ABOUT US PRIVATE NETWORK

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2 ABOUT US Stirling Infrastructure Partners is an experienced investment advisor to institutional investors. We maintain trusted relationships with capital providers that are interested in allocating capital into the infrastructure asset class. In summary, our firm performs three key functions. Firstly, we provide expertise to pension funds as an independent and objective investment advisor. We carry out due diligence on infrastructure asset manager funds, assess their investment strategy, and identify the asset managers that are most aligned to the pension fund's portfolio investment strategy and its target return on investment. Secondly, our firm originates, carries out due diligence and provides advice to project owners concerning infrastructure investments so that they are developed into suitable investment propositions for institutional investors to allocate capital. Finally, our distribution team has firm relationships with pension, insurance, sovereign wealth and infrastructure funds globally, whom we work with closely and whose investment strategies we understand. If an investment is relevant, we can present it to those funds for direct investment. PRIVATE NETWORK Stirling Infrastructure Partners is now in contact with over pension funds and asset manager professionals globally. We invite qualifying organisations and individuals to join this network. Qualifying organisations include pension funds, sovereign wealth funds, insurance funds and asset managers. This network enables effective capital allocation into infrastructure funds, direct investment projects and co-investments. Participants within the network can share market intelligence and data on investment strategies; participants can also raise capital for their funds and specific projects.

3 Infrastructure shelters institutional investors amid rising political risk and populism Stirling Infrastructure Partners is pleased to release the results of the Institutional Infrastructure Survey. This study has been prepared to provide institutional investors, peers and observers with an insight into the current global investment trends and the attitudes and preferences of investors towards infrastructure as an asset class. Michael Stirling Chief Executive Officer Stirling Infrastructure Partners SURVEY FACTS AT A GLANCE Participants: 44 66% Europe 11% North America 23% Rest of world Total current infrastructure allocation: $63 billion Average infrastructure allocation per respondent: Current: $1.5 billion Target: $1.8 billion Total AUM: $6.8 trillion** Institutional investors now have a significant size and consequently an increasing role as financial intermediaries with large pension fund assets for OECD countries representing $30.2 trillion, which corresponds to 61.9% of total OECD GDP. In times of lower yields and global uncertainty, pension and sovereign wealth funds are increasing their allocations towards more predictable and lower risk investments. The political environment is becoming increasingly populist in continental Europe and North America, which might lead to changes in economic policies. There has also been higher volatility in traditional currency and bond markets, and a sustained low interest rate cycle. This means investment decisions have become more complex for these intermediaries and has led to increasing focus on alternative investments, including infrastructure investments as they effectively meet their diversification and return objectives. The OECD estimates that $53 trillion of investment will be needed to meet infrastructure demand over the coming decades, of which over $11 trillion will be required for ports, airports and key rail routes alone. Therefore, increased privatesector investment in strategic transport infrastructure will be essential for meeting this demand. In, the infrastructure landscape presents a new range of investment opportunities for institutional investors to evaluate their allocation of capital into the asset class. These political and economic factors require institutional investors to review their allocation strategy to take into consideration the new political environment. US President Donald Trump has stated as a central policy his vision of a 'golden age' of private investment into US infrastructure development and more fiscal spending. How will the new US administration change its regulatory policies to enable this objective? Obama's movement towards clean power will not be as vigorously supported by the new US administration, with the consequence that it will become less attractive to invest into the US 'green' infrastructure projects due to President Trump's support of fossil fuel energy sources. Estimated 2014 *Target allocation for individual respondents revised to current allocation when target allocation was zero and current allocation was non-zero **Total Assets Under Management (AUMs) for all respondents is projected using the average of known AUMs

