock in Q2, but management Q2F13 Q2 F13 YTD indicated on the call that it had purchased 1.50M in the Retail Financial Services Total Adjusted* subsequent quarter and that no material stock repurchases are anticipated for the remainder of F13. *Q2 F13 YTD operating income includes one-time gain of $51.0M; Source: Company reports.

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■ Loyalty program continues to show promise with management indicating a 30% penetration had been achieved in the quarter. Current membership stands at about 500,000 after two and half months post implementation. Of that amount, 200,000 members were digital, which management indicated have a much higher basket. A digital conversion program is currently underway to further capitalize on this trend. ■ L provided further guidance on the allocation of synergies for the SC acquisition, indicating that the majority of synergies in year one will be related to COGS with some additional savings in marketing expense. In year two, COGS will continue to be the greatest contributor, with additional opportunities coming from market expense and supply chain. In year three, management sees incremental opportunities from supply chain, as well as additional synergies in IT and store support. Management also stated that a comprehensive integration plan was underway and will be led by a member of the senior executive team, with further information on both timing and targets being available in the months to come. Valuation

■ Our target price remains at $60, as improved assumptions modeled on L from this quarter are offset by a more conservative SC roll-up date assumption of February 1, 2014 (vs. previous assumption of beginning of F14). Some upside exists on the stock should the merger close in the earlier time frame guided (6 months), with an estimated price of $63. We continue to value the company on a 5% F14 free cash flow basis. We will not incorporate SC into our earnings profile until post-merger vote.

ScotiaView Analyst Link

59

Intraday Flash Wednesday, July 24, 2013 @ 12:03:14 PM (ET)

(LUN-T C$4.24) Lundin Mining Corporation Mixed Results at Tenke Orest Wowkodaw, CPA, CA, CFA - (416) 945-4526 Dalton Baretto, MBA, CFA - (416) 863-7623 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] [email protected]

Rating: Sector Outperform Target 1-Yr: C$5.75 ROR 1-Yr: 35.6% Div. (NTM) $0.00 Risk Ranking: High Div. (Curr.) $0.00 Valuation: 50% of 7.0x 2014E EV/EBITDA + 50% of 10% NAV Yield (Curr.) 0.0% Commodity, operating, financing, development, political Key Risks to Target:

Event Pertinent Revisions ■ Freeport McMoRan reported Q2/13 results, including the operating New Old results for Tenke Fungurume (24% owned by Lundin Mining).

Adj. EPS13E US$0.23 US$0.24 Implications ■ Overall, Q2/13 operating performance at Tenke was mixed. While copper production of 122m lbs was 7% above our forecast of 114m lbs, cobalt production of 5m lbs was 29% below our forecast of 7m lbs. Cash operating costs of $1.23/lb Cu were slightly higher than our forecast of $1.17/lb. ■ Based on the 1H/13 performance, Freeport revised its 2013 Tenke sales guidance to 450m lbs of copper (up from 435m lbs) and 24m lbs of cobalt (down from 28m lbs) at a cash cost of $1.24/lb Cu (previously $1.18/lb). The revised guidance compares with our previous estimates of 441m lbs of Cu, 28m lbs of Co, and unit costs of $1.19/lb Cu. ■ We estimate Tenke net cash flow to Lundin of $29.4 million in Q2/13, and $101 million for 2013, versus previous guidance of $130 million. The net impact to our estimates was negligible, although we have lowered our Q2/13 EPS estimate to $0.03 (from $0.04). Recommendation ■ Despite the relatively mixed results at Tenke, we reiterate our Sector Outperform rating and our C$5.75 target price on Lundin. Our target price remains based on a 50/50 weighting of 7x our 2014 EBITDA estimate (C$4.86) and 1x our 10% NAVPS estimate (C$6.55). Qtly Adj. EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2011A $0.14 A $0.10 A $0.04 A $0.12 A $0.41 9.3x Shares O/S (M) 584.2 2012A $0.11 A $0.08 A $0.08 A $0.08 A $0.35 14.9x Market Cap (M) C$2,477 2013E $0.07 A $0.03 $0.06 $0.07 $0.23 18.0x Float O/S (M) 510.2 2014E $0.07 $0.05 $0.05 $0.07 $0.25 16.3x Float Value (M) C$2,163 TSX Weight 0.14% (FY-Dec.) 2011A 2012A 2013E 2014E 2015E Adj Earnings/Share $0.41 $0.35 $0.23 $0.25 $0.43 Cash Flow/Share $0.53 $0.33 $0.31 $0.31 $0.62 Price/Earnings 9.3x 14.9x 18.0x 16.3x 9.6x Revenues (M) $784 $721 $700 $697 $1,127 EBITDA (M) $495 $428 $421 $433 $703 IBES EPS 2013E: $0.30 BVPS13E: $6.14 NAV: C$6.55 IBES EPS 2014E: $0.38 ROE13E: 3.78% P/NAV: 0.65x

Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in US$ unless otherwise indicated. ScotiaView Analyst Link

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

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Q2/13 Tenke Operating Results; Strong Copper Production but Cobalt Weak ■ Freeport McMoRan released its Q2/13 results on Tuesday, July 23, including the operating results for the Tenke Fungurume copper-cobalt mine located in the Democratic Republic of Congo (DRC). Freeport is the operator of Tenke. The mine is owned by Freeport (56%), Lundin Mining (24%), and Gecamines (20%). ■ Q2/13 copper production of 122 million lbs was 6.8% above our forecast of 114 million lbs, as markedly higher grades more than offset slightly lower throughput and recoveries. We note that Q2/13 copper production represents an impressive 114% of the 430 million lbs per annum Phase II nameplate. Exhibit 1 details Tenke’s Q2/13 operating performance versus our estimates as well as actual performance in Q1/13 (quarter-over-quarter) and Q2/12 (year- over-year). We note the continuing improvement in throughput as the expansion continues to ramp up. Copper production of 122 million lbs increased by 1.6% q/q due to higher throughput and grades, which more than offset lower recoveries. Copper production increased by 53.9% from Q2/12, driven by markedly improved throughput and grades.

Exhibit 1 - Tenke Fungurume Q2/13 Operating Performance Versus Estimated, with quarter-over-Quarter and Year-over-Year Comparisons

Sequential Yr-Over-Yr Reported BNS est Variance Variance Variance Q2/13A Q2/13E BNS Est. Q1/13A % change Q2/12A % change Tenke (100% basis) Total Milled Ore (000s of tonnes) 1,365 1,400 -2.5% 1,317 3.6% 1,172 16.5% Copper grade 4.6% 4.0% 14.8% 4.4% 3.4% 3.5% 33.0% Copper recovery 89.9% 92.5% -2.8% 93.7% -4.1% 90.6% -0.8% Cobalt grade 0.31% 0.33% -4.6% 0.32% -3.1% 0.36% -13.9% Cobalt recovery 53.6% 70.0% -23.4% 60.3% -11.1% 68.0% -21.2% Copper production (Mlb) 122 114 6.8% 120 1.6% 79 53.9% Cobalt production (Mlb) 5 7 -28.8% 6 -10.7% 6 -20.9% Copper sales (Mlb) 106 114 -7.2% 118 -10.2% 82 29.3% Cobalt sales (Mlb) 5 7 -28.8% 6 -16.7% 6 -16.7% Cash costs per pound of Copper (US$/lb) $ 1.23 $1.17 4.8% $ 1.23 0.0% $ 1.22 0.8%

Source: FCX reports; Scotiabank GBM estimates.

■ Q2/13 copper sales of only 106 million lbs represented 87% of production levels due to the timing of shipments. Based on the strong 1H/13 results, Freeport increased its full-year copper sales guidance to 450 million lbs (from 435 million lbs). The revised guidance was above our previous forecast of 441 million lbs. ■ Cobalt production and sales for the quarter of 5 million lbs were well below our estimate of 7 million lbs. Lower production was largely driven by markedly weaker than expected recoveries of 53.6% (vs. our forecast of 70.0%), although throughput and grades were also slightly lower than anticipated. Cobalt production decreased from 6 million lbs in Q1/13 and Q2/12 primarily due to lower recoveries. However, we note that the impact of lower cobalt volumes was somewhat offset by a higher realized cobalt price of $8.48/lb (vs. our forecast of $7.90/lb). The realized cobalt price represents a 33% discount to the market price. We anticipate this discount to close over time given the recent acquisition of the Kokkola cobalt refinery. Based on the weaker-than-expected 1H/13 results, Freeport reduced its full-year cobalt sales guidance to 24 million lbs (from 28 million lbs). The revised guidance was below our previous forecast of 28 million lbs. ■ Cash costs at Tenke of $1.23/lb Cu were 4.8% higher than our forecast of $1.17/lb. Based on the 1H/13 results, Freeport increased full-year cash cost guidance to $1.24/lb (from $1.18/lb), which remains based on an average $12/lb market cobalt price.

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Exhibit 2 - Tenke Fungurume - Copper Production (100% basis) and Cash Cost Estimates

140 $1.40

120 $1.20

100 $1.00

80 $0.80

60 $0.60

40 $0.40 Cash Costs($/lb Cu) Copper Copper Production (Mlbs)

20 $0.20

0 $- 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13E 4Q13E 1Q14E 2Q14E 3Q14E 4Q14E

Copper production (Mlbs) Cash Costs ($/lb Cu)

Source: Company reports; Scotiabank GBM estimates.

Revisions to Our Estimates ■ We have updated our estimates for the Q2/13 operating results and revised full-year guidance at Tenke. Exhibit 2 details our estimates of copper production and cash costs over the next few quarters. We note that we anticipate lower production at Tenke in 2H/13 on the back of lower expected grades. Our revised copper and cobalt production/sales estimates are in line with Freeport’s updated sales guidance of 450 million lbs of copper and 24 million lbs of cobalt, respectively. Based on the 1H/13 operating performance of Tenke, the company’s revised copper guidance appears overly conservative, in our view. ■ Based on the revisions to the operating numbers as described above, we have reduced our 2013 EPS estimate to $0.23, from $0.24. Our Q2/13 EPS estimate declined to $0.03 from $0.04. We have made no changes to our 2014 and 2015 estimates.

Cash Flow to Lundin ■ Based on the Q2/13 performance of the Tenke mine, we anticipate Lundin to receive $29.4 million in net cash flows from the operation during the quarter. During 2013, we estimate net cash flow to Lundin of $101 million (previously $108 million), versus guidance of $130 million.

Valuation ■ We reiterate our Sector Outperform rating and our C$5.75 target price. Our target price remains based on a 50/50 weighting of 7x our 2014 EBITDA estimate (C$4.86) and 1x our 10% NAVPS estimate (C$6.55). In our view, with a relatively strong balance sheet, Lundin represents an excellent investment vehicle for copper exposure with a unique ownership stake in a world-class mine operated by a major. The shares are currently trading at a 2014E and 2015E EV/EBITDA of 6.0x and 3.9x vs. our producer peer group at 7.0x and 4.0x. The company also trades at a P/NAV (8%) multiple of 0.51x vs. our peer group at 0.62x.

ScotiaView Analyst Link

62

Intraday Flash Wednesday, July 24, 2013 @ 3:05:57 PM (ET)

(LYD-T C$0.91) Lydian International Ltd. Government Resolution Brings Delays Leily Omoumi, MBA - (416) 945-4527 Vitali Mossounov, CPA, CA - (416) 862-3910 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] [email protected]

Rating: Sector Outperform Target 1-Yr: C$1.75 ROR 1-Yr: 92.3% Div. (NTM) C$0.00 Risk Ranking: Speculative Div. (Curr.) C$0.00 Valuation: 0.70x NAV Yield (Curr.) 0.0% Key Risks to Target: Multiple contraction, commodity prices, technical and operational risks, and geopolitical risks

Event Pertinent Revisions ■ The government of Armenia has passed a resolution that extends the New Old boundaries of the "catchment basin" for Lake Sevan in Armenia. Target: Implications 1-Yr $1.75 $2.75 ■ The new boundaries include LYD's proposed location for its heap leach New Valuation: pads. Mineral processing activities are not allowed in the "Immediate 0.70x NAV Impact Zone." The borders of the "catchment basin" expand to include a Old Valuation: horizontal zone 3000m on each side of the Vorotan-Sevan tunnel. 0.91x NAV ■ The UG tunnel has never been used. It was built to transfer water from Spandaryan to Kechut (Kechut is connected to Lake Sevan) to increase the Lake's water levels. This was meant to be used for irrigation water. ■ The government had approved the location of the heap leach in Jan. 2013 and an updated FS was set to be released in Q3/13. However, the timing of the FS is now unclear, pending LYD's discussion with gov't. ■ We have delayed production start-up to 2018 from 2016 to allow for a potentially drawn-out permitting process, but recognize that if permits are secured before late 2015, production would start earlier. Our NAVPS is now C$2.52 (C$2.93 previously). Our 1-yr target is C$1.75. Recommendation ■ It is difficult to understand the government's true motives; however, we believe lack of information and miscommunication between various ministries have played a part. We believe there are solutions to this including relocation of the heap leach pad. Further, we believe the sell-off is overdone based on the delays this may bring on. Maintain SO. Qtly EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2010A $-0.02 A $-0.01 A $-0.02 A $-0.08 A $-0.13 n.m. Shares O/S (M) 130.2 2011A $-0.02 A $-0.03 A $-0.02 A $-0.02 A $-0.10 n.m. Market Cap (M) C$118.5 2012A $-0.02 A $-0.02 A $-0.03 A $-0.02 A $-0.08 n.m. Float O/S (M) 102.1 2013E $-0.02 A $-0.02 $-0.02 $-0.02 $-0.08 n.m. Float Value (M) C$92.9

