Verus Monthly Market Insights

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1 July 2017 July 2017 Energy, Materials and Telecom partially offset the underperformance in the S&P/TSX Composite. The S&P/TSX Composite Index declined 0.25% through the month of July on a price only basis. With 248 stocks in the Index at month end, 139 fell, while 107 rose and 2 were left unchanged. The small and large-cap indices outperformed the broader index, while the mid-cap index underperformed. The index saw majority of its sectors decline through the month of July, while the Energy, Materials and Telecom bucked that trend, advancing 2.0%, 1.7% and 1.5%, respectively Index Returns (Price Only) July YTD S&P/TSX Composite -0.25% -0.94% S&P/TSX % -0.98% S&P/TSX Completion -0.54% -0.77% S&P/TSX Small Cap -0.13% -5.46% Top 10 Point Contributors Top 10 Point Detractors 1) Suncor Energy Inc. (+34.1) 2) Manulife Financial Corp. (+19.9) 3) Teck Resources Ltd. (+15.8) 4) First Quantum Minerals (+14.3) 5) TransCanada Corp. (+12.0) 6) Rogers Communications Inc. (+9.4) 1) Canadian National Railway Co. (-37.3) 2) Brookfield Asset Management Inc. ( ) Canadian Pacific Railway Ltd. (-14.5) 4) Restaurant Brands International Inc. (-11.9) 5) Tahoe Resources Inc. (-10.0) 6) Alimentation Couche-Tard Inc. (-9.1) 7) Canadian Imperial Bank of Commerce (+9.0) 7) Toronto-Dominion Bank (-6.6) 8) Encana Corp. (+8.2) 9) Lundin Mining Corp. (+7.4) 8) Loblaw Companies Ltd. (-6.5) 9) Thomson Reuters Corp. (-6.1) 10) Agrium Inc. (+7.4) 10) CCL Industries Inc. (-6.0) July 2017 Monthly S&P/TSX Composite Index Performance by Sector (Price only) 3.0% 2.0% 1.0% Energy 2.0% Materials 1.7% Telecom 1.5% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% Financials -0.1% S&P/TSX -0.3% Info. Tech. -1.1% Utilities -2.1% Real Estate -2.4% Cons. Disc. -2.8% Cons. Staples -3.2% Industrials -4.0% -6.0% Source: Bloomberg Healthcare -5.2% 1 VERUS MONTHLY MARKET INSIGHTS

2 Sector Monthly price-only return Monthly total return Financials 34.58% of S&P/TSX Composite -0.14% +0.28% Energy 20.36% of S&P/TSX Composite Materials 11.71% of S&P/TSX Composite Industrials 9.28% of S&P/TSX Composite Consumer Discretionary 5.25% of S&P/TSX Composite Telecommunications Services 4.98% of S&P/TSX Composite Consumer Staples 3.74% of S&P/TSX Composite +2.01% +2.10% +1.71% +1.71% -3.98% -3.98% -2.83% -2.71% +1.53% +1.53% -3.22% -3.14% Notable Movement 14 of the Financials sector s 27 constituents rose through July, while 12 declined and 1 remained unchanged. Brookfield Asset Management Inc. (BAM.A, -4.66%) was the largest point detractor in the sector through the month. Manulife Financial Corp. (MFC, %) was the largest contributor to the index. The Energy sector saw 27 of its 50 constituents rise through the month, while 23 fell. Suncor Energy Inc. (SU, +7.34%) was the largest point contributor through month end, despite earnings for Q2F17 coming in below expectations near the end of the month. Imperial Oil Ltd. (IMO, -5.34) had the heaviest drag on the index through the month of July, with a disappointing Q2F17 earnings report dragging shares lower on the last few trading days of the month. Of the Materials sector s 56 constituents, 28 fell while the remaining 27 rose through the month of July. 1 constituent remained unchanged over that period. Teck Resources Ltd. (TECK.B, %) had a very strong month as, with strong Q2F17 earnings and production results. Tahoe Resources Inc. (THO, ) as shares slumped at the beginning of the month, a result of the suspension of its mining license in Guatemala. 19 of the sector s 26 constituents fell through the month, while the other 7 posted gains. The biggest laggard through the month was Canadian National Railway Co. (CNR, -6.25%). Air Canada (AC, %) contributed the most points to the sector through July, as shares were pushed higher early in the month as Air Canada sets a record for passengers carried through a holiday weekend and strong forecasts for earnings for Q2F17. The Consumer Discretionary sector saw 13 of its 21 constituents fall through the month of July, while the remaining 8 rose. Restaurant Brands International Inc. (QSR, -8.45%) detracted the most points through the month. Linamar Corp. (LNR, +6.90%) was the largest point contributor through July. All 3 of the sector s constituents rose through July. Adding the most points through the month was Rogers Communications Inc. (RCI.B, -5.84%), as shares were propelled higher by an upbeat earnings report and robust user growth numbers through Q2F17. 7 of the Consumer Staples sector s 11 constituents fell through the month, while the remaining 4 advanced. Alimentation Couche-Tard Inc. (ATD.B, -4.89%) was the largest point detractor in the sector through July. Saputo Inc. (SAP, +2.45%) added the most points through July, with shares climbing higher midway through the month, after RBC upgraded the stock to outperform. 2 VERUS MONTHLY MARKET INSIGHTS

