A blighted crop sees the structurally different variant(s) thrive

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1 EQUITY RESEARCH July 26, 2016 A blighted crop sees the structurally different variant(s) thrive Our view: We make small 2016/17E forecast cuts and think scope for a FY profit beat (in a sector full of profit warnings) is likely to have been absorbed by an adverse backdrop. However, trading with far more probable delivery of profit outlook (vs. optimistic peers) but at trough 6x EV/EBITDAR multiple, we see compelling value. Key points: Structural variation means not every part of the crop is lost when recessionary disease sets-in. As competitors struggle/disappear, remaining healthy ones can prosper as they efficiently deliver more without being crowded-out. Ryanair s scale, brand, low, still falling unit costs, and healthy balance sheet set it apart (from a sector blighted by overcapacity and corporate hubris). Thus, though macro events have likely eroded Ryanair s ability to deliver a usual 23% beat, we think its conservative base-case unit revenue outlook (-6% Q2, -10%-12% H2) leaves it capable of delivering planned profits - and thus a >33% RoE, near 7% FCF yield after over 1.15bn aircraft capex. 84 bases and a net cash balance sheet allows a re-orientating of growth away from the UK: We see Ryanair equity FCF yield rising to ~11-12% by 2018/19E, building on a net cash balance sheet already in place. With a diversity of bases across Europe, the company looks set to reduce exposure to UK/GBP revenue (presently 28%). Rather than shrinking back overall we sense a desire to use the distressed market to continue expansion to extract lower opex (and capex) costs from suppliers. In passengers and EBIT tripled so history suggests that (even if temporarily dilutive to incremental EBIT margins) Ryanair can make capacity investment for longer-term NPV positive opportunities. Trough multiples at a lowly 2008-like ~10x YA PER, 6.4x EV/EBITDAR. The outlook is sensitive to input price projections, but we think 2016/17E unit pricing would need to fall ~14-15% (base case ~-9%) to end up without positive cash flow. To us, low multiples, high RoE and FCF create value tension and in this case we see low value (not the high projection downgrade risk we think this implies for European airlines overall). We make profit cuts, small in the airlines context: We trim 2016/17E EPS 1%, 2017/18E by 5%. To deliver the FY outlook Ryanair also needs; (1) Q3-on-Q2 price declines at some worst ever rates (-43%, vs. -27% to -40% historically); (2) to reach a ~93% load factor goal, load factor needs to fall slightly YoY over Q2-Q4; and, (3) Fuel cost outlook implies aircraft fuel burn would rise 3-4%/ASK over E. So, we see room for error and scope to still deliver company profit goals. Our only airline at Outperform - scenarios based PT lowered to This implies, ~14.5x YA PER, and ~13x 2017/18E vs. 10 year median PER of 13.2x, and 9.3x YA EV/EBITDAR vs. 10 year median 9.2x, 5-year median 9.2x. RBC Europe Limited Damian Brewer (Analyst) damian.brewer@rbccm.com Andy Jones (Analyst) andrew.jones2@rbccm.com Sector: Transport Outperform ISE: RYA; EUR 11.64; LSE: RYA Price Target EUR WHAT'S INSIDE Ruairi Cullinane (Associate) ruairi.cullinane@rbccm.com Rating/Risk Change Price Target Change In-Depth Report Est. Change Preview News Analysis Scenario Analysis* Downside Scenario % Current Price *Implied Total Returns Key Statistics Shares O/S (MM): 1,255.8 Dividend: 0.00 BVPS: 3.50 ROE: 33.3% Price Target % Upside Scenario % Market Cap (MM): 14,611 Yield: 0.0% P/BVPS: 3.32x Enterprise Val. (MM): 14,756 Avg. Daily Volume: 3,633,013 Debt to Cap: 2% EV is adjusted for operating leases and pension liabilities. RBC Estimates FY Mar 2016A 2017E 2018E 2019E Revenue 6, , , ,495.7 Prev. 6, , ,587.9 EBITDAR 2, , , ,491.1 Prev. 2, , ,609.9 EV/EBITDAR 9.8x 6.7x 5.8x 5.0x Prev. 7.9x 6.7x 5.8x EBIT 1, , , ,848.7 Prev. 1, , ,999.9 EPS, Adj Diluted Prev P/AEPS 10.0x 10.5x 9.0x 7.7x All values in EUR unless otherwise noted. Disseminated: July 26, :15ET; Produced: July 25, :08ET Priced as of prior trading day's market close, EST (unless otherwise noted). For Required Non-U.S. Analyst and Conflicts Disclosures, see page 9.

