BMO

June 19, 2013
U.S. Canadian / Int'l
Initiating Coverage
Aurcana
Rating Downgrades
Tesaro
Estimates/Targets Raised
Fortuna Silver Mines
Estimates/Targets Lowered
QEP
Cenovus Energy Valeant
Company Updates
BlackRock Kohl's Hot Topic Pfizer
Bombardier
Sector Revisions US Diversified Financials: May Fund Flow Review: Industry Flows Remain Healthy
Sector Updates Semiconductors : Extracts From Qs / Ks - AMCC, MRVL Semiconductors : ARM-Based Server Battles Managed Care: AHIP Institute 2013: Courting the Consumer
Featured Reports Precious Metals: Aurcana - Shafter Changes the Game - But Can It Be Fixed in Time? Precious Metals: Dominion Diamond - Ekati Technical Report Underlines Positive Outlook
Macro Quantitative/Technical: Market Elements Economics: A.M. Notes
Click on company name or report title to view full comment.

RESEARCH COMMENTS BY SECTOR
FINANCIALS Diversified Financials Diversified Financials ENERGY & UTILITIES Integrated Oils North American E&P MATERIALS Precious Metals Precious Metals INDUSTRIALS Diversified Industrials CONSUMER Broadlines/Hardlines Apparel & Specialty TECH/TELECOM/MEDIA Semiconductors Semiconductors HEALTH CARE Pharmaceuticals Pharmaceuticals Managed Care Biotech MACRO Quantitative/Technical Economics Market Elements - Daily Quantitative Commentary A.M. Notes - Daily Economic Commentary U.S. U.S. Canada Pfizer - ZTS Exchange Looking Better; Investors Should Consider Participating Valeant - Updating Model and Getting More Comfortable With Expected B&L... Sector Comment - AHIP Institute 2013: Courting the Consumer Tesaro - High Expectations Reasonable, but Leave Little Upside Sector Comment - Extracts From Qs / Ks - AMCC, MRVL Sector Comment - ARM-Based Server Battles U.S. U.S. Kohl's - Key Takeaways from Management Meeting Hot Topic - Dropping Coverage Following Sycamore Partners Acquisition Canada Bombardier - Postcard From Paris Canada Canada Aurcana - Initiating Coverage With a Market Perform (Speculative) Rating and a... Fortuna Silver Mines - FVI Guides for Higher Production at San Jose Canada U.S. Cenovus Energy - Highlights From Investor Day QEP - Regaining Confidence U.S. U.S. BlackRock - Investor Day Showcases Breadth of Management Team; Retail... Sector Comment - May Fund Flow Review: Industry Flows Remain Healthy
June 19, 2013
BlackRock
(BLK-NYSE)
Stock Rating: Outperform Industry Rating: Market Perform
Diversified Financials
David J. Chiaverini, CFA
BMO Capital Markets Corp. 212-885-4115 david.chiaverini@bmo.com
Richard Fellinger
212-885-4092 richard.fellinger@bmo.com
Investor Day Showcases Breadth of Management Team; Retail Opportunity Glistens

Event
BlackRock hosted its inaugural investor day yesterday in New York and we came away with added conviction in our Outperform rating. We were impressed with the depth and breadth of the management team as we gained a first-hand look at various operating unit heads.
Securities Info
Price (18-Jun) $276.49 52-Wk High/Low $298/$163 Mkt Cap (mm) $46,645 Shs O/S (mm, BASIC) 168.7 Options O/S (mm) na Target Price Dividend Yield Float O/S (mm) ADVol (30-day, 000s ) $300 $6.72 2.4% 107.9 752
Price Performance
BLACKROCK INC (BLK)
P ric e: High, Low,Close(US $) Relative t o S &P 500
16 0 30 0 15 0 14 0 13 0 20 0 12 0 11 0 10 0
25 0
Impact
Key takeaways include: (1) BlackRock is targeting net new asset growth of 5%, which is ahead of our estimate of about 3.5% over the next two years; helping to drive this growth is BlackRocks ETF business, which is expected to have double-digit NNA growth; (2) BlackRock reiterated its operating margin guidance of a stable-to-improving margin in a flat market environment, in line with our assumption; and (3) the most significant growth opportunity for BlackRock is growing its retail market share; its current market share is 1.7% and its goal is to get this to 3.0%, which would make it a top-five player.
15 0
10 0 90 50 60 40 20 0 20 08 20 09 20 10 20 11 2 012 2 01 3
Volum e (mln)
80 60 40 20 0
Last Data Point : June 17, 2013
Valuation/Financial Data
(FY-Dec.) EPS Adj. P/E First Call Cons. EPS GAAP Net New Asset Gr Inv Mgt Fees/AUM Oper Profit Margin Rev. ($mm) Quarterly EPS 2012A 2013E 2011A $11.85 $12.37 2.2% 0.24% 39.7% $9,081 1Q $3.16 $3.65A 2012A $13.67 $13.79 -0.1% 0.23% 40.1% $9,337 2Q $3.10 $3.80 2013E $15.70 17.6x $16.11 $15.59 3.0% 0.22% 40.8% $10,383 3Q $3.47 $3.92 2014E $17.20 16.1x $18.23 $17.09 3.3% 0.23% 40.7% $11,441 4Q $3.96 $4.33
Forecasts
Our 2013/2014 adjusted EPS estimates are $15.70/$17.20.
Valuation
BlackRock is trading at 16.1x 2014 adjusted EPS estimate compared to peers at 15.4x. Our $300 price target is based on a sum-of-the-parts valuation. We apply a 17x multiple to our 2014 EPS estimate from asset management operations ($17.47), and combine the resulting value with our estimated MRQ net cash and investments figure of -$0.20 per share.
Balance Sheet Data ( 31-Mar) ROE 8.8% Total Debt ($mm) 6,346 ROA 1.2% Debt/Tang Eq. 0.4x Net Cash & Invstmts/Sh -$1.60 Tang Comm BV/Shr $68.73 Notes: All values in US$. Source: BMO Capital Mark ets estimates, Bloomberg, Thomson Reuters, and IHS Global Insight.
Recommendation
We maintain our Outperform rating.
Please refer to pages 5 to 7 for Important Disclosures, including the Analyst's Certification.
BMO Capital Markets
BlackRock
Key Points
Retail is a key growth opportunity for BlackRock. Retail, at just 11% of AUM, is sometimes
viewed as a smaller business by investors, but it accounts for 33% of fees owing to its higher fee rates. Management presented a three-tiered plan for growing its retail presence including (1) evolving its product set, (2) enhancing distribution, and (3) delivering the firm. For products, BlackRock is concentrated on bringing new/different asset classes, like alternatives, to the retail investor. BlackRock has ~1.7% of US open-end mutual fund market share today and it has set a 3% target, which would make it a top-5 player. Every 1% in market share represents ~$100 billion in assets. For distribution, BlackRock has placed new emphasis on the RIA channel, which it estimates is the fastest growing in the financial sector at a 6-7% CAGR over the next five years. It will also try to further penetrate the wirehouse/broker dealer market and is targeting a 5% market share, up from 3% currently (ex-Merrill Lynch). Management remains happy with results from its recent marketing and brand awareness push, which should help the company penetrate new segments and deepen existing relationships. Delivering the firm means finding ways to be a more complete partner to the retail customer. It is also focused on creating more customized solutions, tools, and content for retail.
We believe BlackRock Solutions remains a key differentiator and the firm continues to monetize its Aladdin platform. BRS revenue has grown at a 13% CAGR over the past three
years and Aladdin revenues have increased as a percentage to 75% of total BRS revenues. Aladdin revenues represent the more recurring fee stream versus financial market advisory (FMA) revenues, which are more one-time, project-type income. We believe Aladdin has good growth opportunities as client needs for risk solutions are growing and the company is just now starting to aggressively expand its international client base. We expect Aladdin to continue to open doors and leading to total solution cross-selling within the institutional segment.
Management expects iShares to protect its market share and to grow at a double-digit pace. Management reiterated that ETFs continue to have a huge runway for growth as an
industry, including from further international adoption and fixed income evolution in the US. Management also noted that organic growth is coming more from new client relationships than product creation. In fact, it stated its belief that the first generation of ETF product generation, which was the global proliferation, or capture the flag strategy, is over. The company is focused on the next stage of growth, which includes more-tailored and sector-specific products including minimum volatility products and enhanced beta ETFs.
Management expects a stable-to-improving operating margin in a stable market environment. Intense investor scrutiny is often placed on operating margins of the asset
managers, and management noted its recent expansion to a 40% adjusted operating margin could be somewhat of a floor. The company noted, however, that it will not run the firm to a margin target, but rather be as efficient as possible in investing in future growth.
Page 2
June 18, 2013
BMO Capital Markets
BlackRock
The strategic product management (SPM) group handles product innovation as well as prudently rationalizes redundant and/or less successful current offerings. Set up last year,
SPM is tasked with optimizing results for BlackRock by sitting between the client teams and project managers to make sure communication is effective. Given BlackRocks size, it often has more product opportunities than it could possibly handle and SPM has helped prioritize product focus. Ideas are now based on materiality and what can drive margins. SPM operates with a long-term focus (three to five years) when evaluating new priorities. That way there is a track record already in place when the theme becomes popular. Its emerging market allocation fund is an example of this. SPM believed clients would continue to want emerging market exposure in the future, but at a lower level of volatility. While BlackRock has 12 separate emerging markets strategies, these strategies had never been brought together under a single platform. By bringing those capabilities together (led by Jeff Shen), it was able to create a differentiated product and further expand its asset allocation capability to bring to market. Part of the business responsibility also includes evaluating current products and eliminating or repositioning unnecessary or underperforming products. It has closed 250 funds to date and has 102 funds currently in closure and 188 funds scheduled to close. While those numbers sound significant, they are diminutive considering the company has 7,373 total portfolios across multiple fund structures. An example of this restructuring is the rationalization of its Australia product line-up where the company closed 94 funds to eliminate product overlap. Despite the closures, management is optimistic it is as well positioned as ever to drive growth in the region, if not more so.
Fundamental equity performance still a black eye for the firm, but management is encouraged by early signs of improvement. In what has become a well known area of
concern with BlackRock, only 39% of fundamental equity AUM is ranked above benchmark or peer median for the three-year period. This led to numerous management changes over the past couple years, which are largely complete, and the majority of new managers have demonstrated better performance since joining. Fixed income and scientific equity AUM have performed very well, with 78% of fixed income AUM and 92% of scientific active equity AUM above benchmark or peer median for the threeyear period. On the beta side, BlackRock also continues to deliver exceptional performance with 96% of AUM at or above its performance tolerance.
Institutional Client Business (ICB) can still grow despite its large size. BlackRocks
institutional business represents 62% of AUM and 32% of fees. Given the size of assets, investors often wonder how much runway there is left for growth, particularly with its largest client type, defined benefit plans (45% of AUM) in secular decline and estimated to shrink 2% in the next three years. Management noted that its $2.4 trillion in long-term assets is still just 8% of the global estimated marketplace of $32 trillion and highlighted three key areas of its growth strategy; (1) focus on key client types, (2) deepen existing relationships, and (3) lead the industry in outcome-oriented approaches.
Page 3
June 18, 2013
BMO Capital Markets
BlackRock
The focus on key client types means concentrating on the faster-growing segments. Those are sovereign wealth funds, insurers, and defined contribution, which it expects to grow at 7%, 5%, and 3% over the next three years, respectively. With defined contribution, the focus is on capitalizing on the shift from defined benefit (DB) to defined contribution (DC) plans by increasing share in leveraging its LifePath product line and fixed income products. US defined contribution market is an $8 trillion market and BlackRock has only about 1.5% share currently. BlackRock will attempt to deepen existing relationships by cross selling. Currently 83% of its top 50 clients (ranked by AUM) own three or more BlackRock products, but only 35% of its top 500 clients own three-plus products and 35% own just one. For outcome-oriented solutions, BlackRock is leveraging its diverse platform and risk analytics capabilities to meet investor demand for portfolio solutions and mutli-asset class products.
We believe BlackRock has been a good steward of capital. Current cash priorities as
presented by management are (1) business investment, (2) tactical acquisitions, (3) dividends, and (4) share repurchases. Management noted it expects a dividend payout ratio range of 40% to 50% going forward. It also expects to be more consistent and predictable with share repurchases and noted the $250 million of repurchases completed in 1Q13 is a good rate. The company says it will not attempt to time the market.
Page 4
June 18, 2013
BMO Capital Markets
BlackRock
BLACKROCK INC (BLK)

Quarterly Price (US$) 350 250 200 150 100 50 250 200 250 150 200 100 150 50 100 BLK Relative to S&P 500 BLK Relative to Capital Markets 500 400 300 200 100 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Revenue / Share - (US$) Price / Revenue 500 400 300 200 100 100 100 BLK Relative to S&P 500 BLK Relative to Capital Markets 100 1) OP 150 200 250 Target Price(US$) Share Price(US$) 350
300
300
140
140
120
120
80
2011
2012
80 2013
150 100 50
10 5 0
BMO 2013FY EPS ( May 13 = 15.55 US$) First Call 2013FY Cons.EPS ( May 13 = 16.08 US$) 16 15 14 BMO 2014FY EPS ( May 13 = 17.05 US$) First Call 2014FY Cons.EPS ( May 13 = 18.23 US$) 16 15 14
100 50
EPS (4 Qtr Trailing) - (US$) Price / Earnings
50
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
15
2011
2012
15 2013
FYE (Dec.) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Range*: Current*
EPS US$ 1.04 1.35 1.65 2.04 2.36 2.69 4.03 5.35 8.22 6.30 7.14 10.94 11.85 13.67
P/E Hi - Lo 18.6 35.5 29.0 23.3 22.7 29.0 28.2 30.2 27.3 39.6 33.8 22.3 17.7 15.4 39.6 12.0 11.1 18.6 16.4 16.1 18.6 17.2 19.8 16.9 15.0 12.5 12.7 11.6 11.7 11.1
DPS US$ 0.00 0.00 0.00 0.00 0.40 1.00 1.20 1.68 2.68 3.12 3.12 4.00 5.50 6.00
Yield% Hi - Lo 0.0 0.0 0.0 0.0 1.0 2.0 1.7 1.6 1.9 3.3 3.5 2.9 4.0 3.7 4.0 0.0 0.0 0.0 0.0 0.7 1.3 1.1 1.0 1.2 1.3 1.3 1.6 2.6 2.9 0.0
Payout % 0 0 0 0 17 37 30 31 33 50 44 37 46 44
BV US$ 4.4 5.8 7.5 9.7 11.1 11.9 14.2 83.6 90.2 92.9 128.9 136.5 140.5 148.4
P/B Hi - Lo 4.4 8.3 6.4 4.9 4.8 6.6 8.0 1.9 2.5 2.7 1.9 1.8 1.5 1.4 8.3 2.8 2.6 4.1 3.4 3.4 4.2 4.9 1.3 1.5 1.0 0.7 1.0 1.0 1.1 0.7
ROE % 27 25 24 23 23 31 11 9 7 6 8 9 9
BLK - Rating as of 5-Jul-10 = NR Date 11-Apr-12 Rating Change NR to OP Share Price $197.81
14.18
19.7
6.72
2.4
47
-1.6
-175
na
Growth(%): 5 Year: 10.8 10 Year: 21.0
20.2 nm
nm nm
* Current EPS is the 4 Quarter Trailing to Q1/2013. * Valuation metrics are based on high and low for the fiscal year. * Range indicates the valuation range for the period presented above.
Last Price ( June 14, 2013): $269.73 Sources: IHS Global Insight, Thomson Reuters, BMO Capital Markets.
Page 5
June 18, 2013
BMO Capital Markets Important Disclosures
BlackRock
Analyst's Certification I, David J. Chiaverini, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Company Specific Disclosure Methodology and Risks to Our Price Target/Valuation Methodology: Our target is based on a sum-of-the-parts analysis. Risks: The company operates in a cyclical industry. A severe downturn in the equity markets would have a negative impact on its business, which may include lower asset valuations and reduced net client asset flows, both of which would lower earnings power. That could result in our target price proving too aggressive. Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013) We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis; Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis; Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis; (S) = Speculative investment; NR = No rating at this time; and R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Rating System (January 4, 2010 April 4, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3. Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, Thomson Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information.
Page 6
June 18, 2013
BMO Capital Markets
BlackRock
Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research, which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx. General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST BMO Financial Group (NYSE, TSX: BMO) is an integrated financial services provider offering a range of retail banking, wealth management, and investment and corporate banking products. BMO serves Canadian retail clients through BMO Bank of Montreal and BMO Nesbitt Burns. In the United States, personal and commercial banking clients are served by BMO Harris Bank N.A., Member FDIC. Investment and corporate banking services are provided in Canada and the US through BMO Capital Markets. BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A, BMO Ireland Plc, and Bank of Montreal (China) Co. Ltd. and the institutional broker dealer businesses of BMO Capital Markets Corp. (Member SIPC), BMO Nesbitt Burns Securities Limited (Member SIPC) and BMO Capital Markets GKST Inc. (Member SIPC) in the U.S., BMO Nesbitt Burns Inc. (Member Canadian Investor Protection Fund) in Canada, Europe and Asia, BMO Capital Markets Limited in Europe, Asia and Australia and BMO Advisors Private Limited in India. Nesbitt Burns is a registered trademark of BMO Nesbitt Burns Corporation Limited, used under license. BMO Capital Markets is a trademark of Bank of Montreal, used under license. "BMO (M-Bar roundel symbol)" is a registered trademark of Bank of Montreal, used under license. Registered trademark of Bank of Montreal in the United States, Canada and elsewhere. TM Trademark Bank of Montreal COPYRIGHT 2013 BMO CAPITAL MARKETS CORP.
A member of BMO
Financial Group
Page 7
June 18, 2013
Industry Rating: Market Perform
June 19, 2013
David J. Chiaverini, CFA

BMO Capital Markets Corp.
212-885-4115
david.chiaverini@bmo.com
Richard Fellinger
212-885-4095
richard.fellinger@bmo.com
May Fund Flow Review: Industry Flows Remain Healthy

In this report we review May mutual fund and ETF flows for investment companies following Morningstars monthly update to its database. We provide views on overall industry trends as well as opinions for the traditional asset managers we cover. Key takeaways include: 1. Investors contributed $61B to long-term mutual funds and ETFs in May. Flows remain healthy overall, and increased sequentially owing to robust equity ETF flows. While equity mutual fund flows remain positive, inflows have continued to slow each successive month this year.
Est.NetFlow($B) Equity FixedIncome Other(exMMF) TotalLongtermMF Equity FixedIncome Other TotalETF Equity FixedIncome Other Total 5/13 11.4 20.4 8.1 39.9 21.3 2.7 2.9 21.1 32.7 23.1 5.2 61.0 4/13 12.4 17.6 8.5 38.5 7.7 6.8 6.1 8.4 20.1 24.5 2.4 47.0 5/12 1.1 13.3 2.7 17.1 4.0 7.8 1.6 2.2 2.8 21.1 1.0 19.3 6mo EMA 11.5 21.9 7.1 40.5 15.5 3.8 2.3 17.0 27.0 25.7 4.8 57.5
Summary
May fund flows for US-registered mutual funds were a net +$40B, compared to the six-month average of +$41B and the year-ago period at +$17B. Equity fund flows remained positive but have slowed for each successive month this year at $11B (six-month average of $12B). Fixed income inflows of $20B were slightly below the six-month average of $22B. ETF flows were strong in the month with $21B of inflows, above the moving six-month average of $17B. Equity ETFs had robust inflows of $21B while fixed income ETF inflows were more modest at $3B. Commodity ETFs remained in net redemptions with $4B of outflows. BlackRock (BLK) had the highest level of longterm inflows among our covered companies with +$3B, while Legg Mason (LM) was the laggard with -$400M of outflows. We are making modest changes to our earnings estimates and price targets as we believe AUM remains largely in line with our previous estimates. (See page 2 for details.)
2. BlackRock (BLK) had the highest level of long-term inflows among our covered companies with +$3B while Legg Mason (LM) was the laggard with $400 mn of outflows. 3. We are making only modest changes to our earnings estimates and price targets as we believe AUM remains largely in line with our previous estimates. (See page 2 for details.)
Our top traditional asset manager pick is BlackRock (BLK). We believe the company should benefit from the passive movement, growth in its risk management segment (BRS), and market share gains in retail.
Refer to pages 26 to 27 for Important Disclosures, including Analyst's Certification.
Page 1
June 18, 2013
BMO Capital Markets
Tweaking Estimates and Price Targets

We are making modest changes to our estimates and price targets given available information quarter to date. Overall, we believe AUM for our covered companies remains largely in line with our previous estimates.
Exhibit 1: EPS Estimate and Price Target Changes

Old 1.89 2.42 3.65 0.55 1.02 0.50 0.52 0.88 (0.07) 0.91 FY1Q13 New 1.89 2.42 3.65 0.55 1.02 0.50 0.52 0.88 (0.07) 0.91 FY2013 New 3.55 10.36 15.70 2.18 2.67 2.15 2.13 2.35 (2.65) 3.85 Change 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Old 1.25 2.69 3.74 0.52 0.50 0.52 0.51 0.46 0.60 0.93 FY2Q13 New 0.57 2.69 3.80 0.52 0.50 0.52 0.51 0.46 0.60 0.93 FY2014 New 2.75 11.45 17.20 2.55 2.90 2.45 2.35 2.25 2.19 4.25 Change (0.68) 0.00 0.06 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Old 0.77 2.57 3.88 0.55 0.51 0.56 0.53 0.48 (3.45) 0.98 FY3Q13 New 0.53 2.57 3.92 0.55 0.51 0.56 0.54 0.48 (3.45) 1.00 Change (0.24) 0.00 0.04 0.00 0.00 0.00 0.01 0.00 0.00 0.02 Old 0.78 2.67 4.29 0.56 0.64 0.57 0.55 0.53 0.23 1.00 FY4Q13 New 0.57 2.68 4.33 0.56 0.64 0.57 0.56 0.53 0.23 1.02 Change (0.21) 0.01 0.04 0.00 0.00 0.00 0.01 0.00 0.00 0.02
APO BEN BLK BX CG EV IVZ KKR LM TROW
Old 4.68 10.35 15.55 2.18 2.67 2.15 2.12 2.35 (2.65) 3.81
Change (1.13) 0.01 0.15 0.00 0.00 0.00 0.01 0.00 0.00 0.04
Old 3.15 11.40 17.05 2.55 2.90 2.45 2.35 2.25 2.25 4.20
Change (0.40) 0.05 0.15 0.00 0.00 0.00 0.00 0.00 (0.06) 0.05
Old $31 $173 $300 $26 $31 $43 $34 $22 $33 $85
PriceTarget New Change $31 $0 $163 ($10) $300 $0 $26 $0 $31 $0 $42 ($1) $36 $2 $22 $0 $33 $0 $82 ($3)
Source: Company reports and BMO Capital Markets.
Exhibit 2: Price Target Methodology

Company BlackRock EatonVance FranklinResources Invesco LeggMason T.RowePrice Ticker BLK EV BEN IVZ LM TROW Rating OP Mkt Mkt Mkt Und Mkt CY2014EPS AstMgmtOps $17.47 $2.67 $11.39 $2.35 $2.51 $4.19 Average Median Price/ AMOEPS 15.8x 14.4x 11.4x 14.8x 11.8x 15.5x 14.0x 14.6x TgtMultiple (2014) 17.2x 15.0x 12.5x 15.5x 11.5x 17.0x 14.8x 15.3x NetCashand Invsts/Share ($0.20) $1.67 $20.54 $0.25 $3.87 $10.70 Target Price $300 $42 $163 $36 $33 $82 Price 6/18/13 $276.49 $40.18 $150.92 $34.54 $33.58 $75.62 Up/Downside w/Dividend 11% 7% 9% 7% 0% 10%
Source: BMO Capital Markets. We tax non-US cash at 35% for BEN and IVZ. Includes net present value ($2.60 per share) of LMs deferred tax asset.
Page 2
June 18, 2013
BMO Capital Markets
May Recap
For our covered companies that report monthly metrics, ending AUM in May was roughly flat month over month. Overall market performance was mixed in May as domestic equity performance greatly outpaced international markets and fixed income returns turned negative with rising interest rates. For domestic equity market performance in May, the S&P 500 increased 2.1% m/m and small-cap equity performance was even better, with the Russell 2000 up 3.9% m/m. For international equity market performance, the MSCI EAFE and MSCI Emerging Markets were -2.9% m/m and -2.6% m/m, respectively. For fixed income, the Barclays US Aggregate Bond index declined 1.8% m/m.
Invesco. We estimate long-term net flows of +$3.1 billion in May, split almost evenly between
active and passive AUM inflows. On the active side, balanced AUM inflows remain solid, driven by its successful IBRA product suite, but money market inflows of $1.3 billion were the largest asset gatherer in the month. We estimate active equity and fixed income had modest inflows as flows there remain volatile month to month. With passive AUM, fixed income had a great month with $1.7 billion of inflows while equity AUM inflows were decent at $700 million.
Franklin. We estimate total net new inflows of +$3.6 billion, owing mostly to robust fixed
income inflows (+$5.2 billion) which continue to dominate the flow picture. Equity AUM flows swung back to material outflows we estimate $2.8 billion. Hybrid AUM inflows were relatively strong at $1.2 billion, which we estimate was the best month of the year.
Legg Mason. We estimate total net inflows of $5 billion, including $1 billion of long-term
AUM inflows and $4 billion of liquidity inflows. Long-term AUM has now had inflows for the second straight month. In May, we estimate flat equity flows and $1.2 billion of fixed income flows.
Exhibit 3: Monthly AUM Recap

May13 EndingAUM($billions) FranklinResources Invesco LeggMason MarketIndices(atmonthend) S&P500 Russell2000 MSCIEAFE MSCIEmergingMarkets BarclaysU.S.AggregateBond EstimatedNetFlows FranklinResources AnnualizedGrowthRate Invesco AnnualizedGrowthRate LeggMason AnnualizedGrowthRate Apr13 May12 M/M Change 0.1% 0.4% 0.2% 2.1% 3.9% 2.9% 2.6% 1.8% Y/Y Change 23.8% 18.9% 4.3% 24.5% 29.2% 27.7% 14.1% 0.9%
846.5 751.8 654.3 1,631 984 1,702 407 1,828 3.6 5% 3.1 5% 1.2 3%
847.5 748.5 655.4 1,598 947 1,754 418 1,861 9.6 14% 5.7 9% 0.9 2%
683.5 632.1 627.4 1,310 762 1,333 357 1,811 (3.7) 6% (3.2) 6% 2.7 6%
Source: Company reports and BMO Capital Markets. BMO estimate calculated from change in ending AUM and backing out assumed market appreciation/depreciation. Long-term AUM, excludes liquidity mandates.
Page 3
June 18, 2013
BMO Capital Markets
BlackRock and T. Rowe Price do not report monthly AUM, but key takeaways from the month, based on available data, are as follows: For BlackRock, the flow picture is challenging to track accurately given the products utilized by its large institutional client base are not captured in the Morningstar data. However, from available ETF data, iShares had a good month with $2.4 billion of inflows. Equity ETFs drove overall flows with $2.6 billion of inflows. Fixed income ETFs had only modest inflows of $450 million. Commodity ETFs had significant outflows in the month, in line with industry trends, at $710 million. BlackRock mutual funds had +$830 million of inflows, which is at the high end of recent levels owing to +$850 million of fixed income inflows. T. Rowe fund flows were lower-than-expected in May, particularly in bond/money market funds. We estimate sponsored equity/balanced mutual fund inflows of $200 million in the month and bond/money market outflows of $125 million.
Recommendations
BlackRock (BLK). We rate BlackRock Outperform with a $300 price target. We believe
passive investments and ETFs will continue to attract above-average asset flows over the next several years, and the company is a leader in managing passive investments, through both its institutional indexed product and its iShares branded ETF line-up. We believe investors should value revenue derived from passive products at a higher multiple than active, given passive assets are stickier and more recurring in nature, in our view. In addition, we expect strong growth from BlackRocks retail business as the company increases its brand recognition through advertising campaigns. BlackRock Solutions, the companys risk management and analytics segment, is a clear differentiator and we believe supports institutional cross selling.
Legg Mason (LM). We rate Legg Mason Underperform with a $33 price target. We believe the
company is not as well positioned to participate in a potential rotation to equities relative to peers, given its high weighting (76%) of AUM in fixed income and liquidity mandates. Legg also has gaps in its product offering, including alternatives and global equities, and we believe it may be difficult acquiring high-performing organizations at a reasonable price in the current environment.
Industry/Company Flow Snapshots

On the following pages we include one-page flow summaries on the industry and our covered companies. Importantly, Morningstars data include only open-end and exchange-traded funds while excluding separate accounts and closed-end funds. Therefore these data represent only a subset of total managed AUM but we believe provide a decent proxy for overall trends.
Page 4
June 18, 2013
BMO Capital Markets
INDUSTRYSNAPSHOT:USREGISTEREDOPENENDMUTUALFUNDS
KeyTakeaway:Equityinflowsremainedpositivewith+$11billionofinflowsbuthavebeenslowingforeachsuccessivemonth
thisyear.Moneymarketfundshadmaterialnetinflowsof+$27billion,recordingnetpurchasesforthefirstmonththisyear.
Exhibit4:EstimatedOpenendNetFundFlowsbyBroadAssetClass
Est.MonthlyNetFlows($B) May13 Apr13 May12 U.S.Stock SectorStock InternationalStock TotalEquity Balanced TaxableBond MunicipalBond TotalFixedIncome Alternative Commodities TotalLongTerm MoneyMarket (1.8) 2.6 10.6 11.4 4.9 21.2 (0.8) 20.4 3.3 (0.2) 39.9 27.2 1.5 2.5 8.5 12.4 4.2 19.4 (1.8) 17.6 3.8 0.5 38.5 (17.9) (2.3) (0.5) 4.0 1.1 1.3 8.4 4.9 13.3 1.5 (0.1) 17.1 1.8 2004 112.9 6.1 67.3 186.4 61.9 18.9 (7.7) 11.2 6.5 4.9 270.8 (83.9) 2005 51.3 8.8 109.7 169.9 48.2 29.9 6.9 36.8 4.5 6.3 265.6 118.6 2006 33.1 6.0 139.2 178.4 28.0 43.0 17.3 60.3 8.5 1.0 276.3 222.7 EstimatedAnnualNetFlows($B) 2007 2008 2009 2010 (6.8) (0.1) 134.6 127.7 45.3 100.9 12.5 113.4 2.8 (1.3) 287.9 327.3 (77.5) (5.1) (63.9) (146.5) (20.5) 35.2 10.4 45.6 2.3 0.3 (118.8) 586.1 (20.1) 5.5 28.5 14.0 4.0 291.6 72.9 364.5 11.0 10.7 404.2 (306.7) (48.1) 7.9 51.8 11.6 15.7 218.4 12.9 231.3 16.3 14.5 289.3 (447.8) 2011 (79.3) 5.4 5.6 (68.2) 17.1 134.5 (11.0) 123.5 15.5 9.7 97.5 (75.6) 2012 (102.2) 2.4 17.5 (82.2) 20.7 266.4 50.1 316.5 14.0 0.7 269.7 22.0 YTD 22.4 15.2 68.3 106.0 24.5 111.0 6.7 117.7 16.5 3.5 268.1 (84.1)
Source: Morningstar Direct. US Open-end mutual funds and money market funds, excluding fund-of-funds.
Exhibit5:EstimatedNetFlowsbyLargestOpenEndFundFamilies
TrailingEst.NetFlows($Mil) 1Mo QTD YTD 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Vanguard FidelityInvestments AmericanFunds PIMCO JPMorgan FranklinTempleton T.RowePrice BlackRock Federated WellsFargoAdvantage 12,174 7,424 (1,130) 2,671 648 4,626 19 5,694 379 4,728 2,261 2,529 990 (469) (64) 21,382 8,004 (3,575) 8,338 (1,358) 8,638 (1,143) 4,802 (6,459) 7,717 4,989 434 1,881 (944) (158) 53,326 1,799 (5,534) 31,238 4,906 15,931 6,359 (4,821) (19,162) 9,896 11,729 1,045 6,907 (1,669) (378) Est.NetFlows($Mil)andOrganicGrowthRate(%) 2012 2011 2010 88,917 1,777 (62,718) 62,659 2,261 18,700 14,867 17,933 (10,306) (4,153) 1,705 (4,550) (3,125) (4,191) (1,338) 6.0% 0.1% 7.2% 13.7% 0.6% 5.4% 5.2% 5.7% 3.4% 2.1% 1.1% 4.0% 5.2% 13.6% 49.8% 49,304 (36,933) (80,382) 28,590 9,406 6,641 10,184 1,245 12,042 (15,205) 2,352 (16,727) (3,179) (1,186) (1,243) 3.5% 2.8% 8.2% 6.9% 2.3% 1.9% 3.6% 0.4% 4.2% 7.3% 1.7% 14.0% 4.8% 3.5% 28.2% 41,137 (29,993) (54,826) 61,215 (48,124) 26,489 11,850 (40,353) (31,371) (6,077) (16,808) (12,504) 9,982 707 (949) 3.4% 2.5% 5.9% 18.8% 10.9% 9.1% 5.1% 11.8% 10.0% 3.4% 11.5% 9.9% 19.5% 2.6% 20.6% MarketShare:TotalNetAssets($Bil) May13 MktSh. May12 MktSh. 1,898 1,467 1,020 591 442 437 383 353 282 218 200 115 75 32 1 15.2% 11.7% 8.2% 4.7% 3.5% 3.5% 3.1% 2.8% 2.3% 1.7% 1.6% 0.9% 0.6% 0.3% 0.0% 1,566 1,274 875 492 409 361 311 320 281 187 162 105 61 30 2 14.4% 11.7% 8.1% 4.5% 3.8% 3.3% 2.9% 2.9% 2.6% 1.7% 1.5% 1.0% 0.6% 0.3% 0.0%
OtherBMOCoveredCompanies: 13. Invesco 21. LeggMason/Western 30. EatonVance 58. LeggMason/Royce 218. LeggMason/Brandywine
Source: Morningstar Direct. US Open-end mutual funds and money market funds, excluding fund-of-funds.
Exhibit6:TrailingOneYearCumulativeAssetFlows
($ billions) 40 20 0 (20) (40) (60) (80) (100) 5/12
Equity
($ billions) 30 25 20 15 10 5 0 (5) 5/12
Balanced
($ billions) 350 300 250 200 150 100 50
FixedIncome
7/12
9/12
11/12
1/13
3/13
5/13
7/12
9/12
11/12
1/13
3/13
5/13
0 5/12 7/12 9/12 11/12 1/13 3/13 5/13
Source: Morningstar Direct. US Open-end mutual funds, excluding money market funds and fund-of-funds.
Page 5
June 18, 2013
BMO Capital Markets
INDUSTRYSNAPSHOT:EXCHANGETRADEDFUNDS(ETFS)
Key Takeaway: Equity ETFs had robust inflows of $21 billion, the best month since January. Commodity ETF outflows remained materialat$4billionasinvestorscontinuetopullmoneyfromthesefundsthisyear.
Exhibit7:EstimatedETFNetFundFlowsbyBroadAssetClass
Est.MonthlyNetFlows($Bil) May13 Apr13 May12 U.S.Stock SectorStock InternationalStock TotalEquity Balanced TaxableBond MunicipalBond TotalFixedIncome Alternative Commodities TotalLongTerm 11.0 4.4 5.9 21.3 0.3 2.7 0.0 2.7 0.7 (3.9) 21.1 3.6 3.4 0.7 7.7 0.3 6.8 0.0 6.8 1.8 (8.2) 8.4 (0.5) 0.1 (3.5) (4.0) 0.1 7.4 0.3 7.8 (0.5) (1.1) 2.2 2004 27.1 6.6 15.0 48.7 0.0 3.5 0.0 3.5 0.0 1.4 52.1 2005 15.2 6.8 22.3 44.2 0.0 6.3 0.0 6.3 0.1 2.8 53.3 2006 13.0 10.1 25.3 48.5 0.0 5.0 0.0 5.0 3.4 8.0 64.9 EstimatedAnnualNetFlows($B) 2007 2008 2009 2010 54.8 19.5 39.8 113.8 0.1 11.7 0.6 11.8 10.0 8.3 143.9 71.1 27.6 13.0 111.3 0.2 17.3 1.6 18.9 18.3 12.3 160.9 (15.8) 18.6 32.5 23.7 0.3 38.1 3.5 39.7 17.5 25.8 108.1 19.6 20.3 38.4 68.4 0.7 25.0 1.1 22.9 6.4 11.5 108.2 2011 29.5 21.1 13.8 49.3 0.7 43.0 0.9 33.3 11.0 0.5 91.8 2012 54.9 27.3 45.9 128.2 0.6 48.4 3.3 51.6 0.8 10.1 191.3 YTD 30.9 23.8 22.6 77.3 1.2 17.2 0.8 18.0 5.1 (18.9) 82.7
Source: Morningstar Direct.
Exhibit8:EstimatedNetFlowsbyLargestFundFamilies
TrailingEst.NetFlows($Mil) 1Mo QTD YTD 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. BlackRock/iShares SPDRSSgA Vanguard Invesco/PowerShares WisdomTree ProShares MarketVectors Guggenheim PIMCO SchwabFunds 2,397 5,882 4,189 1,412 2,757 314 74 638 342 547 6,770 (2,144) 7,709 3,793 4,802 1,680 16 60 1,542 1,046 24,364 (8,559) 27,410 6,468 10,694 3,690 309 1,794 3,552 2,697 60,694 39,953 52,745 8,189 4,749 725 4,348 859 4,887 2,884 Est.NetFlows($Mil)andOrganicGrowthRate(%) 2012 2011 2010 13.6% 15.0% 30.9% 18.4% 39.1% 3.1% 18.4% 8.3% 122.4% 57.3% 29,506 16,056 36,160 4,961 3,951 5,860 8,766 578 1,739 2,629 6.6% 6.5% 24.4% 12.0% 40.1% 24.9% 43.8% 5.4% 80.2% 96.6% 30,885 19,115 40,895 3,123 3,240 3,238 3,873 1,732 1,703 2,201 8.3% 9.7% 44.8% 9.4% 54.9% 13.3% 30.9% 21.4% 358.9% 637.4% MarketShare:TotalNetAssets($Bil) May13 MktSh. May12 MktSh. 607 345 288 71 30 25 24 15 13 12 40.4% 22.9% 19.2% 4.7% 2.0% 1.6% 1.6% 1.0% 0.8% 0.8% 468 278 197 51 15 22 23 11 6 6 41.4% 24.5% 17.4% 4.5% 1.3% 2.0% 2.1% 0.9% 0.5% 0.6%
Source: Morningstar Direct for net cash flows.
Exhibit9:TrailingOneYearCumulativeAssetFlows
($ billions) 200 180 160 140 120 100 80 60 40 20 0 5/12 7/12 9/12 11/12 1/13 3/13 5/13 0.2 (0.2) (0.6) 5/12 0.6
TotalEquity
($ billions) 1.8 1.4 1.0
Balanced
($ billions) 50 45 40 35 30 25 20 15 10 5 0 5/12 7/12
TotalFixedIncome
7/12
9/12
11/12
1/13
3/13
5/13
9/12
11/12
1/13
3/13
5/13
Page 6
June 18, 2013
BMO Capital Markets
COMPANYSNAPSHOT:BLACKROCK(BLK)
Key Takeaway: The company continues to see strong growth through iShares, which had +$2.4 billion of inflows. However, equity ETF inflows of $2.6 billion were up only modestly from $1.9 billion last month despite the material increase in industry flows.
Exhibit10:EstimatedOpenend/ExchangetradedNetFundFlowsbyBroadAssetClass(AUManalyzedis~25%oftotalAUM)
Est.MonthlyNetFlows($Mil) May13 Apr13 May12 U.S.Stock SectorStock InternationalStock TotalEquity Balanced TaxableBond MunicipalBond TotalFixedIncome Alternative Commodities TotalLongTerm MoneyMarket 24 852 1,191 2,067 581 1,262 40 1,302 6 (710) 3,246 4,860 2,097 194 (630) 1,661 217 4,115 65 4,179 25 (955) 5,128 (1,647) (1,431) (379) (2,947) (4,757) 3 4,809 264 5,073 28 (166) 182 4,751 2004 19.8 4.2 15.3 39.3 0.8 3.6 0.0 3.6 0.0 0.0 43.6 (29.0) 2005 11.2 2.9 21.3 35.4 0.8 6.1 (0.5) 5.6 0.0 0.3 42.1 (9.8) 2006 16.7 3.1 21.0 40.7 1.7 5.1 (0.0) 5.1 0.0 2.1 49.6 22.2 EstimatedAnnualNetFlows($B) 2007 2008 2009 2010 13.6 3.4 26.1 43.1 3.4 9.5 3.7 13.2 0.0 1.2 60.8 (7.2) 24.6 4.4 2.7 31.6 6.7 11.6 0.2 11.8 0.0 1.6 51.7 16.1 (3.0) 4.5 14.5 16.0 6.1 27.2 3.3 30.5 0.0 2.8 55.4 20.0 8.6 2.6 7.8 19.1 8.6 11.3 4.3 15.6 0.1 2.7 46.1 (55.8) 2011 7.3 1.1 1.4 9.7 4.5 22.4 2.8 25.2 0.0 1.1 40.6 (9.9) 2012 12.0 6.8 38.1 56.9 (1.2) 22.1 2.7 24.8 0.4 3.3 84.2 14.6 YTD 12.8 4.4 5.1 22.3 1.4 5.6 0.4 6.1 0.1 (1.3) 28.6 (9.1)
Exhibit11:FundPerformanceandNetFlowsof10LargestActivelyManagedFunds
Top10FundsbyAssets: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) BlackRockGlobalAllocation BlackRockEquityDividend BGFGlobalAllocationQ2USD BlackRockHighYieldBond BGFWorldMining BlackRockStrategicIncome BlackRockASFGlobalCorpBd BGFUSDHighYieldBond BlackRockNationalMunicipal BGFEuropeanA2EUR FundType Allocation Equity Allocation FixedIncome Equity FixedIncome FixedIncome FixedIncome TaxPreferred Equity Morningstar Rating AUM %ofTotal ($B) LTAUM $55 29 15 11 8 6 6 5 5 5 1% 1% 0% 0% 0% 0% 0% 0% 0% 0% PerformanceRankvs.PeerGroupPercentile 3Mo 1Yr 3Yr 5Yr 10Yr 26 96 26 32 90 16 49 21 41 13 48 96 39 28 77 24 37 37 46 24 73 65 53 21 84 19 11 31 19 23 61 69 49 17 84 50 NA 32 10 7 22 16 14 10 23 NA NA 100 7 10 3Mo (223) 332 429 431 (481) 1,348 290 660 (51) 57 EstimatedNetFlows($MM) 1Yr 3Yr 5Yr (3,667) 3,370 831 2,536 (1,153) 2,749 NA 2,219 491 1,039 5,386 13,657 591 6,105 (1,719) 5,438 NA 4,308 1,272 2,235 18,067 18,678 9,735 6,352 2,016 5,603 NA 5,331 1,611 6,703 10Yr 32,513 21,229 NA 6,785 NA NA NA NA 1,991 NA
Source: Morningstar Direct. As of 5/31/2013. Excludes money market funds and fund-of-funds. This is the funds total-return percentile rank relative to all funds that have the same Morningstar category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100.
Exhibit12:NetNewAssetGrowthRatesbyCalendarYearTotalManagedAssets
15%
Total(Long term)
8.8% 7.0%
25% 20% 15% 18.2%
Equity
15% 10% 6.1% 5%
FixedIncome
6.3% 2.5% 0.4% 3.8% 1.8%
10%
5% 1.8% 2.2% 0.1% 0% 0.3% 5%
3.3% 3.6%
10% 6.0% 5% 0.2% 0% 5% 0.1% 1.4% 3.5% 3.5% 2.8%
0% 1.3% 5% 5.4% 10% CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E
CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E
Source: Company reports and BMO Capital Markets estimates.
Page 7
June 18, 2013
BMO Capital Markets
COMPANYSNAPSHOT:EATONVANCE(EV)
Key Takeaway: Fund flows had another solid month as trends remain favorable yeartodate. Its fixed income funds (floating ratefundsinparticular)remainthemainassetgathererandequityfundshavenotbeentheAUMdragtheywerelastyear.
Est.MonthlyNetFlows($Mil) May13 Apr13 May12 U.S.Stock SectorStock InternationalStock TotalEquity Balanced TaxableBond MunicipalBond TotalFixedIncome Alternative Commodities TotalLongTerm MoneyMarket (148) (0) 155 7 9 964 (112) 852 123 (24) 968 22 (191) (2) 146 (48) 4 892 (89) 803 116 22 897 (7) (1,899) (7) 2 (1,904) 2 233 20 253 24 (7) (1,632) (5) 2004 (0.3) 0.1 0.2 (0.0) 0.0 1.9 0.5 2.4 0.0 0.0 2.4 (0.0) 2005 0.1 (0.2) 0.6 0.6 0.0 (0.3) 0.7 0.4 0.0 0.0 1.0 (0.0) 2006 1.3 (0.5) 1.5 2.3 0.0 (0.3) 2.7 2.3 0.0 0.0 4.6 0.0 EstimatedAnnualNetFlows($B) 2007 2008 2009 2010 2.8 (0.5) 1.2 3.5 0.0 (2.3) 2.3 (0.1) 0.0 0.0 3.5 0.1 7.7 (0.2) (0.0) 7.4 0.0 (1.9) (0.4) (2.3) 0.0 0.0 5.2 (0.1) 3.1 (0.3) 0.5 3.2 0.0 1.2 0.1 1.3 0.2 0.0 4.7 (0.1) (0.3) (0.2) 1.0 0.5 0.0 10.5 (1.3) 9.2 0.0 0.2 9.9 0.0 2011 (4.4) (0.1) 0.8 (3.7) 0.0 1.8 (1.3) 0.5 (0.1) 0.1 (3.1) (0.1) 2012 (6.6) (0.1) 0.4 (6.3) 0.1 2.7 0.1 2.8 0.1 0.1 (3.2) (0.1) YTD (0.3) (0.0) 0.8 0.5 0.0 5.8 (0.3) 5.5 0.6 0.3 6.9 (0.0)
Exhibit14:FundPerformanceandNetFlowsofTenLargestActivelyManagedFunds
Morningstar Rating AUM %ofTotal ($B) AUM $12 8 7 5 5 5 4 4 3 2 5% 3% 3% 2% 2% 2% 2% 2% 1% 1% PerformanceRankvs.PeerGroupPercentile 3Mo 1Yr 3Yr 5Yr 10Yr 62 33 65 45 100 75 44 34 31 75 73 56 66 34 5 44 76 43 35 75 67 88 84 21 50 8 51 49 29 71 38 93 76 8 96 1 48 36 20 60 49 43 29 19 67 1 21 NA 9 72 NetFlows($MM) 3Yr 5Yr 6,838 (12,006) 2,901 3,510 (2,089) 3,068 1,000 2,372 958 939 7,599 (3,939) 6,729 3,069 (2,779) 3,429 1,318 3,132 1,481 723
Top10FundsbyAssets: (1) (2) (3) (5) (4) (6) (7) (8) (9) (10) EVFloatingRate EVLargeCapValue EVGlblMacrAbsoluteReturn EVFloatingRateAdvantage EVNationalMunicipalIncome EVAtlantaCapitalSMIDCap EVIncomeFundofBoston ParametricEmergingMkts ParametricTaxMgdEmergMkt EVFloatingRate&HighInc
FundType FixedIncome Equity FixedIncome FixedIncome TaxPreferred Equity FixedIncome Equity Equity FixedIncome
3Mo 1,739 (567) 270 1,112 (189) 259 (379) 484 132 181
1Yr
10Yr 9,067 4,304 NA 1,726 1,173 3,447 1,354 NA NA 877
3,764 (2,824) 159 2,427 (272) 1,326 159 1,209 285 695
20% 15.3% 15% 11.0% 10% 9.5% 9.4% 5.4% 5% 0.5% 0% CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E 3.5%
Total
30% 25% 20% 15% 10% 5% 4.1% 0% 5% 10% 15% 9.2% 22.0%
Equity
20% 15% 10%
FixedIncome
12.0% 11.6% 5.8%
0.2% 0.1% 1.2%
0.7% 1.6%
5% 0%
1.9%
2.9%
2.6%
3.6%
9.6% CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E 5%
0.9% CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E
Page 8
June 18, 2013
BMO Capital Markets
COMPANYSNAPSHOT:FRANKLINRESOURCES(BEN)
Key Takeaway: Longterm inflows were good again in May owing to robust asset gathering in fixed income funds. Equity flows returnedtopositiveterritory(+$75million)aftertwomonthsofoutflows.
Exhibit16.EstimatedOpenend/ExchangetradedNetFundFlowsbyBroadAssetClass(AUManalyzedis~52%oftotalAUM)
Est.MonthlyNetFlows($Mil) May13 Apr13 May12 U.S.Stock SectorStock InternationalStock TotalEquity Balanced TaxableBond MunicipalBond TotalFixedIncome Alternative TotalLongTerm MoneyMarket 103 (161) 132 75 793 1,550 (276) 1,274 (14) 2,128 340 124 (14) (284) (174) 799 1,408 (175) 1,233 (12) 1,846 2,167 85 (2) (318) (234) 371 374 509 883 (13) 1,007 500 2004 0.6 (0.0) 3.4 3.9 8.4 (0.1) (2.6) (2.7) 0.0 9.6 0.6 2005 0.3 0.1 4.2 4.6 9.0 (0.1) 0.5 0.4 (0.0) 14.0 (0.6) 2006 0.8 (0.2) 0.3 0.9 6.2 0.4 0.5 0.8 0.2 8.2 0.1 EstimatedAnnualNetFlows($B) 2007 2008 2009 2010 1.2 (0.5) (3.5) (2.9) 8.0 4.0 1.3 5.2 0.0 10.5 (0.4) (5.5) (0.1) (14.3) (19.9) (5.1) 4.3 1.8 6.1 0.2 (18.7) 3.0 (3.0) 0.2 (1.7) (4.5) 1.3 17.1 5.3 22.4 (0.1) 19.1 (1.9) (1.2) 1.0 (3.5) (3.7) 1.4 21.9 1.7 23.6 (0.1) 21.3 5.2 2011 (0.1) 0.6 (5.7) (5.2) 1.0 17.5 (3.9) 13.6 0.2 9.7 (3.1) 2012 (1.1) 0.0 (5.7) (6.7) 4.1 7.1 5.0 12.1 (0.1) 9.4 9.3 YTD 0.5 (0.2) (0.1) 0.1 3.5 8.7 (0.1) 8.5 (0.1) 12.1 1.7
Top10FundsbyAssets: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) FranklinIncome TempletonGlobalBond TempletonGlobalBondMDis TempletonGlblTotalReturn MutualGlobalDiscovery TempletonAsianGrowth TempletonGrowth MutualShares FranklinCATaxFreeIncome FranklinFederalTaxFreeInc FundType Allocation FixedIncome FixedIncome FixedIncome Equity Equity Equity Equity TaxPreferred TaxPreferred Morningstar Rating AUM %of ($B) AUM $78 73 49 41 21 17 16 15 15 12 9% 9% 6% 5% 3% 2% 2% 2% 2% 1% PerformanceRankvs.PeerGroupPercentile 3Mo 1Yr 3Yr 5Yr 10Yr 2 15 27 17 18 97 11 74 46 38 1 3 6 2 26 86 2 58 46 48 4 12 13 3 58 33 18 84 52 40 26 1 6 2 7 18 53 63 41 39 2 1 1 NA 9 9 78 51 14 17 3Mo 1,668 2,597 2,827 8,109 111 (315) 1,660 (265) (95) (61) EstimatedNetFlows($MM) 1Yr 3Yr 5Yr 5,080 7,265 3,736 13,326 (783) (645) 155 (1,622) (180) 486 10,587 30,856 17,335 27,472 (875) 4,569 (4,315) (4,905) (1,744) (86) 9,089 50,658 30,261 32,093 317 6,866 (10,505) (8,582) (2,233) 2,217 10Yr 42,943 59,881 NA NA 8,140 NA (3,496) 679 (3,669) 1,756
15% 10% 5% 0% 5% 4.9% 10% CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E 10% 8.4% CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E 5% 3.4% 3.8% 3.5% 7.5%
Total
10.6% 6.5% 2.6% 2.0% 6.3% 3.6%
10%
Equity
3.8% 2.4% 1.2% 0.5%
40% 35%
FixedIncome
32.6% 25.9%
5%
30% 25% 20% 15% 10% 5% 0% 3.0% 15.3%
0%
14.1% 6.3%
12.6% 5.4%
Page 9
June 18, 2013
BMO Capital Markets
COMPANYSNAPSHOT:INVESCO(IVZ)
KeyTakeaway:TotallongtermflowsweresolidinMaywithmutualfundinflows (+$300million)andETFinflows(+$1.4billion). Within mutual funds, balanced mandates continue to be the main asset gatherers owing to the strength of its Balanced Risk Allocation Fund though equity mutual funds had relatively strong inflows (+$180 million) as flows remain volatile monthto month.
Est.MonthlyNetFlows($Mil) May13 Apr13 May12 U.S.Stock SectorStock InternationalStock TotalEquity Balanced TaxableBond MunicipalBond TotalFixedIncome Alternative Commodities TotalLongTerm MoneyMarket 476 149 278 903 323 785 (338) 446 16 0 1,688 1,982 1,226 24 183 1,432 340 1,073 (135) 937 1 0 2,710 2,400 (936) (211) (74) (1,221) 370 260 163 424 24 0 (403) (1,517) 2004 (5.0) (1.9) (0.0) (7.0) 2.3 (1.5) (0.2) (1.7) 0.0 0.0 (6.4) (7.9) 2005 (2.1) 0.9 0.5 (0.7) 2.3 (1.2) (0.4) (1.5) 0.0 0.0 0.1 (0.6) 2006 (7.4) 2.0 1.1 (4.3) 0.8 (0.9) (0.5) (1.4) 0.0 0.0 (4.9) 3.5 EstimatedAnnualNetFlows($B) 2007 2008 2009 2010 (4.2) 1.5 2.6 (0.2) 0.2 0.1 (0.3) (0.2) 0.0 0.0 (0.2) 4.9 (8.8) 0.8 (2.2) (10.3) (3.0) (0.5) 0.6 0.1 0.1 0.1 (13.0) 5.7 (3.5) 1.3 1.0 (1.1) (1.8) 0.2 2.8 3.0 0.1 (0.0) 0.2 (4.2) (1.8) 0.8 1.2 0.3 (0.9) 1.5 (1.5) 0.0 (0.0) (0.1) (0.7) (13.3) 2011 2.3 (0.3) (1.1) 0.9 1.1 0.3 (1.4) (1.1) (0.0) (0.0) 0.8 6.3 2012 (0.6) (0.1) 0.4 (0.3) 6.1 3.3 1.1 4.4 10.6 0.0 20.7 (0.3) YTD 1.3 0.8 1.5 3.6 2.2 3.5 (0.4) 3.1 0.2 0.0 9.1 9.1
Exhibit20:FundPerformanceandNetFlowsofTenLargestActivelyManagedFunds
Top10FundsbyAssets: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) IPHighIncomeInc IPIncomeInc InvescoBalancedRiskAllc InvescoEquityandIncome InvescoComstock IPCorporateBondAcc InvescoGrowthandInc InvescoDiversifiedDividend InvescoHighYieldMuni InvescoInternationalGrowth FundType Equity Equity Allocation Allocation Equity FixedIncome Equity Equity TaxPreferred Equity Morningstar Rating AUM %ofTotal ($B) LTAUM $21 16 14 11 10 9 8 7 7 6 3% 2% 2% 2% 1% 1% 1% 1% 1% 1% PerformanceRankvs.PeerGroupPercentile 3Mo 1Yr 3Yr 5Yr 10Yr 5 3 70 2 9 54 32 78 31 71 61 61 77 2 9 8 38 58 37 73 16 21 25 13 13 50 56 52 26 52 26 32 NA 9 9 26 24 7 33 31 1 3 NA 15 33 11 31 18 19 32 3Mo (73) (298) 1,181 (177) (36) (381) 87 521 (490) 168 EstimatedNetFlows($MM) 1Yr 3Yr 5Yr (631) (631) 7,068 (1,227) (970) (996) (701) 1,023 (105) 508 (860) (622) 12,583 (4,500) (2,285) (1,741) (1,380) 2,415 (1,097) 1,022 353 1,401 NA (9,343) (6,657) 1,796 (2,866) 2,393 (1,191) 1,191 10Yr NA NA NA (2,776) (4,326) NA (311) 1,971 (425) 1,656
10%
Total
4.6% 3.1% 1.2% 1.9% 4.6%
10% 5.3% 5% 3.7% 0%
Equity
2.9% 1.5%
25% 20% 2.3% 15% 10%
FixedIncome
17.8% 10.4% 10.4%
5%
8.8% 6.0% 4.9%
0% 0.7% 5% 5% 5.7% 4.4% CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E 10% 4.5%
2.7% 2.0%
5% 0% 5% 10% 1.3%
8.0% CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E
Page 10
June 18, 2013
BMO Capital Markets
COMPANYSNAPSHOT:LEGGMASON(LM)
KeyTakeaway:Aftertwomonthsofinflowstostarttheyear,flowswerenegativeforthethirdconsecutivemonthinMay.Fixed incomeinflowshavebeenrelativelyunchanged,withtheweaknessinequityflowsdraggingdownthetotal.
Est.MonthlyNetFlows($Mil) May13 Apr13 May12 U.S.Stock SectorStock InternationalStock TotalEquity Balanced TaxableBond MunicipalBond TotalFixedIncome Alternative TotalLongTerm MoneyMarket (480) 4 (14) (490) 3 105 (47) 58 0 (429) 2,424 (496) 3 (6) (498) (2) 114 (74) 40 0 (461) (2,203) (723) (0) (14) (738) (2) 140 123 263 0 (477) 1,215 2004 7.2 (0.0) 0.0 7.2 (0.0) 1.6 (0.5) 1.2 0.0 8.3 0.6 2005 1.3 (0.0) 0.1 1.3 (0.1) 1.5 (0.7) 0.8 0.0 2.1 (2.6) 2006 0.7 0.0 0.6 1.3 (0.1) 3.4 (0.2) 3.2 0.0 4.5 1.6 EstimatedAnnualNetFlows($B) 2007 2008 2009 2010 (8.2) (0.0) 0.2 (8.0) (0.0) 4.4 (0.5) 3.9 0.0 (4.2) 3.4 (10.9) 0.0 0.1 (10.8) (0.0) (8.1) 1.4 (6.7) 0.0 (17.6) 1.8 (3.2) (0.0) (0.0) (3.3) (0.0) (4.6) 2.7 (1.9) 0.0 (5.1) (20.0) (4.8) (0.0) (0.1) (4.9) 0.0 (3.0) 2.1 (1.0) 0.0 (5.9) (10.2) 2011 (5.7) (0.0) 0.1 (5.6) 0.1 0.4 (1.3) (1.0) 0.0 (6.4) (30.8) 2012 (7.4) (0.0) (0.3) (7.7) (0.0) 3.0 1.2 4.3 0.0 (3.5) (6.6) YTD (2.0) 0.0 (0.0) (2.1) (0.0) 0.6 (0.0) 0.6 0.0 (1.5) 0.5
Top10FundsbyAssets: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) WesternAssetCorePlusBond ClearBridgeAggressiveGr RoycePremierInvmt RoycePennsylvaniaMutualInvmt WesternAssetManagedMunicipals RoyceTotalReturnInvmt ClearBridgeAppreciation ClearBridgeEquityIncBldr RoyceSpecialEquityInvmt LeggMasonGlobalOpportunitiesBond FundType FixedIncome Equity Equity Equity TaxPreferred Equity Equity Equity Equity FixedIncome Morningstar Rating AUM ($B) $10 7 7 7 6 5 5 5 3 3 %ofTotal LTAUM 2% 1% 1% 1% 1% 1% 1% 1% 0% 0% PerformanceRankvs.PeerGroupPercentile 3Mo 1Yr 3Yr 5Yr 10Yr 38 1 88 86 20 84 78 96 77 28 31 1 75 40 26 59 73 90 84 11 19 1 74 83 21 60 44 34 68 1 8 8 32 61 12 57 32 54 5 9 7 27 3 24 4 55 34 67 33 NA 3Mo (86) 48 (372) (80) (141) (9) 24 (20) (15) 268 1Yr NetFlows($MM) 3Yr 5Yr 752 (751) (1,201) (1,022) (859) (870) (935) 982 765 2,578 (6,576) (2,362) (331) 147 707 (1,399) (1,595) 210 1,717 2,713 10Yr 4,581 (3,607) 1,297 2,484 (16) (167) (3,001) (118) 1,477 NA
498 333 (1,039) (569) (61) (381) (100) (169) 32 1,560
10% 5% 0.7% 0% 5% 10% 15% 20% 13.5% 16.4% CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E 9.3% 2.4% 4.7% 0.3% 10% 15% 20% 25% CY08 CY09 CY10 CY11 CY12 CY13E CY14E 17.0% 15.0%
Total
1.0%
5% 0% 5% 5.5%
Equity
1.0%
5% 0%
FixedIncome
0.6%
1.0%
3.2% 9.6% 14.9%
5% 10% 10.5% 15% 20% 20.4% 25% CY08 CY09 CY10 CY11 14.0% 6.3%
3.8%
CY12
CY13E CY14E
Page 11
June 18, 2013
BMO Capital Markets
COMPANYSNAPSHOT:T.ROWEPRICE(TROW)
Key Takeaway: T. Rowe Price had outflows for the second straight month as equity outflows persisted from net redemptions in USstockfundsandfixedincomehadararemonthofoutflowsinthetaxablebondcategory.
Est.MonthlyNetFlows($Mil) May13 Apr13 May12 U.S.Stock SectorStock InternationalStock TotalEquity Balanced TaxableBond MunicipalBond TotalFixedIncome TotalLongTerm MoneyMarket (499) (9) 303 (205) 262 (334) 78 (256) (200) 219 (1,540) 5 197 (1,338) 43 10 133 144 (1,151) (11) 1,552 71 1,104 2,726 62 (462) 127 (335) 2,453 23 2004 10.5 0.2 (0.5) 10.2 1.5 0.9 0.0 0.9 12.7 0.1 2005 7.1 0.2 2.0 9.3 2.5 (0.2) 0.2 0.1 11.9 0.5 2006 4.2 0.5 2.9 7.6 1.0 2.2 0.4 2.7 11.2 0.6 EstimatedAnnualNetFlows($B) 2007 2008 2009 2010 7.9 0.9 4.6 13.3 1.1 4.0 0.1 4.1 18.6 1.4 0.0 0.0 2.0 2.0 (0.9) 1.3 0.2 1.6 2.7 1.9 3.1 0.5 1.5 5.1 0.0 7.8 1.8 9.6 14.7 (2.3) 5.4 (0.8) 0.2 4.9 0.2 5.7 1.5 7.2 12.2 (0.4) 2011 2.0 (0.2) 3.8 5.7 0.0 4.1 (0.1) 4.0 9.6 0.6 2012 2.9 0.9 4.0 7.8 0.8 5.1 1.5 6.6 15.2 (0.3) YTD 0.5 0.3 2.3 3.1 0.8 1.8 0.6 2.4 6.2 0.1
Top10FundsbyAssets: (1) TRPGrowthStock (2) TRPEquityIncome (3) TRPNewIncome (4) TRPMidCapGrowth (5) TRPBlueChipGrowth (6) TRPCapitalAppreciation (7) TRPValue (8) TRPNewHorizons (9) TRPInternationalStock (10) TRPMidCapValue FundType Equity Equity FixedIncome Equity Equity Balanced Equity Equity Equity Equity Morningstar Rating AUM %of ($B) Total $35 27 22 21 18 16 16 12 11 10 6% 4% 4% 3% 3% 3% 3% 2% 2% 2% Perf.RankMorningstarCategoryPercentile 3Mo 39 69 65 28 29 14 17 25 80 81 1Yr 62 46 59 34 46 13 5 45 63 30 3Yr 21 48 67 25 9 6 14 1 62 75 5Yr 25 29 49 15 18 2 16 1 49 26 10Yr 24 39 34 8 29 1 11 2 63 18 3Mo (206) (475) 68 (334) 98 622 (322) 246 219 (122) NetFlows($MM) 1Yr 915 (1,460) 3,800 (1,199) 945 1,121 (656) 655 1,349 (629) 3Yr 1,458 156 8,222 (4,702) 1,207 1,731 (302) 891 3,388 (1,380) 5Yr 403 (766) 10,451 (3,700) 900 1,674 2,144 329 3,437 (334) 10Yr 16,298 1,808 15,024 (2,901) 3,670 6,859 7,524 164 1,597 3,170
15%
Total(MFsandOther)
10.1%
6%
Equity(MFs)
4.1% 4.1% 3.6% 3.1% 3.9% 3.9%
20% 16.6%
FixedIncome (MFs)
10%
8.2%
7.7%
4%
15% 12.2% 10% 9.1% 6.6% 6.3% 6.5% 8.1%
5%
4.3% 2.9%
3.5% 1.5%
3.8%
2% 0.4% 0% 5%
0% CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E
0% CY08 CY09 CY10 CY11 CY12 CY13E CY14E CY08 CY09 CY10 CY11 CY12 CY13E CY14E
Page 12
June 18, 2013
BMO Capital Markets
AGGREGATEINVESTMENTPERFORMANCEANALYSISASSETWEIGHTED
Exhibit28:BlackRockAUManalyzedis~10%oftotalAUM
% Assets top half of peer group 100% 75% 50% 25% 4Q07 2Q08 4Q08 2Q09 1 YrRolling 4Q09 2Q10 3 YrRolling 4Q10 2Q11 4Q11 2Q12 4Q12
5 YrRolling
Source: Morningstar Direct. Rolling window on 3-month moving step. Includes only actively managed OE mutual funds, excluding other investment types.
Exhibit29:EatonVanceAUManalyzedis~35%oftotalAUM
% Assets top half of peer group
100% 75% 50% 25% 0% 4Q07 2Q08 4Q08 2Q09 1 YrRolling 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12
3 YrRolling
5 YrRolling
Exhibit30:FranklinTempletonAUManalyzedis~75%oftotalAUM
% Assets top half of peer group
100% 75% 50% 25% 0% 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12
1 YrRolling
3 YrRolling
5 YrRolling
Page 13
June 18, 2013
BMO Capital Markets
Exhibit31:InvescoAUManalyzedis~35%oftotalAUM
% Assets top half of peer group 100% 75% 50% 25% 0% 4Q07 2Q08 4Q08 2Q09 1 YrRolling 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12
3 YrRolling
5 YrRolling
Exhibit32:LeggMasonAUManalyzedis~20%oftotalAUM
5 YrRolling
Exhibit33:T.RowePriceAUManalyzedis~70%oftotalAUM
5 YrRolling
Page 14
June 18, 2013
BMO Capital Markets
Exhibit 34: Apollo Global Management Financial Model