4 Canada has a well-developed project finance market with a lower risk profile (being an OECD economy). However, as an oil exporting economy, the prospect of a volatile currency needs to be considered for investment decisions. South American economies are broadly linked to commodity prices. This makes those economies more vulnerable to currency volatility and devaluation. However, this region has been progressive in terms of deregulating its electricity industry. Argentina, Brazil, Chile and Colombia have introduced different electricity market systems. This has attracted interest from institutional investors to allocate into these markets. The Brazilian economy is the largest with a high demand for infrastructure, but the fallout of political corruption has impacted investment sentiment with a full resolution remaining distant. Currency and political risk remains a barrier to more rapid investment into this region. is likely to see further political change in Europe, with elections approaching in France, Germany and the Netherlands. The European Parliament will need to reassess the budgets of some of its key policies to respond to the changes that are occurring within the EU. However, the European Commission remains committed to mobilise seed capital of 315 billion through the 'Juncker plan', seeking to make investment into infrastructure more accessible to institutional investors. The current survey results are consistent with data from Europe in, and they confirm that Europe continues to be one of the most sought after markets for pension funds to allocate capital into infrastructure projects. However, the impending departure of the UK from the European Union (Brexit) will require increased monitoring of the UK's economic environment post Brexit and a possible revaluation of domestic infrastructure assets. The BRICS nations (Brazil, Russia, India, China and South Africa) are taking initiatives to open their markets to greater foreign investment, seeking to integrate Public-PrivatePartnership (PPP) models as a source of finance for projects. Middle-Eastern governments are also increasingly seeking to diversify their economies and are opening their markets to co-investment with foreign investors into local infrastructure sectors. With the new Asian Infrastructure Investment Bank (AIIB) entering the market there will be increased competition amongst the development banks, something not limited to the Asia-Pacific region. In Australia, municipalities present new opportunities to invest in local infrastructure, whereas Australian export and commodities infrastructure remains sensitive to the global demand-supply, particularly the Chinese economy. During times of increasing uncertainty, capital tends to congregate into lower risk developed markets. Africa has shown a decline in investment interest due to rising political risk and corruption, as the Institutional Infrastructure Survey notes in comparison to the report. Globally, more governments are seeking investment from private markets, hence leading to increasing opportunities to invest. On top of that, both institutional investors and lenders are becoming increasingly comfortable in understanding this asset class. This shift implies that previous investments that were not so easily funded now have more access to multiple sources of financing. The market is currently at an evolutionary stage with more experience and greater innovation being applied for financial and technological progress. However, knowing how to assess the right opportunities and to mitigate political, economic and regulatory risk remains at the forefront of institutional investors' minds.

5 Survey Results Optimism and increased appetite Survey respondents expect future infrastructure allocations and holding periods to increase. The fourth Institutional Infrastructure Survey, conducted by Stirling Infrastructure Partners between November and January provides a snapshot of a burgeoning institutional asset class. 1) Geographical spread of respondents North South Europe America America 0 Africa 7 Asia 9 2 Australia Middle East Figure 1 44 institutional investors were surveyed from across the globe. Respondents came mainly from Europe, but also from North America, South America, Asia-Pacific, Australia and the Middle East. The average allocation to infrastructure across the respondents is $1.5 billion, while the largest investor owns $13 billion of infrastructure assets. The sample for the survey differs each year, but it is nonetheless interesting to compare results year-on-year from what is a substantial cross section of the investment in infrastructure. The findings support the notion that infrastructure has become an established asset class for institutional investors.

6 Investment appetite and intentions 2) Which of the following applies most? Considered an Have invested in Have never Definite plans to May invest in investment in infrastructure invested in invest in infrastructure in infrastructure the future but since infrastructure infrastructure in the future recently, but divested decided against it Figure 2 There is a marked increase in respondents from those with a non-committal state to those having definitive plans to invest in infrastructure over the short term (Fig. 2), respondents with definitive plans to invest have risen from 9% to 70%. 3) Do you expect your allocation to change over the next 18 months? Rise Fall 41 5 Remain stable Figure 3 As for investment trends, Fig. 3 shows that investment trends remain robust with no responses showing a fall in the level of infrastructure investment over the next 18 months all respondents expect it to be either stable or increasing. Furthermore, there is a rise in the number of respondents who expect investments to increase over the next 18 months from 54% to 64%.