2 Target/Upside/Downside Scenarios Exhibit 1: 125 Weeks 04MAR14-25JUL16 20 UPSIDE TARGET m 30m 20m 10m 2014 M A M J J A S O N 2015 D J F M A M J J A S O N 2016 D J F M A M J J RYA ID Rel. MSCI EUROPEAN INDEX MA 40 weeks CURRENT Source: Bloomberg and RBC Capital Markets estimates for Upside/Downside/Target DOWNSIDE 9.25 Jul 2017 Target price/base case Our base case has 1.5% GDP expansion for 2016/17E (March Y/E) and +1.1% in 2017/18E (with UK GDP -1.1% for March 2018 year), with ticket revenue per passenger down ~5% CAGR until 2019E. We see a 1% fall in unit costs (CASM ex fuel) in 2016/17E. Our Price Target is derived as a probability weighted average of three scenarios, as with other airline shares under coverage. This implies, ~14.5x YA PER, and ~13x 2017/18E vs. 10 year median PER of 13.2x, and 9.3x YA EV/EBITDAR vs. 10 year median 9.2x, 5-year median 9.2x. (This also compares to 2012/ /16 PER exit levels at 16.5x average.) Upside scenario In the upside scenario, we see potential for a (rounded) share price as we replicate a more bullish economic outlook, with high yield growth and high, but off-settable fuel costs. Downside scenario Our downside scenario could see (rounded) based on year ahead clean EPS at a global LCC-like 10x PER - above the current share price. Our 'core' downside scenario of 9.25 derives from a scenario where Europe slips back to a 2008/09 type economy, with yield contraction and rising fuel costs, with deeper multiple contraction into a profit miss scenario. Investment summary We rate the shares Outperform with short-term bumps, long term competitive strengths: We think a tough fare environment is ahead, but as expected already. In the long run, we think fuel and staff costs (but not productivity) are all factors where airlines can struggle to sustain a competitive edge. Staff productivity, airport costs (and choice of airport) and the unit cost of aircraft used remain differentiating competitive factors. To us, Ryanair s (180) aircraft order at US$ unit costs not dissimilar to the order (but with a stronger Euro) is critical in securing one of these key competitive advantages. Steady, then Grow: After almost no seat growth in summer 2014, the company is accelerating supply - even into tougher conditions. In future periods, we see summer growth opportunities opening up (as new aircraft are delivered) while the low operating costs and low incremental aircraft ownership costs leave the carrier well-placed to gain share as the unprofitable short haul operations of Europe s legacy carriers continue to face pressure. Still generating (lots of) cash building headroom for the next order or capital return: Our forecast suggests that Ryanair may remain equity FCF positive in future years (to ~12% yield by 2018/19E), with net cash continuing to build even as progress payments and new aircraft are paid for (before SBB effects). In our view, this gives headroom to both remain tactically competitive on ticket pricing (to gain share) and/or building cash reserves to pay for a follow-on order, or return more cash to shareholders via buy-backs, or dividends. Multiples more attractive due to market-led weakness: The shares trade at 9.9x YA PER with ~16% 2016E-2020E EPS CAGR (base case) with ~6.5% FCF yield rising to ~12% in 2018/19E, while YA EV/EBITDAR of 6.4x remains well below 3 year trailing average of ~10x, but close to recession trough level, and even below some prior troughs (above 7x). July 26, 2016 Damian Brewer, ; damian.brewer@rbccm.com 2