Apollo Global Management - Summary Financial Model
($ in millions, except unit and per unit data) GAAP Earnings per Common Unit Fee Related Earnings (FRE), pre-tax - Diluted Performance Related Earnings - Diluted Economic Net Income (ENI) - Diluted Est. Distributable Earnings (DE), pre-tax - Diluted Distribution to Common Unit 1Q12 $0.66 $0.09 $0.98 $1.10 $0.32 $0.25 2Q12 ($0.38) $0.18 ($0.04) $0.05 $0.29 $0.24 3Q12 $0.55 $0.14 $0.87 $0.98 $0.49 $0.40 4Q12 $1.21 $0.17 $1.54 $1.69 $1.15 $1.05 1Q13 $1.60 $0.17 $1.77 $1.89 $0.72 $0.57 2Q13E $0.44 $0.19 $0.41 $0.57 $0.87 $0.65 3Q13E $0.44 $0.20 $0.37 $0.53 $0.57 $0.43 4Q13E $0.47 $0.22 $0.40 $0.57 $0.58 $0.44 % Change Y/Y Q/Q (218) 3 NM NM 199 172 (72) 11 (77) (70) 20 15 2011 ($4.18) $0.21 ($0.95) ($0.87) $1.29 $1.12 2012 $2.06 $0.58 $3.34 $3.82 $2.24 $1.94 2013E $2.82 $0.77 $2.95 $3.55 $2.74 $2.08 2014E $2.28 $0.97 $1.97 $2.75 $2.33 $1.74 12/11 (149) 181 (451) (542) 74 73 % Change 13E/12 14E/13E 37 34 (12) (7) 22 7 (19) 26 (33) (23) (15) (16)
COMBINEDSEGMENTRESULTS(NonGAAP)
Advisory and transaction fees from affiliates Management fees from affiliates Total carried interest income (loss) Carried interest income from affiliates: Realized Gains Total revenues Total compensation expenses Total profit sharing expense Incentive fee compensation Total non-compensation expenses Total expenses Other income (loss) Non-controlling interest Total Economic Net Income (Loss) Income Tax Rate on Economic Net Income Total Economic Net Income (Loss) After Taxes Fee-Related Earnings, pre-tax (BMO Estimate) Net Realized Performance Fees Realized Investment Income Distributable Earnings, pre-tax (BMO Estimate) Total distribution to common units - Calculated Weighted Avg. Class A Shares - Diluted AOG Units Vested RSUs Non-GAAP Weighted Avg. Shares - Diluted 27.3 130.0 624.1 9.6 791.0 84.0 249.1 53.4 386.5 58.9 (1.4) 462.0 8.6% 422.3 48.8 79.1 13.6 141.5 31.3 125.3 240.0 18.4 383.6 640 801 425 738 $2.93 86,126 38,398 36,465 8,263 59,571 27,653 28,207 3,711 0.89% 984 12% 7,396 70.0 156.4 3.2 9.2 238.8 89.0 19.9 69.3 178.2 (16.2) (2.4) 42.0 55.5% 18.7 81.3 25.3 37.2 143.8 30.3 126.5 240.0 19.6 386.0 620 446 637 738 $2.49 104,893 38,228 56,108 7,861 77,449 27,754 45,509 4,186 1.05% 1,657 22% 6,647 15.2 160.2 574.0 9.7 759.1 81.3 237.4 0.4 59.1 378.2 55.3 (2.7) 433.5 12.6% 379.0 65.9 117.1 31.2 214.2 51.6 129.0 240.0 18.0 386.9 752 464 802 738 $3.30 109,702 38,983 60,107 8,129 77,676 28,146 45,302 4,228 0.83% 78 1% 7,105 37.5 176.4 962.3 9.3 1,185.5 89.2 365.1 0.3 74.9 529.5 43.1 (2.2) 696.9 5.9% 655.8 78.4 330.3 70.6 479.3 136.5 130.0 240.0 18.2 388.3 946 444 1,021 738 $4.26 113,379 37,832 64,406 8,800 81,934 27,932 49,518 4,484 0.91% 472 7% 7,464 47.4 164.3 1,116.6 9.0 1,337.3 90.8 423.6 67.6 582.0 40.6 (3.5) 792.4 6.4% 741.3 79.3 194.4 41.2 314.9 74.8 131.2 240.0 20.8 392.1 899 475 1,434 738 $5.26 114,269 39,205 63,535 9,412 81,633 27,868 48,488 5,277 0.80% 1,190 16% 6,315 51.5 170.2 319.7 10.0 551.4 95.2 157.3 68.8 321.2 33.5 (2.5) 261.3 14.4% 223.7 87.5 272.1 17.5 377.0 94.7 145.0 227.9 21.1 394.0 985 483 1,220 738 $4.94 117,248 42,854 62,878 9,399 85,996 32,788 47,914 5,294 0.83% 51.5 181.6 257.5 10.0 500.6 99.4 110.4 70.8 280.7 30.7 (2.5) 248.0 15.5% 209.7 93.0 152.2 15.5 260.7 67.7 158.7 215.7 21.1 395.5 1,041 489 1,239 738 $5.13 116,451 41,846 63,102 9,386 85,713 32,387 48,015 5,312 0.84% 51.5 220.8 271.1 10.0 553.4 116.0 112.9 86.7 315.6 30.9 (2.5) 266.2 15.4% 225.2 101.5 152.2 15.7 269.4 69.7 160.2 215.7 21.1 397.0 1,099 496 1,264 738 $5.33 120,608 43,780 65,337 9,373 90,292 34,847 50,116 5,329 1.03% (26) 9 NM 9 131 7 690 NM (1) 80 (307) 4 522 1,096 8 975 (53) 162 212 15 (5) 8 2 59 8 92 (0) 98 12 12 12 20 11 18 5 26 9 4 (71) 11 (59) 5 (63) NM 2 (45) (17) (29) (67) (70) 10 40 (57) 20 27 11 (5) 1 0 10 2 (15) 0 (6) 3 9 (1) (0) 5 18 (1) 0 82.3 490.2 (442.0) 44.5 175.0 319.3 (63.6) 3.4 224.0 483.1 19.7 (12.1) (300.5) -7.0% (321.6) 128.4 337.6 64.8 530.9 131.9 116.4 240.0 15.4 371.7 739 516 739 $1.34 75,222 35,384 31,867 7,971 58,121 28,031 26,553 3,537 1.04% 3,350 32% 8,204 150.0 623.0 2,163.6 37.8 2,974.4 343.5 871.5 0.7 256.7 1,472.4 141.1 (8.7) 1,634.4 9.7% 1,475.8 274.4 551.8 152.6 978.9 249.8 127.7 240.0 18.5 386.2 946 444 1,021 738 $4.26 113,379 37,832 64,406 8,800 81,934 27,932 49,518 4,484 1.07% 3,191 39% 7,464 201.9 736.9 1,964.9 39.0 2,942.7 401.4 804.2 293.9 1,499.4 135.7 (11.0) 1,567.9 10.7% 1,399.9 361.3 770.9 89.9 1,222.0 307.0 148.8 224.8 21.0 394.7 1,099 496 1,264 738 $5.33 120,608 43,780 65,337 9,373 90,292 34,847 50,116 5,329 0.90% 206.0 962.9 1,342.7 40.0 2,551.6 484.0 514.4 341.2 1,339.6 158.2 (10.0) 1,360.2 14.9% 1,158.1 465.2 557.1 87.0 1,109.2 279.5 160.2 240.0 21.1 421.3 1,333 533 1,567 738 $6.67 131,198 44,697 75,062 9,323 100,521 36,602 58,520 5,399 1.07% (5) (9) (100) (100) NM NM 82 27 (590) (15) 1,600 8 (1,470) (79) 15 205 616 (28) (644) (559) 114 63 135 84 89 10 0 20 4 28 NM 98 (0) 217 51 7 102 10 41 (0) 86 27 35 18 (9) 3 (1) 17 (8) (100) 15 2 (4) 26 (4) (5) 32 40 (41) 25 23 17 (6) 14 2 16 12 24 0 25 6 16 1 7 10 25 1 19 2 31 (32) 3 (13) 21 (36) NM 16 (11) 17 (9) (13) (17) 29 (28) (3) (9) (9) 8 7 0 7 21 8 24 0 25 9 2 15 (1) 11 5 17 1
BALANCESHEETDATA:
Cash and cash equivalents Investments Carried interest receivable, net Borrowings Net Cash, Investments, Performance Fees/Unit
AUM&CARRIEDINTERESTDATA:
Total Assets Under Management (EOP) Private Equity Credit Real Estate Fee-generating Assets Under Management (EOP) Private Equity Credit Real Estate Base Management Fees/Average FPAUM Private equity dollars invested % of Uncalled PE commitments Uncalled private equity commitments (Dry Powder) Estimated Fund Performance Private Equity Credit Real Estate Carried Interest Roll Forward Carried Interest Receivable (BOP) Change in fair value of funds/subadvisory income Fund cash distributions to the Company Carried Interest Receivable (EOP) Distributions/Carried Interest Receivable (BOP)
18% 12% -
2% 1% -
7% 13% -
14% 5% 0%
21% 8% 0% 1,878.3 1,091.9 (419.0) 2,551.2 22%
5% 3% 3% 2,551.2 319.7 (405.6) 2,465.3 16%
4% 3% 3% 2,465.3 257.5 (220.4) 2,502.4 9%
4% 3% 3% 2,502.4 271.1 (220.4) 2,553.0 9%
86 168 84 89 -
36 (71) (3) (3) -
1,867.1 (304.5) (692.6) 868.6 37%
48% 34% 0% 868.6 2,056.0 (1,082.4) 1,878.3 125%
36% 19% 8% 1,878.3 1,940.2 (1,265.4) 2,553.0 67%
15% 14% 10% 2,553.0 1,342.7 (730.2) 3,165.5 29%
(53) (775) 56 116 -
116 (6) 17 36 -
36 (31) (42) 24 -
868.6 1,369.8 1,302.8 1,627.9 570.1 119.5 561.6 804.8 (70.5) (221.0) (236.5) (554.5) 1,369.8 1,302.8 1,627.9 1,878.3 8% 16% 18% 34%
Page 15
June 18, 2013
BMO Capital Markets
Exhibit 35: BlackRock Financial Model

BlackRock, Inc. - Summary Financial Model
($ millions, except share and per share data) EPS (GAAP) - Diluted EPS (Adjusted) - Diluted EPS - Asset Management Operations Dividends per share 1Q12 $3.14 $3.16 $3.07 $1.50 2Q12 $3.08 $3.10 $3.27 $1.50 3Q12 $3.65 $3.47 $3.61 $1.50 4Q12 $3.93 $3.96 $3.97 $1.50 1Q13 $3.62 $3.65 $3.65 $1.68 2Q13E $3.78 $3.80 $3.85 $1.68 3Q13E $3.89 $3.92 $3.99 $1.68 4Q13E $4.30 $4.33 $4.40 $1.68 % Change Y/Y Q/Q 22 23 17 12 4 4 5 0 2011 $12.37 $11.85 $12.84 $5.50 2012 $13.79 $13.67 $13.91 $6.00 2013E $15.59 $15.70 $15.88 $6.72 2014E $17.09 $17.20 $17.47 $7.26 12/11 11 15 8 9 % Change 13E/12 13 15 14 12 14E/13E 10 10 10 8
INCOMESTATEMENT
Invsmt advisory, admin fees and securities lending Investment advisory performance fees BlackRock Solutions and advisory Distribution fees Other revenue Total Revenue Employee compensation and benefits General and administation Other expenses Total Expenses Operating Income Total non-operating investment income (loss) Pretax Net Income Tax Rate Aftertax Net Income Net Income Available to common shares (GAAP) Shares outstanding (EOP) Weighted avg shares outstanding - Diluted Adjusted Data Operating income, as adjusted Revenue used for operating margin measurement Net income attributable to BlackRock, adjusted Financial Ratios Operating Margin - Adjusted Operating Margin - GAAP Comp. and Benefits/Total Revenue ROE 1,977 80 123 19 50 2,249 825 307 302 1,434 815 23 838 31.4% 575 571 179 182 825 2,138 575 38.6% 36.2% 37.0% 9.0% 2.6 2.0 4.8 ($1.60) 1,744 0.7% 11.1% 26 bp 1,244 -6.2% 0.8% 14 bp 247 8.5% 6.6% 41 bp 110 5.1% 3.3% 63 bp 3,345 -1.3% 6.4% 23 bp 242 -23.5% 0.3% 14 bp 98 -76.1% -0.3% 3,684 -5.5% 5.7% 22 bp 1,990 41 131 20 47 2,229 786 324 290 1,400 829 (40) 789 29.0% 560 554 173 180 832 2,122 558 39.2% 37.2% 35.6% 8.9% 3.6 1.9 6.3 ($4.69) 1,643 -0.5% -5.2% 25 bp 1,266 1.8% 1.7% 14 bp 243 7.1% -2.0% 39 bp 104 -15.1% -2.4% 61 bp 3,255 0.4% -2.3% 23 bp 239 -2.5% 0.2% 15 bp 65 -129.7% 0.0% 3,560 -3.2% -2.1% 22 bp 2,024 103 128 19 46 2,320 828 327 290 1,445 875 30 905 27.6% 655 641 172 175 876 2,213 610 39.6% 37.7% 36.0% 10.2% 4.2 1.9 6.3 ($1.16) 1,774 5.3% 5.9% 25 bp 1,234 -20.7% 1.7% 15 bp 258 4.3% 4.1% 38 bp 113 -7.5% 4.8% 60 bp 3,378 -5.3% 4.1% 23 bp 248 11.8% 0.1% 15 bp 47 -119.2% -0.4% 3,673 -6.2% 3.8% 23 bp 2,081 239 136 13 70 2,539 848 401 285 1,534 1,005 (67) 938 30.7% 650 689 171 175 1,041 2,445 695 42.6% 39.6% 33.6% 10.8% 4.6 1.8 5.8 $3.32 1,846 7.0% 2.5% 24 bp 1,259 4.0% 1.2% 16 bp 268 6.3% 2.1% 36 bp 110 -2.4% -2.0% 58 bp 3,482 5.6% 1.8% 23 bp 264 23.2% 0.1% 15 bp 45 -5.5% -0.5% 3,792 6.6% 1.7% 22 bp 2,129 108 126 17 69 2,449 905 331 304 1,540 909 41 950 29.9% 666 632 171 175 939 2,346 637 40.0% 37.1% 37.2% 9.9% 3.9 1.7 5.7 ($0.20) 1,993 7.3% 7.5% 24 bp 1,246 -0.8% 0.9% 16 bp 284 13.5% 4.2% 36 bp 108 -2.5% -0.1% 61 bp 3,629 4.5% 4.6% 23 bp 261 0.3% 0.0% 13 bp 46 7.8% -0.1% 3,936 4.3% 4.2% 22 bp 2,221 80 140 18 52 2,511 874 354 313 1,541 971 (0) 970 31.0% 670 658 171 174 981 2,398 662 40.9% 38.6% 35.1% 10.0% 3.9 1.7 5.7 ($0.20) 2,070 1.6% 3.5% 24 bp 1,259 2.6% 0.4% 16 bp 296 9.0% 2.3% 37 bp 111 1.5% 2.5% 61 bp 3,736 2.5% 2.3% 23 bp 262 1.0% 0.0% 14 bp 45 -10.0% 0.3% 4,042 2.2% 2.1% 22 bp 2,279 100 145 19 52 2,595 901 366 322 1,589 1,006 (21) 985 31.0% 680 677 171 174 1,013 2,479 682 40.9% 38.8% 35.0% 10.1% 3.9 1.7 5.7 ($0.20) 2,123 2.1% 2.0% 24 bp 1,277 2.6% 0.8% 15 bp 308 9.0% 1.5% 37 bp 114 1.5% 2.5% 61 bp 3,821 2.8% 1.6% 23 bp 263 1.0% 0.0% 14 bp 44 -10.0% 0.3% 4,127 2.6% 1.5% 22 bp 2,361 195 200 19 52 2,827 981 399 337 1,716 1,111 (21) 1,089 31.0% 752 750 171 174 1,118 2,700 755 41.4% 39.3% 34.9% 10.9% 3.9 1.7 5.7 ($0.20) 2,177 2.2% 2.0% 24 bp 1,296 2.7% 0.8% 16 bp 319 9.0% 1.5% 37 bp 117 1.0% 2.5% 61 bp 3,908 2.9% 1.6% 23 bp 263 1.0% 0.0% 14 bp 43 -10.0% 0.3% 4,215 2.6% 1.5% 22 bp 12 95 7 (8) 11 13 11 9 8 10 17 (100) 23 7 20 19 (1) (3) 18 13 19 10 (9) (10) (96) 26 4 (26) 11 8 (25) 3 (3) 7 3 0 7 (100) 2 4 1 4 0 (0) 4 2 4 0 0 0 (0) 7,896 371 510 100 204 9,081 3,199 1,447 1,186 5,832 3,249 (114) 3,135 25.4% 2,339 2,315 178 187 3,421 8,614 2,239 39.7% 35.8% 35.6% 9.2% 3.5 1.6 4.8 $1.95 1,560 1.4% -7.6% 26 bp 1,248 0.4% 8.8% 14 bp 225 23.0% -0.2% 44 bp 105 -3.4% -1.2% 65 bp 3,138 2.2% -0.9% 24 bp 255 -8.2% 0.0% 14 bp 120 -19.8% 1.0% 3,513 0.4% -0.8% 22 bp 8,072 463 518 71 213 9,337 3,287 1,359 1,167 5,813 3,524 (54) 3,470 29.7% 2,440 2,456 171 178 3,574 8,918 2,438 40.1% 37.7% 35.5% 9.6% 4.6 1.8 5.8 $3.32 1,846 3.5% 14.3% 25 bp 1,259 -5.4% 5.4% 15 bp 268 7.0% 11.1% 39 bp 110 -5.2% 3.4% 61 bp 3,482 -0.1% 10.2% 23 bp 264 2.0% 0.8% 14 bp 45 -62.1% -0.7% 3,792 -2.0% 9.1% 22 bp 8,990 483 611 74 225 10,383 3,661 1,450 1,276 6,386 3,997 (2) 3,995 30.7% 2,767 2,717 171 174 4,051 9,923 2,736 40.8% 38.5% 35.5% 9.9% 3.9 1.7 5.7 ($0.20) 2,177 3.5% 15.8% 24 bp 1,296 1.8% 2.9% 15 bp 319 10.8% 10.0% 37 bp 117 0.4% 7.5% 60 bp 3,908 3.3% 10.4% 23 bp 263 0.8% 0.1% 14 bp 43 -5.4% 0.6% 4,215 3.0% 9.6% 22 bp 9,976 510 665 82 208 11,441 4,005 1,613 1,406 7,024 4,417 (79) 4,338 31.0% 2,993 2,982 172 174 4,445 10,910 3,001 40.7% 38.6% 35.3% 9.9% 3.9 1.7 5.7 ($0.20) 2,420 2.8% 8.3% 24 bp 1,387 3.8% 3.3% 16 bp 369 9.2% 6.4% 37 bp 131 1.3% 10.4% 61 bp 4,307 3.6% 6.6% 23 bp 266 1.0% 0.0% 14 bp 39 -9.7% 1.0% 4,612 3.3% 6.1% 23 bp 2 25 2 (29) 4 3 3 (6) (2) (0) 8 (53) 11 17 4 6 (4) (5) 4 4 9 31 7 21 71 18 (2) bp 1 1 bp 19 (5) bp 5 (3) bp 11 (1) bp 4 (0) bp (62) 8 (0) bp 11 4 18 4 6 11 11 7 9 10 13 (96) 15 4 13 11 0 (2) 13 11 12 (14) (2) (2) (106) 18 (1) bp 3 1 bp 19 (2) bp 7 (1) bp 12 0 bp (0) (0) bp (6) 11 0 bp 11 6 9 11 (8) 10 9 11 10 10 11 3,976 9 1 8 10 0 0 10 10 10 0 0 0 (0) 11 (0) bp 7 0 bp 16 (0) bp 12 1 bp 10 0 bp 1 0 bp (9) 9 0 bp
BALANCESHEETDATA($B)
Cash and cash equivalents Investments Total Borrowings Net Cash and Investments/Share
AUM($B)ANDFEEDATA
EQUITY - Ending AUM
Net new asset growth (annualized) Market G/L (sequential) Investment Advisory Fee Rate (annualized) 4 (1) bp (0) bp (1) 1 1 bp (0) bp 22 (2) bp 7 5 1 bp
FIXED INCOME - Ending AUM Net new asset growth (% annualized) Market G/L (sequential %) Investment Advisory Fee Rate (annualized) MULTI-ASSET CLASS - Ending AUM Net new asset growth (% annualized) Market G/L (sequential %) Investment Advisory Fee Rate (annualized) ALTERNATIVES - Ending AUM
Net new asset growth (% annualized) Market G/L (sequential %) Investment Advisory Fee Rate (annualized)
3 0 bp (0) bp 15 0 bp 9 (1) bp (31) 14 0 bp 3 0 bp 0 1 bp (2) 3 0 bp
LONG-TERM - Ending AUM Net new asset growth (% annualized) Market G/L (%) Investment Advisory Fee Rate (annualized) CASH MANAGEMENT - Ending AUM Net new asset growth (% annualized) Market G/L (sequential %) Investment Advisory Fee Rate (annualized) ADVISORY - Ending AUM
Net new asset growth (% annualized) Market G/L (sequential %)
TOTAL- Ending AUM

Net new asset growth (% annualized) Market G/L (sequential %) Investment Advisory Fee Rate (annualized)
Page 16
June 18, 2013
BMO Capital Markets
Exhibit 36: Blackstone Financial Model

Blackstone Group L.P. - Summary Financial Model
($ in millions, except unit and per unit data) Economic Net Income (ENI) - Diluted Fee-Related Earnings (FRE) - Diluted FRE, after-tax estimate - Diluted Performance FRE, pre-tax - Diluted Distributable Earnings (DE) - Diluted Distributable Earnings per Common Unit Distribution to Common Unit 1Q12 $0.44 $0.13 $0.10 $0.25 $0.14 $0.15 $0.10 505 386 83 974 255 110 110 474 500 1.8% 491 147 1 6 23 (6) (9) 0 162 46% (0) 75 507 1,120 1,110 190,074 47,624 48,323 43,351 50,776 156,261 37,324 36,647 40,544 41,747 1.02% 2,720 643 1,144 5 928 4.9 4.0 4.0 4.6 54% 28% 30% 51% 2Q12 $0.19 $0.13 $0.10 $0.08 $0.18 $0.16 $0.10 526 135 (16) 644 269 41 113 423 222 4.2% 212 146 6 48 9 (1) (20) 10 199 47% (10) 84 529 1,120 1,120 413 807 132 2,013 1,756 1,000 $3.67 190,268 46,634 50,226 42,889 50,519 157,647 37,159 38,476 40,161 41,850 0.98% 2,404 103 1,855 446 (4.2) 2.9 (1.2) (0.8) 57% 30% 27% 34% 3Q12 $0.55 $0.12 $0.09 $0.36 $0.18 $0.15 $0.10 509 603 107 1,220 260 200 127 587 633 1.8% 622 135 7 62 25 (8) (31) 20 210 48% (20) 80 545 1,134 1,131 834 1,274 143 2,053 2,049 1,635 $4.16 204,552 50,222 53,546 46,219 54,565 168,630 38,505 40,609 43,602 45,914 0.98% 3,085 1,016 1,343 196 531 7.1 4.9 3.3 6.1 5.0 57% 33% 26% 52% 4Q12 $0.59 $0.24 $0.18 $0.27 $0.49 $0.39 $0.42 647 470 112 1,229 248 164 131 543 686 2.3% 670 273 147 116 37 (6) (73) 61 555 51% (61) 220 554 1,138 1,135 710 1,407 135 2,186 2,238 1,635 8,479 $4.41 210,220 51,003 56,696 46,093 56,429 167,880 37,050 41,931 43,479 45,420 0.99% 5,690 1,462 3,877 352 7.0 3.7 2.2 3.8 5.1 45% 35% 43% 56% 1Q13 $0.55 $0.12 $0.09 $0.32 $0.33 $0.33 $0.30 521 604 135 1,260 267 240 114 621 638 1.6% 628 138 14 205 38 (4) (12) 2 381 51% (2) 191 582 1,143 1,140 815 1,255 142 2,220 2,261 1,635 8,769 $4.42 218,211 52,492 59,475 48,188 58,056 170,949 36,786 42,141 45,585 46,438 0.96% 1,784 277 1,176 56 276 7.9 6.3 4.4 6.1 5.8 56% 40% 30% 51% 2Q13E $0.52 $0.17 $0.13 $0.30 $0.30 $0.29 $0.25 568 491 73 1,132 262 149 118 530 602 2.2% 588 192 85 78 12 (5) (25) 10 347 51% (10) 167 578 1,130 1,128 815 1,255 142 2,220 2,752 1,635 9,070 $4.85 223,999 54,579 61,607 45,647 62,165 177,704 37,691 43,076 47,809 49,128 0.98% 2,600 900 1,200 500 3.5 3.5 2.8 2.6 3.1 50% 30% 33% 53% 3Q13E $0.55 $0.18 $0.14 $0.32 $0.32 $0.31 $0.27 583 514 73 1,171 262 156 121 539 631 2.2% 617 205 90 82 12 (5) (25) 10 369 52% (10) 181 588 1,130 1,129 815 1,255 142 2,220 3,266 1,635 9,381 $5.30 235,109 56,739 63,813 48,175 66,382 184,523 38,596 44,011 50,098 51,818 0.98% 2,600 900 1,200 500 3.5 3.5 2.8 2.6 3.1 49% 30% 34% 54% 4Q13E $0.56 $0.19 $0.14 $0.33 $0.33 $0.32 $0.28 599 532 73 1,204 267 161 124 553 652 2.2% 637 213 93 86 12 (5) (25) 10 383 53% (10) 192 598 1,130 1,130 815 1,255 142 2,220 3,798 1,635 9,699 $5.77 246,554 58,975 66,096 50,774 70,708 191,409 39,501 44,946 52,454 54,508 0.98% 2,600 900 1,200 500 3.5 3.5 2.8 2.6 3.1 48% 30% 35% 54% 15 10 23 11 14 9 (1) 15 12 11 (34) (57) 3 (70) % Change Y/Y Q/Q 25 (7) (8) 29 130 129 200 3 57 62 29 5 119 4 31 28 28 (6) 135 157 15 2 3 (7) (45) (50) 18 (31) (14) (29) (19) 28 21 3 8 47 (13) 14 (7) (6) (49) (31) (13) 5 0 0 4 3 5 5 3 2 (1) 0 5 2 (69) (81) (70) (22) 2011 $1.37 $0.49 $0.37 $0.77 $0.65 $0.58 $0.52 1,924 1,175 185 3,284 961 317 421 1,699 1,585 2.9% 1,539 546 33 95 103 (6) (75) 30 727 44% (30) 288 476 1,126 1,106 755 7,189 166,229 45,864 42,853 40,535 36,977 136,757 37,238 31,237 37,820 30,463 0.99% 13,530 3,849 6,141 889 2,650 5.2 19.9 (0.6) 9.0 58% 27% 30% 48% 2012 $1.77 $0.62 $0.47 $0.96 $0.99 $0.81 $0.72 2,187 1,594 286 4,067 1,031 514 481 2,026 2,041 2.2% 1,995 700 161 231 95 (22) (132) 92 1,126 49% (92) 459 534 1,129 1,124 710 1,407 135 2,186 2,238 1,635 8,479 $4.41 210,220 51,003 56,696 46,093 56,429 167,880 37,050 41,931 43,479 45,420 0.99% 13,899 3,224 8,218 201 2,256 14.3 14.4 8.6 13.4 53% 32% 32% 50% 2013E $2.18 $0.66 $0.50 $1.27 $1.29 $1.21 $1.11 2,271 2,141 354 4,766 1,059 706 479 2,243 2,523 2.0% 2,472 747 52 451 73 (19) (87) 32 1,249 61% (32) 732 587 1,133 1,132 815 1,255 142 2,220 3,798 1,635 9,699 $5.77 246,554 58,975 66,096 50,774 70,708 191,409 39,501 44,946 52,454 54,508 0.98% 9,584 2,977 4,776 56 1,776 19.6 17.9 13.4 14.6 15.3 51% 33% 33% 53% 2014E $2.55 $0.77 $0.58 $1.58 $1.49 $1.41 $1.28 2,548 2,532 303 5,383 1,166 748 527 2,441 2,942 2.2% 2,877 875 54 424 48 (20) (100) 40 1,321 72% (40) 910 623 1,130 1,133 815 1,255 142 2,220 6,330 1,635 11,124 $7.98 293,792 69,151 75,636 61,918 87,086 217,766 43,121 48,686 62,591 63,368 0.97% 10,400 3,600 4,800 2,000 14.8 14.8 11.7 10.8 12.8 49% 30% 34% 55% 26 11 32 14 53 23 (1) 34 15 49 3 (16) 34 (15) 12/11 29 28 26 24 52 39 38 14 36 55 24 7 62 14 19 29 30 28 387 142 (7) 261 77 204 55 204 60 12 0 2 17 16 17 10 25 14 7 7 21 20 (31) (8) (42) (21) % Change 13E/12 14E/13E 23 6 6 32 30 50 54 4 34 24 17 3 37 (1) 11 24 24 7 (68) 95 (24) (14) (34) (65) 11 (65) 60 10 0 1 19 17 14 22 23 14 9 8 19 16 9 21 1 13 17 17 17 25 15 17 16 12 18 (15) 13 10 6 10 9 17 16 17 3 (6) (34) 6 15 24 6 24 24 6 (0) 0 -
Total Fee Revenues Total Performance Fees Total Investment Income (Loss) Total Revenues Base Compensation Total Performance Related Compensation Other Operating Expenses Total Expenses Pre-Tax ENI Tax Rate After-Tax ENI Fee Related Earnings, pre-tax Net Realized Incentive Fees Net Realized Carried Interest Realized Investment Income (Loss) Adj. to Realized Invst Inc. - BX's Cash Mgmt Strategies Taxes and related payables Other payables attributable to common Distributable Earnings before certain payables % to Common Unitholder Less: Other Payables Attributable to Common Distributable Earnings Attributable to Common Avg. GAAP Common Units Avg. Economic Net Income Adusted Units - Diluted Avg. Distributable Earnings Adj. Units - Diluted
BALANCESHEETDATA(ReportableSegment):
Cash and Cash Equivalents Treasury Cash Management Strategies Liquid Investments Illiquid Investments Net Performance Fees Total Borrowings Economic Shareholders Equity Net Cash, Investments, Performance Fees/Unit
AUMDATAANDOTHER:
Total Assets Under Management (EOP) Corporate Private Equity Real Estate Hedge Fund Solutions Credit Businesses Fee-Earning Assets Under Mgt. (EOP) Corporate Private Equity Real Estate Hedge Fund Solutions Credit Businesses Fund Management Fees/Fee-Earning AUM Limited Partner Capital Deployed Corporate Private Equity Real Estate Hedge Fund Solutions Credit Businesses Fund Performance (%) Return on Private Equity Investments Return on Real Estate Investments Return on Hedge Fund Solutions Return on Credit Businesses Return on On-Balance Sheet Investments Financial Ratios: Direct base compensation/Fund Mgmt Fee Revenue Performance compensation/Performance Fees FRE - Operating Margin (segment data) ENI - Operating Margin (segment data)
Page 17
June 18, 2013
BMO Capital Markets
Exhibit 37: Carlyle Financial Model

Carlyle Group L.P. - Summary Financial Model
($ millions, except unit and per unit data) Economic Net Income (ENI) - Diluted Unit Fee-related Earnings (FRE) - Diluted Unit FRE, after-tax estimate - Diluted Performance FRE, pre-tax - Diluted Distributable Earnings (DE) - Diluted Distributable Earnings per Common Unit Distribution to Common Unit 1Q12 $1.10 $0.13 $0.10 $1.16 $0.60 $0.57 2Q12 ($0.19) $0.12 $0.09 ($0.36) $0.33 $0.32 $0.11 3Q12 $0.66 $0.15 $0.11 $0.53 $0.64 $0.63 $0.16 4Q12 $0.47 $0.17 $0.13 $0.42 $0.56 $0.49 $0.85 1Q13 $1.02 $0.12 $0.09 $1.13 $0.50 $0.47 $0.16 2Q13E $0.50 $0.12 $0.09 $0.46 $0.31 $0.28 $0.16 3Q13E $0.51 $0.13 $0.10 $0.47 $0.60 $0.57 $0.16 4Q13E $0.64 $0.15 $0.11 $0.59 $0.65 $0.61 $1.06 % Change Yr./Yr. Qtr./Qtr. (363) 2 2 (229) (6) (10) 45 (51) 8 8 (59) (37) (39) 0 2011 $2.46 $0.40 $0.30 $2.07 2012 $2.04 $0.55 $0.43 $1.76 $2.13 $2.00 $1.12 2013E $2.67 $0.52 $0.39 $2.66 $2.06 $1.93 $1.54 2014E $2.90 $0.78 $0.59 $2.55 $2.74 $2.51 $2.01 12/11 (17) 38 (15) % Change 13E/12 31 (6) 51 (3) (4) 38 14E/13E 9 50 (4) 33 30 30
Fee revenue Performance fees Investment income Interest and other income Total Revenues Base compensation Performance related compensation Other expenses Total expenses Pre-tax Economic Net Income Tax Rate After-Tax Economic Net Income Fee Related Earnings, pre-tax Realized Net Performance Fees Realized Investment Income Distributable Earnings, pre-tax Less: Estimated foreign, state, and local taxes % to Common Unitholder Less: Estimated current corporate income taxes Distributable Earnings to common units Weighted average common units - GAAP Total Adjusted Units 236.1 598.5 7.1 2.6 844.3 134.3 243.7 70.4 448.4 399.6 15.9% 336.1 38.9 149.4 0.8 189.1 3% 10% 5% 17.4 34.7 306.3 159,222 53,264 32,242 28,292 45,424 116,998 37,833 22,848 26,803 29,514 0.77% 2.0 1.5 2.5 39.9 8% 12% 11% 245.7 (195.8) 14.0 2.5 66.4 142.6 (85.9) 70.1 126.8 (58.9) 2.0% (57.7) 37.0 75.7 4.0 116.7 13% 14% 6% 13.7 36.2 304.5 450 217 1,178 500 4.41 156,158 52,524 30,004 29,046 44,584 111,973 37,129 19,528 27,740 27,576 0.84% 3.9 1.4 3.0 40.0 -2% 3% -3% 245.7 325.4 8.4 4.4 583.9 131.4 160.8 73.2 365.4 218.5 6.8% 203.6 45.5 156.2 4.6 206.3 5% 14% 3% 27.1 46.9 307.7 769 216 1,189 500 5.44 157,365 53,171 29,483 30,131 44,580 115,124 36,947 19,571 28,450 30,156 0.81% 3.4 1.6 5.1 39.4 5% 2% 0% 265.2 239.9 (4.2) 4.2 505.1 155.4 108.0 53.4 322.9 182.2 20.1% 145.6 54.5 127.4 5.6 187.5 7% 14% 15% 21.1 48.9 311.8 567 310 1,200 886 3.82 170,156 53,338 40,194 32,542 44,082 123,121 33,840 29,305 31,034 28,942 0.81% 4.6 3.3 6.8 43.9 5% 1% 1% 255.1 591.6 3.0 2.4 852.1 144.2 236.9 70.8 458.2 393.9 18.9% 319.6 36.2 141.5 (9.3) 168.4 7% 15% 8% 21.6 51.1 313.9 570 291 1,437 923 4.38 176,313 55,119 40,340 33,088 47,766 122,904 33,195 29,419 31,436 28,854 0.78% 4.9 2.5 4.1 46.2 9% 9% 3% 258.4 217.5 8.2 2.6 486.7 137.2 71.9 84.8 293.9 192.8 18.8% 156.6 39.0 66.1 3.3 108.3 9% 14% 10% 12.6 51.1 313.9 618 296 1,487 923 4.71 181,321 57,951 41,166 34,005 48,199 125,690 33,235 29,629 32,683 30,143 0.78% 4.3 2.8 2.4 4% 3% 4% 262.4 226.2 8.4 2.6 499.5 138.6 78.1 85.6 302.3 197.2 19.2% 159.4 40.7 154.4 3.3 198.5 5% 14% 5% 25.7 51.1 313.9 756 301 1,472 923 5.12 183,881 58,633 41,777 34,826 48,645 136,261 41,135 29,779 33,914 31,433 0.73% 3.3 3.3 4.0 4% 3% 4% 292.2 288.8 9.1 2.6 592.7 151.7 103.3 95.7 350.7 242.0 17.0% 201.0 47.4 164.5 3.7 215.6 5% 15% 6% 28.1 51.1 313.9 627 306 1,486 923 4.77 187,371 60,342 42,273 35,652 49,104 140,699 42,935 29,889 35,150 32,724 0.79% 4.3 3.8 4.2 4% 3% 4% 5 (211) (41) 4 633 (4) (184) 21 132 (427) (371) 5 (13) (18) (7) (8) 41 3 16 10 37 17 8 12 (10) 52 18 9 1 (63) 174 8 (43) (5) (70) 20 (36) (51) (51) 8 (53) (135) (36) (42) 0 0 3 5 2 3 1 2 0 1 4 4 946.2 1,106.2 81.4 15.5 2,149.3 507.8 475.8 332.6 1,316.2 833.1 10.0% 750.1 121.3 677.5 65.6 864.4 0% 0% 0% 33.1 304.5 146,969 51,065 30,672 24,513 40,719 111,025 37,996 22,172 23,186 27,671 0.78% 6.7 11.3 18.8 37.5 16% 9% 16% 992.7 968.0 25.3 13.7 1,999.7 563.7 426.6 267.1 1,263.5 736.2 14.8% 627.6 169.5 508.7 15.0 693.2 5% 13% 7% 79.3 42.5 307.6 567 310 1,200 886 3.87 170,156 53,338 40,194 32,542 44,082 123,121 33,840 29,305 31,034 28,942 0.77% 13.9 7.8 17.4 43.9 17% 19% 9% 1,068.1 1,324.0 28.7 10.2 2,431.0 571.7 490.2 336.9 1,405.2 1,025.8 18.5% 836.5 163.3 526.5 1.0 690.8 6% 15% 7% 88.0 51.1 313.9 627 306 1,486 923 4.77 187,371 60,342 42,273 35,652 49,104 140,699 42,935 29,889 35,150 32,724 0.72% 16.8 12.4 14.7 21% 17% 14% 1,226.8 1,240.9 57.5 10.4 2,535.6 637.7 440.7 354.1 1,432.5 1,103.1 17.5% 910.0 245.4 653.5 23.0 921.9 7% 16% 9% 122.2 51.1 313.9 858 341 1,588 923 5.94 198,030 63,546 45,194 38,206 51,084 150,751 42,535 30,329 39,984 37,903 0.78% 13.2 14.8 17.6 15% 10% 15% 5 (12) (69) (12) (7) 11 (10) (20) (4) (12) (16) 40 (25) (77) (20) 29 1 16 4 31 33 8 11 (11) 32 34 5 8 37 14 (26) 22 1 15 26 11 39 33 (4) 3 (93) (0) 11 20 2 10 13 5 10 11 14 27 2 13 13 9 50 24 2232 33 39 0 0 6 5 7 7 4 7 (1) 1 14 16 15 (6) 100 2 4 12 (10) 5 2 8 -
Cash and cash equivalents Investments attributable to unitholders Accrued performance fees - Net Total Borrowings Net Cash, Investments, Performance Fees/Unit
AUMDATA:
Total Assets Under Management (EOP) Corporate Private Equity Real Assets Global Market Strategies Fund of funds solutions Fee Earning Assets Under Management (EOP) Corporate Private Equity Real Assets Global Market Strategies Fund of funds solutions Fund Management Fees/Fee-Earning AUM Funds Raised ($B) Equity Invested ($B) Realized Proceeds [Distributions] ($B) Available Capital ["Dry Powder"] ($B) Carry Fund Appreciation/Depreciation Corporate Private Equity Global Market Strategies Real Assets
Page 18
June 18, 2013
BMO Capital Markets
Exhibit 38: Eaton Vance Financial Model

Eaton Vance Corp. - Financial Model ($ in millions)
Fiscal Year (ending October 31) Apprx. Calendar Year (ending January 31) GAAP EPS - Diluted Adjusted EPS - Diluted EPS - Asset Management Operations Dividends per share 2Q12 1Q12 $0.44 $0.45 $0.53 $0.19 3Q12 2Q12 $0.43 $0.43 $0.52 $0.19 4Q12 3Q12 $0.45 $0.53 $0.59 $0.20 1Q13 4Q12 $0.38 $0.50 $0.49 $1.20 2Q13 1Q13 $0.50 $0.52 $0.54 $0.18 3Q13E 2Q13E $0.54 $0.56 $0.59 $0.20 4Q13E 3Q13E $0.54 $0.57 $0.61 $0.22 1Q14E 4Q13E $0.55 $0.59 $0.63 $0.22 2Q14E 1Q14E $0.58 $0.59 $0.62 $0.22 3Q14E 2Q14E $0.62 $0.63 $0.66 $0.22 4Q14E 3Q14E $0.62 $0.65 $0.68 $0.23 1Q15E 4Q14E $0.64 $0.66 $0.70 $0.23 % Change Y/Y Q/Q 28 30 13 5 9 9 8 11 2012 $1.72 $1.89 $2.16 $0.77 Fiscal 2013E $1.96 $2.15 $2.23 $1.80 2014E $2.38 $2.45 $2.59 $0.89 2012 $1.70 $1.89 $2.14 $1.78 Calendar 2013E 2014E $2.13 $2.24 $2.37 $0.82 $2.46 $2.53 $2.67 $0.90 % Change - Fiscal 12/11 13E/12 14E/13E (2) (6) 6 5 14 14 3 134 21 14 16 (51)
INCOMESTATEMENT
Investment advisory and administration fees Distribution and underwriter fees Service fees Other revenue Total Revenue Employee Compensation Distribution expense Service fee expense Other expenses Total Expenses Operating Income Non-Operating Investment Income (Loss) Pretax Net Income Tax Rate Equity in Net Income of Affiliates, net of Tax After-tax Net Income Non-Controlling and Other beneficial interests Net income available to participating restricted shares Net Income Available to Common Shares Non-controlling interest value adjustments Closed-end fund structuring fees Adjusted Net Income Available to Common Shares Shares (EOP) Weighted avg shares outstanding - Diluted Financial Ratios Operating Margin - GAAP Operating Margin - Adjusted Comp. and Benefits/Total Net Revenue ROE 248.9 22.6 32.1 1.3 304.8 97.6 33.0 28.1 47.3 206.0 98.8 (0.9) 98.0 35.9% (0.0) 62.8 (9.9) 1.5 51.3 1.1 52.4 116 116 244.7 22.1 30.8 1.3 298.8 94.7 32.7 28.2 48.2 203.8 95.0 1.9 96.9 35.5% 0.2 62.7 (12.5) 1.4 48.8 0.8 49.6 115 115 255.1 22.3 31.2 1.3 309.9 96.4 33.0 28.6 45.6 203.5 106.3 4.0 110.3 34.1% 1.8 74.4 (21.3) 1.4 51.8 9.9 61.6 116 116 263.3 22.8 31.1 1.4 318.5 108.8 33.9 28.3 46.9 217.8 100.7 (5.8) 94.9 37.9% 3.2 62.1 (12.3) 4.6 45.2 10.6 59.4 120 119 276.9 22.2 31.1 1.5 331.7 110.0 35.3 29.2 49.1 223.6 108.1 (2.2) 105.9 36.1% 3.4 71.1 (7.4) 2.1 61.6 0.7 1.7 63.9 123 123 300.0 25.5 33.5 1.3 360.3 119.9 38.2 31.7 53.0 242.8 117.5 (1.0) 116.5 36.3% 3.0 77.2 (7.8) 2.2 67.2 1.0 1.5 69.7 124 123 310.9 26.5 34.8 1.3 373.5 124.3 39.6 32.9 54.9 251.6 121.9 (1.9) 120.0 36.3% 3.0 79.5 (10.8) 2.2 66.5 4.0 70.5 124 124 321.0 27.4 36.0 1.3 385.6 128.3 40.9 33.9 56.7 259.8 125.9 (1.9) 124.0 36.3% 3.0 82.0 (10.8) 2.4 68.8 4.0 72.8 125 124 320.4 27.4 36.0 1.3 385.1 128.0 40.4 33.9 56.6 259.0 126.1 (1.9) 124.3 36.3% 3.5 82.6 (7.7) 2.5 72.4 1.0 73.4 125 125 341.7 29.3 38.6 1.3 410.9 136.5 43.1 36.2 60.4 276.2 134.7 (1.9) 132.8 36.4% 3.5 88.0 (7.7) 2.6 77.6 1.0 78.6 126 125 352.5 30.3 39.9 1.3 424.1 140.8 44.5 37.3 62.3 285.0 139.1 (1.9) 137.2 36.4% 3.5 90.7 (9.7) 2.6 78.4 3.0 81.4 126 126 363.6 31.4 41.3 1.3 437.5 145.2 45.9 38.5 64.3 294.0 143.5 (1.9) 141.7 36.4% 3.5 93.6 (9.7) 2.9 81.0 3.0 84.0 127 127 23 15 9 1 21 27 17 13 10 19 24 (155) 20 2 23 (37) 55 38 26 41 8 8 8 15 8 (12) 9 9 8 9 8 9 9 (53) 10 1 9 5 5 9 50 9 0 0 988.1 89.4 126.3 5.2 1,209.0 385.4 130.9 113.5 186.3 816.0 393.0 10.8 403.7 35.3% 3.4 264.8 (61.3) 5.7 197.8 19.9 217.7 116 115 1,151.1 96.8 130.6 5.4 1,384.0 463.0 147.0 122.0 203.8 935.8 448.1 (10.9) 437.2 36.6% 12.6 289.9 (38.4) 11.1 240.5 16.3 3.2 263.6 124 122 1,335.6 114.4 150.5 5.2 1,605.7 533.6 169.0 141.3 236.0 1,080.0 525.7 (7.5) 518.3 36.4% 13.5 343.3 (35.9) 10.1 297.3 9.0 306.3 126 125 1,011.9 89.6 125.2 5.2 1,231.9 397.5 132.5 113.1 188.0 831.1 400.9 (0.8) 400.1 35.8% 5.1 262.0 (56.0) 8.9 197.1 22.4 219.5 120 116 1,208.8 101.5 135.5 5.4 1,451.1 482.4 154.0 127.7 213.6 977.8 473.3 (7.0) 466.3 36.2% 12.4 309.8 (36.8) 8.8 264.1 9.7 3.2 277.0 125 124 1,378.2 118.4 155.8 5.2 1,657.6 550.6 174.0 145.9 243.7 1,114.2 543.4 (7.5) 535.9 36.4% 14.0 354.9 (34.8) 10.6 309.5 8.0 317.5 127 126 (1) (13) (13) 142 (3) 4 (1) (9) (5) (1) (7) (126) 6 (15) 16 384 23 (6) (34) (10) 0 (4) 17 8 3 4 14 20 12 8 9 15 14 (201) 8 4 9 (37) 95 22 (18) 21 7 6 16 18 15 (4) 16 15 15 16 16 15 17 (31) 19 (1) 7 18 (6) (9) 24 (45) 16 2 2
32.4% 41.5% 39.0% 40.9% 515 296 500 $2.69 86.0 -12.2% 4.3% 46.9 11.9% 0.1% 24.8 3.5% 1.0% 10.5 3.2% -0.1% 28.9 23.2% 5.7% 197.1 1.2% 2.8% 52 bp 0.3
31.8% 40.7% 38.5% 36.3% 600 286 500 $3.36 79.7 -14.2% -3.8% 48.2 7.8% 0.8% 25.2 9.0% -0.7% 10.6 5.4% -0.3% 0.0% 0.0% 192.6 -3.4% -1.8% 50 bp 0.2
34.3% 43.6% 37.6% 34.6% 462 487 500 $3.87 80.8 -10.3% 3.2% 49.0 3.2% 0.8% 26.4 12.7% 1.3% 12.9 85.1% 0.1% 30.3 11.2% 4.2% 199.3 4.5% 2.3% 52 bp 0.2
31.6% 40.0% 41.1% 34.5% 218 482 500 $1.67 86.5 -2.3% 5.7% 49.7 0.0% 0.5% 28.7 28.8% 1.3% 14.3 23.4% 0.7% 68.4 41.8% 9.5% 247.6 10.7% 4.1% 48 bp 0.2
32.6% 41.2% 39.5% 39.0% 320 542 500 $2.94 89.5 1.3% 3.0% 49.9 -0.5% 0.8% 33.7 68.9% 0.1% 16.0 50.4% -0.2% 71.0 -1.9% 4.2% 260.2 10.7% 2.4% 44 bp 0.1
32.6% 41.2% 39.8% 41.3% 320 542 500 $2.93 92.2 0.0% 3.0% 50.8 3.5% 0.8% 34.6 8.0% 0.8% 16.5 6.0% 1.5% 74.0 5.0% 3.0% 268.1 3.4% 3.6% 45 bp 0.1
32.6% 41.2% 39.8% 39.9% 320 542 500 $2.92 94.1 0.0% 2.0% 51.6 3.5% 0.8% 35.4 6.0% 0.8% 17.0 5.0% 1.5% 76.4 5.0% 2.0% 274.5 3.1% 2.6% 45 bp 0.1
32.6% 41.2% 39.8% 40.0% 320 542 500 $2.91 96.3 1.5% 2.0% 52.5 3.5% 0.8% 36.2 6.0% 0.8% 17.4 5.0% 1.5% 78.9 5.0% 2.0% 281.3 3.6% 2.6% 45 bp 0.1
32.8% 41.3% 39.8% 40.5% 320 542 500 $2.90 98.6 1.5% 2.0% 53.4 3.5% 0.8% 37.0 5.0% 0.8% 17.9 4.0% 1.5% 81.8 7.0% 2.0% 288.6 3.9% 2.5% 44 bp 0.1
32.8% 41.3% 39.8% 41.6% 320 542 500 $2.89 100.9 1.5% 2.0% 54.3 3.5% 0.8% 37.7 5.0% 0.8% 18.3 4.0% 1.5% 84.9 7.0% 2.0% 296.1 3.9% 2.5% 44 bp 0.1
32.8% 41.3% 39.8% 39.8% 320 542 500 $2.87 103.3 1.5% 2.0% 55.2 3.5% 0.8% 38.5 5.0% 0.8% 18.8 4.0% 1.5% 88.1 7.0% 2.0% 303.9 3.8% 2.5% 44 bp 0.1
32.8% 41.4% 39.8% 39.0% 320 542 500 $2.85 105.8 1.5% 2.0% 56.1 3.5% 0.8% 39.3 5.0% 0.8% 19.2 4.0% 1.5% 91.4 7.0% 2.0% 311.8 3.8% 2.5% 44 bp 0.1
16 5 37 56 NM 39 -6 bps (42)
3 2 3 3 4 3 0 bps 0
32.5% 41.6% 38.8% 33.2% 462 487 500 $3.87 80.8 -11.2% 6.4% 49.0 6.5% 5.5% 26.4 7.1% 1.2% 12.9 22.4% -0.8% 30.3 10.7% 14.8% 199.3 0.1% 6.2% 51 bp 0.2
32.4% 40.9% 40.0% 36.5% 320 542 500 $2.92 94.1 -0.2% 14.6% 51.6 1.7% 2.9% 35.4 30.4% 3.5% 17.0 23.4% 4.3% 76.4 15.3% 31.0% 274.5 8.2% 15.3% 46 bp 0.1
32.7% 41.3% 39.8% 37.7% 320 542 500 $2.87 103.3 1.6% 8.3% 55.2 3.6% 3.3% 38.5 5.4% 3.3% 18.8 4.4% 6.2% 88.1 6.9% 8.4% 303.9 4.0% 10.6% 44 bp 0.1
32.5% 41.5% 39.1% 35.7% 218 482 500 $1.67 86.5 -9.6% 9.0% 49.7 5.8% 2.2% 28.7 14.2% 3.0% 14.3 31.0% 0.6% 68.4 0.0% 0.0% 247.6 3.5% 7.8% 51 bp 0.2
32.6% 41.2% 39.7% 38.3% 320 542 500 $2.91 96.3 0.7% 10.4% 52.5 2.6% 3.2% 36.2 23.3% 3.0% 17.4 17.2% 5.0% 78.9 3.6% 11.7% 281.3 5.4% 11.9% 45 bp 0.1
32.8% 41.3% 39.8% 37.2% 320 542 500 $2.85 105.8 1.6% 8.3% 56.1 3.6% 3.3% 39.3 5.2% 3.3% 19.2 4.2% 6.2% 91.4 7.4% 8.5% 311.8 4.1% 10.5% 44 bp 0.1
(26) 12 8 21 NM 6 -1 bps (75)
16 5 34 32 152 38 -6 bps (25) 10
BALANCESHEETDATA($MM)
Cash and cash equivalents Investments Borrowings excl. CLOs Net Cash and Investments/Share
AUM($B)ANDFEEDATA
EQUITY - Ending AUM Net new asset growth (% annualized) Market G/L (%) FIXED INCOME - Ending AUM Net new asset growth (% annualized) Market G/L (%) FLOATING RATE FUND - Ending AUM Net new asset growth (% annualized) Market G/L (%) ALTERNATIVE FUND - Ending AUM Net new asset growth (% annualized) Market G/L (%) IMPLEMENTATION SERVICES - Ending AUM
Net new asset growth (% annualized) Market G/L (%) 7 9 11 15 11 -1 bps 0
LONG-TERM - Ending AUM Net new asset growth (% annualized) Market G/L (%) Investment Management Fees/Avg AUM (% annualized) CASH MANAGEMENT - Ending AUM
Page 19
June 18, 2013
BMO Capital Markets
Exhibit 39: Franklin Resources Financial Model

Franklin Resources, Inc. - Summary Financial Model ($ in millions)
Fiscal Year Calendar Year EPS - Diluted EPS - Asset Management Operations Dividends per share 2Q12 1Q12 $2.32 $2.01 $0.27 3Q12 2Q12 $2.12 $2.09 $0.27 4Q12 3Q12 $2.31 $2.17 $0.27 1Q13 4Q12 $2.42 $2.26 $3.29 2Q13 1Q13 $2.69 $2.49 $0.29 3Q13E 2Q13E $2.57 $2.51 $0.29 4Q13E 3Q13E $2.68 $2.60 $0.29 1Q14E 4Q13E $2.80 $2.71 $0.31 % Change Y/Y Q/Q 21 20 7 (4) 1 0 2012 $8.95 $8.33 $3.08 Fiscal 2013E $10.36 $9.87 $4.16 2014E $11.45 $11.08 $1.24 2012 $9.17 $8.54 $4.10 Calendar 2013E 2014E $10.74 $10.32 $1.18 $11.77 $11.39 $1.24 % Change - Fiscal 12/11 13E/12 14E/13E 4 1 208 16 18 35 11 12 (70)
INCOMESTATEMENT
Investment Management Fees Sales and Distribution Fees Shareholder Servicing Fees Other, net Total Revenues Sales, distribution, and marketing Compensation and benefits Other expenses Total Expenses Operating Income Total Other Income (Expenses), net Pretax Net Income Tax Rate Aftertax Net Income Less: Net Income Attributable to NCIs Less: Allocation of earnings to participating RSUs Net Income Available to Common Stockholders Diluted shares (EOP) Weighted avg shares outstanding - Diluted Financial Ratios Operating Margin - GAAP Operating Magin - Adjusted Comp. and Benefits/Total Net Revenue ROE 1,126 586 77 10 1,799 715 323 144 1,182 617 73 690 29.3% 488 (15) 3 500 215 215 1,114 569 77 23 1,784 692 315 134 1,141 643 (28) 615 30.1% 430 (25) 3 452 213 214 1,143 580 73 20 1,816 702 318 174 1,194 623 56 678 25.7% 504 12 3 490 212 212 1,200 604 74 23 1,902 731 335 151 1,217 685 31 716 29.5% 505 (11) 4 512 213 212 1,268 643 77 27 2,014 781 355 148 1,284 729 86 815 27.2% 593 21 4 569 213 212 1,310 668 83 25 2,086 805 361 160 1,326 761 17 778 29.0% 552 0 5 547 211 213 1,360 693 87 24 2,164 829 374 177 1,380 784 25 809 29.0% 574 0 5 569 211 212 1,391 709 89 26 2,214 848 383 170 1,401 813 27 840 29.0% 597 0 6 591 209 211 18 17 8 10 17 16 15 19 16 18 27 29 21 (1) (0) 3 4 9 (7) 4 3 2 8 3 4 (5) (7) (4) (1) 1 4,459 2,259 302 81 7,101 2,740 1,256 591 4,586 2,515 163 2,678 28.5% 1,915 (16) 12 1,919 212 214 5,138 2,608 321 99 8,166 3,146 1,425 636 5,206 2,960 158 3,118 28.6% 2,225 9 18 2,197 211 212 5,715 2,912 364 96 9,087 3,498 1,590 702 5,790 3,297 110 3,406 29.0% 2,419 0 23 2,396 206 209 4,583 2,339 301 77 7,301 2,840 1,290 603 4,733 2,568 131 2,699 28.6% 1,926 (40) 13 1,954 213 213 5,329 2,712 335 102 8,478 3,263 1,472 655 5,390 3,088 154 3,242 28.5% 2,317 21 20 2,276 209 212 5,844 2,978 372 95 9,289 3,576 1,625 715 5,916 3,373 111 3,484 29.0% 2,474 0 23 2,450 205 208 (2) (0) 1 82 (1) 1 2 10 2 (5) 2 5 0 (3) (3) 16 15 (1) (1) 15 15 6 23 15 15 13 8 14 18 16 9 9 (2) (1) 11 12 13 (3) 11 11 12 10 11 11 9 -
34.3% 54.3% 28.4% 21.4% 4,542 2,816 2,471 1,010 $23.32 $19.07 300 0.6% 10.8% 317 4.6% 5.6% 104 9.1% 5.2% 6 -26.7% 1.7% 726 3.3% 3.3% 64 bp
36.0% 56.5% 27.7% 19.4% 4,677 2,899 2,426 988 $23.99 $19.56 279 -1.5% -6.7% 320 6.9% -0.6% 103 1.2% -0.4% 6 7.0% 0.0% 707 2.6% 2.6% 63 bp
34.3% 53.5% 27.3% 20.1% 5,784 3,124 2,584 1,566 $26.90 $22.12 297 -3.3% 7.5% 336 3.6% 4.5% 110 6.6% 5.3% 6 41.4% 0.0% 750 1.6% 1.6% 63 bp
36.0% 56.0% 27.4% 21.5% 5,087 3,103 2,525 1,263 $24.76 $20.01 303 -8.6% 4.3% 352 8.2% 2.9% 121 1.8% 1.8% 6 -43.8% 0.0% 782 0.2% 0.2% 63 bp
36.2% 56.4% 27.4% 22.6% 5,411 3,463 2,556 1,263 $25.83 $20.54 320 0.3% 5.4% 369 17.7% 0.7% 129 9.3% 4.6% 5 -21.1% 0.0% 824 9.4% 9.4% 63 bp
36.5% 57.0% 27.0% 21.2% 5,411 3,463 2,587 1,263 $26.14 $20.81 326 -2.5% 2.5% 386 18.5% 0.0% 132 4.0% 1.5% 5 1.0% 0.2% 850 8.0% 8.0% 63 bp
36.2% 56.7% 27.0% 21.4% 5,411 3,463 2,622 1,263 $26.37 $21.03 332 0.0% 2.0% 395 6.0% 0.8% 136 4.0% 1.5% 5 1.0% 0.2% 869 3.4% 3.4% 63 bp
36.7% 57.4% 27.0% 21.6% 5,411 3,463 2,658 1,263 $26.70 $21.33 339 0.5% 2.0% 404 6.0% 0.8% 139 4.0% 1.5% 5 1.0% 0.2% 888 3.6% 3.6% 63 bp
16 19 7 28 9 6 17 21 28 (6) 20
0 0 1 0 1 1 2 5 2 0 -
35.4% 55.4% 27.7% 19.7% 5,784 3,124 2,584 1,566 $26.90 $22.12 297 -1.9% 18.9% 336 3.2% 10.8% 110 -6.6% 16.1% 6 -6.0% 1.5% 750 -0.3% -0.3% 63 bp
36.2% 56.5% 27.2% 20.7% 5,411 3,463 2,622 1,263 $26.37 $21.03 332 -2.8% 14.7% 395 13.5% 4.6% 136 5.4% 10.5% 5 -15.2% 0.3% 869 5.6% 5.6% 63 bp
36.3% 56.7% 27.4% 20.2% 5,411 3,463 2,768 1,263 $27.64 $22.18 363 1.0% 8.3% 431 5.7% 3.3% 150 4.4% 6.3% 6 1.0% 0.8% 950 3.7% 3.7% 63 bp
35.2% 55.1% 27.7% 20.5% 5,087 3,103 2,525 1,263 $24.76 $20.01 303 -3.5% 15.8% 352 6.3% 13.1% 121 4.9% 12.6% 6 -6.7% 1.7% 782 2.0% 2.0% 63 bp
36.4% 56.9% 27.1% 20.8% 5,411 3,463 2,658 1,263 $26.70 $21.33 339 -0.5% 12.3% 404 12.6% 2.5% 139 5.6% 9.6% 5 -4.5% 0.6% 888 6.3% 6.3% 63 bp
36.3% 56.8% 27.4% 20.0% 5,411 3,463 2,806 1,263 $28.00 $22.51 372 1.2% 8.3% 439 5.4% 3.3% 154 4.4% 6.3% 6 1.0% 0.8% 971 3.6% 3.6% 63 bp
23 13 (7) 47 7 6 17 13 9 (4) 14 (2) bp 23 18
(6) 11 1 (19) (2) (5) 12 9 11 (15) 16 (0) bp 2 0 0 6 0
Cash and cash equivalents - Total Cash and cash equivalents - non-US Investments excluding VIEs Borrowings excluding VIEs Net Cash and Investments/Share Discounted Net Cash and Inv./Share
5 6 9 -
AUM($B)ANDFEEDATA
EQUITY - Ending AUM Net new asset growth (% annualized) Market G/L (% not annualized) FIXED INCOME - Ending AUM
Net new asset growth (% annualized) Market G/L (% not annualized)
HYBRID - Ending AUM Net new asset growth (% annualized) Market G/L (% not annualized) CASH MANAGEMENT - Ending AUM
Net new asset growth (% annualized) Market G/L (% not annualized)
9 (0) bp
TOTAL- Ending AUM Net new asset growth (% annualized) Market G/L (sequential %) Investment Mgmt Fees/Avg AUM (% annualized)
3 (0) bp (0) bp
Page 20
June 18, 2013
BMO Capital Markets
Exhibit 40: Invesco Financial Model

Invesco Ltd. - Summary Financial Model
($ millions, except share and per share data) GAAP EPS - Diluted Adjusted EPS - Diluted EPS - Asset Management Operations Dividends per share 1Q12 $0.43 $0.44 $0.44 $0.12 2Q12 $0.34 $0.41 $0.41 $0.17 3Q12 $0.38 $0.42 $0.41 $0.17 4Q12 $0.28 $0.45 $0.46 $0.17 1Q13 $0.49 $0.52 $0.52 $0.17 2Q13E $0.48 $0.51 $0.52 $0.23 3Q13E $0.50 $0.54 $0.54 $0.23 4Q13E $0.52 $0.56 $0.56 $0.23 % Change Y/Y Q/Q 41 27 25 30 (4) (0) (0) 30 2011 $1.57 $1.68 $1.73 $0.48 2012 $1.42 $1.71 $1.72 $0.64 2013E $1.99 $2.13 $2.13 $0.85 2014E $2.20 $2.35 $2.35 $1.10 12/11 (9) 2 (0) 34 % Change 13E/12 40 24 23 32 14E/13E 10 11 11 30
NONGAAPINCOMESTATEMENT
Investment Management Fees Service and Distribution Fees Performance Fees Other Third-party Distribution, Service and Advisory Total Net Revenue Employee Compensation Marketing Property, Office, and Technology General and Administrative Total Expenses Operating Income Non-operating investment income (loss) Pretax Net Income Tax Rate Adjusted Net Income Less: (Gains)/Losses attributable to NCIs Net Income Available to Common Stockholders Shares (EOP) Weighted avg shares outstanding - Diluted GAAP Data GAAP net revenues GAAP operating income GAAP net income attributable to common shares Financial Ratios Operating Margin - GAAP Operating Margin - Adjusted Comp. and Benefits/Total Net Revenue ROE 812.1 189.0 21.2 33.1 (319.1) 736.3 313.0 27.0 66.3 60.8 467.1 269.2 (1.0) 268.2 25.1% 201.0 0.0 201.0 448 456 802.1 187.1 15.5 26.0 (318.6) 712.1 306.5 26.8 67.8 62.0 463.1 249.0 (4.4) 244.6 24.5% 184.7 0.0 184.7 445 455 839.9 196.1 3.4 24.4 (329.1) 734.7 327.7 26.5 69.3 60.8 484.3 250.4 3.5 253.9 25.8% 188.4 0.0 188.4 444 453 865.0 199.4 21.1 27.4 (337.0) 775.9 342.0 23.8 71.7 61.9 499.4 276.5 (6.2) 270.3 25.0% 202.6 0.0 202.6 441 451 892.4 206.3 38.6 25.8 (346.6) 816.5 351.3 23.3 69.6 58.7 502.9 313.6 (2.4) 311.2 26.2% 229.6 2.4 232.0 445 449 913.2 229.0 10.0 26.0 (378.7) 799.5 330.2 27.0 68.6 60.5 486.3 313.2 (0.3) 312.8 25.5% 233.1 0.0 233.1 443 453 946.4 237.3 9.0 26.0 (392.5) 826.2 341.2 27.0 71.6 60.5 500.3 325.9 (0.3) 325.6 25.5% 242.5 0.0 242.5 442 451 966.6 242.4 10.0 26.0 (400.9) 844.1 348.6 27.0 71.6 60.5 507.7 336.4 (0.3) 336.0 25.5% 250.3 0.0 250.3 440 450 14 22 (35) 0 19 12 8 1 1 (2) 5 26 (92) 28 26 26 (0) (1) 15 37 40 23 29 28 13 (49) 16 14 1 14 3 13 2 bp 2 11 (74) 1 9 (2) (6) 16 (1) 3 (3) (0) (86) 1 2 0 (0) 1 1 2 (3) 0 0 0 0 0 3 1 (26) 4 2 (0) 0 bp 3,235.3 775.1 38.4 136.5 (1,286.9) 2,898.4 1,229.2 99.5 251.8 249.0 1,829.5 1,068.9 (29.3) 1,039.6 24.8% 781.5 0.1 781.6 446 465 4,092.2 898.1 729.7 21.9% 36.9% 42.4% 8.6% 727 440 485 1,285 ($0.51) 271.0 -2.7% -5.0% 149.0 10.4% 2.4% 44.6 6.9% -3.7% 74.0 8.2% 0.3% 86.7 13.0% -4.3% 625.3 3.1% -2.5% 51 bp 3,319.1 771.6 61.2 110.9 (1,303.8) 2,959.0 1,289.2 104.1 275.1 245.5 1,913.9 1,045.1 (8.1) 1,037.0 25.1% 776.7 0.0 776.7 441 454 4,177.0 871.5 646.4 20.9% 35.3% 43.6% 8.6% 836 528 611 1,186 $0.17 297.4 -2.0% 12.3% 171.9 8.8% 6.3% 62.1 29.1% 8.5% 73.3 -2.3% 1.4% 83.0 -4.3% 2.8% 687.7 1.9% 7.8% 50 bp 3,718.6 914.9 67.6 103.8 (1,518.7) 3,286.2 1,371.3 104.3 281.4 240.2 1,997.2 1,289.0 (3.4) 1,285.6 25.7% 955.5 2.4 957.9 440 451 4,719.2 1,143.0 896.1 24.2% 39.2% 41.7% 10.8% 885 575 722 1,515 ($0.25) 345.0 1.5% 16.6% 184.6 6.0% 2.2% 56.1 17.0% 10.7% 80.9 3.9% -0.1% 92.4 4.3% 7.9% 759.0 4.6% 9.7% 51 bp 4,083.3 1,020.8 38.0 96.0 (1,690.5) 3,547.7 1,479.6 112.0 294.4 254.8 2,140.8 1,406.9 (1.4) 1,405.5 25.5% 1,047.1 0.0 1,047.1 430 445 5,152.2 1,265.8 977.8 24.6% 39.7% 41.7% 11.5% 885 575 722 1,515 ($0.25) 381.7 2.3% 8.3% 200.6 4.9% 3.7% 66.6 12.0% 6.7% 81.2 0.3% 0.1% 103.9 4.0% 8.4% 833.9 3.7% 6.2% 51 bp 3 (0) 59 (19) 1 2 5 5 9 (1) 5 (2) (72) (0) 1 (1) (1) (1) (2) 2 (3) (11) 15 20 26 (8) (134) 10 15 39 (1) (4) 10 (1) bp 12 19 10 (6) 16 11 6 0 2 (2) 4 23 (58) 24 2 23 23 (0) (1) 13 31 39 6 9 18 28 (246) 16 7 (10) 10 11 10 1 bp 9 (2) (1) 9 11 9 0 0 0 0 2 11 9 19 0 12 10 0 bp 10 12 (44) (8) 11 8 8 7 5 6 7 9 (60) 9 (1) 10 -
1,033.7 1,009.0 1,041.4 1,092.9 229.8 202.9 216.0 222.8 193.9 153.9 170.6 128.0 22.2% 36.6% 42.5% 8.8% 592 360 558 1,326 ($0.67) 305.2 4.9% 10.8% 155.0 6.4% 2.2% 50.5 27.8% 5.2% 74.5 -3.2% 1.5% 87.6 -5.5% 2.8% 672.8 1.8% 6.0% 50 bp 20.1% 35.0% 43.0% 8.1% 718 446 563 1,342 ($0.48) 283.8 -5.4% -4.5% 155.6 0.3% 0.5% 51.5 18.2% -1.8% 71.0 -17.2% -0.4% 84.7 -6.4% -1.6% 646.6 -1.7% -2.3% 50 bp 20.7% 34.1% 44.6% 8.2% 880 578 588 1,285 ($0.04) 300.6 -2.0% 5.2% 167.0 18.5% 2.3% 57.9 28.7% 4.1% 73.2 11.8% 0.1% 84.3 -2.4% 1.8% 683.0 5.4% 3.4% 50 bp 20.4% 35.6% 44.1% 9.0% 836 528 611 1,186 $0.17 297.4 -4.4% 1.0% 171.9 8.1% 1.0% 62.1 26.9% 0.5% 73.3 0.0% 0.1% 83.0 -2.8% -0.1% 687.7 1.9% 0.7% 51 bp
1,141.8 1,156.7 1,197.2 1,223.4 273.4 277.9 290.6 301.1 222.2 215.7 225.2 233.0 23.9% 38.4% 43.0% 10.5% 885 575 722 1,515 ($0.25) 319.5 3.2% 8.7% 175.9 11.6% 0.2% 70.5 35.4% 6.6% 77.8 25.1% -0.1% 85.6 10.1% 1.4% 729.3 8.6% 4.6% 51 bp 24.0% 39.2% 41.3% 10.5% 885 575 722 1,515 ($0.25) 330.0 0.3% 3.2% 177.6 3.2% 0.2% 52.1 15.0% 2.0% 80.7 15.0% 0.0% 87.4 -0.2% 2.2% 727.7 3.9% 1.8% 51 bp 24.3% 39.4% 41.3% 10.9% 885 575 722 1,515 ($0.25) 337.4 1.0% 2.0% 181.1 4.2% 0.9% 54.2 10.0% 1.6% 80.8 0.3% 0.0% 89.9 3.3% 2.0% 743.3 2.6% 1.5% 51 bp 24.6% 39.9% 41.3% 11.3% 885 575 722 1,515 ($0.25) 345.0 1.0% 2.0% 184.6 4.3% 0.9% 56.1 8.0% 1.6% 80.9 0.3% 0.0% 92.4 3.4% 2.0% 759.0 2.5% 1.5% 51 bp
Cash and cash equivalents incl. EU subs Cash and cash equivalents in EU subsidiaries Investments Total Borrowings Net Cash and Investments/Share
AUM($B)ANDFEEDATA
EQUITY - Ending AUM
Net new asset growth (% annualized) Market G/L (%)
FIXED INCOME - Ending AUM

BALANCED - Ending AUM

MONEY MARKET - Ending AUM

ALTERNATIVES - Ending AUM

TOTAL - Ending AUM

Net new asset growth (% annualized) Market G/L (%) Investment Management Fees/Avg AUM (% annualized)
Page 21
June 18, 2013
BMO Capital Markets
Exhibit 41: KKR Financial Model

