NIGERIAN INFRASTRUCTURE DEBT FUND (NIDF)

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1 INVESTMENT OPPORTUNITY IN INFRASTRUCTURE FUND January, 2019 Summary: Description MBC Securities Limited is pleased to introduce to you a unique investment opportunity in the SEC and PENCOM approved, Nigerian Infrastructure Debt Fund. The Fund has been approved by NSIA s board with an investment of $5million in Naira equivalent. The fund offers a 7-10 year senior debt instrument (units) with a return of 3-4% above the benchmark 10 years FGN Bond (Currently 15.20%-15.50%). The 10 year FGN bond has historically outperformed inflation rates and is therefore seen as an instrument that adequately hedges against inflation. The Fund pays dividends quarterly and distributes 90% of its net income to unit holders and has paid N17.03 in the last 1year. The Fund is appropriately governed by an experienced Advisory Board and a competent Investment Committee. The Fund s 5-member Investment Committee, which includes an independent member, has over 120 years experience in infrastructure financing and investment management globally. The Fund recently pays N4.40 as Q2 dividend in July, 2018, The Fund is sponsored and managed by Chapel Hill Denham and MBC Securities Limited is an appointed placement agent. Instrument Fund Ratings: Structure of the Fund Status of the Note: Programme Amount: Chapel Hill Denham Nigeria Infrastructure Debt Fund A by Augusto & Co. Close-ended unit trust, regulated by SEC Nigeria Compliant with PENCOM investment guidelines and SEC rules on Infrastructure funds Senior Loans Issuance programme of up to N200billion Proposed Size N16.26billion at an issue price of N Tenor: Minimum Investment Amount: Target Portfolio Returns Distribution Policy NIGERIAN INFRASTRUCTURE DEBT FUND (NIDF) 7-10years NGN 10million Gross: Benchmark FGN Bond yield plus bps Net : Benchmark FGN Bond yield plus bps Quarterly Distribution to unit holders. Funds to distribute at least 90% of its net income MBC Securities Limited 11th Floor, St. Nicholas House, 26, Catholic Mission Street, Lagos Island, Lagos Nigeria /4 oegwuatu@mbcgroup.com.ng yapena@mbcgroup.com.ng gaigbedion@mbcgroup.com.ng MBC Financial Services MBC Financial Services - is a one-stop financial services firm with capabilities in investment banking services which include: transaction advisory, risk management, restructuring and spin-offs, private placements, debt and equity underwriting of public offerings. It also does securities dealing, fixed income, foreign exchange and insurance brokerage. With a history spanning over two decades, the firm has evolved to become a key player in the financial services industry MBC Securities Limited MBC Capital Limited MBC Insurance Limited Target Returns 15% + 3-4% (18-19%) ChilkDum Bureau De Change Annualised Yield 18.20% Fees and Expenses Governing Law: Listing: Management Fee: 1.20% per annum of the NAV of the fund Nigerian Law FMDQ OTC

2 NIDF S KEY HIGHLIGHTS Nigeria and Africa s first and only listed infrastructure Debt Fund Sponsored and managed by Chapel Hill Denham, a leading financial services firm in West Africa NIDF is registered with SEC as an infrastructure Fund and its domiciled in Nigeria as a unit Trust The Fund Manager is rated A by Augusto & Co The fund and the Fund Manager comply with all applicable PENCOM investment guidelines The Fund s 5-member Investment Committee has 120 years experience in infrastructure financing and investment management, including an independent member with global experience The Fund s operations are overseen by an Advisory Board, comprising of the Trustees and PFA nominees The Fund s initial portfolio s in excess of N5billion The Fund is fully invested and has distributed first quarter dividend already in 6 th of October, 2017 The Fund will distribute at least 90% of its net income as dividends, on a quarterly basis An extensive reporting regime is in place to provide quarterly investor updates and annual audited financial statements to all unitholders MBC Securities Limited is the appointed placement agent for the Fund. SUMMARY OF NIDF S INVESTMENT OBJECTIVES NIDF seeks to provide investors regular and stable income by: Investing in a diversified portfolio of high quality infrastructure projects that are located in Nigeria and deliver critical economic and social services. Structuring its investments primarily as senior loans, which benefit from high priority in project cash flow waterfall Seeking to preserve the capital value of its investment, using robust contractual structures Investing in floating rate loan instruments and capturing the term premium available for long-term investments; and Distributing periodically the net returns generated to investors, in the form of quarterly dividends PORTFOLIO CONSTRUCTION CHD NIDF will apply the well tested, non-recourse, project finance analysis framework for investment due diligence. Significant Equity Buffer Substantial sponsor equity to absorb the first loss position, in case of cash flow disruption and/or liquidation Maximum Debt/Equity ratio dependent on robustness of anticipated cash flows All financing Locked-in Investment commitment subject to entire financing (debt and equity) being fully tied up Accept very low or no refinance risk. Third Party due diligence Use of specialist, third party advisors for technical, legal and insurance due diligence

