Verus Monthly Market Insights

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1 Q Relative calm after sharp declines in Q3 TheS&P/TSXCompositeindexslumped2.2% inq4onapriceonlybasis.with244stocksin the index at quarter end, 111 rose, 132 declined, and 1 was unchanged. The sector also saw 2 additions and 4 constituents removedfromtheindexduringthequarter. The S&P/TSX small and midcap indices outperformed the broader index, while the largecapunderperformedinq4 The Information Technology sector posted the biggest gain in the S&P/TSX priceonly basis,gaining10.3%inq4. The Consumer Staples, Financials, and Materials sectors also gained through Q4, whiletheremaining6sector sretreated. ExcludingValeantPharmaceuticals(VRX),the S&P/TSX Composite was close to being flat QoQ in Q4. Valeant ended the year down 15.5%,comparedwitha108%mid2015gain which was erased after its drug pricing strategiescameunderfireanditbecamethe targetofashortsellerreport Index Returns (price only) Q4 YTD S&P/TSXComposite 2.23% 11.09% S&P/TSX % 10.56% S&P/TSXCompletion 1.21% 12.68% S&P/TSXSmallCap 0.35% 15.84% Top 10 Point Contributors CanadianNaturalResourcesLtd. (+37.0) BankofMont(+27.2) TorontoDominionBank(+24.3) BlackberryLtd.(+17.1) TransCanadaCorp.(+16.9) BarrickGoldCorp.(+16.3) CGIGroupInc.(+15.7) BrookfieldAssetManagement Inc.(+11.5) CanadianNationalRailwayCo. (+10.1) FairFaxFinancialHoldingsLtd. (+8.6) Top 10 Point Detractors ValeantPharmaceuticals InternationalInc.(250.2) BankofNovaScotia(27.5) PotashCorpofSaskatchewan( 24.8) MagnaInternationalInc.(24.5) EnbridgeInc.(24.1) CenovusEnergyInc.(18.2) TELUSCorp.(18.1) CanadianPacificRailwayLtd.( 17.2) CanadianImperialBankof Commerce(14.8) HuskyEnergyInc.(14.4) 20.0% 10.0% InfoTech +10.3% Q S&P/TSX Composite Index Performance by Sector (Price only) Source: Bloomberg 0.0% Materials +3.1% Financials +0.6% Cons. Staples +0.5% 10.0% Industrials 1.6% S&P/TSX Index 2.2% Energy 2.6% Utilities 2.6% Telecom 2.8% Cons. Discretionary 5.7% 20.0% 30.0% 40.0% Healthcare 36.9%

2 Sector Financials 38.28%ofS&P/TSXComposite Energy 18.45%ofS&P/TSXComposite Materials 9.50%ofS&P/TSXComposite Industrials 8.27%ofS&P/TSXComposite ConsumerDiscretionary 6.91%ofS&P/TSXComposite price-only return +0.6% 2.6% +3.1% 1.6% 5.7% total return +1.7% 1.6% +3.8% 1.2% 5.3% Notable Movement Ofthesector s46constituentsatquarterend,20advancedwhilethe other26retreated. BankofNovaScotia(BNS,4.9%)wasthesector sbiggestlaggardas Q4/15resultsmissedexpectations. Bank of Mont (BMO, +1.3%) was the sector s largest point contributorasthecompanysaidfiscalfourthquarterprofitrose13%, ledbycapitalmarketsandu.s.banking.thelenderraiseditsquarterly dividend2.4%to$ oftheEnergysector s59constituentsgainedthroughq4,whilethe remaining37retreated,takingintoaccountthat4constituentswere removed. Canadian Natural Resources Ltd. (CNQ, +16.3%) was the sector s largest point contributor after agreeing to combine their royalty business with PrairieSky Royalty Ltd (PSK). PrairieSky will acquire a substantial portion of Canadian Natural s royalty assets for C$1.8 billion($1.4billion),consistingofc$680millionincashandabout44.4 millionprairieskysharesatc$25.20apiece Enbridge Inc. (ENB,7.2%) was the sector s biggest laggard through thefourthquarterafteru.s.peerkindermorgan(kmi)cutitsdividend by75%. The Materials sector saw 30 of its 46 constituents rise through Q4 while 15 retreated. There was also one constituent that remained unchanged. Barrick Gold Corp. (ABX, +20.6%) the world s largest gold producer wasthesector slargestpointcontributorafterreboundingfroma25 year low as thirdquarter earnings beat analysts estimates and gold pricesralliedatthebeginningofthequarter. PotashCorpofSaskatchewan(POT,13.6%)wasthesector sbiggest laggardafterthecompanywithdrewits7.85billioneuroproposalto acquire Germany s K+S AG amid a decline global commodity and equitymarkets. 9ofthesector s23constituentsroseduringthefourthquarterwhile theremaining14declined. CanadianNationalRailwayCo.(CNR,+2.1%)wasthesector slargest pointcontributorduringthefourthquarter. Canadian Pacific Railway Ltd. (CP,7.7%) was the sector s biggest laggardafterthecompanyexploredthetakeoverofu.scarriernorfolk SouthernCorp.inafreshattempttoconsolidatetheNorthAmerican industry.norfolkrejectedcanadianpacificrailway soriginaloffer. TheConsumerDiscretionarysectorsaw7ofits26constituent srise, whiletheremaining19fellthroughq4. Restaurant Brands International Inc. (QSR, +7.7%) owner of the Burger King and Tim Hortons chains, was the sector s largest point contributor after posting thirdquarter profit that topped analysts estimatesafternewmenuitemslikefierychickenfrieshelpedattract customers. Magna International Inc. (MG, 12.3%) was the sector s biggest laggard, sliding the most in more than four years after the largest North American autoparts supplier said currency exchange rates trimmed about $870 million from thirdquarter revenue, which fell shortofanalysts estimates.