KKR & Co L.P. - Summary Financial Model
($ millions, except unit and per unit data) Economic Net Income (ENI) - Diluted Fee-Related Earnings (FRE), pre-tax - Diluted Performance Related Earnings, pre-tax - Diluted Distributable Earnings (DE), pre-tax - Diluted Distribution to Common Units 1Q12 $0.99 $0.11 $0.34 $0.24 $0.15 2Q12 $0.74 $0.10 $0.20 $0.58 $0.13 3Q12 $0.69 $0.13 $0.26 $0.47 $0.24 4Q12 $0.48 $0.12 $0.22 $0.78 $0.70 1Q13 $0.88 $0.12 $0.34 $0.41 $0.27 2Q13E $0.46 $0.13 $0.18 $0.41 $0.34 3Q13E $0.48 $0.13 $0.19 $0.32 $0.25 4Q13E $0.53 $0.13 $0.20 $0.33 $0.26 % Change Yr./Yr. Qtr./Qtr. (38) 27 (6) (29) 150 (47) 2 (46) 0 27 2011 $0.73 $0.61 $0.20 $1.21 $0.75 2012 $2.90 $0.46 $1.01 $2.07 $1.22 2013E $2.35 $0.51 $0.91 $1.47 $1.12 2014E $2.25 $0.53 $0.87 $1.36 $1.08 12/11 295 (25) 404 70 64 % Change 13E/12 (19) 11 (10) (29) (9) 14E/13E (4) 3 (4) (8) (4)
Management fees Incentive fees Net monitoring and transaction fees Total Fee Revenues Net carried interest Total Net Revenues Compensation and benefits Other expenses Total Expenses Other investment income (loss) Income (loss) attributable to NCIs Economic Net Income (Loss), pre-tax Tax rate Economic Net Income (Loss), after tax Fee Related Earnings, pre-tax Realized cash carry Net realized principal investment income Distributed Earnings, pre-tax % to common unitholder Less: estimated current corporate income taxes Additional distribution Total distribution to common units Avg. GAAP Common Units Avg. Partnership Units Avg. Economic Net Income Adusted Units - Diluted Distributable Earnings Adjusted Units - Diluted (EOP) 128.6 9.7 50.8 189.1 237.2 426.2 62.7 53.0 115.7 419.9 3.2 727.2 6% 683.8 73.4 44.9 52.6 167.7 34% 11% 33.8 237.8 454.3 692.1 231.7 856 5,023 600 500 $8.53 62,293 45,986 16,306 47,227 37,975 9,252 1.11% 1,033 11,015 9% 129.6 4.1 54.8 188.5 137.5 326.0 62.7 56.0 118.7 340.1 1.3 546.1 5% 520.3 69.8 39.4 301.6 409.4 35% 12% 32.1 252.5 448.2 700.7 238.2 1,206 5,022 663 500 $9.12 61,489 45,528 15,961 47,201 37,858 9,342 1.10% 680 10,610 5% 126.5 17.8 73.5 217.8 179.6 397.4 71.3 55.7 127.1 240.9 1.3 509.9 4% 487.3 90.7 100.1 145.7 335.2 35% 10% 59.1 257.6 444.6 702.3 241.4 1,438 5,078 733 500 $9.61 66,279 49,771 16,508 50,266 40,354 9,912 1.07% 926 15,846 6% 144.4 12.4 71.8 228.5 152.7 381.3 76.0 66.6 142.6 110.2 1.2 347.7 3% 337.0 86.0 101.0 366.9 552.6 37% 13% 119.1 176.8 268.2 436.6 704.8 253.4 1,534 4,758 755 500 $9.29 75,528 49,128 26,400 60,846 41,173 19,673 1.15% 1,716 16,072 4% 153.0 18.8 49.3 221.1 240.6 461.8 75.2 58.0 133.1 320.2 1.1 647.7 3% 627.6 88.0 52.9 153.2 293.0 38% 8% 69.4 282.0 429.2 711.2 261.8 1,996 4,634 935 1,000 $9.19 78,253 50,340 27,913 62,454 41,218 21,236 1.01% 824 16,207 6% 163.1 9.0 62.9 234.9 131.4 366.4 79.1 65.7 144.8 144.5 1.4 364.6 9% 331.7 90.1 130.5 76.5 295.7 41% 11% 89.4 291.2 424.0 715.2 264.8 2,047 4,697 936 1,000 $9.33 85,963 57,102 28,861 68,436 46,783 21,653 1.04% 1,325 4% 4% 3% 180.0 9.0 63.3 252.3 136.6 388.9 86.6 73.1 159.7 146.4 1.5 374.1 9% 340.5 92.6 67.8 76.5 235.4 41% 11% 68.2 294.2 422.0 716.2 267.8 2,098 4,761 1,005 1,000 $9.58 87,933 58,101 29,832 68,597 46,528 22,069 1.05% 1,325 4% 4% 3% 180.1 9.0 63.7 252.8 144.2 397.1 86.6 72.9 159.5 178.3 1.5 414.5 8% 379.3 93.4 71.6 76.5 240.0 41% 11% 70.5 297.2 420.0 717.2 270.8 2,148 4,828 1,077 1,000 $9.83 89,963 59,134 30,828 68,759 46,273 22,486 1.05% 1,325 4% 4% 3% 26 122 15 25 (4) 12 26 17 22 (58) 13 (33) (36) 29 232 (75) (28) (6) 178 15 (5) 2 11 70 (6) 41 100 2 40 25 81 45 24 132 95 7 (52) 27 6 (45) (21) 5 13 9 (55) 31 (44) (47) 2 147 (50) 1 31 29 3 (1) 1 1 3 1 0 0 2 10 13 3 10 14 2 61 515.4 34.2 362.0 911.7 137.7 1,049.4 258.0 236.6 494.5 202.8 6.7 750.9 33% 502.9 417.2 202.1 235.5 848.1 33% 117% 29.5 224.6 222.5 462.9 685.4 227.2 989 4,743 421 500 $8.20 59,009 43,628 15,381 46,397 37,870 8,528 1.12% 8,441 11,401 4% 529.1 43.8 250.9 823.9 707.0 1,530.9 272.8 231.3 504.1 1,111.1 7.0 2,130.9 5% 2,028.5 319.8 285.4 866.8 1,465.0 35% 46% 119.1 326.0 254.0 445.9 700.0 253.4 1,534 4,758 755 500 $9.29 75,528 49,128 26,400 60,846 41,173 19,673 1.14% 4,355 16,072 24% 676.1 45.8 239.2 961.2 652.9 1,614.1 327.4 269.7 597.1 789.5 5.5 1,801.0 7% 1,679.2 364.1 322.8 382.7 1,064.1 40% 41% 332.5 291.2 423.8 714.9 270.8 2,148 4,828 1,077 1,000 $9.83 89,963 59,134 30,828 68,759 46,273 22,486 1.11% 4,799 17% 11% 8% 721.9 36.0 257.1 1,015.0 628.7 1,643.7 346.0 289.8 635.8 746.8 6.0 1,748.7 7% 1,622.0 379.2 312.2 306.0 991.4 42% 44% 337.4 304.7 415.0 719.7 282.8 2,352 5,197 1,394 1,000 $11.00 98,710 63,643 35,067 69,405 45,253 24,152 1.05% 5,300 15% 15% 10% 3 28 (31) 413 46 6 (2) 2 448 6 184 (85) 303 (23) 41 73 (61) 303 45 14 (4) 2 12 55 0 79 0 13 28 13 72 31 9 131 (48) 41 28 5 (5) (8) 5 20 17 18 (29) (22) (15) 41 (17) 14 13 (27) (9) (100) 2 15 (5) 2 7 40 1 43 100 6 19 20 17 13 12 14 10 7 (21) 8 (4) 2 6 7 6 (5) 9 (3) 7 (3) 4 (3) (7) 6 NM 1 5 (2) 1 4 9 8 29 0 12 10 8 14 1 (2) 7 10 -
Cash and cash equivalents/Liquid short-term investments Investments Unrealized carry Total Borrowings Net Cash, Investments, Unrealized Carry / Unit
AUMDATA($MM):
Total Assets Under Management (EOP) Private Markets Segment Public Markets Segment Fee-Paying Assets Under Mgt. (EOP) Private Markets Segment Public Markets Segment Base Management Fees/Average FPAUM (seg. Data) Committed Dollars Invested Uncalled Commitments (Dry Powder) Estimated Fund Performance Private Equity Funds Energy & Infrastructure Funds Public Markets Segment
Page 22
June 18, 2013
BMO Capital Markets
Exhibit 42: Legg Mason Financial Model

Legg Mason, Inc. - Financial Model ($ in millions)
Fiscal Year Calendar Year GAAP EPS - Diluted Adjusted EPS - Diluted EPS - Asset Management Operations Dividends per share 4Q12 1Q12 $0.54 $0.88 $0.36 $0.08 1Q13 2Q12 ($0.07) $0.64 $0.40 $0.11 2Q13 3Q12 $0.60 $0.75 $0.49 $0.11 3Q13 4Q12 ($3.45) $0.70 ($3.46) $0.11 4Q13 1Q13 $0.23 $0.52 $0.21 $0.11 1Q14E 2Q13E $0.38 $0.68 $0.43 $0.13 2Q14E 3Q13E $0.68 $0.84 $0.72 $0.13 3Q14E 4Q13E $0.56 $0.88 $0.60 $0.13 % Change Yr./Yr. Qtr./Qtr. (662) 7 9 18 69 32 105 18 2013 ($2.65) $2.61 ($2.30) $0.44 Fiscal 2014E $2.19 $3.28 $2.35 $0.52 2015E $2.40 $3.54 $2.55 $0.56 2012 ($2.25) $2.97 ($2.08) $0.41 Calendar 2013E 2014E $1.84 $2.90 $1.94 $0.50 $2.36 $3.50 $2.51 $0.55 % Change - Fiscal 12/11 13E/12 14E/13E (7) (3) 6 45 (272) (6) (228) 38 (182) 26 (202) 18
INCOMESTATEMENT
Investment Management Fees Distribution and service fees Other, net Total Revenues Compensation and benefits Distribution and servicing Other Total Expenses Operating Income Other Income (Expenses), net Pretax Net Income Tax Rate Aftertax Net Income Less: Net income (loss) attributable to NCIs Net Income Attributable to Legg Mason, Inc. Shares (EOP) Weighted avg shares outstanding - Diluted Adjusted Data Operating Revenues, as Adjusted Operating income, as Adjusted Adjusted Income Financial Ratios Operating Margin - GAAP Operating Margin - Adjusted for dist. and service fees Comp. and Benefits/Total Net Revenue ROE 565 82 1 649 299 160 117 576 72 38 110 30.2% 77 1 76 140 140 489 104 124 11.1% 21.2% 52.5% 5.4% 1,382 412 1,387 $2.91 163.4 -12.8% 11.0% 356.1 -3.2% 2.1% 123.8 9.2% 0.2% 643.3 -3.1% 3.9% 35 bp 547 82 2 631 270 170 115 555 76 (94) (18) 27.8% (13) (4) (9) 135 139 461 78 89 12.1% 16.9% 49.2% -0.7% 758 346 1,153 ($0.37) 151.1 -9.5% -5.1% 360.6 0.1% 1.2% 120.1 3.9% -0.2% 631.8 -1.6% -0.7% 34 bp 557 82 2 640 302 145 113 561 80 18 97 16.8% 81 0 81 132 134 496 105 100 12.5% 21.2% 54.2% 5.9% 898 354 1,153 $0.76 153.4 -15.1% 5.3% 369.4 -4.2% 3.5% 127.9 32.3% 0.1% 650.7 0.1% 3.3% 34 bp 589 83 2 674 308 143 856 1,307 (633) (5) (639) 28.2% (459) (5) (454) 129 132 531 105 92 -94.0% 19.8% 52.2% -36.9% 906 346 1,145 $0.83 145.5 -21.6% 0.3% 367.0 -7.4% 1.2% 136.4 23.8% 0.7% 648.9 -4.6% 0.9% 33 bp 582 84 2 668 307 142 175 625 43 6 49 36.9% 31 1 29 125 129 526 51 67 6.4% 9.7% 52.7% 2.4% 933 371 1,145 $1.27 161.8 -7.1% 9.3% 365.1 -0.4% -0.4% 137.7 3.5% 0.1% 664.6 -1.1% 1.9% 34 bp 567 85 2 655 310 149 114 572 82 (8) 74 34.5% 49 1 48 123 125 506 85 85 12.6% 16.8% 54.4% 4.0% 600 371 1,145 ($1.41) 165.0 -2.0% 2.5% 363.3 2.0% -1.0% 125.1 -5.0% 0.1% 653.4 -0.4% 0.1% 34 bp 571 86 2 659 288 150 116 554 105 (5) 100 16.0% 84 1 83 120 122 509 108 103 15.9% 21.2% 50.3% 7.0% 600 376 1,145 ($1.41) 167.5 -2.0% 2.0% 366.2 0.0% 0.8% 125.6 1.0% 0.1% 659.2 -0.3% 1.0% 34 bp 579 87 2 668 292 152 115 559 109 (5) 104 34.5% 68 1 67 118 119 516 112 105 16.3% 21.6% 50.3% 5.7% 600 380 1,145 ($1.40) 170.4 -1.0% 2.0% 370.0 1.0% 0.8% 126.0 1.0% 0.1% 666.5 0.5% 1.0% 34 bp 4 5 26 4 15 (12) (1) 3 8 (92) (514) (475) (605) (9) (10) 10 9 (4) (21) 8 (1) 286 9 1 4 3 (1) (3) 2 (0) (2) 1 5 (35) (8) 91 (240) 53 59 63 (2) (3) (4) 67 28 (36) 0 0 (211) 2 (1) (9) (2) (0) 2,275 330 7 2,613 1,188 601 1,258 3,047 (434) (76) (511) 29.5% (360) (6) (353) 125 133 2,014 339 347 -16.6% 16.8% 52.1% -7.3% 933 371 1,145 $1.27 161.8 -12.5% 8.3% 365.1 -3.1% 5.6% 137.7 15.9% 0.6% 664.6 -1.8% 5.3% 34 bp 2,292 344 8 2,644 1,182 602 458 2,241 403 (22) 381 29.6% 268 4 264 115 121 2,045 415 396 15.2% 20.3% 51.4% 5.6% 600 385 1,145 ($1.39) 174.3 -1.0% 8.7% 373.9 1.0% 1.4% 126.4 -0.6% 0.4% 674.6 0.2% 3.0% 34 bp 2,379 360 8 2,746 1,219 628 478 2,325 422 (19) 403 30.3% 281 4 277 115 115 2,121 433 409 15.4% 20.4% 51.1% 5.7% 600 403 1,145 ($1.23) 190.5 1.0% 8.3% 389.9 1.0% 3.3% 128.2 1.0% 0.4% 708.6 1.0% 4.0% 34 bp 2,258 329 7 2,593 1,180 619 1,200 2,999 (405) (44) (449) 30.2% (314) (7) (306) 129 136 1,977 392 404 -15.6% 19.8% 52.0% -6.2% 906 346 1,145 $0.83 145.5 -14.9% 11.0% 367.0 -3.8% 8.1% 136.4 17.6% 0.8% 648.9 -2.4% 7.4% 34 bp 2,299 342 8 2,649 1,198 594 519 2,310 339 (12) 327 29.2% 232 4 227 118 124 2,058 356 359 12.8% 17.3% 51.9% 4.8% 600 380 1,145 ($1.40) 170.4 -3.2% 16.6% 370.0 0.6% 0.2% 126.0 0.1% 0.4% 666.5 -0.3% 3.9% 34 bp 2,353 355 8 2,716 1,205 621 473 2,299 417 (19) 398 30.2% 278 4 274 115 116 2,098 429 406 15.4% 20.4% 51.1% 5.7% 600 399 1,145 ($1.27) 186.3 1.0% 8.3% 385.8 1.0% 3.3% 127.8 1.0% 0.4% 699.9 1.0% 4.0% 34 bp (3) (10) (16) (4) (3) (9) 6 (3) (12) 65 (17) (27) (6) (225) (13) (7) (7) (3) (11) (10) 0 3 (4) 35 (14) (0) (6) (5) 2 (2) (3) 37 (2) 4 (8) 137 31 (228) 113 (268) 24 (256) (163) (260) (10) (7) (0) (21) (13) (32) (10) (17) (56) (1) 3 11 3 (4) 1 4 11 1 (1) 0 (64) (26) (193) (71) (175) 0 (174) (162) (175) (8) (9) 2 22 14 (36) 4 0 (210) 8 2 (8) 2 0
BALANCESHEETDATA($B)
Cash and cash equivalents, excl. restricted Investments Total Borrowings Net Cash and Investments/Share
AUM($B)ANDFEEDATA
EQUITY - Ending AUM
FIXED INCOME - Ending AUM Net new asset growth (% annualized) Market G/L (%) LIQUIDITY - Ending AUM Net new asset growth (% annualized) Market G/L (%) TOTAL- Ending AUM Net new asset growth (% annualized) Market G/L (%) Investment Mgmt Fees/Avg AUM (% annualized)
Page 23
June 18, 2013
BMO Capital Markets
Exhibit 43: T. Rowe Price Financial Model

T. Rowe Price Group, Inc. - Financial Model ($ in millions)
1Q12 EPS - Diluted EPS - Asset Management Operations Dividends per share $0.75 $0.74 $0.34 2Q12 $0.79 $0.77 $0.34 3Q12 $0.94 $0.85 $0.34 4Q12 $0.88 $0.84 $1.34 1Q13 $0.91 $0.86 $0.38 2Q13E $0.93 $0.91 $0.38 3Q13E $1.00 $0.98 $0.38 4Q13E $1.02 $1.00 $0.38 % Change Y/Y Q/Q 18 19 12 3 6 0 2011 $2.92 $2.87 $1.24 2012 $3.36 $3.20 $2.36 2013E $3.85 $3.76 $1.52 2014E $4.25 $4.19 $1.64 12/11 15 12 90 % Change 13E/12 15 18 (36) 14E/13E 10 11 8
INCOMESTATEMENT
Investment Advisory Fees Administrative Fees Distribution and Servicing Fees Net investment income Total Net Revenue Compensation and related costs Advertising and promotion Distribution and servicing costs Other expenses Total Expenses Operating Income Non-operating investment income (loss) Pretax Net Income Tax Rate Aftertax Net Income Less: net income to restricted stock holders Net Income Available to Common Stockholders Shares outstanding (EOP) Weighted avg shares outstanding - Diluted Financial Ratios Operating Margin - GAAP Operating Margin - Adjusted Comp. and Benefits/Total Net Revenue ROE 623.0 82.9 22.2 0.6 728.7 260.7 25.8 22.2 103.8 412.5 316.2 5.1 321.3 38.5% 197.5 (1.0) 196.5 255 261 43.4% 44.8% 36.9% 22% 1,104 1,117 0 $8.71 243 4.7% 13.8% 60 bp 82 14.4% 1.9% 41 bp 229 14.2% 11.1% 36 bp 555 10.1% 10.8% 47 bp 630.0 82.7 23.7 0.4 736.8 261.5 19.8 23.7 103.8 408.8 328.0 7.4 335.4 38.3% 206.8 (1.2) 205.6 254 261 44.5% 46.0% 36.7% 22% 972 1,260 0 $8.80 238 8.7% -4.5% 60 bp 84 4.9% 1.1% 42 bp 220 -2.8% -3.4% 36 bp 542 3.4% -3.2% 47 bp 661.4 83.4 24.4 0.5 769.7 263.8 17.5 24.4 105.1 410.8 358.9 41.4 400.3 38.2% 247.3 (1.6) 245.7 255 260 46.6% 48.2% 35.4% 25% 1,235 1,315 0 $10.01 255 3.7% 6.2% 60 bp 88 11.0% 2.4% 42 bp 232 -0.4% 5.3% 36 bp 574 3.2% 5.2% 48 bp 677.6 83.6 25.8 0.3 787.3 261.6 26.7 25.8 112.0 426.1 361.2 16.9 378.1 38.6% 232.0 (2.1) 229.9 257 262 45.9% 47.4% 34.4% 24% 879 1,346 0 $8.66 257 -2.2% 1.4% 59 bp 90 4.5% 0.9% 42 bp 230 -6.6% 1.0% 36 bp 577 -2.9% 1.1% 47 bp 702.9 86.3 26.2 0.3 815.7 279.1 25.3 26.2 112.5 443.1 372.6 18.3 390.9 38.1% 241.9 (1.8) 240.1 259 265 45.7% 47.2% 35.4% 23% 1,286 1,487 0 $10.70 284 8.1% 8.6% 59 bp 93 10.7% 0.4% 41 bp 240 -7.5% 6.4% 36 bp 617 2.3% 6.5% 47 bp 743.5 90.3 28.0 0.6 862.4 300.0 20.0 28.0 116.6 464.6 397.8 7.4 405.2 38.5% 249.2 (1.8) 247.4 260 266 46.1% 47.7% 36.0% 23% 1,345 1,487 0 $10.90 294 -0.5% 3.5% 60 bp 93 0.5% 0.0% 42 bp 244 -3.0% 2.5% 36 bp 631 -1.3% 2.6% 48 bp 769.8 93.3 29.0 0.6 892.7 300.0 18.0 29.0 118.8 465.7 426.9 6.9 433.8 38.5% 266.8 (1.9) 264.9 260 266 47.8% 49.4% 34.7% 24% 1,413 1,499 0 $11.18 302 3.5% 2.0% 60 bp 95 7.0% 0.8% 42 bp 248 -1.5% 1.6% 36 bp 645 2.1% 1.7% 48 bp 788.4 95.4 29.6 0.6 914.1 300.0 26.0 29.6 120.3 475.9 438.1 6.9 445.1 38.5% 273.7 (2.0) 271.7 261 267 47.9% 49.5% 33.9% 24% 1,484 1,511 0 $11.47 311 3.5% 2.0% 60 bp 98 7.0% 0.8% 42 bp 252 0.0% 1.6% 36 bp 660 2.7% 1.7% 48 bp 18 9 18 50 17 15 1 18 12 14 21 (0) 21 21 51 20 2 2 38 18 24 24 (0) bp 11 0 bp 11 0 bp 17 1 bp 6 5 7 100 6 7 (21) 7 4 5 7 (60) 4 3 1 3 0 0 5 0 2 3 0 bp 0 1 bp 2 (0) bp 2 0 bp 2,349.0 321.2 74.6 2.4 2,747.2 969.8 90.8 74.6 385.0 1,520.2 1,227.0 23.7 2,592.0 332.6 96.1 1.8 3,022.5 1,047.6 89.8 96.1 424.7 1,658.2 1,364.3 70.8 3,004.7 365.3 112.8 2.1 3,484.9 1,179.1 89.3 112.8 468.2 1,849.4 1,635.5 39.5 3,344.1 403.8 125.3 2.4 3,875.7 1,315.0 91.0 125.3 503.0 2,034.4 1,841.3 27.7 10 4 29 (25) 10 8 (1) 29 10 9 11 199 15 14 57 14 1 (1) (2) 39 17 21 (0) bp 16 1 bp 15 (0) bp 18 (0) bp 16 10 17 17 15 13 (1) 17 10 12 20 (44) 17 17 37 17 2 2 69 12 33 21 (0) bp 9 0 bp 9 0 bp 14 1 bp 11 11 11 14 11 12 2 11 7 10 13 (30) 12 11 10 11 1 1 20 3 10 12 0 bp 11 0 bp 9 (0) bp 11 0 bp
1,250.7 1,435.1 1,675.0 1,869.0 38.2% 38.4% 38.4% 38.5% 773.3 883.6 1,031.6 1,149.4 (3.5) 769.8 253 263 44.7% 45.9% 36.3% 23% 898 971 0 $7.38 212 3.1% -3.4% 60 bp 78 6.3% 4.4% 41 bp 200 1.6% -1.2% 36 bp 490 2.9% -1.4% 47 bp (5.5) (7.5) (8.3) 878.1 1,024.1 1,141.1 257 261 45.1% 46.6% 35.8% 23% 879 1,346 0 $8.66 257 4.1% 17.3% 60 bp 90 9.1% 6.7% 41 bp 230 0.7% 14.1% 36 bp 577 3.5% 14.3% 47 bp 261 266 46.9% 48.5% 35.0% 23% 1,484 1,511 0 $11.47 311 3.9% 17.1% 59 bp 98 6.5% 2.1% 42 bp 252 -3.1% 12.5% 36 bp 660 1.5% 12.9% 48 bp 263 268 47.5% 49.1% 35.1% 22% 1,779 1,561 0 $12.68 349 3.9% 8.4% 60 bp 109 8.1% 3.3% 42 bp 274 2.1% 6.8% 36 bp 732 3.8% 7.0% 48 bp
BALANCESHEET($MM)
Cash and cash equivalents Investments Total Borrowings Net Cash and Investments/Share
AUM($B)ANDFEEDATA
STOCK/BLENDED MFs - Ending AUM Net new asset growth (% annualized) Market G/L (%) Investment Management Fees/Avg AUM (% anlzd) BOND/MONEY MARKET MFs - Ending AUM Net new asset growth (% annualized) Market G/L (%) Investment Management Fees/Avg AUM (% anlzd) OTHER PORTFOLIOS - Ending AUM Net new asset growth (% annualized) Market G/L (%) Investment Management Fees/Avg AUM (% anlzd) TOTAL- Ending AUM Net new asset growth (% annualized) Market G/L (%) Investment Management Fees/Avg AUM (% anlzd)
Page 24
June 18, 2013
BMO Capital Markets

18-Jun Price $13.21 $24.21 $7.94 $16.99 $25.56 $276.49 $9.56 $21.59 $26.66 $20.54 $12.09 $40.18 $150.92 $34.54 $19.72 $33.58 $25.86 $23.10 $75.62 $23.96 EPS* P/E Target 2012E 2013E 2014E 2012E 2013E 2014E $18 $1.16 $0.91 $1.15 11.4 14.5 11.5 $31 $3.82 $3.55 $2.75 6.3 6.8 8.8 $9 $0.88 $0.82 $0.83 9.0 9.7 9.6 $19 $1.52 $1.60 $1.65 11.2 10.6 10.3 $25 $1.01 $1.18 $1.40 25.3 21.7 18.3 $300 $13.67 $15.70 $17.20 20.2 17.6 16.1 $10 $1.02 $0.89 $1.00 9.4 10.7 9.6 $26 $1.77 $2.18 $2.55 12.2 9.9 8.5 $31 $2.04 $2.67 $2.90 13.1 10.0 9.2 $22 $0.69 $0.73 $0.85 29.8 28.1 24.2 $11 -$0.52 $0.45 $0.55 nm 26.9 22.0 $42 $1.89 $2.15 $2.45 21.3 18.7 16.4 $163 $8.95 $10.36 $11.45 16.9 14.6 13.2 $36 $1.71 $2.13 $2.35 20.2 16.2 14.7 $22 $2.90 $2.35 $2.25 6.8 8.4 8.8 $33 $2.71 $2.85 $3.28 12.4 11.8 10.2 $27 $2.33 $2.45 $3.00 11.1 10.6 8.6 $30 $2.20 $2.50 $2.85 10.5 9.2 8.1 $82 $3.36 $3.85 $4.25 22.5 19.6 17.8 $26 $1.06 $1.14 $1.25 22.6 21.0 19.2
Mkt Cap ($mm) 4,199 3,387 1,611 4,229 1,327 46,645 707 24,613 8,369 26,291 3,468 4,862 32,087 15,358 14,094 4,207 323 1,039 19,611 13,182
Diversified Financials American Capital (ACAS) Apollo Global Management (APO) Apollo Investment (AINV) Ares Capital (ARCC) Blackhawk Network (HAWK) BlackRock (BLK) BlackRock Kelso Capital (BKCC) Blackstone Group (BX) Carlyle Group (CG) Charles Schwab (SCHW) E*Trade Financial (ETFC) Eaton Vance (EV) Franklin Resources (BEN) Invesco (IVZ) KKR (KKR) Legg Mason (LM) Regional Management (RM) Solar Capital (SLRC) T. Rowe Price Group (TROW) TD Ameritrade Holding (AMTD)
Rating Outperform Outperform Market Perform Market Perform Market Perform Outperform Market Perform Outperform Market Perform Outperform Market Perform Market Perform Market Perform Market Perform Market Perform Underperform Outperform Outperform Market Perform Outperform
Div $0.00 $0.28 $0.80 $1.59 $0.00 $6.72 $1.04 $0.72 $1.54 $0.24 $0.00 $0.80 $1.16 $0.90 $1.34 $0.52 $0.00 $2.40 $1.52 $0.36
Yld 0.0% 1.2% 10.1% 9.4% 0.0% 2.4% 10.9% 3.3% 5.8% 1.2% 0.0% 2.0% 0.8% 2.6% 6.8% 1.5% 0.0% 10.4% 2.0% 1.5%
Book $0.03 $0.00 $0.04 $0.03 $0.94 -$1.60 $0.04 $0.02 $0.00 $7.51 $17.14 $2.94 $20.54 -$0.25 $0.00 $1.94 $0.07 $0.04 $10.65 $8.02
*EPS figures for ACAS, AINV, ARCC, FSC, PNNT and SLRC are net operating income and figures for BX, CG and KKR are economic net income. **Figures for BLK, EV and IVZ are adjusted eps. Source: BMO Capital Markets estimates and company reports.
Page 25
June 18, 2013

Analyst's Certification I, David J. Chiaverini, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Company Specific Disclosures For Important Disclosures on the stocks discussed http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx. in this report, please go to
Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013) We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis; Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis; Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis; (S) = Speculative investment; NR = No rating at this time; and R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Rating System (January 4, 2010 April 4, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3. Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, Thomson Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information. Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research, which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx. General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc.,
Page 26
June 18, 2013
BMO Capital Markets

BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
A member of BMO
Financial Group
Page 27
June 18, 2013
Cenovus Energy
(CVE-TSX; CVE-NYSE)
Stock Rating: Outperform Industry Rating: Outperform
June 18, 2013 Research Comment Calgary, Alberta
Randy Ollenberger
BMO Nesbitt Burns Inc. (403) 515-1502 randy.ollenberger@bmo.com Assoc: Jordan Kula, P.Eng.
Price (18-Jun) Target Price
Price: High,Low,Close
Highlights From Investor Day

Event
Cenovus held an investor meeting in Calgary on June 18 where management highlighted its execution track record, industry leading cost structure, downstream integration and outlook for continued growth. The company has delivered nine phases of oil sands growth over the last decade on time or ahead of schedule at industry leading capital efficiency. The next ten phases of growth are expected to continue this trend and expanding oil sands production to over 500,000 b/d by 2021.
$30.50 $39.00
52-Week High 52-Week Low
$36.25 $28.32
Cenovus Energy Inc. (CVE)

Earnings/Share
2.5 2.0
40 35 30 25 20 100 50 0 150 100 50

CVE Relative to S&P/TSX Comp Volume (mln)
1.5 1.0 0.5 100 50 0 150 100 50
Impact
Neutral.
Forecasts
We are reducing our 2013 earnings estimate to $2.03/share from $2.20 and our 2014 estimate to $1.92/share from $1.96 to reflect a lower contribution from the companys downstream segment as a result of narrower crude oil differentials and sale of the Shaunavon assets. Our outlook assumes that production averages 268,516 boe/d in 2013E and 286,636 boe/d, in 2014E.
2010
2011
2012
2013
Last Data Point: June 17, 2013
(FY-Dec.) EPS P/E CFPS P/CFPS NAV EV/EBITDA ROCE (%) LT Liab. Quarterly EPS 2011A 2012A 2013E Dividend Book Value Shares O/S (mm) Float O/S (mm) Wkly Vol (000s) Net Debt ($mm)
2011A $1.70 $4.32 $33.81 7.4x 13% 24% Q1 $0.36 $0.49 $0.53a $0.97 $13.01 755.8 755.8 12,485 $3,469
2012A $1.73 $4.80 $33.60 7.7x 12% 26% Q2 $0.51 $0.36 $0.48
2013E $2.03 15.0x $4.96 6.1x $36.89 5.9x 13% 25% Q3 $0.37 $0.60 $0.56
2014E $1.92 15.9x $4.81 6.3x $43.54 6.0x 12% 23% Q4 $0.46 $0.28 $0.46 3.2% 2.3x $23,052 $23,052 $406.9 Jul (E)
Valuation
Cenovus remains one of our top recommendations in the group. The company has demonstrated that it has one of the best oil sands asset bases, has delivered industry-leading operating performance and benefits from having downstream operations that provide a hedge on light-heavy crude oil differentials. We believe that the company can deliver compound annual growth in net asset value of 11% per year, roughly twice the peer average. Our target price of $39 implies a 2014E EV/EBITDA multiple of 7.4x and a 10% discount to our 2014 net asset value per share estimate.
Yield Price/Book Mkt. Cap (mm) Float Cap (mm) Wkly $ Vol (mm) Next Rep. Date
Recommendation
We are maintaining our Outperform recommendation.
Changes
Annual EPS 2013E $2.20 to $2.03 2014E $1.96 to $1.92 Annual CFPS 2013E $5.20 to $4.96 2014E $4.91 to $4.81
Notes: All values in C$; EPS are diluted based on continuing operations; CFPS is diluted discretionary Major Shareholders: Widely Held First Call Mean Estimates: CENOVUS ENERGY INC (C$) 2013E: $2.03; 2014E: $2.18
Quarterly EPS Q3/13E $0.67 to $0.56 Q4/13E $0.52 to $0.46
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to pages 15 to 18.
BMO Capital Markets
Cenovus Energy
Highlights & Asset Overview

We are maintaining our Outperform rating and $39 target price. Cenovus is one of our top recommendations due to the combination of predictable high margin oil sands growth, industry leading operational performance and the attractiveness of its downstream hedge. The quality of the companys oil sands asset portfolio is expected to drive compound annual growth in net asset value of 11% per year, roughly twice the peer average. In the meantime, the shares also offer an attractive dividend yield of 3.2%. Our $39 target price implies a 2014E EV/EBITDA multiple of 7.5x and a 10% discount to our 2014 net asset values estimate of $43.54 per share. Cenovus held an investor meeting in Calgary on June 18 where management highlighted its execution track record, industry leading cost structure, downstream integration and outlook for continued growth. The company has developed a top-tier oil sands portfolio generating predictable, reliable growth, in operations that continue to exhibit strong project execution. Strategic integration with downstream operations has insulated Cenovus from challenging and volatile heavy oil prices over the last year and a solid financial position continues to provide capex flexibility. Going forward, the company forecasts oil production to grow 11% annually through to 2023, where it is expected to reach over 500,000 b/d. The company also provided an update on their marketing strategy where they are targeting to transport up to 50% of marketable production by pipeline & rail through firm commitments, with rail capacity increasing to 30,000 b/d by the end of 2014. Notable highlights from the investor meetings include:
Market Access Strategy: Cenovus is targeting to move up to 50% of its marketable production to tide-water through firm commitments on both pipeline and rail. Cenovus plans to grow its rail capacity from 10,000 b/d to roughly 10% of marketable production, which would account for roughly 30,000 b/d in 2014. To accomplish this, Cenovus has ordered 500 rail cars with delivery scheduled for late-2014, which will be equipped to handle diluted bitumen. The cars will be loaded at existing major hubs in Alberta and sent to refineries in the Gulf Coast. Going forward, the company will have the opportunity to increase its rail capacity should the market conditions deem it beneficial. In addition to rail, the company has signed commitments on multiple pipelines to reduce exposure to any single project including access to the West coast on Trans Mountain and Northern Gateway (175,000 b/d) and to the U.S. Gulf Coast on Keystone XL and Enbridge U.S. Gulf Coast access (150,000 b/d). Management also noted that Cenovus is participating in the TransCanada East open season, which could provide another avenue to get production to markets from Western Canada. It is important to note that Cenovus also markets its JV partners production, bringing estimated total marketable production in 2023 to over 1.2 million barrels per day.
Leveraging Downstream: Cenovus holds a 50% interest in two refineries operated by Phillips 66 with a total crude handling capacity of 457,000 b/d, including 235,000255,000 b/d of heavy crude capability. This allows the company to substantially capture the differential between Brent and land-locked crudes as well as providing insulation against volatile light-heavy differentials. The downstream segment has contributed significant cash flow to the company in recent years given the deep pricing discounts of Canadian crudes. While the company is not looking to pursue any downstream acquisitions, debottlenecking
Page 2 June 18, 2013
BMO Capital Markets
Cenovus Energy
at Wood River could increase heavy oil refining capacity by up to 10% for a manageable incremental cost.
FCCL Continues to Perform: Performance at the companys Foster Creek and Christina Lake (FCCL) assets continues to impress with all stages to date coming in on budget and on time. The next stage, Christina Lake Phase E follows suit with first oil scheduled to come online in a matter of weeks. One new development brought up during the presentation regarding Christina Lake is that the company believes it can add 22,000 b/d of gross capacity (11,000 b/d net) by 2015 at an attractive capital efficiency of $10,000 per flowing barrel through the addition of steam generation capacity. This initiative will increase the value of the asset through the acceleration of cash flows and demonstrates another improvement Cenovus has identified to maximize returns on its In Situ assets. Dividend Policy: Cenovus is reiterated its commitment to its dividend program, which it has grown 10% annually for two consecutive years. Management prioritizes dividends ahead of share repurchases and feels it is the best vehicle to illustrate its confidence in its business model and to maintain capital discipline. Given that Cenovus expects to exit 2013 with a three-year cash flow CAGR of 13%, we believe the dividend will continue to grow correspondingly going forward. Technology: When it comes to technology improvements, management believes they are only in the first inning with eight more to go. The company currently has 100 to 150 current technology initiatives including 34 projects that are currently in the piloting and commercialization phase. Historically, Cenovus has budgeted roughly $200 million per year for research and development initiatives and the development of new technology is expected to help reduce non-fuel operating costs to $810 per barrel.
Asset Overview
Cenovus primary upstream assets include Foster Creek/Christina Lake, Narrows Lake and Telephone Lake oil sands projects as well as Pelican Lake heavy oil, Alberta tight oil and shallow gas assets in Southern Alberta. The company also has a significant land base in the Viking play in Southern Saskatchewan. Cenovus upstream assets are complimented by its 50%-share in two U.S. refineries at Wood River, Illinois and Borger, Texas. Recent dispositions include Cenovus Shaunavon assets, which were sold for $240 million to Surge Energy on June 11.
Oil Sands
The primary assets in the upstream portion of the integrated oil segment are currently Foster Creek & Christina Lake (FCCL) in which Cenovus is a 50/50 partner with Conoco Philips. Operating performance of both Foster Creek and Christina Lake continues to be among the best in the oil sands with steam:oil ratios (SOR) currently hovering just over 2.0x. Cenovus has plans in place to expand the two projects through multiple phases of growth to over 600,000 b/d gross production (over 300,000 b/d net) by 2019. Table 1 details the schedule and production capacity for each phase.
BMO Capital Markets

Table 1: Foster Creek, Christina Lake and Narrows Lake Phases
Cenovus Energy
Project Phase Foster Creek A - E F G H J Future phases Total Foster Creek Christina Lake A - D E A-E Debottleneck F G H Total Christina Lake Narrows Lake A B-C Total Narrows Lake Grand Rapids Telephone Lake Total
Source: company reports
First Production Target Q3-2014 2015 2016 2019
Q3-2013 2015 2016 2017 2019 2017 TBD
Production Capacity Gross Net to Cenovus (b/d) (b/d) 120,000 60,000 45,000 22,500 40,000 20,000 40,000 20,000 50,000 25,000 15,000 7,500 310,000 155,000 98,000 49,000 40,000 20,000 22,000 11,000 50,000 25,000 50,000 25,000 50,000 25,000 310,000 155,000 45,000 85,000 130,000 180,000 90,000 1,020,000 22,500 42,500 65,000 180,000 90,000 645,000
2017 TBD
Foster Creek
Foster Creek currently produces roughly 120,000 b/d (gross) from phases AE with plans in place to expand capacity to 310,000 b/d through phases F through H and potential future phases. The property has been assigned 1.08 billion barrels of 2P reserves and 1.3 billion barrels of contingent resource. Operational performance has continued to improve with optimization of water treatment facilities and the success of Cenovus patented Wedge Well technology. Some of the earlier wells at the site have recently been put on blowdown, where the producing well continues to produce oil but steam injection is suspended. Well blowdown increases overall project oil capacity as it frees up steam for earlier stage wells while still producing from maturing wells. New technologies are currently being piloted to extend the productive life of wells on blowdown. Foster Creek has consistently delivered strong performance, as shown in Chart 1 and 2. Operating costs at Foster Creek are expected to average $12.5014.00/bbl in 2013 with an SOR of 2.02.4 in 2012 and year-to-date 2013, generating attractive returns even in a lower oil price environment. Cenovus estimates that WTI price required to generate a 9% return on capital for Foster Creek is as low as US$35 45/bbl.
BMO Capital Markets

Chart 1: Foster Creek vs. Industry Average SOR
12.0
Cenovus Energy
Chart 2: Foster Creek vs. Industry Average Well Rate (b/d)
2,000 1,800
10.0
1,600 1,400 1,200
8.0
6.0
1,000 800
4.0
600 400 200
2.0
0.0
0
O ct Ap 01 rO 02 ct Ap 02 rO 03 ct Ap 03 rO 04 ct Ap 04 rO 05 ct Ap 05 r-0 O 6 ct Ap 06 r-0 O 7 ct Ap 07 r-0 O 8 ct Ap 08 r-0 O 9 ct Ap 09 rO 10 ct Ap 10 rO 11 ct Ap 11 rO 12 ct -1 2
O ct Ap 01 r-0 O 2 ct Ap 02 r-0 O 3 ct Ap 03 rO 04 ct Ap 04 rO 05 ct Ap 05 rO 06 ct Ap 06 rO 07 ct Ap 07 rO 08 ct Ap 08 rO 09 ct Ap 09 rO 10 ct Ap 10 rO 11 ct Ap 11 rO 12 ct -1 2
Foster Inst. SOR Foster Cum. SOR Industry Cum. SOR
Foster
SAGD Average
Source: BMO Capital Markets
Christina Lake
Christina Lake Q1/13 production averaged 44,351 b/d net to Cenovus representing a 79% increase compared to the same quarter as last year and 6% sequentially due to the impressive six-month ramp up of Phase D. The next expansion at Christina Lake is the 40,000 b/d Phase E which is expected to achieve first production in the third quarter of this year and ramp up to design capacity in 69 months, similar to Phase D. Following the ramp up, Christina will have a productive capacity of roughly 140,000 b/d by 2015. Operating costs at Christina Lake are expected to average $11.7013.00/bbl in 2013 with a SOR of 1.72.1 in 2012 and year-to-date 2013. Newly released by Cenovus at the investor day is an additional 22,000 b/d of gross production gained through debottlenecking initiatives expected in 2015, sourced primarily through efficiency gains in water recycle facilities. As shown in Chart 3 and 4, Christina Lake has delivered very strong performance compared to the industry average. Cenovus estimates that WTI price required to generate a 9% return on capital for Christina Lake is roughly US$3545/bbl.
BMO Capital Markets

Chart 3: Christina Lake vs. Industry Average SOR
12.0
Cenovus Energy
Chart 4: Christina Lake vs. Industry Average Well Rate (b/d)
2,000 1,800
10.0
1,600 1,400 1,200
8.0
6.0
1,000 800
4.0
600 400 200
2.0
0.0
pM 02 ar Se 0 3 pM 03 ar Se 0 4 pM 04 ar Se 0 5 pM 05 ar Se 0 6 pM 06 ar Se 0 7 pM 07 ar Se 0 8 pM 08 ar Se 0 9 pM 09 ar Se 1 0 pM 10 ar Se 1 1 pM 11 ar Se 1 2 p12
0
Se pM 02 ar Se 03 pM 03 ar Se 04 pM 04 ar Se 05 pM 05 ar Se 06 pM 06 ar Se 07 pM 07 ar Se 08 pM 08 ar Se 09 pM 09 ar Se 10 pM 10 ar Se 11 pM 11 ar Se 12 p12
Se
CVE Christina Inst. SOR
CVE Christina Cum. SOR
Industry Cum. SOR
CVE Christina
SAGD Average
Narrows Lake
In May 2012, Cenovus announced that it received approval from the Alberta Energy Resources Conservation Board (ERCB) to construct its 130,000 b/d Narrows Lake oil sands project (50% W.I.). The first of three phases will have a design capacity of 45,000 b/d with initial work beginning this fall and first production now anticipated in 2017 (back from previously estimated 2016). The project will utilize a solvent aided process (SAP) whereby butane is injected along with the steam to reduce the viscosity of the bitumen at a lower temperature. This is expected to reduce the amount of steam required to heat the reservoir, improve total recovery and reduce operating costs. Based on its SAP pilot at Christina Lake, Cenovus expects the process to reduce the steam to oil ratio (SOR) by up to 30% and increase total oil recovery by up to 15% compared to steam alone.
Emerging Oil Sands

Cenovus has several other oil sands developments that it is progressing. These include Grand Rapids (100% W.I.) and Telephone Lake (100% W.I.) as well as other non-delineated properties. The company concluded its process to solicit a joint venture partner to develop the Telephone Lake assets in 2012 due to bids not meeting internal hurdles. We believe Cenovus has ample capital to fund Telephone Lake, and could revisit the opportunity to sell down its interest in the asset when more de-risking has taken place. Dewatering at Telephone has been underway since 2012, displacing roughly 40% of the mobile top water to date and should be concluded by year-end 2013. Regulatory approval for Phases A & B (90,000 b/d) is expected in the first quarter of 2014, after which long-lead construction will commence. The property is expected to have a cumulative SOR of 2.1 and a peak production of 300,000 b/d. Cenovus has 2.2 billion barrels of contingent resource already assigned at Telephone Lake and 5.2 billion barrels assigned to the Borealis region. Grand Rapids is undergoing early stage piloting with 30 months of production on their first well pair (with disappointing results) and roughly four
BMO Capital Markets
Cenovus Energy
months of production on their second well pair (which management indicates had very good results). Regulatory approval is expected by the end of 2013 for a 180,000-b/d project with 1.7 billion barrels of contingent resource assigned and a planned SOR of 3.0 to 3.5. Table 2 illustrates the size of the projects that are likely the next candidates for construction.
Table 2: Oil Sands Project Attributes
Foster Creek Working Interest Potential Size (000 b/d gross) Design SOR Supply Cost (US$/bbl WTI) Core Area Well Density (wps) Land Position (net acres) Bitumen Contingent Resource (billion bbls) 2P Reserves (billion bbls) 50% 310 2.1 35-45 8-26 70,080 1.00 1.08
Christina Lake 50% 300 1.7 35-45 8-40 19,520 0.50 0.96
Narrows Lake 50% 130 2.1 SAGD 1.6 SAP 45-55 11-26 13,440 0.10 0.36
Grand Rapid 100% 180 3.0-3.5 55-65 1-8 74,670 1.70 na
Telephone Lake 100% >300 2.1 55-65 0-16 146,560 2.20 na
Source: company reports Note: Telephone Lake regulatory application of 90,000 b/d submitted December 2011
Conventional/Tight Oil Potential

While not the primary focus, Cenovus maintains an impressive portfolio of legacy conventional assets that play an important role in providing underlying cash flow support to the core oil sands business. These include Pelican Lake and other conventional heavy oil. On June 11, 2013, Cenovus sold its non-core tight oil assets in Lower Shaunavon to Surge Energy for cash consideration of $240 million. In 2013, the company forecasts conventional liquids production of 76,00082,000 b/d (after adjustments for the disposition) and gas production of 490540 MMcf/d.
Pelican Lake
Pelican Lake represents a significant source of growth potential, driven by several enhanced oil recovery (EOR) operations. The field is expected to produce approximately 27,000 b/d of heavy oil from the Wabiskaw formation, over the 2012 average of 23,000 b/d. To date, Q1 production was below expectations of 24,500 b/d at 23,700 b/d due to slower response from the companys polymer flood scheme. Management indicated a contributor to the slower ramp up was longer-than-expected injection response from low pressure pads, which are now expected to peak three years after first injection. In contrast, high pressure pads generally peak six months after first injection. Additionally, the delays will keep operating costs relatively high at $16.8018.60/bbl in 2013 as further flooding takes place. While management continues to believe that the asset can reach a peak production rate of 55,000 b/d, it has nonetheless reduced capex at Pelican by $80 million to $480560 million in 2013 to align the timing of facility expansions with revised production response forecasts. Plans to drill an additional 1,000 production and injection wells over the next five to seven years remain unchanged as the
BMO Capital Markets
Cenovus Energy
ultimate deliverability from Pelican Lake remains largely unchanged. Management expects this field to provide $400440 million of operation cash low in 2013, representing a low-risk source of cash flow growth to support the companys core oil sands initiatives.
Conventional Oil
Cenovus holds a large portfolio of conventional oil assets that are expected to contribute roughly a quarter of the corporate total oil production. These assets include heavy oil plays in Wainwright and Suffield, light and medium oil plays in Southern Alberta and Weyburn, and the Saskatchewan Bakken. Cenovus allocates discretionary capital to its conventional oil plays, which it insists have ample running room; however, these assets will have to continually compete with economic SAGD oil sands projects for capital. While likely only to grow modestly going forward, the conventional oil assets are already cash flow positive, and management forecasts them to contribute $760860 million of cash flow in 2013, over their $670740 million capital budget. These assets could be subject to small dispositions going forward as we saw with the Lower Shaunavon earlier this June.
Natural Gas
Cenovus natural gas assets play a dual role of providing cash flow and acting as a hedge against the cost of fuel for both oil sands production and refining. In the longer term, the company intends to manage the decline rate of natural gas production and to focus its low capital expenditures on high-return opportunities such as coalbed methane (CBM) recompletions, which are lower cost given that the infrastructure is already in place. Cenovus estimates that its natural gas assets will produce 490540 MMcf/d and provide operating cash flow of $450490 million in 2013 with only $2530 million of capital being re-invested.
Marketing
Cenovus has embraced a portfolio approach to marketing its product, with initiatives to get crude to west coast, east coast and gulf coast markets. Going forward, the company is targeting to transport up to 50% of its marketable production (corporate production plus JV partner production) through firm commitments and supply contracts. This helps ensure market access in periods of temporary dislocation, which will become increasing prudent as Western Canadian heavy oil production continues to test off-take capacity. Specific commitments are currently in place on the Trans Mountain pipeline (11,500 b/d) and another 30,000 b/d accessing the U.S. Gulf Coast through Pegasus, rail and barge. The company plans to add pipeline commitments on: the Trans Mountain and Northern Gateway (up to 175,000 b/d), Keystone XL and Enbridge U.S. Gulf Coast access (150,000 b/d), and the company is participating in TransCanadas Energy East open season. Reacting to recent pipeline challenges the company plans to grow rail capacity up to 10% of marketable production, with 30,000 b/d of capacity expected by year-end 2014. Cenovus currently is leasing 300 standard rail cars and has 500 heated rail cars on order for lease, slated for delivery in 2014. Receipt of the heated cars will coincide with the migration to dedicated unit trains in lieu of manifest trains, which will materially reduce transportation costs and improve corporate netbacks.
BMO Capital Markets
Cenovus Energy
Downstream
Cenovus holds a 50% interest in two refineries with a total crude capacity of 457,000 b/d, including 235,000255,000 b/d of heavy crude capability. Cenovus and Phillips 66 completed the expansion of the Wood River refinery CORE Project in 2011. In 2012, the company spent just $118 million on downstream refining operations, and plans to spend $100125 million in 2013. With completion of CORE, Wood River now has total crude oil refining capacity of 155,000 b/d net to Cenovus and heavy crude oil refining capacity of 100,000120,000 b/d net. An additional debottlenecking is currently in the planning stages for Wood River to boost heavy oil capacity by an incremental 10%. The location of Cenovus downstream assets allows the company to largely capture the price spread between Brent and land-locked crudes as well as the light-heavy differential as the company currently has a nearly balanced mix of heavy oil refining capacity and production. Downstream operations are expected to provide $1,100 1,700 million of cash flow in 2013, roughly in line with $1.3 billion of cash flow generated in 2012. Management stated that at this time is has no plans for further acquisition of downstream assets although expansions or debottlenecking initiatives are considered from time to time.
Financial Outlook
We are reducing our 2013 earnings estimate to $2.03/share from $2.20 and our 2014 estimate to $1.92/share from $1.96 due to reflect a lower contribution from the companys downstream segment due to narrower crude oil price differentials and sale of the Shaunavon assets. Cash flow is forecast to be $4.96 in 2013 declining to $4.81 in 2014. Our outlook assumes that production averages 268,516 boe/d and 286,636 boe/d, respectively. Cenovus balance sheet is in good shape with net long-term debt of roughly $3.5 billion at the end of the first quarter. This implies debt-to-total capitalization of approximately 26% and debt-to-cash flow (2013E) of 0.9x. These are below the companys target ranges of 3040% debt-to-capital and 1.02.0x debt-to-cash flow. Accordingly the company is well positioned to follow through on its growth program and maintain its dividend.
BMO Capital Markets

Table 3: Cenovus Financial and Operating Summary
2011 1.76 0.73 (0.53) 1.96 1.70 4.34 4.32 33.81 13% 24% 0.9x 47,282 20,424 66,533 134,239 656.0 243,572 177,972 95.14 77.57 4.03 1.012 2012 1.23 0.96 (0.88) 1.31 1.73 4.82 4.80 33.60 12% 26% 0.9x 53,115 22,552 89,736 165,403 594.0 264,403 205,003 94.17 71.82 2.83 1.000 2013e 1.15 1.47 (0.89) 1.73 2.03 4.97 4.96 36.89 13% 25% 0.9x 53,200 25,500 104,750 183,450 510.4 268,516 217,476 91.10 68.65 4.00 1.000 2014e 1.20 1.17 (0.45) 1.92 1.92 4.83 4.81 43.54 12% 23% 0.9x 54,000 32,000 127,250 213,250 440.3 286,636 242,604 85.00 70.55 4.00 1.000 2015e 1.53 1.34 (0.50) 2.37 2.36 5.48 5.46 47.94 14% 22% 0.8x 59,000 37,000 149,250 245,250 383.9 309,231 270,843 85.00 65.45 4.00 1.000
Cenovus Energy
Upstream Downstream Corporate EPS (basic) EPS (continuing diluted) CFPS (basic) CFPS (discretionary) NAV (diluted) ROCE (%) Long Term Liabilities (%) D/CF Production: Conventional Oil (b/d) Pelican Lake Oil Sands Crude and NGL Natural Gas (MMcf/d) Total Production (Boe/d) Total Production (Boe/d @15:1) Commodity Price Assumptions: WTI (US$/bbl) Western Canada Select (C$/bbl) Henry Hub (US$/Mcf) Exchange Rate
2016e 1.89 1.45 (0.52) 2.83 2.82 6.14 6.12 51.22 15% 20% 0.8x 60,000 45,000 185,250 290,250 331.2 345,443 312,327 85.00 63.75 4.50 1.000
CAGR 2017e 2012-17 2.07 11% 1.45 9% (0.50) -11% 3.02 18% 3.01 12% 6.52 6% 6.50 6% 56.38 11% 14% 9% 18% 23% 0.7x 2.0x 63,000 52,000 225,250 340,250 284.0 387,577 359,181 85.00 63.75 4.50 1.000 3% 18% 20% 16% -14% 8% 12% -2% -2% 10% 0%
Valuation
We are maintaining our Outperform rating and target price of $39 for Cenovus. We believe that the shares are attractively valued and warrant an outperform rating principally for three reasons: Execution: Cenovus has delivered nine phases of growth from Foster Creek and Christina Lake since 1998. Virtually every phase has been completed on time or ahead of schedule and at or below budgeted cost. Indeed, Cenovus capital efficiency is the best in the industry with the lowest capital cost per barrel of production for its previous developments. Industry Leading Costs: Cenovus has among the lowest operating and supply costs in the oil sands business, as shown in Chart 5, and among the lowest supply costs globally, as shown in Table 4.
Page 10 June 18, 2013
BMO Capital Markets

Table 4: 15-Lowest Oil Supply Costs on WTI Equivalent Basis (US$/bbl)
Rank Company 1 Freehold FRU 2 GeoResources GEOI 3 Cenovus CVE 4 Gran Tierra GTE 5 Transglobe TGL 6 Pacific Rubiales PRE 7 Approach AREX 8 Petrobank PBG 9 CNOOC CEO 10 BP Plc BP 11 Vermillion VET 12 Penn West PWT 13 Energy EXXI EXXI 14 Oasis OAS 15 Baytex BTE Global Average of Oil Weighted 1999 8.57 16.84 14.71 17.94 15.54 16.65 2000 16.72 26.16 23.78 23.17 26.71 21.68 2001 27.90 20.29 17.92 26.29 35.04 24.05 2002 13.17 20.25 20.03 29.84 23.10 23.51 2003 21.36 22.77 78.47 25.24 26.33 18.40 42.85 26.26 28.28 2004 33.00 29.46 30.31 42.51 29.54 25.74 51.58 43.64 36.59 2005 70.91 144.29 47.47 36.57 53.73 45.95 42.51 37.16 64.71 39.60 49.42 2006 32.92 48.95 99.74 52.95 300.35 91.39 79.94 37.60 46.25 76.54 79.16 49.94 55.08 2007 71.66 36.13 33.25 60.33 66.19 47.51 51.67 70.05 45.49 60.98 83.08 71.30 63.45 60.29 2008 49.15 68.70 48.67 50.21 168.77 58.39 69.69 62.72 127.32 57.69 75.04 80.61 125.81 81.58 84.75 2009 28.05 29.40 44.32 31.97 34.67 47.98 48.32 33.19 54.72 45.44 40.84 50.92 69.62 44.28 58.78 53.94 2010 29.21 36.15 31.05 64.84 64.96 85.81 41.69 67.32 56.91 61.96 75.81 34.46 60.26 60.01 56.76 75.03
Cenovus Energy
2011 34.72 35.39 43.57 43.67 49.20 40.03 68.25 120.99 63.64 74.05 96.08 81.41 71.42 70.83 75.47 71.84
Weighted Avg 3-Year 5-Year 30.39 40.89 33.47 37.30 36.60 37.67 45.43 47.48 47.58 61.53 50.37 49.68 53.25 53.80 58.93 60.02 58.94 69.58 59.29 56.05 60.06 62.35 60.36 74.08 62.72 70.29 63.19 na 64.03 66.10 66.72 69.65
Value Creation: The combination of the companys asset quality, execution capabilities and all-in supply costs positions Cenovus to grow net asset value at a much quicker pace than its peers, as illustrated in Chart 6.
Chart 5: Oil Sands Supply Costs (US$/bbl)
$160 SAGD $140 Mining
Chart 6: 5-Year Net Asset Value Growth vs. EV/EBITDA

NAV Growth Rate (%), EV/EBITDA Multiple (x)
14 12
$120
10
$100
$80
8 6 4 2 0 CVE MEG SU CNQ 2014E EV/EBITDA COS 5-Year NAV Growth Rate
$60
$40
$20
$0
C IM VE O F C o CV ol st e E d La r C k ST hris e CV CV E ME P S ti na E Fo s G C enl M C t e h ac E G hri r E ri s Ch stin x pa tina ris a E nsi IM tin xp o n O a an Ex si Co p on ld La Sy ansi ke nc on Ex rud pa e n SU S sio n Ex u nc H pan or SE s CN M S io n E u Q G n P r S ri s i u e A mro rmo TH se n t Do /Wo A TH CN ver l f Q J A Han K V CV TH g irb E D in gs y Te ov to le er ne ph W on es IM Sh e e La t O ll A ke K CN ear OSP ST Q l P C P T h ST VE Mc her 1 P G Ka ma M ra y l IM c K n d P h O ay R 1 CL K E ap ea xp id L rl an s G E re at S x p sion D U an iv F s CN PX ide ort io n Q X B Ex Hil H la pa ls or ck n iz ro sio on d n E x Ph CN pa 1 n Sy Q H SU sio J n Lo ncru o riz osl ng de on yn L a E x Ph ke pa 1 Ex n si C H p on SU Fr LL SE ans i Fo o nt Gr Tu on rt ier/ eat ck Hi E D er lls qu iv w/ ino ide Lo sun x P ng k c h 1 L a ap ke ita Ph l 1
Table 5 provides a breakdown of our 2013 net asset value estimate for Cenovus. Based on our commodity price outlook, we estimate a risked net asset value of $36.89 per share while at current NYMEX strip prices net asset value is $38.10 per share. We believe the upside potential for Cenovus shares is well illustrated by our unrisked net asset value assessment of $44.67 per share based on our price assumptions and $45.89 per share at the current strip. We believe that as Cenovus de-risks its prospective resources and delineates additional lands, the shares should trade higher toward their unrisked potential.
Page 11 June 18, 2013
BMO Capital Markets

Table 5: Net Asset Value De-Composition
Risked 10% After-Tax BMO Forecast MMboe $million na na na 8,358.3 na 8,358.3 2,467.0 11,166.2 136.6 716.8 2,603.7 11,883.0 2,319.3 2,603.7 14,202.3 2,603.7 (3,402.5) 2,603.7 19,158.1 na na na 3,491.3 185.0 3,676.3 3,676.3 3,676.3 3,676.3 na na na 13,291.3 185.0 13,476.3 8,600.0 22,076.3 22,076.3 22,076.3 na 8,358.3 8,358.3 18,616.6 970.5 19,587.1 2,319.3 21,906.3 (3,402.5) 26,862.1 na 8,358.3 8,358.3 20,433.8 970.5 21,404.3 1,612.5 23,016.8 (3,402.5) 27,972.6 $/boe na na na 4.53 5.25 4.56 na 5.45 (1.31) 7.36 na na na 5.33 5.25 5.33 na 5.96 (0.93) 7.31 na na na 1.54 5.25 1.59 0.19 1.04 (0.15) 1.27 NYMEX Strip $/share $million $/boe $/share na na na na 11.02 8,418.7 na 11.10 11.02 8,418.7 na 11.10 14.73 11,671.5 4.73 15.39 0.95 711.6 5.21 0.94 15.67 12,383.1 4.76 16.33 3.06 2,319.3 na 3.06 18.73 14,702.3 5.65 19.39 (4.49) (3,322.1) (1.28) (4.38) 25.27 19,799.0 7.60 26.11 na 11.02 11.02 24.55 1.28 25.83 3.06 28.89 (4.49) 35.43 na 11.02 11.02 26.95 1.28 28.23 2.13 30.36 (4.49) 36.89 na 8,418.7 8,418.7 19,354.5 963.4 20,317.9 2,319.3 22,637.2 (3,322.1) 27,733.8 na 8,418.7 8,418.7 21,214.8 963.4 22,178.3 1,612.5 23,790.8 (3,322.1) 28,887.4 na na na 5.54 5.21 5.53 na 6.16 (0.90) 7.54 na na na 1.60 5.21 1.65 0.19 1.08 (0.15) 1.31 na 11.10 11.10 25.53 1.27 26.80 3.06 29.85 (4.38) 36.58 na 11.10 11.10 27.98 1.27 29.25 2.13 31.38 (4.38) 38.10 MMboe na na na 13,291.3 185.0 13,476.3 8,600.0 22,076.3 22,076.3 22,076.3
Cenovus Energy
Marketing Downstream Mid/Downstream Asset Value Crude Oil and NGLs Natural Gas Proved Reserves Land Upstream Asset Value Net Debt Proven Net Asset Value Midstream/Chemicals Downstream Mid/Downstream Asset Value Crude Oil and NGLs Natural Gas Proved + Probable Reserves Land Upstream Asset Value Net Debt Proven + Probable Net Asset Value Midstream/Chemicals Downstream Mid/Downstream Asset Value Crude Oil and NGLs Natural Gas Proved + Probable + Possible Resource Land Upstream Asset Value Net Debt Proven + Probable + Possible Net Asset Value Georgraphic split North America Proven North America Proven+Probable North America Proven+Probable+Possible Major projects Oil Sands JV Proven Oil Sands JV Proven+Probable Oil Sands JV Proven+Probable+Possible Borealis/Grand Rapids Oil Sands Proven+Probable+Possible Prospective Resource
Unrisked 10% After-Tax BMO Forecast NYMEX Strip $million $/boe $/share $million $/boe $/share na 8,358.3 8,358.3 21,494.9 970.5 22,465.3 6,450.0 28,915.3 (3,402.5) 33,871.2 na na na 1.62 5.25 1.67 0.75 1.31 (0.15) 1.53 na 11.02 11.02 28.35 1.28 29.63 8.51 38.13 (4.49) 44.67 na 8,418.7 8,418.7 22,284.6 963.4 23,248.0 6,450.0 29,698.0 (3,322.1) 34,794.6 na na na 1.68 5.21 1.73 0.75 1.35 (0.15) 1.58 na 11.10 11.10 29.39 1.27 30.66 8.51 39.17 (4.38) 45.89
2,603.7 3,676.3 13,476.3 1,717.0 2,393.0 4,993.0 7,200.0 8,600.0
11,883.0 19,587.1 21,404.3 4,069.0 7,697.8 6,331.7 3,183.3 1,612.5
4.56 5.33 1.59 2.37 3.22 1.27 0.44 0.19
15.67 25.82 28.22 5.36 10.15 8.35 4.20 2.13
12,383.1 20,317.9 22,178.3 4,175.4 7,822.0 6,473.2 3,209.2 1,612.5
4.76 5.53 1.65 2.43 3.27 1.30 0.45 0.19
16.33 26.79 29.24 5.50 10.31 8.53 4.23 2.13
2,603.7 3,676.3 13,476.3 1,717.0 2,393.0 4,993.0 7,200.0 8,600.0
11,883.0 19,587.1 22,465.3 4,069.0 7,697.8 6,331.7 4,244.3 6,450.0
4.56 5.33 1.67 2.37 3.22 1.27 0.59 0.75
15.67 25.82 29.62 5.36 10.15 8.35 5.60 8.50
12,383.1 20,317.9 23,248.0 4,175.4 7,822.0 6,473.2 4,278.9 6,450.0
4.76 5.53 1.73 2.43 3.27 1.30 0.59 0.75
16.33 26.79 30.65 5.50 10.31 8.53 5.64 8.50
Source: BMO Capital Markets Notes: Asset value for marketing and downstream businesses based on discounted cash flow analysis Net debt estimated at year-end 2013 including net working capital Western Canada undeveloped land valued at $150/acre. Possible includes economic contingent resource and/or estimated commercial resource potential Borealis and Grand Rapids risked at 75% chance of success Prospective Resource included in Land Value Strip pricing as at June 18, 2013.
At current prices the shares are trading at a 2013E EV/EBITDA multiple of 5.9x and a 17% discount to our 2013 net asset value per share estimate. Our $39 target price implies a 2014E EV/EBITDA multiple of 7.5x and a 10% discount to our risked 2014 net asset value estimate of $43.54 per share.
Page 12 June 18, 2013
BMO Capital Markets