3 Information Technology 3.25% of S&P/TSX Composite Utilities 3.24% of S&P/TSX Composite Real Estate 2.93% of S&P/TSX Composite Health Care 0.67% of S&P/TSX Composite -1.15% -1.15% -2.10% -1.90% -2.36% -2.01% -5.23% -5.14% The Information Technology sector saw 7 of 12 constituents fall, while the remaining 5 rose for the month of July. BlackBerry Ltd. (BB, -9.80%) was the most significant detractor in the sector for the month. OpenText Corp. (OTEX, +1.88%) led the sector higher through the month of July, as shares climbed on the back of news that the company acquired Covisnit late in the month. The Utilities sector saw 10 of its 15 constituents fall through the month, while the other 5 were up. Atco Ltd. (ACO.X -8.48%) was the biggest laggard in the sector for the month of July, after posting a disappointing earnings report for Q2F17. Brookfield Renewable Partners LP (BEP.UN, +1.81%) added the most points to the sector during the month of July. The Real Estate sector saw 15 of its 21 constituents fall through the month, while 6 rose. H&R Real Estate Investment Trust (HR.UN, -4.18%) was the largest point detractor through the month of July. Contributing the most points through the month was Cominar Real Estate Investment Trust (CUF.UN, +3.38%) as a rating upgrade from TD, at the beginning of the month, set the base for a strong July. 5 of the sector s 6 constituents fell and only 1 rose over the month of July. Leading the sectors decline was Valeant Pharmaceuticals International Inc. (VRX, -8.87%). The stock trended downward near the end of the month as analysts raised warnings of long-term fundamental challenges that the company may face. 3 VERUS MONTHLY MARKET INSIGHTS

4 Disclaimer Trademark of The Bank of Nova Scotia, used under license (where applicable). Important Disclosures This material does not include or constitute an investment recommendation, and is not intended to take into account the particular investment objectives, financial conditions, or needs of individual clients. Before acting on this material, you should consider whether it is suitable for your particular circumstances and talk to your investment advisor. General Disclosures The Global Portfolio Advisory Group prepares this report by analyzing information obtained from various sources as a resource for advisors and their clients. Information may be obtained from the Equity Research and Fixed Income Research departments of the Global Banking and Markets division of Scotiabank. Information may be also obtained from the Foreign Exchange Research and Scotia Economics departments within Scotiabank. In addition to information obtained from members of the Scotiabank group, information may be obtained from the following third party sources: Standard & Poor s, Valueline, Morningstar CPMS, Bank Credit Analyst and Bloomberg. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. While the information provided is believed to be accurate and reliable, neither SCI, which includes the International Portfolio Advisory Group, nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. This report is provided to you for informational purposes only. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation or particular needs of any specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and management s analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained herein are those of the Global Portfolio Advisory Group as of the date hereof and are subject to change without notice. For that reason, it cannot be guaranteed by The Bank of Nova Scotia or any of its subsidiaries, including SCI. This report is not, and is not to be construed as (i) an offer to sell or solicitation of an offer to buy securities and/or commodity futures contracts or (ii) an offer to transact business in any jurisdiction or (iii) investment advice to any party. Products and services described herein are only available where they can be lawfully provided. SCI and its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities and/or commodities and/or commodity futures contracts mentioned herein as principal or agent. Copyright 2014 Scotia Capital Inc. All rights reserved. 4 VERUS MONTHLY MARKET INSIGHTS