3 FY 07/08 FY 17/18E FY 07/08 FY 17/18E FY 18/19E FY 98/99 FY 00/01 FY 02/03 FY 04/05 FY 06/07 FY 98/99 FY 99/00 FY 00/01 FY 01/02 FY 02/03 FY 03/04 FY 04/05 FY 05/06 FY 06/07 FY 07/08 FY 17/18E Transport Ryanair: key charts Exhibit 2: Summer 2016 supply/demand (seats, chg YoY) Exhibit 3: Revenue and fuel cost changes (similar), % YoY rev/pax chg YoY fuel cost/seat chg YoY rev/seat chg YoY Source: RBC Capital Markets estimates base d on OAG data (supply of seats), Source: RBC Capital Markets estimates, company reports Exhibit 4: Ryanair ex Fuel unit rev change vs. growth, % YoY Exhibit 5: EBITDAR, equity FCF and capex trajectory, m % 40% 20% 20% 10% 0% -10% -20% % -30% Available seat mile growth YoY (LH axis) Unit revenue (per avialable seat mile) chg YoY RH Axis EBITDAR ( m) Equity free cash flow ( m) Net Capex Source: RBC Capital Markets estimates, company reports Exhibit 6: Rising capital return prospects as FCF growth outpaces capex, m Source: RBC Capital Markets estimates, company reports, Exhibit 7: Net profit tends to beat on outcome by 23% agg. Av. since /17E now looks unlikely FY 06/07 FY 07/08 Adj N Debt Equity free cash flow ( m) Capital returned Aim at end py Actual/f/c at present Beat/miss Source: RBC Capital Markets estimates, company reports, Source: RBC Capital Markets estimates, company reports July 26, 2016 Damian Brewer, ; damian.brewer@rbccm.com 3

4 Exhibit 8: Forecast Change Summary, m m 2016/17E (old) 2016/17E (new) Forecast changes, PT lower to 16.5 (was 18) Exhibit 8 shows changes to our net profit forecasts, where we trim 2016/17E by 2.3%, 2017/18E by 6.7%. EPS cuts are ~1% and ~5% - a lesser impact due to share buy-back effects. In the context of the airlines sector these changes are small but remain sensitive to unit/revenue outlook summations where we see 2016/17E down ~9% YoY, 2017/18E down We see Ryanair delivering equity FCF yield of 6.5% in 2016/17E, rising to ~11-12% by 2018/19E. Our projections assume surplus capital (beyond capex needs) is returned to shareholders (as ND/EBITDA is low already). We still see the DPS and SBB yield close to FCF yield i.e. over 10% by 2018/19E or scope for Ryanair to speed up expansion if opportunistic aircraft became viable to buy. Chg 2017/18E (old) 2017/18E (new) Chg 2018/19E (old) 2018/19E (new) Passengers (m) % % % Chg in pass. 9.2% 10.0% 0.9% 8.3% 7.0% -1.3% 6.8% 7.8% 1.0% Chg YoY in average ticket price (Excl ancillary sales) -7.1% -8.7% % -4.9% % -1.2% - RASM (cents) % % % Chg RASM -4.9% -6.0% -1.0% -3.1% -3.1% 0.0% 0.1% -0.5% -0.6% Total Revenues 6,761 6, % 7,096 6, % 7,588 7, % Fuel cost 1,865 1, % 1,700 1, % 1,787 1, % Employee costs % % % EBITDAR (adj'd) 2,220 2, % 2,458 2, % 2,610 2, % Op profit/(loss) 1,665 1, % 1,873 1, % 2,000 1, % PBT 1,614 1, % 1,827 1, % 1,959 1, % Net Profit 1,427 1, % 1,615 1, % 1,732 1, % BBG cons median - 1, , ,575 - EPS (basic, cents) % % % DPS (Euro) Equity FCF % 1,191 1, % 1,500 1, % Net Debt/(Cash) (adj'd) % % % ND (adj'd)/ebitdar 0.1x 0.1x - 0.1x 0.1x - 0.1x 0.1x - Source: RBC Capital Markets estimates. Our scenarios based PT of 16.5 from Exhibits 12 and 13 implies 15x 2016/17E PER, ~14.5x YA PER, and ~13x 2017/18E vs. 10 year median PER of 13.2x. Our PT implies 9.6x 2016/17E EV/EBITDAR and 9.3x YA EV/EBITDAR vs 10 year median 9.2x, 5 year median 9.2x. We see a 33% RoE in 2016/17E. Chg July 26, 2016 Damian Brewer, ; damian.brewer@rbccm.com 4