Table 6: North American & Multi-National Integrated Oils Valuation Comparables
Ticker Analyst Cenovus CVE RO Hess HES NR Husky Energy HSE RO Imperial Oil IMO RO Murphy MUR NR Suncor SU RO North American Integrateds BP PLC BP NR ConocoPhillips COP NR Chevron CVX NR Exxon Mobil XOM NR Royal Dutch RDS.A NR Total TOT NR Multi-Nationals Shares (mm) 756 343 983 848 191 1,512 3,155 1,223 1,939 4,446 1,899 2,377 Rating OP NR Mkt Mkt NR OP NR NR NR NR NR NR Price 18-Jun 30.50 67.52 28.33 40.52 63.60 31.75 43.29 62.10 121.52 91.93 65.99 51.40 Target 39.00 NR 33.00 47.00 NR 44.00 NR NR NR NR NR NR Return 31% NR 21% 17% NR 41% 27% NR NR NR NR NR NR na 2012 1.73 5.95 2.06 4.34 6.18 3.34 5.55 5.37 12.61 7.56 8.03 5.45 EPS (diluted) 2013e 2.03 6.19 2.08 4.66 5.55 3.95 5.02 5.45 12.33 7.95 8.29 5.02 2014e 1.92 6.10 2.15 4.81 6.62 3.68 5.81 6.00 12.25 8.27 8.30 4.83 P/E 2013e 15.0 10.9 13.6 8.7 11.5 8.0 11.3 8.6 11.4 9.9 11.6 8.0 10.2 9.9 2014e 15.9 11.1 13.2 8.4 9.6 8.6 11.1 7.5 10.4 9.9 11.1 8.0 10.6 9.6 EPS Growth 2013/12 2014/12 17% 5% 2% 1% 1% 2% 7% 5% -5% 3% 18% 5% 7% 4% -10% 5% 1% 12% -2% -3% 5% 9% 3% 3% -8% -11% -2% 2% DPS 2013e 0.97 0.40 1.20 0.50 1.25 0.73 2.16 2.64 3.60 2.28 3.44 3.23
Cenovus Energy
CFPS (diluted) 2012 2013e 2014e 4.80 4.96 4.81 16.62 16.57 16.52 4.96 5.03 5.39 5.94 6.12 6.43 17.75 16.40 19.93 5.91 7.06 7.18 8.78 12.10 19.03 12.12 10.18 9.04 9.68 12.17 20.00 12.07 14.41 10.31 10.30 13.07 21.12 12.72 14.67 10.39
P/CF 2013e 2014e 6.2 6.3 4.1 4.1 5.6 5.3 6.6 6.3 3.9 3.2 4.5 4.4 5.1 4.9 4.5 4.2 5.1 4.8 6.1 5.8 7.6 7.2 4.6 4.5 5.0 4.9 5.5 5.2 P/NAV 2013e Strip* 0.8 0.8 na na 0.9 0.9 0.8 0.8 na na 0.7 0.8 0.80 0.8 na na na na na na na na na na na na na na RLI Proven 22.2 10.5 10.3 29.5 8.5 19.2 16.7 14.0 15.0 11.9 16.3 11.6 14.2 13.8
Ticker Cenovus CVE Hess HES Husky Energy HSE Imperial Oil IMO Murphy MUR Suncor SU North American Integrateds BP PLC BP ConocoPhillips COP Chevron CVX Exxon Mobil XOM Royal Dutch RDS.A Total TOT Multi-Nationals
Mkt Cap Net Debt Ent Val ($bn) ($bn) ($bn) 23.1 3.5 26.5 23.2 7.5 30.6 27.8 1.8 29.6 34.3 4.0 38.3 12.1 1.2 13.3 48.0 6.0 54.0 136.6 75.9 235.6 408.8 125.3 122.2 28.7 18.1 (9.0) 2.0 19.2 16.3 165.3 94.0 226.6 410.8 144.5 138.4
EV/EBITDA 2013e 2014e 5.9 6.0 4.2 4.2 5.2 5.0 6.6 6.2 3.7 3.2 3.7 3.8 4.9 4.7 4.1 4.0 4.2 3.9 4.1 4.0 5.0 4.9 2.2 2.2 4.2 4.1 4.0 3.9
Lt Liab 2012e 26% na 8% 19% na 13% 17% na na na na na na na
D/CF 2013e 0.9 1.3 0.5 1.4 nm 0.4 0.9 0.9 1.2 nm 0.0 0.7 0.7 0.7
2014e 0.9 nm 0.5 1.2 nm 0.5 0.8 0.9 1.1 nm 0.0 0.7 0.7 0.7
ROCE 2013e 2014e 13% 12% na na 10% 10% 17% 15% na na 13% 12% 13% 12% na na na na na na na na na na na na na na
Yield 2013e 3.2% 0.6% 4.2% 1.2% 2.0% 2.3% 2.3% 5.0% 4.3% 3.0% 2.5% 5.2% 6.3% 4.4% Growth 12-14 1% na 2% 8% na 4% 4% 2% 4% 3% 2% 3% 3% 3%
NAV 2013e 36.89 na 33.32 51.56 na 44.05 na na na na na na
Strip* 36.14 na 32.94 51.28 na 41.98 na na na na na na
Ticker Cenovus CVE Hess HES Husky Energy HSE Imperial Oil IMO Murphy MUR Suncor SU North American Integrateds BP PLC BP ConocoPhillips COP Chevron CVX Exxon Mobil XOM Royal Dutch RDS.A Total TOT Multi-Nationals
2011 656 623 607 254 457 458 3,056 6,807 4,516 4,941 13,162 8,986 6,098 44,510
Natural Gas (Mmcf/d) 2012 2013e 594 510 616 na 554 542 192 217 490 na 290 146 2,736 1,416 6,609 na 4,245 na 5,074 na 12,322 na 9,449 na 5,880 na 43,579 na
2014e 510 na 542 217 na 146 1,416 na na na na na na na
2011 134 266 211 255 103 470 1,440 1,285 866 1,849 2,312 1,666 1,226 9,204
Crude & Liquids (000 b/d) 2012 2013e 183 165 303 na 209 225 250 296 113 na 497 561 1,537 1,265 1,179 na 871 na 1,764 na 2,185 na 1,633 na 1,220 na 8,852 na
2014e 183 na 225 296 na 561 1,265 na na na na na na na
Corporate (000 boe/d) 2011 2012 2013e 244 264 269 370 406 na 312 302 316 297 282 332 179 194 na 546 545 585 1,949 1,993 1,501 2,420 2,281 na 1,619 1,579 1,626 2,673 2,610 na 4,506 4,239 na 3,164 3,208 3,311 2,242 2,200 2,255 16,622 16,115 7,191
2014e 269 na 316 332 na 585 1,501 na 1,675 na na 3,401 2,311 7,387
%Oil Proven Resource 2013e mmboe mmboe 68% 2,175 12,669 na 1,553 na 71% 1,192 14,335 89% 3,574 15,000 na 604 na 96% 4,099 30,360 81% 2,200 18,091 52% 11,685 68,000 55% 8,642 40,000 68% 11,347 62,000 52% 25,164 87,000 51% 13,556 60,000 55% 11,400 40,000 55% 81,794 357,000
Source: BMO Capital Markets Note: BMO Capital Markets Commodity Price Forecasts: 2013 US$91.10, 2014 US$85; Henry Hub Natural Gas: 2013 US$4.00, 2014 $US4.00. Per share values for Canadian companies in Canadian dollars, all others in U.S. dollars. *Strip NAV priced as of June 13, 2013.
Page 13 June 18, 2013
BMO Capital Markets
Cenovus Energy
Cenovus Energy
Outperform
Price (Jun-18)
$ 30.50
Target
$ 39.00
Cenovus is an integrated oil and gas company formed in December 2009 as a result of the split with Encana. Cenovus will focus on the development of bitumen assets in Alberta, supported by existing conventional oil and gas assets. Cenovus holds a 50% interest in an integrated oil sands joint venture with ConocoPhillips, under which the company retains 50% of SAGD oil sands assets at Foster Creek and Christina Lake, as well as 50% working interests in two U.S. refineries at Wood River and Borger. Website: cenovus.com Financial 2012 2013E 2014E 2015E 2016E 2017E Production 2012 2013E 2014E 2015E 2016E 2017E 78,700 86,000 96,000 105,000 115,000 EPS $ 1.73 $ 2.03 $ 1.92 $ 2.36 $ 2.82 $ 3.01 North America Conventional Oil (b/d) 75,667 First Call consensus $ 2.01 $ 2.11 $ 2.43 International Conventional Oil (b/d) CFPS $ 4.80 $ 4.96 $ 4.81 $ 5.46 $ 6.12 $ 6.50 Oil Sands (b/d) 89,736 104,750 127,250 149,250 185,250 225,250 First Call consensus $ 4.86 $ 5.10 $ 5.65 North America Natural Gas (mmcf/d) 594 510 440 384 331 284 EBITDA ($/sh) $ 4.80 $ 4.96 $ 4.81 $ 5.46 $ 6.12 $ 6.50 International Natural Gas (mmcf/d) DPS $ 0.88 $ 0.97 $ 0.97 $ 0.97 $ 0.97 $ 0.97 Total Production (boe/d 6:1) 264,403 268,516 286,636 309,231 345,443 387,577 ROCE (%) 12% 13% 12% 14% 15% 14% Total Production (boe/d 15:1) 205,003 217,476 242,604 270,843 312,327 359,181 Long-term Liabilities (%) 26% 25% 23% 22% 20% 18% %Natural Gas (6:1) 37% 32% 26% 21% 16% 12% Y-o-Y Growth (% 6:1) 2% 7% 8% 12% 12% Cash Flow from Ops ($mm) 3,643 3,760 3,649 4,141 4,642 4,930 Y-o-Y Production/Share Growth (%) 2% 7% 8% 12% 12% Capital Spending ($mm) (3,336) (3,317) (2,873) (3,516) (3,946) (4,091) Dividends ($mm) (665) (732) (732) (732) (732) (732) Refining Capacity (net 000 b/d) 228,500 228,500 228,500 228,500 228,500 228,500 Free Cash Flow ($mm) (358) (289) 44 (107) (35) 108 Netbacks ($/boe) Revenue Royalties Transportation Operating Costs Field Netback G&A Interest Other Cash Taxes Cash Netback F&D (proved) Recycle Ratio DD&A Effective Tax Rate (%) 2009 59.19 (2.86) (0.46) (15.81) 40.06 (2.02) (2.33) (10.26) 25.44 4.87 5.2x 13.10 30% 2010 57.12 (4.88) (0.37) (20.32) 31.55 (2.66) (2.96) (0.89) 25.04 3.25 7.7x 12.76 14% 2011 64.13 (5.50) (0.40) (25.81) 32.41 (2.48) (2.71) (1.73) 25.49 3.05 8.3x 12.65 33% 2012 67.04 (4.00) (0.38) (29.92) 32.75 (2.48) (2.44) (3.19) 24.64 4.35 5.7x 14.33 44% 2013E 67.73 (2.92) (0.39) (35.01) 29.42 (2.78) (2.46) (4.06) 20.11 5.00 4.0x 16.38 34% 2014E 73.34 (5.18) (0.33) (38.60) 29.23 (2.93) (2.56) (5.92) 17.82 5.00 3.6x 16.07 28% Reserves Proved Conventional Oil (mmbbls) Proved Oil Sands (mmbbls) Proved Natural Gas (Bcf) Total Proved (mmboe 6:1) Y-o-Y Growth (%) Y-o-Y Proved/Share Growth (%) %Proved Undeveloped Probable Oil (mmbbls) Probable Oil Sands (mmbbls) Probable Gas (Bcf) Contingent Oil (mmbbls) Contingent Oil Sands (mmbbls) Contingent Gas (Bcf) Undeveloped Land (000 acres) 2009 277 866 1,529 1,398 2010 280 1,154 1,390 1,666 19% 19% 65% 146 523 410 na 6,100 na 3,097 2011 290 1,455 1,203 1,946 17% 16% 70% 160 490 391 na 8,200 na 3,293 2012 299 1,717 955 2,175 12% 12% 74% 161 676 338 na 9,600 na 3,480 2013E 499 1,968 820 2,604 20% 20% 74% 269 756 290 na 9,600 na 3,480 2014E 701 2,222 711 3,041 17% 17% 74% 378 836 252 na 9,600 na 3,480
43% 156 479 436 na na na 3,316
Valuation P/E P/CF D/CF EV/EBITDA Dividend Yield (%) Earnings Payout Ratio (%) EV/Production ($/boe/d) EV/Proven ($/boe) EV/Proven+Probable ($/boe) Proved NAV ($/sh) P/NAV Proved+Probable NAV ($/sh) P/NAV Proved+Probable+Possible NAV ($/sh) P/NAV Commodity Assumptions WTI (US$/bbl) Brent (US$/bbl) Edmonton Par (C$/bbl) WCS (C$/bbl) Henry Hub (US$/mcf) AECO (C$/mcf) Exchange Rate (C$/US$) Hedges Oil Volume (b/d) Average Price (US$/bbl) Gas Volume (mmcf/d) Average Price (US$/mcf) Market Data Mkt Cap ($mm) Net Debt ($mm) Ent Value ($mm)
2012 17.6x 6.4x 0.1x 7.3x 2.9% 51% 100,242 12.18 8.64 23.90 1.3x 32.90 0.9x 33.60 0.9x
2013E 15.0x 6.2x 0.1x 7.0x 3.2% 48% 98,706 10.18 7.21 25.27 1.2x 35.43 0.9x 36.89 0.8x
2014E 15.9x 6.3x 0.1x 7.3x 3.2% 51% 92,467 8.71 6.17 27.88 1.1x 39.92 0.8x 43.54 0.7x 2014E $ 85.00 $ 95.00 $ 83.00 $ 70.55 $ 4.00 $ 3.50 $ 1.00 2015E $ 85.00 $ 93.00 $ 83.00 $ 65.45 $ 4.00 $ 3.50 $ 1.00
Peer Averages 2013E 2014E 11.6x 12.2x 5.9x 5.7x 0.6x 1.2x 11.0x 7.1x 3.0% 3.3% 31% 32% 91,747 90,692 13.73 13.63 5.91 6.05 na na 1.6x 1.2x na na 1.0x 1.0x na na 0.8x 0.8x 2016E $ 85.00 $ 93.00 $ 83.00 $ 63.75 $ 4.50 $ 4.00 $ 1.00 2017E $ 85.00 $ 93.00 $ 83.00 $ 63.75 $ 4.50 $ 4.00 $ 1.00
Balance Sheet ($mm) Current Assets Other Net PP&E Total Assets Current Liabilities Other Long Term Debt Total Liabilities Common Shares Preferred Shares Retained Earnings/Cont Surplus Total Liabilities and Equity Shares Outstanding (million) Operating Regions
2009 2,457 3,963 12,629 19,049 2,015 5,569 3,656 11,240 3,681 4,128 19,049 751
2010 2,782 3,721 13,340 19,843 2,503 5,510 3,432 11,445 3,716 4,679 19,840 753
2011 3,911 3,079 15,204 22,194 3,388 5,873 3,527 12,788 3,780 5,626 22,194 758
2012 4,579 2,200 17,437 24,216 3,270 6,461 4,679 14,410 3,829 5,977 24,216 759
2013E 4,876 2,118 18,310 25,304 3,567 6,605 4,712 14,883 3,846 6,574 25,304 758
2014E 4,876 2,118 19,298 26,292 3,567 6,916 4,668 15,150 3,846 7,296 26,292 759
2012 2013E $ 94.17 $ 91.10 $ 111.69 $ 108.78 $ 86.34 $ 85.72 $ 71.74 $ 68.65 $ 2.83 $ 4.00 $ 2.38 $ 3.61 $ 1.00 $ 1.00 2013E 2014E 37,000 $ 111.04 $ 166.0 $ 4.64 $ -
Management Michael Grandin, Chairman Brian Ferguson, CEO John Brannan, COO Ivor Ruste, CFO
23,134 3,370 26,504
Book Value 52-Week High Wkly Vol (000s) EPS 2011A 2012A 2013E
$ 12.97 $ 36.25 12,529 1Q $ 0.36 $ 0.50 $ 0.53
Price/Book 52-Week Low Wkly $ Vol (mm) 2Q $ 0.51 $ 0.36 $ 0.48 3Q $ 0.37 $ 0.60 $ 0.56
2.4x $ 28.32 410 4Q $ 0.46 $ 0.28 $ 0.46
Mgmt and Directors Shares: <1% Major Shareholders: widely held
Notes: Peer Average includes Canadian Natural, Canadian Oil Sands, Husky Energy, Imperial Oil, MEG Energy and Suncor Source: Company reports, BMO Capital Markets estimates.
Page 14 June 18, 2013
BMO Capital Markets
Cenovus Energy
Cenovus Energy Inc. (CVE)

Quarterly Price 50 38 36 34 32 30 28 26 38 45 36 34 32 30 28 25 26 20 CVE Relative to S&P/TSX Comp. CVE Relative to Oil/Gas/Consumable Fuels 130 120 110 100 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Revenue / Share Price / Revenue 130 120 110 100 80 2011 2012 80 2013 120 120 CVE Relative to S&P/TSX Comp. CVE Relative to Oil/Gas/Consumable Fuels 20 25 40 35 30 40 35 30 45 Target Price Share Price 50
140
140
100
100
25 20 15
4 2
50
CVE Relative to S&P/TSX Comp. Y/Y (%) CVE Relative to Oil/Gas/Consumable Fuels Y/Y (%)
50
-50 0 EPS (4 Qtr Trailing) Price / Earnings
2011
2012
-50 2013
4 2
50
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
FYE (Dec.) 2009 2010 2011 2012 Range*: Current*
EPS $ 2.03 1.07 1.70 1.73
P/E Hi - Lo 15.8 31.2 22.9 22.9 31.2 12.2 22.7 17.0 17.4 12.2
DPS $ 0.85 0.80 0.80 0.88
Yield% Hi - Lo 3.5 3.3 2.8 2.9 3.5 2.7 2.4 2.1 2.2 2.1
Payout % 42 75 47 51
BV $ 12.8 11.2 12.5 13.0
P/B Hi - Lo 2.5 3.0 3.1 3.1 3.1 1.9 2.2 2.3 2.3 1.9
ROE % 9 14 14
CVE - Rating as of 27-May-10 = OP
1.77
17.5
0.97
3.1
55
13.0
2.4
14
Page 15 June 18, 2013
BMO Capital Markets
Cenovus Energy
IMPORTANT DISCLOSURES Analyst's Certification I, Randy Ollenberger, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Company Specific Disclosure Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to this issuer within the past 12 months. Disclosure 2: BMO Capital Markets has provided investment banking services with respect to this issuer within the past 12 months. Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to this issuer within the past 12 months. Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from this issuer within the past 12 months. Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months. Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months: Investment Banking Services & Non-Securities Related Services. Disclosure 8: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of this issuer. Disclosure 9: BMO Capital Markets makes a market in this security. Methodology and Risks to Price Target/Valuation Methodology: Our target price is based on an NAV analysis and review of comparable company trading multiples. Risks: Volatile commodity prices as a result of geopolitical issues and supply and demand factors may negatively impact Cenovus' cash flows and economic returns. Steeper-than-forecast decline rates for the company could result in lower production levels. Higher commodity prices could lead to higher capital and operating costs. Company reserves are the best estimate at the effective date of the estimate and are subject to subsequent, possibly material, negative revisions. As well as the above-mentioned risks, the potential of extraordinary upstream or downstream operational events, such as well blow-outs, pipeline breaks, unexpected refinery shutdowns or other environmental issues, could have a material impact on the company's share price. Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013): We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis on a total return basis (S) = speculative investment; NR = No rating at this time; R = Restricted Dissemination of research is currently restricted.
Page 16 June 18, 2013
BMO Capital Markets
Cenovus Energy
BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Ratings System (January 4, 2010April 5, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3. Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, FIRST CALL Research Direct, Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information. Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx. General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
Page 17 June 18, 2013
BMO Capital Markets
Cenovus Energy
ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST BMO Financial Group (NYSE, TSX: BMO) is an integrated financial services provider offering a range of retail banking, wealth management, and investment and corporate banking products. BMO serves Canadian retail clients through BMO Bank of Montreal and BMO Nesbitt Burns. In the United States, personal and commercial banking clients are served by BMO Harris Bank N.A., (Member FDIC). Investment and corporate banking services are provided in Canada and the US through BMO Capital Markets. BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A (Member FDIC), BMO Ireland Plc, and Bank of Montreal (China) Co. Ltd. and the institutional broker dealer businesses of BMO Capital Markets Corp. (Member SIPC), BMO Nesbitt Burns Securities Limited (Member SIPC) and BMO Capital Markets GKST Inc. (Member SIPC) in the U.S., BMO Nesbitt Burns Inc. (Member Canadian Investor Protection Fund) in Canada, Europe and Asia, BMO Capital Markets Limited in Europe, Asia and Australia and BMO Advisors Private Limited in India. Nesbitt Burns is a registered trademark of BMO Nesbitt Burns Corporation Limited, used under license. BMO Capital Markets is a trademark of Bank of Montreal, used under license. "BMO (M-Bar roundel symbol)" is a registered trademark of Bank of Montreal, used under license. Registered trademark of Bank of Montreal in the United States, Canada and elsewhere. TM Trademark Bank of Montreal
COPYRIGHT 2013 BMO CAPITAL MARKETS CORP

A member of BMO Financial Group
Page 18 June 18, 2013
June 19, 2013
QEP Resources
(QEP-NYSE)
Energy: Exploration & Production

Dan McSpirit
BMO Capital Markets Corp. 303-436-1117 dan.mcspirit@bmo.com
Regaining Confidence
Event
In early June, QEP released results on its first four-well pad located on the acquired South Antelope leasehold in the Williston Basin. Strong initial rates. This followed the early-May announcement of the forming of QEP Midstream Partners, LP (proposed: QEPM). We see the former (accelerated Bakken and Three Forks value capture) as the use of proceeds, whereas the latter (QEPM) is another source. The two together can better define the companys game plan of driving returns and, in turn, make more transparent the stocks value, in our view. That was our chief takeaway from meetings BMOCM recently hosted between QEP's management and selected investors. It also represents the focus of this comment. Here, we take a closer look at Williston Basin well results, both those operated on the South Antelope properties and the Fort Berthold acreage. We also calculate standard deviations and compare it to our applied type curve. We take a first (published) cut at valuing QEPM separate from QEP. Lots of assumptions involved, from distributions to ownership.
Securities Info
Price (18-Jun) 52-Wk High/Low Mkt Cap (m m) Shs O/ S (m m, BASIC) Options O/S (mm) $29.71 $34/$24 $5,326 179.3 na Target Price Dividend Yield Float O/S (mm) ADVol (30-day, 000s ) $35 $0.08 0. 3% 177.6 1, 784
Price Performance
QEP Reso urces , In c. (Q EP)
Pric e: Hig h,Lo w , Close( US$ ) Relative t o S&P 50 0
120 110 100
45 40
90 35 80 30 70 25 20 60 Volum e (m ln) 60 50 60 40 20 2008 2009 2010 2011 2012 2013 0
Impact
Better. We launched on QEP in mid-September 2012. The stock has done little since that time. Kind of painful. The story is changing in a way that makes more certain the upstream asset portfolio could be deeper and less wide in the periods ahead, and that the value of the midstream assets is showcased. Reinvestment of proceeds raised in the midstream IPO is the trick. The company has more work to do on both fronts, but believe these moves - and others - help prompt the market to re-rate the shares. We see the risk/reward as favorable at current trading levels in which to gain exposure to this evolution.
40 20 0
Las t Data Poi n t: June 14, 2013
(FY-Dec.) EPS Pro Forma P/E First Call C ons. EPS GAAP DCF P/DCF EBITDA ($mm) EV/EBITDA Rev. ($mm) EV/Rev Produc tion (Bcf e) Quar terl y EPS 2012A 2013E 2011A $1. 77 2012A $1. 24 2013E $1.60 18.6x $1.51 na $8.11 3.7x $1,520 5.7x $3,160 2.8x 314. 2 3Q $0.19 $0.44 2014E $1. 87 15.9x $1. 84 na $9. 28 3.2x $1,814 4.8x $3,740 2.3x 335.6 4Q $0. 33 $0. 52
na $7. 41 $1,387 $3,159 275.4 1Q $0. 41 $0. 28A
na $6. 55 $1, 405 $2, 350 319.2 2Q $0. 31 $0. 36
Forecasts
We are revising our estimates from those last published May 1.
Valuation
Our $35 target price is based on an NAV analysis that yields $37 on the BMOCM price deck and which includes value for the companys midstream assets, both those included in the contemplated partnership and those retained by QEP. The absolute valuation analysis for the upstream assets is grounded in well economics models for each of the company's operations.
Recommendation
We rate QEP Outperform.
Changes
Annual EPS 2013E $1.77 to $1.60 2014E $1.85 to $1.87 Annual DCF 2013E $8.31 to $8.11 2014E $8.82 to $9.28
Balance Sheet Data ( 31-Mar ) Net D ebt ($mm) $3, 364 T ot alDebt /EBITDA 2.2x Total Debt ($mm) $3, 368 EBITDA/IntExp 9.6x Net D ebt/ Cap. 50.5% Price/ NAV 0.8x Notes: All v alues in US$ Source: BMO Capital Markets es timat es , Bloomberg, Thomson Reut ers, and IHS Global Insight.
Quarterly EPS Q2/13E $0.42 to $0.36 Q3/13E $0.50 to $0.44 Q4/13E $0.58 to $0.52
BMO Capital Markets
QEP Resources
Exhibit 1. Peak Oil Production Map and QEPs South Antelope Leasehold
COMMENT: We begin our review of the companys Williston Basin leasehold by creating a map of relative production based on peak oil rates. The map is organized by operator. QEP-operated wells are identified in green. We highlight the companys South Antelope leasehold, which totals ~28k net acres. QEP announced the ~$1.4 billion cash acquisition in August 2012. At the time production was ~10.5 MBOE/d. We limited our search to those wells completed January 2012 or later. We did so in an effort to capture the latest and greatest completion techniques. We say latest and greatest knowing that recent developments in completion design using a combination of slickwater, cemented liner, and plug-n-perf could yield greater recoveries. The theory is that keeping the frac closer to the wellbore may result in greater recoveries and not just accelerated production. We'll see. We expect QEP to remain an observer, at least in these early stages of developing and refining the technique. We can see that Bakken and Three Forks producers located on the South Antelope acreage yield some of the highest peak rates. (These wells were first operated by privately owned Helis Oil & Gas Company, the seller of the leasehold.) Not surprising. Its expected that this leasehold will yield recoveries of ~1.0 MMBOE or more per location. Our review of actual production history and its comparison to the BMOCM applied type curve found later in this comment supports the same conclusion.
South Antelope
Source: BMO Capital Markets estimates, HPDI and company reports.
Page 2
June 18, 2013
BMO Capital Markets
QEP Resources
Exhibit 2. Williston Basin Production Curves by Year of First Production

COMMENT: Continuing our review of the companys Williston Basin leasehold we pulled and plotted the production history on all Bakken and Three Forks producers and created production curves by year, from 2008 to the present day. Time on the x-axis. Oil-equivalent daily production rates on the y-axis. We can see an upward movement of the production curves over time, with more recent vintage wells 2012 (brown) and 2013 (yellow) yielding higher rates, at least in the first 12 or so months of production. The still somewhat narrow spread of results over time, however, may tell us that developments in completion design that can result in greater recoveries may be offset by the drilling of less core (read: less prolific) leasehold over the same periods. These production plots give us greater context in which to analyze and judge QEP-operated well results. Thats where we go next. In the exhibits that follow we show actual production results from wells located on the South Antelope and Fort Berthold leasehold. Doing so helps us build what we believe to be reasonable type curves, ones that drive both our production estimates and absolute valuation analysis. It also helps us confirm what the company purports in terms of estimated recoveries.
Page 3
June 18, 2013
BMO Capital Markets
QEP Resources
Exhibit 3. QEP-Operated Williston Basin Production History & BMOCM Type Curves
COMMENT: We pulled and plotted the Bakken and Three Forks production history from QEP-operated wells located in the Williston Basin. We limited the plots to the first 12 months of production. Included is the mean for all wells (red), BMOCMs applied type curve (blue) and the average rate on wells completed in 2012 or later (green). Generally, we build our type curves based on actual production, not what an operator estimates. Generally, the production history supports what the operator estimates. We believe that to be the case with QEP. We apply a ~923 MBOE gross EUR in valuing the South Antelope leasehold. We get comfort from this recovery estimate again, one that drives both our production estimates and absolute valuation analysis when we compare it to actual results, especially from wells completed in 2012 or later. This confidence is also illustrated in the next exhibit where we calculate the standard deviation from the population of well results.
QEP-Operated (Helis) South Antelope Producers Mean, BMOCM Type Curve and 2012+ Completions 3,000 2,500 2,000 BOE/d 1,500 1,000 500 0 1 2 3 4 5 6 Month 7 8 9 10 11 12
We gain the same comfort when reviewing actual production results from wells located in the Fort Berthold (reservation) area in Dunn County, North Dakota. We apply a ~634 MBOE gross EUR in valuing this leasehold.
QEP-Operated Fort Berthold Producers Mean, BMOCM Type Curve and 2012+ Completions 1,600 1,400 1,200 BOE/d 1,000 800 600 400 200 0 1 2 3 4 5 6 Month 7 8 9 10 11 12
Page 4
June 18, 2013
BMO Capital Markets
QEP Resources
Exhibit 4. Standard Deviations

COMMENT: In an effort to gain even greater confidence in our applied type curve (blue), we calculated the standard deviation of the South Antelope production results as first illustrated in the previous exhibit. The grey area in the chart illustrates one standard deviation, plus and minus. We can see that the BMOCM applied type curve falls well within one standard deviation of the mean. Expected, as the BMOCM type curve fits the mean as presented earlier.
QEP-Operated (Helis) South Antelope Producers Mean, BMOCM Type Curve and +/-1 Standard Deviation of BMOCM Type Curve 2500 2000 BOE/d 1500 1000 500 0 1 2 3 4 5 6 Month 7 8 9 10 11 12
We conducted the same analysis on the companys Fort Berthold area producers. Again, the grey area in the chart illustrates one standard deviation, plus and minus. Same conclusion: the BMOCM applied type curve falls well within one standard deviation of the mean. Again, expected.
QEP-Operated Fort Berthold Producers Mean, BMOCM Type Curve and +/-1 Standard Deviation of BMOCM Type Curve 1,600 1,400 1,200 BOE/d 1,000 800 600 400 200 0 1 2 3 4 5 6 Month 7 8 9 10 11 12
Source: BMO Capital Markets estimates and company reports.
Page 5
June 18, 2013
BMO Capital Markets
QEP Resources
Exhibit 5. South Antelope Field-Level Economics

COMMENT: To drill and complete a Bakken/Three Forks producer on the South Antelope leasehold costs ~$11.0 million today. (Same on the Fort Berthold leasehold.) That ~$11.0 million D&C cost at South Antelope could be reduced by as much as 10% by the end of the year. (The D&C cost on the reservation is unlikely to change, at least by the same amount and over the same time horizon; really the cost of doing business on the reservation.) The South Antelope leasehold is now permitted for four-well pad development, so assumptions on efficiency gains and resulting cost reductions look less like a leap. Were still assuming $11.0 million for valuation purposes. Our well economics model drives an approximate 50% return. We present below what the return looks like with savings of $500,000 to $1.0 million per well.
Summary Well Economics Input / Output (not PV-10 values) @ $11.0MM D&C $11.0 1,375.0 922.7 738.2 80% South Antelope @ $10.5MM D&C $10.5 1,375.0 922.7 738.2 80% @ $10.0MM D&C $10.0 1,375.0 922.7 738.2 80%
INPUT D&C cost ($MM) 30-Day IP rate (BOE/d) EUR (MBOE), gross EUR (MBOE), net Year 1 decline rate
OUTPUT NPV/well ($MM) NPV/BOE IRR, after tax F&D Cost ($/BOE), implied Recycle ratio Payback
@ $11.0MM D&C $9.2 $12.44 51% $14.90 3.7x 2.9x
@ $10.5MM D&C $9.4 $12.78 55% $14.22 3.7x 3.0x
@ $10.0MM D&C $9.9 $13.41 62% $13.55 3.9x 3.2x
The company will soon have five rigs running on its South Antelope leasehold. (A total of eight rigs should be running this year, a sum that includes three rigs running on the Fort Berthold acreage.) The company estimates a total of ~300 gross locations at South Antelope. We assume about the same for modeling purposes. We see this location count largely drilled by the early part of 2016, assuming five rigs running through 2014 and increasing to six rigs in 2015. It doesnt last forever, and thats our chief concern today with the QEP story. Finding an operation that can pick up where South Antelope leaves off in terms of generating returns is the trick. (We show an individual Haynesville Shale well returning ~20% at $6.00/MMBtu long-term, believe it or not; starts to look competitive with what the Bakken/Three Forks Fort Berthold operation generates, by our estimates.)
Page 6
June 18, 2013
BMO Capital Markets
QEP Resources
Exhibit 6. Introducing QEPM

COMMENT: QEP Midstream Partners LP (proposed: QEPM), a wholly owned subsidiary of QEP Resources, announced on May 9 that it had filed an S-1 registration statement with the SEC. The S-1 is in anticipation of an initial public offering of common units representing a limited partnership interest in QEPM. QEP will raise proceeds through the offering by selling 49% of the common units to public unit holders, while retaining the remaining common and subordinated units. In valuing QEPM, we made assumptions that may differ materially from the completed MLP offering. Here, we list certain assumptions: 1) 5% annual return per unit (based on $0.25/unit minimum distribution per quarter); 2) ~$20/unit offering price; 3) Incentive Distribution Rights (IDRs) 48% of distributions above $0.525/unit will go to general partner units; and 4) 51% QEP and 49% public interest in QEPM ownership held constant. Based on the above we calculate a value of approximately $11/share for the assets initially dropped down into the MLP, much of which is made up of fee-based gathering assets. This per share value reflects the value of QEPs limited partnership interest (common and subordinated units valued at an assumed offering price of $20/unit) and the general partnership interest (discounted cash flow analysis). In creating financials that drive the discounted cash flow analysis we relied on what was provided in the S-1, as well as our own assumptions. Required taking a bit of a leap. We value the remaining midstream assets that is, the assets that will not be dropped down into the partnership, at least initially at $8/share. This value is largely made up of processing assets to which we apply a trading multiple to forward EBITDA. The formation of the MLP can provide benefits to both unit holders and QEP. The lack of corporate income tax on MLP distributions enables QEPM to distribute a larger portion of earnings generated from the midstream assets than what is otherwise possible under QEPs structure. The lack of corporate income tax also affords QEPM with a lower cost of capital than QEP for the same midstream assets; may allow QEPM to pursue projects that may not have been feasible for QEP otherwise. Finally, the MLP gives QEP the ability to monetize midstream assets today without forfeiting the strategic value they provide to the E&P segment. We see proceeds partly reinvested into the South Antelope operation in the Williston Basin where returns are tangible and high margin oil production growth is visible.
Page 7
June 18, 2013
BMO Capital Markets
QEP Resources
Exhibit 7. Capital Expenditures, Free Cash Flow and Liquidity

COMMENT: We show QEP growing production while largely living within cash flow over the balance of 2013 and full-year 2014. The potential exists for free cash flow generation in the latter part of 2014 on capital spending totaling ~$1.7 billion based on our assumptions of drilling activity and the costs involved. We like it. Long-term debt is expected to be at the ~$3.0 billion level and leverage at less than 2.0x by the end of the year. A combination of proceeds from asset sales and midstream IPO could be used to pay down debt/replenish liquidity. That compares to ~$3.6 billion in longterm debt and 2.4x our model yields on no outside proceeds.
QEP Resources Capex, Free Cash Flow and Liquidity; Time Horizon: 2Q13 - 4Q14 800,000 600,000 400,000 $000s 200,000 (200,000) (400,000) (600,000) 2Q13E 3Q13E 4Q13E 1Q14E 2Q14E 3Q14E 4Q14E Capital expenditures Free cash flow Liquidity
The pulled sale of Woodford Cana properties doesn't mean it won't be sold. The divestiture process could be revisited later this year (after the newer production matures, however strange a statement that reads; less PUD-like, more PDP-like). We could see the sale of the Tonkawa/Marmaton-prospective leasehold before any sale of the Woodford Cana properties. Looking at greater than $200 million in proceeds from asset sales this year (including PRB), potentially.
Page 8
June 18, 2013
BMO Capital Markets
QEP Resources
Exhibit 8. Financials: Actual and Estimates

Amounts in millions, except unit values and as otherwise noted SUMMARY FINANCIAL RESULTS AND PRODUCTION EPS (recurring) CFPS (discretionary) EBITDAX Production: Bcfe MMcfe/d MMBOE MBOE/d % Oil/condensate/NGLs 1Q12A $0.41 $1.72 $345.7 74.2 815.0 12.4 135.8 20% 2Q12A $0.31 $1.82 $338.5 79.6 875.1 13.3 145.9 20% 3Q12A $0.19 $1.59 $328.7 81.5 885.6 13.6 147.6 21% 4Q12A $0.33 $1.41 $391.8 84.0 912.6 14.0 152.1 27% 2012A $1.24 $6.55 $1,404.7 319.2 872.2 53.2 145.4 22% 1Q13A $0.28 $1.89 $291.0 78.0 866.5 13.0 144.4 25% 2Q13E $0.36 $2.01 $396.1 82.2 902.9 13.7 150.5 29% 3Q13E $0.44 $2.04 $403.6 76.6 832.4 12.8 138.7 34% 4Q13E $0.52 $2.17 $429.5 77.4 841.5 12.9 140.3 36% 2013E $1.60 $8.11 $1,520.2 314.2 860.7 52.4 143.4 31% 2014E $1.87 $9.28 $1,813.8 335.6 919.6 55.9 153.3 40%
MARGIN ANALYSIS ($/Mcfe) Revenue (O&G) LOE, plus production taxes G&A DD&A Interest expense Net Margin COMMODITY PRICES Forecast: Crude Oil ($/Bbl; West Texas Intermediate) Natural Gas ($/MMBtu; Henry Hub) Realized Prices (including hedges): Crude Oil ($/Bbl; West Texas Intermediate) Natural Gas ($/MMBtu; Henry Hub) INCOME STATEMENT SUMMARY Natural gas revenue Oil revenue NGL revenue Gathering, processing and other Purchased gas and oil sales Other operating revenue Total revenue LOE, plus production taxes Purchased gas and oil expense Natural gas, oil and NGL transportation and other handling costs Gathering, processing and other G&A Depletion, depreciation and amortization Exploration expense Stock-based compensation Abandonment and impairment Other Operating income Interest expense Other Pretax income Income tax Minority interest/preferred dividends Reported net income Non-recurring items Recurring net income EPS (recurring) CASH FLOW STATEMENT SUMMARY (Operating and Discretionary) Net income (loss) DD&A Other non-cash items Discretionary cash flow Change in working capital Cash flow from operations Capital expenditures Other investment items Change in debt Change in equity Other financing items Change in cash Ending cash BALANCE SHEET SUMMARY Cash Current assets PP&E Non current assets Total assets Current liabilities LT debt Non current liabilities Equity (plus minority interest, other) Total liabilities and shareholders' equity CREDIT STATISTICS Net debt-to-capitalizaton LTD to EBITDAX (TTM)
$4.98 0.87 0.41 2.69 0.33 $0.68
$4.12 0.75 0.46 2.69 0.35 nm
$4.36 0.82 0.51 2.87 0.37 nm
$5.59 1.01 1.81 3.07 0.48 nm
$4.77 0.86 0.82 2.83 0.38 nm
$5.90 0.96 0.59 3.26 0.51 $0.59
$6.39 1.14 0.59 3.20 0.39 $1.08
$6.84 1.20 0.60 3.22 0.43 $1.39
$7.41 1.29 0.60 3.22 0.43 $1.87
$6.63 1.15 0.60 3.22 0.44 $1.23
$7.22 1.22 0.43 3.45 0.41 $1.70
$102.92 $2.73 $88.47 $4.15 1Q12A $161.2 110.8 97.4 49.8 184.0 0.0 $603.2 $64.8 188.4 34.5 23.7 30.3 199.2 2.0 5.7 6.6 $48.0 (24.7) 221.4 $244.7 $88.7 (0.8) $155.2 (81.5) $73.7 $0.41
$93.43 $2.21 $83.60 $3.92 2Q12A $138.9 107.2 82.1 45.8 125.3 0.0 $499.3 $59.9 124.9 40.7 20.6 36.8 214.1 2.1 55.7 ($55.5) (28.2) 84.0 $0.3 $0.1 (0.9) ($0.7) 55.3 $54.6 $0.31
$92.60 $2.80 $83.43 $3.98 3Q12A $170.3 117.7 67.5 46.3 140.6 0.0 $542.4 $66.5 142.6 36.3 22.1 41.7 234.1 2.2 9.5 ($12.6) (30.0) 38.2 ($4.4) ($2.3) (1.0) ($3.1) 35.8 $32.7 $0.19
$87.90 $3.40 $89.61 $4.16 4Q12A $197.0 196.9 75.1 39.7 196.2 0.0 $704.9 $84.5 199.7 37.4 21.6 152.1 257.5 4.9 61.6 ($114.4) (40.0) 112.3 ($42.1) ($20.0) (1.0) ($23.1) 82.9 $59.8 $0.33
$94.19 $2.79 $86.73 $4.05 2012A $667.4 532.6 322.1 181.6 646.1 0.0 $2,349.8 $275.7 655.6 148.9 88.0 260.9 904.9 11.2 5.7 133.4 ($134.5) (122.9) 455.9 $198.5 $66.5 (3.7) $128.3 92.5 $220.8 $1.24
$94.41 $3.34 $93.24 $4.14 1Q13A $197.6 194.2 68.4 45.6 190.7 0.0 $696.5 $74.8 196.8 34.0 20.6 46.0 254.2 5.1 $65.0 (39.4) (31.5) ($5.9) ($2.2) (0.6) ($4.3) 53.7 $49.4 $0.28
$90.00 $4.00 $93.33 $4.20 2Q13E $229.5 221.1 74.8 68.0 200.2 0.0 $793.6 $93.5 198.2 62.1 22.7 48.5 262.8 5.4 $100.5 (32.2) 37.9 $106.2 $37.2 $69.1 $69.1 $0.36
$90.00 $4.00 $92.46 $4.31 3Q13E $201.1 249.8 73.1 69.5 210.2 0.0 $803.6 $92.2 208.1 58.2 23.3 46.1 246.5 5.0 $124.2 (32.9) 38.3 $129.6 $45.4 $84.3 $84.3 $0.44
$90.10 $4.49 $91.71 $4.49 4Q13E $219.3 280.0 74.6 71.0 220.8 0.0 $865.7 $99.6 218.6 58.9 23.8 46.8 249.5 5.1 $163.5 (33.6) 21.6 $151.6 $53.1 $98.5 $98.5 $0.52
$91.10 $3.96 $92.59 $4.28 2013E $847.5 945.1 290.9 254.1 821.9 0.0 $3,159.5 $360.1 821.7 213.1 90.4 187.4 1,013.0 20.5 $453.2 (138.0) 66.4 $381.5 $133.4 (0.6) $247.5 53.7 $301.2 $1.60
$85.00 $4.00 $83.73 $3.77 2014E $791.3 1,322.8 310.6 316.4 999.1 0.0 $3,740.2 $409.5 989.1 231.4 109.9 145.4 1,158.5 10.1 $686.2 (139.1) $547.2 $191.5 $355.7 $355.7 $1.87
$156.0 199.2 (47.5) $307.7 20.8 $328.5 ($336.5) 1.9 (6.0) (10.2) 22.3 $0.0 $0.0
$0.2 214.1 110.6 $324.9 40.9 $365.8 ($345.0) (2.3) 192.8 (4.4) (60.5) $146.4 $146.4
($2.1) 234.1 52.9 $284.9 (7.2) $277.7 ($718.8) (1,035.0) 1,314.0 (3.6) 19.3 ($146.4) $0.0
($22.1) 257.5 17.1 $252.5 71.5 $324.0 $1.6 (360.4) 26.0 (2.6) 11.4 $0.0 $0.0
$132.0 904.9 133.1 $1,170.0 126.0 $1,296.0 ($1,398.7) (1,395.8) 1,526.8 (20.8) (7.5) $0.0 $0.0
($3.7) 254.2 84.0 $334.5 (162.4) $172.1 ($361.0) (22.1) 160.5 (9.5) 60.0 $0.0 $0.0
$62.9 262.8 29.7 $355.4 $355.4 ($418.4) 66.5 (3.5) $0.0 $0.0
$78.1 246.5 36.3 $360.9 $360.9 ($424.8) 67.4 (3.5) $0.0 $0.0
$92.5 249.5 42.4 $384.4 $384.4 ($449.4) 68.5 (3.5) $0.0 $0.0
$229.8 1,013.0 192.5 $1,435.3 (162.4) $1,272.9 ($1,653.5) (22.1) 362.8 (20.1) 60.0 $0.0 $0.0
$331.1 1,158.5 153.2 $1,642.9 $1,642.9 ($1,748.5) 119.7 (14.2) $0.0 $0.0
$0.0 775.4 6,499.1 258.6 $7,533.1 $549.3 1,673.5 1,852.6 3,457.7 $7,533.1
$146.4 649.2 6,623.6 218.4 $7,637.6 $487.3 1,866.6 1,867.5 3,416.2 $7,637.6
$0.0 619.8 8,189.9 186.4 $8,996.1 $616.7 3,180.7 1,821.7 3,377.0 $8,996.1
$0.0 711.6 8,237.6 159.3 $9,108.5 $761.9 3,206.9 1,826.0 3,313.7 $9,108.5
$0.0 711.6 8,237.6 159.3 $9,108.5 $761.9 3,206.9 1,826.0 3,313.7 $9,108.5
$0.0 654.0 8,329.8 160.1 $9,143.9 $650.7 3,367.5 1,837.9 3,287.8 $9,143.9
$0.0 654.0 8,485.4 160.1 $9,299.5 $650.7 3,442.1 1,867.6 3,339.1 $9,299.5
$0.0 654.0 8,663.6 160.1 $9,477.7 $650.7 3,518.1 1,903.9 3,405.0 $9,477.7
$0.0 654.0 8,863.5 160.1 $9,677.6 $650.7 3,595.9 1,946.4 3,484.6 $9,677.6
$0.0 654.0 8,863.5 160.1 $9,677.6 $650.7 3,595.9 1,946.4 3,484.6 $9,677.6
$0.0 654.0 9,453.4 160.1 $10,267.5 $650.7 3,761.7 2,099.6 3,755.5 $10,267.5
28% 1.2x
29% 1.3x
48% 2.3x
50% 2.3x
50% 2.3x
51% 2.5x
51% 2.4x
51% 2.4x
51% 2.4x
51% 2.4x
50% 2.1x
Page 9
June 18, 2013
BMO Capital Markets
QEP Resources
QEP Resources, Inc. (QEP)

Quarterly Price (US$) 45 45 50 45 40 40 40 35 30 30 30 25 20 25 25 15 QEP Relative to S&P 500 QEP Relative to Oil/Gas/Consumable Fuels 110 100 90 80 70 60 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Revenue / Share - (US$) Price / Revenue 110 100 90 80 80 70 60 60 40 60 40 2013 80 QEP Relative to S&P 500 QEP Relative to Oil/Gas/Consumable Fuels 15 1) OP Target Price(US$) Share Price(US$) 50 45 40 35 30 25 20
35
35
120 100
120 100
2011
2012
600 400 200
4 2 0 2 1
BMO 2013FY EPS ( May 13 = 1.77 US$) First Call 2013FY Cons.EPS ( May 13 = 1.51 US$) 2 1 BMO 2014FY EPS ( May 13 = 1.85 US$) First Call 2014FY Cons.EPS ( May 13 = 1.86 US$) 2 0 2011 2012 2 0 2013
3 2
40 20
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
FYE (Dec.) 2010 2011 2012 Range*: Current*
EPS US$ 1.94 1.77 1.24
P/E Hi - Lo 19.8 25.5 28.7 28.7 14.4 13.3 19.6 13.3
DPS US$ 0.08 0.08 0.08
Yield% Hi - Lo 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2
Payout % 4 5 6
BV US$ 17.1 18.7 18.7
P/B Hi - Lo 2.2 2.4 1.9 2.4 1.6 1.3 1.3 1.3
ROE % 10 7
QEP - Rating as of 5-Jul-10 = NR Date 10-Sep-12 Rating Change NR to OP Share Price $29.64
1.11
25.5
0.08
0.3
17.5
1.6
Page 10
June 18, 2013
QEP Resources
Analyst's Certification I, Dan McSpirit, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Company Specific Disclosure Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to this issuer within the past 12 months. Disclosure 2: BMO Capital Markets has provided investment banking services with respect to this issuer within the past 12 months. Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to this issuer within the past 12 months. Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from this issuer within the past 12 months. Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months. Disclosure 6: This issuer is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months: Investment Banking Services & Non-Securities Related Services. Methodology and Risks to Our Price Target/Valuation Methodology: Our target price is based on an NAV analysis and review of comparable company trading multiples. Risks: 'A significant downturn in commodity prices could negatively affect the company's operating results, market price and our valuation. Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013) We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis; Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis; Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis; (S) = Speculative investment; NR = No rating at this time; and R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Rating System (January 4, 2010 April 4, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
Page 11
June 18, 2013
BMO Capital Markets
QEP Resources
Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3. Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, Thomson Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information. Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research, which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx. General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
Page 12
June 18, 2013
BMO Capital Markets
QEP Resources
A member of BMO
Financial Group
Page 13
June 18, 2013
Aurcana
(AUN-TSXV)
Stock Rating: Market Perform (Speculative) Industry Rating: Market Perform
June 18, 2013 Research Comment Toronto, Ontario
Andrew Kaip, P.Geo.

BMO Nesbitt Burns Inc. (416) 359-7224 andrew.kaip@bmo.com Assoc: Scott Gryba, P.Eng., P.Geo. / Nik Priebe
Initiating Coverage With a Market Perform (Speculative) Rating and a C$2.50 Target Price
The Company
AUN is a growing silver producer with several near-term catalysts. AUNs key asset, the La Negra Mine in Queretaro, Mexico, is an underground silver mine that produces copper, lead and zinc concentrates. The company is currently expanding the underground mining rate to match the 3.0ktpd processing capacity of the plant by the end of Q2/13. AUN continues to build operational consistency at its Shafter mine in Texas after a troubled commissioning in late 2012. AUN is expected to re-rate as the company establishes a positive operational track record at Shafter and expands production to 1.5ktpd at the project by year-end 2013E. Before a re-rating can gain momentum, BMO Research sees a US$30M shortfall that elevates near-term financial risk.
$2.19 $2.50
$10.08 $2.01
Aurcana (AUN) 10 8 6 4 2 0 20 10 0 400 200 0 2008

AUN Relative to S&P/TSX Comp Volume (mln)
10 8 6 4 2 0 20 10 0 400 200 0
2009
2010
2011
2012
2013
Forecasts
BMO Research forecasts silver equivalent production of 3.1Moz at co-product cash costs of US$16.08/oz silver 2013E. BMO Research forecasts the achievement of commercial production at Shafter in Q1/14 resulting in consolidated annual production of 7.1Moz silver equivalent.
(FY-Dec.) EPS P/E CFPS P/CFPS
2011E $0.30
2012A $0.23 9.4x $0.38 5.7x $31.24 2.2 $17.93 $20.12 Q2 $0.06 $0.04 -$0.02
2013E $0.08 26.9x $0.16 13.5x $28.65 3.1 $16.08 $17.11 Q3 $0.11 $0.07 $0.03
2014E $0.68 3.2x $0.95 2.3x $32.00 7.1 $14.18 $16.80 Q4 $0.06 $0.06 $0.04 0.0% 0.7x $128 $127 $5.2 Aug (E)
$0.45
Real'd Price (US$/oz)$35.23 Prod'n (000 oz.) 1.7 Ttl. Cash Cost (US$/oz)$18.31 Ttl. Prod. Cost $20.36 Quarterly EPS 2011A 2012A 2013E Dividend Book Value Shares O/S (mm) Float O/S (mm) Wkly Vol (000s) Net Debt ($mm) Q1 $0.06 $0.06 $0.03a $0.00 $2.97 58.4 57.8 792 $3
Valuation
AUN shares trade at 0.6x the 10% nominal corporate NPV estimate at spot metal prices, below the peer average of 1.4x. AUN trades largely in line on a P/CF and P/E basis.
Recommendation
AUN is rated Market Perform (Speculative) with a C$2.50 target price. A C$2.50 target price represents 0.7x the 10% nominal NPV estimate of US$3.46/sh using spot metal prices. A separate report entitled Shafter Changes the Game But Can It Be Fixed in Time? provides a more detailed analysis of the company.
Notes: Share price & mkt cap in C$, all others US$ Major Shareholders: Wellington (9.8%); Sprott (7.5%); Van Eck (8.1%) First Call Mean Estimates: AURCANA CORPORATION (C$) 2013E: $0.15; 2014E: $0.43
BMO Capital Markets
Aurcana
Aurcana (AUN)
Quarterly Price 35 30 25 20 15 10 5 35 30 7 25 20 15 10 5 6 5 4 3 2 1 AUN Relative to S&P/TSX Comp. AUN Relative to Metals & Mining 300 300 400 200 200 200 200 400 AUN Relative to S&P/TSX Comp. AUN Relative to Metals & Mining 7 6 5 4 3 2 1 10 9 8 Share Price 10 9 8
600
600
100
100
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Revenue / Share Price / Revenue
2011
2012
0 2013
2 1 0
2 1 0 1 0
BMO 2013FY EPS ( May 13 = NA ) IBES 2013FY Cons.EPS ( May 13 = 0.49 ) 1 0 BMO 2014FY EPS ( May 13 = NA ) IBES 2014FY Cons.EPS ( May 13 = 0.56 ) 1.0 1.0 2011 2012 0.5 2013
0.01
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
-0.01
0.5
FYE (Dec.) 2010 Range*: Current* Growth(%): 5 Year: 10 Year: 20 Year:
EPS US$
P/E Hi - Lo na na na na na
DPS $ 0.00
Yield% Hi - Lo 0.0 0.0 0.0 0.0
Payout % na
BV $ ND
P/B Hi - Lo >15 >15 >15 >15
ROE %
AUN - Rating as of 25-Jan-12 = NR
NC
0.00
0.0
na
ND
ND
na
nm nm nm
nm nm nm
nm nm nm
BMO Capital Markets
Aurcana
IMPORTANT DISCLOSURES Analyst's Certification I, Andrew Kaip, P.Geo., hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Company Specific Disclosure Disclosure 16: A BMO Nesbitt Burns Inc. research analyst has extensively viewed the material operations of this issuer. Disclosure 17: The issuer has paid or reimbursed some or all of the BMO Nesbitt Burns Inc. analysts travel expenses. Disclosure 18: A redacted draft of this report was previously shown to the issuer (for fact checking purposes) and changes were made to the report before publication. Methodology and Risks to Price Target/Valuation Methodology: Target prices for senior and intermediate gold producers covered by BMO Research are based on a weighted blend of P/NPV adjusted for market capitalization and EV/EBITDA adjusted for growth. Risks: Risks to the BMO Research target price include commodity/currency, technical/operating, and litigation/political risks inherent to mining operations; as well as feasibility, permitting and financing risks related to development of growth projects as detailed more completely in the companyspecific risk disclosures. Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013): We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis on a total return basis (S) = speculative investment; NR = No rating at this time; R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Ratings System (January 4, 2010April 5, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
BMO Capital Markets
Aurcana
Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3. Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, FIRST CALL Research Direct, Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information. Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx. General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
BMO Capital Markets
Aurcana


(FVI-TSX)
Stock Rating: Market Perform Industry Rating: Market Perform
Andrew Kaip, P.Geo.

BMO Nesbitt Burns Inc. (416) 359-7224 andrew.kaip@bmo.com Assoc: Scott Gryba, P.Eng., P.Geo. / Nik Priebe
FVI Guides for Higher Production at San Jose

Event
Fortuna announced an upgrade to the planned mill expansion at San Jose to 1.8ktpd from 1.5ktpd and released a new production schedule. The mill expansion is on track and expected to be commissioned in Q3/13. FVI is able to realize higher processing rates due to equipment selection without incurring additional costs. Underground development to achieve rates of 1.5ktpd is on schedule for mid-Q3/13 with flexibility in production sequencing accommodating the step-up in processing rates to 1.8ktpd by mid-Q4/13.
$3.58 $4.50
$5.85 $2.65
Fortuna Silver Mines (FVI)

Earnings/Share(US$)
8 6 4 2 0 40 20 0 500
FVI Relative to S&P/TSX Comp Volume (mln)
0.3
0.2
0.1
0.0
-0.1
40 20 0 500
Impact
Slightly Positive. No change to the 10% nominal NPV with the long-term impact of higher processing rates at San Jose offset by lower grade assumptions outlined in the new mine plan relative to BMO Research expectations. BMO Research estimates a +10% increase in 2014E/2015E EPS and 6% increase in 2014E/2015E CFPS.
0 2008 2009 2010 2011 2012 2013 0
(FY-Dec.) EPS P/E CFPS P/CFPS
2011A $0.19
2012A $0.28
2013E $0.23 15.3x $0.43 8.2x $29.53 6.9 $15.63 $18.55 Q3 $0.09 $0.08 $0.06
2014E $0.35 10.0x $0.55 6.4x $32.00 7.0 $15.51 $18.97 Q4 $0.00 $0.07 $0.09 0.0% 1.6x $448 $449 $5.7 Aug (E)
$0.44
$0.54
Forecasts
BMO Research models 2013E payable silver-equivalent production of 6.9Moz for FVI at total cash costs of US$15.63/oz.
Real'd Price (US$/oz)$31.11 Prod'n (Moz) 3.8 Ttl. Cash Cost (US$/oz)$16.12 Ttl. Prod. Cost $18.42 Quarterly EPS 2011A 2012A 2013E Dividend Book Value Shares O/S (mm) Float O/S (mm) Wkly Vol (000s) Net Debt ($mm) Q1 $0.05 $0.09 $0.06a $0.00 $2.17 125.3 125.3 1,334 -$65
$31.24 6.1 $16.47 $19.58 Q2 $0.06 $0.05 $0.02
Valuation
FVI trades at 3.1x the 10% nominal NPV of US$1.13/share at spot metal prices, above junior and intermediate silver peers at 1.6x.
Recommendation
Fortuna is rated Market Perform with a C$4.50 target. The C$4.50 price target represents 4.2x the 10% nominal NPV using spot gold prices.
Notes: Share price, target & market cap. in C$, all other values in US$ Major Shareholders: Sprott (7.7%); Van Eck (6.9%) First Call Mean Estimates: FORTUNA SILVER MINES INC (US$) 2013E: $0.26; 2014E: $0.33
Changes
Annual EPS 2014E $0.31 to $0.35
Annual CFPS 2014E $0.52 to $0.55
Quarterly EPS Q3/13E $0.07 to $0.06 Q4/13E $0.08 to $0.09
BMO Capital Markets
Little Impact to New Mine Plan

Fortuna announced an upgrade to the planned mill expansion at San Jose to 1.8ktpd from 1.5ktpd and released a new production schedule. The mill expansion is on track and expected to be commissioned in Q3/13. FVI is able to realize higher processing rates due to equipment selection without incurring additional costs. Underground development to achieve rates of 1.5ktpd is on schedule for mid-Q3/13 with flexibility in production sequencing accommodating the step-up in processing rates to 1.8ktpd by mid-Q4/13. No change to the 10% nominal NPV with the long-term impact of higher processing rates at San Jose offset by lower grade assumptions outlined in the new mine plan relative to BMO Research expectations. BMO Research estimates a +10% increase in 2014E/2015E EPS and 6% increase in 2014E/2015E CFPS. Fig 1: BMO Revised vs. Old San Jose Production Profile
Annual Silver Equiv. Production (Moz)
6 $24.00
Forecast
5 $20.00
The new mine plan provides a 12% increase in silver equivalent production in 2014E through 2016E.
$16.00
$12.00
$8.00
Co-product cash costs are largely unchanged.
$4.00
0 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
$0.00
BMO (old) BMO (new) Cash Costs (old) Cash Costs (new)
Fig 2: BMO Revised vs. Old San Jose Tonnage & Grade Profile
700 350
Forecast
Annual Tonnes Milled (Mt) Silver Equiv. Grade (g/t)
600 500 400 300 200 100 0 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 300 250 200 150 100 50 0
The gain in increase processing rates has largely been offset by lower grade expectations outlined in the new mine plan.
Tonnage (old) Tonnage (new) Silver Equiv. Grade (old) Silver Equiv. Grade (new)
Silver Co-Product Cash Costs (US$/oz)
BMO Capital Markets
Fig 3: BMO Revised vs. Old FVI Consolidated Production Profile

Annual Silver Equiv. Production (Moz)
10 $35.00
Higher production at San Jose is expected to lift FVI consolidated production an average 8% from 2013E to 2017E. All-in-costs have declined on average 10% due to higher production.
$28.00
$21.00
$14.00
$7.00
0 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
$0.00
BMO (old) BMO (new) AIC (old) AIC (new)
Fig 4: Market Capitalization vs. P/NPV

100,000
FVI currently trades at a premium valuation on an NPV basis relative to silver peers.
Market Capitalization (US$M)
Cheap
Silver Price US$21.61/oz 10% nominal discount rate

FRES
10,000
SLW THO HOC HL BCM SSRI SVM MND MAG EDR FVI FR PAAS
Fair Value
CDE
1,000
Increased production at San Jose appears to already be imputed in the share price of FVI.
Expensive
100 50% 100% 150% 200% 250% 300% 350%
Share price to NPV per share

Fig 5: BMO Research Internal Rate of Return (%)

80% 60% 40%
A negative IRR for FVI reflects a premium valuation at spot metal prices.
IRR (%)
20% 0% -20% -40%
PAAS FVI FRES CDE EDR BCM MND FR SLW
HL THO HOC SVM MAG SSRI MSV
IRR
Silver Co-Product AIC (US$/oz)
Forecast
BMO Capital Markets
Exploration Will Drive Reserve Growth

A shortened reserve life appears to be temporary.
The move to 1.8ktpd has shortened the current reserve life to 5 years from 6.25 years. BMO Research views the reserve decline as a short-term issue given the large inferred resource inventory (4.3Mt containing 25.3Moz of silver and 215koz of gold) and the recent discovery of the Trinidad North discovery located to the north and down plunge of the current reserve base. Recent drill results from the Trinidad North discovery returned a weighted average grade of 547g/t silver and 3.3g/t gold over an average true width of 3.7m, which is appreciatively above the San Jose reserve grades of 190g/t silver and 1.58g/t gold. Many of the reported intercepts were located on the Taviche Oeste Concession that FVI optioned from PAAS in late January. FVI continues to drill the zone, focusing on infill drilling until completion of an underground exploration platform can be completed. FVI has indicated that it plans to release an initial resource estimate for the Trinidad North zone by the end of Q3/13. FVI is already contemplating expediting development of the Trinidad North zone given the zones proximity to existing infrastructure. Development plans already had the main decline advancing to the 1,100m level by mid-2014, which will provide easy access into the zone. Fig 6: San Jose Mine La Trinidad Vein Long Section
Future reserve growth is supported by a large inferred resource and recent Trinidad North discovery.
FVI could begin development of Trinidad North as early as H2/14.
Recent drill results from the Trinidad North discovery returned a weighted average grade of 547g/t silver and 3.3g/t gold over an average true width of 3.7m, which is appreciatively above the San Jose reserve grades of 190g/t silver and 1.58g/t gold.
Future Reserve & Resource Potential
BMO Capital Markets

Fig 7: FVI Block Model at BMO Metal Price Assumptions
FORTUNA SILVER
Project(s): Recommendation Target Price (C$) Share Price (US$) Common Shares O/S (M) Market Cap (US$M) Caylloma, San Jose Mkt 4.50 3.43 125 429 As at: Location: Analyst: 18-Jun-13 Peru, Mexico Andrew Kaip Net Income Non-Cash Items Cash Flows from Operating Activities Property, Plant and Equip. Net Investment and Asset Sales Other Cash Flows from Investing Activities Proceeds from Borrowings Repayment of Borrowings Stock, Warrants, Options Other Cash Flows from Financing Activities Net Increase In Cash Cash At Beginning of Year Cash At End of Year PRICE ASSUMPTIONS (December Year End) Exchange Rate Gold Silver Gold:Silver Ratio Copper Lead Zinc C$/US$ US$/oz US$/oz US$/lb US$/lb US$/lb 2011A 1.01 1569 35.23 45 4.00 1.09 1.00 2012A 1.00 1671 31.24 54 3.61 0.93 0.88 2013E 0.98 1597 28.65 56 3.57 1.05 0.97 2014E 1.01 1700 32.00 53 3.50 1.10 1.00 2015E 1.02 1700 30.00 57 3.25 1.25 1.10 Free Cash Flow 19.5 16.0 35.5 (122.8) 52.9 (69.9) 0.0 (1.2) 3.7 2.5
FVI
CASH FLOW ANALYSIS - US$M (December Year End)
2011A
2012A 31.5 22.4 53.9 (44.2) 11.1 (33.0) (1.6) 0.7 (0.9)
2013E 27.9 36.7 64.6 (69.3) 2.0 (0.0) (67.3) (0.2) 0.0 (0.1)
2014E 42.6 26.0 68.6 (25.0) (25.0) -
2015E 38.6 26.4 65.0 (25.0) (25.0) -
C$
Share Price (C$)
3.50
Market Cap (C$M)
438
0% NPV (US$/share) 3% NPV (US$/share) 5% NPV (US$/share) 10% NPV (US$/share)
3.75 3.21 2.92 2.37
Premium/(Discount) Premium/(Discount) Premium/(Discount) Premium/(Discount)
-9% 7% 17% 45%
70.3 38.7 (88.5)
38.7 58.7 8.0
58.7 55.7 (4.9)
55.7 99.3 43.7
99.3 139.4 40.0
BALANCE SHEET ANALYSIS - US$M (December Year End) Cash and Investments Inventories Other Current Assets Fixed Assets Other Total Assets Payables Short Term Debt Other Current Liabilities LT Debt Other Total Liabilities SHAREHOLDERS EQUITY
2011A 55.7 11.3 20.5 87.5 184.1 0.0 271.6 17.2 1.7 4.7 23.6 2.8 17.0 43.3 228.3 -22%
2012A 64.7 12.9 28.4 106.0 210.2 0.1 316.3 17.3 0.4 0.7 18.5 2.3 31.0 51.8 264.5 -23%
2013E 59.6 12.3 14.3 86.1 259.3 0.2 345.6 15.2 0.4 0.8 16.4 2.2 33.5 52.1 293.5 -19%
2014E 103.3 12.3 14.8 130.4 259.9 0.2 390.5 15.8 0.4 0.8 17.0 2.2 33.5 52.7 337.8 -30%
2015E 143.3 12.3 14.3 169.9 260.2 0.2 430.3 15.3 0.4 0.8 16.5 2.2 33.5 52.2 378.1 -37%
FINANCIAL SUMMARY - ANNUAL (December Year End)
2011A
2012A
2013E
2014E
2015E
EV/EBITDA EPS P/E CFPS P/CF FCFPS P/FCF Common Shares O/S
(US$) (x) (US$) (US$)
7.8 0.20 17.3 0.44 7.8 (0.72) nap 124.9
5.3 0.29 12.0 0.58 5.9 0.07 52.7 125.3
5.6 0.23 14.8 0.43 8.0 (0.04) nap 125.3
3.5 0.35 9.8 0.55 6.3 0.35 9.8 125.3
3.3 0.32 10.8 0.52 6.6 0.32 10.7 125.3
(M)
QUARTERLY EPS CFPS FCFPS (US$) (US$) (US$) Q1/13A 0.06 0.13 0.03 Q2/13E 0.02 0.06 -0.05 Q3/13E Q4/13E 0.06 0.09 0.11 0.13 -0.04 0.03
Net Debt to Equity
PRODUCTION AND COSTS (December Year End) Caylloma Silver Production (Moz) Copper Production (kt) Lead Production (kt) Zinc Production (kt) Silver Equiv. Production (Moz) Cash Costs (U$/oz)* San Jose Silver Production (Mkoz) Gold Production (koz) Total Cash Costs (U$/oz)
2011A
2012A
2013E
2014E
2015E
PROFIT AND LOSS STATEMENT - US$M (December Year End) Mining Revenue Production Costs G&A Exploration and Other Expenses Other Income EBITDA Depreciation EBIT Interest expense EBT Tax NPAT (pre-Adjustments) Minority Interest After-Tax Non-Operating Items Net Income (reported) Net Income (adjusted)
2011A 110.0 40.0 19.8 1.7 48.5 9.1 38.1 0.3 38.3 (18.8) 19.5 19.5 23.6
2012A 161.0 69.9 20.5 0.8 69.8 20.5 45.2 0.1 45.2 (13.8) 31.5 31.5 35.6
2013E 169.8 79.7 20.5 1.3 67.1 20.2 46.9 0.4 47.3 (19.4) 27.9 27.9 29.1
2014E 207.8 91.9 20.5 1.6 92.8 24.3 68.5 0.4 68.8 (26.2) 42.6 42.6 43.8
2015E 202.9 91.6 20.5 1.6 88.2 24.7 63.5 0.6 64.1 (25.5) 38.6 38.6 39.8
2.0 0.0 8.9 10.6 3.3 17.04 0.5 4.6 21.23
2.0 8.1 10.2 3.4 18.97 1.9 17.9 14.89
2.0 7.3 11.0 3.5 18.14 2.4 20.4 15.12
1.6 5.1 7.1 2.6 24.07 3.2 27.1 12.3
1.6 5.1 7.1 2.7 22.23 3.2 26.7 11.1
Total Production Silver Production (Moz) Silver Equiv. Production (Moz) Total Cash Costs (U$/oz)* Total Production Costs ($/oz)*
LOM ESTIMATES Caylloma San Jose TOTAL * Silver co-product cash costs
2.5 3.9 3.8 6.1 16.12 16.47 18.42 19.58 Silver Equiv. Prod'n (Moz) 27.3 53.0 80.2
4.3 4.6 4.6 6.9 7.0 7.2 15.63 15.51 14.61 18.55 18.97 18.03 Total Cash Cost* (US$/oz) 19.92 11.25 13.59
BMO Capital Markets
Fig 8: FVI Block Model at Spot Metal Price Assumptions

FORTUNA SILVER
Project(s): Recommendation Target Price (C$) Share Price (US$) Common Shares O/S (M) Market Cap (US$M) Caylloma, San Jose Mkt 4.50 3.43 125 429 As at: Location: Analyst: 18-Jun-13 Peru, Mexico Andrew Kaip Net Income Non-Cash Items Cash Flows from Operating Activities Property, Plant and Equip. Net Investment and Asset Sales Other Cash Flows from Investing Activities Proceeds from Borrowings Repayment of Borrowings Stock, Warrants, Options Other Cash Flows from Financing Activities Net Increase In Cash Cash At Beginning of Year Cash At End of Year PRICE ASSUMPTIONS (December Year End) Exchange Rate Gold Silver Gold:Silver Ratio Copper Lead Zinc C$/US$ US$/oz US$/oz US$/lb US$/lb US$/lb 2011A 1.01 1569 35.23 45 4.00 1.09 1.00 2012A 1.00 1671 31.24 54 3.61 0.93 0.88 2013E 0.98 1597 28.65 56 3.57 1.05 0.97 2014E 1.01 1700 32.00 53 3.50 1.10 1.00 2015E 1.02 1700 30.00 57 3.25 1.25 1.10 Free Cash Flow 19.5 16.0 35.5 (122.8) 52.9 (69.9) 0.0 (1.2) 3.7 2.5 31.5 22.4 53.9 (44.2) 11.1 (33.0) (1.6) 0.7 (0.9) 8.9 36.6 45.6 (69.3) 2.0 (0.0) (67.3) (0.2) 0.0 (0.1) (2.3) 26.9 24.6 (25.0) (25.0) (1.5) 26.7 25.3 (25.0) (25.0) -
FVI
CASH FLOW ANALYSIS - US$M (December Year End)
2011A
2012A
2013E
2014E
2015E
C$
Share Price (C$)
3.50
Market Cap (C$M)
438
0% NPV (US$/share) 3% NPV (US$/share) 5% NPV (US$/share) 10% NPV (US$/share)
1.88 1.58 1.42 1.13
Premium/(Discount) Premium/(Discount) Premium/(Discount) Premium/(Discount)
82% 117% 142% 204%
70.3 38.7 (88.5)
38.7 58.7 8.0
58.7 36.6 (23.9)
36.6 36.2 (0.4)
36.2 36.6 0.3
BALANCE SHEET ANALYSIS - US$M (December Year End) Cash and Investments Inventories Other Current Assets Fixed Assets Other Total Assets Payables Short Term Debt Other Current Liabilities LT Debt Other Total Liabilities SHAREHOLDERS EQUITY
2011A 55.7 11.3 20.5 87.5 184.1 0.0 271.6 17.2 1.7 4.7 23.6 2.8 17.0 43.3 228.3 -22%
2012A 64.7 12.9 28.4 106.0 210.2 0.1 316.3 17.3 0.4 0.7 18.5 2.3 31.0 51.8 264.5 -23%
2013E 40.6 12.3 10.6 63.4 259.1 0.2 322.7 11.2 0.4 0.8 12.4 2.2 33.5 48.1 274.6 -14%
2014E 40.2 12.3 10.6 63.0 258.9 0.2 322.1 11.3 0.4 0.8 12.4 2.2 33.5 48.2 274.0 -14%
2015E 40.5 12.3 10.5 63.3 258.8 0.2 322.3 11.2 0.4 0.8 12.4 2.2 33.5 48.1 274.2 -14%
FINANCIAL SUMMARY - ANNUAL (December Year End)
2011A
2012A
2013E
2014E
2015E
EV/EBITDA EPS P/E CFPS P/CF FCFPS P/FCF Common Shares O/S
(US$) (x) (US$) (US$)
7.8 0.20 17.3 0.44 7.8 (0.72) nap 124.9
5.3 0.29 12.0 0.58 5.9 0.07 52.7 125.3
10.0 0.08 42.9 0.28 12.4 (0.19) nap 125.3
11.5 (0.01) N/M 0.20 17.5 (0.00) N/M 125.3
11.1 (0.00) N/M 0.20 17.0 0.00 1305.5 125.3
(M)
QUARTERLY EPS CFPS FCFPS (US$) (US$) (US$) Q1/13A 0.06 0.13 0.03 Q2/13E -0.01 0.04 -0.07 Q3/13E Q4/13E 0.00 0.02 0.05 0.06 -0.10 -0.04
Net Debt to Equity
PRODUCTION AND COSTS (December Year End) Caylloma Silver Production (Moz) Copper Production (kt) Lead Production (kt) Zinc Production (kt) Silver Equiv. Production (Moz) Cash Costs (U$/oz)* San Jose Silver Production (Mkoz) Gold Production (koz) Total Cash Costs (U$/oz)
2011A
2012A
2013E
2014E
2015E
PROFIT AND LOSS STATEMENT - US$M (December Year End) Mining Revenue Production Costs G&A Exploration and Other Expenses Other Income EBITDA Depreciation EBIT Interest expense EBT Tax NPAT (pre-Adjustments) Minority Interest After-Tax Non-Operating Items Net Income (reported) Net Income (adjusted)
2011A 110.0 40.0 19.8 1.7 48.5 9.1 38.1 0.3 38.3 (18.8) 19.5 19.5 23.6
2012A 161.0 69.9 20.5 0.8 69.8 20.5 45.2 0.1 45.2 (13.8) 31.5 31.5 35.6
2013E 140.8 79.2 20.5 1.3 39.1 20.4 18.8 0.4 19.2 (10.3) 8.9 8.9 10.1
2014E 147.2 90.6 20.5 1.6 33.9 25.1 8.8 0.2 9.0 (11.3) (2.3) (2.3) (1.1)
2015E 148.7 90.6 20.5 1.6 35.4 25.0 10.4 0.2 10.6 (12.0) (1.5) (1.5) (0.3)
2.0 0.0 8.9 10.6 3.3 17.04 0.5 4.6 21.23
2.0 8.1 10.2 3.4 18.97 1.9 17.9 14.89
2.0 7.3 11.0 3.7 17.13 2.4 20.4 14.23
1.6 5.1 7.1 2.8 20.92 3.2 27.1 11.3
1.6 5.1 7.1 2.8 20.88 3.2 26.7 10.7
Total Production Silver Production (Moz) Silver Equiv. Production (Moz) Total Cash Costs (U$/oz)* Total Production Costs ($/oz)*
LOM ESTIMATES Caylloma San Jose TOTAL * Silver co-product cash costs
2.5 3.9 3.8 6.1 16.12 16.47 18.42 19.58 Silver Equiv. Prod'n (Moz) 26.6 54.7 81.3
4.3 4.6 4.6 7.2 7.5 7.5 14.91 14.08 13.83 17.76 17.42 17.18 Total Cash Cost* (US$/oz) 20.15 10.84 13.26
BMO Capital Markets
Fortuna Silver Mines (FVI)

