BRAZIL BBB- / Stable (S&P)

The Brazilian economy registered a contraction of 0.9% in the second quarter of 2014, following growth of 1.91% (y/y) during the first quarter.

Looking forward, a survey by the central bank suggests that Brazil’s GDP will expand 0.70% in 2014, a figure which was been revised downward

almost weekly from a previous forecast of 3.8% in early 2014. The central bank has announced that it plans to boost lending by US$66 billion to

spur development. The forecast for 2015 is 1.5%. The Outlook on the ratings was lowered by Moody’s Investor Services to negative in

September.

RATIONALE Brazilian yields are generally lower than the average BBB- yield curve. Yields: Will rise as October election approaches.

Currently at 140 bps, Brazil’s 5 year CDS is expected to climb. CDS: Will rise to 150 bps by end of Sept 2014

BARBADOS BB- / Negative (S&P)

Economic activity in Barbados was flat during the first half of 2014, with the Central Bank reporting zero growth. This mirrors economic activity

during the first half of 2013, which was also reported at 0%.Foreign reserves were estimated at US$547 million at the end of June 2014,

providing 15.1 weeks of import cover (goods & services). This compares to foreign reserves of US$610 million at the end of June 2013, which

provided 16.5 weeks of import cover. Gross public sector debt (as a percentage of GDP) was reported at 108.8% in June 2014, up from 102.8%

in June 2013. NIS holdings of government paper is estimated at about 67% of its portfolio, above the guideline recommended in the 13th

actuarial review to limit holdings in government securities to no more than 57%.

RATIONALE

Barbados yields remain higher than similarly rated countries. Yields: 10 yr will increase to 8.25% by Sept 2014

Import cover and reserve levels to decline following exhaustion of 2013 loan.

COLOMBIA BBB / Stable (S&P)

GDP in the first quarter of 2014 was reported at 6.4%. The surprisingly strong result was attributed to increased coal and coffee production. Exports remain one of the main drivers of growth, accounting for over 15% of GDP. After Colombia's budget deficit widened slightly in 2013, the position should improve in 2014 and 2015.

RATIONALE

Yields are generally lower than Panama but higher than recently upgraded Philippines.

5 yr CDS at 88 bps presently. Re-election of President Santos will support negotiations with insurgents.

CDS: To stay below 90 bps to Sept 2014.

FIXED INCOME (LATAM)

CHILE AA- / Stable (S&P)

The Chilean economy grew by a 1.9% in the second quarter of 2014, following growth of 2.4% during the first quarter. Growth in the mining sector increased by 3.96%, spurred by a 4.54% expansion in the copper industry. The state copper producer CODELCO is set to receive US$ 4 billion over the next 4 years to fund its development. Policy makers at the central bank forecast growth of 3.75% to 4.75% in 2014. Chile’s IMACEC Index has indicated an average expansion of 2.23 for the first half of 2014.

RATIONALE

Country risk metrics superior to similarly rated peers

5 yr CDS currently at 70bps. No deterioration expected. To recover with US economy CDS: To stay below 80 bps to Sept 2014

COUNTRY EXPECTATION

Market

Insights SEPTEMBER 2014

1

FIXED INCOME (LATAM) COUNTRY EXPECTATION

DOMINICAN REPUBLIC B+(Stable)

The Dominican Republic economy grew by 4.9% during the months of the April to June 2014, showing some positive progress in 2014. The government, led by Danilo Medina was able to make some significant inroads in reducing the fiscal deficit to 5% of GDP in 2013 down from 8.2% in 2013. This was mainly due to the government passing new tax reform legislation that attempted to boost revenue while at the same time curbing government capital expenditure. S&P has projected that this deficit will fall gradually to 4.5% of GDP in the current year.

RATIONALE

Inflation has remained relatively stable, as Dominican Republic recorded inflation at 3.70 % in May of 2014

CDS: Inflation remains manageable above 3.5% as at Q3 2014.

EL SALVADOR BB- /Negative (S&P)

Growth in the first quarter of 2013 was reported at 2.0%, up from 1.8% in the fourth quarter of 2013. Growth in 2014 is projected at 2.3%. Dysfunctional political governance presents a significant challenge to growth in El Salvador. Pressure for continued social spending and the lack of FDI will likely see the country's Debt/GDP ratio rising to 50% in 2014. The level of international reserves fell by 5.03% between the first and second quarters of 2014

RATIONALE 5yr CDS currently at a low of 403bps, no immediate threats are present. CDS: Not exceeding 440bps in Q3 2014

MEXICO BBB+ / Stable (S&P)

Growth in the second quarter of 2014 was reported at 1.6%, down from 1.8% in the first quarter. This corresponds with the Mexico IGAE index which suggests an average increase in economic activity of 1.8% for the first six months of the year. Mexico's oil production has fallen some 25% since 2004. Moves to open up the sector to private producers are geared towards offsetting this decline. The outlook for Mexico is heavily dependent on the recovery in the US, which accounts for 80% of the country’s exports.

RATIONALE

Yields are generally in line with similarly rated peers, namely Peru

5yr CDS is currently at 75bps. Growth in the US economy should support CDS levels. CDS: Not expected to exceed 100bps in Q3 2014

PANAMA BBB / Stable (S&P)

The Panamanian economy expanded by 5.8% in the first quarter of 2014, which compares to growth of 7.6% in the same period of 2013. Mining and construction increased by 12.3% and 16.1% respectively. Weaker expansions were reported by the Manufacturing (0.9%), Retail (2.2%) and the hotel/restaurant sectors (0.7%). The logistics sector (which contributes 25% of GDP) expanded by 7.7% while the finance sector (13% of GDP) expanded by 4.4%.