(FY-Dec.) 2009A 2010A 2011A 2012A 2013E Earnings/Share $-0.06 $-0.13 $-0.10 $-0.08 $-0.08 Cash Flow/Share $-0.06 $-0.13 $-0.09 $-0.09 $-0.08 Price/Earnings n.m. n.m. n.m. n.m. n.m. Relative P/E n.m. n.m. n.m. n.m. n.m. Revenues (M) $0 $0 $0 $0 $0 Production (oz) (000) 0.0 0.0 0.0 0.0 0.0 EBITDA (M) $0 $0 $-8 $-9 $-11

Tot. Cash Cost (/oz) $0 $0 $0 $0 $0 IBES EPS 2013E: £-0.05 BVPS13E: $0.58 NAV: C$2.52 ScotiaView Analyst Link IBES EPS 2014E: £0.05 P/NAV: 0.36x Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in US$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

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Government Resolution Brings Delays

■ Although the government’s new resolution will delay permitting, we believe that ultimately Lydian and the government will reach a solution. It is difficult to understand the government’s true motives; however, we believe lack of information and miscommunication between various ministries have likely played a part in this. We believe there are solutions to this, including relocation of the heap leach pad. However, at this point we believe the company is looking to work with the government to potentially keep the existing location. ■ The underground Vorotan-Sevan tunnel has never been used. This tunnel was built to transfer water from Spandaryan to Kechut Reservoir (Kechut is connected to Lake Sevan) in order to increase Lake Sevan’s water levels if necessary (Exhibits 1, 2, 3). Lake Sevan is the country’s largest freshwater lake. The tunnel has never been needed in the past 10 years. This was meant to be used for irrigation water. Lake Sevan is 55-60 km from the project. ■ The tunnel at its closest point is 100m away from the edge of the heap leach. It is 100-200 m below surface with typical dimensions (3x4m concrete lined). It is 21.7 km long. Lydian has conducted stress analysis to evaluate the potential for stress impact to the tunnel and to our understanding there were no negative implications. ■ We believe the government is fundamentally supportive of this project. A working group composed of Lydian and government representatives is expected to be set up to find a solution. The company expects the government representatives to have technical backgrounds. Lydian states the government has responded very quickly and it shows their interest in moving this project forward.

Exhibit 1 – Current Plant Layout

To Lake Sevan

Ketchut Reservoir

Heap Leach Pad

Vorotan River

Spandarian Reservoir

Source: Company reports, Scotiabank GBM.

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Valuation

■ We have delayed production start-up to 2018 from 2016 to allow for a potentially drawn-out permitting process, but we recognize that if permits are secured before late 2015, production would start earlier. We believe our new production start-up date provides for more than sufficient time to either relocate the heap leach or reach a solution with the government with respect to the new resolution. ■ Our NAVPS has decreased to C$2.52 from C$2.93. We have also reduced our target multiple to 0.7x from 0.9x to reflect the uncertainty with permitting and the timing of the feasibility study going forward. Our new target price as a result is C$1.75 (C$2.75 previously). ■ We believe that as positive indications between the talks held with the government and Lydian emerge, we will increase our target multiple and potentially bring forward our production start-up date. ■ We continue to like the project for the simplicity of the Amulsar heap leach project, the low initial capital of the project (<$300M) and below-industry-average total cash costs (~$475/oz).

Exhibit 2 – Amulsar’s Heap Leach and Tunnel Location

Source: Company reports.

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Exhibit 3 - Cross Section of Heap Leach and Tunnel Location

Source: Company reports.

ScotiaView Analyst Link

66

Company Comment Thursday, July 25, 2013, Pre-Market

(MTL-T C$23.08) Mullen Group Ltd. Strong Beat on Q2 Results Turan Quettawala, MBA, CFA - (416) 863-7065 Milan Posarac - (416) 863-7532 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] [email protected]

Rating: Sector Outperform Target 1-Yr: C$24.00 ROR 1-Yr: 9.2% Div. (NTM) $1.20 Risk Ranking: High Div. (Curr.) $1.20 Valuation: Equally wtd. DCF and 7.5x NTM EBITDA (one-year fwd.) Yield (Curr.) 5.2% Slower-than-expected economic growth, acquisition integration issues and oil prices. Key Risks to Target: Event ■ MTL reported adjusted EPS of $0.23, above our Street high of $0.19 and consensus of $0.14. Consolidated EBITDA came in at $56M (up 5.5% YOY) as margins expanded 140 bps YOY to 18% (see Exhibit 1). Implications ■ The beat vs. our estimates came mainly from Oilfield Services where margins expanded 280 bps YOY to 19% due to absence of the TFT project that hurt margins last year and increased activity in pipeline construction and specialised transportation services. In our opinion, despite 8% decline in revenue, O&S segment performance was impressive considering a slowdown in western Canada drilling activity and unfavourable weather conditions, including Alberta flooding. ■ Trucking and Logistics revenue of $137M was up 3% YOY with flat EBITDA of $24M (17.6% margin). The growth in revenue was mainly due to the acquisition of Jay's Moving and Storage in mid-May as organic growth was relatively weak. ■ MTL raised 2013 capex by 25% to $100M predominantly to purchase specialized equipment for O&S, including fluid hauling equipment. In our opinion, this is a positive sign as it signals management's confidence that the environment is slowly getting better which could lead to a stronger drilling season. Recommendation ■ We rate MTL SO with $24 one-year target. We will review our estimates and targets after the conf. call at 11AM EST on July 25 (888-231-8191). Qtly EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2011A $0.40 A $0.19 A $0.44 A $0.48 A $1.55 12.6x Shares O/S (M) 92.1 2012A $0.60 A $0.23 A $0.35 A $0.32 A $1.51 13.9x Market Cap (M) $2,126 2013E $0.49 A $0.19 $0.37 $0.42 $1.46 15.8x Float O/S (M) 86.9 2014E $0.56 $0.20 $0.43 $0.46 $1.65 14.0x Float Value (M) $2,005 TSX Weight 0.12% (FY-Dec.) 2010A 2011A 2012A 2013E 2014E Earnings/Share $0.76 $1.55 $1.51 $1.46 $1.65 Free Cash Flow (Basic)/Share $0.10 $0.78 $1.82 $1.51 $1.75 Revenues (M) $1,039 $1,387 $1,428 $1,403 $1,517 EBITDA (M) $201 $288 $294 $293 $321 Operating Profit (M) $125 $207 $210 $206 $230 Operating Ratio 88.0% 85.1% 85.3% 85.3% 84.9% ROIC/Share 7.8% 15.0% 14.5% 14.0% 15.5% EBITDA/Int. Exp 5.2x 7.9x 8.9x 10.8x 11.8x

IBES EPS 2013E: $1.40 BVPS13E: $9.47 ScotiaView Analyst Link IBES EPS 2014E: $1.60 ROE13E: 15.81% Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in C$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

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Exhibit 1 - MTL - Q2/13 Consolidated Results and Estimates Exhibit 2 – MTL – Q2/13 Segment Results and Estimates

Mullen Group Period ended - Dec 31; C$M Period ended - Dec 31; C$M Q2/12 Q2/13A Q2/13E Income Statement (Oilfield Services) Q2/12 Q2/13A Q2/13E Revenues Income Statement (Consolidated) Company revenue $127.4 $113.1 $108.3 Revenue $320.2 $310.4 $304.4 Contractors revenue $59.5 $59.8 $62.5 % YOY 10.1% -3.1% -4.9% Other $1.1 $0.7 $1.1 Total revenues $188.0 $173.6 $171.9 Direct operating expenses $232.3 $219.9 $223.5 % YOY 7.4% -7.7% -8.6% Selling and administrative expenses $34.8 $34.5 $29.9 Expenses EBITDA $53.0 $55.9 $51.0 Wages and benefits $32.4 $31.0 $30.8 % YOY 8.9% 5.5% -3.8% Repairs and maintenance $20.1 $20.6 $18.0 EBITDA Margin (%) 16.6% 18.0% 16.8% Fuel Cost $10.1 $9.4 $8.6 Operating Supplies and contractors and other $76.5 $61.2 $70.3 Depreciation on property, plant and equipment $15.6 $16.6 $16.5 Other (selling and admin) $18.4 $18.4 $13.7 Amortization on intangibles $4.5 $4.5 $5.0 EBITDA $30.5 $33.0 $30.4 EBIT (recurring) $33.0 $34.8 $29.5 % YOY 1.0% 8.2% -0.3% % YOY 13.0% 5.6% -10.4% EBITDA Margin (%) 16.2% 19.0% 17.7% EBIT Margin (%) 10.3% 11.2% 9.7% Operating Ratio (%) 89.7% 88.8% 90.3% Depreciation on PP&E $11.2 $11.9 $12.4 Amortization on intangible assets $3.3 $3.4 $3.9 Interest and accretion expense $8.7 $6.5 $6.8 EBIT $16.0 $17.7 $14.1 Unrealized foreign exchange loss $4.8 $8.4 $0.0 % YOY 3.6% 10.7% -11.6% Change in fair value of investments $7.1 -$16.3 $0.0 EBIT Margin (%) 8.5% 10.2% 8.2% Loss on sale of property, plant and equipment -$0.4 $0.7 $0.0 Operating Ratio (%) 91.5% 89.8% 91.8% Other (gain) $0.0 -$0.4 $0.0 Income before income taxes and earnings from equity investment (reported) $12.7 $35.8 $22.7 Period ended - Dec 31; C$M Income Statement (Trucking and Logistics) Q2/12 Q2/13A Q2/13E Income before income taxes and earnings from Revenues equity investment (recurring) $24.3 $28.3 $22.7 Company revenue $58.5 $62.2 $58.5 Contractors revenue $75.2 $74.9 $75.2 Income tax expense $5.3 $8.4 $5.7 Other $0.0 $0.2 $0.3 Income before earnings from equity investment $7.4 $27.4 $17.0 Total revenues $133.7 $137.3 $134.0 (reported) % YOY 13.2% 2.7% 0.2% Earnings from equity investment $0.0 $0.0 $0.0 Expenses Net income and comprehensive income (reported) $7.4 $27.4 $17.0 Wages and benefits $15.8 $17.9 $16.2 Net income and comprehensive income Repairs and maintenance $8.7 $9.2 $8.0 (recurring) $19.0 $21.7 $17.0 Fuel Cost $7.0 $7.7 $6.0 % YOY 25.6% 14.1% -10.3% Operating Supplies and contractors and other $64.7 $64.1 $67.3 Other (selling and admin) $13.6 $14.3 $13.1 EPS (reported, basic) $0.09 $0.30 $0.19 EBITDA $23.9 $24.1 $23.3 EPS (recurring, basic) $0.23 $0.23 $0.19 % YOY 17.7% 0.8% -2.4% % YOY 21.4% -0.3% -17.2% EBITDA Margin (%) 17.9% 17.6% 17.4% EPS (recurring, diluted) $0.23 $0.23 $0.19 Depreciation on PP&E $3.4 $3.7 $4.1 % YOY 21.3% -0.2% -19.1% Amortization on intangible assets $1.2 $1.1 $1.1 EBIT $19.3 $19.3 $18.1 Source: Company reports; Scotiabank GBM estimates. % YOY 18.6% -0.3% -6.4% EBIT Margin (%) 14.5% 14.0% 13.5% Operating Ratio (%) 85.5% 86.0% 86.5%

Source: Company reports; Scotiabank GBM estimates.

ScotiaView Analyst Link

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Company Comment Wednesday, July 24, 2013, After Close

Potash Corporation of Saskatchewan, Inc. (POT-N US$37.94) (POT-T C$39.17) 5% Buyback Right On Time - Neutral Ben Isaacson, MBA, CFA - (416) 945-5310 Shawn Siddiqui, MBA - (416) 863-5907 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] Carl Chen - (416) 863-7184 (Scotia Capital Inc. - Canada) Rating: Sector Perform Target 1-Yr: US$42.00 ROR 1-Yr: 14.4% Div. (NTM) $1.40 Risk Ranking: High Div. (Curr.) $1.40 Valuation: 7.5x 2014E EBITDA, 12x 2014E EPS, DCF @ 10%, 65% RCN Yield (Curr.) 3.7% Fertilizer supply/demand, crop and energy prices, weather Key Risks to Target: Event ■ Unless you’ve been hiding in a potash mine for the past six months, it should come as no surprise to the market that a 5% share repurchase program was just announced by POT – right on schedule. ■ We view the announcement as a neutral event, as it was widely anticipated, and therefore it should already be priced into the stock. Implications ■ Specifically, POT will spend up to $2B over the next year repurchasing up to 5% of its outstanding stock. If POT were to spend the full $2B buying the full 5% of its stock back, the implied average repurchase price would equate to $46. ■ Had POT not announced a buyback during earnings, we think its shares should have fallen – all else equal. Management needed to provide a signal that its shares may be undervalued. This move is also consistent with its peers like MOS, URKA, CF, AGU, YAR etc, which are all involved in meaningful programs (MOS expected shortly). ■ Why didn’t POT repurchase more, especially given its immense fire power? This is the more interesting question, in our view. We believe the answer is that POT is still very determined to gain a controlling stake of ICL in the mid-term. To move from 13.8% to 51% would require an outlay of $4.5B to $6.5B, depending on several factors. Recommendation ■ We will review our POT recommendation following the call on Thursday. Qtly Adj. EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2011A $0.84 A $0.96 A $0.94 A $0.78 A $3.51 11.7x Shares O/S (M) 876.7 2012A $0.56 A $1.01 A $0.74 A $0.52 A $2.82 14.4x Market Cap (M) $33,261 2013E $0.63 A $0.82 $0.63 $0.72 $2.81 13.5x Float O/S (M) 872.2 2014E $0.80 $0.85 $0.74 $0.84 $3.22 11.8x Float Value (M) $33,091 TSX Weight 2.27% (FY-Dec.) 2010A 2011A 2012A 2013E 2014E Adj Earnings/Share $2.02 $3.51 $2.82 $2.81 $3.22 Cash Flow/Share $2.61 $4.23 $3.83 $3.56 $4.06 Price/Earnings 25.6x 11.7x 14.4x 13.5x 11.8x Relative P/E 1.4x 0.8x 0.9x 0.8x 0.7x Revenues (M) $6,051 $8,219 $7,433 $7,801 $8,108 EBITDA (M) $2,936 $4,795 $3,577 $4,101 $4,675 Current Ratio 0.7x 1.1x 1.3x 1.8x 2.4x EBITDA/Int. Exp 29.6x 30.2x 31.4x 35.7x 38.6x

