31 October 2017 Railroads Canadian Rails clear outperformer as investors anticipate significant margin improvement and an inflection in free cash flow. IFigure 76: Railroads with more energy/coal exposure faired poorly in 2015 U. 40 Oct-14 06-15 Aprbl Sane 0400se as; /Wife Od." 40P17 01247 1 U.S. Class I rails (CP, NSC, UNP) currently trade on average at 19.3x NTM EPS, which is about a 300/. premium to the average this decade (14.6x). Relative to the S&P 500, the U.S. Class l's are trading at 1.07x, which is a 9% premium to their historical average (3.98x). The relative premium makes sense, in our view, given the outsized benefit from potential tax reform that U.S. railroads would see compared to the rest of the S&P 500. Canadian Class I rails currently trade at 18.5x NTM EPS, translating to a 17% premium to the average this decade (15.8x). On a relative basis, however, the Canadian rails are trading at 1.02x the S&P 500, 4% below their historical average (1.07x). Figure 77: U.S. Class I rail historical valuation 22x 20x I8x 16x 14x 12x 10x 60% 10x CI a U.S. Class I NTM P/E Relative to SPX (NTM) eg eft 'e eV, W l0 N k, C ft a. to S IFigure 78: Canadian rail historical valuation 130% 20x 120% 18x 110% 100% 16x 14x 12x 70% —Can. Class I NTM P/E Relative to SPX (NTM) a a m a a in r0 ro N A Et. Sk 24 Sant Deutsche ant. lierSer Son Detesche Brat Ascr-Ser Deutsche Bank Securities Inc 130% 120% 110% 100% 90% 80% 70% 60% Page 37 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0064307 CONFIDENTIAL SDNY_GM_002 10491 EFTA01371110