RATIONALE

Panama’s yield remain higher than similarly rated peers, namely Colombia and the Philippines

Currently at 75bps. CDS: To remain below 90 bps in Sept 2014.

PERU BBB+ / Stable (S&P)

The Peruvian economy grew by 1.7% during the second quarter of 2014, following growth of 4.8% y/y during the first quarter. The nationally important mining sector contracted by 4.4% while manufacturing contracted by 3.4%. Construction contracted by 0.4%. The decline in mining was attributed to poor commodity demand and the subsequent weak demand. The central bank’s Economic Activity Index indicates an average expansion of 3.74% for the first five months of 2014. The Central Bank expects that the economy will grow by 4.4% in 2014 and 6.0% in 2015.

RATIONALE

Yields are generally lower than similarly rated peers, namely Mexico

Currently at 94 bps, no significant deterioration is expected in 5 yr CDS levels. CDS: To stay below 120bps during Q3 2014

Market

Insights SEPTEMBER 2014

2

URUGUAY BBB- / Stable (S&P)

The Uruguayan economy expanded by 2.4% during the first quarter of 2014. This follows growth of 4.6% during the fourth quarter of 2013. GDP for full year 2014 is expected to average 3%. The public-sector debt burden is likely to remain stable, or decline slightly, as a share of GDP in the next three to four years. Less than 60% of central government debt is in local currency. Moody’s upgraded Uruguay’s credit rating to Baa2 in May 2014. On June 2, 2014, Standard & Poor's Ratings Services affirmed its 'BBB-'long-term foreign currency ratings on Uruguay.

RATIONALE

Yields in line with similarly rated peers

5 yr CDS resistance at 160bps broken. Currently at 133bps. CDS: To increase to 140bps by Sept 2014.

FIXED INCOME (LATAM) COUNTRY EXPECTATION

Market

Insights SEPTEMBER 2014

EASTERN CARIBBEAN CURRENCY UNION

Real Gross Domestic Product (GDP) in the ECCU is expected to increase from 1.1% in 2013 to 1.7% in 2014 and 2.1% in 2015. For the year ending March 2014, the health of the region’s tourism industry is expected to have improved, with an estimated increase in tourism receipts of 2.3%. Total stay-over visitor arrivals to the ECCU were provisionally estimated to have increased by 1.0%(y-o-y). These gains can be attributed to a 3.9% increase in arrivals from the US. There was, however, a 3.1% contraction in UK arrivals and a 2.4% decline from the Caribbean. Inflation is expected to remain subdued at 1.7%. Average import coverage for the region is estimated at 4.6 months in 2014, up from 4.4 months in 2012. The ECCB reports that liquidity in the commercial banking sector remains buoyant with total deposits estimated to have increased by 5.2%from 4.2% in the corresponding period of 2013. According to the IMF, limited fiscal space and excessive public debt, financial sector stress, and weak external competitiveness continue to hold back economic recovery.

COUNTRY CREDIT RATING 2013 2014f 2015f

Anguilla CariBBB+ (CariCris) -0.32% 0.77% 1.12%

Antigua & Barbuda - 0.14% 1.91% 3.54%

Dominica CariBBB- (CariCris) 0.02% 1.61% 1.65%

Grenada SD (S&P) 2.74% 1.67% 1.71%

Montserrat BBB- /Stable (S&P) -0.88% 1.29% 1.61%

St. Lucia CariBBB (CariCris) -1.59% 2.06% 2.35%

St. Kitts & Nevis - 1.95% 3.04% 3.46%

St. Vincent & the Grenadines B2/Stable (Moody’s) 3.14% 1.67% 1.76%

Source: Eastern Caribbean Central Bank

3

FIXED INCOME (ASIA) COUNTRY EXPECTATION

CHINA AA- / Stable (S&P)

China's economic growth increased slightly to 7.5% in the second quarter of 2014, meeting government’s full year target. This shows an

increase from 7.4% in the first quarter. Despite this slight increase, there are some concerns as it relates to weak growth in investment, retail

sales and bank lending for July. Headline inflation remained stable as well for August at 2%. One area of concern remains instability in the

manufacturing sector, which showed a dip in the PMI of roughly 50.2 in August down from July’s 51.7. This reflects the need for more

government pro- growth strategies as the economy weathers this period of instability.

RATIONALE

China’s Manufacturing PMI declined to 50.2 in August compared to 51.7 in July Expected to stay greater than 50 by 3Q 2014

Currently averaging roughly 90bps, China’s 5 year CDS is expected to remain stable. Not exceeding 95bps before 3Q 2014

INDIA BBB- / Stable (S&P)

India’s electorate voted overwhelming in April 2014 for a change of government, with Narendra Modi being able to garner a convincing mandate, the highest in close to 30 years. The economy was able to make a strong rebound of 5.7% in the 2Q 2014, up from the first quarter of 4.6%. The economy has been saddled with high rates of inflation in recent times, which has been a challenge for the new government. Following his first Independence day address, Prime Minister Modi has signaled plans to cut bureaucracy, set limits on the export of staples but will ultimately require more concrete long term measures such as developing agricultural access roads as a means of cutting transportation costs to control inflation. With its current credit rating from S&P at “BBB-“, the agency has expressed concern over the policy direction as to how the government expects to generate economic growth and its incentives at boosting FDI (Foreign Direct Investment).