5 FY 98/99 FY 99/00 FY 00/01 FY 01/02 FY 02/03 FY 03/04 FY 04/05 FY 05/06 FY 06/07 FY 07/08 FY 17/18E FY 18/19E FY 19/20E FY 20/21E FY 02/03 FY 03/04 FY 04/05 FY 05/06 FY 06/07 FY 07/08 FY 02/03 FY 03/04 FY 04/05 FY 05/06 FY 06/07 FY 07/08 FY 17/18E FY 18/19E Transport Exhibit 9: On a P/NAV/ROE/COE basis Ryanair is lower multiple to easyjet Ryanair P/NAV/ROE/COE easyjet P/NAV/ROE/COE Source: RBC Capital Markets estimates, company reports Exhibit 10: 9x YA PER at trough levels even though RoE has doubled since last trough (2008/09), m 37.0x 32.0x 27.0x 22.0x 17.0x 12.0x 7.0x 2.0x -3.0x -8.0x 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% PER Year Ahead (LH exis) RoE (RH Axis) Source: RBC Capital Markets estimates, company reports Exhibit 11: EV/EBITDAR at trough 6x, even as FCF yield outlook stronger, m 28.0x 23.0x 18.0x 13.0x 8.0x 3.0x -2.0x -7.0x EV/EBITDAR (LH Axis) FCF yield (RH Axis) Source: RBC Capital Markets estimates, company reports July 26, 2016 Damian Brewer, ; damian.brewer@rbccm.com 5

6 Exhibit 12: SoTP Base Case Valuation m Multiple FY16/17E FY17/18E FY18/19E EBITDAR - 2,207 2,356 2,491 EV/EBITDAR 10 year median 9.2x 9.2x 9.2x 9.2x EV - 20,228 21,600 22,836 Less: Net Debt/(cash) Op leases, capitalised at 7.0x Pensions Core equity value - 19,933 21,303 22,539 Equity holdings: Historical beat effect at: 9.2x % net beat ( , agg av. vs start of year) 23% EBITDAR upside potential (excl amount RBCe is above co profit outlook) Beat upside Total Consolidated equity value - 23,250 24,872 26,354 No of shares, m Value per share, Euro Proportion of year ahead months forward, Euro Source: RBC Capital Markets estimates. Exhibit 13: Scenario-Based rounded PT Scenario for next 12 months 2016/17E Wt'd GDP outlook Base case Bear case (At trough 6x EV/EBITDAR) Bull case 1.5% -8.4% -6.0% -13.0% 3.0% 8.3% RASM Fuel Value 12mo Chance Wt'd val As forecast 55% 19.5 (was 60%)` Low (with fuel cost RASM pressure) % 3.20 Rises but yield growth offsets, airport charges flat on % 2.66 Potential Rounded (down) Price Target Source: RBC Capital Markets estimates. July 26, 2016 Damian Brewer, ; damian.brewer@rbccm.com 6

7 Valuation We base our scenario analysis around a SoTP valuation with an EV/EBITDAR basis. However, future years are dependent on the future economic outlook, which could affect both volume growth demand in the market and potentially achievable yield. Thus, looking at Ryanair s historical performance, we take a probability-weighted approach to price target setting. We use a 55% chance our base case forecasts are likely, a 35% risk of more bearish scenario (-6% GDP) development and a 10% a more bullish Blue Skies outlook evolving to derive our 16.5 PT. Our PT implies, ~14.5x YA PER, and ~13x 2017/18E vs. 10 year median PER of 13.2x, and 9.3x YA EV/EBITDAR vs. 10 year median 9.2x, 5-year median 9.2x. Our price target supports our Outperform rating. Price target impediments Our price target and rating are subject to a number of risks and uncertainties. These include labour relations, kerosene prices, foreign exchange rates, business confidence, geopolitical risks, socio-political risks, geological risks, intergovernmental relations, macroeconomic outlook, aircraft financing terms and availability. Company description was set up in 1985, with 25 staff and a single small commuter aircraft offering daily services between Waterford and Gatwick. In 1986 the company began services on Dublin-London with a starting fare of 99, vs. the 209 offered by BA/Aer Lingus at the time. The Ryanair model changed to its current no frills/ultra low fare shape in 1991, changing direction to emulate the Southwest Airlines business model after a new management team was brought in. Ryanair operates predominantly to secondary airports, with which it often negotiates favourable aviation fee regimes. The company offers very low fares if booked well in advance of travel, often with a very low base fare, and a number of incremental charges, for things such as web check-in, baggage, reserved seating, priority boarding, and administration charges. The company generates ancillary revenue (24% in 2015/16), for items such as allocated seats, priority boarding, on board sales (food, drink, lottery cards), and hotels/insurance/car rental sold through the company s Website (on a commission basis). July 26, 2016 Damian Brewer, ; damian.brewer@rbccm.com 7

