Why we Remain Bullish Despite FX Headwinds

February 12, 2015 Cemex Why we Remain Bullish Despite FX Headwinds Industry View In-Line Stock Rating Overweight Price Target US$13.50 Despite rising risks and adverse FX movements we remain bullish CX. Lower oil is a LatAm risk, but should be a US positive. We see strong momentum for the US business and think Mexico could surprise on the upside. We lower PT to US$13.5 (from US$14.0) and remain OW with ~35% expected return. CX is trading in line with peers despite better growth: Cemex trades at 8.2x 2016e EV/EBITDA, even after reducing estimates due to FX adjustments. This is in-line with European peers, and slightly above LatAm companies. In terms of capacity CX trades close to replacement cost despite its sizable RMC and aggregates business. We see ~35% upside to our PT. 3 key reasons for our bullish stance on Cemex: MORGAN STANLEY MÉXICO, CASA DE BOLSA, S.A. DE C.V.+ Nikolaj Lippmann Nikolaj.Lippmann@morganstanley.com +52 55 5282-6778 Lillian Starke Lillian.Starke@morganstanley.com +52 55 5282-6732 Cemex ( CX.N, CX US ) Latin America Transportation & Infrastructure / Mexico Stock Rating Overweight Industry View In-Line Price target US$13.50 Shr price, close (Feb 12, 2015) US$9.96 Mkt cap, curr (mm) US$12,573 52-Week Range US$13.81-8.73 Fiscal Year Ending 12/14 12/15e 12/16e 12/17e ModelWare EPS (US$) 0.05 0.04 0.41 0.77 Prior ModelWare EPS (0.58) 0.07 0.29 0.74 (US$) P/E 208.3 236.4 24.4 12.9 Consensus EPS (US$) (0.32) (0.08) 0.32 0.72 Div yld (%) - - - - Unless otherwise noted, all metrics are based on Morgan Stanley ModelWare framework = Consensus data is provided by Thomson Reuters Estimates e = Morgan Stanley Research estimates 1) US pricing and EBITDA growth should be very strong. US capacity utilization is approaching the sweet spot of 75-80% which should provide strong pricing power. We expect CX US EBITDA to almost double from 2014 levels of ~US$400 mn to ~US$800 mn by 2016, reaching ~US$1.2 bn by 2018-19. 2) Mexico could surprise on the upside near term. We expect strong pricing and solid volumes in 2015 for CX. No new supply for the market for 2 years and key competitors operating almost at capacity. 3) Asset allocation could create value. Asset sales and global consolidation are positive factors for CX. We think the company could benefit from further rethinking of its portfolio and asset sales could help reduce debt.... Even if risks are still important: No beta reduction (1.4 vs S&P), fiscal risks, mid-term risks for Mexico and Colombia, net debt/ebitda still above 5.0x and lack of debt reduction or FCFE in recent years. All of the above are valid points, often highlighted by investors. However, fundamentals are stronger today, we think. We have more visibility towards 1) US recovery 2) infrastructure funding and development in Colombia and 3) demand in Mexico, from a more balanced housing market and from infrastructure. Estimates & PT: We are reducing our estimates on the back of Morgan Stanley's latest FX forecasts. Thus we lower our estimates by ~4% at the consolidated EBITDA level for the next years and reduce our PT to US$13.5 from US$14.0 per ADS. At the regional level we are making 7-9% reductions across the board due to the FX forecasts. However, we increase EBITDA for the US by 4%. Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. += Analysts employed by non -U.S. affiliates are not registered w ith FINRA, may n ot be associated person s of th e member an d may n ot be su bject to NASD/NYSE restrictions on communications w ith a subject company, public appearances and trading securities held by a research analyst account. 1