RATIONALE

Foreign Institutional Investments(FII) are expected to increase given greater investor confidence FII likely to increase by 30-40 % by 3Q 2014

INDONESIA BB+ / Stable (S&P)

The Indonesian economy recorded 5.1% economic growth in the Q2 2014, slightly lower than the 5.2% growth recorded in Q1 2014. Against this backdrop the country has witnessed an intense presidential campaign over the past few months, with president-elect Joko Widodo due to be inaugurated in October. Top of the list for the new government will be to boost economic growth and deal with the country’s current account deficit which stood at 3.4% of GDP as at the end of 2013

RATIONALE

Indonesia’s 10-year yields remain lower than that of similarly rated Turkey 10-year yields should not exceed 5% by 3Q 2014

Currently averaging 179bps, Indonesia’s 5 year CDS is expected to remain stable. CDS Levels: Expected to remain above 170bps average as at 3Q 2014

PHILIPPINES BBB / Stable (S&P)

Philippines’ economy continued to demonstrate strong resilience recording handsome growth figures for the first half of 2014, settling at 6.4% as at Q2 2014. Additionally the unemployment rate for the country has been seen as steadily decreasing recorded at 6.7% in July down from 7% in April 2014. Despite the likelihood of higher interest rates, both consumer and business confidence in the country continue to remain positive.

RATIONALE

Philippines’ 6 year yields remain lower than that of similarly rated Panama 6-year yields should not exceed 3.5% by 3Q 2014

Currently averaging 144bps, Philippines ’5 year CDS is expected to remain relatively stable Not exceeding an 145bps before 3Q 2014

Market

Insights SEPTEMBER 2014

4

FIXED INCOME (EUROPE, MIDDLE EAST & AFRICA) COUNTRY EXPECTATION

QATAR AA / Stable (S&P)

According to the IMF, Qatar is expected to experience economic growth of 5.9% in 2014 and 7.1% in 2015. Qatar’s economic growth recovered to 6.2% y-o-y in Q1 2014 after a slowdown in the final quarter of 2013 of 5.6%. This increase was as a result in a boost in construction. Activity in Qatar’s construction sector climbed to 19.6 % during Q1 2014, greater than the 13.6 % rise in 2013. S&P notes that Qatar enjoys a “stable” outlook based on its high economic wealth levels and strong fiscal position however is limited in its monetary flexibility and dependence from banks on external financing.

RATIONALE

Currently averaging 97bps, Qatar’s 5 year CDS is expected to remain stable. Not exceeding 100bps before 3Q 2014

SOUTH AFRICA BBB- /Negative (S&P)

With calls to implement structural changes in rescuing the South African economy, the IMF cut the nation’s economic growth for 2014 to 1.7% down from 2.3% in April 2014. This was mainly due to the labour unrest in mining sector that has resulted in repeated strikes and a weak recovery in global demand. The economy has seen a near brink of entering recession, but has recorded a growth of 0.6% in the second quarter of 2014. The unemployment rate continues to be problematic, currently at 25.5% as at Q2 2014. Many have added that there should be a more enabling environment to boost entrepreneurship, and enacting more pro-labour and investor friendly laws. This will assist in curbing the labour instability and foster much needed foreign direct investments that will assist in South Africa realizing full potential.

RATIONALE Currently averaging 165bps, South Africa’s 5 year CDS is expected to further fluctuate given weak economic data

Expected to remain within 170bps by 3Q 2014

TURKEY BB+ /Negative (S&P)

Turkey’s economy has seen the harmful effects of its political instability in recent times. In an environment where policies are becoming less predictable for investors, Turkey’s outlook has been revised from “stable” to “negative” in mid April 2014 by Moody’s. The economy has been burdened by increased pressure on the country’s external financing and growing uncertainty about the medium-term growth due to the heightened political tension. Moreover, the country’s inflation has seen marginal increases from 2013, declining growth in exports coupled by high interest rates has seen the IMF reducing its forecast growth lower than 2013 for Turkey in 2014 to 2. 3%.

RATIONALE

Inflation continues to be a problematic factor and is expected to rise CPI is excepted to be at least 9% by 3Q 2014

Currently averaging 193bps, Turkey’s 5 year CDS is expected to remain moderately high. CDS Levels: At minimum 190bps as at 3Q 2014

UNITED KINGDOM BBB /Stable (S&P)

The British economy expanded 0.8% in the second quarter of 2014, similar to that of the 1Q 2014. There were slight declines in construction and agriculture by 0.5% and 0.2% respectively. Inflation continued to decline gradually, from 1.9% in June to 1.6% in July 2014. There has been a steady decline in the unemployment rate, falling from 6.5% in May to 6.4% in June. More positive data showed that the public sector net borrowing was in deficit by £0.2 billion in June 2014 down from £0.8 billion a year earlier.

RATIONALE As the economy begins to show buoyancy once again, UK manufacturing PMI is excepted to rise PMI Rise of at least 52-55 for 3Q 2014

Currently averaging 58bps, UK’s 5 year CDS is expected to remain relatively stable CDS Levels: Remain relatively low, not exceeding 65bps as at 3Q 2014.

