The Ondo State Government of Nigeria

THIS DOCUMENT IS IMPORTANT AND YOU ARE ADVISED TO CAREFULLY READ AND UNDERSTAND ITS CONTENTS. IF YOU ARE IN DOUBT ABOUT ITS CONTENTS OR THE ACTION TO TAKE PLEASE CONSULT YOUR STOCKBROKER, SOLICITOR, BANKER OR AN INDEPENDENT INVESTMENT ADVISER. THIS PROSPECTUS HAS BEEN SEEN AND APPROVED BY THE MEMBERS OF THE ONDO STATE EXECUTIVE COUNCIL AND THEY JOINTLY AND INDIVIDUALLY ACCEPT FULL RESPONSIBILITY FOR THE ACCURACY OF ALL INFORMATION GIVEN AND CONFIRM THAT, AFTER HAVING MADE INQUIRIES WHICH ARE REASONABLE IN THE CIRCUMSTANCES AND TO THE BEST OF THEIR KNOWLEDGE AND BELIEF, THERE ARE NO OTHER FACTS, THE OMISSION OF WHICH WOULD MAKE ANY STATEMENT HEREIN MISLEADING.

For information about risks factors which should be considered by prospective investors, see Risk Factors on page 37.

THE ONDO STATE GOVERNMENT OF NIGERIA SUPPLEMENTARY SHELF PROSPECTUS OFFER FOR SUBSCRIPTION OF ONDO STATE N27,000,000,000 [15.5%] FIXED RATE BOND [SERIES 1] 2012/2019 [UNDER THE N50,000,000,000 DEBT ISSUANCE PROGRAMME]

THIS SUPPLEMENTARY SHELF PROSPECTUS AND THE SECURITIES THAT IT OFFERS HAVE BEEN APPROVED AND REGISTERED BY THE SECURITIES & EXCHANGE COMMISSION. IT IS A CIVIL WRONG AND CRIMINAL OFFENCE UNDER THE INVESTMENTS AND SECURITIES ACT (NO. 29 OF 2007) TO ISSUE A PROSPECTUS WHICH CONTAINS FALSE OR MISLEADING INFORMATION. THE CLEARANCE AND REGISTRATION OF THIS PROSPECTUS AND THE SECURITIES WHICH IT OFFERS DOES NOT RELIEVE THE PARTIES FROM ANY LIABILITY ARISING UNDER THE ACT FOR FALSE AND MISLEADING STATEMENTS CONTAINED HEREIN OR FOR ANY OMISSION OF A MATERIAL FACT.

THE REGISTRATION OF THE SUPPLEMENTARY SHELF PROSPECTUS AND ANY SUPPLEMENTARY PROSPECTUS THEREAFTER DOES NOT IN ANY WAY WHATSOEVER SUGGEST THAT THE SECURITIES AND EXCHANGE COMMISSION ENDORSES OR RECOMMENDS THE SECURITIES OR ASSUMES RESPONSIBILITY FOR THE CORRECTNESS OF ANY STATEMENT MADEOR OPINION OR REPORT EXPRESSED THEREIN.

THIS SUPPLEMENTARY SHELF PROSPECTUS IS A DRAFT RED HERRING PROSPECTUS AND IS ISSUED IN ACCORDANCE WITH SECURITIES & EXCHANGE COMMISSION GUIDELINES ON BOOK BUILDING. THE PROSPECTUS DOES NOT HAVE COMPLETE PARTICULARS OF THE COUPON TO BE PAID ON THE BONDS BEING OFFERED. UPON THE APPROVAL OF THE SECURITIES & EXCHANGE COMMISSION, AND BEFORE THE BID OPENING DATE, THIS DOCUMENT WILL BECOME A RED HERRING PROSPECTUS. THIS DOCUMENT WILL BECOME A PROSPECTUS UPON FILING WITH THE SECURITIES & EXCHANGE COMMISSION AFTER THE DETERMINATION OF THE COUPON.

LEAD ISSUING HOUSE

Capital Partners RC: 733583

JOINT ISSUING HOUSES

RC:229205 RC: 446599 RC: 446561 RC: 103022

RC: 672560 RC: 125097 RC: 356853 RC: 370890

This Prospectus will be available on the following websites from Dec. 30, 2011 to Jan. 30, 2012: www.ondostate.gov.ng; www.sec.gov.ng; www.radixng.com; www.lgcapitalng.com; www.fbncapital.com; www.firstcitygroup.com; www.fidelitybankplc.com; www.skyefinancialservices.com; www.ibtc.com; www.standardchartered.com; www.unioncapitalmarkets.com

This Offer is restricted to Qualified Institutional Investors and High Networth Individuals as defined under Rule 78(C) (2) of the Rules and Regulations of the Securities & Exchange Commission.