Risk Reward Cemex (CX.US, $10.0, OW, PT $13.5) Investment Thesis Cemex has strong operating leverage. Running at a low capacity rate in key markets, CX should increasingly have pricing power as markets recover. We expect a 12% EBITDA CAGR in 2015-18 with a ~220 bps margin expansion in the same period. Recovery in the Mexican market is likely to be driven by stronger consumption, public infrastructure and housing heading into 2015. We expect the US to keep posting strong results and an important increase in EBITDA margin (14.6% in 2015e vs. 11.4% in 2014). Source: Thomson Reuters, Morgan Stanley Research Price Target $13.5 Bull $19.0 EV/EBITDA 12.3x Bull Case 2015e EBITDA US$3.3 bn Base $13.5 EV/EBITDA 11.4x Base Case 2015e EBITDA US$ 3.0 bn Bear $7.5 EV/EBITDA 9.8x Bear Case 2015e EBITDA US$ 2.7 bn We derive our PT using a DCF model and a SOPT analysis. We use an 8.8% WACC in nominal US$ using 12.1% cost of equity and 5.5% cost of debt. Our terminal EV/EBITDA multiple is 8.0x. Global recovery, crediting CX s view. Consolidation leads to higher volumes in Mexico, mainly in 2016 (+3% Base case) and 36% EBITDA margins. US consolidation supports pricing with margins stabilizing at ~20%. In Europe, pricing in northern markets and volume recovery in Mediterranean supports margins of ~11% and ~28%, respectively. In S. America, infrastructure projects continue to explain the lion s share of demand, with no pressure on pricing. 2017 EBITDA of US$4.3 bn, and ROIC of 7.7%. A strong outlook for 2015. We forecast demand recovery in Mexico in 2015 yet at a lower pace than in previous numbers with 2-5% cement volume & pricing growth. Margins stabilize at levels ~35%. In the US we expect demand to bloom. For 2015 we expect margins ~15%, stabilizing at ~20%. In Europe, we expect low single-digit growth in volumes in-line yet weak pricing. In S. America, we expect volume, rather than pricing to support revenue growth. 2017 EBITDA of US$3.8 bn and ROIC of 6.4% Sudden stop slows down growth. Recovery in 2015 is lower than anticipated with the cuts to public spending in addition to little pricing momentum. We expect stabilized margins at 34%. In the US, volumes grow moderately while prices continue to grow above inflation. In Europe, no growth seen and pricing declines due to weak FX. In S. America, pricing declines heavily in US$ as the COP keeps depreciating and the first wave of 4G gets delayed putting at risk the rest of the projects. 2017 EBITDA of US$3.1 bn and ROIC of 5.0% Key Value Drivers Increase in public spending in 2015. Positive outlook in South America. Lower than expected energy costs. Cement pricing. Potential Catalysts Consolidation in Mexico and US. US cement & ready-mix pricing. Energy reform program and infrastructure plan in Mexico Recovery of oil prices should be positive for LatAm economies, allowing to ensure funding for infrastructure projects mainly in Mexico and Colombia Risks to Achieving Price Target Increase in capacity from Mexican competitors US housing could disappoint as interest rates decline Fiscal austerity could limit public spending in Europe Political climate in Europe could delay the recovery in the region The list of things that could wrong in the global economy is still long and construction is the center of any sort of slowdown. Weaker than expected public spending in Mexico A new entrant into Colombia could limit growth and pricing in that market 2

Small changes to estimates & price target Slightly reducing estimates and price target to reflect new global Morgan Stanley FX forecasts: We are reducing our price target to US$13.5 per ADS from US$14.0. This leaves us with 35% expected return for CX shares, among the highest in our coverage universe and well above the cost of equity. Thus, we reiterate our OW rating. The reduction in price target is a reflection of new MS FX forecast, which implies a stronger USD relative to almost all currencies (MXN, COP & EUR, more importantly) See report: FX Pulse: Calling USD (Even) Higher (22 Jan 2015). We are also fine tuning estimates post 4Q14 results, but that represents a minor change to our numbers. Our new estimates continue to show strong growth in US$ EBITDA in the coming years (12% EBITDA CAGR 2015-18). Overall, we are reducing EBITDA by 4-5% at the EBITDA. Our 2015-16 EBITDA stands in-line with consensus. Exhibit 1: MS estimates: Change and vs. consensus Source: Thomson Reuters, Morgan Stanley Research estimates; e= estimates At the regional level we are making a downward reduction, with the exception of the US. The ~7% reduction to our Mexican estimates is solely on the basis of MS most recent FX forecast (8-11% weaker USDMXN vs. previous estimate). We still expect a strong 2015 for Mexico in terms of pricing and volumes (+4% YoY). Lower oil prices could put our already lowered estimates for the country at some risk. We are also reducing our estimates for Northern Europe by 9-11% to reflect 1) a slightly worse operating environment in some parts of Eastern Europe, 2) MS new FX forecast for the USDEUR and 3) fine tuning the effect from the asset swap with Holcim. For the US market we are making a slight upwards adjustment (~4%) to the solid operating trends witnessed in recent quarters. Reduction in South America, is mainly associated with the FX adjustment in our model. 3