IBES EPS 2013E: $2.89 BVPS13E: $12.44 ScotiaView Analyst Link IBES EPS 2014E: $3.15 ROE13E: 23.63%

Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in US$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

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Company Comment Thursday, July 25, 2013, Pre-Market

(QCOM-Q US$61.39) QUALCOMM Incorporated Q3 Beats -- Guidance in Line Gus Papageorgiou, MBA, CFA - (416) 863-7552 Daniel Chan, MBA - (416) 863-7237 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] John MaGee - (416) 863-7289 (Scotia Capital Inc. - Canada) Rating: Focus Stock Target 1-Yr: US$80.00 ROR 1-Yr: 32.7% Div. (NTM) $1.44 Risk Ranking: Medium Div. (Curr.) $1.10 Valuation: 14x forward P/E one year out (Q4/14E - Q3/15E) Yield (Curr.) 1.8% P/E Multiple could remain lower than normal Key Risks to Target:

Event Pertinent Revisions ■ Qualcomm reported Q3/13 results last night. New Old Target: Implications 1-Yr $80.00 $75.60 ■ Quarter beats with all key variables better than expected. Revenue EPS13E $4.60 $4.50 of $6.24B and EPS of $1.09 were 4% and 6% better than our EPS14E $5.30 $5.06 expectations, respectively. Versus our expectations chip volumes of New Valuation: 172M were 2% better, chip ASPs of $24.55 were 2% better, device 14x forward P/E one year out (Q4/14E - ASPs of $230 were 3% better and device volumes of 246M were 3% Q3/15E) better. Profitability was also better than expected thanks to slightly Old Valuation: better gross margins and slightly lower opex. 14x forward P/E one year out (Q3/14E -

■ Guidance in line - timing of new phone releases may impact Q2/15E) quarter. The company is guiding for roughly $6.25B in revenue and EPS of $1.06. The Street was looking for $6.3B and $1.08, and we were at $6.2B and $1.04. The timing of certain product releases by QCOM's customers will likely impact the quarter. ■ QCOM's business continues to fire on all cylinders. Sales were up 35% YOY and EPS increased 29%. At the same time the company bought back shares and increased the dividend 40% YOY. The only sore spot is that despite the company's repeated share buybacks the share count keeps rising. Recommendation ■ Maintain Focus Stock rating. QCOM maintains a superior competitive position in its industry with great cash flow and reasonable valuation. In fact we argue investors are buying the chip business for under 5x EPS. Qtly EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2011A $0.82 A $0.86 A $0.73 A $0.80 A $3.20 15.2x Shares O/S (M) 1,765.0 2012A $0.97 A $1.01 A $0.85 A $0.89 A $3.71 16.8x Market Cap (M) $108,353 2013E $1.26 A $1.17 A $1.09 A $1.08 $4.60 13.3x Float O/S (M) 1,765.0 2014E $1.44 $1.32 $1.24 $1.30 $5.30 11.6x Float Value (M) $108,353 S&P Weight 0.66% (FY-Sep.) 2010A 2011A 2012A 2013E 2014E Earnings/Share $2.46 $3.20 $3.71 $4.60 $5.30 Cash Flow/Share $2.33 $3.14 $4.01 $4.51 $5.25 Price/Earnings 18.4x 15.2x 16.8x 13.3x 11.6x Relative P/E 1.0x 1.0x 1.0x 0.8x 0.7x Revenues (M) $10,982 $14,958 $19,121 $24,658 $28,856 EBITDA (M) $4,982 $7,146 $7,998 $9,979 $11,584 Current Ratio 2.2x 2.7x 3.0x 3.4x 4.4x EBITDA/Int. Exp -6.5x -9.5x -8.6x -11.8x -14.5x

IBES EPS 2013E: $4.54 BVPS13E: $21.92 ScotiaView Analyst Link IBES EPS 2014E: $4.91 ROE13E: 22.33%

Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in US$ unless otherwise indicated.

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

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Great Quarter with All Variables Moving in the Right Direction

■ Quarter comes in pretty much in line: The results for the quarter are outlined in Exhibit 1. The company beat expectations with all of its major variables coming in better than expected. The chip business (QCT) saw improvements in both volumes and ASPs YOY. Volumes were assisted by the growing smartphone market and ASPs were largely assisted by the increasing mix of LTE chips. Despite ongoing concerns the high end of the smartphone market is saturating, QCOM’s results do not seem to exhibit this influence. The company saw good volumes in the mid and high end. The company noted that ASPs were hindered by foreign exchange influences that lowered the figure by $3.00. QCOM continues to win slots with handset OEMs and has secured 1,000 wins with 500 still in the pipe line. The licensing business also performed well given the strong growth in volumes and ASPs on devices. Device ASPS hit $230, a multi-year high, as high and mid end devices continue to do well and consumers continue to switch from feature phones to smartphones in the developing world. QCOM maintains 240 CDMA and 65 OFDM licensees globally. Total profitability was down YOY thanks largely to the increasing mix of QCT in revenue. But within QCT profitability remains relatively flat with EBIT margins at 17.5%, despite revenue being up 47%. QCOM has some leeway as to how expenses are allocated between the two divisions, and we believe QCT is unfairly burdened with costs. But aside from that QCOM continues to invest heavily in R&D to advance its performance across all aspects of the chip solution including radio frequencies, processing power, graphics, multimedia capabilities, display,

Exhibit 1 – Q3 Results QCOM Scotia Street Guidance $M Q3/13A Q3/13E B/(W)% Q3/12A B/(W)% Q2/13A B/(W)% Q3/13 B/(W)% Q3/13 Revenue Breakout QCT 4,222 4,032 4.7% 2,869 47.2% 3,916 7.8% QTL 1,867 1,818 2.7% 1,593 17.2% 2,057 -9.2% QWI 158 155 1.9% 160 -1.3% 155 1.9% 5,800 - Total Revenue 6,243 6,005 4.0% 4,626 35.0% 6,124 1.9% 6,055 3.1% 6,300

Gross Margin (%) 61.3% 60.8% 64.4% 62.8% EBT QCT (%) 17.5% 16.0% 16.5% 17.4% EBT QTL (%) 87.5% 86.0% 88.3% 87.7% Total EBT (M) 2,368 2,205 7.4% 1,922 23.2% 2,454 -3.5% Total EBT Margin (%) 37.9% 36.7% 41.5% 40.1% EPS from Cont. Ops. ($) 1.09 1.03 5.6% 0.85 29.0% 1.17 -7.0% 1.03 5.8% 0.97 - 1.05

MSM Volume (M) 172.0 168.0 2.4% 141.0 22.0% 173.0 -0.6% Revenue per MSM ($) 24.55 24.00 2.3% 20.35 20.6% 22.64 8.4% Device Volume (M)* 246.0 239.8 2.6% 208.5 18.0% 281.0 -12.5% Device ASP ($)* 230.0 223.0 3.1% 229.0 0.4% 217.0 6.0% Royalty Rate (%) 3.3% 3.4% -2.9% 3.3% -1.1% 3.4% -2.2% Source: Company reports; Scotiabank GBM estimates.

digital signal processing and sensors. R&D expense increased 36% YOY in line with sales. In the quarter the company took an impairment charge for its display business for $158M, or $0.06/share, which we have excluded from the EPS from continuing operations calculation. The balance sheet remained strong with total cash dropping by $100M despite the company spending $1.55B in share buybacks and $600M on a dividend. Also, inventories increased by $243M in the quarter as inventory days increased to 73 from 67. This is likely due to the expectations that certain customers would have launched new products sooner than they are going to (Apple). The only sore spot in the results is that despite QCOM’s almost constant share buybacks the share count continues to go up. The share count came in at 1.765M, up slightly sequentially and YOY.

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■ Guidance for Q4 in line with expectations but likely highly dependent on timing of new product launches: Exhibit 2 outlines our expectations for next quarter and the year ahead. The company delivered guidance that was pretty much in line with our and Street expectations. QCOM is looking for revenue of roughly $6.25B (range $5.9B-$6.6B) and EPS of roughly $1.06 (range $1.02-$1.10). The company also expects to ship roughly 176M MSM chips (range 171M to 181M). The guidance is dependent on the timing of the release of new products from Qualcomm’s customers. Specifically, we believe Apple will launch its new iPhone late in September or early October, based on the guidance that company provided two nights ago. Given Apple accounts for over 10% of QCOM’s revenue, the timing of the release of that product can have a material impact on QCOM’s revenues. Should Apple launch its product later than expected (mid-October vs. late September/early October) QCOM could come in at the lower end of the guidance range. Even if QCOM comes in at the lower end of the range for next quarter we believe it will make up for the loss in Q1 of the next fiscal year. At this stage the design specifications for devices scheduled to launch in the fall are already set and we believe there is little chance QCOM would lose a slot. Additionally, yesterday Broadcomm delayed the launch of its LTE product until the second half of 2014, further strengthening QCOM’s lead in LTE in the near term. The company also maintains $3.5B in its $5.0B buyback plan, and we believe it is likely to continue to buy back shares. Since the quarter closed QCOM purchased $500M worth of shares.

Exhibit 2 - Changes to our Model

$M Q4/13E 2013E 2014E New Old Delta New Old Delta New Old Delta Revenue Breakout QCT 4,224 4,225 0.0% 16,482 16,293 1.2% 19,541 18,171 7.5% QTL 1,883 1,776 6.0% 7,564 7,408 2.1% 8,669 8,402 3.2% QWI 166 163 1.9% 625 619 1.0% 645 633 1.9% Total Revenue 6,273 6,164 1.8% 24,658 24,310 1.4% 28,856 27,206 6.1%

Gross Margin (%) 61.1% 61.0% 62.3% 62.2% 63.9% 64.5% EBT QCT (%) 16.0% 16.0% 19.2% 18.8% 19.5% 19.2% EBT QTL (%) 87.0% 87.0% 87.3% 87.0% 87.1% 87.1% Total EBT (M) 2,310 2,218 4.2% 9,827 9,572 2.7% 11,343 10,803 5.0% Total EBT Margin (%) 36.8% 36.0% 39.9% 39.4% 39.3% 39.7% EPS from Cont. Ops. ($) 1.08 1.04 4.1% 4.60 4.50 2.2% 5.30 5.06 4.9%

MSM Volume (M) 176.0 179.8 -2.1% 703.0 702.8 0.0% 821.2 808.6 1.6% Revenue per MSM ($) 24.00 23.50 2.1% 23.45 23.18 1.1% 23.79 22.47 5.9% Device Volume* 248.0 237.4 4.5% 1,010.0 993.2 1.7% 1,139.0 1,124.5 1.3% Device ASP ($)* 230.0 220.0 4.5% 225.7 221.5 1.9% 223.9 219.8 1.9% Royalty Rate (%) 3.3% 3.4% -2.9% 3.3% 3.4% -1.4% 3.4% 3.4% 0.0% Source: Company reports; Scotiabank GBM estimates.

No Sign of ASP Pressure -- Yet

■ High and Medium End of the Market continue to keep ASPS healthy: There continues to be concern that the high end of the smartphone market is saturating and that growth in the developed world will put pressure on device ASPs and, therefore, QCOM’s royalty stream. Looking at the chip business MSM volumes and ASPs were both up over 20% YOY this quarter. This is due to QCOM gaining share thanks to its domination in LTE, the bump in ASPs the LTE chips bring and the overall growth of the smartphone market. As we go into the fall we expect these trends to continue to be positive, although the YOY comps will likely get tougher. Most major OEMs are scheduled to launch new products in the fall, many of which will be high end devices. And currently, it is still these devices that are moving. Apple’s results yesterday show that company growing iPhone volumes 20% YOY on a product with ASPs just south of $600. Eventually we do believe the low to mid end of the market will grow faster than the high end and this will put pressure on ASPs. But it should

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also drive volumes. For example, QCOM is not well represented in any of the devices that run on China Mobile’s network (600M + subscribers). However, as that carrier moves to LTE we believe many of its domestic suppliers will likely use a QCOM chipset to access that LTE network. A big opportunity for QCOM. And, if high-end OEMs, such as Apple, do decide to tackle the mid-range market it is likely they will go with an integrated solution to lower the bill of materials. In that case no one has the level of chip integration that QCOM maintains and no one can likely match QCOM’s price points thanks to its scale. We also want to point out that QCOM continues to launch product innovations that can add value to the processor such as quad-core capabilities and the RF 360 that aims to deal with LTE band fragmentation. So while we are expecting these growth trends in ASPs and volumes to temper somewhat as we move into next year, we do not expect any drastic collapse. From a competitive position we believe QCOM will remain unchallenged in LTE chips for the next product re-fresh this Christmas. After that it appears Broadcomm will be out of the running until the second half of 2014, by which time the slots for the fall launches will likely already have been decided. Over the long term we do worry about Intel but that company is not likely to really challenge the LTE market until next year, at the earliest. ■ Big believers in long-term trends: Exhibits 3 and 4 outline the ASPs for QCOM’s chip business and the ASPs for 3G/4G devices. Over the nearly 9-year period what we notice is

Exhibit 3 – MSM ASPs continue to climb.