Market

Insights SEPTEMBER 2014

5

FIXED INCOME (EUROPE, MIDDLE EAST & AFRICA) COUNTRY EXPECTATION

POLAND A-/ Stable (S&P)

The Polish economy has seen decent growth during the first half of 2014, recording 3.3% at the end of the second quarter of 2014. The central bank expects a 3.6% growth for 2014. Despite minimal growth in retail sales (2.1%) and industrial production (2.3%) in July 2014, there remain concerns of deflation, as the country’s CPI took a dip below 0%. There have been speculations of a rate cut by central bank as a means to stimulate spending in the economy in addressing the deflation risk. Moreover, given the ban imposed by Russia on the importation of foods and fruits from Poland, it has added to pressure in its attempt of spurring demand. In its affirmation in late 2013, Moody’s has maintained its “stable” outlook for Poland given its ability to manage moderately affordable debt burden and improving external finances.

RATIONALE

Currently averaging 140 bps, Poland’s 5 year CDS is expected to remain stable. CDS Levels: Not exceeding 145bps before 3Q 2014

Market

Insights SEPTEMBER 2014

6

FIXED INCOME RELATIVE VALUE ANALYSIS

BOND DESCRIPTION YEARS TO

MATURITY YIELD TO

MATURITY (%) S&P RATING

SPREAD OVER U.S. BENCHMARK TREASURY (BPS)

PERU 7.35% 07/21/25 10.84 3.782 BBB+ 1.378

MEXICO 8.30% 08/15/31 16.91 4.315 BBB+ 1.585

PERU 8.75% 11/21/33 19.18 4.570 BBB+ 1.754

MEXICO 6.05% 01/11/40 25.32 4.677 BBB+ 1.691

PERU 5.625% 11/18/50 36.17 4.805 BBB+ 1.595

PHILIPPINES 6.50% 01/20/20 5.34 2.722 BBB 1.004

PANAMA 5.20% 01/30/20 5.37 2.997 BBB 1.273

BAHAMA 5.75% 01/16/24 9.33 4.893 BBB 2.597

COLOM 8.125% 05/21/24 9.68 3.930 BBB 1.609

PANAMA 9.375% 04/01/29 14.54 4.592 BBB 1.971

BAHAMA 6.95% 11/20/29 15.18 5.458 BBB 2.806

PHILIP 9.50% 02/02/30 15.38 4.265 BBB 1.603

PANAMA 6.70% 01/26/36 21.36 4.844 BBB 1.958

PHILIP 5 .00% 01/13/37 22.33 4.146 BBB 1.233

BAHAMA 7.125% 04/02/38 23.54 6.434 BBB 3.489

BRAZIL 12.75% 01/15/20 5.33 2.910 BBB- 1.196

SOAF 5.50% 03/09/20 5.48 3.720 BBB- 1.970

BRAZIL 12.25% 03/06/30 15.47 4.476 BBB- 1.810

RUSSIA 7.50% 03/31/30 15.54 4.868 BBB- 2.199

BRAZIL 5.625% 01/07/41 26.31 5.022 BBB- 2.014

SOAF 6.25% 03/08/41 26.48 5.091 BBB- 2.080

RUSSIA 5.625% 04/04/42 27.55 5.773 BBB- 2.740

INDON 5.875% 03/13/20 5.49 3.501 BB+ 1.748

TURKEY 7.00% 06/05/20 5.72 3.785 BB+ 1.978

COSTAR 9.995% 08/01/20 5.88 4.571 BB+ 2.731

INDON 8.50% 10/12/35 21.07 5.389 BB+ 2.512

TURKEY 6.00% 01/14/41 26.33 5.345 BB+ 2.338

COSTAR 5.625% 04/30/43 28.62 6.516 BB+ 3.462

INDON 6.75% 01/15/44 29.33 5.323 BB+ 2.255

BARBAD 7.25% 12/15/21 7.25 8.392 BB- 6.313

ELSALV 7.75% 01/24/23 8.36 5.737 BB- 3.527

ELSALV 8 1/4 04/10/32 17.57 6.626 BB- 3.870

BARBAD 6 5/8 12/05/35 21.22 8.464 BB- 5.582

ELSALV 7 5/8 02/01/41 26.38 7.005 BB- 3.996

NOTE The relative value analysis contrasts similarly rated bonds of similar tenors (years remaining to maturity) so that yields can be compared.

Market

Insights SEPTEMBER 2014

7

BANKING EXPECTATION

NATIONAL COMMERCIAL BANK JAMAICA LIMITED (NCBJ)

NCBJ interest income has grown 5% or JMD1871 million, primarily due to growth in net loans, advances and investment securities portfolios. As a testament of positive performances NCB Capital Markets has been named Best Investment Management Company for the Caribbean 2014 by the internationally acclaimed World Finance Magazine. Investors should be aware of the exchange rate risk involved with Jamaican stocks. The Jamaican dollar depreciated by 40 basis points for half year 2014 and currently trades at JMD0.0553 to 1TTD. NCBJ is trading at P/E 5.5x, D/Y 6.3%.