Exhibit 2: MS estimate change by region Source: Morgan Stanley Research 4

Valuation We support our price target with a DCF analysis and sum-of-the-parts valuation DCF: For this model we use a US$-denominated WACC of 8.8% and an implied terminal value EV/EBITDA of 8.0x. This reflects a terminal growth rate of 3.6% in nominal US$ terms. The result of the DCF is the key determining factor behind our PT of US$ 13.5 per ADS. SOTP: We also conduct a SOTPs analysis using a DCF analysis for each operating region. The SOTP results in a value estimate for YE 2015 of US$13.4 per ADS, in-line with our DCF analysis. Valuation versus peers: Cemex trades at a small premium to Latam peers and also to European average including Holcim, but slightly below Lafarge on an EV/EBITDA and EV/Revenue basis. In terms of EV/Capacity Cemex trades at a premium to the European peers, and a discount to LatAm peers. At US$300 per ton of capacity Cemex trades close to replacement costs for new capacity. This type of analysis ignores any value of its vast RMC and aggregates business, that accounts for ~50% of consolidated revenue. Despite our scepticism towards the ability of the RMC business to make its cost of capital across the cycle in several markets, we think it does contain important value. Exhibit 3: DCF valuation summary Source: Morgan Stanley Research estimates, e = estimate 5

Exhibit 4: SOTP valuation summary Exhibit 5: Cemex's EV by region Source: Company data, Morgan Stanley Research estimates Source: Morgan Stanley Research estimates Where could we be wrong? CX is indeed a leveraged investment story with a higher than average level of risk, mainly due to the high level of debt and the cost of servicing the debt. Our analysis is focused on the cement demand and supply fundamentals in key markets. We could be underestimating the impact from the lower oil price on some markets. We could be underestimating the risk arising from the financial situation in Europe or other factors that could impact the discount rate such as the geopolitical situation around Russia. Also, oil prices could be materially higher or lower than what MS is assuming. Exhibit 6: Despite FX depreciation CX should be able to cover interest payments... Exhibit 7:... and pay down debt Source: Company data, Morgan Stanley Research estimates; e = estimates Source: Company data, Morgan Stanley Research estimates; e = estimates 6

Global comparable companies Exhibit 8: Global comparables ++ Rating and price target for this company have been removed from consideration in this report, because under applicable law and/or Morgan Stanley policy, Morgan Stanley may be precluded from issuing such information w ith respect to this company at this time. Source: Company Data, Thomson Reuters, Morgan Stanley Research estimates except for non -covered companies, w hich reflect Thomson Reuters consensus estimates, NC = non -covered, OW = Overw eight, EW = Equal-w eight, UW = Underw eight. For important disclosures regarding companies that are the subject of this screen, please see the Morgan Stanley Research Disclosure w ebsite, at w w w.morganstanley.com/researchdisclosures 7

8

3 Key reasons to be OW Cemex 1) The US is getting stronger, and could benefit mid-term from lower oil prices. Cement is an inelastic commodity and the US market is slowly but surely approaching full capacity. We estimate current capacity utilization to be at 75-80% and rapidly increasing. Simply put, given the current level of housing starts average of 1 million in 2014 and the average need of cement per house in the US slightly above 20 tons per house the cement industry could reach 85-90% capacity based on a normalization of housing over the next years. In other words, even if we were to see no growth from any of the remaining sectors (~70% of the cement demand pie), housing alone would be able to do the job of bringing the US cement industry close to full capacity, simply under the assumption of housing starts returning to the historical average of 1.35 million. This coincides with our estimates for long term demand based on demographics, second homes and demolitions. Exhibit 9: Housing should continue to be an important driver in the US cement story Exhibit 10: Mean reversion of housing starts could bring US cement industry closer full operating capacity Source: Bloomberg, Morgan Stanley Research estimates, MSe = estimates Source: Bloomberg, Morgan Stanley Research Exhibit 11: Our US cement model suggests limited excess capacity Source: Global Cement Report, USGS, Morgan Stanley Research estimates; e = estimate As we show below (Exhibit 12) the current 75-80% capacity utilization covers some degree of regional differences; Texas, Missouri, California and Ohio are close to full capacity, while Illinois is below 50% capacity utilization. While some of the differences could be explained by interstate/regional trade it does showcase a fairly heterogeneous demand recovery. Our analysis suggests, that while demand from 2012 to 2014 grew ~20% in several states including key regions such as California and South Texas it declined in the New York/Maine area. 9

