Month in Review: DECEMBER 2012

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1 RBC Dominion Securities Inc. Month in Review: DECEMBER 2012 What Moved the Markets As 2012 drew to a close, concerns surrounding the fiscal cliff negotiations gripped financial markets, euro-zone worries subsided for the time-being, and Japan ushered in a new stimulus-centric government. Equity markets worldwide traded in a tight range for the month; however, China and Japan were notable exceptions with both turning in strong performances on the back of improving investor sentiment toward near-term growth and monetary policy. Yields on safe-haven government bonds in the U.S., Canada, Japan, and Germany all closed the month higher as the upbeat tone in the market during the first half of the month managed to outweigh pessimism in the latter half. Investors remained optimistic throughout most of month that U.S. lawmakers would strike a deal to avert the fiscal cliff of more than US$600- billion in tax increases and federal spending cuts. However, as the January 1st deadline approached, concern grew that any form of a deal could succumb to political brinksmanship as both parties appeared willing to go over the cliff. Equity-Specific Developments Loblaw (L) announced on December 6th that it would create a real estate investment trust (REIT) to acquire a significant portion of the company s real estate assets with a plan to sell units in the REIT to the general public through an initial public offering. Loblaw indicated that it planned to retain a large stake in the new entity; however, investors applauded nonetheless with the stock adding more than 25% for the month. Fixed Income-Specific Developments The Bank of Canada (BoC) left its overnight interest rate unchanged at 1.00% and noted that economic activity in the third quarter was weak, but expects the pace of economic growth to pick up through The BoC also retained its tightening bias suggesting that higher rates will likely be required over time. Corporate credit spreads (the extra yield that investors demand to own corporate bonds rather than government debt) closed the month largely unchanged despite narrowing mid-way through

2 What Moved the Markets continued from page 1 the month on optimism a fiscal cliff deal would be reached. Corporate bond issuance remained strong and pushed global issuance into record territory as corporate bond sales worldwide broke the previous record of $3.89 trillion established in Global Developments Mr. Shinzo Abe won the Japanese general election with a super-majority and will lead the Liberal Democratic Party back to power as prime minister. This means that Mr. Abe can pass legislation without the approval of the upper house of Parliament in Japan. Abe promised to launch bold economic measures to pull Japan out of deflation. He also vowed to establish or strengthen an alliance with the United States to stabilize Japan s diplomacy shaken by increasing territorial threats from its neighbours. Euro-zone concerns were largely overshadowed by the looming fiscal cliff, although anxiety surrounding Greece s budgetary concerns waned somewhat when the country received an upgrade from S&P. This buoyed hopes that the worst of the country s troubles may be behind it. Another positive development occurred when European Union finance ministers signed a deal to give the European Central Bank supervisory powers over the region s banks. Number Crunching Equity Indices* Month YTD* S&P/TSX Composite Index TR 1.9% 7.2% Dow Jones Industrial Average TR 0.8% 10.2% S&P 500 Index TR 0.9% 16.0% NASDAQ Composite Index TR 0.5% 17.5% MSCI EAFE TR (USD) 3.2% 17.9% MSCI World TR (USD) 1.9% 16.5% S&P/TSX Sector Performance* Month YTD* S&P/TSX Financials TR 2.4% 17.6% S&P/TSX Energy TR 1.3% -0.6% S&P/TSX Materials TR 0.0% -5.7% S&P/TSX Industrials TR 3.8% 15.3% S&P/TSX Consumer Discretionary TR 4.0% 22.1% S&P/TSX Telecom Services TR 2.3% 11.5% S&P/TSX Information Technology TR 1.2% -2.9% S&P/TSX Consumer Staples TR 5.9% 22.6% S&P/TSX Utilities TR 3.4% 4.0% S&P/TSX Healthcare TR 2.8% 24.7% Currencies (in Canadian Dollars) Exchange Month YTD* US Dollar % -2.9% Euro % -1.1% British Pound % 1.6% Japanese Yen (100) % -13.9% Commodities (US$) Spot Price Month YTD* Crude Oil (WTI per barrel) $ % -7.1% Natural Gas (per million btu) $ % 12.1% Gold (per ounce) $1, % 7.1% Silver (per ounce) $ % 9.0% Copper (per pound) $ % 4.2% Nickel (per pound) $ % -9.2% Aluminum (per pound) $ % 2.3% Zinc (per pound) $ % 12.7% * All returns are on a Total Return basis All indices are in local currency unless otherwise noted. 1.2 % 1.0 % 0.8 % 0.6 % 0.4 % 0.2 % S&P/TSX Index - Target Overnight Rate, LTM S&P/TSX Index - Target Overnight Rate, LTM 1/17/12 2/14/12 3/14/12 4/12/12 S&P/TSX Index 5/10/12 6/8/12 7/9/12 8/7/12 Target Overnight Rate 9/5/12 10/3/12 11/1/12 11/29/12 12/31/12 13,000 12,000 11,000 10,000 2 MONTH IN REVIEW