Quarterly Price 9 7 6 5 4 3 2 1 7 6 5 4 3 2 1 1 1) OP FVI Relative to S&P/TSX Comp. FVI Relative to Metals & Mining 600 600 FVI Relative to S&P/TSX Comp. FVI Relative to Metals & Mining 8 7 6 5 4 3 2 3) OP 4) Mkt 2) Mkt Target Price Share Price 9 8 7 6 5 4 3 2 1
400 300 200 100
400 300 200 100 0 2013
400
400
200 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Revenue / Share Price / Revenue
200 0 2011 2012
1.5 1.0 0.5
10 5 0 0.6 0.4 0.2
BMO 2013FY EPS ( May 13 = 0.24 ) IBES 2013FY Cons.EPS ( May 13 = 0.28 ) 0.6 0.4 0.2 BMO 2014FY EPS ( May 13 = 0.32 ) IBES 2014FY Cons.EPS ( May 13 = 0.38 ) 0.5 0.0 2011 2012 0.5 0.0 2013
0.5 0.0
50
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
FYE (Dec.) 2008 2009 2010 2011 2012 Range*: Current*
EPS US$ -0.02 0.09 0.10 0.19 0.28
P/E Hi - Lo -204 -23.1 32.7 7.2 46.6 17.7 37.2 18.2 26.6 10.6 46.6 -23.1
DPS $ 0.00 0.00 0.00 0.00 0.00
Yield% Hi - Lo 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Payout % 0 0 0 0 0
BV $ 1.3 1.2 1.6 1.9 2.1
P/B Hi - Lo 2.6 1.9 2.9 3.9 3.6 3.9 0.3 0.4 1.1 1.9 1.4 0.3
ROE % 7 7 11 14
FVI - Rating as of 7-Jul-10 = NR Date 15-Jul-10 1-Nov-11 28-Mar-12 11-Jul-12 Rating Change NR to OP OP to Mkt Mkt to OP OP to Mkt Share Price $2.09 $6.27 $4.38 $3.43
0.25
12.9
0.00
0.0
2.2
1.5
12
1 2 3 4
BMO Capital Markets
IMPORTANT DISCLOSURES Analyst's Certification I, Andrew Kaip, P.Geo., hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Company Specific Disclosure
Disclosure 16: A BMO Nesbitt Burns Inc. research analyst has extensively viewed the material operations of this issuer. Disclosure 17: The issuer has paid or reimbursed some or all of the BMO Nesbitt Burns Inc. analysts travel expenses.
Methodology and Risks to Price Target/Valuation Methodology: Target prices for senior and intermediate gold producers covered by BMO Research are based on a weighted blend of P/NPV adjusted for market capitalization and EV/EBITDA adjusted for growth. Risks: Risks to the BMO Research target price include commodity/currency, technical/operating, and litigation/political risks inherent to mining operations; as well as feasibility, permitting and financing risks related to development of growth projects as detailed more completely in the companyspecific risk disclosures. Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013): We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis on a total return basis (S) = speculative investment; NR = No rating at this time; R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Ratings System (January 4, 2010April 5, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
BMO Capital Markets
BMO Capital Markets

Page 10 June 19, 2013
Bombardier
(BBD.B-TSX)
Stock Rating: Outperform Industry Rating: Outperform
Fadi Chamoun, CFA

BMO Nesbitt Burns Inc. (416) 359-6775 fadi.chamoun@bmo.com Assoc: Francisco Lung / Devin Dodge, CFA
Postcard From Paris

Event
Bombardiers management team held a number of meetings for analysts and the media at the Paris Air Show.
$4.56 $5.00
$5.00 $2.97
Bombardier B (BBD.B)
Earnings/Share(US$)
0.55 0.50 0.45
8 6
Impact
Mixed. While execution remains on track and the CSeries first flight is only days away, the Paris Air Show failed to impress due to the lack of CSeries orders and the launch of a re-engined E-Jets family by Embraer, which underscored the intense competitive challenges the program faces. We note this could be a source of near-term pressure on the stock. However, the CSeries addressable market is large and the aircrafts economics place it in a favourable position to capture a large enough share to generate a reasonable return on investments. With first flight approaching and execution continuing to progress at a good pace, we expect that the pace of orders will accelerate over time. Management reiterated that they remain comfortable with achieving 300 firm orders or more by Entry into Service in mid-2014 and indicated that the interest level from customers has continued to rise in recent months.
0.40
4 2 400 200 0 150 100 50

BBD.B Relative to S&P/TSX Comp Volume (mln)
0.35 0.30
400 200 0 150 100 50
2008
2009
2010
2011
2012
2013
(FY-Dec.) EPS P/E CFPS P/CFPS Rev. ($mm) EV ($mm) EBITDA ($mm) EV/EBITDA Quarterly EPS 2011A 2012A 2013E Dividend Book Value Shares O/S (mm) Float O/S (mm) Wkly Vol (000s) Net Debt ($mm)
2011A $0.47 $0.14 $18,347 $11,340 $1,535 7.4x Q1 $0.12 $0.10 $0.08a $0.10 $0.84 1,739.4 1,739.4 28,352 $3,483
2012A $0.43 $0.78 $16,768 $8,971 $1,240 7.2x Q2 $0.12 $0.10 $0.08
2013E $0.36 12.4x $0.91 4.9x $18,180 $11,366 $1,357 8.4x Q3 $0.11 $0.12 $0.09
2014E $0.51 8.8x $1.26 3.6x $20,053 $11,024 $1,902 5.8x Q4 $0.12 $0.10 $0.11 2.2% 5.3x $7,932 $7,932 $111.1 Aug (E)
Forecasts
There are no changes to our forecasts.
Valuation
We are maintaining our target price of $5.00, which equates to 9.8 times forward EPS and 7 times EV/EBITDA.
Recommendation
We come out of the Paris Air Show maintaining our positive view on Bombardiers stock. The outlook for the Business Aviation and Transportation segments is positive, capital spending is declining and the company appears to be progressing well in terms of the CSeries execution with first flight only days away. CSeries orders are expected to improve, raising the probability of commercial success for the program. We believe continued strong execution in combination with an expected increase of CSeries orders should be supportive for valuation, which we deem to be very attractive for a high growth stock like Bombardier. We rate Bombardier Outperform.
Notes: Share price, target & cap. in C$, all others in US$; Subordinate Voting Major Shareholders: Management - (Class A shares: 1.4%; Class B shares: 1.1%): Bombardier family - (Class A shares: 82.2%) First Call Mean Estimates: BOMBARDIER INC (US$) 2013E: na; 2014E: $0.52
BMO Capital Markets
Bombardier
Execution on Track, but CSeries Orders Not Quite Living Up to Expectations

Coming into the Paris Air Show, expectations for Bombardier were fairly high especially with the CSeries first flight on track for next week. While Bombardier announced a number of aircraft orders (business aircraft and regional) and a large Transportation order with Deutsche Bahn, we believe that the lack of CSeries orders and the successful launch of the new E-Jets E2 by Embraer (intensifying competitive pressures) are likely to be sources of pressure on the stock in the near term. We also believe that the CSeries first flight, which is expected in few days, is unlikely to be a catalyst in itself without any new orders given that it is already expected. However, longer term our positive view on Bombardier is supported by: 1. Positive Outlook for Bombardier Transportation (BT) both on the revenues and margins side and also the long term structural drivers that we believe are underpinning demand for mass transit products in developed and developing markets. We expect revenues to ramp up over the course of the year, which should provide a lift to EBIT margin from current levels. Management continues to expect BT revenues to grow in the high single digits in 2013, in line with our expectations, and EBIT margin is projected to reach 8% in 2014. The company has won a number of large orders in recent months and we continue to expect trailing twelve months book-to-bill to remain comfortably above 1 time for the foreseeable future supporting growth in the mid-to-low single digit range. 2. Business Aviation The business aviation segment remains a key area of growth for Bombardier Aerospace (BA) and we maintain our positive outlook for production rates and margins. Recall that BA is expected to achieve an EBIT margin of 8% (excluding 2% impact from CSeries) in 2014, with the biggest contribution coming from the business jet segment. We note that BA has steadily gained market share in recent years in the business jet segment as a result of its strong product offering, focus on improving customer satisfaction, and growing presence in emerging markets. We believe that the strong performance from a market share standpoint was also partially a function of BA's product strength, particularly in the large aircraft segment where demand has been strong. We note that book-to-bill for this segment has been over 1 time on a trailing twelve months basis for the past nine quarters. Furthermore, the strength of the backlog was reinforced at the Air Show with the announcement of the order for up to 40 Challenger 350s from VistaJet and 12 Global 8000 aircraft from an undisclosed customer. We sense that the business aviation segment is continuing to recover even in the small-size market. Bombardiers launch of the new Learjet70/75 should support improving production rates and margins. 3. Commercial Aviation - At the Air Show, Embraer officially launched its second generation of the E-Jets family, named the E-Jets E2, comprising of the E175, E190, and E195, which are expected to enter into service beginning in the first half of 2018 to 2020 and will cost $1.7 billion over the next eight years. The new generation of aircraft will have capacity for 70 to 130 seats. We sense that intensifying competitive pressure from the new E-Jets family will add to an already fierce competition in the higher end of the 100150 seat segment from the re-engined Boeing (737MAX) and Airbus (Neo) aircraft.
BMO Capital Markets
Bombardier
Airlines also have a tendency to favour upgrading existing aircraft and sticking to the all proven Boeing/Airbus products. We believe these factors represent a challenge to Bombardiers strategy with the CSeries family, which targets the 110 to 160 seat segment. However, this is not unexpected. We believe the addressable market for the CSeries is large and the aircrafts economics place it in a favourable position to capture a large enough share to generate a reasonable return on investments. With first flight approaching and execution continuing to progress at a good pace, we expect orders will improve over time. Management reiterated that they remain comfortable with achieving 300 firm orders or more by Entry into Service in mid-2014 and indicated that the interest level from customers has continued to rise in recent months. As for the CRJ family, we sense that the lead time for the entry into service of the reengined E175 provides Bombardier with the breathing room to determine the appropriate next step for the company in this segment. We anticipate that Bombardier will maintain a long-term presence in this market and is more likely to re-invest than to abandon the segment. In the interim, despite the recent setback from the United Airlines orders (won by Embraer) in recent months, the company believes that it would still likely end up capturing around a third of the replacement orders in this segment. This effectively requires the company to be awarded the next expected order from American Airlines.
Forecasts
There are no changes to our forecasts.
Valuation and Recommendation

We are maintaining our target price of $5.00 and continue to use a sum-of-the-parts (SOTP) analysis to value the shares. Our target price equates to 9.8 times our forward EPS forecast and approximately 7 times EV/EBITDA. While risk remains elevated both from a financial and execution standpoint in the near term, we believe that our valuation adequately reflects the risks associated with the companys program development plans. We rate Bombardier Outperform.
Exhibit 1: NAV Valuation Based on 12-month Forward Projections
On 12-Month Forward Earnings (US$ millions except per share data) (US$ millions except per share data) Aerospace Transportation EBITDA 1,074 828 Multiple (x) 8.0x 6.5x implied EV/Sales 0.8x 0.6x Firm Value 8,595 5,379 Net Debt (including Pension) Equity Value Shares Outstanding Value per Share (US$) FX CAD/US$ Value per Share CAD$ Implied PE
Source: Company reports, BMO Capital Markets
Consolidated 1,902 7.3x 0.7x 13,974 5,256 8,718 1739 $5.01 1.00 $5.01 9.8x
BMO Capital Markets
Bombardier
Bombardier B (BBD.B)
Quarterly Price 9 25 25 8 20 20 7 6 5 10 10 4 1) OP 3 2 BBD.B Relative to S&P/TSX Comp. BBD.B Relative to Aerospace & Defense 400 300 200 100 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Revenue / Share Price / Revenue 400 300 200 100 BBD.B Relative to S&P/TSX Comp. BBD.B Relative to Aerospace & Defense 4 3 2 8 7 6 5 Target Price Share Price 9
15
15
140 120 100 80 60 40
140 120 100 80 60
2011
2012
40 2013
20 10
4 2 0
BMO 2013FY EPS ( May 13 = 0.37 ) IBES 2013FY Cons.EPS ( May 13 = 0.40 ) 0.6 0.4 0.2 BMO 2014FY EPS ( May 13 = 0.53 ) IBES 2014FY Cons.EPS ( May 13 = 0.51 ) 0.6 0.4 2011 2012 0.6 0.4 2013 0.6 0.4 0.2
1 0
100 50
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
FYE (Dec.) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Range*: Current*
EPS US$ ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND 0.42 0.47 0.43
P/E Hi - Lo 22.1 13.3 22.1 10.1 19.4 13.7 22.1 13.6 25.1 16.5 29.1 18.3 32.7 19.2 33.8 19.9 42.4 22.1 31.7 11.3 33.4 6.0 -73.2 -27.7 -98.8 -25.9 33.0 16.9 29.3 15.9 34.2 18.0 17.5 6.2 10.1 4.2 13.9 9.5 15.6 7.0 11.7 7.1 42.4 -27.7
DPS $ 0.03 0.03 0.04 0.05 0.05 0.08 0.09 0.11 0.14 0.18 0.18 0.09 0.09 0.09 0.09 0.09 0.10 0.10 0.10 0.10 0.10
Yield% Hi - Lo 2.0 2.2 1.8 1.8 1.2 1.4 1.3 1.2 1.0 2.0 5.8 3.6 4.9 4.9 3.9 2.5 3.2 4.6 2.4 3.1 3.4 5.8 1.2 1.0 1.2 1.1 0.8 0.9 0.8 0.7 0.5 0.7 1.0 1.4 1.3 2.5 2.1 1.3 1.1 1.9 1.6 1.4 2.1 0.5
Payout % 27 22 24 25 19 26 25 23 21 22 35 >100 >100 83 62 45 20 19 24 21 24
BV $ 0.7 0.8 2.0 2.4 1.2 1.5 1.8 2.2 2.4 2.6 2.8 1.6 1.6 1.4 1.4 1.6 1.6 1.8 2.3 0.2 0.6
P/B Hi - Lo 3.0 1.8 3.4 1.6 1.6 1.1 1.9 1.2 5.3 3.5 5.7 3.6 6.3 3.7 7.3 4.3 11.1 5.8 10.0 3.6 6.3 1.1 4.2 1.6 4.6 1.2 2.6 1.4 3.2 1.7 4.3 2.3 5.6 2.0 3.0 1.2 2.7 1.9 >15 >15 8.7 5.2 >15 1.1
ROE % na na na na na na na na na na na na na na na na na 20 39 >50
BBD.B - Rating as of 7-Jul-10 = Mkt Date 15-Jul-10 Rating Change NR to OP Share Price $4.75
0.39
11.7
0.10
2.2
25
0.9
5.4
46
Growth(%): 5 Year: 8.3 10 Year: 17.2 20 Year: 8.0
2.1 1.0 7.0
-11.4 -5.9 0.6
BMO Capital Markets
Bombardier
IMPORTANT DISCLOSURES Analyst's Certification I, Fadi Chamoun, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Company Specific Disclosure Disclosure 8: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of this issuer. Methodology and Risks to Price Target/Valuation Methodology: Our target price is derived based on a sum-of-the-parts valuation, 12 months from now. Risks: Key risks to our estimates on Bombardier include changes to aerospace production rates and pricing on both business and commercial aircraft determined by the level of demand for such aircraft, which is in turn influenced by factors such as global GDP expansion and corporate profits, airline traffic growth, among others. The level of infrastructure spending by government will contribute to demand for passenger rail products and services; the global trend toward urbanization and reducing greenhouse gasses also fuels demand for rail products. Bombardier absorbs the risk of cost overruns on many fixed price contracts. Further, Bombardier is exposed to currency fluctuation relative to the USD in regions where manufacturing is domiciled. Finally, Bombardier is exposed to residual value of some commercial aircraft sold previously. Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013): We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis on a total return basis (S) = speculative investment; NR = No rating at this time; R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Ratings System (January 4, 2010April 5, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
BMO Capital Markets
Bombardier
BMO Capital Markets
Bombardier

June 18, 2013
Kohl's
(KSS-NYSE)
Broadline Retail
Wayne Hood
BMO Capital Markets Corp. 404-926-1590 wayne.hood@bmo.com
Shannon Coyne / Gabe Lembeck

404-926-1591 / 404-926-1592
shannon.coyne@bmo.com / gabe.lembeck@bmo.com
Key Takeaways from Management Meeting

Event
Our comments follow BMO-hosted meetings with Kohl's Chairman, President and Chief Executive Officer Kevin Mansell.
Securities Info
Price (18-Jun) 52-Wk High/Low Mkt Cap (mm) Shs O/S (mm, BASIC) Options O/S (mm) $52.44 $55/$41 $11,614 221.5 na Target Price Dividend Yield Float O/S (mm) ADVol (30-day, 000s) $56 $1.40 2.7% 198.7 2,915
Price Performance
Kohl's Corp. (KSS)
Price: High,Low,Close(US$) Relative to S&P 500
Impact
Positive. The following are our key takeaways from our management meetings: 1) management continues to believe the path to stronger compstore sales growth is through increasing traffic among its noncore customers; 2) management is excited about the rollout of the new loyalty program that allows the company to better engage existing customers and attract new ones (currently in 200 stores); 3) inventory per store is still expected to be up lowto mid-single digits in 2Q13, flat in 3Q13 and down in 4Q13; 4) we have greater confidence in 2Q13 flat to +2% comp guidance and modest GM expansion in FY2013 (BMO est. +35bp); 5) there is a significant opportunity to improve e-commerce profitability (est. $1.8B in sales; low-single-digit EBIT margin) on lower fulfillment costs; 6) tight expense control enables company to leverage at a low 2% comp-store sales increase; 7) advertising spend will continue to shift away from print toward digital media; and 8) management is happy with the balance of national brands and private brands at 50%, but will give national brands more prominent space in stores and in marketing messaging than it has in the past two years.
65 60 55 50 45 40 35 30 25 20 300 200 100 0 2008 2009 2010 2011 2012 2013

Volume (mln)
180 170 160 150 140 130 120 110 100 90 300 200 100 0
(FY-Jan.) EPS GAAP P/E First Call Cons. FCF P/FCF EBITDA ($mm) EV/EBITDA Rev. ($mm) EV/Rev Quarterly EPS 2012A 2013E 2011A $4.30 2012A $4.17 2013E $4.48 11.7x $4.37 $5.63 9.3x $2,785 5.6x $19,400 0.8x 3Q $0.91 $1.02 2014E $5.23 10.0x $4.81 $5.77 9.1x $2,888 5.4x $19,923 0.8x 4Q $1.66 $1.76
$4.20 $2,935 $18,804 1Q $0.63 $0.66A
$1.61 $2,724 $19,280 2Q $1.00 $1.08
Forecasts
We did not hear material new information that would cause us to change our FY2013 EPS estimate of $4.48 or our FY2014 $5.23 estimate.
Valuation
The stock is trading at 10x our FY2014 estimate or at a 28% discount to the market.
Balance Sheet Data (4-May) Net Debt ($mm) $4,028 TotalDebt/EBITDA 1.6x Total Debt ($mm) $4,578 EBITDA/IntExp na Net Debt/Cap. 38.2% Price/Book 1.9x Notes: All values in US$. Source: BMO Capital Markets estimates, Bloomberg, Thomson Reuters, and IHS Global Insight.
Recommendation
We reiterate our Outperform rating.
BMO Capital Markets
Kohl's
Key Points
The following are our key takeaways from our management meetings: 1) management continues to believe the path to stronger comp-store sales growth is through increasing traffic among its noncore customers; 2) management is excited about the rollout of the new loyalty program that allows the company to better engage existing customers and attract new ones (currently in 200 stores); 3) inventory per store is still expected to be up low- to mid-single digits in 2Q13, flat in 3Q13 and down in 4Q13; 4) we have greater confidence in 2Q13 flat to +2% comp guidance and modest GM expansion in FY2013 (BMO est. +35bp); 5) there is a significant opportunity to improve e-commerce profitability (est. $1.8B in sales; low-singledigit EBIT margin) on lower fulfillment costs; 6) tight expense control enables company to leverage at a low 2% comp-store sales increase; 7) advertising spend will continue to shift away from print toward digital media; and 8) management is happy with the balance of national brands and private brands at 50%, but will give national brands more prominent space in stores and in marketing messaging than it has in the past two years.
Page 2
June 18, 2013
BMO Capital Markets
Kohl's
Kohls Corp. (KSS)

Quarterly Price (US$) 80 70 60 50 40 30 20 10 70 70 60 50 40 30 20 10 30 KSS Relative to S&P 500 KSS Relative to Multiline Retail
1500 1500
Target Price(US$) Share Price(US$)
80
70
60
60
50
50
40
40
30 KSS Relative to S&P 500 KSS Relative to Multiline Retail
120
120
100
1000 1000
100
500
500
80
80
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Revenue / Share - (US$) Price / Revenue
60
2011
2012
60 2013
100 50
5 5 0 4
BMO 2013FY EPS ( May 13 = 4.48 US$) First Call 2013FY Cons.EPS ( Feb 13 = 4.15 US$) 5 4 BMO 2014FY EPS ( May 13 = 5.23 US$) First Call 2014FY Cons.EPS ( May 13 = 4.37 US$) 6 4 6 4 2013
100 50
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
2011
2012
FYE (Jan.) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Range*: Current*
EPS US$ 0.15 0.19 0.23 0.27 0.35 0.45 0.60 0.78 1.10 1.45 1.87 1.72 2.14 2.43 3.31 3.39 2.89 3.66 4.30 4.17
P/E Hi - Lo na 29.1 34.3 30.0 26.3 30.0 41.9 56.5 52.1 65.6 49.8 42.2 38.0 25.3 24.2 22.8 23.5 19.4 16.6 13.7 13.8 65.6 na 11.0 17.2 20.7 17.6 18.1 20.1 27.0 36.7 30.5 28.9 23.5 23.7 18.5 17.6 12.9 11.0 8.4 8.9 10.2 10.1 8.4
DPS US$ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00
Yield% Hi - Lo ND 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.4 2.4 ND 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 0.0
Payout % na 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 24
BV US$ ND 0.7 0.9 1.1 1.4 1.8 3.0 3.7 5.2 6.6 8.3 10.4 12.3 14.5 17.3 17.5 19.7 22.1 27.7 25.7 26.2
P/B Hi - Lo >15 >15 5.9 2.2 7.2 3.6 6.1 4.2 5.1 3.4 6.0 3.6 6.2 3.0 9.2 4.4 7.9 5.5 10.9 5.1 8.7 5.0 7.6 4.2 5.3 3.3 3.7 2.7 3.4 2.5 4.3 2.5 4.0 1.9 2.5 1.1 2.2 1.2 2.3 1.7 2.2 1.6 10.9 1.1
ROE % na 23 23 21 22 19 18 18 19 19 20 15 16 15 19 18 14 15 16 16
KSS - Rating as of 14-May-10 = OP
4.23
12.2
1.40
2.7
33
26.2
2.0
16
nm nm nm
5.9 9.7 19.5
Page 3
June 18, 2013
Kohl's
Analyst's Certification I, Wayne Hood, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Company Specific Disclosure Disclosure 9: BMO Capital Markets makes a market in this security. Methodology and Risks to Our Price Target/Valuation Methodology: We apply a P/E multiple to our forward 12-month earnings estimate considering the company's historical relative P/E range (relative to the S&P 500) and the company's current fundamental outlook. Risks: The risks to our target include: an acceleration in the company's secular growth rate, above plan comparable-store sales and earnings growth, better than plan new product launches, and higher than plan operating margin. Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013) We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis; Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis; Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis; (S) = Speculative investment; NR = No rating at this time; and R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Rating System (January 4, 2010 April 4, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3. Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, Thomson Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time
Page 4
June 18, 2013
BMO Capital Markets
Kohl's
to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information. Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research, which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx. General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
A member of BMO
Financial Group
Page 5
June 18, 2013
June 18, 2013
Hot Topic
(HOTT-NASDAQ)
Stock Rating: Market Perform Industry Rating: Market Perform
Apparel Retail
John D. Morris
BMO Capital Markets Corp. 212-885-4016 john.morris@bmo.com
Jennifer Redding / Janine Stichter

212-885-4072 / 212-885-4053
jennifer.redding@bmo.com / janine.stichter@bmo.com
Securities Info
Dropping Coverage Following Sycamore Partners Acquisition

Event
We are dropping coverage of Hot Topic following completion of its acquisition by Sycamore Partners on June 12, 2013.
Price (18-Jun) 52-Wk High/Low Mkt Cap (mm) Shs O/S (mm, BASIC) Options O/S (mm)
$14.00 na $571 40.8 na
Target Price Dividend Yield Float O/S (mm) ADVol (30-day, 000s)
$14 $0.32 2.3% 36.3 542
Price Performance
HOT TOPIC INC (HOTT)
350 300 250 200 150 100 50
14 12 10 8 6
Recommendation
Hot Topics has been rated Market Perform since May 27, 2009.
4 100 50 0
Volume (mln)
100 50 0
2008
2009
2010
2011
2012
2013
(FY-Jan.) EPS Pro Forma P/E First Call Cons. EPS GAAP FCF P/FCF EBITDA ($mm) EV/EBITDA Rev. ($mm) EV/Rev Quarterly EPS 2012A 2013E 2011A $0.19 $0.19 $1.21 $48.8 $698 1Q $0.09 na 2012A $0.44 $0.44 $1.07 $65.0 $741 2Q -$0.02 na 2013E $0.54 25.9x $0.54 na na $74.6 6.9x $825 0.6x 3Q $0.10 na 2014E na na na na na na na na na 4Q $0.27 na
Balance Sheet Data (4-May) Net Debt ($mm) -$56 TotalDebt/EBITDA nm Total Debt ($mm) $0 EBITDA/IntExp na Net Debt/Cap. nm Price/Book 3.1x Notes: All values in US$. Source: BMO Capital Markets estimates, Bloomberg, Thomson Reuters, and IHS Global Insight.
BMO Capital Markets
Hot Topic
HOT TOPIC INC (HOTT)

Quarterly Price (US$) 16 30 25 20 15 10 5 30 14 25 20 15 10 5 12 10 8 6 4 2 HOTT Relative to S&P 500 HOTT Relative to Specialty Retail 600 400 200 600 150 400 100 200 50 2010 50 2013 100 150 HOTT Relative to S&P 500 HOTT Relative to Specialty Retail 14 12 10 8 6 4 2 Target Price(US$) Share Price(US$) 16
200
200
2011
2012
20 10
4 0.4 2 0 0.2 0.0
BMO 2013FY EPS ( May 13 = 0.54 US$) First Call 2013FY Cons.EPS ( Feb 13 = 0.44 US$) 0.4 0.2 0.0 BMO 2014FY EPS ( May 13 = NA US$) First Call 2014FY Cons.EPS ( May 13 = 0.55 US$) 0.5 0.4 2010 2011 2012 0.5 0.4 2013
2 1
1000 500
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
FYE (Jan.) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Range*: Current*
EPS US$ 0.06 0.10 0.14 0.30 0.49 0.57 0.70 0.97 0.83 0.53 0.31 0.36 0.50 -0.01 0.19 0.44
P/E Hi - Lo na 54.6 34.4 24.2 20.1 24.4 29.8 26.9 33.3 38.9 44.3 50.5 38.9 19.0 na 52.4 19.9 54.6 na 26.9 16.1 7.8 4.7 6.6 12.4 14.1 14.0 16.7 24.6 30.4 10.8 7.8 na 24.1 11.5 4.7
DPS US$ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.28 0.28
Yield% Hi - Lo ND 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.1 5.5 6.1 ND 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.8 3.2 0.0
Payout % na 0 0 0 0 0 0 0 0 0 0 0 0 0 0 >100 64
BV US$ 0.1 0.9 1.0 1.0 1.2 1.6 2.2 2.9 3.4 4.7 4.2 4.6 5.1 5.6 6.1 4.2 4.4
P/B Hi - Lo >15 >15 3.5 1.7 3.6 1.7 3.3 1.1 5.2 1.2 7.7 2.1 7.8 3.2 6.5 3.4 9.4 4.0 6.9 3.0 5.6 3.1 3.4 2.1 2.8 0.8 1.7 0.7 2.3 0.9 2.4 1.1 2.0 1.2 9.4 0.7
ROE % 11 11 14 27 36 31 28 31 21 12 7 7 9 na 4 10
HOTT - Rating as of 27-May-09 = Mkt
0.28
50.0
0.32
2.3
>100
4.1
3.4
Growth(%): 5 Year: -4.9 10 Year: -9.1
nm nm
-4.3 3.5
Page 2
June 18, 2013
Hot Topic
Analyst's Certification I, John D. Morris, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Company Specific Disclosure Disclosure 9: BMO Capital Markets makes a market in this security. Methodology and Risks to Our Price Target/Valuation Methodology: We apply a P/E multiple to our forward 12-month earnings estimate considering the company's historical relative P/E range (relative to the S&P 500) and the company's current fundamental outlook. Risks: The risks to our target include: a reduction in the companys secular growth rate, below plan comparable-store sales and earnings growth, higher than planned inventory levels that could lead to merchandise markdown pressure, as well as fashion risk, which can cause earnings volatility. Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013) We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis; Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis; Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis; (S) = Speculative investment; NR = No rating at this time; and R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Rating System (January 4, 2010 April 4, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3. Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, Thomson Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time
Page 3
June 18, 2013
BMO Capital Markets
Hot Topic
to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information. Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research, which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx. General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
A member of BMO
Financial Group
Page 4
June 18, 2013
Semiconductors
June 19, 2013
Ambrish Srivastava, PhD

415-591-2116
ambrish.srivastava@bmo.com
Gabriel Ho 415-591-2131
gabriel.ho@bmo.com
Summary
Extracts From Qs / Ks AMCC, MRVL

We offer notes from our review of the SEC filings in our coverage universe for C1Q. This note includes extracts from the filings by AMCC and MRVL. We have reviewed the filings and extracted what we believe to be important information. We have also reviewed the risks sections for material changes from the prior period. Following are some of our takeaways:
AMCC: In FY13, revenues were down 15% y-y to $195.6 million. The overall
AMCC: the company expects to commence commercial shipments of X-C1 enterprise class ARM 64-bit server system development platforms consisting of X-Gene Cloud Server hardware and software components in June 2013.
The company has spent ~$238 mn in the development of X-Gene since 2010. Excluding the costs incurred relating to the Veloce accrued liability of $126.6 mn as of FY4Q13, APM spent ~$54.2 mn, $32.5 mn, and $16.4 mn in FY13, FY12 and FY11, respectively. The company expects to pay another $74 mn in cash and stock by September 30, 2013. As of FY4Q13, APM had ~$85.5 mn cash on its balance sheet and on April 22, APM received cash payment of $30.2 mn from the sale of TPack business to Altera.
revenue decline was spread across both the computing and connectivity product families and was a result of lower demand due to overall softness in the macro conditions and due to the roll-off of legacy products. In addition, revenues for Connectivity products were lower owing to the delay in the overall OTN infrastructure build-out. Cash, cash equivalents and short-term investments was $85.5 million as of FY4Q13, up from $84.2 million in FY3Q13. APM expect the X-C1 enterprise class ARM 64-bit server system development platform, consists of X-Gene Cloud Server hardware and software components, including compilers, operating systems, virtualization and application software for multiple Tier 1 ecosystem partners to commence commercial shipments in June 2013. APM believes X-Gene's disruptive new technology will by 2016 increase the companys overall addressable market to as much as $7.5 billion in cloud infrastructure, data center server and other markets, effectively quadrupling the companys 2012 addressable market. The company believes market penetration for next-generation cloud infrastructure and data center servers could range from 8% to 25% of all servers by the end of calendar 2015 and noted at the high end of this range, the addressable market for ARM-based server solutions in these applications could be as high as $3 billion. The company disclosed that it has spent ~$238 million in the development of X-Gene since the programs inception in 2010. The company also provided non-GAAP income from the companys base business, which excludes
APM added several items to the risks factors. For details, please refer to page 3 of this note. MRVL: Revenues from the companys top three and top two customers were 48% of total and 39% of total in FY1Q14, respectively, implying revenues from the companys top three customers and top two customers were up 11% and up 9% yy, respectively vs. total revenues down 8% y-y.
Marvell expects the District Court to issue its final judgment on CMU litigation in the next few months. Marvell believes the low end of range of possible loss is zero, but it cannot reasonably estimate the upper range of the possible loss.
Page 1
June 19, 2013
BMO Capital Markets
Semiconductors
expenditures relating to the companys X-Gene product development costs. Excluding costs incurred relating to the Veloce accrued liability, APM spent ~$54.2 million, ~$32.5 million, and ~$16.4 million on X-Gene product development in FY13, FY12, and FY11, respectively. Related to Veloce, APM expects to pay ~$142.8 million upon the completion of the first and second performance milestone. The third and last development and performance milestone was not yet considered probable of achievement as of March 31, 2013. Of the $142.8 million, ~$126.6 million has been recognized through Mar 31, 2013 (up from $117 million in FY3Q13), and $33.2 million has been paid to date ($16.6 million in cash and $16.6 million in common stock). APM expects that another ~$74.0 million will be paid in cash and stock by Sept. 30, 2013. During FY1Q14 and FY2Q14, APM expects to issue ~2.3 million additional shares of common stock as part of the Veloce acquisitions considerations and thereafter, the company will have the ability to issue up to ~7.6 million additional shares as Veloce acquisition consideration without obtaining stockholder approval. On April 22, 2013, APM completed the sale of AppliedMicro TPACK A/S (TPack) and certain specified IP assets owned by the Company related to TPacks business for $33.5 million, payable in cash. The company received a cash payment of $30.2 million, with the remaining cash payment of $3.3 million will be held by in escrow until Mar 31, 2014 to secure the companys indemnification obligations subject to and in accordance with the terms of the Purchase Agreement. In connection with the TPack Purchase Agreement, APM and Altera entered into a memorandum of understanding intended to result in the joint development and marketing of optimized solution for data center applications. Likely owing to the introduction of X-Gene products, APM added AMD, Calxeda, Cavium, and Texas Instruments to its list of competitors in cloud and enterprise server market. APM also added Broadcom to its list of competitors in the embedded computing silicon solution market. APM announced availability of Gearbox product in February 2012 and believe the product, which is based on CMOS process technology has been widely accepted as the lowest power and best performing product of its type, and is displacing older technology products that were based on Silicon Germanium process technology. In FY13, APM removed Apple, Nokia-Siemens Network and Panasonic from its embedded computing products customer list. The company also removed ECI, Ericsson and NEC from its connectivity products customer list. Applied Micros full-time employee headcount was 649 as of FY13, down from 728 as of FY12. Sales to distributors accounted for roughly 66%, 58%, and 46% of revenues in FY13, FY12, and FY2011, respectively; implying sales to distributors were down ~3% y-y to ~$129 million. The largest distributor, Avnet was ~27% of revenues for FY13, up ~16% y-y from ~20% of total during FY12. Wintec, a global logistics supplier, was ~19% of total for FY13, down ~18% y-y to ~$37 million from ~20% of total in FY12. During FY13, the company capitalized $3.1 million of total mask costs, down ~35% y-y from $4.8 million in FY12. During FY13, APM repurchased ~0.1 million shares at a weighted average price of $5.18 per share, leaving $15.9 million available in the companys stock repurchase program. The company did not enter into any structured stock repurchase agreements in FY13. During FY12,
Page 2
June 19, 2013
BMO Capital Markets
Semiconductors
the company received 1.0 million shares of its common stock from the settled structured stock repurchase agreement at effective purchase price of $9.74 per share. In April, 2013, the company settled and dismissed with prejudice and without costs the contract litigation with Xtera and its subsidiary Meriton Networks Canada Inc. Addition to the risks includes that (1) issuance of more than ~7.6 million shares in addition to the planned issuance of ~2.3 million shares during FY1Q14 and FY2Q14 as Veloce acquisition consideration may require stockholder approval. (2) APMs operating results may fluctuate because of market acceptance of APMs products and APMs customers products, including without limitation failure X-Gene to be commercially accepted at the levels the company anticipate, as well as risks associated with APM customers dependence on third-party manufacturing and supply relationships; (3) disruption in the distributors operations could materially harm the companys business; (4) APMs operating results are subject to fluctuations as a result of foreign currency exchange fluctuations to the extent that this affects the companys customers purchasing power, and uncertain economic conditions that may worsen or sustain improvements which trail those in the United States may impact operating results; (5) delays in development, manufacture and roll-out of new products could have a negative impact on the companys reputation with customers and result in liability; (6) reduction in number of employees assigned to financial reporting and regulatory compliance functions may increase risk of failure in the companys internal control systems and adversely affect the companys business and stock price; (6) the departure from the company of one or more Veloce management or engineering personnel could materially adversely affect the companys product development efforts for X-Gene and next-generation products; (7) shortages of water, electricity or other supplies could severely hamper the companys ability to supply a sufficient number of products to meet customer demand; and that (8) the market price of APMs common stock could be subject to significant fluctuations due to the following factors: (i) the companys announcement of actual results or financial outlook that are higher or lower than market or analyst expectations, (ii) changes in the economic performance or market valuations of other semiconductor companies or companies perceived by investors to be comparable to APM, (iii) positive or negative commentary about the companys business or prospects by industry bloggers and journalists, and (iv) volume fluctuations due to inconsistent trading volume levels of AMCC shares.
MRVL: Revenues from the companys top three customers and the companys top two
customers were 48% of total and 39% of total in FY1Q14, respectively, implying revenues from the companys top three customers and top two customers were up 11% and up 9% y-y respectively vs. total revenues down 8% y-y. Marvell believes it has reached a trough in the mobile market business in FY1Q14 as the company continues to make strong progress with its integrated 3G and 4G platforms at multiple top tier OEMs. It disclosed that one of these leading Asian OEMs recently launched a new smartphone and is in production for a tablet design based on the companys dual-core platform. The company believes additional devices will be launched by this OEM and other top-tier OEMs in the coming quarters. Marvell had $1.7 billion of cash, cash equivalents, and short-term investments on its balance sheet at FY1Q14. Subsequent to the end of FY1Q14 through May 30, 2013, the company repurchased 2.1 million of its common shares for $23.3 million at an average price per share of $11.11.
Page 3
June 19, 2013
BMO Capital Markets
Semiconductors
As of FY1Q14, the companys purchase commitments were $236.1 million, up 11% q-q. Share-based compensation increased by $6.3 million y-y to $33.5 million in FY1Q14, primarily due to increased headcount in FY14, combined with higher expense related to the employee stock purchase plan as the offering price of the employee stock purchase plan was reset in June 2012 and in December 2012 owing to the decline in the companys stock price. Related to the CMU litigation, post-trial motions were heard on May 1 and 2, 2013 and the company expects the District Court to issue its final judgment some time in the next few months. The company believes the low end of the possible range of loss is zero, but it cannot reasonably estimate the upper range of the possible loss, as the number of factors (including finalization of the post-trial motions at the District Court) could significantly change the assessment of damages. In Lake Cherokee Patent Litigation, on May 14, 2013, MSI filed a motion for partial summary judgment related to Lake Cherokees asserted damages and both parties filed motions to strike opinions and testimony of certain expert witnesses. Trial is set for August 5, 2013. In APT Patent Litigations, the parties reached an agreement to dismiss all claims and counterclaims and expect to have the cases dismissed shortly. Marvell expects the resolution will not have a significant impact on the companys financial statements. In Azure Networks Litigation, on May 20, 2013, the District Court issued an order denying plaintiffs motion for reconsideration and adopted the magistrate judges claim construction ruling and on May 30, 2013, the District Court entered a judgment of non-infringement In Power Management Systems Litigation, a claim construction hearing was held on January 18, 2013, and a ruling was issued on May 30, 2013. Marvell disclosed that during the next 12 months, it is reasonably possible that the amount of unrecognized tax benefits could decrease significantly owing to a potential settlement with tax authorities and/or the expiration of applicable statutes of limitations and that the amount cannot be reasonably estimated as the company could have negotiations with various tax authorities throughout the year. Net reductions in unrecognized tax benefits was $9.7 million in FY1Q14, primarily arose from the expiration of the statute of limitations and from the settlement of two audits in non-US jurisdictions (one for $3.5 million and the other for $4.1 million) less an increase in current unrecognized tax benefit estimates. Marvell disclosed that Economic Development Board of Singapore (EDB) granted the company Pioneer Status in July 1999 that expires in June 2014. For FY1Q14, the tax savings associated with this tax holiday was ~$1.6 million. The company has begun early discussions with EDB regarding tax incentives after June 2014.
Exhibit 1. Extracts From C1Q Filings From Our Coverage Universe