Exhibit 12: Lower oil could cause growth to be spread out across regions Source: USGS, Morgan Stanley Research ; 2014 estimate = 11M14 annualized Exhibit 13: Cemex US operations continues to show strong volume growth Exhibit 14: Consumption has been strong in several of Cemex's key markets Source: USGS, Morgan Stanley Research Source: USG, Morgan Stanley Research; 2014 estimate = 1M14 annualized 10

Exhibit 15: Oil cement could experience a lower growth rate but the rest of the cement pie should benefit Exhibit 16: All in, we expect an improvement both capacity utilization and pricing over the next 4 years Source: USGS, Morgan Stanley Research Source: Global Cement Report, Industry and National sources, Morgan Stanley Research A key question from investors is how demand could be affected by lower energy prices, especially in Texas. We argue, that lower energy could be net positive for CX's US business, despite the lower potential growth rate and likely decline in cement margin for oil cement in Texas. The reason we remain constructive is because we believe demand is likely to be spread out towards more regions in the US. Oil represents 4% of total cement demand in the US, and 6% for Cemex. For Texas specifically, we think that demand growth could decline should oil remain at current levels, but we are constructive regarding Proposition 1 and other infrastructure initiatives that could make up for any lost demand from energy. Finally, as Texas is one of the states with the highest capacity utilization rates in the US, the marginal cement needs to be brought in from other markets, including imports. This makes the marginal profitability of demand in Texas below that of other markets. 2) Mexico might see better pricing, ahead of what most cement watchers would think Capacity utilization in the US is around 75-80% providing an increase leverage for higher pricing. In Mexico, it remains at ~70%. However, we think that cement companies in Mexico would be able to enjoy an improvement in pricing in the 2015-16 period as capacity utilization is very asymmetric among industry players. Both Moctezuma and Cruz Azul are close to full capacity which could leave room for near term growth and not least higher pricing power than seen in recent years. 11

Exhibit 17: Mexico: Cement supply/demand model Source: Company data, Industry and national sources, Morgan Stanley Research estimates; e = estimates Exhibit 18: Asymmetric capacity utilization could support pricing improvement in 2015-16 Exhibit 19: We see pricing momentum building up in Mexico Source: Company data, INEGI, Morgan Stanley Research Source: Company data, INEGI, Morgan Stanley Research estimates; e = estimates What if oil prices remain at current levels? Oil prices represent an important risk to infrastructure spending in Mexico, as highlighted in our recent report on Mexico Equity Strategy Why the Oil is Not Enough (January 22, 2015). Mexico could be facing cuts to public spending amounting to several percentage points of GDP in 2016, should oil contrary to MS expectations remain at current levels. This represents a risk to our Mexico cement growth forecast of 3% in 2016. We would however highlight that much of the current demand is derived form an increase in housing, experiencing a better supply demand balance supported by strong demographics. While housing only represents ~25-30% of cement demand in the US and most DMs, it accounts for ~55% in Mexico and other LatAm countries. Although there would be ripple though effects to housing from any major cuts to public spending, we think the cement market is growing off a very low base. Thus there could be positive volume growth in 2016, despite large cuts in infrastructure spending. Our key concern would be the market's ability to absorb the significant increase in capacity expected in 2017-18 as Moctezuma, Cruz Azul, Cemex and potentially Elementia could add a total of 5-7 mn tons mainly in central Mexico. 12

Exhibit 20: Why the oil is not enough Exhibit 21: Housing accounts for ~55% cement demand in Mexico Source: Pemex, SHCP, Morgan Stanley Research Source: Company data, Morgan Stanley Research Exhibit 22: Mexico: Cement market share based on capacity (2013) Exhibit 23: Mexico: Cement market share based on production (2013) Source: Company data, Morgan Stanley Research 3) Asset allocation can add value Source: Company data, Morgan Stanley Research We think it is positive that, in a period of FX risk potential volatility in both the FI markets and in Europe, Cemex management is proactive on the possibility of assets sales as a way to generate value, lower risk, pay down debt and strengthen its portfolio. We see several ways Cemex management could think about asset allocation. Below are several options: - Industry consolidation should continue. Both the US and several European markets remain fragmented and could benefit from consolidation and restructuring. In the US there are 11 cement companies with capacity below 2 million tons, while the top 5 players have 55% of the market. In Europe there is also important restructuring potential and we think the ongoing merger between Lafarge and Holcim will act as a catalyst for restructuring. 13