RATIONALE

Largest financial institution in Jamaica Market Price: TT$1.00

Positive ROE of 15.6% Intrinsic Price: TT$2.94 Customer deposits of JMD204.9 billion, increased by 19%. UNDERVALUED

Market

Insights

FIRSTCARIBBEAN INTERNATIONAL BANK LIMITED (FCI)

CIBC First Caribbean International Bank is a Canadian controlled, regional bank with its core operations in Barbados and the Bahamas. The Bank’s performance and operations have been challenged within recent periods mainly due to the impact of the subdued economic climate in its core locations. For the nine months ended July 2014, the bank reported a net loss of USD 176 million. Performance was impacted by large loan losses incurred and goodwill impairment charges. For the third quarter however, the Group posted an improvement in revenues, net income and operating profit compared to the same quarter last year, as the Bank engages in reorganization and expense reduction initiatives to restore growth and profitability. FCI trading price has suffered a year to date drop of 23.1% on the TTSE due to a bearish outlook by investors and trading illiquidity. FCI is trading at D/Y 3.8% .

RATIONALE Persistent increase in loan loss impairment expenses Market Price: TT$5.00 Exposure to poorly-performing tourism-based markets Intrinsic Price: TT$3.28 Low levels of growth expected in short-term period OVERVALUED

REPUBLIC BANK LIMITED (RBL)

The RBL Group has demonstrated a consistent performance with steady increase in profits over the last three years. Revenue and profits are driven by steady growth in net interest income from its Trinidad and Guyana operations. The Group reported a 3% increase in net profit of TT$901 million for its 9 month results to June 2014 over same period last year. With an NPL ratio of 3.7%, RBL has strong earnings quality and capacity, however it is threatened by its exposure to its Barbados operations which has an NPL ratio of 12%. The Group is well capitalized and has strong liquidity indicators. RBL is trading at P/E 16.7x, P/B 2.3x, D/Y 3.5%

RATIONALE Steady growth in loan portfolio and net interest income Market Price: TT$121.73 Buy and hold trading limits stock liquidity Intrinsic Price: TT$104.99 Recent bid-ask spread $117-$121.85 OVERVALUED

SCOTIABANK TRINIDAD & TOBAGO LIMITED (SBTT)

SBTT has had a positive trend in profitability for the three year period to year-end 2013, however the bank reported lower profits and net interest income for the nine-month period to July 2014. The Group reported net profit after tax of $390 million a 3% reduction to the same period to July 2013, along with a 0.41% drop in net revenue to $664 million in 2014 (2013 $667 million). This performance reflects the bank’s challenges in the current low interest rate environment. The bank has maintained strong NPL ratios, lower than the industry average, is well capitalized and has positive liquidity indicators. SBTT is trading at P/E 19.2x, P/B 3.2x, D/Y 3.1%

RATIONALE Increased loans and deposits Market Price: TT$61.18 Strong earnings quality , low NPL ratios Intrinsic Price: TT$60.65 Challenged revenue and profit growth OVERVALUED

EQUITY

8

SEPTEMBER 2014

NON-BANKING FINANCE EXPECTATION

GUARDIAN HOLDINGS LIMITED (GHL)

GHL’s top line grew 13% from TTD2.8 billion to TTD3.1 billion for second quarter 2013, due to growth in core businesses -Health and Pensions grew TTD178 million (12%) while the Property and Casualty segment increased by TTD176 million (14%). The Asset Management segment produced operating profits of TTD16 million, an 8% increase over the last year. Operating expenses increased by TTD37 million or 9% of which TTD11 million is related to the Pointe Simon project. GHL is trading at P/E 8.44x, P/B 1.03x, D/Y 4.00%

RATIONALE Market Price: TT$13.50

Operating expenses increased by 9% for Q2 2014 over same 2013 period Intrinsic Price: TT$12.30 Declining investment returns from other activities from low interest rates and absence of attractive investments

OVERVALUED

Market

Insights

JAMAICA MONEY MARKET BROKERS LIMITED (JMMB)

A Preference share was launched for JMMB Ltd, which was oversubscribed by 96% and raised a total of JMD1.47 billion, displaying client confidence in the Group. JMMB experienced continued successful integration of newly acquired the Capital and Credit Financial Group (CCFG) entity into the Group, represented by stabilization of the Merchant Bank’s core revenues, profitability and healthy loan portfolio. For the first quarter end 30 June 2014 the Group recorded operating revenue of JMD2.4 billion, a 16.1% increase over the comparative period April-June 2013. JMMB is trading at P/E 5x, P/B 0.65x, D/Y 4.00%

RATIONALE

Increased market share

Enhancements in electronic services Market Price :TT$0.45

Acquisition in complementary lines of business Intrinsic Price: TT$0.62

MARKET

NATIONAL ENTERPRISES LIMITED (NEL)

NEL year ended 31 March 2014 reflected a significantly lower performance than the previous year. Global prices for investee companies NGC NGL and NGC LNG product declined and profits in Tringen were invested in ensuring plant sustainability, leading to lower dividend receipts. Corporate restructuring of TSTT and changes in NFM accounting policies of retirement benefits has reduced retained earnings by TTD152 million. NEL is trading at P/E 23x, P/B 3x, D/Y 2.59%

RATIONALE

Lower profitability of investee companies Market Price: TT$17.75

Lower dividend receipts from Tringen Intrinsic Price: TT$7.90

TSTT recorded net loss of TTD505.9 million OVERVALUED

EQUITY

9

SEPTEMBER 2014

NON-BANKING FINANCE EXPECTATION

SAGICOR FINANCIAL CORPORATION (SFC)

Sagicor has begun to recover from a poor performance in financial year 2013. The disposal of European exposure has resulted in stronger top and bottom line figures. SFC purchased RBC Royal Bank (Jamaica) Limited as well as RBTT Securities Limited from Royal Bank of Canada without increasing net exposure to Jamaica since the company reallocated its Jamaican asset portfolio. SFC is trading at P/B 0.58 D/Y 4.06%