AMCC AMCC AMCC FY2013 10-K Review Business Update Applied Micro Circuits Corporation (AppliedMicro, APM, AMCC or the Company) is a global leader in computing and connectivity solutions that span embedded computing, Telco, and solutions for next-generation cloud infrastructure and data centers. The Company's products include the X-Gene ARM 64-bit Server on a Chip solution, or X-Gene, designed for cloud data center and enterprise applications.
Page 4
June 19, 2013
BMO Capital Markets
Semiconductors
Its embedded computing products are deployed in applications in markets such as control- and data-plane functionality, wireless access points, residential gateways, wireless base-stations, storage controllers, network attached storage, network switches and routing products, and multifunction printers. The Company's connectivity products address high growth segments including 10, 40, and 100Gbps solutions serving data center and service provider market opportunities. Connectivity products include framer/mapper devices for Optical Transport Network (OTN) equipment and physical layer devices that transmit and receive signals in a very highspeed serial format. The Company's corporate headquarters are located in Sunnyvale, California. Sales and engineering offices are located throughout the world.
Industry Background Computing and Connectivity Silicon Solutions Global data center traffic is expected to grow from 1.8 zetabytes per year in 2011 to 6.6 zetabytes per year in 2016. This represents a compound annual growth rate (CAGR) of 31% through 2016. A tier 1 server OEM estimates the need for eight million to ten million new cloud servers by 2016, with a physical footprint large enough to cover Manhattan island. o Data centers today consume as much as 1.5% of the world's energy production and, without changes to data center architectures, could exceed 7.0% by the end of the decade. Motivated by operating costs, land use restrictions and environmental concerns, data center operators are keenly aware of the need to lower power consumption while increasing hardware density and, at the same time, maintaining or improve the user experience. We believe these trends create opportunities for highperformance, high density, lower TCO cloud infrastructure and data center silicon and system solutions. Cloud industry experts believe that server solutions that are able to successfully combine ARM 64-bit processor hardware, high speed input/output ("I/O") and software-defined networking capabilities onto a single chip will provide significant benefits over existing solutions. By combining the inherent power advantages of the ARM Instruction Set Architecture ("ISA") with on-chip networking capabilities, such next generation server solutions are expected to deliver significantly lower TCO for typical cloud workloads. Industry experts anticipate market penetration for next-generation cloud infrastructure and data center servers could range from 8% to 25% of all servers by the end of calendar 2015. At the high end of this range, the addressable market for ARM-based server solutions in these applications could be as high as $3 billion. Cloud infrastructure growth also creates opportunities for new connectivity approaches within the data center. Emerging technologies include highspeed switch fabrics, 100Gbps Ethernet and RoCE (remote direct memory access over converged Ethernet). These new technologies will allow for faster data transfer between processor nodes, semiconductor components, blades, racks and appliances, substantially lowering TCO and allowing more efficient use of physical space. Communications technology between the user and the data center has also evolved considerably. Consumers demand ubiquitous access to content such as information, photographs and streaming high-definition media through a proliferation of smart mobile and at-home devices. As a result, carrier networks face increased challenges to support the rapid and cost-effective delivery of voice, data and media to meet this demand. In wireline, the access, metro and core networks are shifting towards packet-based services that are fundamentally less expensive than the transitional synchronous optical network (SONET) and the synchronous data hierarchy (SDH) networks, but provide the same level of quality and guarantee of content delivery. OTN technology has emerged as the layer one protocol to replace SONET/SDH in the metro and core. Combined with Wavelength-Division Multiplexing ("WDM") and Dense
Page 5
June 19, 2013
BMO Capital Markets
Semiconductors
AppliedMicro Strategy ARM-based Server on a Chip Solutions Our strategy is to leverage our existing connectivity and embedded processor core competencies and solutions to create disruptive new technologies that will define and lead the market for silicon solutions addressing cloud data center and enterprise applications. Our base business, consisting of a broad array of embedded computing and connectivity products, produces significant revenues and strong gross margins. Our addressable market size and opportunities for revenue growth in these segments, however, are constrained by service provider demand and attrition of lower-margin legacy products. We believe X-Gene's disruptive new technology will by 2016 increase our overall addressable market to as much as $7.5 billion in cloud infrastructure, data center server and other markets, effectively quadrupling our 2012 addressable market. We anticipate our new addressable market will consist of server solutions for cloud data centers and enterprise applications, data center connectivity solutions and a variety of related products including routers, networkattached storage appliances, top of rack switches, and wireless access points. We commenced our investment in the X-Gene program in 2010, and thereafter actively supported the program's research and development ("R&D") until we were ready to publicly announce our development of disruptive Cloud Server technology in late 2011. During and after this development period, our financial reporting reflected abnormally high R&D expenses relative to ongoing revenue levels. Since its inception, we have expensed approx. $238 million in the development of X-Gene. As of today, the returns on that investment include our working pre-production Server-on-a-Chip product, a large and rapidly growing addressable market, and our first-to-market advantage. We believe X-Gene is the world's first, and currently the only, ARM 64-bit Serveron-a-Chip solution sampling today. X-Gene provides enterprise class ARM 64-bit high performance processor cores, coupled with switch fabric and high-speed networking capabilities that we believe will deliver substantially lower power consumption and substantial TCO savings. Our introduction last year of our X-Gene FPGA hardware development platform facilitated the development and availability of necessary software for commercial deployment and evolution of the ARM 64-bit ecosystem. In January 2013, we announced our plans for the world's first enterprise class ARM 64-bit server system development platform based on X-Gene. This X-C1 platform consists of both XGene Cloud Server hardware and software components, including compilers, operating systems, virtualization and application software for multiple Tier 1 ecosystem partners. We expect to commence commercial shipments of these development platforms in June 2013. We believe market interest and demand for our X-Gene development platforms demonstrates our leadership and first-to-market advantage. X-Gene builds on our history as a global leader in providing energy-efficient, sustainable solutions to process and transport information for current and next generation networks. Being a leader in processor design, embedded processor System-on-Chip ("SoC") design, mixed-signal design, high speed signal processing, Internet protocol, OTN and Ethernet packet processing gives AppliedMicro the foundation to compete and excel in the next several generations of solutions.
Embedded Computing We continue to market our processor products based on Power Architecture. Developed by IBM, Power Architecture is the leading standard computing platform within the communications market for high-performance embedded systems. Many
Page 6
June 19, 2013
BMO Capital Markets
Semiconductors
of our customers' products require embedded computing solutions for managing control plane and data plane functionality. Our products combine the embedded central processing unit ("CPU") with peripheral functionality to create optimum solutions for applications such as wireless access points, residential gateways, wireless base-stations, storage controllers, network attached storage, network switches and routing products, and multi-function printers. Products based on Power Architecture are broadly deployed and continue to be designed into major telecommunications, consumer, and networking equipment. Our PACKETpro family leverages the general purpose embedded computing capabilities of Power Architecture in combination with technologies derived from our portfolio of traffic management and packet computing products to create solutions that are ideally suited for converged Internet Protocol-based networks. As part of our SLIMpro PowerPC ISA product offering, we developed an asymmetric multiprocessing architecture that combines the ARM 32-bit and PowerPC 32-bit cores. This combination has enabled enhanced features for security, power management and offload capabilities. Furthermore, this technology led to the implementation of ARM 32-bit offload engines (or accelerators) built into our X-Gene product family.
Connectivity Historically, our connectivity products have focused on the SONET/SDH optical telecommunications infrastructure. Today our product mix continues to shift to the data center as our newer products begin to mature. Our PHY design wins include service provider and data center customers, particularly with our 100Gbps QPSK Mux and Gearbox products. Design wins for our QPSK Mux product include eight of the world's largest optical module manufacturers and vertically integrated 100Gbps system companies. In the service provider market segment, emerging metro Ethernet and OTN deployments are driving substantial investments in optical infrastructure. These new deployments are increasingly based on OTN with highly integrated framing, mapping, and multiplexing functions. High-speed physical layer capabilities in combination with our Forward Error Correction (FEC) experience play a critical role in providing cost-and power-optimized solutions for the leading edge platforms in the Wide Area Network ("WAN"). Data center and enterprise networks continue to deploy computing and storage assets. To address the rapidly increasing volume of information, data center network infrastructures are migrating from 1Gbps Ethernet to 10Gbps and 100Gbps. Ethernet is increasingly used for connectivity between processor nodes, semiconductor components, blades, racks and appliances. Our data center connectivity technology portfolio, consisting of optical, backplane and short reach copper solutions, is specifically targeted to provide high speed connectivity with increased port density, at lower power and operating cost points, that will enable greater penetration into the present and future data center infrastructure markets. Interest income, net of management fees (of $2.6 million in FY2013 vs. $4.2 million in FY2012), reflects interest earned on cash and cash equivalents, short-term investments and marketable securities. The decrease in interest income, net for FY2013, compared to FY2012 was primarily due to an other-than-temporary impairment of short term investments and marketable securities of $1.1 million and our lower cash, cash equivalents and short-term investments available-for-sale balances. Net other expense was $2.4 million in FY2013 vs. net gain of $7.1 million in FY2012. The decrease in other income for FY2013, compared to FY2012 was due to an impairment of $2.2 million relating to a strategic equity investment, an impairment of $1.8 million to notes receivable and other assets, no net gain on disposal of strategic equity investment recorded during FY2013 as compared to FY2012 (wherein a net gain of $7.1 million was recorded) and which was offset by a
Page 7
June 19, 2013
BMO Capital Markets
Semiconductors
gain of $1.3 million arising from the sale of equipment and other assets. The federal statutory income tax rate was 35% for FY2013 and 2012. Income tax expense recorded for FY2013 was a benefit of $(0.6) million compared to an expense of $0.9 million for FY2012. The decrease in tax expense in FY2013 versus FY2012 was primarily related to other comprehensive income. The allocation of the current year tax provision included a $1.0 million tax benefit in operations with an offsetting tax expense in other comprehensive income. As of March 31, 2013, our principal source of liquidity consisted of $85.5 million in cash, cash equivalents and short-term investments which is approx. $1.26 per share of outstanding common stock as compared to $1.84 per share at March 31, 2012. o o Working capital as of March 31, 2013 was $26.9 million. Total cash, cash equivalents, and short-term investments decreased by $28.4 million during FY2013, primarily due to cash used for operations of $33.1 million, purchase of property and equipment of $9.0 million, funding of restricted stock units withheld for taxes of $3.1 million and repurchases of our common stock for $0.7 million, and offset by proceeds from stock issuance of $8.9 million, proceeds from sale of a strategic equity investment of $7.1 million and proceeds from the sale of equipment and other assets of $1.8 million. At March 31, 2013, we had contractual obligations not included on our balance sheet totaling $83.1 million, primarily related to facility leases, IP licenses, engineering design software tool licenses, non-cancelable inventory purchase commitments and liability for uncertain tax positions.
Products and Customers Server on a Chip Products: In April 2013, we announced shipping samples of XGene to customers and partners. X-Gene is the world's first ARM 64-bit Server on a Chip platform, featuring eight high-performance cores operating at up to 2.4GHz, coupled with network and storage offload engines and integrated Ethernet. X-Gene represents a new, grounds-up Cloud Server solution tailored for the rapid growth of structured and unstructured compute requirements in next generation data centers. We currently expect to commence production of our X-Gene Server on Chip solution by the end of calendar 2013 and to begin generating sales revenue in calendar 2014. In June 2013, we expect to ship our X-C1 server system development platform based on X-Gene. This platform consists of both X-Gene hardware and software components, including compilers, operating systems, virtualization and application software for multiple Tier 1 ecosystem partners. Target customers for our X-Gene development platform include cloud and enterprise data centers, as well as Tier 1 server OEMs and networking equipment OEMs.
Embedded Computing Products In FY2012, we introduced the APM8669x Black Mamba, the highest performance member of our second generation of PACKETpro embedded processors. While PACKETpro is our second-generation of embedded processors, it is the first to feature offload acceleration of critical features at performance levels up to 1.3 GHz. The innovative subsystem design features the Scalable Lightweight Intelligent Management processor, or SLIMpro, to enable breakthrough flexibility in power management, protected asymmetrical multi-processing, failover protection, resiliency and end-to-end security for a wide range of mission-critical applications in wireless and wired networking, multi-function printer, industrial, network-attached storage, consumer and enterprise access point markets. Additional members of the PACKETpro family include Green Mamba, Diamond Back, Keelback, and Catalina. Our current embedded processor customers include Brocade, Cisco, Ericsson, Fujitsu, Hewlett-Packard, Kyocera, Netgear, Q-Logic, Toshiba TEC and Western Digital (where Apple, Nokia-Siemens Networks and Panasonic has been
Page 8
June 19, 2013
BMO Capital Markets
Semiconductors
removed from list in FY2012 10-K). Connectivity Products We announced availability of our Gearbox product in February 2012. It features four 28 Gbps interfaces, among the highest performing true Telecom Grade Gearbox products available in CMOS in the industry. Its initial applications are for 100Gbps optical modules that are used by our mainstream service provider customers. With current industry products for Gearbox-type products based on more expensive and power-intensive processes, we believe our CMOS-based Gearbox offers much lower power and increased likelihood of assured supply compared to other silicon solution vendors. Our customers include leading OEMs for both wide area and access network equipment: Alcatel-Lucent, Cisco, Fujitsu, Huawei, Juniper Networks, Nokia-Siemens Networks, ZTE and many others. More recently, we introduced a PM-QPSK Multiplexer which provides the transmit function in a 100Gbps Coherent Optical Module. Realized in CMOS process technology, we believe it has been widely accepted as the lowest power and best performing product of its type, and is displacing older technology products that were realized in Silicon Germanium process technology. Our framing layer silicon solutions transmit and receive signals to and from the physical layer in a parallel format and are used in high-speed optical network infrastructure equipment. For OTN applications, our framer products incorporate our industry-leading Forward Error Correction technology to significantly improve reach. Most customers in the service provider space have production life cycles of five to seven years, and we are in the middle stage of this life cycle with our Rubicon and Pemaquid OTN devices. We followed these products with our Yahara product family, which improves on the functionality of Rubicon and integrates 10Gbps PHY. Customers have found Yahara to be a very effective upgrade to Rubicon for newer line cards. In FY2012, we went into production with our PQ60 family of OTN framers. Where Rubicon and Yahara feature a single primary 10Gbps interface, PQ60 offers six of them. PQ60 and derivative products have become the de facto standard in edge routers, the single highest growth segment in OTN. Our current customers for framers and mappers include Adva, Alcatel-Lucent, Ciena, Cisco, Fujitsu, Huawei, Juniper, Tellabs and ZTE (where ECI, Ericsson and NEC has been removed from list in FY2012 10-K).
Competition We designed X-Gene for existing and emerging cloud and enterprise data centers. Existing data centers currently rely primarily on Xeon server processors and related chipsets developed and marketed by Intel. As a result, we will compete with Intel in the existing cloud and enterprise server infrastructure market. In the cloud and enterprise server market, we will compete with Intel Xeon in addition to lowpower server silicon products from Intel, AMD, and a number of ARM-based server silicon vendors, including Calxeda, Cavium, Texas Instruments and others. We believe X-Gene is well-positioned to address the performance capabilities and enterprise features demanded by today's cloud infrastructure providers, offering high-speed networking, software-defined networking capabilities and enterpriseclass security, along with significant projected TCO savings. We believe X-Gene will be a compelling solution in both the existing cloud and enterprise infrastructure and the cloud growth opportunity. In the embedded computing silicon solutions market, we compete with technology companies such as Broadcom, Cavium and Freescale Semiconductor. In addition, some of our customers and potential customers have internal integrated circuit designs or manufacturing capabilities with which we compete. In the connectivity silicon solutions market segment, we compete primarily against companies such as Broadcom, Cortina and PMC-Sierra (Vitesse removed from list in FY2012).
Page 9
June 19, 2013
BMO Capital Markets
Semiconductors
Our ability to successfully compete in these markets will depend on our ability to design and oversee the manufacture of new products that showcase new technologies and gain end-market acceptance in a time-efficient and cost-effective manner.
Technology Our computing team has delivered a multi-core processor running at up to 2.4Ghz based on ARM 64-bit architecture and CMOS process technology. Our analog and connectivity teams have created and delivered to customers 100Gbps production silicon, also in CMOS. Our products incorporate a combination of internally developed and licensed technologies. For our embedded processor products, we are a licensee of Power Architecture along with ARM's 32-bit cores. For our Server on a Chip and embedded computing products, we hold an ARM 64-bit (v8) architectural license and we believe we are the first company to deliver silicon using this ISA. We also license various other technology components used in our products, as well as various engineering design and verification tools.
Research & Development Our R&D expertise and efforts are focused on the development of highperformance analog, digital and mixed-signal silicon solutions and the development of highly integrated embedded processing SoC silicon solutions for the communications market, and the development efforts related to the 40nm and 28nm X-Gene ARM 64-bit Server on a Chip products.
Intellectual Property We rely in part on patents to protect our intellectual property (IP). We currently hold approx. 265 issued patents (vs. 340 in PY), which principally cover aspects of the design and architecture of our IC and enterprise storage products. In addition, we have over 192 inventions (vs. 161 in PY) in various stages of the patenting process in the United States and abroad. To protect our IP, we also rely on a combination of mask work protection under the Federal Semiconductor Chip Protection Act of 1984, trademarks, copyrights, trade secret laws, employee and third-party nondisclosure agreements and licensing arrangements. In the United States, our trademarks and registered trademarks include AppliedMicro, AMCC, APM, X-Gene, Server on a Chip, Cloud Server, OTNsec, Arming the Cloud and Hard Silicon, among others. In addition to our IP, we also rely upon licensing certain third-party technologies for the development of our products.
As of March 31, 2013, the Company had 649 full-time employees (vs. 728 in PY): 64 in administration (vs. 80 in PY), 507 in R&D (vs. 535 in PY), 13 in operations (vs. 24 in PY) and 65 in marketing and sales (vs. 89 in PY). Our ability, as the economy recovers, to attract and retain qualified personnel is essential to our continued success. None of our employees are covered by a collective bargaining agreement, nor have we ever experienced any work stoppage. On a sell-through basis, we had approx. 78 days of inventory in the distributor channel (vs. 61 days in PQ) at March 31, 2013 as compared to 83 days at March 31, 2012. The decrease in inventory days was due to higher distributor sell-through revenues in FY4Q13 offset by higher overall net inventory in the distributor channel. We also assess the performance of our business on a non-GAAP basis, excluding the impact of expenditures relating to our X-Gene product development costs. Non-
Page 10
June 19, 2013
BMO Capital Markets
Semiconductors
GAAP net (loss) income is derived by excluding certain items required by GAAP, such as stock-based compensation charges, amortization of purchased intangibles, Veloce acquisition consideration, restructuring charges, impairment of strategic investments, impairment of notes receivable and other assets, other-thantemporary impairment on investments, income taxes, and other one-time and/or non-cash items. In addition, when X-Gene product development related expenditures are excluded from the above, we derive the adjusted Non-GAAP income from our base business (NGIBB). o We believe that NGIBB is a useful supplemental measure for investors as it helps them view the performance of the ongoing base business without the effect of unusual or infrequent costs including non-cash expenditures and also excluding an unusual and very significant R&D project. The measure is useful for investors to evaluate and compare the results of operations of the Company to its peers in a more meaningful way and allows investors to assess the health and performance of the base business. NGIBB is not a measure determined in accordance with generally accepted accounting principles in the United States, or GAAP, and should not be considered a substitute for operating income, net income or any other measure determined in accordance with GAAP. NGIBB should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP and may not be consistent with the presentation used by other companies. During FY2013, the company spent $54.192 million on X-Gene product development, up from $32.45 million and $16.379 million in FY2012 and FY2011, respectively. These amounts relate to direct expenditures associated with the X-Gene product development and does not include costs incurred relating to the Veloce accrued liability.
Based on direct shipments, net revenues to customers that were equal to or greater than 10% of total net revenues were as follows: o o FY13: Avnet: 27% (vs. 20% in FY12), Wintec (global logistics provider) 19% (vs. 20% in FY11), Flextronics: < 10% (vs. 11% in FY11) Sales to distributors accounted for approx. 66%, 58% and 46% of our revenues for FY2013, FY2012, and FY2011, respectively.
Our fourth quarter book-to-bill ratio at March 31, 2013, 2012 and 2011 was 0.7, 0.8 and 1.0, respectively. Our annual book-to-bill ratio at March 31, 2013, 2012 and 2011 was approx. 1.1, 0.8 and 1.0, respectively. During FY2013 and FY2012, total mask costs capitalized were $3.1 million and $4.8 million, respectively During FY2013, approx. 0.1 million shares (vs. 3.5 million shares in PY) were repurchased on the open market at a weighted average price of $5.18 per share (vs. $5.98 in PY). As of March 31, 2013, we had $15.9 million available in our stock repurchase program. We did not enter into any structured stock repurchase agreements during FY2013. During FY2012, we entered into structured stock repurchase agreements totaling $10.0 million. For those agreements that settled during FY2012, we received 1.0 million in shares of our common stock at an effective purchase price of $9.74 per share from the settled structured stock repurchase agreements. At March 31, 2013, we had no outstanding structured stock repurchase agreements. Total contractual operating leases and other purchase commitments were $83.1 million as of FY4Q13, down from $93.3 million in FY4Q12. At March 31, 2013, the Company has federal and state R&D tax credit carryforwards of approx. $59.8 million and $29.0 million, respectively (vs. $96.3 million and $51.1 million in PY), which begin to expire in FY2014 unless previously utilized. The Company also has federal and state net operating loss carryforwards of approx. $1,124.4 (vs. $1,051.5 million in PY) million and $652.1 million,
Page 11
June 19, 2013
BMO Capital Markets
Semiconductors
respectively, which will begin to expire in FY2018 and FY2014, respectively. In April 2013, the contract litigation between AppliedMicro TPACK A/S, the Companys wholly-owned subsidiary, Xtera Communications Inc. and its subsidiary Meriton Networks Canada Inc., which previously was commenced in September 2009 in the Ontario Superior Court of Justice in Canada was fully settled and dismissed with prejudice and without costs.
Investments During FY2013, we recorded approx. $1.1 million in other-than-temporary impairment charges. During FY2012 and FY2011, we did not record any other-thantemporary impairment charges. As of March 31, 2013, we did not record an impairment charge in connection with other securities in a continuous loss position (fair value less than carrying value) with unrealized losses of $48,000 as we believe that such unrealized losses are temporary. In addition, we also had $8.1 million in unrealized gains.
AMCC
Acquisition / Divesture Veloce On June 20, 2012 (the Closing Date), we completed our acquisition of Veloce pursuant to the terms of the Agreement and Plan of Merger, entered into as of May 17, 2009 (the Initial Agreement), as amended by Amendment No. 1 to Agreement and Plan of Merger, entered into as of November 8, 2010 (the First Amendment), and Amendment No. 2 to Agreement and Plan of Merger, entered into as of April 5, 2012 (the Second Amendment and, collectively with the Initial Agreement and the First Amendment, the Merger Agreement). The First Amendment was amended, restated and replaced in its entirety by the Second Amendment. The terms of the Merger Agreement include the payment of initial consideration of up to $60.4 million, payable in shares of Company common stock and/or cash (at our election) to the holders of Veloce common stock, Veloce stock options that were vested on the Closing Date, and Veloce stock equivalents. During the twelve months ended March 31, 2013, as part of the above arrangement, we issued approx. 3.0 million shares valued at approx. $16.6 million and paid approx. $16.6 million in cash. To the extent payments of the $60.4 million are settled in the Company's common stock, and relate to shares of Veloce stock that were outstanding at the date of the closing of the Merger, the value of the Company's common stock used to settle the Veloce obligation is fixed at $5.546 per share (fixed shares). The balance of the $60.4 million or approx. $27.2 million will be paid over multiple quarters and will include approx. 1.1 million fixed shares and at least $9.7 million in cash for a total value of $15.6 million. The remaining amount will be settled in a combination of cash and shares of the Company's common stock valued at the then-current market price. Payment of the remaining Veloce consideration will occur based upon when each performance milestone is completed and when satisfaction of vesting requirements, if applicable, are met. As of March 31, 2013, we believe that the first two performance milestones are probable of attainment, and the third and final performance milestone was not believed to be probable of attainment as of March 31, 2013. Approx. $142.8 million of Veloce consideration is expected to be payable upon the attainment of the first two Veloce development and performance milestones and is expected to be paid over multiple quarters. As of March 31, 2013, $33.2 million has been paid to date and we expect that an additional $74.0 million will be paid in cash and stock by September 30, 2013. Additional consideration may become payable if we are able to complete the third and final performance milestone. The Veloce accrued liability included on the Consolidated Balance Sheets is based upon the amount of R&D expense recognized in connection with the development of the
Page 12
June 19, 2013
BMO Capital Markets
Semiconductors
Veloce performance milestones less amounts paid either in cash or our common stock. The estimated total value of the Veloce consideration is currently based upon the benchmarks that were achieved during simulations that were performed during FY3Q13 and correlating the results of the simulations to the contractual terms included in the Merger Agreement. As a result of higher than expected benchmarks achieved during simulations, the total estimated value to Veloce has been updated from a previous estimated maximum of $135 million to the contractual maximum of $178.5 million. As a result of this increase in value, the estimated value relating to the first and second performance milestone was also increased. Total R&D expenses expected to be recognized upon completion of the first and second performance milestones is approx. $142.8 million (including the initial consideration of $60.4 million), of which approx. $126.6 million has been recognized through March 31, 2013. (vs. $117 million in PQ) During the twelve months ended March 31, 2013, expenses recognized in connection with first and second performance milestones were $37.0 million and $29.2 million, respectively.
TPack On April 12, 2013, the Company entered into an Asset Purchase Agreement (the Purchase Agreement) with Altera European Trading Company Limited (the Buyer), a private limited company organized under the laws of Ireland and a wholly-owned subsidiary of Altera Corporation (Altera), and AppliedMicro TPACK A/S (TPack), a limited liability company organized under the laws of Denmark and a wholly-owned subsidiary of the Company. Pursuant to the Purchase Agreement, the Company is selling 100% of the issued and outstanding shares of TPack and certain specified intellectual property assets owned by the Company related to TPack's business for a total purchase price of $34 million, entirely in cash. The purchase price was subject to an adjustment based on TPack's working capital balance as of the closing of the transaction. On April 22, 2013, the Company completed the sale of TPack and certain specified intellectual property assets owned by the Company related to TPack's business for an aggregate consideration of $33.5 million, payable in cash, which reflects the $34.0 million base purchase price as adjusted for the working capital adjustment mechanism set forth in the Purchase Agreement, and remains subject to a potential final, non-material post-closing adjustments. In connection with the closing, the Company received a cash payment of $30.2 million. The remaining cash payment of $3.3 million of the aggregate consideration will be held by the in escrow until March 31, 2014 to secure the Company's indemnification obligations subject to and in accordance with the terms of the Purchase Agreement. The distribution of this holdback amount is subject to any indemnification claims that the Buyer may have under the terms of the Purchase Agreement and final resolution of any such claims. As a result of the transactions contemplated by the Purchase Agreement, employees employed by TPack will remain TPack employees and be transferred along with the sale of the TPack shares. Pursuant to the terms of the Purchase Agreement, the Company, TPack and the Buyer entered into ancillary agreements, including an Intellectual Property Agreement. The Intellectual Property Agreement provides that the Company will receive a fully-paid perpetual license to substantially all of TPack's intellectual property rights being acquired by the Buyer in the transaction, and the Company and the Buyer will license to each other certain intellectual property rights specified in the Intellectual Property Agreement. In connection with entering into the Purchase Agreement, the Company and Altera entered into a memorandum of understanding dated April 11, 2013 intended to result in their joint development and marketing of optimized solutions for data center applications.
Page 13
June 19, 2013
BMO Capital Markets
Semiconductors
AMCC
FY2013 Results Net revenues for FY2013 were $195.6 million, representing a decrease of 15.3% from the net revenues of $230.9 million for FY2012. During FY2013, our Computing revenues declined by 13.0% while our Connectivity revenues declined by 17.8%. The overall revenue decline was spread across both the Computing and Connectivity product families and was a result of lower demand for our products due to overall softness in the macro conditions and due to the rolloff of legacy products as we continue to focus on the development of our new products. In addition, the revenues for our Connectivity products were lower due to the delay in the overall OTN infrastructure build-out. The gross profit percentage for FY2013 increased marginally to 57.6%, compared to 57.2% for FY2012. o Our gross profit percentage, excluding the impact of amortization of purchased intangibles, also increased marginally to 58.9% as compared to 58.8% for FY2013 and FY2012, respectively. The amortization of purchased intangible assets included in cost of revenues during FY2013 was $2.7 million, compared to $3.6 million for FY2012. The decrease was primarily due to certain purchased intangible assets being fully amortized resulting in a lower amortization charge in FY2013.
Research and Development. Increases in R&D expenses, despite reductions in our headcount, were primarily driven by the effect of a ramp-up in the costs relating to the X-Gene 64-bit ARM Server on a Chip platform product development efforts, and costs incurred on our developmental effort relating to other new products. The increase in R&D expenses of 6.7% for FY2013 compared to FY2012 was primarily due to $7.1 million for Veloce merger consideration costs (which includes approx. $1.3 million of expense related to the acceleration of Veloce warrants), $2.5 million in consumable equipment and software cost, $1.5 million in development cost related to new products, $1.3 million in stock-based compensation charges, $0.5 million in third party foundry cost, $0.4 million each in packaging cost and other engineering costs and $0.2 million in customer funded non-recurring engineering payments offset by a decrease of $0.9 million each in printed circuit board cost and contractor cost and $0.4 million in small tools and supplies cost. The increase in SG&A expenses of 12.9% for FY2013 compared to FY2012 were primarily due to $4.3 million in stock-based compensation charges, $2.4 million relating to the adjustment to contingent accrued liabilities associated with an acquisition in the twelve months ended March 31, 2012 (none in the twelve months ended March 31, 2013) and $2.1 million in professional and other service fees. These increases were offset by decreases of $1.0 million in personnel cost, $0.7 million in corporate allocation expenses, $0.6 million in marketing and travel costs and $0.4 million each in provision for doubtful debts and sales commission cost. Stock-based compensation for FY13 and FY12 were $24.2 million and $18.4 million, respectively. o The increase in stock-based compensation of 31.9% during FY2013 compared to FY2012 was primarily due to the expense associated with new performance retention grants and other performance based awards. The stock based compensation expense of approx. $24.2 million for the twelve months ended March 31, 2013 does not include approx. $1.3 million of expense related to the acceleration of Veloce warrants. Stockbased compensation expense will continue to have a significant adverse impact on our reported results of operations, although it will have no impact on its overall financial position.
Restructuring Charges, net. We implemented a restructuring program during
Page 14
June 19, 2013
BMO Capital Markets
Semiconductors
December 2012 to reorganize our operations and reduce our workforce and related operating expenses. The plan includes eliminating job redundancies and reducing our current workforce by approx. 70 employees. o As a result, we recorded a charge of $1.7 million for employee severance expenses and $4.7 million for an asset impairment during the twelve months ended March 31, 2013. The asset impairment related to the impairment of the unamortized value of a software intellectual property license, which we no longer intend to use to develop new products.
As part of our ongoing cost reduction efforts, we could implement additional restructuring programs and may incur significant additional restructuring charges. We incurred cash expenditures of approx. $1.2 million during the twelve months ended March 31, 2013 for employee severance expenses and anticipate that the restructuring plan will reduce ongoing headcount expenses by approx. $8.0 million to $9.0 million annually and other additional operational expenses by $4.0 million to $5.0 million annually. The savings from the restructuring action started commencing fiscal 2013, when the plan was implemented.
o
AMCC
Risks (underlined added per delta report) If we issue additional shares of stock in the future, it may have a dilutive effect on our stockholders. We have a significant number of authorized and unissued shares of our common stock available. These shares will provide us with the flexibility to issue our common stock for proper corporate purposes, which may include making acquisitions (including, without limitation, discharging our remaining purchase price obligations in the Veloce acquisition) through the use of stock, adopting additional equity incentive plans and raising equity capital. Any issuance of our common stock will result in immediate dilution of our stockholders. In addition, the issuance of a significant amount of our common stock may result in additional regulatory requirements, such as stockholder approval. During the FY1Q14 or FY2Q14, we expect to issue approx. 2.3 million additional shares of our common stock as part of the Veloce acquisition consideration. Thereafter, we have the ability to issue up to approx. 7.6 million additional shares of our common stock as Veloce acquisition consideration without obtaining stockholder approval. The actual amount and timing of additional share issuances to be made in connection with Veloce acquisition payments will be based upon numerous factors including, without limitation, the total amount of acquisition consideration to be paid, the market price of our common stock as of each payment date, and our available cash balances and liquidity requirements as of such dates, none of which are determinable at this time.
The markets in which we compete are highly competitive, and we expect competition to increase in these markets in the future. We designed X-Gene for existing and emerging cloud and enterprise data centers. Existing data centers currently rely primarily on Xeon server processors and related chipsets developed and marketed by Intel. As a result, we will compete with Intel in the existing cloud and enterprise server infrastructure market. In the cloud and enterprise server market, we will compete with Intel Xeon in addition to low-power server silicon products from Intel, AMD, and a number of ARM-based server silicon vendors, including Calxeda, Cavium, Texas Instruments and others. In the embedded computing silicon solutions market, we compete with technology companies such as Broadcom, Cavium and Freescale Semiconductor. In addition, some of our customers and potential customers have internal integrated circuit designs or manufacturing capabilities with which we compete. In the connectivity silicon solutions market segment, we compete primarily against companies such as Broadcom, Cortina and PMC-Sierra. Many of these companies have substantially greater financial, marketing and distribution resources than we have. We may also face competition from new entrants to our target markets, including larger technology companies that may develop or acquire differentiating technology and
Page 15
June 19, 2013
BMO Capital Markets
Semiconductors
then apply their resources to our detriment. Our operating results may fluctuate because of a number of factors, many of which are beyond our control. If our operating results are below the expectations of research analysts or investors, then the market price of our common stock could decline. Some of the factors that affect our quarterly and annual results, but which are difficult to control or predict, include those discussed elsewhere in this Risk Factors section, as well as the following: o Market acceptance of our products and our customers' products, including without limitation failure of X-Gene to be commercially accepted at the levels we anticipate. Risks associated with our or our customers' dependence on third-party manufacturing and supply relationships
Our business is dependent on selling to distributors and any disruption in their operations could materially harm our business There is no guarantee that design wins will become actual orders and sales. A design win occurs when a customer or prospective customer notifies us that our product has been selected to be integrated with the customer's product. There can be delays of several months or more between the design win and when a customer initiates actual orders of our product. Following a design win, we will commit significant resources to the integration of our product into the customer's product before receiving the initial order. Receipt of an initial order from a customer following a design win, however, is dependent on a number of factors, including the success of the customer's product, which cannot be guaranteed. The design win may never result in an actual order or sale of our products. If we fail to generate revenues after incurring substantial expenses to develop a product, our business and operating results would suffer.
An important part of our strategy is to focus on data center markets. If we are unable to further expand our share of these markets or accurately anticipate or react timely or properly to emerging trends, our revenues may not grow and could decline. Our business strategy contemplates the potential acquisition of other companies, products and technologies, as well as the divestitures of subsidiaries or operations that no longer are material to our core business. Merger and acquisition activities involve numerous risks and we may not be able to conduct these activities successfully without substantial expense, delay or other operational or financial problems that could disrupt our business and harm our results of operations and financial condition. Acquiring products, technologies or businesses from third parties, making and increasing equity investments in companies developing such products, technologies or businesses, and divesting business units or subsidiaries and selling product lines and technologies that are no longer material to our core business, are all part of our long-term business strategy. The risks involved with merger and acquisition, equity investment and divestiture activities include: o potential difficulties resulting from the divestiture of business operations, with respect to protecting the confidentiality of proprietary information and trade secrets not subject to the divestiture; difficulties and risks associated with the methods, estimates and judgments we use in applying critical accounting policies, such as the valuation of merger consideration affecting operating expenses as reflected in the reduction in R&D expense recognized in FY4Q13; both expected and unanticipated adverse effects from the loss of technologies, patents and other intellectual property, and personnel relating to divested subsidiaries, product lines and businesses;
In addition, as a result of our acquisition and investment activities, mergers or
Page 16
June 19, 2013
BMO Capital Markets
Semiconductors
acquisitions, we could; o o assume liabilities, including unanticipated third-party litigation and other unknown liabilities and unanticipated costs, events or circumstances; incur amortization or impairment expenses related to goodwill and other intangible assets, depreciation and deferred compensation
Our operating results are subject to fluctuations because we rely heavily on international sales. International sales account for a significant part of our revenues and may account for an increasing portion of our future revenues. The revenues we derive from international sales are subject to certain risks, including: o o foreign currency exchange fluctuations to the extent that this impacts our customers purchasing power; uncertain economic conditions that may worsen or sustain improvements which trail those in the United States
The complexity of our products may lead to errors, defects and bugs, which could negatively impact our reputation with customers and result in liability. Products as complex as ours may contain errors, defects and bugs when first introduced or as new versions are released. Our products have in the past experienced such errors, defects and bugs. Delivery of products with production defects or reliability, quality or compatibility problems could significantly delay or hinder market acceptance of the products or result in a costly recall and could damage our reputation and adversely affect our ability to retain existing customers and attract new customers. Errors, defects or bugs could cause problems with device functionality, resulting in interruptions, delays or cessation of sales to our customers. We may also be required to make significant expenditures of capital and resources to resolve such problems. We cannot assure you that problems will not be found in new products, both before and after commencement of commercial production, despite testing by us, our suppliers or our customers. Any such problems could result in: o delays in development, manufacture and roll-out of new products;
If our internal control over financial reporting is not considered effective, our business and stock price could be adversely affected. Over time, our internal control over financial reporting may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. In addition, as a result of the reduction in the number of employees assigned to financial reporting and regulatory compliance functions in connection with recently completed and anticipated future restructuring activities, we may be at increased risk of failures in our internal control systems. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Our management has concluded, and our independent registered public accounting firm has attested, that our internal control over financial reporting was effective as of March 31, 2013. We cannot be certain in future periods that any control deficiencies that may constitute one or more significant deficiencies (as defined by the relevant auditing standards) or material weaknesses in our internal control over financial reporting will not be identified by us or our independent registered public accounting firm. If we fail to maintain the adequacy of our internal controls, including any failure to implement or difficulty in implementing required new or improved controls, our business and results of operations could be harmed, the results of operations we report could be subject to adjustments, and we could fail to be able to provide reasonable assurance as to our financial results or the effectiveness of our internal controls or meet our reporting obligations. A material weakness in our internal control over financial reporting would require management and our independent registered public accounting firm to report our internal control over financial reporting as ineffective. If our internal control over financial reporting is not considered effective, we may experience a restatement like we have in the past of
Page 17
June 19, 2013
BMO Capital Markets
Semiconductors
our financial statements. Any restatement or actual or perceived weakness or conditions in our internal control over financial reporting, or in management's assessment thereof, could result in a loss of public confidence in our reported financial information, and have a material adverse effect on our business, the market price of our common stock, and our ability to access capital markets, and may result in litigation claims, regulatory actions and may otherwise divert management attention and resources. Our future success depends in part on the continued service of our key senior management, design engineering, sales, marketing, and manufacturing personnel, our ability to identify, hire and retain additional, qualified personnel and successful succession planning. Our future success depends to a significant extent upon the continued service of our senior management and engineering personnel and successful succession planning. In addition, as our core business and technologies continue to evolve, including without limitation with respect to our growth and expansion into nextgeneration cloud infrastructure and data center markets, our success will depend on effectively transitioning to certain new management and engineering personnel most capable of supporting that evolution. The loss of key senior executives or engineers could have a material adverse effect on our business. There is intense competition for qualified personnel in the semiconductor industry, in particular design, product and test engineers. We may not be able to continue to identify, attract and retain engineers or other qualified personnel necessary for the development of our business, or to replace engineers or other qualified personnel who may leave our employment in the future. Also, the departure from the Company of one or more Veloce management or engineering personnel could materially adversely affect our product development efforts for X-Gene and nextgeneration products. We also face the risks associated with our former employees assisting their new employers to recruit our key talent, in violation of their contractual non-solicitation and confidentiality covenants and other legal obligations to us. Our efforts to enforce these contractual covenants and legal obligations has required, and may in the future require, us to incur significant litigation expenses and devote significant management attention. Furthermore, while we encourage our employees to abide by all contractual and legal obligations owed to their former employers, there can be no assurance that we will not be the target of allegations made by other companies that we have, directly or indirectly, unlawfully solicited their employees to join us. There are significant costs associated with recruiting, hiring and retaining personnel, as well as significant actual and potential losses to our business arising from the delays in or cancellation of technology development, product completion and roll-out, customer design wins and product orders, and sales revenues caused by the departure of key engineering resources.
Our ability to supply a sufficient number of products to meet customer demand, and customer demand itself, could be severely hampered by natural disasters or other catastrophes, the effects of war, acts of terrorism, global threats or shortages of water, electricity or other supplies. We could incur substantial fines, litigation costs and remediation expenses associated with our storage, use and disposal of hazardous materials. We could be harmed by litigation involving patents, proprietary rights or other claims. In addition, litigation may be necessary to enforce our IP rights, to determine the validity and scope of the proprietary rights of others or to defend against claims that our products are infringing or misappropriating the IP rights of third parties. The semiconductor industry is characterized by substantial litigation regarding patent and other IP rights. Currently we are not a named defendant in any IP infringement lawsuits. Nevertheless, as our products and IP become instantiated in more and more customer products and applications, and as patent infringement litigation brought by our competitors, NPEs and patent-licensing companies is on the rise, we are at an increased risk of being named as a defendant in such litigation. Due in
Page 18
June 19, 2013
BMO Capital Markets
Semiconductors
part to the factors described above, we have been or currently are subject to the following: o demands from customers that we enter into springing licenses that prospectively grant such customers and related parties automatic license rights to any patents we sell or otherwise divest control over in specified transactions.
Our stock price is volatile. The market price of our common stock has fluctuated significantly. In the future, the market price of our common stock could be subject to significant fluctuations due to general economic and market conditions and in response to: o o our announcement of actual results or financial outlook that are higher or lower than market or analyst expectations changes in the economic performance or market valuations of other semiconductor companies or companies perceived by investors to be comparable to us; positive or negative commentary about our business or prospects by industry bloggers and journalists; volume fluctuations due to inconsistent trading volume levels of our shares; general economic and market conditions.
o o o MRVL MRVL
MRVL FY1Q14 10-Q Review Business Update FY2014 has a 52-week period and FY2013 had a 53-week period. Historically, a relatively small number of customers have accounted for a significant portion of our net revenue. We had two end customers who each represented greater than 10% of our total net revenue for FY1Q14. o Combined revenue from these two customers was 39% of total net revenue for FY1Q14. No distributors accounted for more than 10% of our net revenue for FY1Q14. We had two end customers who each represented greater than 10% of our total net revenue for FY1Q13. Combined revenue from these two customers was 33% of total net revenue for FY1Q13. In addition, we had one distributor who accounted for more than 10% of our net revenue for FY1Q13. We receive a significant amount of our revenues from a limited number of customers. Net revenue from our three largest customers represented 48% and 40% of our net revenue for FY1Q14 and FY1Q13, respectively.
We expect to continue to experience similar customer concentration in future periods and most of our sales are expected to continue to be made to customers located outside of the United States, primarily in Asia. Sales to customers located in Asia represented 93% of our net revenue for FY1Q14 compared to 88% of our net revenue for FY1Q13. Because many manufacturers and manufacturing subcontractors of our customers are located in Asia, we expect that most of our net revenue will continue to be represented by sales to our customers in that region. Although our operating results for FY1Q14 were lower than the corresponding quarter of FY2013, the results were at the high end of our expectations. We are starting to see the benefit of our investments and key initiatives across our end markets to produce tangible results and we believe we are well positioned for future growth. o
In the mobile market, we believe we have reached a trough in this business as we continue to make strong progress with our integrated 3G and 4G platforms at multiple top tier OEMs.
One of these leading Asian OEMs recently launched a new smartphone and is in production for a tablet design based on our
Page 19
June 19, 2013
BMO Capital Markets
Semiconductors
dual-core platform. We believe that additional devices will be launched by this OEM and other top tier OEMs in the coming quarters. In addition to our dual-core devices, we are also seeing faster adoption for our recently introduced quad-core 3G platform as we have begun initial shipments. Recently, we announced a quad-core 5-mode Category 4 LTE single-chip solution targeted for the mainstream 4G market. Our LTE solution has received certification in China and we expect to achieve certification in North America this year. We expect at least one leading handset OEM to bring to market a 4G LTE smartphone using our solution this year. In wireless connectivity, we continue to see increased traction for our 2x2 combo solution for 802.11n and 802.11ac, where we have won multiple designs in tablets, ultrabooks, gaming and video platforms. Our combo solutions support multiple operating systems, which we believe will lead us to increased opportunities in the tablet and ultrabook markets. In gaming, we expect to benefit from multiple new consoles that are scheduled to launch this year. We also continue to see significant traction for our 4x4 solutions as global enterprise carriers are realizing this design is the necessary architecture for HD video distribution. Looking forward, we anticipate seasonal increases in wireless connectivity during our second and third quarters as our OEM customers begin to ramp-up production activity for the holiday season. In the storage market, we believe that storage needs for consumers and enterprises will continue to rise as the amount of data consumed increases. This has led us to steadily invest in advanced storage technologies, many of which are still years from commercialization. We have gained market share within HDDs as we have seen strong growth for our 500 gigabyte per platter products. Within our SSD market, revenue continues to grow and our strategy of partnering with top tier OEMs is resulting in excellent traction for our advanced SSD solutions. We are also leveraging our technology leadership in HDD and SSD to help our customer migrate to hybrid storage devices. In the networking market, we continue to outperform the market with new solutions for the data center, enterprise and infrastructure networking markets. We recently introduced new 10G and 40G physical layer devices that offer high-performance and strong security features for our customers, as well as a new family of Prestera packet processors that are capable of processing data up to 1.28 terabits per second. We are also collaborating with leading software companies that provide services for mobile backhaul, carrier Ethernet and data center networks. The combination of our high-performance networking solutions and advanced software capabilities is being well received by our customers and is well suited for emerging software defined networks of the future. We believe our investments in these new areas of growth will enable us to continue to outperform our networking peers.
We currently expect overall net revenue for FY2Q14 to be in the range of $770 million to $810 million due to seasonal increases in sales of wireless products and the ramp-up of seasonal new mobile programs. o o o o We currently expect cost of goods sold as a percentage of net revenue for FY2Q14 to be slightly higher compared to FY1Q14. We currently expect cost of goods sold as a percentage of net revenue for FY2Q14 to be slightly higher compared to FY1Q14. We currently expect that selling and marketing expense for FY2Q14 will be slightly higher than the level of expense reported for FY1Q14. We currently expect that general and administrative expense for FY2Q14 will be slightly higher than the level of expense reported for FY1Q14.
Page 20
June 19, 2013
BMO Capital Markets
Semiconductors
During the next 12 months, it is reasonably possible that the amount of unrecognized tax benefits could decrease significantly due to a potential settlement with tax authorities and/or the expiration of applicable statutes of limitations. However, the amount cannot be reasonably estimated as we could have negotiations with various tax authorities throughout the year.
Under the Companys manufacturing relationships with its foundry partners, cancellation of all outstanding purchase orders are allowed but require payment of all costs and expenses incurred through the date of cancellation. As of May 4, 2013, these foundries had incurred approx. $236.1 million of manufacturing costs and expenses relating to the Companys outstanding purchase orders (up 11% qq). Share-based compensation expense (of $33.5 million) increased by $6.3 million for FY1Q14 compared to FY1Q13. The increase was primarily due to increased headcount in FY2014, combined with higher expense related to the employee stock purchase plan. The offering price of the employee stock purchase plan was reset in June 2012 and also in December 2012 due to the decline in our stock price. Interest and other income, net, increased for FY1Q14 compared to FY1Q13 primarily due to the effect of the strengthening of the U.S. dollar on our foreign currency denominated tax liabilities. This was partially offset by a $1.0 million write down to fair value of an equity investment and lower interest income in FY1Q14 from lower average cash and investment balances. We had an income tax benefit for FY1Q14 that included the current income tax liability of $1.8 million and $0.7 million in settlements of audits in non-U.S. jurisdictions which was more than offset by net reductions in unrecognized tax benefits of $9.7 million in FY1Q14. The net reduction in unrecognized tax benefits primarily arose from the expiration of the statute of limitations and from the settlement of two audits in non-U.S. jurisdictions (one for $3.5 million and the other for $4.1 million) less an increase in current unrecognized tax benefit estimates. The Company repurchased 19.9 million of its common shares for $200.2 million in cash during FY1Q14 and 14.6 million of its common shares for $223.2 million in cash during FY1Q13. The repurchased shares were retired immediately after the repurchases were completed. The Company records all repurchases, as well as investment purchases and sales, based on trade date. o Approx. $5.6 million of repurchases during FY1Q14 was made in the final three days of the fiscal quarter and is included in accrued liabilities in the condensed consolidated balance sheet due to the standard three-day settlement period. As of May 4, 2013, a total of 203.6 million cumulative shares have been repurchased under the Companys share repurchase program for a total $2.6 billion in cash and there was $412.4 million remaining available for future share repurchases. Subsequent to the end of the quarter through May 30, 2013, the Company repurchased an additional 2.1 million of its common shares for $23.3 million at an average price per share of $11.11.
On May 23, 2013, the Company announced that its board of directors declared a cash dividend of $0.06 per share to be paid on July 3, 2013 to shareholders of record as of June 13, 2013. Our principal source of liquidity as of May 4, 2013 consisted of approx. $1.7 billion of cash, cash equivalents and short-term investments. o Our principal source of liquidity as of May 4, 2013 consisted of approx. $1.7 billion of cash, cash equivalents and short-term investments. We believe that our existing cash, cash equivalents and short-term investments, together with cash generated from operations, exercise of employee stock options and purchases under our employee stock purchase plan will be sufficient to cover our working capital needs, capital expenditures, investment requirements and commitments for at least the
Page 21
June 19, 2013
BMO Capital Markets
Semiconductors
next 12 months. Our capital requirements will depend on many factors, including our rate of sales growth, market acceptance of our products, costs of securing access to adequate manufacturing capacity, the timing and extent of research and development projects and increases in operating expenses, which are all subject to uncertainty. In addition, we are named as defendants to several litigation actions and an unfavorable outcome in any current litigation could have a material adverse effect on our liquidity, cash flows and results of operations. Based on investment positions as of May 4, 2013, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $15.4 million decline in the fair market value of the portfolio. Due to our positive cash flow from operations, the relatively short-term nature of our investment portfolio and our ability to hold investments to maturity, such change in fair market value would likely not have resulted in any cash flow impact.
Dr. Sehat Sutardja, our President and Chief Executive Officer, and Weili Dai, who serves as the Vice President and General Manager of Communications and Consumer Business of Marvell Semiconductor, Inc, are husband and wife, and Dr. Sehat Sutardja and Dr. Pantas Sutardja, our Vice President, Chief Technology Officer and Chief Research and Development Officer, are brothers. Together, these three individuals held approx. 21% (vs. 20% in PQ) of our outstanding common shares as of May 4, 2013. As a result, if these individuals act together, they may influence the election of our directors and the approval or disapproval of any significant corporate actions that require shareholder approval. This influence over our affairs might be adverse to the interests of other shareholders. For example, the voting power of these individuals could have the effect of delaying or preventing an acquisition of us on terms that other shareholders may desire.
MRVL
FY1Q14 Results Net revenue for FY1Q14 declined 7.8% compared to FY1Q13 primarily due to continued declines in revenue for our products in the mobile and wireless end market, which was partially offset by an increase in revenue from our storage end market. In the mobile market, we experienced lower demand for our products for the TD handset market in China as we continue to transition to multi-core processors and declining revenue from our leading North American handset customer. In our storage market, we saw higher HDD revenue, which was mostly driven by strong growth for our 500 gigabyte per platter products and higher revenue for our SSD products. Cost of goods sold as a percentage of net revenue was slightly lower for FY1Q14 compared to FY1Q13. The impact of lower commodity costs was mostly offset by higher manufacturing period costs as we ramp new product designs. Commodities costs were lower mainly due to our continued efforts to replace the use of gold in our products with copper, along with the drop in gold prices. Amortization and write-off of acquired intangible assets for FY1Q14 decreased by $3.7 million compared to FY1Q13. The decrease was primarily due to the certain intangible assets acquired in earlier acquisitions that became fully amortized. In addition, FY1Q13 included a $0.8 million write-off of in-process research and development related to an abandoned project.
MRVL
Legal Updates (underlined added per delta report) Carnegie Mellon Litigation. On March 6, 2009, CMU filed a complaint in the U.S. District Court for the Western District of Pennsylvania naming Marvell Semiconductor, Inc. (MSI) and the Company as defendants and alleging patent infringement. CMU has asserted U.S. Patent Nos. 6,201,839 and 6,438,180 (collectively, the CMU patents in suit), which relate to read-channel integrated circuit devices and the HDD products incorporating such devices. A jury trial began on November 26, 2012. On December 26, 2012, a jury delivered a verdict that found the CMU patents in suit were literally and willfully infringed and valid, and awarded past damages in the amount of $1.17 billion. Due to the finding of
Page 22
June 19, 2013
BMO Capital Markets
Semiconductors
willfulness, during post trial proceedings the judge could enhance the damages by an amount up to triple the damages awarded by the jury at trial. In addition, CMU has disclosed in its post trial motions that it is seeking pre-judgment interest up to $322 million, post-judgment interest, attorneys fees, and an injunction or ongoing royalties. Post-trial motions were heard on May 1 and 2, 2013, and the Company expects the District Court to issue its final judgment some time in the next few months. o The Company and MSI believe that the evidence and the law do not support the jurys findings of infringement, validity and the award of damages and do not believe a material loss is probable. The Company believes that there are strong grounds for appeal and the Company and MSI will seek to overturn the verdict in post trial motions before the District Court and, if necessary, to appeal to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. The Company and MSI intend to vigorously challenge the judgment through all appropriate post trial motions and appeal processes. In addition, the District Court in Pittsburgh has yet to rule on certain of the Companys defenses and motions, including laches and the Companys renewed request for a mistrial. The Company believes the low end of the possible range of loss is zero, but it cannot reasonably estimate the upper range of the possible loss, as a number of factors (including finalization of the post-trial motions at the District Court) could significantly change the assessment of damages.
Jasmine Networks Litigation. On September 12, 2001, Jasmine Networks, Inc. (Jasmine) filed a lawsuit in the Santa Clara County Superior Court alleging claims against MSI and three of its officers for allegedly improperly obtaining and using information and technologies during the course of the negotiations with its personnel regarding the potential acquisition of certain Jasmine assets by MSI. o The case proceeded to trial on September 20, 2010. On November 24, 2010, a Santa Clara County jury returned a verdict in favor of MSI on all claims. On January 7, 2011, the court entered judgment in MSIs favor. Pursuant to California Civil Procedure provisions, Jasmine filed motions for a new trial and for a judgment notwithstanding the verdict. These motions were heard by the court on February 25, 2011 and denied in written orders. Jasmine has appealed and MSI is contesting the appeal vigorously. Oral arguments on the appeal are scheduled to be heard on June 18, 2013.
Lake Cherokee Patent Litigation. On June 30, 2010, Lake Cherokee Hard Drive Technologies, L.L.C. filed a complaint in the U.S. District Court for the Eastern District of Texas. The complaint alleges infringement of U.S. Patent Nos. 5,844,738 and 5,978,162 (collectively, the Lake Cherokee patents in suit). The Lake Cherokee patents in suit relate to read-channel integrated circuit devices, and to certain HDD products incorporating such devices. MSI filed its answer and counterclaims to the complaint on September 13, 2010. Defendants filed a motion to transfer on April 1, 2011, which was denied on February 13, 2012. Lake Cherokee filed an amended complaint on April 21, 2011. MSI filed its answer and counterclaims to the amended complaint on May 9, 2011. A claim construction hearing was held on May 14, 2012, and the claim construction ruling was issued on August 6, 2012. o In pre-trial proceedings, Lake Cherokee has alleged that it is entitled to damages in the amount of approx. $689 million as a result of the alleged infringement. MSI strongly disputes its liability and the damages claimed by Lake Cherokee. On May 14, 2013, MSI filed a motion for partial summary judgment related to Lake Cherokees asserted damages and both parties filed motions to strike opinions and testimony of certain expert witnesses. Trial is set for August 5, 2013.
APT Patent Litigations. On January 18, 2011, Advanced Processor Technologies, LLC (APT), a subsidiary of Acacia Research Corp., filed a complaint in the U.S. District Court for the Eastern District of Texas. The complaint names MSI and eight other defendants and alleges infringement of U.S. Patent Nos. 6,047,354 (354 patent) and 5,796,978 (978 patent). The asserted patents relate to
Page 23
June 19, 2013
BMO Capital Markets
Semiconductors
microprocessor technologies. The complaint seeks unspecified damages and a permanent injunction. A first amended complaint was filed on January 26, 2011. The first amended complaint continues to assert the 354 patent against MSI, but appears to no longer assert the 978 patent against MSI. MSI filed its answer and counterclaims on April 15, 2011. A claim construction hearing was held on January 29, 2013. o On March 23, 2012, APT filed a separate complaint in the U.S. District Court for the Eastern District of Texas. The complaint alleges that MSI infringes U.S. Patent Nos. 6,092,172 and 6,629,207. The asserted patents relate to microprocessor technologies. The complaint seeks unspecified damages and a permanent injunction. MSI filed its answer and counterclaims on May 25, 2012. In both cases, ARM filed a motion to intervene on July 23, 2012, which was granted on January 7, 2013, and a motion to transfer on July 27, 2012, which was denied on March 20, 2013. On January 30, 2013, the Court consolidated these two cases, as well as several other cases that APT had filed against various defendants, into a single case. In April 2013, the parties reached an agreement to dismiss all claims and counterclaims, and expect to have the cases dismissed shortly. The resolution will not have a significant impact on the Companys financial statements.
MOSAID Litigation. On March 16, 2011, MOSAID Technologies Inc. filed suit in the U.S. District Court for the Eastern District of Texas against MSI and 16 other companies. The complaint alleges that defendants products, which operate in compliance with various IEEE 802.11standards, infringe the six asserted patents (U.S. Patent Nos. 5,131,006; 5,151,920; 5,422,887; 5,706,428; 6,563,768; 6,992,972). MSI filed its answer and counterclaims on June 9, 2011. On March 28, 2012, MSI and other defendants filed a motion to transfer, which was denied. A claim construction hearing was held on April 16, 2013 and a claim construction ruling was issued by the magistrate judge on April 22, 2013. On June 3, 2013, the District Court issued an order denying plaintiffs motion for reconsideration and adopted the magistrates claim construction ruling. Trial is set for January 8, 2014. Azure Networks Litigation. On March 22, 2011, Azure Networks, LLC and TriCounty Excelsior Foundation filed suit in the U.S. District Court for the Eastern District of Texas against MSI and eight other companies. The Complaint asserts U.S. Patent No. 7,756,129 against MSIs Bluetooth products. MSI filed its answer and counterclaims on July 20, 2011. On November 2, 2012, defendants filed a motion for summary judgment of invalidity, which was denied. A claim construction hearing was held on December 20, 2012. On January 15, 2013, the magistrate judge issued a claim construction ruling. On May 20, 2013, the District Court issued an order denying plaintiffs motion for reconsideration and adopted the magistrate judges claim construction ruling. On May 30, 2013, the District Court entered a judgment of non-infringement. Power Management Systems Litigation. On August 22, 2011, Power Management Systems LLC (PMS), a subsidiary of Acacia Research Corp., filed a complaint against the Companys subsidiary Marvell Semiconductor, Ltd. (MSL) and other defendants, in the U.S. District Court for the District of Delaware. The complaint asserts U.S. Patent No. 5,504,909, which relates to a power management apparatus, against various products. The complaint seeks unspecified damages. On October 17, 2011, PMS amended its complaint by substituting MSL with MSI. MSI filed its answer and counterclaims on November 4, 2011. A claim construction hearing was held on January 18, 2013, and a ruling was issued on May 30, 2013. Freescale Litigation. On July 6, 2012, Freescale Semiconductor, Inc. (Freescale) filed a complaint against MSI in the U.S. District Court for the Western District of Texas. The complaint asserts U.S. Patent Nos. 6,920,316, 5,825,640, 5,943,274, 5,467,455 and 7,927,927 (collectively, the Freescale patents in suit) against certain of the Companys integrated circuits and/or chipsets. The complaint seeks unspecified damages and a permanent injunction. Freescale filed an amended complaint on January 14, 2013, and withdrew its assertion of U.S. Patent No.
Page 24
June 19, 2013
BMO Capital Markets
Semiconductors
5,825,640; MSI filed its answer to the amended complaint on February 4, 2013. This case has been consolidated for pre-trial purposes with nine other pending cases. A claim construction hearing is scheduled for September 9, 2013. No trial date has been set. o On January 4, 2013, three of the Companys subsidiaries, MSI, Marvell International Ltd. and Marvell World Trade Ltd., filed a complaint against Freescale in the U.S. District Court for the Western District of Texas, and filed an amended complaint on January 14, 2013. The amended complaint alleges that Freescale infringes U.S. Patents Nos. 6,903,448 and 7,379,718. A claim construction hearing is scheduled for December 13, 2013. No trial date has been set.
MRVL
Risks (underlined added per delta report) Tax benefits that we receive may be terminated or reduced in the future, which would harm our results of operations and profitability. The Economic Development Board of Singapore (the EDB) initially granted a 10 year Pioneer Status in July 1999 to our subsidiary in Singapore if the Company meets several requirements as to investments, headcount and activities. In June 2006, the EDB agreed to extend the Pioneer status to 15 years to June 2014 rather than 10 years. For FY1Q14, the tax savings associated with this tax holiday is approx. $1.6 million which if earned would impact our earnings per share results by less than $0.01 per share. As a result, we anticipate that a significant portion of the income we earn in Singapore during this period will be exempt from the Singapore income tax. We have begun early discussions with the EDB regarding incentives after June 2014. Under the Israeli Encouragement law of approved or benefited enterprise, two branches of Marvell Israel (M.I.S.L.) Ltd. (MISL), the GTL branch and the cellular branch (formerly Marvell DSPC), are entitled to approved and benefited tax programs that include reduced tax rates and exemption of certain income. The first program was approved for MISL in fiscal 1996 and the most recent was started in FY2013. The cellular branch has five approved programs and three benefited programs, with the first approved in fiscal 1991 and the most recent benefited enterprise started in fiscal 2011. The benefit period is generally 10 to 15 years and begins in the first year in which our Israeli divisions earn taxable income from the approved or benefited enterprises, provided the maximum period has not elapsed. Income from the approved or benefited enterprises is subject to reduced tax rates ranging between 0% and 10% or tax exemptions for fiscal 2008 through fiscal 2027. For FY1Q14, the tax savings associated with this tax holiday is approx. $0.5 million which if earned would impact our earnings per share results by less than $0.01 per share.
*Any comments or information from tables that we have added are italicized.
Source: Company reports, SEC.gov
Semiconductors Advanced Mirco Devices (AMD) Altera (ALTR) Analog Devices (ADI) Applied Mirco Circuits (AMCC) ARM Holdings (ARM) Broadcom (BRCM) Freescale Semiconductor (FSL) Intel Corp. (INTC) Linear Technology (LLTC) Marvell Technology Group (MRVL) Maxim Integrated Products (MXIM) NVIDIA (NVDA) SanDisk (SNDK) Sensata Technologies (ST) Texas Instruments (TXN) Xilinx (XLNX)
Rating Market Perform Outperform Market Perform Outperform Outperform Outperform Market Perform Market Perform Market Perform Market Perform Market Perform Market Perform Market Perform Outperform Outperform Outperform
18-Jun Price $4.09 $32.92 $46.66 $9.72 8.46 $34.62 $15.23 $25.47 $37.28 $11.57 $28.32 $14.40 $63.04 $35.92 $36.12 $40.19
Target 2012E $4 -$0.15 $40 $1.72 $45 $2.14 $10 -$0.10 12 0.15 $40 $2.92 $14 -$0.26 $21 $2.13 $35 $1.70 $12 $1.27 $26 $1.57 $14 $0.96 $59 $2.38 $38 $1.96 $40 $1.51 $41 $1.91
EPS 2013E -$0.24 $1.37 $2.06 -$0.45 0.21 $2.95 $0.33 $1.86 $1.71 $0.86 $1.79 $0.93 $4.30 $2.10 $1.73 $1.78
P/E 2014E 2012E 2013E 2014E $0.07 nm nm 58.4 $1.73 19.1 24.0 19.0 $2.31 21.8 22.7 20.2 $0.07 nm nm nm 0.26 56.4 40.3 32.5 $3.12 11.9 11.7 11.1 12.2 $1.25 nm 46.2 $1.95 12.0 13.7 13.1 $1.82 21.9 21.8 20.5 $0.84 9.1 13.5 13.8 $1.88 18.0 15.8 15.1 $0.66 15.0 15.5 21.8 $5.00 26.5 14.7 12.6 $2.65 18.3 17.1 13.6 $2.33 23.9 20.9 15.5 $1.84 21.0 22.6 21.8
Div $0.00 $0.40 $1.36 $0.00 0.05 $0.44 $0.00 $0.90 $1.04 $0.24 $0.96 $0.30 $0.00 $0.00 $1.12 $1.00
Yld 0.0% 1.2% 2.9% 0.0% 0.6% 1.3% 0.0% 3.5% 2.8% 2.1% 3.4% 2.1% 0.0% 0.0% 3.1% 2.5%
Book $0.58 $10.43 $14.13 $1.37 0.87 $13.78 -$18.20 $10.36 $3.42 $8.82 $8.83 $7.83 $30.28 $5.20 $9.89 $10.79
Mkt Cap ($mm) 2,922 10,538 14,277 658 11,816 17,933 3,837 125,975 8,670 5,805 8,283 8,870 15,246 6,414 39,905 10,512
Page 25
June 19, 2013

Analyst's Certification I, Ambrish Srivastava, PhD, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Company Specific Disclosures For Important Disclosures on the stocks discussed http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx. in this report, please go to
Page 26
June 19, 2013
BMO Capital Markets

A member of BMO
Financial Group
Page 27
June 19, 2013
Semiconductors
June 19, 2013
Ambrish Srivastava, PhD

415-591-2116
Gabriel Ho 415-591-2131
gabriel.ho@bmo.com
ARM-Based Server Battles

We offer our thoughts on AMDs latest announcement on its server roadmap, which includes its ARM-based server effort, and provide some contrast with Applied Micros ARM-based server effort.
Summary
Based on several inbound queries, we offer our thoughts on AMDs latest announcement on its server roadmap, which includes its ARM-based server effort, and provide some contrast with Applied Micros ARM-based server effort. To be sure, we are comparing an announcement with silicon that is shipping in development systems and ready to ship for commercial production by the end of the year. We also believe that APMs solution has meaningfully more mixed signal circuitry built into its solution. APM is not only roughly a year ahead in terms of shipments, but it also would be shipping its own 28-nm second-generation X-Gene by the time AMD begins to ship for production. Clock speed jumps out at us - APM has been able to demonstrate a 2.4 GHz core at the 40-nm node, while AMD aims to have speed of equal to or greater than 2 GHz at 28-nm. AMD does have a lot of history in the server market, although Intel has essentially boxed AMD in with now only a low- to mid-single-digit market share.
Page 1
June 19, 2013
BMO Capital Markets
Semiconductors
Key Points
We have received questions about our thoughts on AMDs announcement on its server roadmap and whether it changes the dynamics in the overall server market and more specifically how we think about the announcement vs. what Applied Micro (APM) is doing on its ARM-based server effort. In our view, APM has roughly a lead of a year in terms of having silicon and shipping it, as well as having been on the development path for several years now. APM also has integrated several mixed-signal functions into its solution, such as Ethernet controller, SATA controller, going from 10GbE, to having a 100GbE controller in its 28 nm part, which we expect to be taped out later this year. The company has also been able to achieve 2.4GHz speed with its current 40nm chip. AMDs ARM-based server effort has been more recent. The company does have a lot of experience in the server market, although its market share has been virtually decimated by Intel now to an estimated low- to mid-single digits.
ARM-Based Server Battles

On June 18, AMD revealed details of its 2014 server portfolio, including the companys first 64-bit ARM server processor, codenamed Seattle. AMD plans to sample Seattle in 1Q14 with production in 2H14. Meanwhile APM continues to execute on its X-Gene development. In its recent 10-K filing, the company noted that it expects to commence commercial shipments of X-C1 enterprise class ARM 64-bit server system development platforms consisting of X-Gene Cloud Server hardware and software components, including compilers, operating systems, virtualization and application software for multiple Tier 1 ecosystem partners in June 2013. Also earlier this month, MiTAC international Corp, a Taiwan-based manufacturing company, announced a new range of 64-bit ARM v8 processor-based server system. This 7-Star server system is based on APMs X-Gene SoC. During the Red Hat summit on June 13, 2013, ARM and APM demonstrated two 64-bit ARMv8 X-C1 systems powered by an X-Gene server SoC running a full Fedora 19 Linux distribution with Apache web server, a WordPress blog portal, and a Gluster distributed file system hosting video content streaming to a client device. We continue to believe the company is on target to enter X-Gene production by the end of CY13 and generate revenues in CY14. AMDs announcement appears to validate our view that X-Gene has a ~1 year lead against other chip suppliers in the 64-bit ARM server market.
APMs Working and to-Be Shipped Silicon Appears Ahead of AMDs Seattle
While public benchmarking information on X-Gene is not yet available, and Seattle samples are roughly three quarters out, we attempt to provide an initial comparison of APMs and AMDs 64-bit ARM server roadmap. Based on our analysis, we conclude that the first generation
Page 2
June 19, 2013
BMO Capital Markets
Semiconductors
X-Gene, manufactured in TSMC 40nm process, appears superior to AMDs Seattle, to be based on 28nm process. We believe the second-generation X-Gene, to be based on TSMCs 28nm process and expected to tape out in CY4Q13/CY1Q14 and enter production in 2014, can potentially widen the lead vs. Seattle. In Exhibit 1, we summarize what we believe are important server SoC features of X-Gene and Seattle, as well as Intel Xeon E5 for reference. We believe APMs custom ARMv8 compatible processor core and mixed signal IPs differentiates X-Gene from Seattle, which uses a licensable Cortex A57 core from ARM.
X-Genes High-Performance Custom Processor Cores Enable APM Target Larger Set of Workloads Than Licensable Cores
From a performance standpoint, X-Genes main processor cores are quad-issue, out-of-order cores, which we believe provides higher clock-for-clock performance against A57s 3-issue, out-of-order cores. Moreover, X-Gene Gen 1 achieved 2.4GHz speed at 40nm process vs. Seattles target of at least 2GHz at 28nm process. We believe X-Gene Gen 2, to be based on 28nm process, could potentially widen the performance and/or power lead vs. Seattle.
APMs 100Gb Ethernet Mixed Signal IP Differentiates
Both X-Gene Gen 1 and Seattle are expected to have built-in 10Gb Ethernet and PCIe connectivity, as well as hardware accelerators. We expect the company to integrate 100Gb Ethernet onto X-Gene Gen 2, enabling X-Gene to target a larger set of applications than the current generation product.
Exhibit 1. Server Based on X-Gene SoC

Comparison of Server Microprocessors APM X-Gene Gen 1 Architecture Core Type Cores per Socket Memory Controller HW virtualization support Maximum Cache Issue Rate and Type ARMv8-A 64-bit Custom 8 4 channels DDR3 1866MHz Yes L1, L2 and L3 4, out-of-order APM X-Gene Gen 2 ARMv8-A 64-bit Custom 16 4 channels DDR3 1866MHz Yes L1, L2 and L3 4, out-of-order >= 2.4GHz, TSMC 28nm Web Server / Mainstream Cloud Server 100GbE, PCIe Hardsware accelerators, Fabric Sampling in C4Q13/C1Q14; Production in 2014 AMD Seattle ARMv8-A 64-bit Cortex A-57 8 - 16 N/A* Yes Up to L3** 3, out-of-order** >= 2GHz 28nm Web / Enterprise Service Server 10GbE, PCIe HW accelerators, Fabric Sampling 1Q14; Production in 2H14 Shipping Intel Xeon x86 Sandy Bridge E5 4-8 4 channels DDR3 1600MHz Yes 20MB L3 4, out-of-order Max 3.1GHz, Intel 32nm Mainstream Enterprise / Cloud Server External
Expected Frequency / 2.4GHz, TSMC 40nm Process Web Server / Target Application Mainstream Cloud Server Network Connectivity Other features Availability
* Information not available ** based on ARM specification
4x10GbE, PCIe Hardware accelerators, Fabric Sampling in C1Q13; Production in end of CY2013
Source: Company Reports, BMO Capital Markets estimates
Page 3
June 19, 2013
BMO Capital Markets
Semiconductors
Exhibit 2. Server Based on X-Gene SoC

Micro Server Motherboard X-Gene SOC
Memory (DRAM) 8 64-bit ARM Cores NIC 4x 10GbE Network Switch
Network Storage
Accelerators Chipset, PCIe BMC SATA SSD HDD
Motherboard with X-Gene SOC
NIC: Network Interface Card BMC: Baseboard Management Controller 10GbE: 10 Gigabit Ethernet Source: Company Reports, BMO Capital Markets estimates
Page 4
June 19, 2013
BMO Capital Markets
Semiconductors
Exhibit 3. Traditional Compute Server

Server Motherboard Processor
Memory (DRAM) Cache BMC CPU cores Chipset PCIe Memory (DRAM) CPU cores Cache NIC 2 or 4 10GbE Network Switch
SSD
Other Server
Other Server
SATA HDD
Network Storage
NIC: Network Interface Card BMC: Baseboard Management Controller 10GbE: 10 Gigabit Ethernet Source: Company Reports, BMO Capital Markets estimates
Other companies mentioned (priced as of the close on June 18, 2013):
Red Hat (RHT, $46.63, Market Perform by Karl Keirstead) TSMC (TSM, $18.43, Not Rated)
Sector Comparison
Semiconductors Advanced Mirco Devices (AMD) Altera (ALTR) Analog Devices (ADI) Applied Mirco Circuits (AMCC) ARM Holdings (ARM) Broadcom (BRCM) Freescale Semiconductor (FSL) Intel Corp. (INTC) Linear Technology (LLTC) Marvell Technology Group (MRVL) Maxim Integrated Products (MXIM) NVIDIA (NVDA) SanDisk (SNDK) Sensata Technologies (ST) Texas Instruments (TXN) Xilinx (XLNX) Rating Market Perform Outperform Market Perform Outperform Outperform Outperform Market Perform Market Perform Market Perform Market Perform Market Perform Market Perform Market Perform Outperform Outperform Outperform 18-Jun Price $4.09 $32.92 $46.66 $9.72 8.46 $34.62 $15.23 $25.47 $37.28 $11.57 $28.32 $14.40 $63.04 $35.92 $36.12 $40.19 Target 2012E $4 -$0.15 $40 $1.72 $45 $2.14 $10 -$0.10 12 0.15 $40 $2.92 $14 -$0.26 $21 $2.13 $35 $1.70 $12 $1.27 $26 $1.57 $14 $0.96 $59 $2.38 $38 $1.96 $40 $1.51 $41 $1.91 EPS 2013E -$0.24 $1.37 $2.06 -$0.45 0.21 $2.95 $0.33 $1.86 $1.71 $0.86 $1.79 $0.93 $4.30 $2.10 $1.73 $1.78 P/E 2014E 2012E 2013E 2014E $0.07 nm nm 58.4 $1.73 19.1 24.0 19.0 $2.31 21.8 22.7 20.2 $0.07 nm nm nm 0.26 56.4 40.3 32.5 $3.12 11.9 11.7 11.1 12.2 $1.25 nm 46.2 $1.95 12.0 13.7 13.1 $1.82 21.9 21.8 20.5 $0.84 9.1 13.5 13.8 $1.88 18.0 15.8 15.1 $0.66 15.0 15.5 21.8 $5.00 26.5 14.7 12.6 $2.65 18.3 17.1 13.6 $2.33 23.9 20.9 15.5 $1.84 21.0 22.6 21.8 Div $0.00 $0.40 $1.36 $0.00 0.05 $0.44 $0.00 $0.90 $1.04 $0.24 $0.96 $0.30 $0.00 $0.00 $1.12 $1.00 Yld 0.0% 1.2% 2.9% 0.0% 0.6% 1.3% 0.0% 3.5% 2.8% 2.1% 3.4% 2.1% 0.0% 0.0% 3.1% 2.5% Book $0.58 $10.43 $14.13 $1.37 0.87 $13.78 -$18.20 $10.36 $3.42 $8.82 $8.83 $7.83 $30.28 $5.20 $9.89 $10.79 Mkt Cap ($mm) 2,922 10,538 14,277 658 11,816 17,933 3,837 125,975 8,670 5,805 8,283 8,870 15,246 6,414 39,905 10,512
Page 5
June 19, 2013
Page 6
Ambrish Srivastava 415-591-2116
AMD Quarterly Income Statement (2011-2014E)
(Fiscal Year Ends December)
BMO Capital Markets
(Millions, except per-share data)
2012 2011 $ 1Q 2Q 3Q 4Q 2012 1Q 2QE 3QE 4QE 2013E 1QE 2QE 3QE
2013E
2014E 4QE 2014E
Revenues COGS (Pro forma) Gross profit (Pro forma) Operating expenses (Pro forma) R&D SG&A Other Operating Expenses (Income) (Pro Forma) Operating Income (Pro forma) Interest Income and Other Pro forma Interest (Expense) Pretax income (pro forma) Provision (benefit) for inc. tax (Pro forma) Extraordinary item / disc ops. Net Income (pro forma) $ $ $ $ $ 745 739 734 748 755 755 745 745 747 747 745 749 749 749 751 751 753 753 0.51 0.64 0.64 $ $ $ 0.12 $ (0.80) $ (0.80) $ 0.06 0.05 0.05 $ $ $ (0.20) $ (0.21) $ (0.21) $ (0.14) $ (0.63) $ (0.63) $ (0.15) $ (1.60) $ (1.60) $ (0.13) $ (0.19) $ (0.19) $ (0.12) $ (0.13) $ (0.13) $ (0.01) $ (0.02) $ (0.02) $ 0.03 0.02 0.02 755 755 491 $ (590) $ 37 $ (157) $ (473) $ (1,183) $ (146) $ (96) $ (14) $ 17 $ $ $ $ (239) $ (0.24) $ (0.32) $ (0.32) $ 752 752 (26) $ (0.03) $ (0.03) $ (0.03) $ 757 757
6,568 $ 3,599 2,969 2,445 1,453 992 524 26 (180) 370 (4) (4) 370 $
1,585 $ 855 730 592 368 224 138 1 (43) 96 4 92 $
1,413 $ 770 643 557 345 212 86 (3) (43) 40 (6) 46 $
1,269 $ 877 392 516 328 188 (124) 18 (44) (150) (150) $
1,155 $ 704 451 506 313 193 (55) 2 (45) (98) 4 (102) $
5,422 $ 3,206 2,216 2,171 1,354 817 45 18 (175) (112) 2 (114) $
1,088 $ 643 445 491 312 179 (46) (2) (44) (92) 2 (94) $
1,110 $ 676 434 480 306 174 (46) 4 (46) (88) 4 (92) $
1,199 $ 713 485 450 284 166 35 4 (46) (7) 4 (11) $
1,273 $ 751 522 456 288 168 66 4 (46) 24 4 20 $
4,670 $ 2,783 1,886 1,877 1,190 687 10 10 (182) (162) 14 (176) $
1,182 $ 709 473 449 284 165 24 4 (46) (18) 4 (22) $
1,205 $ 711 494 453 287 166 41 4 (46) (1) 4 (5) $ (9) $ (0.01) $ (0.01) $ (0.01) $ 759 759
1,278 $ 741 537 464 294 170 73 4 (46) 31 4 27 $ 23 0.04 0.03 0.03 761 761 $ $ $ $
1,329 $ 757 571 473 300 173 98 4 (46) 56 4 52 $ 49 0.07 0.06 0.06 763 763 $ $ $ $
4,994 2,919 2,075 1,839 1,165 674 236 16 (184) 68 16 52 38 0.07 0.05 0.05 760 760
Net Income - GAAP
EPS Pro Forma EPS Continuing Ops EPS GAAP
Diluted shares Diluted Shares pro forma
Margin Analysis Revenues Gross Margin Operating Expenses R&D SG&A Operating Margin Pretax margin Tax rate Net margin 100% 45.2% 37.2% 22.1% 15.1% 8.0% 5.6% -0.1% 5.6% 100% 46.1% 37.4% 23.2% 14.1% 8.7% 6.1% -2.0% 5.8% 100% 45.5% 39.4% 24.4% 15.0% 6.1% 2.8% -0.4% 3.3% 100% 30.9% 40.7% 25.8% 14.8% -9.8% -11.8% 0.0% -11.8% 100% 39.0% 43.8% 27.1% 16.7% -4.8% -8.5% 0.3% -8.8% 100% 40.9% 40.0% 25.0% 15.1% 0.8% -2.1% -0.6% -2.1% 100% 40.9% 45.1% 28.7% 16.5% -4.2% -8.5% 0.2% -8.6% 100% 39.1% 43.3% 27.6% 15.7% -4.2% -7.9% 0.4% -8.3%
100% 40.5% 37.6% 23.7% 13.9% 3.0% -0.6% 0.3% -0.9%
100% 41.0% 35.8% 22.6% 13.2% 5.2% 1.9% 0.3% 1.6%
100% 40.4% 40.2% 25.5% 14.7% 0.2% -3.5% 0.3% -3.8%
100% 40.0% 38.0% 24.0% 14.0% 2.0% -1.6% 0.3% -1.9%
100% 41.0% 37.6% 23.8% 13.8% 3.4% -0.1% 0.3% -0.4%
100% 42.0% 36.3% 23.0% 13.3% 5.7% 2.4% 0.3% 2.1%
100% 43.0% 35.6% 22.6% 13.0% 7.4% 4.2% 0.3% 3.9%
100% 41.6% 36.8% 23.3% 13.5% 4.7% 1.4% 0.3% 1.0%
Percentage Change - Q/Q Revenue COGS Gross Profit Operating Expenses R&D SG&A Operating income Pretax income Net income EPS (Diluted) -6% -7% -6% -1% 3% -8% -20% -28% -33% -35% -11% -10% -12% -6% -6% -5% -38% -58% -50% -88% -10% 14% -39% -7% -5% -11% NMF NMF NMF NMF -9% -20% 15% -2% -5% 3% -56% -35% -32% NMF
-6% -9% -1% -3% 0% -7% -16% -6% -8% -8%
2% 5% -2% -2% -2% -3% 0% -4% -2% -20%
8% 6% 12% -6% -7% -5% NMF -92% -88% -89%
6% 5% 8% 1% 1% 1% 87% NMF NMF NMF
-7% -6% -9% -1% -1% -2% -64% NMF NMF NMF
2% 0% 5% 1% 1% 1% 73% -94% -78% -97%
6% 4% 9% 2% 2% 2% 78% NMF NMF NMF
4% 2% 6% 2% 2% 2% 35% 83% 95% NMF
Percentage Change - Y/Y Revenue Gross Profit Operating Expenses R&D SG&A Operating income Pretax income Net income EPS (Diluted) 1% 3% 5% 3% 6% -5% 5% 3% 3% -2% 1% -6% 0% -14% 50% 66% 64% 63% -10% -11% -8% -6% -11% -25% -45% -34% -35%
-25% -48% -15% -9% -24% NMF NMF NMF NMF
-32% -42% -16% -13% -21% NMF NMF NMF NMF
-17% -25% -11% -7% -18% -91% NMF NMF NMF
-31% -39% -17% -15% -20% NMF NMF NMF NMF
-21% -33% -14% -11% -18% NMF NMF NMF NMF
-6% 24% -13% -13% -12% NMF -96% -93% -93%
10% 16% -10% -8% -13% NMF NMF NMF NMF
-14% -15% -14% -12% -16% -79% 45% 55% 53%
9% 6% -9% -9% -8% NMF -80% -76% -76%
9% 14% -6% -6% -5% NMF -99% -95% -95%
7% 11% 3% 3% 2% NMF NMF NMF NMF
4% 9% 4% 4% 3% 48% NMF NMF NMF
7% 10% -2% -2% -2% NMF NMF NMF NMF
Semiconductors
June 19, 2013
Source: Company reports and BMO Capital Market estimates
BMO Capital Markets
Semiconductors
AMD Consolidated Balance Sheet (2011-2014E)

2011 Assets Cash and Cash Equivalents Short-Term Investments Receivables Inventories Other Current Assets Total Current Assets Property, Plant, and Equipment, net Minority Interest in GF / LT Investments Other Assets Total Assets Liabilities and Shareholders' Equity Accounts Payable Other Current Liabilities Total Current Liabilities Long Term Debt Long-Term Liabilities Minority Interest / Accumlated Loss in GF Shareholders' Equity Total Liabilities and Shareholders' Equity KEY DATA ROAE Debt/Capital Debt/Equity Inventory Turns Inventory Days DSOs Receivable Turns Payable Days Net Cash (Debt) Book Value/Share Tangible Book Value/Share Net Cash/Share Total Cash (inc LT investments) Total Cash (ex. LT investments) Cash/Share 869 896 919 476 69 3,229 726 427 572 4,954
2012 549 453 630 562 71 2,265 658 181 896 4,000
2013E 591 400 628 683 76 2,379 356 180 826 3,740
2014E 573 400 626 681 80 2,359 285 180 807 3,630
540 1,234 1,774 1,527 63 1,590 4,954
732 665 1,397 2,037 28 538 4,000
718 610 1,328 2,039 51 322 3,740
557 621 1,178 2,039 53 360 3,630
$ $
38% 55.9% NMF 7.6 48 51 7.1 54 (251) $ $2.13 $2.04 $0.24 1,765 $ 1,765 $ $2.37
-111% 79.1% NMF 7.5 49 42 8.6 64 (859) $ $0.72 $0.63 ($1.15) 1,183 $ 1,002 $ $1.59
-56% 86.4% NMF 4.1 90 49 7.4 94 (873) $ $0.43 $0.33 ($1.16) 1,171 $ 991 $ $1.56
11% 85.0% NMF 4.3 85 46 8.0 70 (891) $0.47 $0.37 ($1.17) 1,153 973 $1.52
Note: Net cash and Cash/Share include long-term marketable securities
Page 7
June 19, 2013
BMO Capital Markets
Semiconductors
AMD Free Cash Flows (2011-2014E)

2011 Net Income Depreciation and Amortization Changes in Working Capital Other Cash from Operating Activities Capital Expenditures "Free" Cash Flow From Operations Operating Cash Flow per share "Free" Cash Flow per share $ 491 $ 317 (242) (184) 382 (250) 132 $ 0.51 0.18 $ $
2012 (1,183) $ 260 220 365 (338) (133) (471) $ (0.45) $ (0.63) $
2013E (239) $ 262 (138) 176 61 (150) (89) $ 0.08 $ (0.12) $
2014E 38 240 (141) 96 233 (155) 78 0.31 0.10
$ $ $
Free Cash Flow to Sales
2.0%
-8.7%
-1.9%
1.6%
Page 8
June 19, 2013
Page 9
Applied Micro Pro Forma Income Statement (2012-2015E)
FY Ends in March
BMO Capital Markets
(In 000s, except per share data)
Revenues Cost of Goods Sold Gross profit Operating expenses R&D Expense SG&A Expense Operating Income Interest and Other Inc. (exp.), net Pretax income Provision (benefit) for income taxes (proforma) (23,390) (23,390) $ $ $ 13,000 17,480 0.01 0.06 0.23 73,050 73,050 74,900 74,900 $ $ $ $ $ (11,427) $ 12,500 1,073 (0.37) $ (0.18) $ 0.02 $ 62,409 62,409 64,947 64,947 66,113 66,113 67,566 68,522 65,259 65,498 71,000 71,000 72,900 72,900 73,900 73,900 74,400 74,400 (0.33) $ (0.16) $ 0.04 $ (1.08) $ (0.10) $ 0.11 $ (0.45) $ 0.00 $ 0.22 $ (2.24) $ (0.45) $ 0.39 $ (0.06) $ 0.00 $ 0.18 $ (0.05) $ 0.01 $ 0.19 $ (0.03) $ 0.03 $ 0.20 $ (0.03) $ 0.03 $ 0.20 $ $ $ 13,000 2,474 $ $ 14,000 7,088 $ $ 14,692 14,775 $ $ 54,192 25,410 $ $ 12,500 12,605 $ $ 12,500 13,557 $ $ 12,500 14,449 $ $ 12,500 14,509 $ $ 50,000 55,120 $ $ (10,526) $ (6,912) $ 83 $ (28,782) $ 105 $ 1,057 $ 1,949 $ 2,009 $ 5,120 $ 4,480 (21,557) (21,557) $ (71,562) (71,562) $ (30,248) (146,757) (30,248) $ (146,757) $ (4,299) (4,299) $ (3,297) (3,297) $ (2,395) (2,395) $ (2,295) (2,295) $ (12,286) (12,286) $ 455 455 2,623 2,623 6,648 13,000 19,648 0.03 0.09 0.26 75,400 75,400
FY2012 230,887 94,820 136,067 145,640 104,760 40,880 (9,573) 3,794 (5,779) (174)
Jun-12 41,294 17,414 23,880 36,333 26,952 9,381 (12,453) 673 (11,780) (353)
FY2013 Sep-12 Dec-12 46,324 51,698 19,705 22,121 26,619 29,577 38,132 37,392 28,343 27,967 9,789 9,425 (11,513) (7,815) 661 689 (10,852) (7,126) (326) (214) Mar-13 56,326 20,399 35,927 36,358 24,920 11,438 (431) 517 86 3 FY2013 195,642 79,639 116,003 148,215 108,182 40,033 (32,212) 2,540 (29,672) (890) Jun-13E 54,000 23,490 30,510 30,505 23,485 7,020 5 400 405 300 Mar-14E 59,644 25,647 33,997 32,089 24,335 7,754 1,909 400 2,309 300 FY2014E 229,556 99,267 130,289 125,569 95,787 29,783 4,720 1,600 6,320 1,200 Jun-14E 64,416 27,699 36,717 32,337 24,414 7,923 4,380 400 4,780 300
FY2014E Sep-13E Dec-13E 56,268 59,644 24,364 25,766 31,904 33,878 30,947 32,029 23,633 24,335 7,315 7,694 957 1,849 400 400 1,357 2,249 300 300
FY2015E Sep-14E Dec-14E 68,925 72,371 29,775 31,120 39,149 41,251 32,601 32,639 24,468 24,389 8,133 8,250 6,548 8,612 400 400 6,948 9,012 300 300
Mar-15E 70,417 30,561 39,856 32,181 24,012 8,168 7,675 400 8,075 300
FY2015E 276,128 119,155 156,974 129,758 97,283 32,475 27,216 1,600 28,816 1,200
Net income continuing ops (GAAP) Extraordinary items / disc. Ops Net income (GAAP) $ $ $ $ $ $ $ 62,245 62,561 (1.34) $ (0.09) $ 0.43 $ 32,450 26,845 $ $ (5,605) $
(82,688) (82,688) $
$ $ $ $ $ $ $
4,887 4,887 8,712 13,000 21,712 0.06 0.11 0.29 75,900 75,900
$ $ $ $ $ $ $
3,950 3,950 7,775 13,000 20,775 0.05 0.10 0.27 76,400 76,400
$ $ $ $ $ $ $
11,916 11,916 27,616 52,000 79,616 0.16 0.36 1.05 75,650 75,650
Net income (pro forma)
ARM based operating expenses Net income pro forma Ex ARM
EPS (Diluted - GAAP) EPS (Diluted - Pro forma) EPS (Diluted - Pro forma ex ARM)
(0.17) $ 0.07 $ 0.75 $
Diluted shares (GAAP) Diluted shares (pro forma)
Margin Analysis (Pro Forma) Revenues Gross margin Operating Expenses R&D SG&A Operating margin Operating margin Ex ARM expenses Pretax margin Tax rate Net margin 100% 58.9% 63.1% 45.4% 17.7% -4.1% 9.9% -2.5% 3.0% -2.4% 100% 57.8% 88.0% 65.3% 22.7% -30.2% 0.1% -28.5% 3.0% -27.7% 100% 57.5% 82.3% 61.2% 21.1% -24.9% 3.2% -23.4% 3.0% -22.7% 100% 57.2% 72.3% 54.1% 18.2% -15.1% 12.0% -13.8% 3.0% -13.4% 100% 63.8% 64.5% 44.2% 20.3% -0.8% 25.3% 0.2% 3.5% 0.1% 100% 59.3% 75.8% 55.3% 20.5% -16.5% 11.2% -15.2% 3.0% -14.7% 100% 56.5% 56.5% 43.5% 13.0% 0.0% 23.2% 0.8% 74.0% 0.2% 100% 56.7% 55.0% 42.0% 13.0% 1.7% 23.9% 2.4% 22.1% 1.9% 100% 56.8% 53.7% 40.8% 12.9% 3.1% 24.1% 3.8% 13.3% 3.3%
100% 57.0% 53.8% 40.8% 13.0% 3.2% 24.2% 3.9% 13.0% 3.4%
100% 56.8% 54.7% 41.7% 13.0% 2.1% 23.8% 2.8% 19.0% 2.2%
100% 57.0% 50.2% 37.9% 12.3% 6.8% 27.0% 7.4% 6.3% 7.0%
100% 56.8% 47.3% 35.5% 11.8% 9.5% 28.4% 10.1% 4.3% 9.6%
100% 57.0% 45.1% 33.7% 11.4% 11.9% 29.9% 12.5% 3.3% 12.0%
100% 56.6% 45.7% 34.1% 11.6% 10.9% 29.4% 11.5% 3.7% 11.0%
100% 56.8% 47.0% 35.2% 11.8% 9.9% 28.7% 10.4% 4.2% 10.0%
Percentage Change - Q/Q Revenue Cost of goods sold Gross Profit Operating Expenses R&D SG&A Operating income Pretax income Net income EPS (Diluted) -15% -14% -17% 2% 7% -10% 77% 85% 85% 82% 12% 13% 11% 5% 5% 4% -8% -8% -8% -11% 12% 12% 11% -2% -1% -4% -32% -34% -34% -35% 9% -8% 21% -3% -11% 21% -94% -101% -101% -101%
-4% 15% -15% -16% -6% -39% -101% 371% 27% 23%
4% 4% 5% 1% 1% 4% NMF NMF NMF NMF
6% 6% 6% 3% 3% 5% NMF 66% 84% 82%
0% 0% 0% 0% 0% 1% 3% 3% 3% 2%
8% 8% 8% 1% 0% 2% 129% 107% 123% 122%
7% 7% 7% 1% 0% 3% 49% 45% 48% 47%
5% 5% 5% 0% 0% 1% 32% 30% 31% 30%
-3% -2% -3% -1% -2% -1% -11% -10% -11% -11%
Percentage Change - Y/Y Revenue Cost of goods sold Gross Profit Operating Expenses R&D SG&A Operating income Pretax income Net income EPS (Diluted) -7% 15% -18% 3% 5% -1% -140% -120% -120% -122% -32% -30% -34% -1% 4% -14% NMF NMF NMF NMF -29% -27% -30% 1% 2% -1% NMF NMF NMF NMF -8% -4% -11% 6% 9% -3% NMF NMF NMF NMF
16% 1% 26% 2% -1% 10% -94% -101% -101% -101%
-15% -16% -15% 2% 3% -2% NMF NMF NMF NMF
31% 35% 28% -16% -13% -25% -100% -103% -101% -101%
21% 24% 20% -19% -17% -25% -108% -113% -110% -109%
15% 16% 15% -14% -13% -18% -124% -132% -128% -125%
6% 26% -5% -12% -2% -32% NMF NMF NMF NMF
17% 25% 12% -15% -11% -26% -115% -121% -118% -115%
19% 18% 20% 6% 4% 13% NMF NMF NMF NMF
22% 22% 23% 5% 4% 11% NMF NMF NMF NMF
21% 21% 22% 2% 0% 7% NMF NMF NMF NMF
18% 19% 17% 0% -1% 5% NMF NMF NMF NMF
20% 20% 20% 3% 2% 9% NMF NMF NMF NMF
Semiconductors
June 19, 2013
NMF - Not Meaningful. Source: Company reports and BMO Capital Markets estimates.
BMO Capital Markets
Semiconductors
Applied Micro Balance Sheet (2012-2015E) Fiscal year ends in March ($ in 000s, except per share data) FY2012 Assets Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses/Other current assets Total Current Assets Property and equipment, net Intangible assets, net Goodwill Other assets Total Assets Liabilities and Stockholders' Equity Accounts payable Other Current Liabilities Total Current Liabilities Long term Iiabilities TOTAL LIABILITIES Mandatorily redeemable convertible preferred stock STOCKHOLDERS' EQUITY Common stock Additional paid-in capital Retained earnings (accumulated deficit) Accumulated other comprehensive loss Stockholders' Equity Total Liabilities and Stockholders' Equity 21,383 50,903 72,286 27,530 99,816 17,650 96,439 114,089 15,787 129,876 17,425 52,253 69,678 11,332 81,011 28,065 85,781 22,666 23,244 31,105 190,861 38,100 16,634 13,183 10,274 269,052 FY2013 19,065 66,411 24,575 12,900 17,998 140,949 34,391 11,991 13,183 10,866 211,380 FY2014E 49,620 36,000 23,531 15,973 17,893 143,017 40,697 3,085 11,929 198,728
FY2015E 57,152 45,000 27,781 17,629 17,604 165,167 45,897 885 12,675 224,624
20,341 47,607 67,949 7,042 74,991
619 680 680 680 5,881,336 5,926,630 5,975,130 5,995,130 (5,710,954) (5,845,069) (5,857,355) (5,845,440) (1,765) (737) (737) (737) $ 169,236 $ 81,504 $ 117,718 $ 149,633 211,380 $ 198,728 $ 224,624 $ 269,052 $
KEY DATA ROAE Debt/Capital Debt/Equity Inventory Turns Inventory Days Receivable Turns DSOs Book Value/Share Tangible Book Value / Share DSO Net Cash Net Cash/Share
$ $ $ $
-38.4% 0.0% 0.0% 4.3 86 10.2 36 2.71 2.23 36 113,846 1.82
$ $ $ $
-117.1% 0.0% 0.0% 6.4 57 8.0 46 1.24 0.86 46 85,476 1.31
$ $ $ $
-12.3% 0.0% 0.0% 6.4 57 9.8 37 1.61 $ 1.57 37 85,620 $ 1.20 $
8.9% 0.0% 0.0% 6.9 53 9.9 37 1.98 37 102,152 1.35
Source: Company reports and BMO Capital Markets estimates. Note: Net cash and Cash/Share include long-term marketable securities
Page 10
June 19, 2013
BMO Capital Markets
Semiconductors
Applied Micro Statement of Free Cash Flows 2012-2015E Fiscal year ends in March ($ in 000s, except per share data) FY2012 FY2013 Net income Depreciation and amortization Changes in working capital Others Cash Flow From Operations Capital Expenditures "Free" Cash Flow From Operations Operating Cash Flow per share "Free" cash flow per share Free Cash Flow to Sales
FY2014E
FY2015E
$ (82,688) $ (146,757) $ (12,286) $ 11,916 8,436 9,542 9,600 10,000 (10,836) (12,345) (24,852) (12,383) 116,495 23,906 22,200 75,736 (9,352) (33,065) (3,633) 31,732 (13,264) $ (22,616) $ $ $ (0.15) $ (0.36) $ -9.8% (9,045) (12,000) (13,000) (42,110) $ (15,633) $ 18,732 (0.51) $ (0.65) $ -21.5% (0.05) $ (0.21) $ -6.8% 0.42 0.25 6.8%
Page 11
June 19, 2013

Analyst's Certification I, Ambrish Srivastava, PhD, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Company Specific Disclosures For Important Disclosures on the stocks discussed http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx. in this report, please go to
Page 12
June 19, 2013
BMO Capital Markets

A member of BMO
Financial Group
Page 13
June 19, 2013
June 19, 2013
Pfizer
(PFE-NYSE)
Pharmaceuticals
Alex Arfaei
BMO Nesbitt Burns Inc. 212-885-4033 / 416-359-4505 alex.arfaei@bmo.com
ZTS Exchange Looking Better; Investors Should Consider Participating

Event
We are providing our latest recommendations for the PFE/ZTS split-off.
Securities Info
Pr ice (18-Jun) 52-Wk High/ Low Mk t Cap (mm) Shs O/S (mm, BASIC) Options O /S (mm) $29.40 $31/$22 $208,541 7,093 na Target Pr ice $33 Dividend $0.96 Yield 3.3% Float O/S (mm) 7,089 ADVol (30-day, 000s) 56,404
Price Performance
Pfizer Inc. (PFE)
Price: High,Lo w ,Close( U S$) Relativ e to S&P 500
150 140 130
Impact
Our analysis should guide investors regarding their decision to participate in the PFE/ZTS share exchange offer during the important June 19-21 dates.
30
25 120 20 110
Forecasts
Based on the average daily volume-weighted average prices (VWAP) of PFE and ZTS shares during the first two days of the averaging period (June 1718), we believe that upper limit of the exchange will almost certainly be in effect. This should automatically extend the expiration of the exchange offer by two trading days from midnight June 19 to June 21, 2013. Importantly, we estimate that Pfizer shareholders who tender their shares will likely receive an effective discount of 4.7-5.9% for ZTS shares. Thus, we expect the offer to be oversubscribed, which means that only a proportion of a tendered PFE shares will be accepted and exchanged for ZTS shares.
15
100 90
Vo lum e ( mln)
10 2000 1000 0
2000 1000 0
2008
2009
2010
2011
2012
2013
L ast Data Point : Jun e 1 7, 2 01 3
(FY-Dec.) EPS Pro Forma P/ E First Call Cons. EPS GAAP FCF P/ FCF EBITDA ($mm) EV/EBITDA Rev. ($mm) EV/Rev Quar ter ly EPS 2012A 2013E 2011A $2. 31 $1. 27 $2. 38 $35,468 $67,425 1Q $0. 58 $0. 54A 2012A $2.19 $1.94 $2.09 $31,774 $58,986 2Q $0.62 $0.58 2013E $2.21 13.3x $2.21 $1.75 $2.78 10.6x $30,262 6.6x $56,421 3.5x 3Q $0.53 $0.56 2014E $2.28 12.9x $2.33 $1.83 $2.69 10.9x $29,625 6.7x $55,507 3.6x 4Q $0.47 $0.54
Valuation
$33/share using DCF including Zoetis and P/E multiple excluding Zoetis: 13.5x our 2013 Non-GAAP EPS of $2.30 + $1.30/share for Palbociclib.
Recommendation
Investors should consider participating in the exchange. With a ~5% discount, PFE shareholders have the opportunity to own ZTS at ~$29.40$29.70/share, roughly 15% below our valuation of $34/share. Moreover, we believe there is strong support for ZTS below $30; thus, lowering downside risk for participating in the exchange. We recommend tendering ~20% of PFE shares, with the understanding that since the offer will likely be oversubscribed, not all of the tendered PFE shares will be converted to ZTS. More aggressive investors should considering tendering more PFE shares.
Balance Sheet Data ( 31-Mar ) Net Debt ($mm) -$9,397 TotalDebt/EBITDA 1.2x Total Debt ($mm) $37,460 EBITDA/IntExp 18.5x Net Debt/Cap. na Price/Book 2.6x Notes: All values in US$. Source: BMO Capital Markets estimates, Bloomberg, Thomson Reuters, and I HS Global Insight.
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc. For disclosure statements, including the Analyst's Certification, please refer to pages 16 to 20.
BMO Capital Markets
Pfizer
Background: Pfizer-Zoetis Share Exchange Summary