Exhibit 24: The transition into phase IV (reorganization) could mean higher returns *Note: Phase I: International expansion, Phase II: Crisis, Phase III: Coast cutting, Phase IV: Industry reorganization, Phase V (not in chart). Demand recovery; Source: Company data, Morgan Stanley Research estimates; e = estimate - CX management is proactive. As far as Cemex is concerned we think the market should applaud managements proactive approach with regards to asset sales and asset swaps, as stated on the 4Q14 conference call. Management focus is profitability and investment grade: The proactive approach of management shows its focus on increasing profitability and decreasing risk, not on just increasing size. We think the market should give them more credit for asset allocation. Cemex is highly unlikely to make significant acquisitions and we believe that several assets, or even regions could be candidates for listing, asset swaps or outright sales. Either we think could add value. Our central thesis for M&A in the sector is that it is a result of an industry generating returns below cost of capital, realizing that demand in many markets in unlikely to return rapidly See report: Cemex: Asset Swaps Could Improve LT Industry Returns; Cemex Should Benefit (18 Oct 2013). Thus, the industry is looking for a supply response to return levels to cost of capital, providing a wide plus. We think Cemex could be thinking about divestments or asset swaps in the following areas: 1. Several plants in Northern Europe or the Mediterranean region that could either be part of an asset swap deal, much like the recent Holcim deal or outright sales. 2. Concrete piping assets in the US, as debated on the block in 2011-12. 3. Asian assets. We question the synergies of Cemex Asian assets with the rest of the portfolio. We know that part of the value from Asia is generated from trading that could largely be done from elsewhere. We also question how much the market appreciates the Asian assets. Over the past years covering Cemex and speaking to hundreds of investors, we have received less than a handful questions on the Asian assets. Morgan Stanley & Co. International plc ( Morgan Stanley ) is acting as financial advisor to Lafarge S.A. 14

( Lafarge ) in relation to the proposed merger of equals with Holcim Ltd ( Holcim ) and various associated transactions as announced on 7th April 2014 (the Merger ). On 2nd February 2015 CRH Plc ( CRH ) entered into a binding commitment to acquire certain assets being disposed of by Lafarge and Holcim in advance of the Merger (the Acquisition ). The Merger is subject to approval by shareholders, regulatory approval and other customary closing conditions. The Acquisition is subject to approval by CRH's shareholders and is also conditional upon 1) successful completion of the Merger and 2) completion of local reorganisation plans. This report and the information provided herein is not intended to (i) provide voting advice, (ii) serve as an endorsement of the proposed transactions, or (iii) result in the procurement, withholding or revocation of a proxy or any other action by a security holder. Lafarge has agreed to pay fees to Morgan Stanley for its financial services. 15

Financials Exhibit 25: Cemex's financial summary Source: Company data, Morgan Stanley Research estimates; e = estimate 16