7 4) How much do you expect to invest or commit over the coming 18 months? Up to 20m Zero / Undisclosed m m m Over 200m Figure 4 Similarly, Fig. 4 shows that investment appetite remains robust with a majority (52%) of respondents increasing investments in notional terms to above 100million. Investment intervals of both million and greater than 200million have registered an increase from the previous year's survey. 5) What investment holding period are you comfortable with for infrastructure? years years 5-10 years years More than 15 years Figure 5 The holding period for infrastructure investments continues to shift towards a longer time horizon as shown in Figure 5. We note that the previous survey shows that most holding periods were between 5-15 years (73% representation in ), but have now shifted to 10 years or more (73% representation in ).

8 Allocations, approaches and targets 6) Which of the following types of assets have you invested in and are interested in? Airports Rail Ports LPG storage Toll roads Water Renewables companies Figure 6 Fig. 6 presents trends in sectorial allocation, where respondents were asked to choose which sectors they were most likely to invest in. Respondents investing in airports, toll roads and renewables show an increase from the previous survey and these remain the top 3 sectors of interest. Of these, renewables show a significant increase, mainly driven by technological innovation and increased viability (increase from 70% in to 89% in ). An increase is also seen for airports (65% in to 77% in ) and toll roads (59% in to 73% in ). Other sectors show levels of interest that are like those of the previous year. 7) Which geographical regions have you invested in and are interested in? North Western Central & Nordic Eastern countries America Europe Europe Latin America 5 11 Africa 2 Asia-Pacific 3 Middle East Figure 7 Regional portfolio allocation trends can be seen from Fig. 7, which shows that there is a preference towards capital allocations into developed markets and OECD countries. The data shows that there is also increasing investment in Latin America, Asia Pacific and Central & Eastern Europe. However, there is a slight decrease in allocation to Africa in (11% respondents in to 5% in ).

9 8) Are you more interested in infrastructure equity or debt, or a combination of the two? Debt Equity 43 A combination Figure 8 Preferences towards type of investment between equity, debt or a combination of the two can be seen in Fig. 8. Previous results and current responses are very similar, with most respondents either preferring equity or a combination of equity and debt. 9) Do you invest directly in projects, or indirectly through funds or listed investments? Direct IndirectFunds Listed Unlisted Combination Figure 9 As seen in Fig 9, 50% of respondents make allocations by making direct investments and using asset managers, whereas 36% exclusively allocate using asset managers. The remainder of the respondents only allocate through direct investments. The choice of a combination of investments was introduced for the survey.

10 10) What are your annual return requirements for infrastructure investments? % 5-10% % % Figure 10 The majority of investors are targeting an annual yield of 5-15% from infrastructure. The largest group (66%) is targeting returns of 5-10%, while about a quarter of investors are aiming for 10-15%. Only 7% of investors are seeking sub-5% yield, and only 5% investors surveyed were targeting beyond 15%. Conclusions Of the 44 funds surveyed, 39 allocated capital into infrastructure and only 5 respondents did not do so. The reasons cited for not allocating to infrastructure were the unsuitability of investment structures and vehicles, lack of internal resources to perform due diligence, illiquidity of the asset class and lack of suitable external advice. In summary, our analysis of survey results shows an increased and definitive investment appetite and allocations to infrastructure. Furthermore, institutional investors show a willingness to make commitments to longer term investment beyond a 10 year period. Although a longer investment horizon comes with increased duration risk, the inflationlinked stable income streams make these investments attractive to institutional investors. Renewables, toll roads and airports remain the top 3 investment sectors, while Latin America, Asia Pacific and Central & Eastern Europe show an increase in investment interest. Moreover, the survey results show a preference for equity only allocation or a combination of debt and equity allocations compared to debt only allocation. Interestingly, half the respondents were using a combination of direct investments and asset managers. Finally, most respondents are targeting a return in the 5-10% range for infrastructure.

11 Further Information If you would like further information with regard to the survey, our private network or support in allocating to the infrastructure asset class, please contact us at: Tel: +44 (0) Stirling Infrastructure Partners, 84 Brook Street, Mayfair, London W1K 5EH Stirling Infrastructure Partners is an advisor to institutional investors on allocation of capital into the infrastructure asset class. Stirling Infrastructure Partners is regulated by the Financial Conduct Authority.

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