Pfizer plans to exchange 400,985,000 common stock shares of Zoetis, which corresponds to its remaining 80.2% ownership interest in Zoetis, for outstanding common stock of Pfizer. Pfizer shareholders have the option to exchange all, some or none of their PFE shares for ZTS shares owned by Pfizer at a 7% discount, subject to an upper limit of 0.9898 shares of Zoetis common stock per share of Pfizer common stock. The exchange ratio will be based on simple arithmetic average of the daily volume-weighted average prices (VWAP) of Pfizer common stock and Zoetis common stock during June 17, 18 and 19, 2013 (called the Averaging Period), unless the exchange offer is extended. o
BMO comments: As we illustrate below, based on the VWAP for PFE and ZTS shares during June 17-18, we believe that the upper limit of the exchange will almost certainly be in effect, which means the exchange ratio will be fixed at 0.9898 ZTS shares per PFE share. We also estimate that Pfizer shareholders who tender their shares would receive an effective discount of 4.7-5.9% for ZTS shares.
The final exchange ratio will be announced by press release by 4:30 p.m. ET, June 19, 2013, unless the exchange offer is extended or terminated. Pfizer will also announce whether the upper limit is in effect for the exchange. If the upper limit is in effect, then the exchange offer will be automatically extended until 12:00 midnight ET, on the second following trading day (i.e., Friday June 21, 2013) to permit stockholders to tender or withdraw their shares of Pfizer common stock during those days. o
BMO comments: Since we believe that the upper limit will most likely be in
effect; it is highly likely that exchange offer will be automatically extended to 12:00 midnight ET on Friday June 21, 2013; however, investors must pay close attention to whether the upper limit is in effect so that they dont miss the deadline. The final exchange ratio will also be available at www.zoetisexchange.com. This site currently contains a lot of useful information, including daily VWAP of both Pfizer common stock and Zoetis common stock with indicative exchange ratios, and whether the upper limit would be in effect at these levels. The site also contains links to the prospectus and a helpful Q&A page. Pfizer shareholders can withdraw shares tendered at any time before the exchange offer expires. The exchange offer and withdrawal rights will expire at 12:00 midnight ET, on June 19, 2013, unless the exchange offer is extended (e.g. automatically by two trading days if the upper limit is in effect) or terminated. However, prior to the expiration of the exchange offer Pfizer shareholders can re-tender their Pfizer common stock by following the tender procedures again. In the likely event that the exchange offer is oversubscribed, in most cases the PFE shares tendered will be accepted for exchange on a pro rata basis in proportion to the number of shares tendered, which is referred to as proration. Any shares of Pfizer common stock not accepted for exchange as a result of proration will be returned to tendering stockholders. Pfizer will announce the preliminary proration factor by a press
Page 2
June 19, 2013
BMO Capital Markets
Pfizer
release by 9:00 a.m. ET on the business day immediately following the expiration of the exchange offer.
Exhibit 1. Our sensitivity analysis and recommendations for the Pfizer-Zoetis share exchange offer: The upper limit will almost certainly be in effect; since the expected discount for ZTS shares will likely be at least 4.7%, we recommend that PFE shareholders participate in the exchange
Potential exchange ratios in the Pfizer-Zoetis Share Exchange Offer: Average daily VWAP of PFE shares during June 17, 18, and 19, 2013 $30.85 $30.90 $30.95 $31.00 Average $31.05 daily $31.10 VWAP of $31.15 ZTS $31.20 shares $31.25 during $31.30 June 17, $31.35 18, and $31.40 19, 2013 $31.45 $31.50 $31.55 $31.60 $29.00 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9884 0.9868 $29.05 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9885 $29.10 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 $29.15 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 $29.20 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 $29.25 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 $29.30 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 $29.35 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 $29.40 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 $29.45 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 $29.50 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 $29.55 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 $29.60 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898 0.9898
VWAP = Volume weighted average price Yellow: Upper Limit Ratio in Effect 0.9898 Exchange Discount if below upper limit
7%
Corresponding Effective Discount Rates for Zoetis Shares: Average daily VWAP of PFE shares during June 17, 18, and 19, 2013 $29.00 $29.05 $29.10 $30.85 5.0% 4.9% 4.7% $30.90 5.2% 5.0% 4.9% $30.95 5.3% 5.2% 5.0% $31.00 5.5% 5.3% 5.2% $31.05 5.6% 5.5% 5.3% $31.10 5.8% 5.6% 5.5% $31.15 5.9% 5.8% 5.6% $31.20 6.1% 5.9% 5.8% $31.25 6.2% 6.1% 5.9% $31.30 6.4% 6.2% 6.1% $31.35 6.5% 6.4% 6.2% $31.40 6.7% 6.5% 6.4% $31.45 6.8% 6.7% 6.5% $31.50 7.0% 6.8% 6.7% $31.55 7.0% 7.0% 6.8% $31.60 7.0% 7.0% 7.0% BMO Recommendations: $29.15 4.5% 4.7% 4.8% 5.0% 5.2% 5.3% 5.5% 5.6% 5.8% 5.9% 6.1% 6.2% 6.4% 6.5% 6.7% 6.8% $29.20 4.4% 4.5% 4.7% 4.8% 5.0% 5.1% 5.3% 5.4% 5.6% 5.7% 5.9% 6.0% 6.2% 6.3% 6.5% 6.6% $29.25 4.2% 4.4% 4.5% 4.7% 4.8% 5.0% 5.1% 5.3% 5.4% 5.6% 5.7% 5.9% 6.0% 6.2% 6.3% 6.5% $29.30 4.0% 4.2% 4.4% 4.5% 4.7% 4.8% 5.0% 5.1% 5.3% 5.4% 5.6% 5.7% 5.9% 6.0% 6.2% 6.3% $29.35 3.9% 4.0% 4.2% 4.3% 4.5% 4.7% 4.8% 5.0% 5.1% 5.3% 5.4% 5.6% 5.7% 5.9% 6.0% 6.2% $29.40 3.7% 3.9% 4.0% 4.2% 4.3% 4.5% 4.6% 4.8% 5.0% 5.1% 5.3% 5.4% 5.6% 5.7% 5.9% 6.0% $29.45 3.6% 3.7% 3.9% 4.0% 4.2% 4.3% 4.5% 4.6% 4.8% 4.9% 5.1% 5.2% 5.4% 5.5% 5.7% 5.8% $29.50 3.4% 3.5% 3.7% 3.9% 4.0% 4.2% 4.3% 4.5% 4.6% 4.8% 4.9% 5.1% 5.2% 5.4% 5.5% 5.7% $29.55 3.2% 3.4% 3.5% 3.7% 3.9% 4.0% 4.2% 4.3% 4.5% 4.6% 4.8% 4.9% 5.1% 5.2% 5.4% 5.5% $29.60 3.1% 3.2% 3.4% 3.5% 3.7% 3.8% 4.0% 4.2% 4.3% 4.5% 4.6% 4.8% 4.9% 5.1% 5.2% 5.4%
Average daily VWAP of ZTS shares during June 17, 18, and 19, 2013
The boxed range indicates the probable exchange ratios and corresponding effective discount rates, in our view. Green: Pfizer Shareholders should tender 10-20% of their PFE shares for the exchange. Pink Pfizer Shareholders should either NOT tender their PFE shares for the exchange, or withdraw their tendered shares and prior to offer expiration. Red: Source: Pfizer and Zoetis reports, BMO Capital Markets Pharmaceuticals Research
Page 3
June 19, 2013
BMO Capital Markets
Pfizer
Exhibit 2. Pfizers near-term non-GAAP P&L assuming completion of the exchange offer in late June 2013. We believe the exchange will be at least $0.02-$0.04 accretive to 2014 EPS
In millions, except EPS Revenues with Zoetis Revenues w/out Zoetis

Impact
2012A $58,986 $54,650

-7.4% 81.4% 82.7% 1.4% 41.3% 42.9% 1.6% 27.9% 29.2% 1.2%
Q1 2013 Q2 2013 Q3 2013 Q4 2013 2013E Q1 2014 Q2 2014 Q3 2014 Q4 2014 2014E $13,500 $14,412 $13,773 $14,737 $56,421 $13,319 $14,175 $13,507 $14,506 $55,507 $12,410 $13,263 $12,703 $13,509 $51,886 $12,178 $12,959 $12,366 $13,191 $50,693
-8.1% 80.6% 82.1% 1.5% 42.1% 43.5% 1.4% 29.0% 30.1% 1.1% -8.0% 81.3% 82.7% 1.4% 42.8% 44.2% 1.5% 28.7% 29.8% 1.1% -7.8% 81.3% 82.7% 1.3% 42.5% 44.0% 1.5% 28.6% 29.7% 1.1% -8.3% 81.5% 83.1% 1.6% 37.2% 38.6% 1.4% 25.2% 26.3% 1.1% -8.0% 81.2% 82.7% 1.5% 41.1% 42.5% 1.5% 27.8% 28.9% 1.1% -8.6% 81.4% 83.1% 1.7% 43.6% 45.3% 1.7% 30.0% 31.3% 1.3% -8.6% 81.0% 82.5% 1.5% 42.9% 44.4% 1.5% 29.5% 30.7% 1.2% -8.4% 80.6% 82.0% 1.4% 41.8% 43.2% 1.4% 28.8% 29.9% 1.1% -9.1% 80.9% 82.5% 1.7% 36.5% 37.7% 1.3% 25.1% 26.1% 1.0% -8.7% 81.0% 82.5% 1.5% 41.1% 42.6% 1.5% 28.3% 29.4% 1.1%
Gross Margin with Zoetis Gross margin w/out Zoetis

Impact
Operating Margin with Zoetis Operating Margin w/out Zoetis

Impact
Net Margin with Zoetis Net Margin w/out Zoetis

Impact
Net Income with Zoetis
$16,476
$3,911 $3,732
-4.6% 7,269 7,269 0.0%
$4,137 $3,952
-4.5% 7,146 7,146 0.0%
$3,943 $3,778
-4.2% 7,032 6,627 -5.8%
$3,712 $3,549
-4.4% 6,922 6,517 -5.9%
$15,703 $15,012
-4.4% 7,092 6,890 -2.9%
$3,999 $3,813
-4.7% 7,011 6,605 -5.8%
$4,185 $3,979
-4.9% 6,930 6,525 -5.8%
$3,886 $3,692
-5.0% 6,851 6,445 -5.9%
$3,643 $3,441
-5.6% 6,772 6,367 -6.0%
$15,712 $14,924
-5.0% 6,891 6,486 -5.9%
Net Income without Zoetis $15,937

Impact -3.3% 7,508 7,508
Diluted Shares With Zoetis Diluted Shares Without Zoetis

Impact
Diluted EPS with Zoetis Diluted EPS w/out Zoetis

Impact Impact
$2.19
$0.54 $0.51
$0.58 $0.55
$0.56 $0.57 $0.01

1.7%
$0.54 $0.54 $0.01

1.6%
$2.21 $2.18
$0.57 $0.58 $0.01

1.2%
$0.60 $0.61 $0.01

1.0%
$0.57 $0.57 $0.01

1.0%
$0.54 $0.54 $0.00

0.5%
$2.28 $2.30 $0.02

0.9%
Notes: Assumes the transaction* allows Pfizer to retire ~405MM PFE shares Sources: Pfizer Reports, Zoetis Reports, BMO Capital Markets Pharmaceuticals Research
We expect the Zoetis share exchange to be about $0.03/share dilutive in 2013 but at least $0.020.04/share accretive in 2014. The expected dilution in 2013 is because Zoetis revenues and income will be excluded for the full year 2013, but the share count reduction will only be included as of mid 2013. Assuming completion of the exchange, we forecast non-GAAP Pfizer revenues of $51.9Bn and $50.7Bn, and EPS of $2.18 and $2.30 in 2013 and 2014, respectively.
Page 4
June 19, 2013
BMO Capital Markets

Exhibit 3. Our valuation of PFE shares: $33/share using DCF (Including Zoetis) and P/E (Excluding Zoetis)
FCFF Valuation, $MM Cash flow from operations Y/Y Growth CAPEX Interest Expense (1-t) Free Cash Flow to Firm (FCFF) Discount Period Discount Rate Discounted FCFF PV of FCFF (2012-2023) Terminal Value at 2023 PV of Terminal Value Value of Firm Risk Adj. value for Palbociclib Net Cash & Investments Legal reserve liabilities Probability adjusted milestones (due)/receivable Under funded pension and post-retirement liabilities Preferred Shares Total Equity Value Minority Interest Diluted shares, MM Total PFE Stockholders' Equity Value, $MM 2013E 18,755 1,060 927 20,741 0.5
8.5%
Pfizer
2014E 2015E 19,916 18,321

-5.1% -8.0%
2016E 19,999
9.2%
2017E 20,928
4.6%
2018E 21,258
1.6%
2019E 21,795
2.5%
2020E 21,269
-2.4%
2021E 20,333
-4.4%
2022E 20,822
2.4%
2023E 20,470
-1.7%
>2023E 20,470
0.0%
(1,401) (1,429) 1,081 962 19,597 17,854 1.5 2.5
(1,439) 858 19,418 3.5
(1,453) 772 20,247 4.5
(1,462) 691 20,487 5.5
(1,468) 571 20,897 6.5
(1,472) 563 20,359 7.5
(1,477) 513 19,369 8.5 9,682
(1,480) 484 19,826 9.5 9,134
(1,491) 423 19,402 10.5 8,238
(1,566) 423 19,327 11.5
Total 143,905 227,381 88,984 232,889 9,360 10,361 (2,044) (630) (9,676) (39) 240,222 (418) 7,269 239,804
19,912 17,340 14,560 14,595 14,026 13,080 12,297 11,042 BMO Comments: Per Share $20 Assumes terminal value growth rate of 0%. $12 Terminal Value accounts for 39% of firm value. $32 $1.29 $1.43 ($0.28) ($0.09) ($1.33) ($0.01) $33.05 ($0.06) Diluted shares as of Q1'13 $33
Total DCF present value of $11.7Bn, with 80% probability of success given promising phase-2 data. Assumes US launch in 2016, ex-US in 2017; could be conservative given possibility of accelerated approval in 2014.
Source: Annual report We assume 40% probability of paying the aggregate potential milestones of $1.6 billion. Pension plans underfunded by $7.9 billion, we also include about half of post-retirement liabilities of $1.8 billion
In line with 13.5x our 2013 Non-GAAP EPS of $2.30 excluding Zoetis + $1.30/share for Palbociclib.
Source: Pfizer, BMO Capital Markets Pharmaceuticals Research
Exhibit 4. Key events in 2013: Pfizer has a number of potentially positive catalysts in 2H13
Event Xeljanz Phase 3 data in psoriasis Phase 3: Dacomitinib for salvage treatment of NSCLC (BR.26 trial) Timing 2013.2H (EULAR/ ACR) 2H13 topline Importance Med-High BMO Comments Phase 2 data suggests Tofa should be on par with Enbrel & Humira but probably not as good as Stelara; safety will be the focus Second generation EGFR-TKI with better efficacy than Tarceva, but also more toxicity. Also behind key competitor Afatinib. We have low expectations. Will probably be better than Tarceva, but focus will be on EGFR mutants. Afatanib (BI) is way ahead w +ve Ph3 in EGFR mutants vs. Alimta. Top line press release expected in 2H13, presentation will be in San Antonio in Dec. Focus is on the ER-positive, HER-2-negative advanced breast cancer patient population. Based on strong Phase-2 data we're adding ~$1/share on a risk adjusted basis to our valuation. Please see comments.
Low-Med
Phase 3: Dacomitinib vs. Tarceva in 2nd/3rd line NSCLC unselected 2H13/1H14 pts (ARCHER 1009)
Low
Palbociclib (PD-332991) Ph2 data in advanced breast cancer
2013.2H
High
To support FDA accelerated approval and determine whether Prevnar 13 is effective in preventing the first episode of community-acquired Prevnar 13 Community-Acquired pneumonia. Results will determine whether U.S. Centers for Disease Pneumonia Immunization Trial in 2H13 High Control and Preventions Advisory Committee on Immunization Adults (CAPiTA) Practices (ACIP) recommends routine vaccinations for adults >50. We expect a positive outcome. Source: Pfizer, BMO Capital Markets Pharmaceuticals Research
Page 5
June 19, 2013
BMO Capital Markets

Exhibit 5. Pfizers revenue breakdown and our forecasts: Includes Zoetis for now
2010A 2011A 2012A
Q1 2013 Q2 2013 Q3 2013 $13,773 11,787 440 1,038 943 988 702 459 282 344 313 257 74 81 90 6 58 132 204 145 188 185 139 153 72 87 163 87 123 27 97 81 6 89 59 82 95 84 86 27 62 58 62 53 62 50 53 50 31 56 51 55 36 66 762 1,795 1,986 1,070 852 64 Q4 2013 $14,737 12,418 401 1,114 984 1,318 767 478 308 364 339 298 91 85 106 7 63 140 191 158 182 197 171 162 74 102 154 85 137 28 70 106 0 96 65 86 105 75 90 27 65 71 71 67 58 62 58 51 31 58 51 59 48 85 467 1,888 2,319 1,227 1,014 78
Pfizer
2013E
$56,421 48,145 1,997 4,330 3,850 4,162 2,804 1,855 1,197 1,417 1,293 1,073 209 279 342 19 237 575 783 618 764 731 641 638 291 414 609 371 512 120 382 408 101 374 245 333 379 323 354 157 262 196 275 227 238 224 222 205 115 220 203 224 145 217 2,768 7,218 8,276 4,536 3,477 263
2014E
$55,507 46,554 1,603 4,106 3,954 5,438 1,927 1,605 1,146 1,507 1,358 1,078 666 439 467 47 273 542 753 244 673 746 633 644 289 323 543 304 494 108 260 377 0 369 220 316 387 288 367 68 247 196 275 199 239 215 224 164 99 245 196 253 72 541 1,565 7,258 8,953 4,814 3,665 474
2015E
$55,357 45,869 1,503 3,595 3,939 5,945 993 1,441 1,130 1,202 1,423 1,088 1,435 580 491 58 309 472 732 172 608 779 627 650 298 259 497 268 481 106 240 354 0 362 216 296 394 254 376 76 238 196 275 171 232 203 227 136 83 269 196 283 36 836 1,344 7,495 9,488 5,093 3,859 536
TOTAL REVENUES $67,791 $67,423 $59,517 $13,500 $14,412 Biopharmaceuticals: 58,523 57,747 51,214 11,546 12,395 Lipitor 10,733 9,577 3,948 626 530 Lyrica 3,063 3,693 4,158 1,066 1,112 Enbrel (ex-US & CAN) 3,274 3,666 3,737 877 1,046 Prevnar13 2,416 3,657 3,718 846 1,010 Celebrex 2,374 2,523 2,719 653 682 Viagra 1,928 1,981 2,051 461 457 Norvasc 1,506 1,445 1,349 301 306 Zyvox 1,176 1,282 1,345 342 367 Sutent 1,066 1,187 1,236 302 339 Premarin family 1,040 1,013 1,073 244 274 Xeljanz (Tofacitinib) 0 0 0 0 45 Xalkori 0 15 124 53 60 Inlyta 0 0 93 63 83 Bosulif 0 0 2 3 4 Uplypso/Elelyso 238 233 239 54 62 Xalatan/Xalacom 1,749 1,250 806 147 156 Genotropin 885 889 832 189 199 Detrol/Detrol LA 1,013 883 761 151 163 BeneFIX 643 693 775 189 206 Vfend 825 747 754 187 162 Chantix/Champix 755 720 670 166 164 Pristiq 466 577 630 166 156 Revatio 481 535 534 72 73 Medrol 455 510 523 113 112 Refacto AF/Xyntha 404 506 584 139 153 Zosyn/Tazocin 952 636 484 87 111 Zoloft 532 573 541 116 136 Geodon/Zeldox 1,027 1,022 353 36 29 Effexor 1,718 678 425 105 110 Zithromax/Zmax 415 453 435 116 105 Prevnar7 1,253 488 399 81 14 Fragmin 341 382 381 86 103 Aricept 417 443 326 62 59 Cardura 413 380 338 76 89 Relpax 324 341 368 86 92 Rapamune 388 372 346 84 80 Tygacil 324 298 335 87 91 EpiPen 272 194 264 72 30 Xanax XR 285 306 274 70 65 BMP2 400 340 263 0 67 Sulperazon 213 218 262 71 71 Diflucan 258 265 259 50 57 Caduet 527 538 258 56 62 Neurontin 224 289 235 52 60 Unasyn 244 233 228 56 55 Aromasin 483 361 210 51 53 Arthrotec 182 233 196 21 32 Inspra 0 49 167 52 55 Dalacin/Cleocin 0 52 183 50 51 Toviaz 136 187 207 52 57 Metaxalone/Skelaxin 175 265 223 21 40 Eliquis Alliance Rev. 0 0 0 11 55 Other Alliance Rev. 4,084 3,630 3,492 736 803 Other Biopharma 6,445 6,939 7,101 1,693 1,842 Diversified Revenues: 9,288 9,727 8,324 1,954 2,017 Animal Health (Zoetis) 3,577 4,233 4,331 1,090 1,149 Consumer HC 2,772 3,057 3,219 811 800 Nutrition 1,867 2,138 Other 1,053 248 753 53 68 *2012 and beyond excludes Nutrition business. Source: Pfizer, BMO Capital Markets
Page 6
June 19, 2013
BMO Capital Markets

Exhibit 6. Our Zoetis revenue forecast by species: 10-year CAGR of 4.8%
Zoetis Revenues by Species $8.0 $7.0 $6.0 $5.0 Billions $4.0
$1.3 $1.5 $1.6 $1.7 $1.9 $2.0 $2.1 $2.2 $2.3 $2.4 $2.6
Pfizer
$2.5
$1.3
$3.0 $2.0 $1.0

$1.1 $1.0 $0.1 $0.4
$1.2 $0.5 $0.3 $0.4 $1.5 $0.6 $1.6 $0.5 $0.6 $1.6 $0.5 $0.6 $1.6 $0.6 $0.7
$0.6 $0.8
$0.7 $0.8
$0.7 $0.9
$0.8 $0.9
$0.8 $1.0
$0.9 $1.1
$0.9 $1.1
$1.0 $1.2
$1.0
$1.3
$1.6
$1.7
$1.7
$1.7
$1.8
$1.8
$1.8
$1.9
$1.9
$1.9
$0.0
2009A 2010A 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
Cattle
Swine
Poultry
Other Livestock (Fish and Sheep)
Horses
Dogs and Cats
Source: Zoetis, BMO Capital Markets.
Exhibit 7. Our Zoetis revenue forecast by geographic segment: 10-year CAGR of 4.5% (NOTE: Our model uses the average of our revenue forecast by species and geographic segment)
Zoetis Revenues by Geographic Operating Segment $8.0 $7.0 $6.0 $5.0 Billions $4.0
$0.5 $0.6 $0.8 $1.1 $1.0 $1.7 $1.8 $1.9 $2.0 $2.1 $2.2 $2.3 $2.4 $2.5 $2.7 $2.8 $2.9 $3.0 $0.7 $0.8 $1.1 $0.7 $0.8 $1.1 $0.8 $0.9 $1.2 $0.9 $0.9 $1.0 $1.0 $1.1 $1.0 $1.1 $1.0 $1.2 $1.2 $1.3 $1.3
$0.9 $0.9 $1.3
$1.1
$1.1
$1.1
$1.2
$3.0 $2.0 $1.0

$1.1 $0.3 $0.5 $0.9
$0.7
$1.3
$1.3
$1.4
$1.4
$1.4
$1.5
$1.5
$1.5
$1.4
$0.0
2009A 2010A 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
US
Europe/Africa/Middle East (EuAfME)
Canada/Latin America (CLAR)
Asia/Pacific (APAC)
Page 7
June 19, 2013
BMO Capital Markets
Pfizer
Exhibit 8. We expect Zoetis margins to improve overtime, driven primarily by improved operational efficiency as SG&A and R&D should grow at a slower rate than revenues
70.0% 66.4% 66.6% 64.8% 65.0% 65.2% 65.4% 65.6% 65.8% 66.0% 66.2% 63.2% 62.7% 64.3% 64.6%
60.0%
50.0%
40.0%
30.0%
20.0%
34.3% 35.2% 32.4% 33.4% 31.4% 30.3% 28.2% 29.3% 27.0% 24.5% 25.7% 23.3% 24.4% 21.6% 21.1% 21.8% 22.6% 20.3% 19.3% 18.9% 17.4% 18.4% 15.4% 16.5% 13.6% 11.9% 12.4% 7.7%
10.0%
0.0% 2010A 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Gross Profit
Operating Profit
Net Income
Zoetis Investment Thesis

Zoetis, a former business unit of Pfizer (PFE), is the largest global animal medicines and vaccines company and the only pure-play large-cap animal health company that is publically traded. Zoetis is a unique healthcare growth story with therapeutic and geographically diversified revenues and strong fundamental growth drivers (i.e., growing global demand for animal protein and pet ownership, particularly in emerging markets). Zoetis' base revenue (excluding acquisitions, divestitures, and Fx) is growing at a similar rate as the animal vaccines and medicines market at roughly 5%, which isnt surprising given that the company has about 19% market share. The market is projected to grow by a CAGR of 6% between 2011 and 2016 (ex-Fx). Forecasting revenues using two different methods (i.e., by species and operating segment), we estimate that Zoetis revenues should grow by a CAGR of 4.6% through 2023. Moreover, we forecast non-GAAP EPS CAGR of roughly 10% and operating cash flow CAGR of 10% through 2023.
Page 8
June 19, 2013
BMO Capital Markets
Pfizer
Our Zoetis Valuation

We value ZTS shares using our DCF model and support it by using P/E multiple. In our DCF, we assume a 2.5% terminal growth rate because of the sustainability of the business, and as such our terminal value accounts for nearly 60% of the firm value. On a relative basis, applying a 22x-24x multiple, which is on the top range of that seen with other roughly similar companies, to our new 2013-2016E non-GAAP EPS estimates produces an average valuation of $34, in line with our DCF valuation. Our assumed diluted outstanding share count is 500MM, which assumes successful completion of the share exchange offer by Pfizer.
Exhibit 9. Our valuation of ZTS shares is based on DCF and P/E multiple
FCFF Valuation, $MM Cash flow from operations Y/Y Growth CAPEX Interest Expense (1-t) Free Cash Flow to the Firm (FCFF) Y/Y Growth Discount Period Discount Rate Discounted FCFF PV of FCFE (2013-2023) Terminal Value at 2023 PV of Terminal Value Cash & Equivalents Total Debt Total Equity Value Minority Interest Total Zoetis Stockholders' Equity Value Diluted shares, MM Equity value per current PFE share DCF Assumptions: 2013E 2014E 2015E 630 820 912 25% 11% (101) (132) (130) 62 83 83 592 0.50 8.5% 568 Total, $MM 8,098 31,944 12,501 279 3,650 17,228 (15) 17,213 500 $34 PE Multiple Valuation Using Non-GAAP EPS 2012A 2013E 2014E 2015E 2016E 2013-16 EPS CAGR $1.08 $1.40 $1.59 $1.78 $1.97 12.0% $22 $28 $29 $30 $31 $23 $29 $31 $32 $32 $24 $31 $32 $33 $34 $25 $32 $34 $35 $36 $26 $35 $36 $37 $34 0 1 2 3 As of 1Q13. 682 705 729 742 747 761 780 795 794 794 771 865 2016E 2017E 2018E 1,017 1,123 1,234 12% 10% 10% (126) (132) (135) 80 80 70 970 2019E 1,361 10% (137) 70 2020E 1,504 10% (135) 70 2021E 2022E 2023E >2023E 1,658 1,797 1,966 2,015 10% 8% 9% 2.5% (136) (142) (136) (139) 70 70 41 41 1,917 2% 11.50
1,071 1,169 1,294 1,438 1,591 1,724 1,870 10% 9% 11% 11% 11% 8% 8% 4.50 5.50 6.50 7.50 8.50 9.50 10.50
30% 12% 12% 1.50 2.50 3.50
Terminal growth rate: 2.5% Accounts for nearly 60% of firm value given sustainability of business. Current outstanding debt Source: Zoetis Form 10-K
Required Rate of Return on Equity 10.4% Rf 2.0% EPS Beta 1 20 Rm 10% 21 PEx Cost of Debt 3% 22 Debt 3,650 23 Equity 16,504 24 Discount Period % Debt 18% Discount rate 8.5% % Equity 82% Average $34 WACC 8.4% Terminal Value Growth Rate 2.5% Sources: Pfizer Reports, Zoetis, BMO Capital Markets Pharmaceuticals Research
Page 9
June 19, 2013
BMO Capital Markets
Pfizer
Pfizer Income Statement: Our Near-Term Non-GAAP or Adjusted Estimates (Includes Zoetis)
2012A
Revenues Cost of Sales Gross Profit Selling, Informational and Administrative Expenses R&D Expenses Total Operating Expenses EBITDA Amortization of Intangible Assets EBIT Other (Income) / Deductions -- Net Income From Cont. Operations Before Taxes Provision / (Benefit) for Taxes on Income
Effective Tax Rate
Q1 2013 $13,500 2,615 10,885 3,494 1,708 7,817 5,683 43 5,640 264 5,376 1,446
26.9%
Q2 2013 $14,412 2,701 11,710 3,934 1,615 8,250 6,161 59 6,102 258 5,844 1,665
28.5%
Q3 2013 $13,773 2,572 11,201 3,716 1,633 7,921 5,852 38 5,815 270 5,545 1,564
28.2%
Q4 2013 $14,737 2,721 12,015 4,598 1,930 9,250 5,487 23 5,464 256 5,207 1,458
28.0%
2013E
$56,421 10,610 45,812 15,742 6,886 33,238 23,184 164 23,020 1,048 21,972 6,134
27.9%
Q1 2014 Q2 2014 Q3 2014 Q4 2014 $13,319 2,475 10,844 3,374 1,662 7,511 5,808 39 5,769 203 5,566 1,531
27.5%
2014E
$55,507 10,552 44,954 15,391 6,739 32,682 22,824 147 22,677 789 21,888 6,019
27.5%
2015E
$55,357 10,408 44,948 15,119 6,746 32,274 23,083 133 22,950 682 22,268 6,124
27.5%
$58,986 10,994 47,992 16,281 7,346 34,621 24,365 202 24,163 835 23,328 6,824
29.3%
$14,175 2,689 11,486 3,829 1,578 8,096 6,079 53 6,025 197 5,829 1,603
27.5%
$13,507 2,614 10,893 3,646 1,601 7,861 5,646 34 5,612 199 5,413 1,488
27.5%
$14,506 2,775 11,731 4,541 1,898 9,214 5,292 21 5,270 191 5,080 1,397
27.5%
Income From Continuing Operations Net Income / (Loss) Attributable to NonControlling Interests Net Income Attributable to Pfizer Earnings Per Share - Basic Earnings Per Share - Diluted Weighted-Average Shares - Basic Weighted-Average Shares - Diluted Dividend per Share
$16,504 28 $16,476 $2.21 $2.19 7,442 7,508 $0.88
$3,930 19 $3,911 $0.54 $0.54 7,187 7,269 $0.24
$4,178 42 $4,137 $0.59 $0.58 7,067 7,146 $0.24
$3,981 38 $3,943 $0.57 $0.56 6,952 7,032 $0.24
$3,749 37 $3,712 $0.54 $0.54 6,841 6,922 $0.24
$15,838 135 $15,703 $2.24 $2.21 7,012 7,092 $0.96
$4,036 37 $3,999 $0.58 $0.57 6,930 7,011 $0.26
$4,226 41 $4,185 $0.61 $0.60 6,849 6,930 $0.26
$3,924 38 $3,886 $0.57 $0.57 6,770 6,851 $0.26
$3,683 40 $3,643 $0.54 $0.54 6,691 6,772 $0.26
$15,869 156 $15,712 $2.31 $2.28 6,810 6,891 $1.04
$16,144 176 $15,969 $2.38 $2.35 6,712 6,793 $1.12
2012A
Growth Rates Revenues Gross Profit Operating Income (EBIT) Net Income EPS - Diluted Dividend Margins Gross Margin Operating Margin (EBIT) Net Income Return Analysis Dividend Payout Ratio Dividend as % of Free Cash Flow (FCF) Shares repurchased as % of FCF Dividend + Share Buyback as % of FCF -12.5% -12% -9% -10% -5% 10% 81.4% 41% 28% 40% 42% 52% 94%
Q1 2013 -9.3% -11% -13% -10% -6% 9% 80.6% 42% 29% 45% 85% 227% 312%
Q2 2013 -4.3% -6% -9% -11% -7% 9% 81.3% 42% 29% 41% 24% 48% 72%
Q3 2013 -1.5% -2% 2% 0% 7% 9% 81.3% 42% 29% 43% 30% 58% 88%
Q4 2013 -2.2% 0% 4% 6% 13% 9% 81.5% 37% 25% 45% 36% 70% 106%
2013E
-4.3% -5% -5% -5% 1% 9% 81.2% 41% 28% 43% 35% 75% 109%
Q1 2014 Q2 2014 Q3 2014 Q4 2014 -1.3% 0% 2% 2% 6% 8% 81.4% 43% 30% 46% 30% 46% 76% -1.6% -2% -1% 1% 4% 8% 81.0% 43% 30% 43% 44% 61% 105% -1.9% -3% -3% -1% 1% 8% 80.6% 42% 29% 46% 33% 46% 80% -1.6% -2% -4% -2% 0% 8% 80.9% 36% 25% 48% 50% 71% 121%
2014E
-1.6% -2% -1% 0% 3% 8% 81.0% 41% 28% 46% 38% 54% 92%
2015E
-0.3% 0% 1% 2% 3% 8% 81.2% 41% 29% 48% 44% 30% 74%
Page 10
June 19, 2013
BMO Capital Markets
Pfizer
Pfizer Income Statement: Our Long-Term Non-GAAP or Adjusted Estimates (Includes Zoetis)
2012A
Revenues Cost of Sales Gross Profit Selling, Informational and Administrative Expenses R&D Expenses Total Operating Expenses EBITDA Amortization of Intangible Assets EBIT Other (Income) / Deductions -- Net Income From Cont. Operations Before Taxes Provision / (Benefit) for Taxes on Income
Effective Tax Rate
2013E
$56,421 10,610 45,812 15,742 6,886 33,238 23,184 164 23,020 1,048 21,972 6,134
27.9%
2014E
$55,507 10,552 44,954 15,391 6,739 32,682 22,824 147 22,677 789 21,888 6,019
27.5%
2015E
$55,357 10,408 44,948 15,119 6,746 32,274 23,083 133 22,950 682 22,268 6,124
27.5%
2016E
$56,540 10,570 45,970 15,422 6,814 32,806 23,734 119 23,615 537 23,078 6,231
27.0%
2017E
$57,096 10,617 46,479 15,730 6,882 33,229 23,867 107 23,760 410 23,350 6,304
27.0%
2018E
$57,940 10,716 47,224 15,416 6,951 33,082 24,857 97 24,761 277 24,484 6,488
26.5%
2019E
$57,672 10,609 47,064 15,107 7,020 32,736 24,936 87 24,849 115 24,734 6,554
26.5%
2020E
$55,699 10,190 45,509 14,805 7,020 32,016 23,684 78 23,606 47 23,558 6,125
26.0%
2021E
$54,647 9,943 44,704 14,509 7,020 31,472 23,175 70 23,104 (40) 23,144 6,017
26.0%
2022E
$54,323 9,830 44,493 14,219 7,020 31,069 23,254 63 23,191 (88) 23,278 6,052
26.0%
2023E
$54,205 9,808 44,397 13,935 7,020 30,763 23,442 57 23,385 (168) 23,553 6,124
26.0%
$58,986 10,994 47,992 16,281 7,346 34,621 24,365 202 24,163 835 23,328 6,824
29.3%
Income From Continuing Operations Net Income / (Loss) Attributable to NonControlling Interests Net Income Attributable to Pfizer Earnings Per Share - Basic Earnings Per Share - Diluted Weighted-Average Shares - Basic Weighted-Average Shares - Diluted Dividend per Share
$16,504 28 $16,476 $2.21 $2.19 7,442 7,508 $0.88
$15,838 135 $15,703 $2.24 $2.21 7,012 7,092 $0.96
$15,869 156 $15,712 $2.31 $2.28 6,810 6,891 $1.04
$16,144 176 $15,969 $2.38 $2.35 6,712 6,793 $1.12
$16,847 192 $16,656 $2.52 $2.49 6,617 6,698 $1.20
$17,045 207 $16,838 $2.58 $2.55 6,526 6,607 $1.28
$17,996 227 $17,769 $2.76 $2.73 6,436 6,517 $1.36
$18,179 246 $17,933 $2.82 $2.79 6,349 6,430 $1.44
$17,433 265 $17,168 $2.74 $2.71 6,265 6,346 $1.52
$17,127 283 $16,844 $2.72 $2.69 6,183 6,264 $1.60
$17,226 300 $16,926 $2.77 $2.74 6,103 6,184 $1.68
$17,429 321 $17,107 $2.84 $2.80 6,024 6,105 $1.76
2012A
Growth Rates Revenues Gross Profit Operating Income (EBIT) Net Income EPS - Diluted Dividend Margins Gross Margin Operating Margin (EBIT) Net Income Return Analysis Dividend Payout Ratio Dividend as % of Free Cash Flow (FCF) Shares repurchased as % of FCF Dividend + Share Buyback as % of FCF -12.5% -12% -9% -10% -5% 10% 81.4% 41% 28% 40% 42% 52% 94%
2013E
-4.3% -5% -5% -5% 1% 9% 81.2% 41% 28% 43% 35% 75% 109%
2014E
-1.6% -2% -1% 0% 3% 8% 81.0% 41% 28% 46% 38% 54% 92%
2015E
-0.3% 0% 1% 2% 3% 8% 81.2% 41% 29% 48% 44% 30% 74%
2016E
2.1% 2% 3% 4% 6% 7% 81.3% 42% 29% 48% 43% 27% 70%
2017E
1.0% 1% 1% 1% 3% 7% 81.4% 42% 29% 50% 43% 26% 69%
2018E
1.5% 2% 4% 6% 7% 6% 81.5% 43% 31% 50% 44% 25% 70%
2019E
-0.5% 0% 0% 1% 2% 6% 81.6% 43% 31% 52% 45% 25% 70%
2020E
-3.4% -3% -5% -4% -3% 6% 81.7% 42% 31% 56% 48% 25% 73%
2021E
-1.9% -2% -2% -2% -1% 5% 81.8% 42% 31% 59% 53% 27% 79%
2022E
-0.6% 0% 0% 0% 2% 5% 81.9% 43% 31% 61% 53% 26% 79%
2023E
-0.2% 0% 1% 1% 2% 5% 81.9% 43% 32% 63% 56% 26% 82%
Page 11
June 19, 2013
BMO Capital Markets
Pfizer
Pfizer Income Statement: GAAP or Fully Reported Estimates (Includes Zoetis)

2012A
Revenues, $MM Cost of Sales Gross Profit Selling, Informational and Administrative Expenses R&D Expenses EBITDA Amortization of Intangible Assets EBIT Acquisition-Related In-Process R&D Charges Restructuring Charges & Certain Acquisition-Related Costs Other (Income) / Deductions -- Net Income From Continuing Operations Before Provision for Taxes on Income Provision / (Benefit) for Taxes on Income Income From Continuing Operations Income / (Loss) from Discontinued Operations -- Net of Tax Gain / (Loss) on Sale of Discont. Operations -- Net of Tax Net Income / (Loss) Attributable to NonControlling Interests Net Income Attributable to Pfizer Earnings Per Share - Basic Earnings Per Share - Diluted Diluted EPS from dis-cont. Operations Diluted EPS from Cont. Operations Weighted-Average Shares - Basic Weighted-Average Shares - Diluted $58,986 11,334 47,652 16,616 7,870 23,166 5,175 17,991 0 1,880 4,031 12,080 2,562 $9,518 249 4,831 28 $14,570 $1.96 $1.94 $0.03 $1.27 7,442 7,508
2013E
$56,421 10,772 45,649 15,917 7,173 22,559 4,985 17,575 0 1,038 (276) 16,813 4,297 $12,515 4 0 131 $12,388 $1.77 $1.75 $0.00 $1.76 7,012 7,092
2014E
$55,507 10,635 44,872 15,451 7,139 22,282 4,412 17,870 0 378 (111) 17,603 4,817 $12,786 0 0 156 $12,630 $1.85 $1.83 $0.00 $1.86 6,810 6,891
2015E
$55,357 10,457 44,900 15,175 7,046 22,678 3,606 19,072 0 354 582 18,136 4,947 $13,189 0 0 176 $13,013 $1.94 $1.92 $0.00 $1.94 6,712 6,793
2016E
$56,540 10,602 45,938 15,478 7,114 23,346 2,948 20,398 0 332 437 19,629 5,242 $14,386 0 0 192 $14,195 $2.15 $2.12 $0.00 $2.15 6,617 6,698
2017E
$57,096 10,638 46,458 15,786 7,182 23,490 2,412 21,078 0 313 310 20,455 5,469 $14,987 0 0 207 $14,779 $2.26 $2.24 $0.00 $2.27 6,526 6,607
2018E
$57,940 10,730 47,210 15,472 7,251 24,487 1,974 22,514 0 296 177 22,041 5,777 $16,264 0 0 227 $16,037 $2.49 $2.46 $0.00 $2.50 6,436 6,517
2019E
$57,672 10,618 47,055 15,163 7,320 24,571 1,616 22,955 0 280 15 22,660 5,945 $16,715 0 0 246 $16,469 $2.59 $2.56 $0.00 $2.60 6,349 6,430
2020E
$55,699 10,196 45,503 14,861 7,320 23,322 1,323 21,998 0 266 (53) 21,785 5,598 $16,186 0 0 265 $15,922 $2.54 $2.51 $0.00 $2.55 6,265 6,346
2021E
$54,647 9,947 44,700 14,565 7,320 22,815 1,085 21,730 0 254 (140) 21,616 5,559 $16,058 0 0 283 $15,775 $2.55 $2.52 $0.00 $2.56 6,183 6,264
2022E
$54,323 9,832 44,491 14,275 7,320 22,895 889 22,006 0 242 (188) 21,951 5,649 $16,303 0 0 300 $16,002 $2.62 $2.59 $0.00 $2.64 6,103 6,184
2023E
$54,205 9,810 44,395 13,991 7,320 23,084 730 22,354 0 232 (268) 22,390 5,765 $16,625 0 0 321 $16,303 $2.71 $2.67 $0.00 $2.72 6,024 6,105
Page 12
June 19, 2013
BMO Capital Markets
Pfizer
Pfizer Balance Sheet (Includes Zoetis)

Pfizer Balance Sheet, $MM Assets Cash & ST Investments Receivables (Net) Inventories - Total Short Term Loans Assets held for sale Deferred income taxes and other current assets Current Assets - Total Investments Property Plant & Equipment - Net Other Intangibles, Net Other Assets Total Assets Liabilities Accounts Payable ST Debt & Current Portion of LT Debt Accrued and other current liabilities Income Taxes Payable Deferred Taxes Liabilities of Discontinued Operations & Other Liabilities Held for Sale Dividends Payable Current Liabilities - Total Long Term Debt Pension benefit obligations Post-retirement benefit obligations Deferred Income Taxes and Noncurrent Liabilities Other Liabilities Total Liabilities Total Shareholder's Equity 3,836 4,018 17,406 1,013 1,796 28,069 34,931 6,355 3,344 26,483 6,199 4,264 6,424 15,187 1,010 1,734 28,619 31,036 7,830 3,493 28,203 4,939 4,601 5,320 14,767 1,262 1,661 27,611 34,197 7,328 3,498 27,960 5,132 4,651 4,463 14,742 1,321 1,761 26,938 31,132 6,937 3,345 27,785 5,167 3,707 6,056 14,745 1,332 1,886 27,726 26,474 6,628 3,200 27,740 5,172 96,942 75,223 3,754 4,032 14,747 1,333 1,993 25,859 23,840 6,285 3,035 27,732 5,173 91,924 77,551 3,804 4,468 14,747 1,334 2,097 26,450 20,770 6,096 2,944 27,731 5,173 89,163 80,061 3,851 4,725 14,747 1,334 2,198 26,855 17,443 5,874 2,836 27,731 5,173 85,911 83,442 3,743 1,398 14,747 1,334 2,297 23,518 17,443 5,620 2,714 27,731 5,173 82,198 86,877 3,662 4,032 14,747 1,334 2,393 26,167 14,809 5,621 2,714 27,731 5,173 82,214 89,398 171,612 3,591 1,398 14,747 1,334 2,486 23,555 14,809 5,422 2,618 27,731 5,173 79,308 91,414 170,722 3,560 3,998 14,747 1,334 2,577 26,216 12,209 5,427 2,620 27,731 5,173 79,375 93,308 172,683 3,564 1,898 14,747 1,334 2,666 24,209 11,709 5,236 2,528 27,731 5,173 76,586 95,167 171,753 26,452 13,608 6,969 101 9,441 56,571 9,814 16,938 53,833 5,779 32,708 12,378 7,063 70 9,196 61,415 14,149 14,461 46,013 5,088 0 9,325 63,935 15,392 13,293 41,028 5,387 37,014 11,462 6,134 0 9,316 61,606 15,392 12,157 36,617 5,442 34,651 11,282 6,356 0 9,311 63,552 15,392 11,007 33,011 5,451 36,106 11,463 6,673 0 9,309 65,067 15,392 9,749 30,062 5,452 37,188 11,687 6,883 0 9,309 68,576 15,392 8,401 27,651 5,452 40,789 11,915 6,562 0 9,309 71,886 15,392 7,194 25,677 5,452 43,865 12,133 6,579 0 9,309 74,536 15,392 5,882 24,061 5,452 46,816 11,861 6,550 0 9,309 79,622 15,392 4,656 22,738 5,452 171,612 52,175 11,670 6,469 0 9,309 80,740 15,392 3,732 21,653 5,452 170,722 53,580 11,508 6,343 0 9,309 84,600 15,392 2,723 20,764 5,452 172,683 57,737 11,473 6,081 0 9,309 85,487 15,392 1,635 20,034 5,452 171,753 58,571 11,489 6,119 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
188,002 185,798 182,788 174,966 172,164 169,474 169,224 169,353 169,075
105,381 104,120 105,727 101,304 82,621 81,678 77,061 73,662
Total Pfizer Liabilities & Stockholders' 188,002 185,798 182,788 174,966 172,164 169,474 169,224 169,353 169,075 Equity Source: Pfizer, BMO Capital Markets Pharmaceuticals Research
Page 13
June 19, 2013
BMO Capital Markets
Pfizer
Pfizer Statement of Cash Flows (Includes Zoetis)

Pfizer Statement of Cash Flows, $MM 2011A Operations Net Income (GAAP) 10,051 Depreciation, Depletion & Amortization 9,026 Intangible asset impairment charges 1,198 (Gain)/loss on disposals 15 (Gains) / Losses on Sales of Discontinued (1,688) Operations Benefit plan contributions (in excess of)/less (1,775) than expense Acquisition-related in-process research and development charges Equity income From affiliates Dividends and distributions from equity affiliates Deferred Income Taxes 454 Shared based compensation 419 Other (189) Funds From/For Other Operating Activities Net Cash Flow - Operating Activities Investing Capital Expenditures (Addition to Fixed Assets) Acquisitions of businesses, net of cash acquired Purchases of securities and other investments Decrease In Investments Dispositions of businesses, net of cash divested Other Use/(Source) - Investing Net Cash Flow - Investing Financing Net Proceeds From Sale/Issue of Stock Common Shares repurchased Proceeds from issuance of debt Principal payments on long-term borrowings 2,729 20,240 (1,660) (3,282) 2012A 14,598 7,611 1,299 0 (7,123) 135 2,198 481 (203) (1,942) 17,054 (1,327) (1,050) 2013E 12,519 7,241 513 284 3 609 (566) 392 20,996 (1,262) 0 2014E 12,786 6,948 284 (167) 587 (20) (503) 19,916 (1,401) 0 0 0 0 104 (1,297) 2015E 13,189 6,186 284 (39) 584 (4) (1,880) 18,321 (1,429) 0 0 0 0 104 (1,325) 2016E 14,386 5,645 284 (7) 584 (1) (893) 19,999 (1,439) 0 0 0 0 104 (1,335) 2017E 14,987 5,211 284 (1) 584 (0) (137) 20,928 (1,453) 0 0 0 0 104 (1,349) 2018E 16,264 4,644 284 (0) 584 (0) (517) 21,258 (1,462) 0 0 0 0 104 (1,358) 2019E 16,715 4,396 284 0 584 (0) (184) 21,795 (1,468) 0 0 0 0 104 (1,364) 2020E 16,186 4,021 284 0 584 (0) 194 21,269 (1,472) 0 0 0 0 104 (1,368) 2021E 16,058 3,485 284 0 584 0 (79) 20,333 (1,477) 0 0 0 0 104 (1,373) 2022E 16,303 3,379 284 0 584 0 273 20,822 (1,480) 0 0 0 0 104 (1,376) 2023E 16,625 3,309 284 0 584 0 (331) 20,470 (1,491) 0 0 0 0 104 (1,387)
(22,491) (35,163) (18,584) 27,197 2,376 60 2,200 31,751 11,850 93 6,154 7,830 0 104 (11,912)
(9,000) 1 (6,986)
(8,228) 0 (1,513)
(14,726) (10,000) 6,624 0 (1,286) (3,065)
(5,000) 0 (4,658)
(5,000) 0 (2,634)
(5,000) 0 (3,070)
(5,000) 0 (3,327)
(5,000) 0 0
(5,000) 0 (2,634)
(5,000) 0 0 0 (2,634) (9,928) 0 (17,562) 8 1,406 18,963 20,368
(5,000) 0 (2,600) 2,600 0 (10,297) 0 (15,297) 8 4,157 20,368 24,525
(5,000) 0 (500) 0 (2,100) (10,657) 0 (18,257) 8 834 24,525 25,359
Proceeds from Short Term Borrowings 12,810 7,995 3,485 427 2,638 0 1,570 2,257 0 2,634 Principal payments on short-term (11,366) (8,207) (3,576) (1,284) (1,045) (2,024) (1,134) (2,000) (3,327) 0 borrowings Cash Dividends Paid - Total (6,234) (6,534) (6,882) (7,067) (7,483) (7,931) (8,352) (8,762) (9,161) (9,550) Other Source (Use) - Financing 168 488 688 0 0 0 0 0 0 0 Net Cash Flow - Financing (20,607) (15,999) (15,673) (20,989) (15,548) (17,589) (15,986) (16,832) (17,488) (14,550) Effect of Exchange Rate On Cash (29) (2) 2 6 8 8 8 8 8 8 Inc(Dec) In Cash & Equivalents 1,447 7,207 (6,587) (2,363) 1,455 1,083 3,601 3,076 2,950 5,359 Cash & Equivalents at beginning of period 1,735 3,182 10,389 3,802 1,439 2,894 3,976 7,577 10,653 13,604 Cash & Equivalents at end of period 3,182 10,389 3,802 1,439 2,894 3,976 7,577 10,653 13,604 18,963 Source: Pfizer, BMO Capital Markets Pharmaceuticals Research
Page 14
June 19, 2013
BMO Capital Markets

Other companies mentioned (priced as of the close on June 18, 2013):
Pfizer
Zoetis (ZTS, $31.18, Market Perform)
Page 15
June 19, 2013
BMO Capital Markets
Pfizer
Pfizer Inc. (PFE)

Quarterly Price (US$) 50 50 35 Target Price(US$) Share Price(US$) 35
40
40
30
30
30
30
25
25
20 20 20 15 10 10 10 PFE Relative to S&P 500 PFE Relative to Pharmaceuticals 250 200 150 100 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Revenue / Share - (US$) Price / Revenue 250 140 200 120 150 100 100 80 2011 2012 2) NR 1) OP
3) OP
20
15
10 PFE Relative to S&P 500 PFE Relative to Pharmaceuticals
160
160 140 120 100 80 2013
10 5
20 10 0
BMO 2013FY EPS ( May 13 = 2.21 US$) First Call 2013FY Cons.EPS ( May 13 = 2.21 US$) 2.4 2.2 2.0 BMO 2014FY EPS ( May 13 = 2.28 US$) First Call 2014FY Cons.EPS ( May 13 = 2.34 US$) 2.4 2.2 2011 2012 2.4 2.2 2013 2.4 2.2 2.0
4 2
100 50
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
FYE (Dec.) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Range*: Current*
EPS US$ 0.27 0.31 0.35 0.41 0.50 0.53 0.51 0.82 1.02 1.27 1.53 1.75 2.12 2.02 2.08 2.20 2.43 2.02 2.22 2.31 2.19
P/E Hi - Lo 26.9 21.5 18.9 27.2 30.4 50.3 84.3 61.0 48.3 37.8 28.7 21.1 18.3 14.5 13.8 12.7 10.1 9.4 9.2 9.5 11.9 84.3 20.1 14.1 12.6 14.9 19.4 25.0 45.5 38.5 29.4 26.8 16.4 15.4 10.4 10.0 9.7 10.1 5.9 5.8 6.3 7.1 9.0 5.8
DPS US$ 0.12 0.14 0.16 0.09 0.20 0.23 0.29 0.36 0.44 0.52 0.60 0.68 0.76 0.96 1.16 1.28 1.28 0.72 0.80 0.88 0.96
Yield% Hi - Lo 2.3 3.2 3.5 1.4 2.1 1.7 1.3 1.1 1.5 1.5 2.4 2.5 3.5 4.7 5.7 5.8 9.0 6.2 5.7 5.4 4.9 9.0 1.7 2.1 2.4 0.8 1.3 0.9 0.7 0.7 0.9 1.1 1.4 1.8 2.0 3.3 4.1 4.6 5.2 3.8 3.9 4.0 3.7 0.7
Payout % 46 45 45 21 40 43 58 44 43 41 39 39 36 48 56 58 53 36 36 38 44
BV US$ 1.2 1.0 1.1 1.4 1.8 2.0 2.3 2.3 2.6 2.9 3.2 8.5 9.1 8.9 10.0 9.6 8.5 11.2 11.0 10.8 11.1
P/B Hi - Lo 6.0 6.6 5.8 7.7 8.5 13.1 >15 >15 >15 >15 13.6 4.3 4.3 3.3 2.9 2.9 2.9 1.7 1.9 2.0 2.4 >15 4.5 4.4 3.9 4.3 5.4 6.5 10.2 13.7 11.8 11.7 7.8 3.2 2.4 2.3 2.0 2.3 1.7 1.0 1.3 1.5 1.8 1.0
ROE % 28 33 32 31 28 24 36 42 47 50 30 24 22 22 22 27 21 20 21 20
PFE - Rating as of 7-Jul-10 = Mkt Date 2-Feb-11 3-May-11 27-Sep-12 Rating Change Mkt to OP OP to NR NR to OP Share Price $18.96 $20.44 $24.96
1 2 3
2.16
12.6
0.96
3.5
44
11.2
2.4
19
-5.6 4.8 10.1
3.1 13.2 12.0
Page 16
June 19, 2013
BMO Capital Markets
Pfizer
Zoetis Inc. (ZTS)

Quarterly Price (US$) 36 35 35 34 1) Und. 34 34 32 30 28 26 24 ZTS Relative to S&P 500 ZTS Relative to Pharmaceuticals ZTS Relative to S&P 500 ZTS Relative to Pharmaceuticals 32 30 28 26 24 34 Target Price(US$) Share Price(US$) 36
33
33
2) Mkt
32
32
31
31
100
100
120 110 100
120 110 100 90 80 2013
95
95
90
90 90
85 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Revenue / Share - (US$) Price / Revenue
85 80 2011 2012
55 50 45
1.0 0.5 0.0
BMO 2013FY EPS ( May 13 = 1.40 US$) First Call 2013FY Cons.EPS ( May 13 = 1.40 US$) 1.4 1.3 1.2 BMO 2014FY EPS ( May 13 = 1.59 US$) First Call 2014FY Cons.EPS ( May 13 = 1.62 US$) 1.5 1.0 1.5 1.0 2013 1.4 1.3 1.2
1.15 1.10
40 20
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
2011
2012
FYE (Dec.) Range*: Current*
EPS US$
P/E Hi - Lo na na
DPS US$
Yield% Hi - Lo NC
Payout %
BV US$
P/B Hi - Lo >15 >15
ROE %
ZTS - Rating as of 1-Feb-13 = NR Date 7-Mar-13 24-Apr-13 Rating Change NR to Und. Und. to Mkt Share Price $34.56 $30.62
1.13
28.3
0.26
0.8
23
0.0
NC
na
1 2
Page 17
June 19, 2013
Pfizer
Analyst's Certification I, Alex Arfaei, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Company Specific Disclosure for PFE Disclosure 9: BMO Capital Markets makes a market in this security. Methodology and Risks to Our Price Target/Valuation Methodology: DCF: Free Cash Flow To Equity. Risks: Uncertainty of Phase 3 Pipeline. Company Specific Disclosure for ZTS Methodology and Risks to Our Price Target/Valuation Methodology: DCF and P/E Multiple Risks: Demand for animal health products could fluctuate and there are relatively low barriers to entry for competitors. Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013) We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis; Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis; Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis; (S) = Speculative investment; NR = No rating at this time; and R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Rating System (January 4, 2010 April 4, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3.
Page 18
June 19, 2013
BMO Capital Markets
Pfizer
Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, Thomson Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information. Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research, which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx. General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
Page 19
June 19, 2013
BMO Capital Markets
Pfizer
A member of BMO
Financial Group
Page 20
June 19, 2013
June 19, 2013
Valeant Pharmaceuticals International

(VRX-NYSE; VRX-TSX)
Pharmaceuticals
Alex Arfaei
BMO Nesbitt Burns Inc. 212-885-4033 / 416-359-4505 alex.arfaei@bmo.com
Updating Model and Getting More Comfortable With Expected B&L Synergies
Event
We are updating our model following the companys recent SEC filings, including the pricing of its previously announced offering of common shares. Last night, Valeant announced that it will issue 23.5MM shares at a price of $85/share, for gross proceeds of approximately $2.0Bn.
Securities Info
Pr ice (18-Jun) 52-Wk High/ Low Mk t Cap (mm) Shs O/S (mm, BASIC) Options O /S (mm) $85.86 $96/$42 $26,087 303.8 na Target Pr ice Dividend Yield Float O/S (mm) ADVol (30-day, 000s) $107 --282.1 1,979
Price Performance
VALEANT PHARMACEUTICALS (VRX)
Price: High,Lo w ,Close( U S$) Relativ e to S&P 500
800 700
100
80
600 500
Impact
Positive. Valeant now estimates that the Bausch & Lomb (B&L) acquisitionrelated restructuring charges should be in the range of $375MM to $425MM, on a pre-tax basis. This is below our initial conservative estimate of $600M, and obviously less than the estimated annual synergies of at least $800MM, which are expected to be mostly completed by the end of 2014. At a recent investor event on June 11, the CFO provided more color on the source of expected synergies, stating that roughly $450MM are expected to come from G&A and R&D and $350MM from commercial costs. Valeants management has a strong track record in meeting or exceeding its acquisition synergy targets, and we expect a similar outcome in this case.
60 400 40 300 200 20 100 0 150 100 50 0 2008 2009 2010 2011 2012 2013
Vo lum e ( mln)
0 150 100 50 0
L ast Data Point : Jun e 1 7, 2 01 3
(FY-Dec.) EPS Pro Forma P/ E First Call Cons. EPS GAAP FCF P/ FCF EBITDA ($mm) EV/EBITDA Rev. ($mm) EV/Rev Quar ter ly EPS 2012A 2013E 2011A $2. 93 $0. 49 $1. 91 $1,311 $2,465 1Q $1. 14 $1. 30A 2012A $4.51 -$0.38 $1.80 $1,928 $3,547 2Q $1.01 $1.30 2013E $6.03 14.2x $5.98 $0.51 $6.53 13.1x $2,907 12.5x $6,094 6.0x 3Q $1.15 $1.52 2014E $7.34 11.7x $8.60 $2.00 $6.08 14.1x $3,827 9.5x $8,550 4.2x 4Q $1.22 $1.88
Forecasts
Assuming the B&L deal closes mid-3Q13, we forecast revenues of $6.1 billion in 2013 growing to $9.35 billion in 2016; cash EPS of $6.03 growing to $9.60.
Valuation
$107/share based on 14x-15x forward one-year P/E multiples and supported by DCF to account for the leverage and the $2Bn new share offering.
Recommendation
Buy. Valeant has diversified revenues without the patent cliff or the R&D risk associated with its peers. The strategy of growth by acquisitions and the low tax rate should be sustainable over our forecast time horizon.
Changes
Annual EPS 2013E $6.14 to $6.03 2014E $7.41 to $7.34 Annual FCF 2013E $6.48 to $6.53 2014E $6.08 to $6.08
Balance Sheet Data ( 30-Jun) Net Debt ($mm) $10,203 TotalDebt/EBITDA 3.7x Total Debt ($mm) $10,617 EBITDA/IntExp 3.8x Net Debt/Cap. 733.6% Price/Book 18.5x Notes: All values in US$. Source: BMO Capital Markets estimates, Bloomberg, Thomson Reuters, and I HS Global Insight.
Quarterly EPS Q2/13E $1.33 to $1.30 Q3/13E $1.57 to $1.52 Q4/13E $1.92 to $1.88
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc. For disclosure statements, including the Analyst's Certification, please refer to pages 9 to 12.
BMO Capital Markets
Exhibit 1. Our Forecasts for Valeants Diversified Revenue Base (B&L Added as of Mid-3Q13); Unchanged
$10,000 $9,000 $8,000 $7,000 $Millions $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $2,171 387 812 2013E 504 565 524 796 580 1,317 1,634 535 773 2,247 421 898 2014E 1,343 589 598 1,370 B&L: Pharmaceuticals 2,012 539 698 2,409 VRX: Southeast Asia / Africa 487 1,061 2016E VRX: Central & Eastern Europe VRX: Latin America VRX: Canada and Australia VRX: U.S. Neurology and Other VRX: US Promoted 2,327 B&L: Surgical B&L: Vision Care
1,830 542 734
455 984 2015E
Source: Valeant, BMO Capital Markets Pharmaceuticals Research
Exhibit 2. Changes to Our Forecasts: Getting More Comfortable With B&L Synergies and Margin Expansion
Non-GAAP Revenue Gross Margin, % EBIT EBIT Margin EBITDA Effective Tax Rate Net Income Net Margin EPS, Non-GAAP New $6,094 73.5% $2,808 46% $2,907 4% $1,961 32% $6.03 2013E Prior $6,149 73.4% $2,806 46% $2,898 4% $1,976 32% $6.14 2014E New Prior $8,550 $8,550 71.1% 71.5% $3,596 $3,547 42% 41% $3,827 $3,748 5% 5% $2,465 $2,457 29% 29% $7.34 $7.41 2015E New Prior $8,967 $8,967 71.6% 72.2% $3,961 $3,848 44% 43% $4,229 $4,082 5% 5% $2,852 $2,783 32% 31% $8.49 $8.39 2016E New Prior $9,352 $9,352 72.1% 72.9% $4,261 $4,100 46% 44% $4,567 $4,367 5% 5% $3,226 $3,103 34% 33% $9.60 $9.36
At a recent investor event, Valeants CFO Howard Schiller provided more color on the source of expected synergies from the B&L deal. He stated that roughly $450MM are expected to come from G&A and R&D and $350MM from commercial costs. On the G&A side, Mr. Schiller emphasized that B&L had a global corporate structure made up of three global business units and supporting regional infrastructure that could be simplified with Valeants decentralized approach. Regarding commercial synergies, Mr. Schiller stated that there is significant overlap with existing Valeant infrastructure, and in such cases, Valeant can cut
Page 2
June 19, 2013
BMO Capital Markets
80%-90% of the costs. Moreover, Valeant plans to lower marketing spend. Finally, on R&D, Mr. Schiller emphasized that a lot of projects are winding down. We believe this added color should make investors more comfortable with Valeants expected synergies.
Exhibit 3. BMO Forecasts vs. the Street: We Have Higher Revenue Expectations, but Remain More Conservative About Rapid Margin Expansion After B&L Deal
Non-GAAP Revenue Gross Margin, % EBIT EBIT Margin EBITDA Effective Tax Rate Net Income Net Margin EPS, Non-GAAP BMO $6,094 73.5% $2,808 46% $2,907 4% $1,961 32% $6.03 2013E Street $5,562 76.8% $2,654 48% $2,678 3% $1,909 34% $5.98 2014E BMO Street $8,550 $8,374 71.1% 74.8% $3,596 $3,721 42% 44% $3,827 $3,906 5% 1% $2,465 $2,860 29% 34% $7.34 $8.60 2015E BMO Street $8,967 $8,895 71.6% 75.6% $3,961 $4,253 44% 48% $4,229 $4,312 5% 2% $2,852 $3,347 32% 38% $8.49 $10.13 2016E BMO Street $9,352 $8,585 72.1% 74.6% $4,261 $4,607 46% 54% $4,567 $3,965 5% 3% $3,226 $3,422 34% 40% $9.60 $10.45
Source: BMO Capital Markets Pharmaceuticals Research, Thomson One, Bloomberg
Page 3
June 19, 2013
BMO Capital Markets
Exhibit 4. Our DCF and P/E Based Valuation of VRX Shares: $107/Share
FCFF Valuation, $MM Cash flow from operations Y/Y Growth CAPEX Interest Expense (1-t) Free Cash Flow to Firm (FCFF) Discount Period Discount Rate Discounted FCFF 2013E 1,999 (159) 593 2,433 0.5
8.8%
2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E >2023E 2,391 3,046 3,470 3,866 4,219 4,520 4,751 4,924 5,047 5,148 5,199
19.6% 27.4% 13.9% 11.4% 9.1% 7.1% 5.1% 3.6% 2.5% 2.0% 1.0%
(390) 981
(396) 957
(420) 883
(431) 812
(442) 771
(453) 694
(464) 563 4,850 7.5
(476) 466
(488) 434
(500) 419
(512) 419 5,106 11.5
2,982 3,606 3,933 4,247 4,549 4,761 1.5 2.5 3.5 4.5 5.5 6.5
4,914 4,993 5,067 8.5 9.5 10.5
Total PV of FCFF (2013-2023) Terminal Value at 2023 28,666 65,664
2,333 2,628 2,922 2,930 2,909 2,864 2,755 2,581 BMO Comments: Per Share $87
2,404 2,245 2,095
Assumes gradual decline of ~1-2.5% in cash flows after 2016, our last forecast year.
PV of Terminal Value
24,956
$76
Over 50% of the current product portfolio does not have patent exclusivity. Given the brand loyalty with many cosmetic/optic care/OTC products and effectiveness of life cycle management tactics in these markets , we assume a 1% terminal growth rate.
Value of Firm Net Cash & Investments Legal reserve liabilities Probability adjusted milestones (due)/receivable Under funded pension and post-retirement liabilities Total Equity Value Minority Interest Diluted shares Total Valeant Stockholders' Equity Value
53,622 (17,703) (265) (196) (242) 35,217 0 329
$163 ($53.76) ($0.80) ($0.59) ($0.73) $106.95 $0.00
Assumes $6.95Bn in new debt to finance the B&L deal.
We assume 40% probability of paying the aggregate potential milestones. Unfunded pension obligations at December 31, 2012
23.5M common shares priced at $85/share to finance the B&L deal. Gross proceeds of $2Bn. $107 Our DCF valuation supports our relative PE valuation of VRX shares, including B&L.
35,217
EPS 11 12 PEx 13 14 15
Discount Period Discount rate
2013E 2014E 2015E 2016E $6.03 $7.34 $8.49 $9.60 $66 $77 $82 $86 $72 $84 $90 $93 $78 $91 $97 $101 $84 $99 $105 $109 $90 $106 $112 $117 0 0.5 1.5 2.5
Average
9% $108
Page 4
June 19, 2013
BMO Capital Markets
Valeant GAAP Income Statement: Including Bausch & Lomb as of Mid-3Q13

GAAP Income Statement, $MM Product sales Other revenues Total Revenues Cost of goods sold Cost of alliance and service revenues Gross Profit Selling, General and Administrative Research and Development Amortization of intangible assets Restructuring and integration costs Acquired in-process research and development Acquisition-related costs Legal settlements Acquisition-related contingent consideration Total Operating Expenses EBIT Depreciation and Amort. EBITDA Interest income Interest expense Write-down of deferred financing charges Loss on extinguishment of debt Foreign exchange and other Gain (loss) on investments, net Earnings before Taxes Provision for Income Tax Net Earnings Weighted average shares outstanding (Basic) Weighted average shares outstanding (Diluted)
2011A 2012A Q1 2013 Q2 2013E Q3 2013E Q4 2013E 2013E 2014E 2015E 2016E
2,255 208 $2,463 684 43 1,737 572 66 558 98 109 33 12 (11) 1,437 300 613 913 4 (333) (1) (37) 27 23 (18) (178) $160 305 326 3,310 237 $3,547 922 117 2,508 756 79 929 344 190 79 57 (5) 2,428 80 986 1,066 6 (473) (8) (20) 20 2 (394) (278) ($116) 305 305 1,039 29 $1,068 285 15 768 242 24 326 57 0 0 4 (2) 651 117 341 458 2 (155) 0 (21) 1 2 (55) (27) ($28) 306 306 (0.09) (0.09) 1,096 25 $1,121 245 16 860 247 26 277 36 0 0 0 0 585 275 292 567 1 (154) 0 0 0 0 122 6 $116 310 316 0.37 0.37 1,595 25 $1,620 415 14 1,191 408 54 397 111 0 74 0 0 1,043 148 413 561 6 (209) 0 0 0 0 (55) (3) ($53) 329 336 (0.16) (0.16) 2,261 25 $2,285 665 15 1,606 617 88 397 111 0 0 0 0 1,213 393 449 842 4 (262) 0 0 0 0 135 7 $128 329 336 0.39 0.38 5,990 8,453 8,874 9,262 104 97 93 90 $6,094 $8,550 $8,967 $9,352 1610 60 4,425 1514 192 1397 314 0 74 4 (2) 3,493 932 1,496 2,428 12 (779) 0 (21) 1 2 147 (17) $164 319 323 0.51 0.51 2417 57 6,075 2283 290 1569 225 0 0 0 0 4,368 1,708 1,800 3,508 31 (1,032) 0 0 0 0 706 35 $671 329 336 2.04 2.00 2498 54 6,415 2275 273 1539 0 0 0 0 0 4,087 2,327 2566 53 6,733 2295 271 1487 0 0 0 0 0 4,053 2,680
1,807 1,793 4,134 4,473 48 64 (1,007) (930) 0 0 0 0 0 0 0 0 1,369 1,814 68 91 $1,300 $1,724 329 336 3.95 3.87 329 336 5.23 5.13
Basic EPS (GAAP) 0.52 (0.38) Diluted EPS (GAAP) 0.49 (0.38) Source: Valeant, BMO Capital Markets Pharmaceuticals Research
Page 5
June 19, 2013
BMO Capital Markets
Valeant Non-GAAP Income Statement: Including B&L as of Mid-3Q13