8 Ryanair: Summary of Financials Profit and Loss statement Cash flow statement m, Year to Mar 31st FY 17/18E FY 18/19E m, Year to Mar 31st FY 17/18E FY 18/19E Revenue 5,654 6,536 6,740 6,987 7,496 Operating Profit 1,043 1,460 1,616 1,737 1,849 % change Y/Y 12.3% 15.6% 3.1% 3.7% 7.3% Depreciation & Amortisation EBITDAR (clean) 1,530 2,003 2,207 2,356 2,491 Working Capital Chgs 77 (16) % change Y/Y 37.6% 30.9% 10.2% 6.8% 5.7% Other movements EBITDAR Margin (%) 27.1% 30.6% 32.7% 33.7% 33.2% Cash flow from operations 1,501 1,874 2,124 2,277 2,421 Operating Profit (reported) 1, , , , ,848.7 Net Interest (72) (72) (65) (58) (52) % change Y/Y 58.3% 40.0% 10.7% 7.5% 6.4% Gross Capex (789) (1,218) (1,167) (1,167) (1,018) Op. Pr. Margin (%) 18.4% 22.3% 24.0% 24.9% 24.7% Other investing cash Net Interest income/(expense) (61) (56) (51) (46) (41) Equity FCF (RBC defn.) ,093 1,397 Profit before tax 982 1,722 1,565 1,692 1,808 Businesses acquired % change Y/Y 66.1% 75.3% -9.1% 8.1% 6.9% Equity raised/ (repaid) (98) (1,103) (944) (1,093) (1,397) Tax (charge) (116) (163) (171) (185) (198) Dividends paid (520) as % of PBT 11.8% 9.5% 10.9% 10.9% 10.9% Other, debt raised and non-cash (829) Net Income (Reported) 867 1,559 1,394 1,507 1,610 Net cash flow (546) % change Y/Y 65.7% 79.9% -10.6% 8.1% 6.9% Shares Outstanding (Av. m) Y/E net debt/(cash) (363) (310) (310) (310) (310) EPS (reported, basic, ) Lease adjustment EPS (clean, continuing, ) Adjusted net debt % change Y/Y 69.4% 85.2% -4.1% 16.2% 17.7% DPS (, declared, gross) Balance sheet Ratio Analysis m, Year to Mar 31st FY 17/18E FY 18/19E year-end Dec FY 17/18E FY 18/19E Cash and cash equivalents 4,796 4,335 3,951 3,568 3,186 Inventory/Receivables EBITDAR margin (%) 27.1% 30.6% 32.7% 33.7% 33.2% Other current assets EBIT margin (%) 18.4% 22.3% 24.0% 24.9% 24.7% Current assets 5,741 4,822 4,423 4,042 3,664 Net profit margin (%) 15.3% 23.9% 20.7% 21.6% 21.5% Incremental EBITDAR margin (%) 67.7% 53.6% 99.9% 60.7% 26.5% Tangible assets 5,471 6,262 6,925 7,559 8,021 FCF margin (%) 15.9% 9.6% 14.0% 15.6% 18.6% Intangible assets Interest coverage (x) 17.2x 26.2x 31.9x 38.0x 45.3x Financial assets Effective Interest rate (IS) (%) 17.8% 11.8% 22.1% 19.7% 17.4% Total assets 12,185 11,218 11,483 11,736 11,820 Adj. Net debt/ebitdar (x) 0.3x 0.3x 0.1x 0.1x 0.1x Liabilities Revenue/total assets (x) 0.46x 0.58x 0.59x 0.60x 0.63x ST loans Total assets/equity 3.0x 2.8x 2.6x 2.4x 2.3x Payables ROE (%) 23.7% 39.0% 33.3% 32.7% 32.7% Others 2,750 2,689 2,926 3,180 3,482 RoIC (%) 23.1% 31.4% 32.7% 33.5% 35.4% Total current liabilities 3,346 3,370 3,594 3,853 4,173 RoIC/WACC Long term debt 4,032 3,573 3,189 2,806 2,424 Key Operating Stats Other liabilities ASM Growth 2.3% 11.8% 9.7% 7.0% 7.8% Total liabilities 8,150 7,262 7,077 6,917 6,787 RPM Growth 9.1% 17.5% 10.0% 7.0% 7.8% Total equity 4,035 3,957 4,406 4,820 5,033 RASM YoY Chg 9.8% 3.4% -6.0% -3.1% -0.5% CASM (ex-fuel) YoY Chg 8.3% 2.6% -1.0% 1.0% 0.8% NAV/Sh ( ) Fuel as % Revenue 35.2% 31.7% 27.6% 24.7% 24.2% Source: Company data, RBC Capital Markets estimates July 26, 2016 Damian Brewer, ; damian.brewer@rbccm.com 8