THIS SUPPLEMENTARY SHELF PROSPECTUS IS DATED FEBRUARY 14, 2012

TABLE OF CONTENTS

1. Abridged Timetable 3

2. Parties to the Programme 4

3. Declaration by the Issuer 10

4. Summary of the Bond Issue 11

5. Extract from Issue Ratings Report 14

6. Use of Proceeds 16

7. Description of Projects 17

8. Historical Financial Information 26 8.1. Reporting Accountants' Report 26 8.2. Statement of Accounting Policies 27 8.3. Statement of Adjusted Assets & Liabilities 28 8.4. Statement of Consolidated Revenue Fund 29 8.5. Notes to the Financial Statements 30

9. Financial Forecasts 32 9.1. Reporting Accountants' Report 32 9.2. Revenue and Expenditure Forecast 33 9.3. Assessment of Bond – Related Cash Flows 35 9.4. Bases & Assumptions 36

10. Risk & Mitigating Factors 37

11. Statutory & General Information 41 11.1. Material Contracts 41 11.2. Relationship between Parties 41 11.3. Charges Costs & Expenses 41 11.4. Extract from Supplemental Trust Deed 41 11.5. Remittance to Sinking Fund 44

12. Procedure for Application and Allotment 44 12.1. Application 44 12.2. Payment Instructions 45 12.3. Allocation/Payment 45 12.4. Details of Bank Account 46

13. Application Form 47

1. ABRIDGED TIMETABLE

Date Activity Responsibility

Circulate Red Herring Prospectus to Qualified Dec. 29, 2011 Issuing Houses Investors (Premarketing)

Dec. 30, 2011 Book opens Book Runners

Jan. 31, 2012 Book closes Book Runners

Determine Coupon Rate and Aggregate Amount of Feb. 08, 2012 Book Runners/ODSG Bonds to be Issued

Feb. 09, 2012 Dispatch Allotment Confirmation Letters Book Runners

Feb. 09, 2012 File amended/updated prospectus with the SEC Issuing Houses

Feb. 13, 2012 Effect Payment for Allotted Bonds Allottees/Participants Hold Completion Meeting [Application List Opens Feb. 14, 2012 Issuing Houses/ODSG and Closes] Allotment of bonds to Qualified Investors/Net issue Feb. 15, 2012 Issuing Houses/Receiving Bank proceeds remitted to ODSG Feb. 16, 2012 File Allotment Schedule with SEC Issuing Houses

Feb. 17, 2012 Credit CSCS Accounts/Dispatch Bond Certificates Registrars

Feb. 17, 2012 File executed documents with the SEC Issuing Houses

Feb. 20, 2012 Publish Allotment Announcement Issuing Houses

Feb. 22, 2012 Listing of bonds on the Nigerian Stock Exchange Stockbrokers

Feb. 23, 2012 Trading of bond commences Stockbrokers/ Primary Dealers

Feb. 24, 2012 File Summary Report to SEC Issuing House

The dates are indicative only and are subject to change without prior notice

2. PARTIES TO THE ISSUE

Issuer The Ondo State Government Ondo State Secretariat, Akure Ondo

Representatives of the State Executive Council His Excellency, Dr. Olusegun Mimiko Governor and Chairman State Executive Council

Alhaji Alli Olanusi Deputy Governor

Dr. Aderotimi Adelola Secretary to the State Government

Chief Yele Ogundipe Honourable Commissioner for Finance

Mr. Akin Adaramola Honourable Commissioner for Economic Planning & Budget

Mr. Eyitayo Jegede (SAN) Honourable Commissioner for Justice & Attorney General

Engr. Gboye Adegbenro Honourable Commissioner for Works

Engr. Ademola Olorunfemi Honourable Commissioner for Agriculture

Mrs. Margret Akinsuroju Honourable Commissioner for Adult, Technical & Vocational Education

Mr. Tayo Akinjomo Honourable Commissioner for Commerce & Industry

Mr. Clement Faboyede Honourable Commissioner for Community Development & Coop Services