RATIONALE

Net Income from continuing operations fell 25% in Q2 2014 Market Price: TT$6.25

USD1.5 million loss from discontinued operations Intrinsic Price: TT$4.52

OVERVALUED

Market

Insights

SCOTIA INVESTMENTS JAMAICA LIMITED (SIJL)

SIJL reported a drop in net income for Q3 2014 of 6% compared to the same period to 2013 , due to lower interest income and higher operation expenses. EPS was JMD3.17 compared to JMD3.36 for the same period 2013. Return on Average Equity fell from 16.10% to 13.87% this year. SIJl has an average ROE of 20% and an average 35% dividend payout ratio over the past 7 years . SIJL share price is down 3.33% year to date and is trading at P/E 5.22, P/B 0.62 D/Y 6.55% on the TTSE.

RATIONALE Net profit fell 2.7% year-on year Market Price: TT$1.45 Net income down quarter on quarter down JMD 5 million Intrinsic Price: TT$1.35

MARKET

EQUITY

10

SEPTEMBER 2014

CONGLOMERATE, TRADING & PROPERTY EXPECTATION

AGOSTINI’S LIMITED (AGL)

Agostini Limited reported a 14% increase in net profits for the nine month period to June 2014 , along with an 8% rise in operating profit. Over the last five years, the company reported smooth increases in its after-tax profits, mainly due to its Hand Arnold and Super Pharm acquisitions. However, following the Super Pharm takeover in 2010, profits have been flat, with a 5% decline in 2013. AGL is trading at P/E 16.7x, D/Y 2.65%

RATIONALE Flat projected revenue growth rates following acquisitions Market Price: TT$17.25 Negative operating margins post Super pharm acquisition Intrinsic Price: TT$13.27

OVERVALUED

Market

Insights

ANSA MCAL LIMITED (AMCL)

Ansa Mcal delivered profitable growth trends over the last three years. The quality of the Group's profits are supported by strong operations, with return on equity driven mainly by returns generated on its assets. The Group’s operations are supported by healthy cash flows and good liquidity . Working capital and revenue growth declined in 2013 from the prior year but have remained positive. The Group’s financial strength is supported by low debt ratios. AMCL is trading at a P/B 2.2x, P/E 15.4x, D/Y 2.0%

RATIONALE Market Price: TT$66.24

Consistent dividend payout policy Intrinsic Price: TT$72.03

Strong fundamental performance indicators UNDERVALUED

Exposure to Barbados operations

GRACEKENNEDY LIMITED (GKC)

GKC’s money services segment recorded 18.7% growth in revenue primarily due to the Jamaican and Guyanese operations. The insurance segment displayed recovery demonstrated by a 6.3% increase in profits from underwriting and an absence of extraordinary claims losses experienced in 2013. The banking and investments segment saw a 36.8% decline in profit due to a 105% increase in finance expenses. Investors should be aware of the exchange rate risk involved with Jamaican stocks. The Jamaican dollar depreciated by 40 basis points for half year 2014 and currently trades at JMD 0.0553 to 1 TTD. GKC is trading at P/E 6X, D/Y 2.3%

RATIONALE Large regional corporate entity across diversified markets Expanding food division in the U.S Market Price: TT$3.55 Cash reserves available for banking business and regional expansion Intrinsic Price: TT$3.45 Consistent dividend payout policy MARKET

MASSY LIMITED (MASSY)

Massy Limited (previously Neal & Massy Holdings Limited) saw the impact of its Group-wide rebranding initiative on its bottom line ,reporting a 6% drop in net profit for the nine month period to June 2014 to TT$396 million, due to one time rebranding costs of TT$59 million. Excluding these charges, the Group’s profitability trend continued, reporting a 3% increase in profit before tax to TT$617 million, supported by 12% increase in revenues and 5% rise in operating profits compared to the same period year ago. The Group’s source of growth is mainly from acquisition activity as it seeks to continue diversification and expansion of its operations. Liquidity levels are positive although there has been decline in free cash flows over the last three years. . MASSY is trading at P/B 1.7x, P/E 12.2x, D/Y 2.5%

RATIONALE Strong growth potential from aggressive M&A strategy Strong performance of core business Market Price: TT$68.51 Leverage activity supporting growth strategy Intrinsic Price: TT$70.66 Exposure to Barbados operations UNDERVALUED

EQUITY

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SEPTEMBER 2014

CONGLOMERATE, TRADING & PROPERTY EXPECTATION

PLIPDECO (PLD)

PLIPDECO is host of the Point Lisas Industrial Estate and Port Point Lisas, the second major port of the country. Through its industrial real estate management and port management operations, the Corporation reported profits in the last three years. For the first half of 2014 PLIPDECO reported a profit before tax excluding fair value gains of TT$16.06M, an 8% decrease from the same period last year. Reported revenue grew by 6% to June 2014 compared to a year ago, but extensive repairs to port equipment and salary payments led to a 13% increase in operating and administration expenses.