9 Required disclosures Non-U.S. analyst disclosure Damian Brewer, Andy Jones and Ruairi Cullinane (i) are not registered/qualified as research analysts with the NYSE and/or FINRA and (ii) may not be associated persons of the RBC Capital Markets, LLC and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Conflicts disclosures The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated by investment banking activities of the member companies of RBC Capital Markets and its affiliates. Please note that current conflicts disclosures may differ from those as of the publication date on, and as set forth in, this report. To access current conflicts disclosures, clients should refer to DisclosureLookup.aspx?entityId=1 or send a request to RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7. RBC Capital Markets, LLC makes a market in the securities of. Explanation of RBC Capital Markets Equity rating system An analyst's 'sector' is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assigned to a particular stock represents solely the analyst's view of how that stock will perform over the next 12 months relative to the analyst's sector average. Although RBC Capital Markets' ratings of Top Pick (TP)/Outperform (O), Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same because our ratings are determined on a relative basis. Ratings Top Pick (TP): Represents analyst's best idea in the sector; expected to provide significant absolute total return over 12 months with a favorable risk-reward ratio. Outperform (O): Expected to materially outperform sector average over 12 months. Sector Perform (SP): Returns expected to be in line with sector average over 12 months. Underperform (U): Returns expected to be materially below sector average over 12 months. Risk Rating As of March 31, 2013, RBC Capital Markets suspends its Average and Above Average risk ratings. The Speculative risk rating reflects a security's lower level of financial or operating predictability, illiquid share trading volumes, high balance sheet leverage, or limited operating history that result in a higher expectation of financial and/or stock price volatility. Distribution of ratings For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories - Buy, Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Top Pick(TP)/ Outperform (O), Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same because our ratings are determined on a relative basis (as described below). Distribution of ratings RBC Capital Markets, Equity Research As of 30-Jun-2016 Investment Banking Serv./Past 12 Mos. Rating Count Percent Count Percent BUY [Top Pick & Outperform] HOLD [Sector Perform] SELL [Underperform] July 26, 2016 Damian Brewer, ; damian.brewer@rbccm.com 9

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Any U.S. recipient of this report that is not a registered broker-dealer or a bank acting in a broker or dealer capacity and that wishes further information regarding, or to effect any transaction in, any of the securities discussed in this report, should contact and place orders with RBC Capital Markets, LLC. To Canadian Residents: This publication has been approved by RBC Dominion Securities Inc.(member IIROC). Any Canadian recipient of this report that is not a Designated Institution in Ontario, an Accredited Investor in British Columbia or Alberta or a Sophisticated Purchaser in Quebec (or similar permitted purchaser in any other province) and that wishes further information regarding, or to effect any transaction in, any of the securities discussed in this report should contact and place orders with RBC Dominion Securities Inc., which, without in any way limiting the foregoing, accepts responsibility for this report and its dissemination in Canada. July 26, 2016 Damian Brewer, ; damian.brewer@rbccm.com 11