3 North American Equity Highlights December ,000 1,550 Dec 5: Apple (AAPL) pushed the Info Tech sector lower, falling 5.8% on a combina8on of weak technicals and a report forecas8ng a decline in its market share of the tablet market Dec 17: American Interna+onal Group (AIG) advances 3.0% on plans to sell its remaining stake in AIA Group Ltd in a deal that could raise as much as $6.5 billion Dec 21: Nike (NKE) advances 6.2% a/er repor8ng earnings that exceeded analysts' expecta8ons. 1,500 13,500 1,450 1,400 S&P/TSX 13,000 12,500 Dec 5: Freeport McMoRan (FCX) retreats 16.0% on the announcement that it is acquiring two oil and natural gas explora8on and produc8on companies Dec 8: Glencore Interna+onal won approval from China's Ministry of its aquisi8on of Viterra (VT) Dec 17: First Majes+c Silver (FR) falls 9.7% a/er it announced acquisi8on of a junior silver miner. December 31: Cliffs Natural Resources (CLF) rallies 8.4% a/er the HSBC China Manufacturing PMI rose to 51.5 in December from 50.5 in November. Dec 21: Research In Mo+on (RIM) falls 22.2% amid concerns over the sustainability of its high margin service fees. 1,350 1,300 1,250 S&P 500 From Subject Received Size Mackay, Ry Can I get m 11:05 AM 2 KB 1,200 12,000 1,150 1,100 11,500 1,050 12/4/12 12/5/12 12/6/12 12/7/12 12/10/12 12/11/12 12/12/12 12/13/12 12/14/12 12/17/12 12/18/12 12/19/12 12/20/12 12/21/12 12/24/12 12/25/12 12/26/12 12/27/12 12/28/12 12/31/12 Dec 6: Loblaw (L) surges 13.7% a/er the company announced its plans to create a REIT with its real estate porzolio Dec 7. Industry Canada approves Petronas takeover of Progress Energy and CNOOC acquisi8on of Nexen. Dec 17: Encana (ECA) reaches a $2.2- billion joint venture with PetroChina to develop the Duvernay property in Alberta Dec 31: PotashCorp (POT) and Agrium (AGU) increases 1.9% and 1.3%, respec8vely, a/er Canpotex announced it had struck a six- month agreement with China's Sinofert to supply one million tonnes of potash. 3 MONTH IN REVIEW

4 World Markets December 2012 Most global indices posted strong returns in December, led by the Japanese and Chinese equity markets which delievered impressive double-digit returns for the month. All returns are on a total return basis unless otherwise noted All returns calculated in local currency except for MSCI World ** These indices are calcuated on a price return basis Canada: S&P/ TSX M/M: 1.9% YTD: 7.2% U.K: FTSE 100 M/M: 0.6% YTD: 10.6% MSCI World Index: Global USD CAD M/M: 2.0% M/M: 2.2% YTD: 16.6% YTD: 14.1% U.S: S&P 500 M/M: 0.9% YTD: 16.0% Germany: DAX M/M: 2.8% YTD: 29.1% China: Shanghai Index M/M: 14.6% YTD: 5.8% Japan: Nikkei M/M: 10.2% YTD: 25.5% Brazil:** Bovespa M/M: 6.1% YTD: 7.4% India: Sensex M/M: 0.5% YTD: 28.0% Hong Kong: Hang Seng M/M: 2.9% YTD: 27.4% Australia: S&P/ ASX 200 M/M: 3.4% YTD: 22.2% 4 MONTH IN REVIEW

5 Canadian & U.S. Equities December 2012 S&P/TSX Composite Sector Movement S&P 500 Sector Movement -20% -15% -10% -5% 0% 5% 10% 15% 20% Consumer Staples Consumer Discretionary Industrials Utilities Healthcare Financials Information Technology Telecom Services Energy Materials -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% Financials Materials Industrials Energy Consumer Discretionary Information Technology Utilities Healthcare Telecom Services Consumer Staples S&P 500 Sector Movement Top 10 S&P/TSX Contributors/Decliners by Index Points Top 10 S&P 500 Contributors/Decliners by Index Points Enbridge Inc Potash Corp of Saskatchewan Inc Bank of Nova Scotia Royal Bank of Canada Manulife Financial Corp Teck Resources Ltd Canadian Pacific Railway Ltd Nexen Inc Valeant Pharmaceuticals International Inc Brookfield Asset Management Inc Catamaran Corp Kinross Gold Corp Sun Life Financial Inc Crescent Point Energy Corp Agnico-Eagle Mines Ltd MEG Energy Corp Eldorado Gold Corp Yamana Gold Inc Encana Corp Goldcorp Inc Bank of America Corp Citigroup Inc JPMorgan Chase & Co Wells Fargo & Co Ford Motor Co Intel Corp Chevron Corp Oracle Corp Goldman Sachs Group Inc/The Cisco Systems Inc Freeport-McMoRan Copper & Gold Inc Altria Group Inc Home Depot Inc/The Procter & Gamble Co/The Wal-Mart Stores Inc Coca-Cola Co/The Exxon Mobil Corp Merck & Co Inc Philip Morris International Inc Apple Inc 5 MONTH IN REVIEW