3 Telecommunications Services 5.42%ofS&P/TSXComposite ConsumerStaples 4.49%ofS&P/TSXComposite InformationTechnology 3.21%ofS&P/TSXComposite Healthcare 3.17%ofS&P/TSXComposite Utilities 2.30%ofS&P/TSXComposite 2.8% +0.5% +10.3% 36.9% 2.6% 1.7% +0.8% +10.5% 36.9% 1.3% shortofanalysts estimates. 2ofthe4constituentsintheTelecommunicationsServicessectorrose duringthefourthquarterwhiletheothertwolost. TELUS Corp. (T,9.0%) was the sector s biggest laggard after Shaw Communicationsannounced plans tobuy Wind Mobile and compete headtoheadwiththethreewirelessincumbents. Rogers Communications Inc. (RCI.B, +3.8%) was the sector s largest point contributor after reporting thirdquarter earnings that topped analysts estimatesasitaddedmoresubscribersthanprojected. Ofthesector s10constituentsatquarterend,5advancedwhilethe other5retreated. Saputo Inc. (SAP, +13.0%) was the sector s largest point contributor after the company bought Woolwich Dairy for C$80 million, which generatesc$70minrevenueayear. LoblawCosLtd.(L,4.9%)wastheConsumerStaplesbiggestlaggard throughq4. TheInformationTechnologysectorsaw9ofitsconstituentsriseinthe fourthquarter,whiletheother4declined.therewasalsoanaddition ofoneconstituent. BlackberryLtd.(BB,+56.8)wasthesector slargestpointcontributor asthecompanyhaditsbiggestjumpsincejanuaryafterseeingitsnew Androidphone,theBlackberryPriv,hittingthemarketsinNovember. Thecompanyalsoreportedthatthenewmobiledeviceisbeingsoldat WalMartstores. DHCorp.(DH,19.3%)wasthesector sbiggestlaggardafterbecoming thetargetofa shortseller report. The Healthcare sector saw 3 constituents rise during Q4, while the remaining2declined. ProMeticLifeSciencesInc.(PLI,+128.6%)wastheHealthcaresector s biggestpointcontributorinq4. Valeant Pharmaceuticals International Inc. (VRX, 41.0%) was the sector sbiggestlaggardafterastockcommentarysiterunbyashort selleraccusedthecompanyofanenronlikestrategyofrecordingfake salesbyusingphonycustomers.citronresearchsaidvaleantisusinga specialtypharmacycalledphilidorrxservicestostoreinventoryand recordthosetransactionsassales. 4 of the Utilities sector s 12 constituents gained in Q4 while the remaining8declined. Canadian Utilities Ltd. (CU,11.6%) was the sector s biggest laggard after the company posted thirdquarter profit that missed analysts estimates. Algonquin Power & Utilities Corp. (AQN, +15.6%) was the sector s largestpointcontributor.