Non-GAAP Income Statement, $MM Product sales Other revenues Total Revenues Cost of goods sold Cost of alliance and service revenues Gross Profit Selling, General and Administrative Research and Development Amortization of intangible assets Restructuring and integration costs Acquired in-process research and development Acquisition-related costs Legal settlements Acquisition-related contingent consideration Total Operating Expenses EBITA Depreciation EBITDA Interest income Interest expense Write-down of deferred financing charges Loss on extinguishment of debt Foreign exchange and other Gain (loss) on investments, net Earnings before Taxes Provision for Income Tax Net Earnings Weighted average shares outstanding (Basic) Weighted average shares outstanding (Diluted) Basic EPS (non-GAAP) Diluted EPS (non-GAAP, "Cash EPS") Growth Rates Revenue growth (YOY) Gross Profit Operating Income (EBITA) Net Income Margins Gross Margin Operating Margin (EBITA) Net Margin
2011A 2012A Q1 2013 Q2 2013E Q3 2013E Q4 2013E 2013E 2014E 2015E 2016E
2,255 209 $2,465 610 24 1,831 509 65 0 0 0 0 0 0 574 1,256 55 1,311 4 (306) (1) 0 27 21 1,000 45 $955 305 326 3.13 2.93 3,310 237 $3,547 809 66 2,671 722 79 0 0 0 0 0 0 801 1,871 57 1,928 6 (437) (8) 0 20 2 1,453 41 $1,412 305 313 4.62 4.51 1,039 29 $1,068 231 15 822 242 24 0 0 0 0 0 0 266 556 15 571 2 (146) 0 0 1 2 415 10 $405 306 312 1.33 1.30 1,096 25 $1,121 245 16 860 247 26 0 0 0 0 0 0 273 587 16 603 1 (154) 0 0 0 0 434 22 $412 310 316 1.33 1.30 1,595 25 $1,620 414 14 1,192 398 53 0 0 0 0 0 0 451 741 16 757 6 (209) 0 0 0 0 538 27 $511 329 336 1.55 1.52 2,261 25 $2,285 663 15 1,608 597 87 0 0 0 0 0 0 684 924 52 976 4 (262) 0 0 0 0 666 33 $633 329 336 1.92 1.88 5,990 8,453 8,874 9,262 104 97 93 90 $6,094 $8,550 $8,967 $9,352 1,553 60 4,482 1,484 190 0 0 0 0 0 0 1,674 2,808 99 2,907 12 (770) 0 0 1 2 2,053 92 2,409 57 6,083 2,201 286 0 0 0 0 0 0 2,487 3,596 2,490 54 6,423 2,193 269 0 0 0 0 0 0 2,462 3,961 2,558 53 6,741 2,213 267 0 0 0 0 0 0 2,479 4,261
231 268 306 3,827 4,229 4,567 31 48 64 (1,032) (1,007) (930) 0 0 0 0 0 0 0 0 0 0 0 0 2,595 3,002 3,395 130 150 170
$1,961 $2,465 $2,852 $3,226 319 325 6.16 6.03 329 336 7.49 7.34 329 336 8.66 8.49 329 336 9.80 9.60
43.9% 45.9% 48.9% 47.8%
24.8% 30.1% 25.3% 12.4%
36.7% 37.7% 36.8% 31.1%
83.2% 76.9% 55.8% 42.9%
131.7% 116.9% 76.9% 66.8%
71.8% 67.8% 50.1% 38.9%
40.3% 35.7% 28.1% 25.7%
4.9% 5.6% 10.1% 15.7%
4.3% 5.0% 7.6% 13.1%
74.3% 51.0% 38.8%
75.3% 52.7% 39.8%
76.9% 52.0% 37.9%
76.7% 52.4% 36.8%
73.6% 45.7% 31.5%
70.4% 40.4% 27.7%
73.5% 46.1% 32.2%
71.1% 42.1% 28.8%
71.6% 44.2% 31.8%
72.1% 45.6% 34.5%
Page 6
June 19, 2013
BMO Capital Markets
Valeant Balance Sheet: Including B&L as of Mid-3Q13

Valeant Balance Sheet, $MM Current Assets Cash and Cash Equivalents Marketable securities Accounts receivable, net Inventories, net Prepaid expenses and other current assets Assets held for sale Deferred tax assets, net Total Current Assets Non Current Assets Marketable securities Property, plant and equipment, net Intangible assets, net Goodwill Deferred tax assets, net Restricted cash Other long-term assets, net Total Assets Current Liabilities Accounts payable Accrued liabilities and other current liabilities Acquisition-related contingent consideration Current portion of long-term debt Deferred tax liabilities, net Total Current Liabilities Acquisition-related contingent consideration Long Term Debt Liabilities for uncertain tax positions Deferred tax liabilities, net Other long-term liabilities Total Liabilities
2011A
164 6 569 355 42 72 148 1,358
2012A
916 4 914 531 126 91 195 2,777
2013E
2,587 0 1,242 795 167 57 302 5,151
2014E
4,146 0 1,410 865 186 57 302 6,966
2015E
6,354 0 1,520 894 191 57 302 9,319
2016E
7,276 0 1,620 919 192 57 302 10,367
0 414 7,658 3,599 55 0 59 13,142
7 463 9,309 5,141 76 0 177 17,950
0 1,476 14,777 8,518 67 0 174 30,164
0 1,635 13,208 8,518 67 0 175 30,569
0 1,764 11,669 8,518 67 0 175 31,512
0 1,878 10,182 8,518 67 0 175 31,188
158 551 100 111 4 924 320 6,540 91 1,145 115 9,135
227 1,008 103 480 4 1,823 353 10,535 104 1,248 170 14,233
419 1,578 99 439 5 2,541 380 17,753 116 3,573 418 24,779
526 1,578 99 439 5 2,648 384 17,313 121 3,573 418 24,456
544 1,578 99 2,125 6 4,352 384 15,188 122 3,573 418 24,037
560 1,578 99 521 6 2,763 384 14,667 122 3,573 418 21,928
Shareholders' Equity Total shareholders' equity 4,007 Total Liabilities & Shareholders Equity 13,142 Source: Valeant, BMO Capital Markets Pharmaceuticals Research
3,717 17,950
5,385 30,164
6,113 30,569
7,475 31,512
9,260 31,188
Page 7
June 19, 2013
BMO Capital Markets
Valeant Statement of Cash Flows: Including B&L as of Mid-3Q13

Valeant Statement of Cash Flows, $MM Operating Activities Net Earnings Depreciation and amortization Amortization of deferred revenue Amortization and write-down of discounts on long-term debt Acquired in-process research and development Acquisition accounting adjustment on inventory sold Acquisition-related contingent consideration Allowances for losses on accounts receivable and inventories Deferred income taxes Additions to accrued legal settlements Payments of accrued legal settlements Share-based compensation Tax benefits from stock options exercised (Gain) loss on disposal of assets and other charges Payment of accreted interest on repurchase of convertible de Loss on extinguishment of debt Other Changes in operating assets and liabilities: Accounts receivable Inventories Prepaid expenses and other current assets Accounts payable, accrued liabilities and other liabilities Cash Flow from Operating Activities Investing Activities Acquisition of businesses, net of cash acquired Acquisitions of intangible assets Purchases of property, plant and equipment Proceeds from sale of assets Proceeds from sales and maturities of marketable securities Purchases of marketable securities Other Cash Flow from Investing Activities Financing Activities Issuance / (Payment) of debt Repurchases of convertible debt Issuance / (Repurchases) of common shares Proceeds from exercise of stock options Tax benefits from stock options exercised Cash settlement of call options Acquisition of noncontrolling interest Payment of employee withholding tax upon vesting of share-b Payments of contingent consideration Payments of debt issuance costs Other Cash Flow from Financing Activities Effect of exchange rate changes on cash and cash equivalents Net Change in Cash Net Cash - Beginning Balance Net Cash - Ending Balance Source: Valeant, BMO Capital Markets Pharmaceuticals Research
2011A
2012A
2013E
2014E
2015E
2016E
160 613 0 27 109 59 (11) 6 (223) 12 (27) 94 (27) (5) 0 0 (9) (165) (12) (3) 42 640
(116) 986 0 36 190 79 (5) 22 (320) 57 (42) 66 (13) 11 0 0 (42) (219) (80) 55 (8) 657
164 1,496 0 10 0 43 (2) 31 (161) 4 (3) 49 (18) (2) 0 21 (1) 312 279 169 (139) 2,255
671 1,800 0 0 0 0 0 31 0 0 0 51 (18) 0 0 0 0 (168) (70) (18) 112 2,391
1,300 1,807 0 0 0 0 0 31 0 0 0 52 (18) 0 0 0 0 (110) (30) (5) 19 3,046
1,724 1,793 0 0 0 0 0 31 0 0 0 52 (18) 0 0 0 0 (100) (25) (1) 16 3,470
(2,464) (327) (59) 36 87 (81) 0 (2,809)
(3,485) (73) (108) 92 625 (7) (9) (2,966)
(9,378) (1) (174) 8 9 0 0 (9,534)
0 0 (390) 0 0 0 0 (390)
0 0 (396) 0 0 0 0 (396)
0 0 (420) 0 0 0 0 (420)
3,384 (613) (639) 42 27 (67) (52) (60) (32) (41) 0 1,948 (10) (230) 394 164
4,081 (4) (281) 23 13 0 0 (31) (104) (33) (606) 3,057 4 752 164 916
7,148 0 1,865 20 18 0 0 (32) (21) (33) 0 8,964 (13) 1,671 916 2,587
(439) 0 0 22 18 0 0 (33) 0 0 0 (432) (11) 1,558 2,587 4,146
(439) 0 0 22 18 0 0 (33) 0 0 0 (431) (11) 2,208 4,146 6,354
(2,125) 0 0 22 18 0 0 (33) 0 0 0 (2,117) (10) 922 6,354 7,276
Page 8
June 19, 2013
BMO Capital Markets
VALEANT PHARMACEUTICALS (VRX)

Quarterly Price (US$) 120 80 80 100 80 2) OP 60 40 40 40 20 20 1) NR 20 0 VRX Relative to S&P 500 VRX Relative to Pharmaceuticals
4000 3000 2000 1000 4000 3000
Target Price(US$) Share Price(US$)
120 100 80 60 40 20 0
60
60
300 250 200
VRX Relative to S&P 500 VRX Relative to Pharmaceuticals
300 250 200 150 100
2000 1000
150 100 50 2011 2012
50 2013
10 5
20 10 0
BMO 2013FY EPS ( May 13 = 6.14 US$) First Call 2013FY Cons.EPS ( May 13 = 6.02 US$) 6 5 4 BMO 2014FY EPS ( May 13 = 7.41 US$) First Call 2014FY Cons.EPS ( May 13 = 8.70 US$) 6 5 4
200 100
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
2011
2012
5 2013
FYE (Dec.) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Range*: Current*
EPS US$ 0.15 0.06 0.23 0.35 0.43 0.58 0.80 1.35 1.77 1.41 1.35 1.87 2.70 1.92 1.49 1.62 NA 2.93 4.51
P/E Hi - Lo 5.7 >100 43.5 28.3 28.8 40.8 56.7 42.4 32.3 36.4 19.3 14.6 10.5 13.8 10.4 9.6 20.1 19.5 13.5 >100 2.4 9.5 18.8 14.6 11.9 14.0 21.3 21.5 11.2 11.7 10.6 7.3 5.4 6.9 4.5 4.9 8.8 9.0 9.4 2.4
DPS US$ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.00 0.50 1.50 1.50 0.36 0.38 0.38 0.00
Yield% Hi - Lo 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.6 3.4 11.4 22.6 4.5 2.8 1.4 0.0 22.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.3 1.8 5.7 9.7 2.3 1.2 0.7 0.0 0.0
Payout % 0 0 0 0 0 0 0 0 0 0 0 >100 19 78 >100 22 25 13 0
BV US$ 2.0 0.1 0.2 0.4 0.7 0.5 3.5 1.8 7.2 5.4 5.6 8.5 8.6 8.0 8.1 7.6 16.2 13.1 12.2
P/B Hi - Lo 0.4 >15 >15 >15 >15 >15 13.0 >15 8.0 9.6 4.7 3.2 3.3 3.3 1.9 2.0 1.9 4.4 5.0 >15 0.2 7.2 >15 14.1 7.2 >15 4.9 >15 2.8 3.1 2.6 1.6 1.7 1.6 0.8 1.0 0.8 2.0 3.5 0.2
ROE % 6 >50 >50 >50 >50 40 >50 40 23 25 27 31 23 19 21 na 20 36
VRX - Rating as of 7-Jul-10 = Mkt Date 3-May-11 30-May-13 Rating Change Mkt to NR NR to OP Share Price $48.30 $91.00
1 2
4.68
19.5
0.00
0.0
4.7
19.6
>50
Growth(%): 5 Year: 19.5 10 Year: 10.2
nm nm
-10.3 -4.2
Page 9
June 19, 2013
Analyst's Certification I, Alex Arfaei, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Company Specific Disclosure Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months. Disclosure 6: This issuer is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months: Non-Securities Related Services. Disclosure 8: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of this issuer. Disclosure 9: BMO Capital Markets makes a market in this security. Methodology and Risks to Our Price Target/Valuation Methodology: DCF and P/E Multiple Risks: 1) Highly levered balance sheet may hamper Valeant's strategy of in-organic growth 2) Inability to maintain the low tax structure 3) Inability to successfully integrate the acquired business Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013) We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis; Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis; Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis; (S) = Speculative investment; NR = No rating at this time; and R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Rating System (January 4, 2010 April 4, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3.
Page 10
June 19, 2013
BMO Capital Markets
Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, Thomson Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information. Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research, which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx. General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
Page 11
June 19, 2013
BMO Capital Markets
A member of BMO
Financial Group
Page 12
June 19, 2013
Managed Care
June 18, 2013
Jennifer Lynch
212-885-4059
jennifer.lynch@bmo.com
Kamellia Saroop
212-885-4195
kamellia.saroop@bmo.com
AHIP Institute 2013: Courting the Consumer

We attended the annual managed care industry conference in Las Vegas to take the pulse of major players ahead of highly anticipated 2014 changes to the healthcare system. We found health plan executives less fearful and more accepting with regard to reform and next years challenges. The word consumer was used in nearly every session we attended, as plans continue to look for the most effective ways to influence member behavior (and spending). Development of member facing tools for functions like provider search and real-time claims management underscore the growing retail aspect of health insurance. This technology focus buoys our confidence in shares of UnitedHealth Group as the company offers both internal and external solutions for consumer engagement through the Optum unit. As the industry grapples with ways to improve the performance of growing government programs, concepts are being shared among platforms. We heard from Dr. Jeffrey Brenner, MD, who is leading the Medicaid Accountable Care Organization demonstration in New Jersey. This demonstration project borrows from the Medicare ACO model established by PPACA and points to the potential value of coordinated care. While the ACO remains a nascent concept, we believe the effort to broaden its reach shows an industry willingness to create and test. This flexibility could yield new solutions for old problems as we work through the implementation of reform.
18-Jun Price $62.65 $51.98 $69.66 $31.82 $83.60 $65.68 $9.77 $79.64
Summary
Gearing up for change The boots on the ground at AHIP seemed less apprehensive about 2014 than when we last checked in with the group this winter. Consumer concentration Consumer engagement is the tool du jour in managed care, translating into a positive for shares of UNH. Through Optum, UNH provides services designed to influence member behavior and improve health. We believe demand for these services is increasing. Still buyers Managed care stands to benefit from increased coverage in 2014, as more covered lives drive additional dollars into the healthcare system. We reiterate our Outperform ratings on UNH, AET and CI.
Managed Care Rating Aetna (AET) Outperform Centene (CNC) Market Perform Cigna (CI) Outperform Health Net (HNT) Market Perform Humana (HUM) Market Perform UnitedHealth Group (UNH) Outperform Universal American (UAM) Market Perform Wellpoint (WLP) Market Perform Source: BMO Capital Markets estimates and company reports.
Target $70 $48 $76 $29 $85 $70 $9 $75
2012E $5.13 $1.23 $5.99 $1.02 $7.47 $5.28 $0.65 $7.51
EPS 2013E $5.81 $2.64 $6.47 $2.24 $8.52 $5.40 $0.65 $8.06
P/E 2014E 2012E 2013E 2014E $6.38 12.2 10.8 9.8 $3.55 42.3 19.7 14.6 $6.95 11.6 10.8 10.0 $2.52 31.2 14.2 12.6 $8.47 11.2 9.8 9.9 $5.87 12.4 12.2 11.2 $0.70 15.0 15.0 14.0 $8.31 10.6 9.9 9.6
Div $0.80 $0.00 $0.04 $0.00 $1.08 $0.85 $0.00 $1.50
Yld 1.3% 0.0% 0.1% 0.0% 1.3% 1.3% 0.0% 1.9%
Book $29.65 $18.71 $24.33 $18.68 $56.10 $30.09 $11.14 $75.48
Mkt Cap ($mm) 20,549 2,829 19,920 2,524 13,167 67,317 829 24,213
Page 1
June 18, 2013
BMO Capital Markets
Managed Care
Important Disclosures
Analyst's Certification I, Jennifer Lynch, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Company Specific Disclosures For Important Disclosures on the stocks discussed http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx. in this report, please go to
Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013) We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis; Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis; Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis; (S) = Speculative investment; NR = No rating at this time; and R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Rating System (January 4, 2010 April 4, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3. Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, Thomson Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information. Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research, which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx.
Page 2
June 18, 2013
BMO Capital Markets
General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
A member of BMO
Financial Group
Page 3
June 18, 2013
June 19, 2013
Tesaro
(TSRO-NASDAQ)
Stock Rating: Market Perform Industry Rating: Outperform
Biotechnology
Jim Birchenough, M.D.
BMO Capital Markets Corp. 415-591-2129 jim.birchenough@bmo.com
Chuck Whitesell / Nick Abbott, PhD.
High Expectations Reasonable, but Leave Little Upside

Event
Tesaro shares are up 110% year-to-date vs. +29% for the NBI and +16% for the S&P. Strength has been driven by both anticipation of pivotal phase 3 data for NK-1 antagonist rolapitant in chemotherapy-induced nausea and vomiting (CINV) as well as improved visibility on PARP inhibitor niraparib for ovarian cancer and breast cancer. Increased optimism for rolapitant in CINV has emerged since ASCO based on validation from a positive phase 3 study for competing, long-acting NK-1 antagonist netupitant, and favorable differentiation with rolapitant in terms of half-life, drug interactions and an easier comparator in phase 3. Additional upside has emerged from improved visibility on PARP inhibitor niraparib and ahead of planned phase 3 initiation in ovarian CA and breast CA and phase 2 data suggesting 40% ORR in BRCA+ ovarian CA and 2 of 4 responses in BRCA+ breast cancer.
Securities Info
Price (18-Jun) 52-Wk High/Low Mkt Cap (mm) Shs O/S (mm, BASIC) Options O/S (mm) $35.99 $52/$11 $1,173 32.6 na Target Price Dividend Yield Float O/S (mm) ADVol (30-day, 000s) $36 --16.0 377
Price Performance
Tesaro Inc. (TSRO)
55 50 45 40 35 30
240 220 200 180 160 140
25 20 15 10 10 5
Volume (mln)
120 100 80 10 5 0
Impact
We are lowering our rating on TSRO to Market Perform from Outperform but maintaining our $36 price target. With positive rolapitant data reflected in current valuation we see limited upside potential in the near term on confirmation of phase 2 results and greater downside risk in the event of trial disappointment or on results that don't match those of netupitant. While we are encouraged by progress with niraparib, expert feedback suggests that the PARP inhibitor field is getting crowded and there is no clear differentiation between niraparib, olaparib, rucaparib, and BM-673, although olaparib has most robust data and a head-start in Europe, while niraparib has a six-month lead in the US. With peak sales estimates of $336 mn for rolapitant and $834 mn for niraparib reflected in our current valuation it is difficult to envision a basis for upward revision over the next 12 months, notwithstanding strong execution, and would look for a better entry point ahead of CINV data.
2008
2009
2010
2011
2012
2013
(FY-Dec.) EPS GAAP P/E First Call Cons. FCF P/FCF EBITDA ($mm) EV/EBITDA Rev. ($mm) EV/Rev Quarterly EPS 2012A 2013E 2011A -$31.90 2012A -$36.11 2013E -$2.70 nm -$2.67 -$66.00 nm -$80 nm $0 na 3Q -$0.52 -$0.67 2014E -$2.88 nm -$3.20 na na -$98 nm $0 na 4Q -$0.70 -$0.73
-$14.24 -$15 $0 1Q -$13.59 -$0.66A
-$47.73 -$62 $0 2Q -$21.31 -$0.65
Forecasts
Our 2013 forecast is for a loss per share of $2.70.
Balance Sheet Data (31-Mar) Net Debt ($mm) -$199 TotalDebt/EBITDA nm Total Debt ($mm) $0 EBITDA/IntExp na Net Debt/Cap. nm Price/Book 8.4x Notes: Quarterly EPS may not sum due to share count. All values in US$. Source: BMO Capital Markets estimates, Bloomberg, Thomson Reuters, and IHS Global Insight.
Valuation
Our $36 target is based on 20x our 2017E EPS of $3.35, discounted 25%.
Recommendation
We rate Tesaro Market Perform.
Changes
Rating OP to Mkt
BMO Capital Markets
Tesaro
Tesaro Inc. (TSRO)

Quarterly Price (US$) 50 50 45 40 35 30 25 20 50 45 40 30 35 30 25 10 20 1) OP 0 TSRO Relative to S&P 500 TSRO Relative to Biotechnology 180 160 140 120 100 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Revenue / Share - (US$) Price / Revenue 180 160 140 120 100 TSRO Relative to S&P 500 TSRO Relative to Biotechnology 0 10 20 20 30 40 40 Target Price(US$) Share Price(US$) 50
300 250 200 150 100 50
300 250 200 150 100
2011
2012
50 2013
2 1 0
2
-2.5
BMO 2013FY EPS ( May 13 = -2.70 US$) First Call 2013FY Cons.EPS ( May 13 = -2.67 US$)
-2.5 -3.0 -3.5
1 0 EPS (4 Qtr Trailing) - (US$) Price / Earnings
-3.0 -3.5
0 -20
0.01
BMO 2014FY EPS ( May 13 = -2.88 US$) First Call 2014FY Cons.EPS ( May 13 = -3.18 US$) -2 -4 -2 -4 2013
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
-0.01
2011
2012
FYE (Dec.)
EPS US$
P/E Hi - Lo na na na na na
DPS US$ 0.00
Yield% Hi - Lo 0.0 0.0 0.0 0.0
Payout % 0
BV US$ 2.6
P/B Hi - Lo 7.8 7.8 4.3 4.3
ROE %
TSRO - Rating as of 23-Jul-12 = OP Date 23-Jul-12 Rating Change NR to OP Share Price $13.90
2012 -36.11 Range*: Current* -23.19
1
na
0.00
0.0
4.3
8.0
Page 2
June 18, 2013
Tesaro
Analyst's Certification I, Jim Birchenough, M.D., hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Company Specific Disclosure Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to this issuer within the past 12 months. Disclosure 2: BMO Capital Markets has provided investment banking services with respect to this issuer within the past 12 months. Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to this issuer within the past 12 months. Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from this issuer within the past 12 months. Disclosure 6: This issuer is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months: Investment Banking Services. Disclosure 9: BMO Capital Markets makes a market in this security. Methodology and Risks to Our Price Target/Valuation Methodology: We arrive at our price target by applying a 20x multiple to 2017 GAAP EPS estimate of $3.35 and discounting 25%. Risks: There are a number of risks associated with investment in biotechnology companies. These risks include, but are not limited to, risk of clinical trial delay or failure, adverse regulatory decisions including product non-approval, unanticipated adverse effects of drugs which may result in removal from market, risk of manufacturing difficulties, capital market risk which may impair the ability to fund product discovery, research, regulatory filing, manufacture and/or commercialization, risk in attaining and retaining appropriate development or commercial partners, lower-than-expected product adoption, difficulties in gaining appropriate reimbursement for products from payors, unforeseen generic and branded competition, risk to patents being invalidated, and failure to meet earnings and revenue expectations. Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013) We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis; Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis; Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis; (S) = Speculative investment; NR = No rating at this time; and R = Restricted Dissemination of research is currently restricted. BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Rating System (January 4, 2010 April 4, 2013): http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
Page 3
June 18, 2013
BMO Capital Markets
Tesaro
Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3. Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, Thomson Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information. Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research, which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx. General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
Page 4
June 18, 2013
BMO Capital Markets
Tesaro
A member of BMO
Financial Group
Page 5
June 18, 2013
Market Elements
Equities added to gains; the S&P 500 and MSCI World indices closed at the best levels of the month. Treasury yields rose and fell with JPY, but ended unchanged; European peripheral yields rose; corporate default risk indices were mixed. Commodities
%Chg -0.2% 0.2% 0.3% -0.5% -0.9% -0.2% -0.6% 0.0% -0.3% -0.3% -0.3% -0.3% -0.5% Symbol DJ UBS WTI Oil NMX Gas Gold Silver Platinum Palladium CMX Cu LME Al 3m LME Ni 3m LME Zn 3m Lumber Corn H/L

June 18, 2013 Research Comment Quantitative/Technical Research Website
Mark Steele
(416) 359-4641 mark.steele@bmo.com Assoc: Tiberiu Stoichita/Jin Li JPY weakened back above the 95 level (unsupported by inflation expectations); EUR strengthened to 1.34 for the first time since Feb; CLP and INR fell over 1%; the slide BRL was tempered by intervention; the RUB fell over devaluation concerns. Metals were mixed to lower; oil continued to churn at a 2-4m high (benchmark dependant); grains rebounded from a three-week low; lumber continued to be felled. Government 10- Yr Benchmark
Level 130.90 98.48 3.91 1,369.0 21.68 1,441.8 710.6 315.25 0.84 6.42 0.84 282.20 673.25 %Chg 0.1% 0.7% 0.9% -1.2% -0.9% 0.5% -0.5% -1.4% -0.2% -1.0% 0.0% 0.0% 0.7% Symbol U.S. Canada U.K. Germany France Italy Spain Portugal Greece Australia Hong Kong India Japan H/L

Levels* Currencies (USD per)

Symbol DXY EUR CHF GBP JPYx10 CAD AUD NZD BRL MXNx10 ZAR KRWx10 SGD H/L

Equity Indices & Sentiment

Symbol S&P 1200 S&P 500 S&P/TSX Euro STOXX FTSE 100 Hang Seng Topix S&P/ASX Shang/Shen Sensex30 CDX IG 5Yr ARMS VIX H/L

Level 80.66 1.3397 1.0873 1.5644 0.1049 0.9793 0.9484 0.7993 0.4592 0.7765 0.1000 0.8833 0.7930
Level 2.19 2.16 2.14 1.57 2.13 4.29 4.55 6.11 10.08 3.39 1.61 7.28 0.84
Chg 0.00 0.01 0.06 0.05 0.04 0.02 -0.03 -0.14 -0.02 0.00 0.00 0.03 -0.00
Level 1,653 1,652 12,367 2,701 6,374 21,226 1,086 4,814 2,419 19,223 82.02 0.59 16.6
%Chg 0.4% 0.8% 0.6% -0.1% 0.7% -0.0% 0.2% -0.2% 0.6% -0.5% 0.1% -18% -1.1%
Moves Currencies (spot)

CHF EUR NZD CAD ZAR BRL KRW MXN SGD GBP AUD JPY 1.0% 0.5% 0.0% 0.5%
Commodities
NMX Gas WTI Oil Corn Platinum DJ UBS Lumber LME Zn 3m LME Al 3m Palladium Silver LME Ni 3m Gold CMX Cu 2.0% 1.5% 1.0% 0.5% 0.0% 0.5% 1.0%
Government 10- Yr Benchmarks Equity Indices

Portugal Spain Greece Japan Australia U.S. Hong Kong Canada Italy India France Germany U.K. 0.10 0.05 0.00 -0.05 -0.10 -0.15 -0.20 Topix Hang Seng Euro STOXX S&P/ASX Sensex30 1.0% 0.5% 0.0% 0.5% 1.0% S&P 500 FTSE 100 S&P/TSX Shang/Shen S&P 1200
Sectors S&P Global 1200

Cons Disc Info Tech Telecom Industrials Utilities Energy Financials Hlth Care Cons Stap Materials 0.2% 0.0% 0.2% 0.4% 0.6% 0.8%
S&P Europe 350

Financials Utilities Telecom Industrials Info Tech Materials Cons Disc Energy Cons Stap Hlth Care 1.0% 0.5% 0.0% 0.5% 1.0%
S&P 500
Industrials Telecom Cons Disc Hlth Care Info Tech Utilities Financials Energy Materials Cons Stap 0.0% 0.5% 1.0% 1.5%
S&P/TSX Composite
Info Tech Cons Disc Energy Telecom Cons Stap Industrials Hlth Care Utilities Financials Materials 2.0% 1.0% 0.0% 1.0% 2.0%
Source for all data and graphics in this publication: BMO Capital Markets, Bloomberg, Thomson * H/L = at a new closing 52- wk High/Low; / = within 10% of the 52- week High/Low; Colour codes are inverted for bond and sentiment indications This report was prepared in part by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to pages 8 to 9.
Market Elements
Daily Charts
3-Month View with 26-Day Bollinger Bands and 150-, 200- and 50-Day Moving Averages
Currencies
Commodities
Bonds
Equities
Market Elements
Intra Day Charts

2-Day 1-Minute View
Currencies
Commodities
Bonds
Equities
Market Elements
Daily Sector Charts

3-Month View with 26-Day Bollinger Bands and 150-, 200- and 50-Day Moving Averages
S&P 500
S&P/TSX Composite
S&P Europe 350
Market Elements
Market Movers Largest Daily Percentage Moves
S&P Global 1200 ex U.S. & Canada

Energy
Name SECURITY_NAME TonenGeneral Sekiyu KK Inpex Corp OMV AG SK Innovation Co Ltd Petroleo Brasileiro SA Saipem SpA SECURITY_NAME Yara International ASA Cemex SAB de CV Lonmin PLC Antofagasta PLC Formosa Chemicals & Fibre Corp Toray Industries Inc SECURITY_NAME Firstgroup PLC Mitsui OSK Lines Ltd Embraer SA Brambles Ltd Latam Airlines Group SA NSK Ltd SECURITY_NAME Sony Corp Sands China Ltd LG Electronics Inc Oriental Land Co Ltd/Japan OPAP SA Nitori Holdings Co Ltd SECURITY_NAME Cencosud SA Aeon Co Ltd Tate & Lyle PLC Lawson Inc Unicharm Corp Kao Corp SECURITY_NAME Smith & Nephew PLC Fresenius Medical Care AG & Co Chugai Pharmaceutical Co Ltd Shionogi & Co Ltd Ono Pharmaceutical Co Ltd SECURITY_NAME Symbol TICKER 5012 JT 1605 JT OMV AV 096770 KP PBR/A UN SPM IM TICKER % Chg Chg 3.1% 2.6% 2.2% -1.4% -1.9% -2.5% Chg
S&P 500
Name SECURITY_NAME Newfield Exploration Co WPX Energy Inc Marathon Oil Corp Occidental Petroleum Corp Tesoro Corp Williams Cos Inc/The SECURITY_NAME Cliffs Natural Resources Inc United States Steel Corp CF Industries Holdings Inc Vulcan Materials Co MeadWestvaco Corp Newmont Mining Corp SECURITY_NAME ADT Corp/The Masco Corp General Electric Co Deere & Co Fastenal Co Iron Mountain Inc SECURITY_NAME DIRECTV L Brands Inc Expedia Inc Goodyear Tire & Rubber Co/The International Game Technology Apollo Group Inc SECURITY_NAME Archer-Daniels-Midland Co Campbell Soup Co Kraft Foods Group Inc Estee Lauder Cos Inc/The Safeway Inc Hormel Foods Corp SECURITY_NAME Regeneron Pharmaceuticals Inc Amgen Inc Celgene Corp DaVita HealthCare Partners Inc Boston Scientific Corp Medtronic Inc SECURITY_NAME Peoples United Financial Inc Franklin Resources Inc Hudson City Bancorp Inc Simon Property Group Inc Leucadia National Corp Weyerhaeuser Co SECURITY_NAME FLIR Systems Inc Micron Technology Inc Xerox Corp VeriSign Inc NVIDIA Corp Autodesk Inc SECURITY_NAME Verizon Communications Inc Crown Castle International Cor Sprint Nextel Corp CenturyLink Inc Windstream Corp Frontier Communications Corp SECURITY_NAME Sempra Energy Exelon Corp NextEra Energy Inc NRG Energy Inc AES Corp/VA Pinnacle West Capital Corp Symbol % Chg Ticker Chg NFX 4.0% WPX 3.1% MRO 3.0% OXY -0.2% TSO -0.9% WMB -1.2% Ticker Chg CLF 5.1% X 2.2% CF 2.0% VMC -0.7% MWV -0.8% NEM -2.5% Ticker Chg ADT MAS GE DE FAST IRM Ticker DTV LTD EXPE GT IGT APOL Ticker ADM CPB KRFT EL SWY HRL Ticker REGN AMGN CELG DVA BSX MDT Ticker PBCT BEN HCBK SPG LUK WY Ticker FLIR MU XRX VRSN NVDA ADSK Ticker VZ CCI S CTL WIN FTR Ticker SRE EXC NEE NRG AES PNW 2.9% 2.4% 2.4% 0.2% -0.6% -1.3% Chg 2.8% 2.6% 2.6% -0.9% -0.9% -3.2% Chg 1.7% 1.3% 1.3% -0.7% -0.7% -3.6% Chg 4.3% 2.4% 2.2% -0.5% -1.0% -1.1% Chg 2.7% 2.5% 2.4% -0.7% -1.4% -1.5% Chg 6.2% 3.9% 3.6% -0.4% -0.6% -0.8% Chg 1.7% 1.4% 1.4% 0.7% -0.5% -1.0% Chg 1.7% 1.4% 1.2% 0.2% -0.7% -2.1%
S&P/TSX Composite
Name SECURITY_NAME Petrominerales Ltd Enerplus Corp ARC Resources Ltd Secure Energy Services Inc Calfrac Well Services Ltd Athabasca Oil Corp SECURITY_NAME Labrador Iron Ore Royalty Corp Potash Corp of Saskatchewan In CCL Industries Inc Franco-Nevada Corp OceanaGold Corp Banro Corp SECURITY_NAME Finning International Inc Canadian Pacific Railway Ltd CAE Inc Genivar Inc Bombardier Inc Chorus Aviation Inc SECURITY_NAME Tim Hortons Inc Dollarama Inc Gildan Activewear Inc Aimia Inc Cineplex Inc Martinrea International Inc SECURITY_NAME North West Co Inc/The Jean Coutu Group PJC Inc/The Saputo Inc Cott Corp Metro Inc Maple Leaf Foods Inc SECURITY_NAME Valeant Pharmaceuticals Intern CML HealthCare Inc Extendicare Inc/US Catamaran Corp SECURITY_NAME Manulife Financial Corp Great-West Lifeco Inc Allied Properties Real Estate Dundee Real Estate Investment AGF Management Ltd Dream Unlimited Corp SECURITY_NAME Research In Motion Ltd Wi-Lan Inc Open Text Corp MacDonald Dettwiler & Associat Constellation Software Inc/Can Celestica Inc SECURITY_NAME Rogers Communications Inc TELUS Corp Manitoba Telecom Services Inc Bell Aliant Inc BCE Inc SECURITY_NAME Superior Plus Corp Just Energy Group Inc Canadian Utilities Ltd TransAlta Corp Northland Power Inc Atlantic Power Corp Symbol % Chg Ticker Chg PMG 13.7% ERF 3.5% ARX 2.8% SES -1.5% CFW -2.1% ATH -2.7% Ticker Chg LIF 2.3% POT 1.6% CCL/B 1.0% FNV -5.7% OGC -9.8% BAA -11.5% Ticker Chg FTT CP CAE GNV BBD/B CHR/B Ticker THI DOL GIL AIM CGX MRE Ticker 2.4% 1.9% 1.7% -1.4% -3.0% -3.3% Chg 4.0% 2.7% 2.0% 0.0% 0.0% -0.2% Chg
Materials
Industrials
YAR NO 3.0% CEMEXCPO MM 2.6% LMI LN 1.9% ANTO LN -2.0% 1326 TT -2.1% 3402 JT -2.2% TICKER Chg FGP LN 8.0% 9104 JT 6.1% ERJ UN 4.8% BXB AT -2.4% LFL UN -2.5% 6471 JT -3.6% TICKER Chg 6758 JT 1928 HK 066570 KP 4661 JT OPAP GA 9843 JT TICKER 4.4% 4.4% 4.0% -2.1% -3.6% -3.9% Chg
Cons Disc
Cons Stap
Health Care Sonic Healthcare Ltd
CENCOSUD CC 3.8% 8267 JT 3.5% TATE LN 1.9% 2651 JT -1.8% 8113 JT -1.9% 4452 JT -1.9% TICKER Chg SHL AT 1.7% SN/ LN 1.1% FME GY 1.0% 4519 JT -2.6% 4507 JT -2.9% 4528 JO -3.3% TICKER Chg MGR AT DXS AT 8766 JT BSAC UN LLC AT DANSKE TICKER DC IFX GY 6501 JT 6857 JT ALU FP 2382 TT 6963 JO TICKER OIBR UN ST SP BT/A LN TKA AV TIT IM 9432 JT TICKER 9503 JT 9508 JT EBR UN 9532 JT 9531 JT CPL UN 3.4% 3.3% 2.6% -2.2% -2.3% -6.1% Chg 4.4% 2.8% 2.5% -1.9% -2.7% -3.4% Chg 2.7% 2.4% 2.3% -1.1% -1.1% -1.1% Chg 6.2% 5.5% 3.6% -1.8% -2.8% -3.1%
NWC 3.0% PJC/A 2.3% SAP 1.8% BCB 0.4% MRU 0.3% MFI -1.2% TICKER Chg VRX CLC EXE CCT 1.7% 1.0% -0.5% -1.0%
Financials
Mirvac Group Dexus Property Group Tokio Marine Holdings Inc Banco Santander Chile Lend Lease Group Danske Bank A/S SECURITY_NAME Hitachi Ltd Advantest Corp Alcatel-Lucent/France Quanta Computer Inc Rohm Co Ltd SECURITY_NAME
Ticker Chg MFC 2.2% GWO 2.0% AP-U 1.6% D-U -1.2% AGF/B -1.4% DRM -1.9% TICKER Chg BB 3.6% WIN 2.1% OTC 1.7% MDA 1.2% CSU -0.8% CLS -1.6% TICKER Chg RCI/B T MBT BA BCE Ticker SPB JE CU TA NPI ATP 2.1% 1.5% 1.4% 0.6% 0.4% Chg 3.2% 2.6% 1.0% -0.3% -0.3% -3.2%
Technology Infineon Technologies AG
Telecom
Oi SA Singapore Telecommunications L BT Group PLC Telekom Austria AG Telecom Italia SpA Nippon Telegraph & Telephone C SECURITY_NAME Kansai Electric Power Co Inc/T Kyushu Electric Power Co Inc Centrais Eletricas Brasileiras Osaka Gas Co Ltd Tokyo Gas Co Ltd CPFL Energia SA
Utilities
Bold = move of more than 5%
Market Elements
U.S. Market Movers
Energy
Symbol ESV NE DO NBR HP RDC PTEN UNT ATW PES SLB HAL BHI NOV CAM FTI OII DRQ OIS TDW CRR SPN CKH EXH BRS LUFK HLX TTI IO HOS BAS MTRX GIFI XOM CVX COP OXY MRO HES MUR APA DVN APC Symbol DD DOW PPG EMN ASH FMC MON CF PX APD ARG ECL SHW SIAL IFF ALB VMC MLM OI BLL AA FCX SCCO NEM NUE CLF X ATI IP MWV
H/L
Industrials
Last 59.48 38.48 68.53 16.80 64.04 34.31 21.04 44.67 56.51 7.16 74.16 44.07 46.75 71.49 63.96 57.98 74.15 92.50 93.86 58.51 72.76 28.13 80.43 29.79 64.97 88.49 24.41 11.01 6.05 55.01 13.63 16.62 20.99 91.93 121.52 62.10 92.43 36.05 67.52 63.60 87.12 55.30 87.00 Last 54.02 34.62 156.57 73.25 86.74 64.70 105.63 188.63 119.01 96.58 96.09 86.73 184.30 82.18 79.95 63.99 54.15 109.73 28.03 43.19 8.21 29.52 29.76 32.59 44.87 18.59 17.86 28.29 45.97 35.41 %Chg 0.4% 1.2% 0.4% 1.4% 0.8% 1.0% -1.6% -0.0% 1.5% 1.7% 1.4% 1.0% 0.6% 1.4% 0.4% 0.2% 1.1% 1.1% 0.6% -0.4% 3.0% 0.8% 0.3% 2.1% 0.2% 0.0% 4.0% 0.6% 0.0% -0.3% 2.4% 1.4% 0.5% 0.4% 0.2% 0.2% -0.1% 3.0% 0.0% -0.0% 0.6% 0.5% -0.0% %Chg 0.6% 1.4% 0.3% 1.4% 0.7% 1.3% 0.8% 2.0% 0.5% 0.0% 0.2% 0.5% 0.5% 0.6% 0.6% 1.1% -0.7% -0.1% 0.3% -0.2% 1.2% -0.5% -0.3% -2.5% -0.2% 5.1% 2.2% 0.9% -0.6% -0.8% Symbol UTX BA HON LMT GD RTN NOC PCP LLL COL ITT FLR EMR ROK GE MMM TYC CAT DE PCAR CMI DHR ITW ETN PH DOV FAST GWW WM RSG UPS FDX CHRW EXPD LUV DAL UNP NSC CSX Symbol MDT BAX COV SYK BDX ISRG STJ ZMH BSX HSP MCK CAH ESRX DGX UNH WLP HUM AET CI AMGN GILD CELG BIIB JNJ PFE MRK ABT BMY LLY AGN FRX TMO A LIFE
H/L
Consumer Discretionary
Last 96.17 104.08 80.85 108.85 78.85 68.07 83.93 221.66 86.80 64.70 30.12 63.28 57.34 88.11 24.33 112.97 33.75 84.55 85.00 54.51 117.37 64.36 71.33 65.84 98.70 80.62 46.90 255.87 40.85 34.75 87.43 99.48 57.33 38.99 13.86 18.97 157.95 77.03 25.29 Last 52.92 70.88 65.94 67.67 100.40 509.61 45.87 79.79 9.54 36.59 114.62 48.76 62.94 62.39 65.68 79.64 83.60 62.65 69.66 101.50 51.94 120.24 210.80 86.36 29.40 47.75 37.51 46.85 52.35 101.49 41.57 86.18 44.80 74.27 %Chg 1.3% 1.0% 1.4% 0.5% 0.6% 0.4% 0.3% 1.2% 0.4% 0.4% 1.4% 1.6% 1.4% 1.4% 2.4% 0.9% 1.1% 0.8% 0.2% 1.2% 1.1% 1.6% 0.9% 1.7% 1.0% 1.9% -0.6% 0.6% 1.0% 1.7% 1.0% 1.1% 0.8% 0.9% 0.6% 0.8% 1.3% 0.7% 1.8% %Chg -1.1% 0.2% -0.4% -0.2% 0.2% 2.0% 0.4% 0.1% -1.0% 0.4% 0.2% 1.0% -0.0% -0.3% 2.0% 1.1% 1.6% 1.8% 2.0% 2.4% 1.7% 2.1% 1.4% 0.8% 0.8% -0.1% 1.6% 0.8% -0.0% 0.0% 0.7% 0.7% 0.9% 0.0% Symbol H/L JCI BWA H GM F HOG MHK PHM DHI NVR WHR NWL MAT HAS COH VFC H RL NKE LVS WYNN IGT CCL MAR HOT WYN MCD YUM SBUX H DRI CMG APOL DV HRB OMC H IPG CBS DISCA CMCSA DTV SIRI TWC SNI DIS TWX NWSA VIAB GCI GPC AMZN PCLN EXPE NFLX KSS SHLD M JWN JCP TGT DG FDO DLTR TJX GPS LTD ROST URBN GES BBY HD LOW SPLS TIF AZO ORLY KMX BBBY

Consumer Staples
Symbol CVS WAG SYY KR SWY WFM WMT COST TAP BEAM BF/B KO PEP CCE DPS ADM MDLZ KRFT GIS K CPB CAG MJN HSH HSY SJM TSN HRL MKC PM MO RAI LO PG CL KMB CLX CHD AVP EL
H/L
Technology
%Chg 1.1% 1.0% 0.1% 1.0% -0.7% 0.8% 1.0% 0.3% -0.3% 0.0% 0.1% 0.6% 0.0% 0.8% 0.7% 1.7% 0.5% 1.3% 0.2% 0.4% 1.3% -0.3% 0.3% 1.1% -0.1% 0.4% 0.9% -3.6% 0.8% 0.2% 1.0% 0.7% 0.8% 0.1% 0.1% -0.1% -0.3% -0.2% 0.3% -0.7% %Chg 0.5% 1.3% 0.8% 1.1% 0.7% 0.8% 1.1% 0.2% 0.5% 0.9% -2.0% 0.4% -0.1% 1.0% 0.8% 0.6% 1.3% 0.7% 1.2% 0.6% 1.6% 1.6% 1.8% 0.4% 0.2% 1.2% 0.8% 0.3% 0.8% 1.2% 1.3% 0.6% 1.5% Symbol GOOG EBAY YHOO AKAM VRSN ACN CTSH SAI V MA ADP WU PAYX FIS CSC FISV ADS ADBE INTU CRM CTXS ADSK MSFT ORCL SYMC CA BMC RHT ATVI EA CSCO QCOM MSI JNPR HRS FFIV AAPL IBM HPQ DELL TDC EMC NTAP WDC SNDK FLIR GLW APH AVT XRX AMAT KLAC LRCX INTC TXN BRCM FSLR NVDA ADI MU CREE ALTR XLNX LLTC AMD MCHP Symbol T VZ CTL CCI FTR WIN S
H/L
Financials
Last 900.62 52.57 26.66 42.84 45.00 82.93 64.05 13.66 184.01 584.41 69.60 17.13 37.80 44.33 45.69 88.64 179.84 43.36 58.70 38.25 62.20 35.13 34.98 34.40 22.73 28.64 45.20 46.63 14.59 23.03 24.82 62.38 57.35 19.13 50.09 76.06 431.77 204.87 25.44 13.48 55.34 24.99 39.39 64.67 63.04 26.49 15.19 79.28 34.18 9.49 15.97 56.39 47.68 25.47 36.12 34.62 45.96 14.40 46.66 13.75 65.70 32.93 40.20 37.28 4.09 38.04 Last 36.17 51.55 36.24 71.33 4.04 8.09 7.32 %Chg 1.6% 0.9% 0.4% -0.2% -0.3% 0.5% 0.9% -0.0% 0.9% 1.0% 1.3% 1.1% -0.1% 0.7% 1.0% 0.8% 0.5% -0.0% 1.1% 0.0% 1.3% -0.8% -0.0% 0.3% 1.7% 0.1% 0.1% 2.0% -0.9% 2.6% 0.4% 0.4% 0.0% 0.3% 0.4% 2.0% -0.0% 0.9% 1.1% 0.5% -0.2% 0.6% 2.0% 0.0% 2.9% 6.1% 0.5% 0.3% -0.1% 3.6% 1.2% 0.7% 0.8% 1.4% 0.9% 0.9% 1.3% -0.6% 1.5% 3.8% 4.4% 0.2% 1.7% 1.1% 0.9% 1.3% %Chg 1.1% 1.6% 0.6% 1.4% -0.9% -0.4% 1.3% Symbol WFC USB CMA PNC BBT STI FITB RF MTB KEY HBAN AMT NYCB HCBK PBCT BAC JPM C LUK CME MHFI ICE NYX MCO AXP COF DFS SLM BK BEN BLK STT TROW NTRS AMP IVZ LM GS MS SCHW MMC AON MET PRU AFL PFG LNC UNM AIG L HIG GNW BRK/B TRV ACE ALL CB PGR XL VNO PLD BXP SLG EQR AVB SPG KIM MAC FRT PSA HST HCP WY VTR PCL
H/L
H H H
H H H

H H

H H

H
H/L
H
H/L
Health Care
Last 37.49 86.72 34.01 15.65 54.19 114.71 21.49 24.38 987 129.61 27.00 45.05 44.75 58.48 190.48 178.90 62.15 57.07 139.30 17.14 34.31 40.82 66.90 59.61 99.75 72.22 67.10 53.13 372.66 20.20 29.30 29.22 63.82 14.79 48.75 77.85 40.39 63.58 3.40 103.01 67.93 65.29 58.89 31.56 67.60 24.96 79.64 281.76 834.82 60.64 228.83 52.44 47.06 49.32 59.64 17.53 70.16 52.29 64.08 50.60 50.53 42.34 52.32 65.31 40.65 32.09 28.06 77.19 41.46 16.48 76.59 425.33 113.09 48.21 71.99
%Chg -0.4% 0.5% 0.8% 0.6% 1.3% 1.3% 0.3% 0.5% 0.4% 0.3% 0.4% 1.3% 1.0% 0.6% 1.2% 1.6% 0.3% 0.5% 0.7% -0.9% 1.8% 0.4% 0.4% 0.7% 1.0% 0.9% 1.6% 0.7% 1.4% -3.2% 1.0% 1.2% 0.8% 1.0% 2.0% 1.0% 0.8% 2.8% 1.8% 1.7% 0.7% 1.2% 1.6% 0.9% 0.5% 0.0% 0.8% 1.3% 1.1% 2.6% -0.2% -0.6% 0.5% 1.0% 0.9% -0.4% 0.4% 2.3% 0.8% 0.9% 1.5% 1.3% 2.6% 1.2% -0.4% 1.0% 2.4% 1.4% 0.2% 0.3% 1.6% 0.1% 1.0% 2.3% 1.1%
H H
H/L
Last 59.91 50.90 34.74 35.52 23.94 52.73 75.73 112.09 49.84 65.01 70.64 40.93 82.57 36.49 47.43 33.83 30.50 56.65 49.91 64.92 45.73 34.50 83.24 33.54 89.61 103.66 25.88 39.19 73.36 92.65 36.15 49.31 44.92 79.04 59.70 99.44 85.85 61.81 23.45 69.72 Last 44.75 31.15 68.23 81.59 45.90 69.17 29.46 38.25 47.71 42.56 56.20 20.36 23.58 32.12 23.11 25.01 46.37 48.83 49.77 47.05 36.06 22.54 39.44 44.57 61.92 39.26 43.70 24.09 41.10 34.80 43.86 44.40 48.72
H H

Last 40.84 35.35 37.76 71.74 33.38 31.75 18.40 9.11 104.13 10.50 7.62 77.29 13.61 8.57 14.29 13.27 54.11 50.01 27.36 77.28 56.08 183.07 42.28 62.61 74.98 62.10 47.89 23.13 29.77 150.92 276.49 67.32 75.62 58.36 83.39 34.54 33.58 164.15 26.32 20.54 40.46 65.63 45.41 72.97 57.77 38.88 35.87 28.70 45.14 45.17 30.35 11.39 115.17 84.09 90.16 47.67 87.97 25.30 31.69 83.99 38.34 111.20 91.72 56.61 134.90 167.30 22.27 62.70 104.85 152.40 17.22 45.98 28.24 71.67 47.44
%Chg 0.5% 0.3% 0.4% 0.6% 0.8% 1.2% 0.6% 1.5% 1.0% 0.7% 0.7% 0.4% 0.8% 2.3% 2.7% 0.4% 0.4% 1.3% -1.3% 1.1% 1.8% 2.3% 1.7% 0.6% 1.5% 0.1% 1.0% 0.5% 1.3% 2.4% 0.1% 0.7% 1.5% 0.5% 0.9% 0.5% 1.2% 0.0% 0.4% 1.0% 0.3% 0.3% 1.1% 1.0% 0.3% 0.3% 1.8% 1.1% -0.0% 0.6% 2.1% 1.6% 0.2% 1.0% 0.7% 0.5% 0.6% 1.1% 1.7% 0.9% -0.3% -0.0% 0.1% 0.3% 0.4% -0.7% 0.9% 0.4% -0.4% -0.6% 0.2% 0.4% -1.4% 0.3% -0.2%
Utilities
Symbol SO EXC DUK NEE AEP ETR PPL FE EIX NU PNW POM NVE WR GXP HE CNL IDA ALE UNS EE PNM UIL OKE NFG UGI GAS STR ATO PNY WGL NJR SWX
H H H

Materials
H H H

H H

H H

H H H H

H H

H H

H
H/L
Telecom Services
H/L = at a new closing 52- wk High/Low; / = within 10% of the 52- wk High/Low; Bold = move of more than 5%
Market Elements
Canadian Market Movers
Energy
Symbol PD ESI TDG SVY WRG SCL TCW MTL PSI SES CFW EFX CEU FRC SU IMO HSE CVE IOC US CNQ CPG ECA TLM COS ARX TOU PRE MEG VET PWT PEY BTE POU UPL US ERF ATH TET BNP PGF KOG US AOI LTS FRU WCP BNE BIR NVA LEG CR PPY AAV BNK RRX KEL PXX NKO IAE BXE TBE WZR TGL DTX KEY PKI ENB TRP PPL IPL-U ALA GEI VSN ENF CCO UUU DML
H/L
Materials
Last 9.29 16.84 7.55 6.92 7.88 41.26 15.76 22.75 18.25 13.54 30.74 13.61 15.62 12.09 31.75 40.52 28.33 30.50 75.22 30.27 36.61 18.48 12.05 20.23 28.07 41.31 21.31 32.31 51.53 11.97 30.50 38.37 37.34 22.12 15.69 7.61 31.58 14.79 5.18 9.07 7.79 8.36 24.10 10.81 49.49 8.53 7.59 5.19 5.77 8.79 4.37 2.85 3.89 7.33 1.92 7.58 1.90 5.40 2.26 1.35 7.23 7.25 59.85 16.68 45.74 47.79 32.58 24.00 39.03 25.64 12.74 24.58 22.00 2.76 1.27 %Chg 0.0% 2.0% 0.5% 1.7% 2.2% 2.1% -0.3% 0.9% -0.1% -1.5% -2.1% 0.0% -1.4% -0.9% 1.6% 0.8% 0.5% 1.6% -0.2% 0.9% 0.5% 2.6% 1.7% 1.6% 2.7% 1.0% 0.7% -1.4% 0.9% 0.5% 1.8% 0.5% 1.1% 1.4% 3.4% -2.6% 2.3% 0.7% 0.9% 0.4% 0.0% -0.2% -0.5% 2.1% 1.5% -0.5% -1.5% -0.1% -1.3% 2.3% -0.2% -0.6% 0.7% 1.3% 0.0% -0.9% 1.0% 0.5% 0.0% 3.8% 0.2% 0.9% 1.6% 0.6% 1.7% 1.4% -0.0% 0.8% 0.7% 0.1% -1.1% 0.4% 1.8% 0.1% 1.6% Symbol MX CUS CHE-U POT AGU CCL/B ITP WPK CAS TCK/B TRQ FM LUN S HBM TCM CS MDI TKO RIO NDM ABX G K AEM ELD YRI IMG IGT OSK FNV CG NGD AGI SMF NG DGC PVG PHY/U SEA GBU KGI BTO XGD SGR AR TXG GSC LSG CNL AUQ RMX SSL OGC GUY CGG TNX ASR NSU SLW PAA FR SSO SVM PHS/U DPM DDC THO ELR III LIF WFT CFP SJ ANS
H/L
Industrials
Last 44.74 9.19 17.30 41.94 91.44 63.66 12.15 17.93 5.63 24.03 6.34 16.82 4.20 4.25 7.74 3.17 2.04 7.36 2.07 2.44 2.36 19.24 27.71 5.86 30.14 7.19 10.90 5.20 13.53 4.03 37.87 4.18 6.73 13.43 1.70 2.30 10.40 7.59 11.35 11.15 1.22 4.76 2.40 11.61 0.14 7.02 1.54 0.49 0.29 3.61 4.78 1.61 7.30 1.47 1.46 2.63 2.75 2.68 3.10 23.24 12.08 10.88 7.09 2.79 8.49 4.25 15.03 13.70 0.08 11.16 30.72 84.59 18.73 94.72 4.00 %Chg -0.1% -0.2% -0.1% 1.6% 0.5% 0.9% 0.0% -1.2% 0.3% 0.3% -1.8% -0.7% -3.6% -2.0% -0.8% -3.6% -2.3% -0.1% -1.8% -4.3% -1.6% -2.5% -2.0% -1.8% -3.1% -3.8% -5.1% -2.4% -1.0% -5.1% -5.7% 0.2% -1.8% -1.8% -2.2% -5.7% -2.9% -4.6% -0.8% -4.2% -3.9% -0.8% -2.4% -2.8% -3.5% -0.7% 0.6% -2.0% 0.0% -8.6% -2.2% -4.1% -2.0% -9.8% -5.8% -2.9% -6.7% 0.0% -3.4% -2.0% -2.0% -0.9% -1.6% -1.0% -0.9% 0.0% 0.1% -3.4% 2.5% -0.6% 2.2% -0.7% -1.3% 0.7% 1.2% Symbol BBD/B CAE HRX WFI VIC SNC ARE BDT GNV CUQ BAD TIH WPT AFN NFI ATA GLV/A XTC EFL FTT RUS RCH MIL US WJX CVL CWX TCL/A BIN NAL RBA US DCI BDI HNL MSI STN WJA CHR/B AC/B HNZ/A EIF CNR CP TFI STB CSS WTE
H/L
Consumer Discretionary
Last 4.56 10.70 7.99 20.38 11.89 44.01 10.80 12.27 24.50 8.39 47.52 22.45 30.66 35.64 10.15 10.60 3.01 5.89 0.54 22.60 25.62 38.85 8.23 31.59 19.14 2.59 11.95 22.65 13.41 21.00 23.74 22.49 6.43 14.19 42.63 22.35 2.04 2.62 21.00 25.62 101.24 127.15 20.17 6.45 11.01 28.70 %Chg -2.9% 1.7% 0.1% -0.5% 1.7% -0.5% 0.2% -0.1% -1.4% -0.2% 0.2% 0.4% 1.3% 2.3% 0.4% 1.1% 7.5% 0.5% 3.8% 2.4% -0.1% -0.1% 0.1% 0.7% 0.3% -0.3% 0.5% 0.2% 1.2% 0.4% 0.2% 0.4% 0.6% 0.4% -0.0% 0.5% -3.3% 1.9% 0.6% -0.8% 1.5% 1.8% 1.5% 0.0% 0.0% 1.3% Symbol H/L MG H LNR MRE BLD DII/B BRP MB LLL GIL GC TRZ/B WB THI MTY BPF-U PZA AW-U ECI AIM MDZ/A H ACM/A CJR/B TVA/B SJR/B CCA XSR CGO CGX LGF US IMX MM TRI QBR/B TS/B GVC UNS SCC HBC CTC/A DOL RET/A GLN RON IDG ACQ LNF GBT/A
Technology
Symbol H/L OTC GIB/A CTY MDA CSU DSG CMG ESL RKN ABT NXJ BB JDSU US WIN AAH SW MITL US SVC CDV EXF VCM ET GSIG US PUR AVO VNP CLS SO CSIQ US Last 73.35 31.27 19.66 69.76 144.00 11.07 23.16 23.40 3.25 7.00 3.14 15.13 14.42 4.42 20.61 12.65 3.84 1.95 4.00 4.28 4.55 15.29 8.65 4.49 15.99 2.88 9.80 20.00 9.92 %Chg 1.7% 1.3% -0.7% 1.1% -0.8% 0.5% 0.6% 1.3% -1.5% 0.0% -3.3% 3.6% 1.5% 2.0% -1.2% -0.3% -1.2% -1.0% -0.4% -0.4% 0.0% 1.4% 0.0% -0.2% -0.6% 12.9% -1.6% 0.0% -1.9%
Financials
Symbol XIU XSP XIC XDV XFN CPD ZEB RY TD BNS BMO CM NA CWB LB MIC HCG ETC FN MKP FC DH OCX X SIL CSF IGM CIX AGF/B DC/A U SII AD GS GCG/A GMP CF MFC GWO PWF SLF POW IAG FFH IFC XRE HR-U REF-U CUF-U CRR-U AP-U D-U BOX-U BEI-U CAR-U NPR-U REI-U CWT-U MRT-U AX-U CSH-U INN-U NWH-U BAM/A FCR MRC BPO GRT-U KMP MEQ MRD GDC FSV AIF BRE
H/L
Last 72.04 28.85 10.44 1.80 35.79 24.25 14.20 66.73 41.99 9.72 6.20 13.99 56.05 24.00 22.50 12.10 21.40 9.29 14.14 19.00 48.13 23.55 9.40 23.31 43.44 6.65 39.30 33.90 28.14 25.58 1.04 34.50 46.26 5.93 1.55 21.13 10.95 16.23 82.75 70.72 8.55 17.42 10.26 10.91 26.72 12.71 13.87
%Chg 1.7% 1.1% -0.1% -1.0% 1.4% 0.7% -1.7% 0.8% 2.0% 0.2% -0.1% -0.0% 4.0% -0.2% -1.5% 0.8% 0.0% 0.9% 0.0% 0.9% 0.0% 0.2% 0.0% 1.7% 0.6% 0.6% 2.5% 0.0% 1.5% -0.9% -0.9% 1.2% 0.5% -0.5% 0.0% 0.5% 0.8% -3.1% 0.8% 2.7% 1.7% -0.4% 0.0% 0.2% 0.0% -0.3% -4.3%
Utilities
Symbol XBB
H/L
Last 17.92 19.02 19.64 22.05 24.68 16.91 18.15 61.15 82.41 57.42 60.67 77.53 75.46 28.30 44.13 25.40 54.51 35.62 16.81 14.28 12.41 23.93 48.39 46.50 1.46 2.42 46.24 31.01 11.55 23.00 5.18 3.06 33.68 19.80 13.68 6.50 6.10 16.39 28.92 30.91 30.64 27.94 39.25 414.00 60.53 16.14 22.27 42.95 21.20 14.45 32.67 33.28 26.51 59.00 23.01 27.70 26.37 26.28 16.82 15.50 10.01 4.31 11.65 37.12 18.52 104.57 17.43 36.91 11.08 32.31 18.70 3.71 31.31 8.15 12.18
%Chg 0.9% 0.7% 0.8% 0.7% 0.7% 0.0% 0.4% 1.1% 0.5% 0.2% 0.4% 0.2% 0.5% 0.2% -0.5% 0.8% -0.8% -0.2% 0.4% 0.3% 0.4% 0.9% 1.2% 0.0% -0.6% -5.0% 0.9% 0.5% -1.3% -1.0% -0.7% -2.5% 2.0% 1.5% 1.3% -0.4% 0.1% 2.2% 2.0% 1.5% 1.1% 0.9% 0.3% -0.8% -0.2% -0.2% -0.9% 0.8% -0.5% -0.2% 1.6% -1.1% 0.2% -0.8% -0.2% -0.6% -0.9% 1.0% 0.3% -0.4% -1.0% -0.2% 0.6% 0.6% 0.1% -0.1% 0.6% -0.1% 0.2% 0.0% 0.5% 0.0% -0.1% 0.0% -0.5%
XCB XRB XSB

FTS BIP-U EMA VNR SPB CU ACO/X JE NPI BEP-U ETX ATP CPX RPG AQN BLX AXY INE CSE CUP/U PRI MXG TA
L L L
Health Care
Symbol H/L NVDQ US IM CLC CHH DR ACC LW RLC CCT CNJ QLT ONC RVX NYMX US VRX PLB COM NDN PTI EXE Last 13.81 2.56 7.34 0.47 14.81 8.96 12.89 8.55 53.95 2.65 8.57 2.31 2.42 5.35 87.74 51.90 2.10 7.67 5.73 6.57 %Chg -1.2% -3.4% 1.0% 0.0% -0.5% -0.4% 2.1% -0.8% -1.0% 10.4% -0.1% -2.1% 1.7% 2.7% 1.7% -0.5% 2.4% -0.9% -0.7% -0.5%
Consumer Staples
Symbol SC PJC/A GCL L WN MRU ATD/B EMP/A NWC LIQ CDL/A BCB SAP CBY MFI AGT RSI PBH CLR SOY HLF ATB
H/L
H H

Last 46.24 17.26 3.24 48.95 82.78 70.07 62.28 77.30 24.00 17.86 19.85 8.13 48.84 56.03 13.41 14.35 6.07 19.09 4.55 8.17 30.49 14.50
%Chg 0.9% 2.3% -7.7% 1.2% 1.1% 0.3% 1.2% 0.6% 3.0% 0.1% 0.1% 0.4% 1.8% 0.0% -1.2% 0.6% -0.3% 1.1% 0.0% 1.9% 0.7% -1.1%
Last 30.88 21.24 23.66 28.75 33.23 37.52 34.67 16.23 11.78 38.65 46.00 6.61 17.86 28.72 0.22 4.59 21.53 0.17 7.43 10.31 0.33 9.23 3.95 10.53 4.54 3.05 13.62
%Chg -0.1% -0.1% -0.3% 0.1% 0.8% 0.6% 1.0% -0.4% 3.2% 1.0% 1.0% 2.6% -0.3% -3.1% 0.0% -3.2% 0.4% 6.3% -0.1% -1.0% 1.6% 0.0% 0.0% 2.1% -1.7% 5.5% -0.3%
H H

Telecom Services
Symbol MBT BA T BCE RCI/B
H/L
Last 35.37 27.45 35.44 44.44 46.90
%Chg 1.4% 0.6% 1.5% 0.4% 2.1%
H/L = at a new closing 52- wk High/Low; / = within 10% of the 52- wk High/Low; Blue = S&P/TSX 60 member, Italics = ETF, Bold = move of more than 5%
Market Elements
IMPORTANT DISCLOSURES Analyst's Certification I, Mark Steele, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Company Specific Disclosures For Important Disclosures on the stocks discussed http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx in this report, please go to
Distribution of Ratings (March 31, 2013) Rating BMOCM US BMOCM US BMOCM US BMOCM BMOCM Starmine Category BMO Rating Universe* IB Clients** IB Clients*** Universe**** IB Clients***** Universe Buy Outperform 37.3% 16.5% 53.8% 38.2% 51.3% 53.2% Hold Market Perform 58.0% 8.8% 44.6% 56.8% 47.7% 41.1% Sell Underperform 4.7% 3.7% 1.5% 4.9% 1.0% 5.7% * Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. ** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. *** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. **** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. Rating and Sector Key (as of April 5, 2013) We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis; Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis; Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis; (S) = Speculative investment; NR = No rating at this time; and R = Restricted Dissemination of research is currently restricted.
BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating). Prior BMO Capital Markets Rating System (January 4, 2010 April 4, 2013) http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf Other Important Disclosures For Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3. Dissemination of Research Our research publications are available via our web site http://www.bmocm.com/research. Institutional clients may also receive our research via FIRST CALL, FIRST CALL Research Direct, Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information.
Market Elements
Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer. To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
A member of BMO
Financial Group

BMO

Enviado por

Dados do documento

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

BMO

Enviado por

Direitos autorais:

Formatos disponíveis

June 19, 2013

U.S. Canadian / Int'l

Fortuna Silver Mines

Cenovus Energy Valeant

BlackRock Kohl's Hot Topic Pfizer

Macro Quantitative/Technical: Market Elements Economics: A.M. Notes

Click on company name or report title to view full comment.

June 19, 2013

Investor Day Showcases Breadth of Management Team; Retail Opportunity Glistens

Last Data Point : June 17, 2013

BMO Capital Markets

June 18, 2013

BMO Capital Markets

June 18, 2013

BMO Capital Markets

June 18, 2013

BMO Capital Markets

BLACKROCK INC (BLK)

EPS (4 Qtr Trailing) - (US$) Price / Earnings

Growth(%): 5 Year: 10.8 10 Year: 21.0

June 18, 2013

BMO Capital Markets Important Disclosures

June 18, 2013

BMO Capital Markets

June 18, 2013

June 19, 2013

David J. Chiaverini, CFA

May Fund Flow Review: Industry Flows Remain Healthy

Refer to pages 26 to 27 for Important Disclosures, including Analyst's Certification.

June 18, 2013

BMO Capital Markets

Tweaking Estimates and Price Targets

Exhibit 1: EPS Estimate and Price Target Changes

APO BEN BLK BX CG EV IVZ KKR LM TROW

APO BEN BLK BX CG EV IVZ KKR LM TROW

APO BEN BLK BX CG EV IVZ KKR LM TROW

Source: Company reports and BMO Capital Markets.

Exhibit 2: Price Target Methodology

June 18, 2013

BMO Capital Markets

Exhibit 3: Monthly AUM Recap

June 18, 2013

BMO Capital Markets

Industry/Company Flow Snapshots

June 18, 2013

BMO Capital Markets

($ billions) 30 25 20 15 10 5 0 (5) 5/12

($ billions) 350 300 250 200 150 100 50

0 5/12 7/12 9/12 11/12 1/13 3/13 5/13

June 18, 2013

BMO Capital Markets

Source: Morningstar Direct.

Source: Morningstar Direct for net cash flows.

($ billions) 1.8 1.4 1.0

($ billions) 50 45 40 35 30 25 20 15 10 5 0 5/12 7/12

Source: Morningstar Direct.

June 18, 2013

BMO Capital Markets

Source: Morningstar Direct.

25% 20% 15% 18.2%

15% 10% 6.1% 5%

5% 1.8% 2.2% 0.1% 0% 0.3% 5%

10% 6.0% 5% 0.2% 0% 5% 0.1% 1.4% 3.5% 3.5% 2.8%

CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E