6 Canadian and U.S. Economic Data December 2012 Higher Than Expected Event Period Consensus Actual Prior 12/4/12 CA Bank of Canada Rate 4-Dec 1.00% 1.00% 1.00% 12/7/12 US Avg Weekly Hours All Employees Nov /7/12 US Avg Hourly Earning YOY All Emp Nov 1.70% 1.70% 1.60% 12/12/12 US FOMC Rate Decision 12-Dec 0.25% 0.25% 0.25% 12/18/12 US NAHB Housing Market Index Dec /20/12 US Leading Indicators Nov -0.20% -0.20% 0.20% 12/21/12 CA Gross Domestic Product MoM Oct 0.10% 0.10% 0.00% As Expected Event Period Consensus Actual Prior 12/3/12 US Markit US PMI Final Nov /5/12 US ISM Non-Manf. Composite Nov /5/12 US Factory Orders Oct 0.00% 0.80% 4.80% 12/6/12 US Continuing Claims 24-Nov 3275K 3205K 3287K 12/6/12 CA Building Permits MoM Oct 2.30% 15.00% % 12/7/12 US Change in Private Payrolls Nov 90K 147K 184K 12/7/12 CA Participation Rate Nov /7/12 CA Unemployment Rate Nov 7.40% 7.20% 7.40% 12/7/12 US Unemployment Rate Nov 7.90% 7.70% 7.90% 12/7/12 US Change in Nonfarm Payrolls Nov 85K 146K 171K 12/11/12 US Trade Balance Oct -$42.7B -$42.2B -$41.5B 12/11/12 US JOLTs Job Openings Oct /13/12 CA Capacity Utilization Rate 3Q 80.50% 80.90% 81.00% 12/13/12 US Retail Sales Ex Auto & Gas Nov 0.40% 0.70% -0.30% 12/14/12 US Capacity Utilization Nov 78.00% 78.40% 77.80% 12/14/12 US Industrial Production Nov 0.30% 1.10% -0.40% 12/19/12 US Housing Starts Nov 872K 861K 894K 12/20/12 CA Retail Sales Less Autos MoM Oct 0.20% 0.50% 0.00% 12/20/12 US Continuing Claims 8-Dec 3200K 3225K 3198K 12/20/12 CA Retail Sales MoM Oct 0.20% 0.70% 0.10% 6 MONTH IN REVIEW

7 Economic Data continued from page 6 As Expected Event Period Consensus Actual Prior 12/20/12 US Initial Jobless Claims 15-Dec 360K 361K 343K 12/20/12 US House Price Index MoM Oct 0.30% 0.50% 0.20% 12/21/12 US Durables Ex Transportation Nov -0.20% 1.60% 1.50% 12/21/12 US Personal Income Nov 0.30% 0.60% 0.00% 12/21/12 US Durable Goods Orders Nov 0.30% 0.70% 0.00% Lower Than Expected Event Period Consensus Actual Prior 12/3/12 US ISM Manufacturing Nov /5/12 US ADP Employment Change Nov 125K 118K 158K 12/6/12 US Initial Jobless Claims 1-Dec 380K 370K 393K 12/10/12 CA Housing Starts Nov 200.0K 196.1K 204.1K 12/11/12 US NFIB Small Business Optimism Nov /14/12 US CPI Ex Food & Energy (YoY) Nov 2.00% 1.90% 2.00% 12/21/12 CA Gross Domestic Product YoY Oct 1.20% 1.10% 1.00% 12/21/12 CA Consumer Price Index MoM Nov 0.00% -0.20% 0.20% 12/21/12 CA Consumer Price Index YoY Nov 1.10% 0.80% 1.20% 12/21/12 US U. of Michigan Confidence Dec F /27/12 US New Home Sales Nov 380K 377K 368K The information contained in this report has been compiled by RBC Dominion Securities Inc. ( RBC DS ) from sources believed by it to be reliable, but no representations or warranty, express or implied, are made by RBC DS or any other person as to its accuracy, completeness or correctness. All opinions and estimates contained in this report constitute RBC DS s judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. This report is not an offer to sell or a solicitation of an offer to buy any securities. Additionally, this report is not, and under no circumstances should be construed as, a solicitation to act as securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is prepared for general circulation to Investment Advisors and does not have regard to the particular circumstances or needs of any specific person who may read it. RBC DS and its affiliates may have an investment banking or other relationship with some or all of the issuers mentioned herein and may trade in any of the securities mentioned herein either for their own account or the accounts of their customers. RBC DS and its affiliates may also issue options on securities mentioned herein and may trade in options issued by others. Accordingly, RBC DS or its affiliates may at any time have a long or short position in any such security or option thereon. Neither RBC DS nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. This report may not be reproduced, distributed or published by any recipient hereof for any purpose. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member Canadian Investor Protection Fund. Registered trademark of Royal Bank of Canada. Used under licence. RBC Dominion Securities is a registered trademark of Royal Bank of Canada. Used under licence. Copyright All rights reserved.