4 Q Year Ends on Defensive Note TheS&P500indexgained6.5%throughQ4onaprice only basis. With 512 stocks in the index, 367 rose while 145 fell, after considering 7 additions and 8 removalstotheindex. The Dow Jones Industrial Average and NASDAQ Compositeoutperformedthebroaderindexwhilethe Russell2000underperformedtheS&P500. Theonlysectorthatdeclinedinthequarterwasthe Energy sector (0.6%), while the remaining ten sectors gained, led by the Materials sector, which was up 9.1%, followed closely by Health Care and Information Technology, which were up 8.8% and 8.7%,respectively. Whileequitieswerestronginthefourthquarter,all of the gains were delivered in October, with NovemberandDecemberremainingrelativelyrange bound. In addition, while Q4 was positive, the S&P 500 recorded a negative return in 2015, its first calendaryearlosssince2008. Marketswereagaindrivenbyeconomicdatareleases as investors awaited the first rate hike by the U.S. FederalReservesince Index Returns (price only) Q4 YTD S&P % 0.73% DowJonesIndustrialAverage +7.00% 2.23% NASDAQComposite +8.38% +5.73% Russell % 5.71% Top 10 Point Contributors MicrosoftCorp(+10.2) Amazon.comInc.(+7.1) GeneralElectricCo.(+6.7) AlphabetInc.(GOOG,+5.1) AlphabetInc.(GOOGL, +4.6) FacebookInc.(+3.8) Johnson&Johnson(+2.9) HomeDepotInc.(+2.4) ChevronCorp.(+2.4) IntelCorp.(+2.3) Top 10 Point Detractors AppleInc.(3.3) KinderMorganInc.(2.6) UnionPacificCorp.(1.0) WilliamsCosInc.(0.9) ChipotleMexicanGrill Inc.(0.9) InternationalBusiness Machine(0.8) QUALCOMMInc.(0.7) AnadarkoPetroleum Corp.(0.7) WalMartStoresInc.( 0.6) Macy sinc.(0.6) 10.0% Q S&P 500 Index Performance by Sector (Price Only) Materials +9.1% Healthcare +8.8% InfoTech +8.7% Source: Bloomberg 8.0% 6.0% Industrials +7.4% Cons. Staples +6.9% S&P % Telecom +6.2% Financials +5.4% Cons. Discretionary +5.4% 4.0% 2.0% 0.0% Utilities +0.1% 2.0% Energy 0.6%

5 Sector Information Technology 20.69%ofS&P500Index Financials 16.47%ofS&P500Index Healthcare 15.16%ofS&P500Index Consumer Discretionary 12.89%ofS&P500Index ConsumerStaples 10.06%ofS&P500Index Industrials 10.05%ofS&P500Index price-only return +8.7% +5.4% +8.8% +5.4% +6.9% +7.4% total return +9.2% +5.9% +9.2% +5.8% +7.6% +8.0% Notable Movement TheInformationTechnologysectorsaw55ofits69constituentsgainthrough thefourthquarter,while16declined.thereweso2constituentsaddedand 2constituentsremovedfromtheInformationTechnologysectorinthefourth quarter. MicrosoftCorp.(MSFT,+25.4%)wasthesector slargestpointcontributorafter reportingfiscalfirstquarterprofitthatexceededanalysts estimates,buoyedby demand for Internetbased programs that handle business tasks and host companies applications. Apple Inc. (AAPL, 4.6%) was the Information Technology sector s biggest laggard throughout Q4 on concerns that iphone sales are weaker than expected. 72 of the Financials sector s 89 constituents gained through Q4, while 17 declined. JPMorganChase(JPM,+8.3)wasthesector slargestpointcontributor,leading positiveperformanceforthelargemoneycenterbanksinthequarter. AmericanExpress(AXP,6.2%),thecreditcardissuergrapplingwiththelossof a few contracts, was the sector s biggest laggard afterposting thirdquarter profitthatmissedanalysts estimatesasexpensesroseandrevenuedeclined. The Healthcare sector had 45 of its 56 constituents gain through the fourth quarter,withtheother11declining.thesectoralsosaw1constituentaddedin Q4. Johnson & Johnson (JNJ, +10.0%), the world s biggest maker of healthcare products, was the sector s largest point contributor after the company beat analysts forthirdquarterprofit. HCA Holdings (HCA,12.6%) was the sector s biggest laggard after the U.S. hospitalchainreportedpreliminarythirdquarterearningsthatmissedanalysts estimates, raising concerns across the industry of an increase in uninsured patientswhocan tpaytheirbills. 54of89constituentsintheConsumerDiscretionarysectorgainedinthefourth quarter while the remaining 35 declined.the sector also saw 1 constituent addedand2removed. Amazon.comInc.(AMZN,+32.0)wasthesector slargestpointcontributorafter thirdquarter sales topped analysts estimates thanks to the company s fast growing cloudcomputing division, aboost fromits JulyPrime Day promotion andawatchfuleyeonspending. ChipotleMexican GrillInc.(CMG,33.4%)wasthesector sbiggestlaggardin the fourth quarter after the U.S. Centers for Disease Control and Prevention reportedsevennewinstancesofconsumersfallingillduetoane.colioutbreak that sbeenlinkedtothemexicanfoodchain. 34 of the Consumer Staples 38 constituents advanced in Q4, while the remaining4retreated.therewasalsooneconstituentaddedtothesector. Procter & Gamble Co. (PG, +10.4) the world s largest consumerproducts maker, was the sector s largest point contributor after posting firstquarter profit that topped analysts estimates as Chief Executive Officer A.G. Lafley s costcuttingprogramhelpedthecompanycopewithdecliningsales. WalMart Stores Inc. (WMT,5.5%) was the sector s biggest detractor after sufferingitsworststockdeclineinmorethan15yearsafterpredictingadropin annualprofit,underscoringthegiantretailer sstrugglestoreignitegrowth. The Industrials sector saw 49 of its 67 constituents rise during the fourth quarterwhiletheremaining18retreated. General Electric Co. (GE, +23.5%) was the sector s largest point contributor afterbeatinganalysts thirdquarterearningsestimates,buoyedbygainsinthe aviation and transportation units, as the industrial giant reemphasized manufacturingandaccelerateditsretreatfromfinance. UnionPacificCorp.(UNP,11.6%)wasthesector sbiggestlaggardasconcerns about weak volumes combined with ongoing weakness in its coal business weighedontheshareprice.