12 To U.K. Residents: This publication has been approved by RBC Europe Limited ('RBCEL') which is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority ('FCA') and the Prudential Regulation Authority, in connection with its distribution in the United Kingdom. This material is not for general distribution in the United Kingdom to retail clients, as defined under the rules of the FCA. However, targeted distribution may be made to selected retail clients of RBC and its affiliates. RBCEL accepts responsibility for this report and its dissemination in the United Kingdom. To German Residents: This material is distributed in Germany by RBC Europe Limited, Frankfurt Branch which is regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). To Persons Receiving This Advice in Australia: This material has been distributed in Australia by Royal Bank of Canada - Sydney Branch (ABN , AFSL No ). This material has been prepared for general circulation and does not take into account the objectives, financial situation or needs of any recipient. Accordingly, any recipient should, before acting on this material, consider the appropriateness of this material having regard to their objectives, financial situation and needs. If this material relates to the acquisition or possible acquisition of a particular financial product, a recipient in Australia should obtain any relevant disclosure document prepared in respect of that product and consider that document before making any decision about whether to acquire the product. This research report is not for retail investors as defined in section 761G of the Corporations Act. To Hong Kong Residents: This publication is distributed in Hong Kong by RBC Capital Markets (Hong Kong) Limited and Royal Bank of Canada, Hong Kong Branch (both entities which are regulated by the Hong Kong Monetary Authority ('HKMA') and the Securities and Futures Commission ('SFC')). Financial Services provided to Australia: Financial services may be provided in Australia in accordance with applicable law. Financial services provided by the Royal Bank of Canada, Hong Kong Branch are provided pursuant to the Royal Bank of Canada's Australian Financial Services Licence ('AFSL') (No ). RBC Capital Markets (Hong Kong) Limited is exempt from the requirement to hold an AFSL under the Corporations Act 2001 in respect of the provision of such financial services. RBC Capital Markets (Hong Kong) Limited is regulated by the HKMA and the SFC under the laws of Hong Kong, which differ from Australian laws. To Japanese Residents: Unless otherwise exempted by Japanese law, this publication is distributed in Japan by or through RBC Capital Markets (Japan) Ltd. which is a Financial Instruments Firm registered with the Kanto Local Financial Bureau (Registered number 203) and a member of the Japan Securities Dealers Association ("JSDA").. Registered trademark of Royal Bank of Canada. RBC Capital Markets is a trademark of Royal Bank of Canada. Used under license. Copyright RBC Capital Markets, LLC Member SIPC Copyright RBC Dominion Securities Inc Member Canadian Investor Protection Fund Copyright RBC Europe Limited 2016 Copyright Royal Bank of Canada 2016 Copyright RBC Capital Markets (Hong Kong) Limited 2016 All rights reserved July 26, 2016 Damian Brewer, ; damian.brewer@rbccm.com 12