200 $30.00

180 $25.00 160

140 $20.00 120

100 $15.00

80 MSM ASP

MSM Volume (M) Volume MSM $10.00 60

40 $5.00 20

0 $0.00 Q1AQ2AQ3AQ4AQ1AQ2AQ3AQ4AQ1AQ2AQ3AQ4AQ1AQ2AQ3AQ4AQ1AQ2AQ3AQ4AQ1AQ2AQ3AQ4AQ1AQ2AQ3AQ4AQ1AQ2AQ3AQ4AQ1AQ2AQ3A 2005 2006 2007 2008 2009 2010 2011 2012 2013

MSM Volume MSM ASP

Source: Company reports; Scotiabank GBM.

Exhibit 4 - Device ASPs holding steady.

300 $250 250 $200 200 $150 150 $100 100 50 $50 Device ASP

Device (M) Volume Device - $0 Q1A Q3A Q1A Q3A Q1A Q3A Q1A Q3A Q1A Q3A Q1A Q3A Q1A Q3A Q1A Q3A Q1A 2005 2006 2007 2008 2009 2010 2011 2012 2013

Device Units (M) Device ASP ($)

Source: Company reports; Scotiabank GBM.

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that these ASPs are relatively flat. However, there is no contest with the Exhibit 5 - Valuation Table mobile phone you had 9 years ago and US$ M (except per share data) QCOM.O BRCM.O NVDA.O BBRY.O AAPL.O NOK.N the device you have now. Current Price $61.39 $27.01 $14.21 $9.00 $440.51 $4.01 Transmission speeds, processing S O/S (M) 1,765.0 571.0 616.8 524.2 946.0 3,711.5 power, screen resolution, features and Market Cap $108,353 $15,423 $8,764 $4,717 $416,738 $14,883 device capabilities have improved Year-End 30-Sep 31-Dec 31-Jan 28-Feb 30-Sep 31-Dec drastically. There may be a current lull Sales (Trailing 12 Months) $23,256 $8,303 $4,310 $11,349 $169,104 $37,460 in the pace of innovation but we firmly EBITDA (Trailing 12 Months) $9,486 $1,382 $908 $197 $57,381 $1,496 believe the smartphone will remain the EBITDA% (Trailing 12 Months) 40.8% 16.6% 21.1% 1.7% 33.9% 4.0% hub for technology innovation the Net Income (Trailing12 Months) $7,741 $411 $580 ($195) $39,672 ($557) world over. Over the next decade we ROS (Trailing12 Months) 33.3% 5.0% 13.5% (1.7)% 23.5% (1.5)% expect the smartphone to displace the Operating Performance PC, set-top box, almost all cameras, EBIT Margin 35.1% (11.9)% 8.7% (4.7)% 28.8% 3.1% video recorders, credit cards, and keys. Asset Turnover 0.5 0.7 0.6 0.9 1.0 1.0 As it does so, we believe it will take ROA 17.9% (8.8)% 5.2% (4.0)% 28.2% 3.0% on more and more value which will ROE 21.2% (12.6)% 6.5% 1.5% 35.1% (5.3)% help maintain its ASP. EPS Maintain Recommendation – C2012A $4.00 $2.81 $0.95 ($0.64) $44.10 ($0.23) Qualcomm Remains Our Focus Last 12 MonthsA $4.41 $2.90 $0.96 ($0.40) $41.89 ($0.14) Next 12 MonthsE $5.10 $2.92 $0.76 ($0.17) $42.98 $0.15 Stock C2013E $4.79 $2.90 $0.86 ($0.43) $41.00 $0.06 C2014E $5.46 $2.89 $0.73 $0.64 $50.34 $0.41 ■ Maintain rating – Focus Stock; one- year target price increased: The YOY Growth quarter and guidance came in better Next 12 over last 12 Months 15.6% 0.6% (20.6)% 58.5% 2.6% (203.7)% than we had expected. We point out C2013E/C2012A 19.9% 3.2% (9.0)% (33.1)% (7.0)% (127.2)% that Qualcomm is one of the very few C2014E/C2013E 13.8% (0.5)% (15.8)% 250.8% 22.8% 554.3% companies that is showing strong growth, superb competitive position, a P/E commitment to return cash to P/E Last 12 13.9 9.3 14.8 n.m. 10.5 n.m. P/E Next 12 12.0 9.3 18.6 n.m. 10.2 27.4 shareholders, and very healthy P/E C2014E 11.2 9.4 19.6 14.0 8.8 9.9 profitability. Over the next year we believe there are few challengers to Enterprise Value the company’s stronghold in LTE EBITDA YOY Growth chips and in our view the trend Next 12 over last 12 Months 17.4% 4.0% (14.4)% 198.0% 2.3% 51.5% towards more and more 3G/4G C2013E/C2012A 21.5% (3.0)% 0.4% 1111.9% (4.4)% 106.2% devices is undisputable. Once again C2014E/C2013E 38.6% 7.9% (17.1)% 4247.1% 12.6% 238.5% we point out that we believe investors are buying the world’s leading mobile EV/EBITDA chip business for under 5.0x P/E. EV/EBITDA Last 12 8.2 7.7 5.6 8.4 4.7 6.0 QCOM maintains $17.22 in cash. We EV/EBITDA Next 12 7.0 7.4 6.5 2.8 4.6 4.0 value the licensing business at EV/EBITDA C2014E 6.5 7.2 6.9 1.4 4.1 2.8 $38.00/share or roughly 12x’s forward BVPS $21.29 $13.83 $7.82 $17.93 $143.22 $2.73 EPS. That leaves roughly $6.17 for the 2.9 2.0 1.8 0.5 3.1 1.5 chip business, which we estimate will P/BVPS generate roughly $1.67 in EPS over Dividend Yield (TTM) 1.8% 1.6% 1.1% - 1.8% 6.6% the next 12 months – suggesting a P/E multiple of 3.7x. We continue to Source: Company reports; IBES; Scotiabank GBM estimates for QCOM, BBRY, AAPL, NOK. recommend investors maintain an overweight position in QCOM.

ScotiaView Analyst Link

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Company Comment Thursday, July 25, 2013, Pre-Market

(RCI.B-T C$41.95) Rogers Communications Inc. (RCI-N US$40.65) Cost Control Offset Subscriber/ARPU Pressure Jeff Fan, CPA, CA, CFA - (416) 863-7780 Jay Oduwole - (416) 945-4249 (Scotia Capital Inc. - Canada) (Scotia Capital Inc. - Canada) [email protected] Shay Nulman, MBA - (416) 862-3721 (Scotia Capital Inc. - Canada) Rating: Sector Outperform Target 1-Yr: C$52.00 ROR 1-Yr: 28.2% Div. (NTM) $1.78 Risk Ranking: Medium Div. (Curr.) $1.74 Valuation: 7.3x NTM EBITDA 1-yr fwd Yield (Curr.) 4.1% Wireless competition (from both incumbents and new entrants) Key Risks to Target:

Event Pertinent Revisions ■ We updated our forecast post RCI Q2/13 results. New Old Adj. EPS13E $3.61 $3.54 Implications Adj. EPS14E $3.73 $3.62 ■ We believe the strong cost control will continue to more than offset the New Valuation: weaker wireless ARPU and cable subscriber additions. Due to lower 7.3x NTM EBITDA 1-yr fwd cost estimates, we increased our consolidated EBITDA estimates by Old Valuation:

approximately 1.5% and our margin estimates by 40-50bp in 2013 and 7.4x NTM EBITDA 1-yr fwd 2014. ■ Wireless ARPU was weak at a -1.6% decline, but we believe higher roaming usage and higher ARPUs of the two-year plans should start to absorb some of the re-pricing impact in Q3 and Q4. Furthermore, we believe this will be more than offset by wireless cost control to maintain the wireless margin expansion trend. ■ Although cable RGU additions were weak, we believe the focus on ARPU and margin will also sustain stable margin improvement. Recommendation ■ We maintain our SO rating and our one-year target at $52. Trading at NTM 11.2x EV/cash EBIT, 6.3x EBITDA, and 6.8% FCF yield, we believe the shares are attractively valued and provide a good risk-reward profile. Even if Verizon enters the market, we believe the impact will take time to materialize. And if VZ decides to not enter, we believe the reward for shareholders will be significant. Qtly Adj. EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2011A $0.76 A $0.85 A $0.89 A $0.70 A $3.22 12.2x Shares O/S (M) 514.7 2012A $0.69 A $0.92 A $0.96 A $0.88 A $3.45 13.1x Market Cap (M) $21,594 2013E $0.79 A $0.97 A $1.03 $0.83 $3.61 11.6x Float O/S (M) 401.5 2014E $3.73 11.2x Float Value (M) $16,843 TSX Weight 1.42% (FY-Dec.) 2010A 2011A 2012A 2013E 2014E Adj Earnings/Share $2.94 $3.22 $3.45 $3.61 $3.73 Cash Flow/Share $6.30 $7.19 $6.98 $6.99 $7.60 Price/Earnings 11.8x 12.2x 13.1x 11.6x 11.2x Relative P/E 0.6x 0.9x 0.7x 0.6x 0.6x Revenues (M) $12,186 $12,428 $12,486 $12,861 $13,307 EBITDA (M) $4,582 $4,652 $4,757 $4,936 $5,137 Current Ratio 0.6x 0.6x 0.7x 0.6x 0.6x EBITDA/Int. Exp 6.8x 7.0x 6.9x 6.8x 6.8x

IBES EPS 2013E: $3.51 BVPS13E: $9.20 ScotiaView Analyst Link IBES EPS 2014E: $3.64 ROE13E: 43.98%

Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in C$ unless otherwise indicated. ^ Non-Voting

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S. Scotia Capital Inc was retained by Telus Corporation to provide a fairness opinion with respect to a proposed share conversion.

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Summary and Investment Thesis

■ We maintain our target price and Sector Outperform rating. Our target price is unchanged at $52. With good cost control offsetting lower wireless ARPU and cable subscriber estimates, we maintained our $52 price target. Our target implies 7.3x forward EBITDA, 13x cash EBIT, and 6.2% FCF yield. We believe the shares are attractively valued and provide a good risk-reward profile. Even if Verizon enters the market, we believe the impact will take time to materialize. And if VZ decides to not enter, we believe the reward for shareholders will be significant. ■ We revised our estimates reflecting weaker wireless ARPU and cable subscriber results offset by cost control and higher margins. We lowered our postpaid ARPU estimate due to slower postpaid data roaming growth. By Q4 and early 2014, we expect roaming impact will be offset by new 2-year rate plans. We lowered our cable subscriber estimates due to heightened competition. However, we increased our EBITDA estimates due to higher cost control. We now expect consolidated EBITDA CAGR of approximately 3.4% from 2013- 2015 and see service margins at approximately 46% over the same period. Wireless Showed Excellent Cost Control

■ The cost control was excellent and helped offset the cost of stronger subscriber additions and lower-than-expected ARPU. Excluding equipment cost, opex dropped 5% YOY vs. our expectation of flat YOY, mainly due to “cost management and productivity initiatives across various functions.” We believe the cost reduction was broad-based and did not reflect any non-recurring or one-time items. Management indicated the company will continue to target 2%-3% in productivity improvement (across all segments). We believe this provides the wireless segment the flexibility to re-invest in subscriber additions and still manage to produce strong margins. ■ Postpaid ARPU was under more pressure than expected. Postpaid ARPU declined -1.6% YOY vs. our +0.2% expectation. There were several moving pieces that are affecting postpaid ARPU: 1. The near-term pressure caused by new roaming plans. This was expected but the magnitude of $20M for two months was higher than our forecast. We estimate this translated to approximately $1.25 of postpaid ARPU impact per month in the quarter. This is expected to remain in Q3 and the impact will be the full 3 months (vs. 2 months in Q2). 2. Pressure from first-month free promotion was a drag on ARPU in Q2. The promotion has expired but the impact on the quarter was approximately $15M-$20M. 3. New 2-year plans have higher potential ARPU, which neutralizes the economic impact of the shift from 3-year to 2-year contracts. As new subscribers or existing subscribers are added, this should have a positive ARPU impact. 4. Data-only devices have lower ARPUs. As RCI increases its efforts to add multiple devices to existing plans via the data-share plans, this should have a negative impact on ARPU due to the lower cost to add additional devices. However, as we have demonstrated in our latest edition of Converging Networks, we believe the adoption of more devices per account can be a margin-accretive wireless revenue enhancer. ■ Postpaid churn was higher YOY for the first time in 5 quarters at 1.17% vs. 1.15% last year. The positive impact of weaker new entrants on churn likely has subsided while incumbent competition remains steady. We believe a more conservative outlook on churn is likely more prudent. ■ Although ARPU results were lower than expected, we believe RCI will be able to sustain strong margins even with more aggressive loading through continued cost control. We increased our wireless gross adds and net adds to reflect the increased flexibility of cost control to add more subs and still show margin improvement. Our 2013-2015 service margin estimates increase to approximately 46% over the period, reflecting lower operating cost forecasts excluding equipment costs. We lowered our 2013 postpaid ARPU growth

