Market Analysis and Survey Results Michael Stirling Chief Executive Officer / Chairman of the Editorial Board Stirling Infrastructure Partners Welcome to the Stirling Infrastructure Partners 4th Infrastructure Conference. Our firm as you may be aware is an advisor to pension and SWF and project owners on making either direct or indirect investments into the infrastructure asset class. In uncertain times infrastructure presents itself increasingly as trusted asset class by institutional investors. However, infrastructure as an asset class is often described a boring and predictable asset class as it provides stable long term income. However, I would suggest that this is not actually the case, infrastructure market is rapidly evolving with more governments globally seeking to attract private investment from institutional investors. There is the emergence of more development banks competing with one another with the establishment of Asian Infrastructure Investment Bank (AIIB), many of these banks no longer focus on their original defined territories and moving across into a wider range of markets. The IFC has recently launched new products offering institutional investors more diversified exposure via the emerging markets. The IFC is willing to take are tranches of risk in the earlier phases project finance for a higher proportion of reward. With over 180 infrastructure funds globally seeking to raise capital and more direct investment from pension, insurance and SWF, infrastructure is hardly a boring asset class. Stirling Infrastructure foresees the future of the infrastructure market to be more diverse with more innovative financial solutions and greater technology enabling investors achieve superior returns. We work with the investment committees and trustees of pension and SWF on selection of the appropriate investment strategies, selection of asset managers, we are open to project owners presenting opportunities to us for direct investment to appraise for capital So what does the response to our 2017 from the investment committees of pension funds show us?

Methodology Participants include both public and corporate pension plans, fiduciary managers and sovereign wealth funds 44 responses collected between 2 November 2016 and 12 January 2017 Responses represent a total of $63 billion in infrastructure assets and $6.76 trillion in AUM 44 respondents Survey 2nd November to 12 January Respondents represented close to 7 trillion USD $ 63 Billion dollars was allocated to infrastructure investments Survey was offered globally with all regions represented Survey offered globally with all regions represented

Geographical spread of respondents – 2017 Good global distribution of pension funds With a higher response of pension funds from the European region. 66% - respondents from Europe, second place North America Non from Africa

1) Do you invest in infrastructure? If not why not? % of Respondents 86% of Pension Funds already invest in infrastructure The most common reasons why by pension funds for not investing into infrastructure was due to: a) lack of internal resource b) Unsuitability of investment structures

2) Which of the following applies most in the next 18 months? % of Respondents Respondents were asked – Do you have definite plans to invest in infrastructure in the 18 months? Choices were: Considered investment into infrastructure and recently but decided against it. Have invested but since divested Have never invested in infrastructure Definite plans to invest into infrastructure May invest into infrastructure Notable observations: This year there were no respondents that had NEVER invested in infrastructure – last year 1 in 5 respondents had not invested in infrastructure. A staggering 70% of respondents have definite plans to invest into infrastructure an increase of 59% from last year This shows that the market is buoyant with funds looking for asset managers and direct investment opportunities.

3) Do you expect your allocation to change over the next 18 months? % of Respondents Do you expect your allocation to change over the next 18 moths? There were NO respondents that stated that they anticipate that their allocation will fall in infrastructure 66% of respondents anticipated that their allocations will RISE.

4) How much do you expect to invest or commit over the coming 18 months? % of Respondents How much do you expect to invest or commit over the coming 18 months? There was a fair distribution of capital of portions of capital available for allocation into the infrastructure sector from all respondents. What is interesting is that there is a paradigm shift towards most funds making larger allocations of above €200 Euros into asset class. This may be due to: Greater confidence by investors into the asset class Other asset classes do not offer the same certainty as infrastructure Asset value multiples for sought after infrastructure assets is increasing so investors have to pay more to get desirable assets It was reported that the consortium made up from Wren House and Ontario Teacher Pension Plan paid a multiple of over 30 x EBITDA for London City Airport

5) What investment holding period are you comfortable with for infrastructure? % of Respondents What investment holding period are you comfortable with for infrastructure? Institutional investors are progressively, treating infrastructure as a different type of investment to private equity investments. Historically, the earlier funds that invested into infrastructure invested into those assets for a shorter time period and achieved higher returns on disposal. While those returns may have appear as superior returns in comparison to lower yielding infrastructure asset today, at that point time global markets were in a very different environment to that of today. In today’s market with greater uncertainty and the prospect of negative interest rates more infrastructure investors are treating infrastructure as a separate asset class, and recognise the value of it as a long term hold. With more 73% of respondents holding the asset for more than 10 years, and 41% for over 15 years.

6) Which of the following types of assets have you invested in and are interested in? % of Respondents Which of the following types of assets have you invested in and are interested in? The most popular sector for investment for 2 continuous years has been Renewables. However, it will be interesting to see if renewables continues to hold the top position in the preferences of pension funds with the Trump Administration moving back towards traditional fossil fuels. How will this effect pricing, competition of energy markets globally? Will renewables remain competitive? The cost of technology has certainly come down, but these are factors than need consideration. Airports and Toll Roads took second and third place in this years survey, with broadly depressed globally shipping markets in 2016. Therefore, ports falling out of favour and outside of the top three preferred sectors.

7) Which geographical regions have you invested in and are interested in? % of Respondents Which geographical regions have you invested in and are interested in? Western Europe attracted the greatest interest from the respondent's followed by North America. Both these regions offer more certain (1)regulatory environments, (2)security of rule of law and lower currency risks so this is why these markets prevail with followed by the Nordics as preferred destinations for institutional investors. However, this could also be due the fact that respondents were mainly from those regions and they also have a preference to invest in markets which they can understand best. However, what is interesting is that there interest from institutional capital to allocate into all regions of the globe.

8) Are you more interested in infrastructure equity or debt, or a combination of the two? % of Respondents Are you more interested in infrastructure equity or debt, or a combination of the two? The results towards investing into infrastructure debt or equity broadly remain unchanged between the 2016 and 2017 survey. The returns on infrastructure debt typically appear too low to attract a pure debt strategy. However a blended strategy of debt and equity appears to attract greater interest from pension funds. A pure equity strategy is favoured approximately 4 more than a pure debt strategy by pension fund investors.

9) What are your annual return requirements for infrastructure investments? % of Respondents 89% pension funds respondents seek a yield of between 5 and 15%. With 2/3 of respondents seeking a yield of 5-10% and 23% of respondents seeking a yield 10-15%.

Infrastructure Advisors to Institutional Investors I hope that this provides context and up to date market intelligence on the current thinking of a significant sample investment committees of pension funds globally. Today we will be examining some of the key topics to enable institutional investors to make better and more informed investment decisions. www.stirlinginfrastructure.com