5 July 2017 S&P 500 pushes forward on all fronts The S&P 500 Index rose 1.93% on the price only basis through the month of July. Of the 505 stocks in the index at month end, 335 rose, while 177 declined. There were 7 constituents removed and 7 added to the index through month end. The Dow Jones Industrial Average and NASDAQ indices outperformed the S&P 500, while the Russell 2000 underperformed the broader index through July. The benchmark index advanced broadly through July, with all 11 sectors posting gains by month end. Telecom and Info Tech sectors led the index higher, climbing 5.1% and 4.3% respectively Index Returns (Price Only) S&P 500 Dow Jones Industrial Average NASDAQ Composite Russell 2000 Top 10 Point Contributors 1) Facebook Inc. (+5) 2) Microsoft Corp. (+3.4) 3) The Boeing Corp. (+2.9) 4) Apple Inc. (+2.9) 5) Verizon Communications Inc. (+2.1) 6) Netflix Inc. (+1.6) 7) Charter Communications Inc. (+1.4) 8) The Procter & Gamble Co. (+1.3) 9) AT&T Inc. (+1.3) 10) NVIDIA Corp. (+1.2) July 10) 10) Microsoft 3M Co. (-0.5) Corp. (-0.8) YTD 1.93% 10.34% 2.54% 10.77% 3.38% 17.93% 0.69% 5.01% Top 10 Point Detractors 1) Altria Group Inc. (-2.1) 2) General Electric Co. (-1.4) 3) International Business Machines Corp. (-0.9) 4) Wells Fargo & Co. (-0.8) 5) Starbucks Corp. (-0.7) 6) Medtronics PLC (-0.7) 7) CSX Corp. (-0.6) 8) Union Pacific Corp. (-0.6) 9) Home Depot Inc. (-0.5) July 2017 Monthly S&P 500 Index Performance by Sector (Price only) 6.0% 5.0% Telecom 5.1% Info Tech 4.3% Source: Bloomberg 4.0% 3.0% 2.0% 1.0% 0.0% Energy 2.4% Utilities 2.4% S&P % Cons. Discret. 1.8% Financials 1.6% Materials 1.4% Real Estate 1.1 % Healthcare 0.7% Cons. Staples 0.4% Industrials 0.01% 5 VERUS MONTHLY MARKET INSIGHTS