Mr. Ayodeji Falae Honourable Commissioner for Culture & Tourism

Mr. Aderemi Olatubora Honourable Commissioner for Education

Mr. Taye Akinyele Honourable Commissioner for Employment, Labour & Productivity

Chief Sola Ebiseni Honourable Commissioner for Environment & Mineral Resources

Dr. Dayo Adeyanju Honourable Commissioner for Health

Mr. Kayode Akinmade Commissioner for Information

PARTIES TO THE ISSUE CONT’D

Representatives of the State Executive Council Alhaji Lasisi Oluboyo Continued Honourable Commissioner for Natural Resources

Arc. Igbekele Daodu Honourable Commissioner for Physical Planning & Urban Development

Mrs. Olayinka Alabi Honourable Commissioner for Women Affairs & Social Development

Otunba Nicholas Tofowomo Honourable Commissioner for Transportation

Mr. Temitayo Oluwatuyi Honourable Commissioner for Local Government & Chieftaincy Affairs

Alhaji Yekini Olanipekun Honourable Commissioner for Youth Development & Sports

Mr. Ajose Kudehibu Head of Service

Dr. Kola Ademujimi Chief of Staff to the Governor

Accountant-General to the State Mr. Lawrence Layiwola Ibukun Ondo State Secretariat, Akure Ondo

Auditor-General to the State Mr. Sunday Omoniyi Adegoke Ondo State Secretariat, Akure Ondo

Lead Issuing House Radix Capital Partners Limited AIICO House, 3rd Floor PC 12 Afribank Street Victoria Island, Lagos

Joint Issuing Houses FBN Capital Limited 16 Keffi Street Ikoyi, Lagos

FCMB Capital Markets Limited Primrose Tower Tinubu Square Lagos

Fidelity Bank PLC 2 Kofo Abayomi Street Victoria Island Lagos

2. PARTIES TO THE ISSUE CONT’D

Joint Issuing Houses Cont’d Longterm Global Capital Limited 2A Idanre Close Osborne Estate Ikoyi Lagos

Skye Financial Services Limited Plot 287 Ajose adeogun Street Victoria Island Lagos

Stanbic IBTC Bank PLC I.B.T.C Place Walter Carrington Crescent Victoria Island Lagos

Standard Chartered Bank Nigeria Limited 142 Ahmadu Bello Way Victoria Island Lagos

Union Capital Markets Limited Plot 97 Ahmadu Bello Way Victoria Island Lagos

Lead Stockbroker Security Swaps Limited Okoi Arikpo House, 1st Floor 5 Idowu Taylor Street Victoria Island Lagos

Joint Stockbrokers Capital Assets Limited 8th Floor, Bookshop House 50/52 Broad Street Lagos

Chapel Hill Denham Securities Limited 2nd Floor 45 Saka Tinubu Street Victoria Island Lagos

Cowry Asset Management Limited Plot 1319 Karimu Kotun Street Victoria Island Lagos

F & C Securities Limited 13 Ribadu road Off Awolowo Road Ikoyi Lagos

Greenwich Securities Limited Plot 1698A Oyin Jolayemi Street Victoria Island Lagos

2. PARTIES TO THE ISSUE CONT’D

Joint Stockbrokers Cont’d GTI Capital Limited 4 Tinubu Street Lagos

Independent Securities Limited 8 Idowu Taylor Street Victoria Island Lagos

Integrated Trust & Investments Limited Integrated Trust House 2nd Floor, 61 Marina Lagos

International Standard Securities Limited 144A Association Road Dolphin Osborne Ikoyi Lagos

Interstate Securities Limited 14B Keffi Street SW Ikoyi Lagos

Kedari Securities Limited Kedari House 8A Ojora close Off Idowu Martins Street Victoria Island Lagos

Lakeworth Investments & Securities Limited First Bank Building 23/25 Ijora Causeway Lagos

Lead Securities & Investment Limited Plot 281 Ajose Adeogun Street Victoria Island Lagos

Morgan Capital Securities Limited 3 Biaduo Street Off Keffi Street SW Ikoyi Lagos

Portfolio Advisers Limited 3rd Floor CSS Bookshop House 50/52, Broad Street Lagos

Primewealth Capital Limited 18A Elsie Femi Pearse Street Victoria Island Lagos

2. PARTIES TO THE ISSUE CONT’D

Joint Stockbrokers Cont’d PSI Securities Limited 50B Adisa Bashua Street Off Adelabu Street Surulere Lagos

Signet Investments & Securities Limited 4th Floor Church House 29 Marina Lagos

Skye Stockbrokers Limited 5th Floor Skye Bank Building 30 Marina Lagos

Solicitor to the State Government Eyitayo Jegede, SAN Ondo State Attorney General Ondo State Secretariat Akure Ondo