76

estimate to approx. -1% YOY due to higher-than-expected impact from new lower-priced roaming plans introduced midway through Q2. In 2014, we expect the roaming impact will be offset by new 2-year rate plans that are expected to be revenue accretive in the near term. We increased our F13 and F14 churn estimates reflecting a more conservative forecast due to persistent competition among the incumbents. Ready to Compete, but on a Level Playing Field ■ RCI wants a level playing field against any foreign well-capitalized incumbent operator entering Canada. CEO Nadir Mohamed pointed to the importance of having a level playing field in the 700MHz spectrum auction should Verizon (VZ) or any other well-capitalized strategic operator enter Canada. In particular, his view is the spectrum cap for Canadian incumbents in the 700MHz auction should be on par with VZ’s cap. ■ This is a coordinated effort to campaign the government/regulator to reconsider the spectrum auction rules. RCI’s statement is consistent with TELUS CEO and BCE statements. Incumbents believe that the change in Industry Minister last week provides them with an opportunity to have the department reconsider the spectrum cap rules. There is limited time before the September 17th deadline for the government to make this change but one should never underestimate the ability of incumbents to lobby effectively. Cable Resilient Despite Subscriber Pressure ■ Subscriber additions were lower than expected at -12K vs. our +4K and consensus at - 4K due to bigger TV losses and lower Internet additions. The Internet subscriber miss was a surprise considering recent management focus on broadband. The higher TV subscriber loss was due to heightened competition. ■ Despite the subscriber pressure, cable financial results were generally in line driven by Internet, positive revenue mix shift, and cost control. Excluding Mountain Cable, revenue grew 2% and EBITDA grew 5%. Internet revenue was very strong at 15% growth excluding the Mountain Cable acquisition, which reflected strong ARPU driven by higher tier upgrades and price increase. Excluding Mountain Cable, phone revenue also grew 2% while TV revenue declined 5%. Cable operations margin increased from 47.8% to 49.5% irrespective of Mountain Cable contribution due to good cost control. Excluding Mountain Cable, cable opex was down -1% YOY. ■ We lowered our Cable RGU estimates offset by higher revenue and margin estimates. For 2013, we forecast slower TV and Internet additions due to lower-than-expected results in Q2. For 2014, we forecast relatively flat YOY RGU growth due to competition. However, we expect continued cost efficiency, Mountain Cable synergies, and pricing power, specifically in Internet, to drive higher margins in 2013 and beyond. As a result, we increased our F13 EBITDA margin estimate by 60 bps to 49% and by 110 bps to 50.2% in 2014. Media Revenue Stronger Than Expected ■ Media revenue stronger than expected. Media revenue was more resilient than anticipated at $470M vs. our $448M and consensus at $454M. Excluding the Score acquisition, media revenue grew 5%. This was due to Sportsnet, The Shopping Channel, and higher baseball attendance. This was the main reason for the EBITDA upside vs. expectations. EBITDA declined 19% YOY to $64M but this was better than our $54M and lower than consensus at $70M. The additional NHL games (higher broadcasting cost) and higher baseball salaries caused an extra $35M in cost which was in line with our $30M-$35M estimate. Excluding the acquisition and the impact of higher hockey production and baseball salaries, media EBITDA declined 8%. ■ Our 2013 Media estimates are largely unchanged. In the second half of the year, we continue to expect impact from higher Blue Jays salary in Q3 and difficult Q4 comparison due to lower YOY NHL cost in Q4/12 due to the lock-out. In 2014, our estimates continue to reflect higher costs and tough comparisons.

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Exhibit 1 - Rogers NAV

(C$ thousands, except per share data) Current 1-Year Target Share Price $41.95 $52.00 EV/Cash EBIT Multiple (net of tax shield) 11.2 x 13.0 x EV/EBITDA Multiple (net of tax shield) 6.3 x 7.3 x P/E Multiple (NTM) 11.4 x 13.5 x Free Cash Flow Yield (NTM actual tax) 6.9% 6.2% Free Cash Flow Yield (NTM fully taxed) 6.8% 5.9% 1-Year ROR 28.3%

Current 1-Year Target EBITDA Shares EV/EBITDA Mult. Value EV/EBITDA Mult. Value 2012 2013E 2014E 2015E Owne d or Share Price Value* per Share or Share Price Value* per Share

Rogers Wireless Rogers Wireless 3,063,000 3,156,995 3,220,408 3,294,094 6.37 x 20,323,462 $39.23 7.75 x 25,280,118 $49.15 Inukshuk Less: Wireless Debt 1,642,333 $3.17 881,333 $1.71 Total Rogers Wireless 0.9% 3.1% 2.0% 2.3% 18,681,129 $36.06 24,398,785 $47.43

Rogers Cable Inc. Rogers Cable 1,694,000 1,818,736 1,928,816 1,995,120 6.0 x 11,284,784 $21.79 6.0 x 11,797,182 $22.94 Less: Cable Debt 1,653,667 $3.19 1,300,870 $2.53 Total Rogers Cable 3.6% 5.3% 4.2% 2.8% 9,631,117 $18.59 10,496,313 $20.41

Rogers Media Inc. Broadcasting (incl Citytv) 220,196 212,339 233,056 238,266 7.0 x 1,568,133 $3.03 7.0 x 1,651,954 $3.21 Publishing 182 6,390 24,758 25,501 5.5 x 92,103 $0.18 5.5 x 138,475 $0.27 BlueJays/SkyDome -30,378 -53,735 -58,734 -60,496 5.5 x -311,044 -$0.60 5.5 x -328,501 -$0.64 Less: Media Debt 0 $0.00 0 $0.00 Total Rogers Media 190,000 164,994 199,081 203,271 7.3 x 1,349,192 $2.60 7.3 x 1,461,928 $2.84 5.6% -16.5% 15.4% 2.1% Investments Cogeco Inc. (CGO) 6.0 M $47.40 282,949 $0.55 $47.40 282,949 $0.55 Cogeco Cable (CCA) 10.7 M $50.45 539,206 $1.04 $40.00 427,517 $0.83 37.5% stake in MLSE and other investments 860,000 $1.66 860,000 $1.67 Less: Holding Company Discount 30.0% 504,646 $0.97 30.0% 471,140 $0.92 Total Investments 1,177,508 $2.27 1,099,326 $2.14

Corporate Corporate Expense and Elim. (113,000) (131,842) (136,379) (139,557) 6.5 x -873,596 -$1.69 6.5 x -898,109 -$1.75 Less: Corporate Debt Net of Cash 8,329,000 $16.08 10,906,048 $21.20 Total Corporate (9,202,596) -$17.77 (11,804,157) -$22.95

NAV Excluding Tax Shields 21,636,350 $41.77 25,558,445 $49.69 Plus: Present Value of Tax Shields (Discounted 25%) 93,750 $0.18 93,750 $0.18 NET ASSET VALUE 21,730,100 $41.95 25,652,195 $49.87

Shares Outstanding ('000) 518,000 514,369

Average of DCF and NAV $51.65

* Enterprise Value calculated using 12 month forward EBITDA or Revenue

Source: Company reports; Scotiabank GBM estimates.

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Exhibit 2 - Rogers Summary Model

We kept postpaid churn steady for 2013 and beyond.

Year ending December 31 2011 2012 2013E 2014E 2015E Q1/F12 Q2/F12 Q3/F12 Q4/F12 Q1/F13 Q2/F13 Q3/F13E Q4/F13E Operational Data Wireless Subs (postpaid) 7,574 7,846 8,124 8,396 8,672 7,621 7,708 7,788 7,846 7,878 7,976 8,059 8,124 We increased wireless Net Adds 269 268 278 273 275 47 87 76 58 32 98 83 65 gross adds and net adds to Wireless Subs (prepaid) 1,761 1,591 1,382 1,322 1,292 1,689 1,643 1,644 1,591 1,498 1,442 1,432 1,382 reflect the increased flexibility of cost control to Net Adds 109 (170) (209) (60) (30) (72) (46) 1 (53) (93) (56) (10) (50) add more subs and still Blended Wireless ARPU ($ / month / subscriber) $60.15 $59.76 $60.51 $60.98 $61.10 $57.64 $59.02 $61.90 $60.45 $59.64 $59.24 $62.27 $60.87 show margin improvement. % YOY change -3.9% -0.7% 1.2% 0.8% 0.2% -3.8% -2.1% 0.2% 2.8% 3.5% 0.2% 0.6% 0.6% Blended Data ARPU $21.18 $24.17 $28.17 $30.48 $32.15 $22.42 $23.19 $25.52 $25.69 $27.00 $27.10 $29.41 $29.34 Data ARPU as % of total ARPU 35.2% 40.5% 46.6% 50.0% 52.6% 38.9% 39.3% 41.2% 42.5% 45.3% 45.7% 47.2% 48.2% Wireless churn (postpaid) 1.32% 1.29% 1.28% 1.28% 1.28% 1.26% 1.15% 1.34% 1.40% 1.22% 1.17% 1.35% 1.40% Wireless churn (prepaid) 3.62% 3.99% 4.15% 4.06% 4.01% 4.31% 4.04% 3.77% 3.77% 4.48% 4.13% 3.92% 3.92%

We lowered ARPU due to slower postpaid data roaming growth. By Q4 and early 2014, we expect roaming impact will be offset by new 2-year rate plans.

Basic Cable Subs 2,297 2,214 2,129 2,001 1,889 2,276 2,255 2,239 2,214 2,189 2,194 2,164 2,129 Net Adds (14) (83) (125) (128) (112) (21) (21) (16) (25) (25) (35) (30) (35) Penetration 61.2% 58.1% 54.1% 50.1% 46.6% 60.5% 59.7% 58.9% 58.1% 57.2% 56.1% 55.2% 54.1% We reduced TV subs and Digital Cable Subs 1,777 1,768 1,796 1,789 1,782 1,776 1,777 1,776 1,768 1,773 1,799 1,798 1,796 Internet net additions to Net Adds 39 (7) (10) (8) (6) (1) 1 (1) (6) 5 (12) (1) (1) reflect incresed focus on Penetration of Basic 77.4% 79.9% 84.4% 89.4% 94.3% 78.0% 78.8% 79.3% 79.9% 81.0% 82.0% 83.1% 84.4% ARPU and margins over subscriber adds. High-speed Internet Subs 1,793 1,864 1,975 2,052 2,129 1,806 1,815 1,844 1,864 1,890 1,930 1,955 1,975 Net Adds 83 73 77 77 77 13 9 29 22 26 6 25 20 Penetration of Basic 78.1% 84.2% 92.8% 102.5% 112.7% 79.3% 80.5% 82.4% 84.2% 86.3% 88.0% 90.3% 92.8% Digital Phone Subs 1,052 1,074 1,163 1,200 1,238 1,053 1,061 1,065 1,074 1,091 1,145 1,151 1,163 Net Adds 45 23 52 37 38 1 8 4 10 17 17 6 12 Penetration of Basic 45.8% 48.5% 54.6% 60.0% 65.5% 46.3% 47.1% 47.6% 48.5% 49.8% 52.2% 53.2% 54.6% Total RGU (basic, Internet and phone) 5,142 5,152 5,267 5,253 5,256 5,135 5,131 5,148 5,152 5,170 5,269 5,270 5,267 RGU year-over-year change 3.0% 0.2% 0.0% -0.3% 0.1% 2.4% 1.6% 0.6% 0.2% 0.7% 0.5% 0.2% 0.0% We increased cable ARPU Cable revenue per RGU $54.47 $54.44 $55.69 $56.85 $57.68 $53.52 $54.74 $54.35 $55.15 $55.61 $55.56 $55.16 $56.42 outlook primarily driven by YOY Growth 0.9% -0.1% 2.3% 2.1% 1.4% -1.2% -0.7% 0.3% 1.2% 3.9% 1.5% 1.5% 2.3% Internet ARPU growth.

Source: Company reports; Scotiabank GBM estimates.

79

Exhibit 2 - Rogers Summary Model (cont'd)

Year ending December 31 2011 2012 2013E 2014E 2015E Q1/F12 Q2/F12 Q3/F12 Q4/F12 Q1/F13 Q2/F13 Q3/F13E Q4/F13E Revenue S ervic e 6,601 6,719 6,853 7,034 7,216 1,612 1,652 1,744 1,711 1,683 1,670 1,766 1,734 In wireless, we reduced Equipment 537 561 578 684 699 94 113 145 209 77 143 145 213 service revenue but Wireless 7,138 7,280 7,432 7,718 7,914 1,706 1,765 1,889 1,920 1,760 1,813 1,911 1,947 increased EBITDA due to Cable 3,796 3,709 3,867 3,974 4,041 912 933 924 940 954 960 970 983 lower cost. Media 1,611 1,620 1,685 1,742 1,794 354 440 392 434 341 470 418 456 Corporate (117) (123) (123) (127) (130) (29) (32) (29) (33) (28) (31) (30) (34) Total Revenue 12,428 12,486 12,861 13,307 13,619 2,943 3,106 3,176 3,261 3,027 3,212 3,270 3,352 In cable, we lowered Growth (1) - Consolidated 1.6% 1.1% 2.2% 3.0% 2.3% -0.7% 0.3% 1.4% 3.4% 2.9% 2.8% 1.7% 1.6% revenue (lower subs) but increased EBITDA due to Wireless Service 1.1% 1.8% 2.0% 2.6% 2.6% -0.2% 0.9% 2.2% 4.3% 4.4% 1.1% 1.3% 1.4% lower cost. Cable Operations 3.7% 1.5% 3.0% 1.8% 1.3% 1.5% 1.3% 1.5% 1.7% 4.4% 2.0% 3.1% 2.6% Media 9.4% 0.6% 2.6% 2.0% 3.0% 4.4% 0.7% -3.7% 1.4% -3.7% 5.0% 3.7% 2.4% We lowered wireless service revenue but increased EBITDA wireless equipment and media revenues. Wireless 3,036 3,063 3,157 3,220 3,294 737 796 843 687 765 821 865 706 Cable 1,612 1,694 1,819 1,929 1,995 396 425 425 448 444 456 448 470 Media 180 190 165 199 203 (14) 79 50 75 (12) 64 49 52 Corporate (112) (113) (132) (136) (140) (25) (24) (30) (34) (31) (35) (31) (35) On a consolidated basis, Total EBITDA (excl. stock comp.) 4,716 4,834 5,009 5,212 5,353 1,094 1,276 1,288 1,176 1,166 1,306 1,332 1,193 EBITDA margin increased EBITDA Margin 37.4% 38.1% 38.4% 38.6% 38.7% 37.0% 41.5% 39.7% 34.3% 36.6% 40.6% 40.5% 35.4% by 30-50 bp between 2013 and 2015. EBITDA Growth (1) 0.7% 2.0% 2.7% 3.5% 2.7% -6.3% 2.6% 5.0% 6.8% 6.6% 1.7% 2.1% 0.0% Wireless EBITDA Service Margin 46.0% 45.6% 46.1% 45.8% 45.7% 45.7% 48.2% 48.3% 40.2% 45.5% 49.2% 49.0% 40.7% Wireless EBITDA Growth -4.3% 0.9% 3.1% 2.0% 2.3% -6.7% 4.6% 3.4% 2.5% 3.8% 3.1% 2.7% 2.7% Cable Ops EBITDA Margin 46.8% 47.8% 49.0% 50.2% 50.9% 45.8% 47.8% 48.1% 49.4% 48.9% 49.5% 48.0% 49.4% Cable Ops EBITDA Growth 9.2% 3.6% 5.3% 4.2% 2.8% -1.0% 1.5% 9.8% 4.5% 11.4% 5.0% 2.6% 2.5% Media EBITDA Margin 11.2% 11.7% 9.8% 11.4% 11.3% -4.0% 18.0% 12.8% 17.3% -3.5% 13.6% 11.8% 11.4% Media EBITDA Growth 31.4% 5.6% -16.5% 15.4% 2.1% n.m. -13.2% -9.1% 70.5% n.m. -8.0% -8.5% -34.2%

Media EBITDA recovery in 2014 due to higher sports broadcast We increased our EBITDA estimates due to the strong cost and payroll in 2013. control and higher margins across all segments.