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley & Co. LLC, and/or Morgan Stanley C.T.V.M. S.A., and/or Morgan Stanley Mexico, Casa de Bolsa, S.A. de C.V., and/or Morgan Stanley Canada Limited. As used in this disclosure section, "Morgan Stanley" includes Morgan Stanley & Co. LLC, Morgan Stanley C.T.V.M. S.A., Morgan Stanley Mexico, Casa de Bolsa, S.A. de C.V., Morgan Stanley Canada Limited and their affiliates as necessary. For important disclosures, stock price charts and equity rating histories regarding companies that are the subject of this report, please see the Morgan Stanley Research Disclosure Website at www.morganstanley.com/researchdisclosures, or contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY, 10036 USA. For valuation methodology and risks associated with any price targets referenced in this research report, please contact the Client Support Team as follows: US/Canada +1 800 303-2495; Hong Kong +852 2848-5999; Latin America +1 718 754-5444 (U.S.); London +44 (0)20-7425-8169; Singapore +65 6834-6860; Sydney +61 (0)2-9770-1505; Tokyo +81 (0)3-6836-9000. Alternatively you may contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY 10036 USA. Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Nikolaj Lippmann. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy, which is available at www.morganstanley.com/institutional/research/conflictpolicies. Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research: Nikolaj Lippmann - ASUR(common or preferred stock). As of January 30, 2015, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in Morgan Stanley Research: America Latina Logistica, CCR, Cemex, CEMEX Latam Holdings S.A., Copa Holdings, Gol Airlines, Iochpe-Maxion, Mills, Volaris. Within the last 12 months, Morgan Stanley has received compensation for investment banking services from Gol Airlines. In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from America Latina Logistica, Arteris SA, ASUR, CCR, Cementos Argos S.A., Cemex, Copa Holdings, Duratex, EcoRodovias, G.A. Pacifico, Gol Airlines, Iochpe-Maxion, Latam Airlines Group SA, Localiza Rent A Car SA, Mills, Multiplus S.A., OMA, Randon, Santos Brasil, Smiles, Volaris, WEG. Within the last 12 months, Morgan Stanley has received compensation for products and services other than investment banking services from America Latina Logistica, Cemex, Gol Airlines, Iochpe-Maxion, Latam Airlines Group SA. Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking client relationship with, the following company: America Latina Logistica, Arteris SA, ASUR, CCR, Cementos Argos S.A., Cemex, Copa Holdings, Duratex, EcoRodovias, G.A. Pacifico, Gol Airlines, Iochpe-Maxion, Latam Airlines Group SA, Localiza Rent A Car SA, Mills, Multiplus S.A., OMA, Randon, Santos Brasil, Smiles, Volaris, WEG. Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past has entered into an agreement to provide services or has a client relationship with the following company: America Latina Logistica, Cementos Argos S.A., Cemex, Copa Holdings, Gol Airlines, Grupo Aeromexico, S.A.B. de C.V, Iochpe-Maxion, Latam Airlines Group SA, Volaris. Morgan Stanley & Co. LLC makes a market in the securities of ASUR, Cemex, Copa Holdings, G.A. Pacifico, Gol Airlines, Latam Airlines Group SA, Volaris. The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues. Morgan Stanley and its affiliates do business that relates to companies/instruments covered in Morgan Stanley Research, including market making, providing liquidity and specialized trading, risk arbitrage and other proprietary trading, fund management, commercial banking, extension of credit, investment services and investment banking. Morgan Stanley sells to and buys from customers the securities/instruments of companies covered in Morgan Stanley Research on a principal basis. Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report. Certain disclosures listed above are also for compliance with applicable regulations in non-us jurisdictions. STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight, Equal-weight, Not-Rated or Underweight (see definitions below). Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold and sell. Investors should carefully read the definitions of all ratings used in Morgan Stanley Research. In addition, since Morgan Stanley Research contains more complete information concerning the analyst's views, investors should carefully read Morgan Stanley Research, in its entirety, and not infer the contents from the rating alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Global Stock Ratings Distribution (as of January 31, 2015) For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside our ratings of Overweight, Equal-weight, Not-Rated and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold, and sell but represent recommended relative weightings (see definitions below). To satisfy regulatory requirements, we correspond Overweight, our most positive stock rating, with a buy recommendation; we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations, respectively. 17

COVERAGE UNIVERSE INVESTMENT BANKING CLIENTS (IBC) STOCK RATING CATEGORY COUNT % OF TOTAL COUNT % OF TOTAL IBC % OF RATING CATEGORY Overweight/Buy 1173 35% 320 41% 27% Equal-weight/Hold 1446 43% 361 46% 25% Not-Rated/Hold 107 3% 14 2% 13% Underweight/Sell 603 18% 92 12% 15% TOTAL 3,329 787 Data include common stock and ADRs currently assigned ratings. Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months. Analyst Stock Ratings Overweight (O or Over) - The stock's total return is expected to exceed the total return of the relevant country MSCI Index, on a risk-adjusted basis over the next 12-18 months. Equal-weight (E or Equal) - The stock's total return is expected to be in line with the total return of the relevant country MSCI Index, on a risk-adjusted basis over the next 12-18 months. Not-Rated (NR) - Currently the analyst does not have adequate conviction about the stock's total return relative to the relevant country MSCI Index on a riskadjusted basis, over the next 12-18 months. Underweight (U or Under) - The stock's total return is expected to be below the total return of the relevant country MSCI Index, on a risk-adjusted basis, over the next 12-18 months. Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months. Analyst Industry Views Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the relevant broad market benchmark, as indicated below. In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark, as indicated below. Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant broad market benchmark, as indicated below. Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index or MSCI sub-regional index or MSCI AC Asia Pacific ex Japan Index. Stock Price, Price Target and Rating History (See Rating Definitions) 18