Joint Solicitors to the Issue SPA Ajibade & Co. 27A Macarthy Street Onikan Lagos

Olawoyin & Olawoyin 13th Floor Mamman Kontagora House 23A Marina Lagos

Solicitor to the Trustee George Ikoli & Okagbue 864B Bishop Aboyade Cole Street Victoria Island Lagos

Joint Trustees to the State Sterling Asset Management & Trustees Limited (SAMTL) Plot 1703A Adetokunbo Ademola Victoria Island Lagos

Mainstreet Trustees & Asset Management Co. Limited 94 Broad Street Lagos

Intercontinental Trustees Limited 2nd Floor Kingsway Building 107/113 Broad Street Lagos

Rating Agencies Agusto & Co. UBA House, 5th Floor 57 Marina Lagos

2. PARTIES TO THE ISSUE CONT’D

Rating Agencies Cont’d Global Credit Rating 17th Floor New Africa House 31 Marina Lagos

Reporting Accountants KPMG Professional Services 22A Gerrard Road Ikoyi Lagos

Registrars to the Issue First Registrars Nigeria Limited Plot 2 Abebe Village First Bank Training School Complex Iganmu Lagos

Receiving Bank United Bank for Africa PLC UBA House 57 Marina Lagos

3. DECLARATION BY ISSUER

4. SUMMARY OF THE ISSUE

Issuer: Ondo State Government of Nigeria

Series Number 1

Principal Amount: N27, 000,000,000 [Twenty Seven Billion Naira]

Par Value: At Par [100%]

Unit of Sale: Minimum subscription of 10,000 and multiples of 5,000 thereafter

Bond Issue Date: 2012

Maturity/Redemption Date: 2019

Coupon Basis Fixed Rate

Mode of Issuance: By way of Book Building.

Coupon: 15.5%. The coupon was determined at the close of the book build.

Coupon Payment: Coupon is payable semi-annually and payment shall commence 6 months after allotment.

Qualified Investors: The investors that are permitted to participate in this Book Building are High Networth Individuals and Qualified Institutions which include Fund Managers, Pension Fund Administrators, Insurance Companies, Unit Trusts, Multilateral and Bi-Lateral Institutions, Registered and/or Verifiable Hedge Funds, Market Makers, Staff Schemes, Trustees/Custodians and Stockbroking firms as stipulated by Rule 78 [2] of the Rules and Regulation of the Securities and Exchange Commission. Retail Investors are exempted from this offer.

Issuer Rating: [Bbb-] rating by Agusto & Co. Limited [“Agusto”] [BBB] rating by Global Credit Rating Co. Limited [“CGR”]

Bond Rating: [A] rating by Agusto & Co. Limited [“Agusto”] [A-] rating by Global Credit Rating Co. Limited [“CGR”]

A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating agency.

Redemption/ Payment Basis: The Principal amount outstanding on the Bonds will be redeemed in installments on an amortising basis yearly, commencing from the 3rd anniversary of issue while coupon payment will be paid semi annually commencing from the first 6 months from allotment date.

Optional Early Redemption The Issuer may, upon appropriate redemption notice to the Bondholders, in [Call Option]: the form which is available from the office of the Registrar, and upon such conditions as may be contained in the said notice, redeem a part or all of the Bonds together with accrued interest (if any) thereon.

Sinking Fund: A Sinking Fund will be created in accordance with the provisions of the enabling law and the ISA. The Sinking Fund shall be funded from first line deductions by way of an ISPO. The management of the Sinking Fund will be the sole responsibility of the Joint Trustees.

4. SUMMARY OF THE ISSUE CONT’D

Coupon and Principal Payment The State has authorised monthly deductions of the sum of Structure: N315,000,000.00, over the tenor of the Bonds, from the State’s share of statutory allocation from the Federation Account pursuant to an ISPO issued to the Accountant General of the Federation. The monthly deductions from the State’s share of statutory allocation shall rise to N692,132,360.59 from the 25th month. These sums shall be credited to the Series 1 Sinking Fund account on a monthly basis until maturity and utilized in servicing Coupon and principal payment obligations of the Bonds from time to time.