Depr. & Amort. 1,743 1,819 1,810 1,902 1,974 463 466 437 453 450 463 449 449

EBIT 2,909 2,938 3,114 3,234 3,302 625 822 825 666 658 842 876 737

Net Income to Common 1,563 1,732 1,830 1,849 1,895 324 413 466 529 353 532 523 422

Average shares (millions) 543 519 515 510 496 525 521 515 515 515 515 515 515

We estimate ~2% CAGR reduction in shares outstanding from 2012 to 2015

Basic adj. EPS (C$) $3.22 $3.45 $3.61 $3.73 $3.93 $0.69 $0.92 $0.96 $0.88 $0.79 $0.97 $1.03 $0.83 EPS Growth 10% 7% 5% 3% 5% -9% 8% 8% 26% 14% 5% 7% -6%

Dividends per share (C$) $1.42 $1.58 $1.74 $1.91 $2.11 $0.40 $0.40 $0.40 $0.40 $0.44 $0.44 $0.44 $0.44 YOY Growth 11% 11% 10% 10% 10% We believe 10% dividend increase is achievable in 2014 Our forecasts reflect Wireless LTE investment, Cable network improvements (a-to-d & and 2015 with payout at ~60% of after tax FCF. spectrum reclaim, all-IP migration), and investment at RBS. Other: Capex (2) 2,127 2,142 2,228 2,298 2,355 449 458 528 707 464 525 592 647 Capex Intensity 17.1% 17.2% 17.3% 17.3% 17.3% 15.3% 14.7% 16.6% 21.7% 15.3% 16.3% 18.1% 19.3% Cash EBIT (EBITDA - Capex) 2,589 2,692 2,781 2,914 2,998 645 818 760 469 702 781 740 546 Cash EBIT Margin % 20.8% 21.6% 21.6% 21.9% 22.0% 21.9% 26.3% 23.9% 14.4% 23.2% 24.3% 22.6% 16.3% Net Debt 10,551 11,087 12,482 12,402 12,768 10,754 10,693 10,843 11,087 11,333 11,713 11,643 12,482 Net Debt / EBITDA (x) 2.24 2.29 2.49 2.38 2.39 2.46 2.10 2.10 2.36 2.43 2.24 2.19 2.62 FCF (Scotiabank GBM def'n, after tax) 1,777 1,479 1,372 1,578 1,641 286 688 459 46 361 534 286 191 FCF (RCI definition, after-tax) 1,851 1,649 1,422 1,578 1,641 416 633 561 39 428 505 336 141 FCF (RCI definition, pre-tax) 1,950 2,029 2,085 2,178 2,256 488 656 589 296 543 602 567 373

We estimate stable reported pre-tax FCF growth Our F13 leverage estimate reflects 700 MHz spectrum purchase ($1B estimate), transaction with Shaw in 2013. Higher cash tax impacts F13 after-tax (~$600M net cash commitment), and BLACKIRON acquisition, which keeps leverage within RCI's 2.0x- FCF growth. 2.5x target range. Our F14 estimate assumes $0.5B buyback.

Subscriber figures in 000. Financial figures in C$ millions except per share data. Estimates are under IFRS 2011 onward. Video segmented treated as discontinued operations beginning in F12. (1) 2011 adjusted for Atria acquisition. 2013 and 2014 adjusted for theScore, Mountain Cable, and BLACKIRON acquisitions. (2) As required under IFRS, includes capitalized interest in F11 onward for assets under construction but not yet in use. Source: Company reports; Scotiabank GBM estimates.

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Exhibit 3 - Valuation Comparables

NTM Valuation One-Year Market Dividend FCF Yield Country (Currency) Company Ticker Rating Current Price Div. / Share Target Price ROR Cap ($M) Yield EV/cash EBIT EV/EBITDA P/E Full tax 1 Actual tax Can (C$) Quebecor Inc. 2 QBR Focus Stock $48.30 $0.20 $55.00 14% 3,633 0.4% 12.3x 6.6x 16.3x 5.8% 5.3% Can (C$) TELUS Corporation T.TO Sector Outperform $31.02 $1.36 $41.00 37% 20,349 4.4% 12.3x 6.5x 14.1x 6.7% 6.8% Can (C$) Rogers Communications RCI Sector Outperform $41.95 $1.74 $52.00 28% 21,730 4.1% 11.2x 6.3x 11.4x 6.8% 6.9% US (US$) Verizon Communications VZ Sector Outperform $50.38 $2.06 $56.00 15% 144,339 4.1% 12.0x 6.7x 17.2x 6.2% 6.6% Can (C$) Cogeco Cable CCA Sector Outperform $50.45 $1.04 $55.00 11% 2,454 2.1% 12.0x 6.2x 9.9x 9.6% 10.8% US (US$) Comcast Corporation CMCSA Sector Outperform $44.96 $0.78 $48.00 8% 120,698 1.7% 10.5x 7.4x 17.5x 6.9% 7.2% Can (C$) Shaw Communications SJR Sector Outperform $26.04 $1.02 $27.00 8% 11,744 3.9% 16.4x 7.8x 16.4x 3.4% 3.4% Can (C$) BCE Inc. BCE Sector Perform $42.59 $2.33 $47.00 16% 33,046 5.5% 11.8x 6.6x 14.4x 6.5% 7.6% Can (C$) Bell Aliant BA Sector Perform $27.89 $1.90 $28.00 7% 6,392 6.8% 12.4x 7.3x 16.9x 6.2% 6.8% Can (C$) Manitoba Tel 3 MBT Sector Perform $34.50 $1.70 $33.00 1% 2,312 4.9% 13.5x 6.8x 18.8x 4.4% 4.4% US (US$) Time Warner Cable Inc. TWC Sector Perform $117.29 $2.60 $100.00 -13% 33,876 2.2% 11.5x 6.9x 16.6x 6.3% 6.9% US (US$) AT&T Inc. T Sector Underperform $35.40 $1.80 $36.00 7% 188,859 5.1% 12.6x 6.1x 14.7x 5.7% 6.1% LatAm (US$) NII Holdings 4 NIHD Sector Outperform $7.60 $0.00 $8.00 5% 1,344 0.0% n.m. 6.3x n.m. n.m. n.m. LatAm (US$) America Movil 4 AMX Sector Underperform $21.00 $0.36 $19.00 -8% 79,174 1.7% 11.9x 5.5x 11.1x 6.3% 6.3% Can (C$) Glentel Inc. GLN Sector Outperform $16.71 $0.50 $20.50 26% 371 3.0% n.m. 6.5x 11.2x 13.7% 13.7%

Prices as at July 24, 2013 U.S. Average 11.8x 6.7x 16.2x 6.2% 6.6% 1 Assumes full cash taxes are paid, except for MBT which has a tax holiday beyond 2019. Can. Average 12.4x 6.7x 14.1x 6.2% 6.7% 2 Actual tax FCF Yield reflects two years (F12 and F13) of cash tax paid in 2013. Full tax FCF Yield assumes no payment of F12 cash taxes in 2013. Cable Average 11.2x 7.2x 16.5x 6.6% 6.9% 3 EV/EBITDA multiple pro forma sale of Allstream to Accelero, but other multiples have not yet been adjusted. Integrated Telco Average 12.2x 6.3x 14.8x 6.1% 6.4% 4 Covered with Andres Coello Sources: Reuters; Scotiabank GBM estimates.

Source: Company reports; Scotiabank GBM estimates.

ScotiaView Analyst Link

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Intraday Flash Wednesday, July 24, 2013 @ 3:27:20 PM (ET)

(VIV-N US$21.79) Telefonica Brasil SA Same Story: Quality Has a Price...and a Reward Andres Coello - +52 (55) 5123 2852 Jeff Fan, CPA, CA, CFA - (416) 863-7780 (Scotiabank Inverlat) (Scotia Capital Inc. - Canada) [email protected] [email protected]

Rating: Sector Outperform Target 1-Yr: US$25.00 ROR 1-Yr: 22.5% Div. (NTM) $1.70 Risk Ranking: Medium Div. (Curr.) $1.70 Valuation: DCF - 5 years results, 9.01% WACC, terminal growth rate of 3.0% Yield (Curr.) 7.8% Key Risks to Target: Economy/FX; weakness in landline; competition in mobile

Event Pertinent Revisions ■ We have updated our model after the Q2/13 results, including higher New Old capex from the realignment of spectrum and a tougher FX outlook. We Target: are cutting our target to US$25/ADR from US$28/ADR. 1-Yr $25.00 $28.00 Implications Revenues13E $15,962 $17,528 Revenues14E $16,603 $17,741 ■ In Q2/13, Vivo delivered 118% and 24% more postpaid adds than

Revenues15E $17,723 $17,349 AT&T and Verizon in the U.S., respectively, a significant achievement for a wireless operator in LatAm. We also saw signs of improvement in its wireline division, like yearly broadband adds doubling. ■ However, these achievements came at a cost to profitability, with the adjusted EBITDA margin of the company falling 370 bp YOY. ■ On the Q2/13 call, Vivo clarified that the pressure in costs observed in the quarter was related to its efforts to enhance quality, accelerate growth in postpaid, and turning around the wireline segment (FTTH). ■ The company said that it expects improvements in cost trends in 2H/13. VIV also made it clear that it doesn't foresee changes to its commitment to dividends (net debt to EBITDA is at its lowest point). Recommendation ■ Reflecting the lower-than-expected Q2/13 EBITDA, we are cutting our 2013 EPS projection by 10.2% in local currency (20% for the ADR to reflect the tougher FX outlook.) However, we continue to see in VIV a combination of solid fundamentals, attractive valuation (4.3x 2014 EV/EBITDA and 11.9x P/E), and the highest dividend yield in the LatAm sector (7.8% 2013E.) Telefonica Brasil remains one of our top picks. Qtly Revenues (M) Q1 Q2 Q3 Q4 Year Price/Rev Capitalization enue Shares O/S (M) 1,125.6 2010A $4,138 A $4,309 A $4,518 A $4,815 A $17,779 1.55x (ADS) 2011A $4,776 A $5,163 A $4,949 A $4,652 A $19,540 1.57x Market Cap (M) $24,527 2012A $4,481 A $4,193 A $4,190 A $4,344 A $17,197 1.57x Float O/S (M) (ADS) 294.9 2013E $4,185 A $4,015 A $3,913 $3,849 $15,962 1.53x Float Value (M) $6,426 S&P Weight 0.08% (FY-Dec.) 2011A 2012A 2013E 2014E 2015E Earnings (ADS)/Share n.m. n.m. n.m. n.m. n.m. Price/Earnings 10.3x 12.0x 13.3x 12.1x 10.5x Relative P/E 0.7x 0.7x 0.8x 0.7x 0.6x Revenues (M) $19,540 $17,197 $15,962 $16,603 $17,723 EBITDA (M) $7,094 $6,439 $5,281 $5,941 $6,569 Current Ratio 0.9x 1.2x 1.3x 1.2x 1.3x EBITDA/Int. Exp 13.7x 14.5x 13.5x 13.7x 15.1x

IBES EPS 2013E: $1.85 BVPS13E: $17.29 IBES EPS 2014E: $1.96 ROE13E: 10.02% ScotiaView Analyst Link Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in US$ unless otherwise indicated. ^ Limited Voting

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

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Our New Financial Estimates for VIV

Exhibit 1 - Summary: P&L, Balance Sheet and FCF (in R$ Million Unless Otherwise Stated)