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates, are available on the Morgan Stanley Wealth Management disclosure website at www.morganstanley.com/online/researchdisclosures. For Morgan Stanley specific disclosures, you may refer to www.morganstanley.com/researchdisclosures. Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC. This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley. This could create a conflict of interest. Other Important Disclosures Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Morgan Stanley produces an equity research product called a "Tactical Idea." Views contained in a "Tactical Idea" on a particular stock may be contrary to the recommendations or views expressed in research on the same stock. This may be the result of differing time horizons, methodologies, market events, or other factors. For all research available on a particular stock, please contact your sales representative or go to Matrix at http://www.morganstanley.com/matrix. Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients. Certain, but not all, Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience. For access to all available Morgan Stanley Research, please contact your sales representative or go to Matrix at http://www.morganstanley.com/matrix. Any access and/or use of Morgan Stanley Research is subject to Morgan Stanley's Terms of Use (http://www.morganstanley.com/terms.html). By accessing and/or using Morgan Stanley Research, you are indicating that you have read and agree to be bound by our Terms of Use (http://www.morganstanley.com/terms.html). In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (http://www.morganstanley.com/privacy_pledge.html), including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalized service and products to you. To find out more information about how Morgan Stanley processes personal data, how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (http://www.morganstanley.com/privacy_pledge.html). If you do not agree to our Terms of Use and/or if you do not wish to provide your consent to Morgan Stanley processing your personal data or using cookies please do not access our research. The recommendations of Nikolaj Lippmann, Lillian Starke in this report reflect solely and exclusively the analyst's personal views and have been developed independently, including from the institution for which the analyst works. Morgan Stanley Research does not provide individually tailored investment advice. Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of an investment or strategy will depend on an investor's circumstances and objectives. The securities, instruments, or strategies discussed in Morgan Stanley Research may not be suitable for all investors, and certain investors may not be eligible to purchase or participate in some or all of them. Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any security/instrument or to participate in any particular trading strategy. The value of and income from your 19

investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices, market indexes, operational or financial conditions of companies or other factors. There may be time limitations on the exercise of options or other rights in securities/instruments transactions. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. If provided, and unless otherwise stated, the closing price on the cover page is that of the primary exchange for the subject company's securities/instruments. The fixed income research analysts, strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues), client feedback and competitive factors. Fixed Income Research analysts', strategists' or economists' compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks. The "Important US Regulatory Disclosures on Subject Companies" section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1% or more of a class of common equity securities of the companies. For all other companies mentioned in Morgan Stanley Research, Morgan Stanley may have an investment of less than 1% in securities/instruments or derivatives of securities/instruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research. Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securities/instruments or derivatives of securities/instruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research. Derivatives may be issued by Morgan Stanley or associated persons. With the exception of information regarding Morgan Stanley, Morgan Stanley Research is based on public information. Morgan Stanley makes every effort to use reliable, comprehensive information, but we make no representation that it is accurate or complete. We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company. Facts and views presented in Morgan Stanley Research have not been reviewed by, and may not reflect information known to, professionals in other Morgan Stanley business areas, including investment banking personnel. Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management. Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report. To our readers in Taiwan: Information on securities/instruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited ("MSTL"). Such information is for your reference only. The reader should independently evaluate the investment risks and is solely responsible for their investment decisions. Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without the express written consent of Morgan Stanley. Information on securities/instruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities/instruments. MSTL may not execute transactions for clients in these securities/instruments. To our readers in Hong Kong: Information is distributed in Hong Kong by and on behalf of, and is attributable to, Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong. If you have any queries concerning Morgan Stanley Research, please contact our Hong Kong sales representatives. Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC. Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC. PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals, licenses, verifications and/or registrations from the relevant governmental authorities themselves. Morgan Stanley Research is disseminated in Brazil by Morgan Stanley C.T.V.M. S.A.; in Japan by Morgan Stanley MUFG Securities Co., Ltd. and, for Commodities related research reports only, Morgan Stanley Capital Group Japan Co., Ltd; in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents) and by Bank Morgan Stanley AG, Hong Kong Branch; in Singapore by Morgan Stanley Asia (Singapore) Pte. (Registration number 199206298Z) and/or Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H), regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from, or in connection with, Morgan Stanley Research) and by Bank Morgan Stanley AG, Singapore Branch (Registration number T11FC0207F); in Australia to "wholesale clients" within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited A.B.N. 67 003 734 576, holder of Australian financial services license No. 233742, which accepts responsibility for its contents; in Australia to "wholesale clients" and "retail clients" within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (A.B.N. 19 009 145 555, holder of Australian financial services license No. 240813, which accepts responsibility for its contents; in Korea by Morgan Stanley & Co International plc, Seoul Branch; in India by Morgan Stanley India Company Private Limited; in Indonesia by PT Morgan Stanley Asia Indonesia; in Canada by Morgan Stanley Canada Limited, which has approved of and takes responsibility for its contents in Canada; in Germany by Morgan Stanley Bank AG, Frankfurt am Main and Morgan Stanley Private Wealth Management Limited, Niederlassung Deutschland, regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin); in Spain by Morgan Stanley, S.V., S.A., a Morgan Stanley group company, which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations; in the US by Morgan Stanley & Co. LLC, which accepts responsibility for its contents. Morgan Stanley & Co. International plc, authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority, disseminates in the UK research that it has prepared, and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000, research which has been prepared by any of its affiliates. Morgan Stanley Private Wealth Management Limited, authorized and regulated by the Financial Conduct Authority, also disseminates Morgan Stanley Research in the UK. Private UK investors should obtain the advice of their Morgan Stanley & Co. International plc or Morgan Stanley Private Wealth Management representative about the investments concerned. RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa. RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc. and RMB Investment Advisory (Proprietary) Limited, which is wholly owned by FirstRand Limited. The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. International plc (DIFC Branch), regulated by the Dubai Financial Services Authority (the DFSA), and is directed at Professional Clients only, as defined by the DFSA. The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client. The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. International plc (QFC Branch), regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA), and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA. As required by the Capital Markets Board of Turkey, investment information, comments and recommendations stated here, are not within the scope of investment advisory activity. Investment advisory service is provided exclusively to persons based on their risk and income preferences by the authorized firms. Comments and recommendations stated here are general in nature. These opinions may not fit to your financial status, risk and return preferences. For this reason, to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations. The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners. Third-party data providers make no warranties or representations relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages relating to such data. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and S&P. Morgan Stanley Research or portions of it may not be reprinted, sold or redistributed without the written consent of Morgan Stanley. Morgan Stanley Research, or any portion thereof may not be reprinted, sold or redistributed without the written consent of Morgan Stanley. 20