RATIONALE Steady increases in Group turnover in last 3 years Market Price: TT$4.20 Growth potential from the Port Expansion Project & Logistics Park Intrinsic Price: TT$5.78 Consistent growth in dividend payout UNDERVALUED

Market

Insights

PRESTIGE HOLDINGS LIMITED (PHL)

The Prestige Group has demonstrated its commitment to growth and positive shareholder return through its investments, acquisitions and divestments in recent periods. The Group benefits from a strong brand in a strong geographic location and is focused on maximizing the profitability of this brand through cost reduction, while divesting from unprofitable and challenging locations. Threatened by rising food costs the Group reported lower profits in 2013, but promises positive long-run earning potential. PHL is trading at P/E 12.2x, D/Y 2.4%

RATIONALE Steady growth in revenues from its core brands and locations Market Price: TT$9.50 Growth potential through horizontal integration Intrinsic Price: TT$11.11 Divestments from unprofitable markets UNDERVALUED

EQUITY

12

SEPTEMBER 2014

MANUFACTURING I EXPECTATION

NATIONAL FLOUR MILLS LIMITED (NFM)

For the period ended 30 June 2014, NFM recorded a profit of TTD6.79 million in comparison with a profit of TTD4.67 million for the same period 2013. NFM experienced a 5% decrease in sales volumes, contributing to a 2.4% fall in revenue for the first half of 2014 compared to 2013. Despite the decline, the company maintained similar margins year-on year as cost of sales also dropped 2.7% compared to 2013. Profits increased 9% for the quarter from TTD4.48 million to TTD4.88 million . The company continues to place emphasis on operational efficiencies, thereby cutting cost. NFM is trading at P/E 7.65x, P/B 0.9x, D/Y 6.15%

RATIONALE Limited financial growth Market Price: TT$1.30 Revenue dependent on international cost of grain Intrinsic Price: TT$0.62 Loss of market share to imported products OVERVALUED

Market

Insights

ONE CARIBBEAN MEDIA LIMITED (OCM)

The OCM Group recorded a 5% growth in revenue and a 2% increase in profit before tax over the same period in 2013. Performance was affected by challenges faced in the Barbados and Eastern Caribbean markets and rising marketing cost (17.3%).In the second quarter 2014, OCM acquired a 60% interest in a small innovative digital media company. This acquisition represents less than 0.02% of OCM’s net book value. Group Revenues are expected to increase due to the impending General Election in 2015. OCM is trading at P/E 20x, P/B 2.5x, D/Y 2.96%

RATIONALE Diversified conglomerate within the region Good brand recognition Market Price: TT$25.01 Expected revenue increase over the next year Intrinsic Price: TT$24.31 Consistent dividend growth over past 4years. OVERVALUED

UNILEVER CARIBBEAN LIMITED (UCL)

UCL reported a 0.8% growth in revenue TTD283.3 million for the half year 2014 while reducing cost of sales by TTD0.8 million as a result of tight cost controls. The company commands a strong presence in the domestic market in spite of an intensely competitive environment. UCL invests heavily in advertising and promotion and has increased investments in systems and technology to ensure the company's sustainability in the domestic market. UCL trading on the TTSE is highly illiquid with investors choosing to hold the stock long term. UCL is trading at P/E 26x, P/B 8x, D/Y 3.05%

RATIONALE Increased advertising and manufacturing cost has negative impact on net profit Market Price: TT$64.01 Increased competition from imported goods adversely affects margins Intrinsic Price: TT$52.37 Sluggish consumer demand in relatively stable trading environments OVERVALUED

EQUITY

13

SEPTEMBER 2014

MANUFACTURING I EXPECTATION

THE WEST INDIAN TOBACCO COMPANY LIMITED (WCO)

WITCO continues to post strong growth in the manufacturing sector and in the domestic markets. The Company's strong performance is attributed to 17.8% increase in revenue. Profit after tax for the same period was TTD223.5 million, reflecting an increase of 19.2% over 2013. This performance is driven by its Trinidad and Tobago operations which accounts for 86% of total regional revenue. WITCO paid an interim dividend of TTD1.20 per share bringing total dividend for the first half of 2014 to TTD2.18, a 17.2% increase over the same period 2013. P/E 27.27x, P/B 26.47, D/Y 4.12%

RATIONALE

Single product company Market Price: TT$118.09

Increases in raw materials cost adversely impacts net earnings Intrinsic Price: TT$93.75

Attractive dividend payout and yields but relatively illiquid stock OVERVALUED

Market

Insights

MUTUAL FUNDS EXPECTATION

CLICO INVESTMENT FUND (CIF)

Since the fund’s inception, CIF’s share price is down 12.00%. Net Asset Value (NAV) as at 18 September 2014 was TT$27.72 while the current market price is TT$22.00. CIF is trading at a 20.70% discount. RBL paid an interim dividend on 29 May 2014 of TTD1.25 per share. CIF currently holds 40,072,229 RBL shares, resulting in revenue from dividends in excess of TTD50 million. The fund's assets increased by 0.8% mainly attributed to a combination of a 3.7% increase in local equities held, a 142% increase in accrued income and a 95% fall in fixed deposits. Year-on-year 120 million short term deposits have been held in 2013. These deposits are held with maturity dates of less than 90 days and earns interest of less than 1%. For the half year 2014 CIF shares traded accounted for 10% of total market shares traded. D/Y 4.36%, Share price QTD 2.28%.

RATIONALE Access to Republic Bank Limited shares Market Price: TT$22.00 95% dividend payout policy Intrinsic Price: TT$27.74 Consistent high dividend yield above 4% UNDERVALUED

EQUITY

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SEPTEMBER 2014

TERM DEFINIITION

Annualized Return The average amount of money earned by an investment each year over a given time period.