6 Energy 6.50%ofS&P500Index Utilities 2.99%ofS&P500Index Materials 2.76%ofS&P500Index Telecommunications Services 2.43%ofS&P500Index 0.6% +0.1% +9.1% +6.2% +0.2% +1.1% +9.7% +7.6% Of the 40 constituents in the Energy sector, 16 were positive while 24 constituentswerenegativeinq4 Kinder Morgan Inc. (KMI,46.1%) was the sector s biggest laggard after the company cut its 2016 dividend by 74 percent as the decline in crude prices reducedcashflowneededtocoverdebtpaymentsandcapitalexpenditures. Chevron Corp. (CVX, +14.1%) was the sector s largest point contributor after beating analysts thirdquarter earnings estimates and cutting jobs forthenewyear(10%ofitsworkforce). The Utilities sector saw 18 of its 29 constituents rise through Q4 while the remaining11fell. NextEra Energy Inc. (NEE, +6.5%) was the sector s largest point contributor afteragreeingtoselltwonaturalgasfiredgeneratorsintexastoanaffiliateof EnergyFutureHoldingsCorp.for$1.59billion. Public Service Enterprise Group Inc. (PEG, 8.2%) was the Utilities sector biggestlaggardafterreportingaslightearningsmissinlateoctober,followed byaratingdowngradetoholdatdeutschebank. 20 of the Materials 28 constituents gained in the fourth quarter, while the remaining8declined.thematerialssectoralsosaw1constituentremovedin thefourthquarter. DuPont (DD, +38.2%) was the sector s largest point contributor after Dow ChemicalCo.andDuPontCo.announcedplanstojoininanallstockmergerof equalsthat sthefirststepinaplantocreatethreenewbusinesses. FreeportMcMoRan Inc. (FCX,30.1%) was the sector s biggest laggard after reporting thirdquarter results that missed analysts estimates by a wide margin. Ongoing weakness in commodity prices, particularly copper and oil, alsoweighedontheshareprice. 4ofthe5constituentsintheTelecommunicationsServicessectorgainedwhile theother1retreated. AT&TInc.(T,+5.6%)wasthesector slargestpointcontributor,followedclosely byverizon(vz)(+6.2%). Frontier Communications Corp. (FTR, 1.7%) was the only company in the sectortodeclineinthequarter.

7 Important Disclosures This report has been prepared by members of the ScotiaMcLeod Portfolio Advisory Group. ScotiaMcLeod is the full service retail division of Scotia Capital Inc General Disclosures The ScotiaMcLeod Portfolio Advisory Group prepares this report by aggregating information obtained from various sources as a resource for ScotiaMcLeod Wealth 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 Scotia Capital Inc., which includes the ScotiaMcLeod 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 ized. 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 ized Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change without notice. Copyright 2012 Scotia GBM Inc. All rights reserved Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod under license. ScotiaMcLeod is a division of Scotia Capital Inc. Scotia Capital Inc. is a member of Canadian Investor Protection Fund.