INDUSTRY COVERAGE: Latin America Transportation & Infrastructure COMPANY (TICKER) RATING (AS OF) PRICE* (02/12/2015) Eduardo S Couto America Latina Logistica (ALLL3.SA) E (07/10/2013) R$5.56 Arteris SA (ARTR3.SA) U (07/10/2013) R$10.60 ASUR (ASR.N) E (01/23/2013) US$133.74 CCR (CCRO3.SA) E (09/05/2014) R$15.64 Copa Holdings (CPA.N) E (09/03/2014) US$118.85 Duratex (DTEX3.SA) O (07/10/2013) R$7.53 EcoRodovias (ECOR3.SA) E (01/06/2014) R$9.96 G.A. Pacifico (PAC.N) E (01/10/2011) US$67.22 Gol Airlines (GOL.N) O (09/03/2014) US$3.84 Grupo Aeromexico, S.A.B. de C.V (AEROMEX.MX) E (01/29/2012) M$22.92 Iochpe-Maxion (MYPK3.SA) E (07/10/2013) R$11.30 Latam Airlines Group SA (LFL.N) U (05/08/2011) US$10.60 Localiza Rent A Car SA (RENT3.SA) E (07/10/2013) R$33.00 Mills (MILS3.SA) E (01/06/2014) R$5.64 Multiplus S.A. (MPLU3.SA) U (04/16/2014) R$33.17 OMA (OMAB.O) E (06/21/2009) US$39.42 Randon (RAPT4.SA) E (03/20/2012) R$3.70 Santos Brasil (STBP11.SA) O (03/31/2014) R$12.87 Smiles (SMLE3.SA) O (06/05/2013) R$43.25 Volaris (VLRS.N) E (04/08/2014) US$9.35 WEG (WEGE3.SA) U (02/16/2012) R$32.84 Nikolaj Lippmann Cementos Argos S.A. (CCB.CN) O (10/01/2014) Co$9,000.00 Cemex (CX.N) O (06/25/2013) US$9.96 CEMEX Latam Holdings S.A. (CLH.CN) E (10/01/2014) Co$14,520.00 Stock Ratings are subject to change. Please see latest research for each company. * Historical prices are not split adjusted. 2015 Morgan Stanley 21