Asset Management The management of investments on behalf of a client usually by an investment bank. The company will invest on behalf of clients giving them access to wide range of investment products that would not be available to the average investor.

Book Value The value at which an asset is carried on a balance sheet. Determined as the Cost of the asset minus it’s Accumulated Depreciation.

Book Value Per Share An accounting measure of the worth of a single share of company’s stock.

Capital Base The money contributed by the shareholders who first purchased shares in a company plus retained earnings.

Capital Adequacy Ratio A measure of a bank’s capital expressed as a percentage of the bank’s risk-weighted credit exposures.

Conglomerate A corporation that is comprises a number of different, seemingly unrelated business.

Comprehensive Income An accounting measure of the total of net income plus items that affect the owner’s equity but are not reported on the income statement.

Continuing Operations The operating activities of a company, excluding the major segments of the company that are being discontinued.

Debt to Equity Ratio A measure of the proportion of a company’s assets provided by creditors versus owners. The higher the proportion of debt to equity the more risk y the company appears to be.

Discontinued Operations Operations of a division or segment of a company that has been sold, disposed or abandoned or where there is a formal plan to eliminate it from the company.

Dividends Distribution of a portion of company’s earnings, decided by the board of directors to a class of its shareholders.

Dividend Policy The approach a company uses to decide how much it will pay out to shareholders as dividends.

Dividend Yield A financial ratio that shows how much a company pays out in dividends each year relative to its share price. Typically denoted in the financial markets as “D/Y”.

Earnings The after tax net profit that a company produces during a specific period usually a quarter (three calendar months) or a year.

Earnings Per Share The portion of a company’s profit allocated to each outstanding share of a common stock.

Economies of Scale The cost savings that arise with increased output of a product.

Equity Accounting An accounting technique whereby a corporation will document a portion of its undistributed profits from its investment in an associate company.

Financial Leverage An indicator of the degree to which a company uses debt and preferred equity .

Horizontal Integration The acquisition of additional business activities that are at the same level of the value chain in similar of different industries.

Impairment An accounting term associated with a long-lived asset that has a market value that is less that the carrying value of the asset on the balance sheet.

GLOSSARY

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TERM DEFINIITION

Intrinsic Value/Price The actual value or underlying perception of its the true value of a company based on a fundamental analysis of all aspects of a the business , both tangible and intangible. The value may or may not be same as the current market value.

Market Value/Price The current or most recently-quoted price for a market-traded security. It is also used to refer to the most probable price an asset would fetch on the open market.

Market Share The percentage of an industry’s total sales that is earned by a particular company over a specified time period.

National Debt Exchange The process by which the Government exchanges one type of debt for another.

Net Asset Value The value of an entity’s assets less the value of its liabilities , often used in relation to mutual funds. Typically denoted as the “NAV”.

Net Interest Income The excess revenue that is generated from the spread between interest paid out on a bank’s liabilities i.e. deposits and interested earned a bank’s assets i.e. . loans and mortgages.

Operating Expenses Expenses that a business incurs in carrying out daily activities but not directly associated with production , including selling and administration expenses.

Overvalued A stock with a current market price that is not justified by its earnings outlook and therefore is expected to drop in price.

Profit Margin A measure of how much of every dollar of sales a company actually keeps in earnings. Calculated as net income divided by revenues.

Price/Book Value Measures a company’s market price in relation to its book value. The ratio denotes how much equity investors are paying for each dollar in net assets. Typically denoted as “P/B”.

Price/Earnings A valuation multiple that shows how much investors are willing to pay per dollar of earnings. Typically denoted as “P/E”. In general a high P/E suggest that investors are expecting higher growth in the future compared to companies with a lower P/E.

Shareholder’s Equity The amount by which a company is financed through common and preferred shares. Calculated as a firm’s total assets minus its total liabilities.

Undervalued A stock that is selling for a price that is presumed to be below its true intrinsic value.

Unrealized Gain Earnings on a investment that exists on paper and has not been physically obtained.

GLOSSARY

Sources: Research & Analytics, Investopedia, Bloomberg

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Trinidad and Tobago (868) 622 3247 or (868) 653 9857

Barbados (246) 417 6810

St. Lucia (758) 450 2662 or (800) 788 2662

St. Vincent & the Grenadines (784) 453 2662

Market

Insights

Contact: research@firstcitizenstt.com

DISCLOSURE We, First Citizens Investment Services Limited hereby state that (1) the views expressed in this Research report reflects our personal view about any or all of the subject securities or issuers referred to in this Research report, (2) we are a beneficial owner of securities of the issuer (3) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report (4) we have acted as underwriter in the distribution of securities referred to in this Research report in the three years immediately preceding and (5) we do have a direct or indirect financial or other interest in the subject securities or issuers referred to in this Research report.

DISCLAIMER This report has been prepared by First Citizens Investment Services Limited, a subsidiary of First Citizens Bank Limited. It is provided for informational purposes only and without any obligation, whether contractual or otherwise. All information contained herein has been obtained from sources that First Citizens Investment Services believes to be accurate and reliable. All opinions and estimates constitute the author’s judgment as at the date of the report. First Citizens Investment Services does not warrant the accuracy, timeliness, completeness of the information given or the assessments made. Opinions expressed may change without notice. This report does not constitute an offer or solicitation to buy or sell any securities discussed herein. The securities discussed in this report may not be suitable to all investors, therefore Investors wishing to purchase any of the securities mentioned should consult an investment adviser.

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