31 October 2017 Railroads Canadian Rails Figure 74: Railroad stocks underperformed the market during the 08109 (recession 10 0 run-0r Dec-07 lens Dec-00 tun-09 Dec-09 Jun-ID Dec-10 Jun-II Dec-It Scum Da.eathe E.vl Compane Five Following the 08/09 recession, rails had another good run with CP and UNP outperforming the rest of the industry. This was driven by two factors: stronger earnings growth and multiple expansion on the back of significant margin improvements. We note that NTM P/E multiples for CP and UNP expanded by 40% and 30% during this time, respectively, compared to 20% for the rest of the industry and the S&P 500. Figure 75: Solid margin expansion at CP and UNP supported stronger EPS growth arid higher PIE multiples from 2011-2014 400 350 300 230 300 1.10 too se 0 On-It Ap-12 05-11 AOr13 Ott-13 ARE-14 Oct-14 Source Cush* Oink feeder 1 After peaking in late 2014 / early 2015, railroad shares declined 40% on average from peak to trough (vs. an essentially flat S&P 500 during that time) amidst industry-wide carload declines due to weak industrial activity and a significant decrease in coal demand. We note that CP was the worst performing railroad peak to trough (-50%) given its higher exposure to energy related carloads while CNI outperformed (-31%) given its undersized exposure to coal and Canadian crude. Railroad shares began to recover in late 2015 / early 2016 as fears over further volume declines subsided. Performance was relatively similar across the board until Hunter Harrison left CP to join CSX. Since then, CSX has been the Page 36 Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0064306 CONFIDENTIAL SDNY_GM_00210490 EFTA01371109