2012E-13E CAGR P & L Accounts 2011A 2012A 2013E 2014E 2015E 2016E 2017E Growth 2012E-17E Fixed-line 13,569 12,534 11,838 11,501 11,195 10,875 10,529 -5.6% -3.4% Mobile 19,500 21,398 23,215 24,612 26,580 28,812 31,000 8.5% 7.7% Total sales 33,069 33,932 35,053 36,112 37,776 39,687 41,529 3.3% 4.1% Net revenues ex-intercompany in US$ 19,540 17,197 15,962 16,603 17,723 18,077 18,365 -7.2% 1.3% Labor costs 2,295 2,404 2,425 2,528 2,644 2,778 2,907 0.9% 3.9% Cost of services 10,149 10,097 10,616 10,503 10,326 10,664 10,736 5.1% 1.2% Cost of handsets (cost of sold merchandise) 1,787 1,840 2,267 2,889 3,159 3,432 3,727 23.2% 15.2% Cost of commercialization of services 6,125 6,474 6,945 6,658 6,965 7,317 7,657 7.3% 3.4% General and administrative expenses 1,207 1,098 1,092 1,264 1,322 1,389 1,454 -0.6% 5.8% Other revenues (costs) 499 687 -111 650 642 675 706 -116.2% 0.5% Total operational costs 21,064 21,226 23,456 23,191 23,774 24,905 25,774 10.5% 4.0% EBITDA 12,005 12,706 11,597 12,921 14,002 14,782 15,755 -8.7% 4.4% EBITDA margin 36.3% 37.4% 33.1% 35.8% 37.1% 37.2% 37.9% -436 n/a EBITDA in US$ million 7,094 6,439 5,281 5,941 6,569 6,733 6,967 -18.0% 1.6% Depreciation 5,132 5,493 5,663 5,934 6,231 5,757 5,824 3.1% 1.2% EBIT 6,873 7,213 5,934 6,987 7,771 9,025 9,931 -17.7% 6.6% Comprehensive financial result 179 291 5 192 123 141 103 -98.3% -18.8% Income Tax and Social Contribution 1,651 2,469 1,866 2,379 2,677 3,109 3,440 -24.4% 6.9% Net Income 5,043 4,452 4,063 4,417 4,971 5,774 6,388 -8.7% 7.5% EPS (R$) 4.48 3.96 3.61 3.92 4.42 5.13 5.68 -8.7% 7.5% EPADR (US$) 2.65 2.00 1.64 1.80 2.07 2.34 2.51 -18.0% 4.6% 2012E-13E CAGR Margins (%) 2011A 2012A 2013E 2014E 2015E 2016E 2017E Growth 2012E-17E EBITDA Margin 36.3% 37.4% 33.1% 35.8% 37.1% 37.2% 37.9% -436 n/a Operating Margin 20.8% 21.3% 16.9% 19.3% 20.6% 22.7% 23.9% -433 n/a Net Margin 15.2% 13.1% 11.6% 12.2% 13.2% 14.6% 15.4% -153 n/a 2012E-13E CAGR Balance Sheet 2011A 2012A 2013E 2014E 2015E 2016E 2017E Growth 2012E-17E Assets 65,490 70,255 70,455 70,788 71,407 73,867 75,710 0.3% 1.5% Total current assets 11,810 16,272 15,627 15,033 15,271 16,781 17,721 -4.0% 1.7% Total non-current assets 53,680 53,983 54,828 55,756 56,136 57,086 57,989 1.6% 1.4% Liabilities 22,159 25,574 26,675 26,775 26,891 28,181 28,377 4.3% 2.1% Total current liabilities 12,740 13,538 13,178 13,277 13,394 13,655 13,850 -2.7% 0.5% Long-term debt 9,419 12,036 13,498 13,498 13,498 14,526 14,526 12.1% 3.8% Shareholders capital 43,326 44,681 43,779 44,013 44,515 45,686 47,334 -2.0% 1.2% 2012E-13E CAGR Free Cash Flow Statement 2011A 2012A 2013E 2014E 2015E 2016E 2017E Growth 2012E-17E EBITDA 12,005 12,706 11,597 12,921 14,002 14,782 15,755 -8.7% 4.4% EBIT 6,873 7,213 5,934 6,987 7,771 9,025 9,931 -17.7% 6.6% Less: Taxes 2,062 2,164 1,899 2,236 2,487 2,888 3,178 -12.2% 8.0% Less: Capex 5,741 6,117 6,236 6,861 6,611 6,707 6,728 1.9% 1.9% Less: Changes in Working Capital 70 -1,679 -220 -246 -266 -281 -299 -86.9% -29.2% Free cash flow 4,272 2,746 3,242 3,578 4,638 4,906 5,550 18.1% 15.1% Freee cash flow in US$ 2,524 1,392 1,476 1,645 2,176 2,234 2,454 6.1% 12.0% Dividend per ADR in US$ 2.0 1.7 1.7 1.8 1.9 1.9 1.9 1.2% 2.0% Dividend yield (%) 9.1% 7.7% 7.8% 8.1% 8.5% 8.5% 8.5% 1.2% 2.0% Source: Company reports; Scotiabank GBM estimates.

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The Leadership of Telefonica Brasil in Postpaid Continues to Widen

Exhibit 2 - Operational Highilghts (in 000 of Subscribers Unless Otherwise Stated)

2012E-13E CAGR Operational Metrics 2011A 2012A 2013E 2014E 2015E 2016E 2017E Growth 2012E-17E Mobile prepaid subscribers 55,438 57,335 54,215 54,015 54,165 54,265 54,315 -5.4% -1.1% Mobile postpaid subscribers 16,116 18,802 22,985 27,586 32,418 37,491 42,817 22.2% 17.9% Total mobile subscribers 71,554 76,137 77,200 81,601 86,583 91,756 97,132 1.4% 5.0% Mobile net additions 11,262 4,583 1,063 4,401 4,981 5,173 5,377 -76.8% 3.2%

Churn rate 4.6% 3.5% 3.7% 3.8% 3.9% 4.0% 4.2% 6.2% 3.6%

Fixed-line subscribers 10,981 10,646 10,541 10,225 9,918 9,491 9,081 -1.0% -3.1% Fixed-line net additions -312 -335 -105 -316 -307 -427 -410 -68.7% 4.1% Broadband subscribers 3,631 3,733 3,997 4,347 4,683 4,927 5,159 7.1% 6.7% Broadband net additions 312 102 264 350 336 244 232 158.8% 17.9% Video subscribers 699 600 577 713 840 947 1,042 -3.8% 11.7% Video net additions 213 -99 -23 136 127 106 95 -76.8% -199.2% Total Fixed RGUs 15,311 14,979 15,115 15,285 15,442 15,365 15,282 0.9% 0.4% New fixed RGUs 213 -332 136 170 156 -77 -83 -141.0% n/a

Total RGUs (fixed and mobile) 86,865 91,116 92,315 96,887 102,024 107,120 112,414 1.3% 4.3% Total New RGUs (fixed and mobile) 11,474 4,251 1,199 4,572 5,138 5,096 5,294 -71.8% 4.5%

Wireless Voice ARPU 17.6 16.7 16.0 15.2 14.5 14.2 14.0 -4.4% -3.4% Wireless Data ARPU 5.9 6.4 7.5 8.6 9.7 10.3 10.8 18.3% 11.2% Total Wireless ARPU 23.4 23.1 23.5 23.8 24.2 24.6 24.8 1.9% 1.5%

Fixed-line voce ARPU 64.0 57.1 52.7 48.3 43.8 39.7 36.1 -7.6% -8.8% Fixed-broadband ARPU 82.7 80.6 79.2 78.4 77.6 76.8 76.0 -1.8% -1.2% Video ARPU 91.0 76.2 67.9 67.2 66.6 65.9 65.2 -10.9% -3.1% Total ARPU per RGU 74.4 69.0 65.6 63.1 60.7 58.8 57.3 -4.9% -3.7%

Source: Company reports; Scotiabank GBM estimates.

ScotiaView Analyst Link

84

Company Comment Thursday, July 25, 2013, Pre-Market

(TMK-N US$69.76) Torchmark Corporation Reported EPS in Line but Sales Still Sluggish Joanne Smith, CFA - (212) 225-5071 Jeff Flynn, MBA - (212) 225-5039 (Scotia Capital (USA) Inc.) (Scotia Capital (USA) Inc.) [email protected] [email protected]

Rating: Sector Perform Target 1-Yr: US$72.00 ROR 1-Yr: 4.2% Div. (NTM) $0.68 Risk Ranking: Low Div. (Curr.) $0.68 Valuation: Target P/E of 12x using 2014E (60% weight); Target P/BV of 1.8x using 2013E (40% weight) Yield (Curr.) 1.0% Interest rate risk; Credit losses; Rating downgrades; Regulatory risk Key Risks to Target:

Event Pertinent Revisions ■ Operating EPS of $1.42, an increase of 9% YOY, matched our forecast New Old and was $0.02 ahead of the consensus estimate of $1.40. However, Operating $5.71 $5.68 results benefited from a revised accounting treatment for marketing EPS13E expenses in the Direct Response business, adding $0.03 to results. Operating $6.26 $6.18

■ While life insurance sales increased 2% YOY, an improvement versus a EPS14E 4% decline in Q1/13, they were short of our expectations with the American Income (AI) distribution system accounting for most of the shortfall. Given sluggish life sales in 1H/13, we expect management to reduce the current full-year sales outlook for AI of +10% to +14%. Implications ■ We increased our 2013E and 2014E EPS estimates to $5.71 and $6.26 from our prior estimates of $5.68 and $6.18; the increase primarily to account for the revised accounting. ■ BVPS, excluding AOCI, increased 10% YOY to $36.73 and operating ROE came in at 15.6%, both in line with our expectations. Share repurchases in the quarter of 1.4M ($90M) were also in line. Recommendation ■ While we expect TMK to post strong EPS growth, solid returns, and believe the company has a competitive advantage in middle-market insurance sales and distribution, we see only limited upside from the current stock price given the current valuation of 1.8x 2013E BVPS and 11.1x 2014E EPS. We maintain our Sector Perform rating. Qtly Operating EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2011A $1.04 A $1.09 A $1.17 A $1.21 A $4.50 9.6x Shares O/S (M) 94.6 2012A $1.27 A $1.30 A $1.29 A $1.33 A $5.18 10.0x Market Cap (M) $6,597 2013E $1.39 A $1.42 A $1.43 $1.46 $5.71 12.2x Float O/S (M) 93.3 2014E $1.53 $1.53 $1.58 $1.62 $6.26 11.1x Float Value (M) $6,507 S&P Weight 0.04% (FY-Dec.) 2010A 2011A 2012A 2013E 2014E Op Earnings/Share $4.50 $5.18 $5.71 $6.26 Net Earnings/Share $4.53 $5.42 $5.59 $6.26 Relative P/E 0.7x 0.6x 0.7x 0.7x Price/Book 1.1x 1.1x 1.6x 1.5x IBES EPS 2013E: $5.68 BVPS13E: $42.95 IBES EPS 2014E: $6.21 ROE13E: 15.46% Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates.

All values in US$ unless otherwise indicated. ScotiaView Analyst Link

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

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Reported Q2/13 EPS in Line but Life Sales Still Sluggish

■ Q2/13 Results: Operating EPS of $1.42, an increase of 9% YOY, matched our forecast and was $0.02 ahead of the $1.40 consensus. However, results benefited from a revised accounting treatment for marketing expenses in the Direct Response business, adding $0.03 to quarterly results. Higher underwriting profit drove a 5% YOY increase in net operating income and the average share count declined by 5%. Life insurance results were in line with our expectations including the benefit from the revised accounting treatment, as benefit ratios were modestly higher than we expected. Health insurance underwriting performance was slightly above our target, but was offset by modestly weaker net investment income. Life insurance sales were short of expectations for the second quarter in a row, and we expect management to revise sales guidance lower. o Conference Call: TMK will hold a conference call on Wednesday, July 25, at 11:00 AM. The dial-in number is (719) 325-2448. o EPS Guidance: The low-end of full-year EPS guidance was increased by $0.10 to $5.60 while the high end was unchanged at $5.75. The increase to the low end of guidance was primarily due to the go-forward impact of the revised accounting treatment. o Life Insurance Sales: While life insurance sales increased 2% YOY, an improvement versus a 4% decline in Q1/13, they fell short of our estimate by 5%, with American Income accounting for most of the shortfall. We believe the sales softness at American Income was partially due to the weaker-than-expected producing agent count, which fell 1% QOQ, but we look for more details on today’s conference call. The current life insurance sales guidance for American Income of +10% to +14% growth could be revised lower. o Captive Agents: Captive agent counts increased by 13% YOY to 7,600 with most of the increase due to the acquisition of Family Heritage at the end of 2012, which added roughly 750 agents. Excluding Family Heritage, agent counts rose 2% YOY. o Book Value, ROE & Share Repurchase: Book value per share, excluding AOCI increased 10% YOY to $36.73 and operating ROE came in at 15.6%, both in line with expectations. ROE was unchanged YOY. During the quarter, TMK repurchased 1.4M shares at an average price of $63 for a total cost of $90M. The average share count fell 5%. ■ Estimates & Price Target: We increased our 2013E and 2014E EPS estimates to $5.71 and $6.26 from $5.68 and $6.18, respectively, with the increase accounting for the revised accounting treatment of acquisition costs in the direct business, which allows for a greater deferral of expenses. This benefit was partially offset by an increase in the assumed price for share repurchases, as well as a slightly more conservative benefit ratio forecast in the life insurance business. ■ Investment Recommendation. While we expect TMK to post strong EPS growth, solid returns and believe the company has a competitive advantage in middle-market insurance sales and distribution, we see only limited upside from the current stock price given the current valuation of 1.8x 2013E BVPS and 11.1x 2014E EPS. We maintain our Sector Perform rating. Segment Review:

■ Life Insurance: Life insurance underwriting profit increased 9% YOY, to $136M, which was essentially in line with our forecast, but included a roughly $3M benefit from a revised accounting treatment for marketing expenses in the direct business. Life insurance premiums rose 5% YOY, with an increase of 9% at American Income (AI), a rise of 7% at Direct Response, and a decline at Liberty National (LN) of 2%. The life insurance underwriting margin of 28.6% was in line with our forecast, but would have slightly fallen short excluding the benefit from the accounting change.