6 Sector Information Technology 22.79% of S&P 500 Index Financials 14.51% of S&P 500 Index Health Care 14.36% of S&P 500 Index Consumer Discretionary 12.32% of S&P 500 Index Industrials 10.13% of S&P 500 Index Consumer Staples 8.66% of S&P 500 Index Monthly price-only return Monthly total return +4.27% +4.33% +1.61% +1.72% +0.67% +0.77% +1.76% +1.87% +0.01% +0.06% +0.39% +0.57% Notable Movement The Information technology sector saw 55 of its 68 constituents rise through the month, while the remaining 13 fell. Adding the most points to the sector through the month was Facebook Inc. (FB, %), with the company reporting an increase of 17% of daily users on a year-over-year basis, along with stronger than expected Q2F17 earnings results. International Business Machines Corp. (IBM, -5.95%) was the largest point detractor through July. Shares tumbled midway through the month on missed revenue results for Q2F17. Of the Financials sector s 66 constituents at month end, 50 rose, while the remaining 16 fell. Berkshire Hathaway (BRK/B, +3.31%) was the largest point contributor to the sector in July. The largest laggard in the sector by month end was Wells Fargo & Co. (WFC, -2.65%), hampered by a new scandal centered on reports that the bank may have pushed clients into loan default by requiring they purchase unnecessary auto insurance. 31 of the 61 constituents rose through the month of July, while 31 fell. There was 1 constituent added to the sector by month end and one removed. Contributing the most points to the sector through the month was Gilead Science Inc. (GILD, +7.50%). Gilead surprised investors by revising up full-year 2017 revenue guidance. Medtronic PLC (MDT, -5.39%) removed the most points from the sector through the month. Shares struggled after CFO Karen Parkhill stated a computer crash may have a significant drag on quarterly sales numbers. The Consumer Discretionary sector saw 50 of its 85 constituents advance through the month, while the remaining 36 fell. There was 1 constituent removed, while 1 was added to the sector in July. Netflix (NFLX, %) was the largest point contributor in July, surging on the back of record setting subscriber growth for Q2F17. Detracting the most points from the sector through the month was Starbucks (SBUX, -7.43%). Shares plummeted on the 28 th as the company announced it would slash its profit forecast for fiscal 2017 and would be shutting down its Teavana business. 37 of the sector s 68 constituents rose through July, while 31 posted declines. There was 1 constituent added by month end. The sector s largest point contributor through the month was Boeing Co. (BA, %). Shares rose amid a mixed Q2F17 earnings season for Boeing in which free cash flow surged, earnings beat although sales fell short of analyst expectations. General Electric Co. (GE, -5.18%) was the largest laggard of the sector during July. Of the Consumer Staples sector s 35 constituents at month end, 24 were up, while the remaining 12 fell. There was 1 constituent removed from the sector through July. Procter & Gamble Co. (PG, +4.21%) was the largest point contributor in the sector. Altria Group Inc. (MO, %) was a significant headwind for the sector as the FDA announced it would require cigarettes to reduce nicotine levels below what is considered addictive. 6 VERUS MONTHLY MARKET INSIGHTS

7 Energy 6.02% of S&P 500 Index Utilities 3.18% of S&P 500 Index Real Estate 2.95% of S&P 500 Index Materials 2.88% of S&P 500 Index Telecommunication Services 2.21% of S&P 500 Index +2.44% +2.50% +2.38% +2.44% +1.12% +1.20% +1.36% +1.54% +5.07% +6.36% The Energy sector saw 27 of its 32 constituents rise through the month, while 8 posted declines. There was 1 constituent added and 3 were removed by month end. Chevron Corp. (CVX, +4.66%) was the sectors largest point contributor, posting a strong earnings report for Q2F17. Exxon Mobil (XOM, -0.85%), the most prominent point detractor of the sector, posted a disappointing earnings report in Q2F17 where revenue was the sole bright spot. The Utilities sector saw 24 of its 28 constituents post a monthly gain with only 4 ending the month down. NextEra Energy Inc. (NEE, 4.25%) led the sector with a strong quarterly report for Q2F17 that solidifies earnings forecasts for the fiscal year. Facing difficulties in completing two U.S. reactors, Scana Corp. (SCG, %), lagged behind the rest of the sector. The reactors have experienced lengthy delays and soaring costs. The Real Estate sector saw 22 of 32 constituents climb through the month, while the remaining 11 fell. There were 2 constituents added while 1 was removed by the end of the month. American Tower Corp. (AMT, +3.03%) added the most points to the sector through the month. A beat on earnings continued the stocks rally through July. Simon Property Group Inc. (SPG, -2.02%) ended the month on a down note and was the sectors most significant detractor. Of the Materials sector s 26 constituents, 13 rose, while the remaining 13 fell through the month and 1 was added. Freeport-McMoRan Inc. (FCX, %) led the sector while riding the surge in global copper prices. The company surpassed analyst expectations in all areas for Q2F17 except earnings. PPG Industries Inc. (PPG, -4.28%) had a strong earnings report for Q2F17 but saw the demand for consumer paint soften significantly, forcing this stock lower at month end. The Telecoms sector was split for the month of July as 2 constituents were up and 2 were down. Verizon Communications Inc. (VZ, +8.37%) led the sector higher during the month of July on the back of upbeat subscriber growth, which was 10 times that of analyst expectations. 7 VERUS MONTHLY MARKET INSIGHTS