3 Completion guarantees and contingent equity to cover construction risk; Bank guarantees and Liquidated damages to back O&M performance obligation. Other protection and Borrowers Obligation Clearly ring-fenced cash waterfall with lenders supervision Affirmative rights for change of operator/major shareholder, refinancing Customary events of default and acceleration provisions SECTOR FOCUS NIDF s investment portfolio will be well diversified across different sectors and sub-sectors. The fund manager will carefully consider regulatory and policy risks in making its investment decisions. Electricity Captive power plant Embedded power plant Integrated electric utilities Transmission and distribution IPPs-state government offtake IPPs-NBET offtake Utilities Water treatment and supply Wastewater treatment Municipal and industrial waste management Other utility services, e.g street lighting Transportation &Logistics Ports and airports Toll roads Railways and mass transit system Industrial zones and waterhouse Transport and cargo handling services Energy Infrastructure Gas processing plants Storage terminals and distributions networks Gas and liquid fuel transport e.g pipelines and fleets Logistics and support services Telecom Infrastructure Mobile services infrastructure e.g. telecom towers Fibre optics networks Data centres Public Private Partnerships (PPP) Social infrastructure e.g health and education facilities Urban infrastructure Accommodations and other facilities Logistics and support services SECURITY PACKAGE First priority mortgage over all the borrower s assets, rights, title and interest. Share charge over 100% of borrower s equity Six-stage cash flow waterfall Assignment of all project contracts and insurance policies Direct agreements with off-takers Debt service reserve account for three months debt RECOMMENDATION In view of the robust Fund strategy, competence of the fund manager and strong security properties of this Fund; carefully structured to protect investors, we recommend that investors should take advantage of this Fund. In addition, the Fund outperforms inflation in the long run and offers a significant premium above the benchmark government securities and therefore we place a BUY recommendation. MBC Securities Limited is the appointed placement agent for the Fund.

4 THE FUND MANAGEMENT AND GOVERNANCE STRUCTURE RISKS Secondary Liquidity market Default due to failure of the Infrastructure Asset Efficiency of the Fund Managers Interest Rate and Inflation Risk RISKS AND MITIGANTS SECTION MITIGANTS The fund is going to be listed on FMDQ and the secondary market trading is going to be guaranteed by fund managers and PFAs. It is a self-amortising structure with no exit risk. One of the major downside risk associated with this fund is the risk of failure of the infrastructure assets and subsequent default on the repayment of the infrastructure loans granted from the funds. This will automatically affect the interest servicing on the loans as well as the repayment of investors principals at maturity. In a bid to mitigate this risk, NIDF is ranked as a senior debt and has first claim on the assets of the debtors to the funds. The fund manager has carefully identified performing infrastructure such as brown-field captive power plants that are currently generating steady cash-flows as well as greenfield assets. The funds will not invest in non-performing power assets and moribund NIPP assets which do not have good cash flow records. In addition, the operating and financial performance of the underlying projects are predictable and with little or no volatility. Infrastructure debt demonstrates very low default rate and high degree of principal preservations. The default rate globally for infrastructure debt in the last 32years is 1% as against non-infrastructure debt with 14% default rate, as compiled by Moody s Infrastructure Default and Recovery Rate ( ) The success of the fund depends on the efficiency and effectiveness of the fund manager in ensuring that the fund s assets are carefully invested and deliver returns to investors. In view of this, Chapel Hill Denham has carefully assembled global infrastructure finance experts and an investment team with a combined experience of over 120-year and track records of successful infrastructure finance management across the globe. The fund manager has also put in place a robust corporate governance structure. This fund is based on a floating rate structure and adjusts to the fluctuations in the interest rate as well movement in the headline inflation. The 10-year infrastructure debts have been statistically proven to have historically outperformed inflation over a long period of time. The fund also earns a premium of 300/400bps over its benchmark 10-year sovereign bond. As such it will adequately provide a hedge against inflation.

5 IMPORTANT INFORMATION DISCLAIMER MBC Securities Limited financial reports and its attendant recommendations are prepared based on publicly available information and are meant for general information purposes only and it may not be reproduced or distributed to any other person. All reasonable care has been taken to ensure that the information contained herein is not misleading or untrue at the time of publication; MBC Securities Limited and any of its associated or subsidiary companies or the employees thereof cannot be held responsible for any loss suffered by relying on the said information as this information as earlier stated, is based on publicly available information, analysts estimates and opinions and is meant for general information purposes. The value of any investment is subject to fluctuations, i.e. may fall and rise. Past performance is no guide to the future. The rate of exchange between currencies may cause the value of investment to increase or diminish. Hence investors may not get back the full value of their original investment. MBC Securities Limited is registered with the Securities and Exchange (SEC) and is also a member of The Nigerian Stock Exchange.