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o Life insurance sales rose 2% YOY, to $91M, with AI up 2%, Direct Response higher by 3%, and LN up 2%. While we attribute some of the sales shortfall to normal variability, we believe slower-than-expected agent growth at American Income has restrained sales. American Income experienced strong agent growth of 18% in 2012 and we expect that attrition, as a result, may be running somewhat higher than expected. ■ Health Insurance: Health insurance underwriting profit increased 25% YOY, to $50M, and was slightly ahead of our forecast. Health underwriting margins benefited from stronger- than-expected underwriting performance at American Income, where margins of 49% were well ahead of our forecast. On an organic basis, health insurance premiums fell 4%, but increased 23% including the addition of Family Heritage. o Health insurance sales increased to $24M from $13M in the prior year, due to the inclusion of $11M in sales from Family Heritage. Excluding Family Heritage, health sales were unchanged YOY with Medicare Supplement sales up 11% and limited benefit plan sales falling 10%. ■ Excess Investment Income: Excess investment income of $55M was slightly below expectations, declining 12% YOY due to the impact of lower interest rates. The portfolio yield in the quarter was 5.95%, down from 6.43% in the year-ago quarter. ■ Administrative Expenses: Administrative expenses, at 6.4% of total company premium, were in line with our estimates.

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Exhibit 1 - TMK Summary Financial Model ($ millions, except per share) 2012A 2013E 2014E 1Q13A 2Q13A 3Q13E 4Q13E Revenue 3,590 3,814 3,916 958 950 947 958 Pre-tax Operating Income 775 812 842 202 204 202 204 After-tax Operating Income 507 529 548 132 133 132 133

Operating EPS 5.18 5.71 6.26 1.39 1.42 1.43 1.46

Common Shares Out. 98 93 88 95 93 92 91 Book Value (ex AOCI) 35.24 38.36 42.03 35.98 36.73 37.53 38.36 Book Value (with AOCI) 45.85 42.95 46.90 45.88 41.19 42.05 42.95

Equity (ex AOCI) 3,353 3,462 3,576 3,376 3,408 3,434 3,462

Core ROE (ex AOCI), % 15.4% 15.5% 15.5% 15.7% 15.6% 15.4% 15.4%

Growth (YoY%): Revenue 6% 6% 3% 7% 7% 8% 3% After-tax Operating Income 3% 4% 4% 3% 5% 5% 5% Operating EPS 15% 10% 10% 10% 9% 10% 10%

Book Value (ex AOCI) 10% 9% 10% 10% 10% 9% 9% Equity (ex AOCI) 3% 3% 3% 3% 6% 4% 3%

Pre-tax Operating Income Life Insurance 509 543 583 133 136 137 137 Health Insurance 164 196 195 50 50 47 48 Part D/Other 37 37 39 9 9 9 10 Excess Investment Income 237 220 215 56 55 54 55 Administrative Expenses (165) (177) (184) (44) (44) (44) (45) Other Income/Expenses (6) (7) (6) (2) (2) (2) (2) Total 775 812 842 202 204 202 204

Business Mix: Life Insurance 66% 67% 69% 66% 67% 68% 67% Health Insurance 21% 24% 23% 25% 25% 23% 24% Part D/Other 5% 5% 5% 4% 5% 5% 5% Excess Investment Income 31% 27% 26% 28% 27% 27% 27% Administrative Expenses -21% -22% -22% -22% -22% -22% -22% Other Income/Expenses -1% -1% -1% -1% -1% -1% -1%

Total 100% 100% 100% 100% 100% 100% 100% Source: Company reports; Scotiabank GBM estimates.

ScotiaView Analyst Link

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Appendix A: Important Disclosures Company Ticker Disclosures (see legend below)* Agnico Eagle Mines Limited AEM P, T America Movil AMX M4, T Banco de Chile SA CHILE M7, T Banco de Crédito e Inversiones SA BCI M7, T Banco Santander-Chile SA BSANTANDER M7, T BCE Inc. BCE B26, B8, G, I, S, T, U Bell Aliant Inc. BA G, I, T, U BlackBerry BB N2, T Bombardier Inc. BBD.B G, N1, T, U, VS1, VS2, VS3 Brookfield Canada Office Properties BOX.UN G, I, T, U Brookfield Office Properties BPO G, I, S, T, U Canadian Pacific Railway Limited CP I, N1, T Cenovus Energy Inc. CVE G, I, N1, P, S, T, U Coca-Cola FEMSA, S.A.B. de C.V. KOF M3 Cogeco Cable Inc. CCA G, I, N1, T, U CorpBanca SA CORPBANCA M7, T Empresa Nacional de Electricidad SA ENDESA M8 Encana Corporation ECA I, N1, S Fibria Celulose S.A. FBR P, T Grupo Aeroportuario Centro Norte, S.A.B. de C.V. OMAB M3, T Loblaw Companies Limited L B27, D30, I, T Lundin Mining Corporation LUN I, T Lydian International Ltd. LYD I, P, T Manitoba Telecom Services Inc. MBT B9, I, S, T Mullen Group Ltd. MTL I, J, T NII Holdings, Inc. NIHD M4, T Potash Corporation of Saskatchewan, Inc. POT I, T Quebecor Inc. QBR.B I, N1, T Rogers Communications Inc. RCI.B G, I, S, T, U Shaw Communications Inc. SJR.B I, S, T Telefonica Brasil SA VIV M4 TELUS Corporation T G, I, J, T, U, U63

For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S. 89

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The following analysts certify that (1) the views expressed in this report in connection with securities or issuers they analyze accurately reflect their personal views and (2) no part of their compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by them in this report: Tanya Jakusconek, Turan Quettawala, Mario Saric, Ovais Habib, Mark Polak, Ezequiel Fernández López, Benoit Laprade, Rodrigo Echagaray, Orest Wowkodaw, Leily Omoumi, Patricia Baker, Ben Isaacson, Gus Papageorgiou, Jeff Fan, Joanne Smith, Andres Coello, Claudia Benavente A., and Kevin Choquette This research report was prepared by employees of Scotia Capital Inc. and/or its affiliates who have the title of Analyst. All pricing of securities in reports is based on the closing price of the securities’ principal marketplace on the night before the publication date, unless otherwise explicitly stated. All Equity Research Analysts report to the Head of Equity Research. The Head of Equity Research reports to the Managing Director, Head of Institutional Equity Sales, Trading and Research, who is not and does not report to the Head of the Investment Banking Department. Scotiabank, Global Banking and Markets has policies that are reasonably designed to prevent or control the sharing of material non-public information across internal information barriers, such as between Investment Banking and Research. The compensation of the research analyst who prepared this report is based on several factors, including but not limited to, the overall profitability of Scotiabank, Global Banking and Markets and the revenues generated from its various departments, including investment banking. Furthermore, the research analyst’s compensation is charged as an expense to various Scotiabank, Global Banking and Markets departments, including investment banking. Research Analysts may not receive compensation from the companies they cover. Non-U.S. analysts may not be associated persons of Scotia Capital (USA) Inc. and therefore may not be subject to NASD Rule 2711 restrictions on communications with subject company, public appearances and trading securities held by the analysts.

For Scotiabank, Global Banking and Markets Research analyst standards and disclosure policies, please visit http://www.gbm.scotiabank.com/disclosures Scotiabank, Global Banking and Markets Research, 40 King Street West, 33rd Floor, Toronto, Ontario, M5H 1H1.

* Legend

G Scotia Capital (USA) Inc. or its affiliates has managed or co-managed a public offering in the past 12 months. I Scotia Capital (USA) Inc. or its affiliates has received compensation for investment banking services in the past 12 months. J Scotia Capital (USA) Inc. or its affiliates expects to receive or intends to seek compensation for investment banking services in the next 3 months. P This issuer paid a portion of the travel-related expenses incurred by the Fundamental Research Analyst/Associate to visit material operations of this issuer. U Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to, this issuer. S Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of this issuer. T The Fundamental Research Analyst/Associate has visited material operations of this issuer. N1 Scotia Capital (USA) Inc. had an investment banking services client relationship during the past 12 months. N2 Scotia Capital (USA) Inc. had a non-investment banking securities-related services client relationship during the past 12 months. M8 Ezequiel Fernandez Lopez, an analyst, prepared this report and is an employee of the Research Department of Scotia Corredora de Bolsa Chile S.A.

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M3 Rodrigo Echagaray, an analyst, prepared this report and is an employee of the Research Department of Scotia Inverlat Casa de Bolsa, S.A. de C.V. which forms a part of Grupo Financiero Scotiabank Inverlat. B8 Ronald Brenneman is a director of BCE Inc and is a director of The Bank of Nova Scotia. B9 N. Ashleigh Everett is a director of Manitoba Telecom Services Inc. and is a director of The Bank of Nova Scotia. M7 Claudia Benavente A., an analyst, prepared this report and is an employee of the Research Department of Scotia Corredores de Bolsa Chile S.A. M4 Andres Coello, an analyst, prepared this report and is an employee of the Research Department of Scotiabank Inverlat, S.A., Institucion de Banca Multiple which forms a part of Grupo Financiero Scotiabank Inverlat. VS1 Our Research Analyst visited BT's Derby facility, a manufacturing plant and servicing centre for trains, on July 11, 2012. No payment was received from the issuer for the travel-related expenses incurred by the Research Analyst to visit this site. VS2 Our Research Analyst visited Bombardier Sifang Transportation and Bombardier CPC Propulsion System Co., both JVs with Bombardier Inc., on October 15-19, 2012. Partial payment was received from the issuer for the travel-related expenses incurred by the Research Analyst to visit this site. VS3 Our Research Analyst visited Bombardier Transportation, a production facility for commuter/regional trains, on June 19, 2013. Partial payment was received from the issuer for the travel-related expenses incurred by the Research Analyst to visit this site. B26 Thomas C. O'Neill is a director of BCE Inc. and is a director of The Bank of Nova Scotia. B27 Thomas C. O'Neill is a director of Loblaw Companies Limited and is a director of The Bank of Nova Scotia. D30 Sarabjit Marwah, Vice-Chairman and Chief Operating Officer of The Bank of Nova Scotia, is a member of the board of directors for George Weston Limited. Loblaw Companies Limited is a subsidiary of George Weston Limited. U63 Scotia Capital Inc was retained by Telus Corporation to provide a fairness opinion with respect to a proposed share conversion.

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Definition of Scotiabank, Global Banking and Markets Equity Research Ratings & Risk Rankings We have a four-tiered rating system, with ratings of Focus Stock, Sector Outperform, Sector Perform, and Sector Underperform. Each analyst assigns a rating that is relative to his or her coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst. Our risk ranking system provides transparency as to the underlying financial and operational risk of each stock covered. Statistical and judgmental factors considered are: historical financial results, share price volatility, liquidity of the shares, credit ratings, analyst forecasts, consistency and predictability of earnings, EPS growth, dividends, cash flow from operations, and strength of balance sheet. The Director of Research and the Supervisory Analyst jointly make the final determination of all risk rankings. The rating assigned to each security covered in this report is based on the Scotiabank, Global Banking and Markets research analyst’s 12-month view on the security. Analysts may sometimes express to traders, salespeople and certain clients their shorter-term views on these securities that differ from their 12-month view due to several factors, including but not limited to the inherent volatility of the marketplace. Ratings Risk Rankings Focus Stock (FS) Low The stock represents an analyst’s best idea(s); stocks in this category are Low financial and operational risk, high predictability of financial results, expected to significantly outperform the average 12-month total return of the low stock volatility. analyst’s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst. Medium Moderate financial and operational risk, moderate predictability of financial Sector Outperform (SO) results, moderate stock volatility. The stock is expected to outperform the average 12-month total return of the analyst’s coverage universe or an index identified by the analyst that includes, High High financial and/or operational risk, low predictability of financial results, but is not limited to, stocks covered by the analyst. high stock volatility. Sector Perform (SP) Speculative The stock is expected to perform approximately in line with the average 12- Exceptionally high financial and/or operational risk, exceptionally low predictability month total return of the analyst’s coverage universe or an index identified by of financial results, exceptionally high stock volatility. For risk-tolerant investors the analyst that includes, but is not limited to, stocks covered by the analyst. only. Sector Underperform (SU) The stock is expected to underperform the average 12-month total return of the analyst’s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst. Other Ratings Tender – Investors are guided to tender to the terms of the takeover offer. Under Review – The rating has been temporarily placed under review, until sufficient information has been received and assessed by the analyst. Scotiabank, Global Banking and Markets Equity Research Ratings Distribution* Distribution by Ratings and Equity and Equity-Related Financings* Percentage of companies covered by Scotiabank, Global Banking and Markets Equity Research within each rating category. Percentage of companies within each rating category for which Scotiabank, Global Banking and Markets has undertaken an underwriting liability or has provided advice for a fee within the last 12 months.

Source: Scotiabank GBM. For the purposes of the ratings distribution disclosure FINRA requires members who use a ratings system with terms different than “buy,” “hold/neutral” and “sell,” to equate their own ratings into these categories. Our Focus Stock, Sector Outperform, Sector Perform, and Sector Underperform ratings are based on the criteria above, but for this purpose could be equated to strong buy, buy, neutral and sell ratings, respectively.

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General Disclosures This report has been prepared by analysts who are employed by the Research Department of Scotiabank, Global Banking and Markets. Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including Scotia Capital Inc. All other trademarks are acknowledged as belonging to their respective owners and the display of such trademarks is for informational use only. Scotiabank, Global Banking and Markets Research produces research reports under a single marketing identity referred to as “Globally-branded research” under U.S. rules. This research is produced on a single global research platform with one set of rules which meet the most stringent standards set by regulators in the various jurisdictions in which the research reports are produced. 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