8 Disclaimer Trademark of The Bank of Nova Scotia, used under license (where applicable). Important Disclosures This material does not include or constitute an investment recommendation, and is not intended to take into account the particular investment objectives, financial conditions, or needs of individual clients. Before acting on this material, you should consider whether it is suitable for your particular circumstances and talk to your investment advisor. General Disclosures This report is provided to you for informational purposes only. The report is not intended to provide personal investment advice and does not take into account the specific investment objectives, financial situation or particular needs of any specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and management s analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change without notice. The ScotiaMcLeod Global Portfolio Advisory Group prepared this report by aggregating information from various sources as a resource for ScotiaMcLeod Wealth Advisers and their clients. Information may be obtained from the Equity Research and Fixed Income Research departments of the Global Banking and Markets division of Scotiabank. Information may also be obtained from the Foreign Exchange Research and Scotia Economics departments within Scotiabank. In addition to information obtained from members of the Scotiabank group, information may be obtained from the following third party sources: Standard & Poor s, Valueline, Morningstar, Bloomberg, and FactSet. The information and opinions contained in this report have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness. While the information provided in this report is believed to be accurate and reliable, neither Scotia Capital Inc., which includes the ScotiaMcLeod Global Portfolio Advisory Group, nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. Copyright 2017 Scotia Capital Inc. 8 VERUS MONTHLY MARKET INSIGHTS

9 Additional Disclosures This report is distributed by Scotia Capital Inc., a subsidiary of The Bank of Nova Scotia. Scotia Capital Inc.is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Registered trademark of The Bank of Nova Scotia, used under licence. Trademark of The Bank of Nova Scotia, used under licence. Scotia Wealth Management consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank ); The Bank of Nova Scotia Trust Company (Scotiatrust ); Private Investment Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod, a division of Scotia Capital Inc. International private banking services are provided in Canada by The Bank of Nova Scotia. International investment advisory services are provided in Canada by Scotia Capital Inc. Scotia Capital Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Scotia Wealth Management consists of a range of financial services provided, in The Bahamas, by Scotiabank (Bahamas) Limited and The Bank of Nova Scotia Trust Company (Bahamas) Limited. International private banking services are provided in The Bahamas by Scotiabank (Bahamas) Limited, an entity registered with The Central Bank of The Bahamas. International investment advisory services are provided in The Bahamas by Scotiabank (Bahamas) Limited, an entity registered with The Securities Commission of The Bahamas. International wealth structuring solutions are provided in The Bahamas by The Bank of Nova Scotia Trust Company (Bahamas) Limited, an entity registered with The Central Bank of The Bahamas. Scotia Wealth Management consists of international investment advisory services provided, in Barbados, by The Bank of Nova Scotia, Barbados Branch, an entity licensed by the Barbados Financial Services Commission. Scotia Wealth Management consists of a range of financial services provided, in the Cayman Islands, by Scotiabank & Trust (Cayman) Ltd. International private banking services, international investment advisory services and international wealth structuring solutions are provided in the Cayman Islands by Scotiabank & Trust (Cayman) Ltd., an entity licensed by the Cayman Islands Monetary Authority. Scotia Wealth Management consists of international private banking services provided, in Peru, by Scotiabank Peru S.A.A, an entity supervised by the Peru Superintendence of Banking and Insurance. 9 VERUS MONTHLY MARKET INSIGHTS