Utilisation of Proceeds: The estimated net issue proceeds of N25,923,834,950.89 after deduction of N1,076,165,049.11 (representing 3.9% of the Gross Issue Proceeds) will be utilized as follows: 1. Repayment of N10.0 billion Bridge Facilities granted by First Bank of Nigeria PLC and United Bank for Africa PLC 2. Financing of Projects

The bridge facilities obtained pursuant to the Programme and the balance of the proceeds from the Programme after the deduction of the facilities will be utilized in executing the underlisted projects:

Use of Proceeds Amount [N,Bn] % Completion Period Road Projects1 21.53 83.1 6 – 36 months Water Project 2 2.05 7.9 6 – 12 months Educational Projects3 0.86 3.3 3 – 12 months Healthcare Projects4 1.48 5.7 2 – 12 months TOTAL 25.92

Payment Terms: In full on application

Listing: An application has been made to the Council of the Nigerian Stock Exchange for the admission of the Bonds to the Daily Official List of the Exchange.

Tax Considerations: The Bonds will be exempt from tax in Nigeria. As such, all payments made to Bondholders will be free and clear of Withholding, State and Federal Income and Capital Gains taxes with no deductions made at source whatsoever.

The Federal Inland Revenue Service (“FIRS”) has issued a letter of ‘No Objection’ to the request by the Ondo State Government for a tax waiver. The waiver is however, subject to the approval of the Federal Executive Council (“FEC”).

Final Redemption Amount N27,000,000,000 [Twenty Seven Billion Naira Only]

1 A description of the road projects to be executed with the bridge facilities and the balance of the issue proceeds can be found on pages 17 to 19 of this SSP.

2 A description of the water projects to be executed with the bridge facilities and the balance of the issue proceeds can be found on pages 20 to 21 of this SSP.

3 A description of the educational projects to be executed with the bridge facilities and the balance of the issue proceeds can be found on pages 22 to 23 of this SSP.

4 A description of the healthcare projects to be executed with the bridge facilities and the balance of the issue proceeds can be found on pages 24 to 25 of this SSP.

4. SUMMARY OF THE ISSUE CONT’D

Status of the Bonds: The Bonds qualify as securities in which Pension Fund Administrators may invest under the Pension Reform Act, Cap P4, LFN 2004; The Bonds qualify as securities in which Trustees may invest under the Trustees Investment Act, Cap T22, LFN 2004 ; and The Bonds will constitute an irrevocable obligation of the State and shall rank pari passu in all respect with the State’s existing debt obligations.

Events of Default: The events of default under the Bond are as specified within the Programme Trust Deed and as modified in respect of this Series by the Supplemental Trust Deed. The Trustees shall notify the Commission as required by Rule 307 [3a & b] of the rules and regulation of the Commission.

Offer Opens: December 30, 2011

Offer Closes: January 31, 2011

Delivery: Investors’ respective CSCS accounts will be credited electronically upon allotment. Investors are required to provide their CSCS account number and their Clearing House Number [“CHN”] on the application form.

Bonds Settlement: Bond purchases will be settled by electronic funds transfer; CIBFTS, NEFT or RTGS.

Underwriting: The instrument shall not be underwritten.

Currency of Payment: Nigerian Naira

Lead Issuing House: Radix Capital Partners Limited

Joint Issuing Houses: FBN Capital Limited, FCMB Capital Markets Limited, Fidelity Bank PLC, Longterm Global Capital Limited, Skye Financial Services Limited, Stanbic IBTC Bank PLC, Standard Chartered Bank Nigeria Limited and Union Capital Markets Limited

Stockbrokers to the Issue: Security Swaps Limited, Capital Assets Limited, Chapel Hill Denham Securities Limited, Cowry Asset Management Limited, F & C Securities Limited, Greenwich Securities Limited, GTI Capital Limited, Independent Securities Limited, Integrated Trust & Investments Limited, International Standard Securities Limited, Interstate Securities Limited, Kedari Securities Limited, Lakeworth Investments & Securities Limited, Lead Securities & Investment Limited, Morgan Capital Securities Limited, Portfolio Advisers Limited, Primewealth Capital Limited, PSI Securities Limited, Signet Investments & Securities Limited, and Skye Stockbrokers Limited

Registrar/Paying Agent: First Registrars Nigeria Limited

Receiving Bank: United Bank for Africa PLC

5. EXTRACT FROM ISSUE RATINGS REPORT

The following information is an extract from the Ratings Report prepared by Agusto & Co:

5. EXTRACT FROM ISSUE RATING REPORT CONT’D

The following information is an extract from the Ratings Report prepared by Global Credit Rating Co:

6. USE OF PROCEEDS

The estimated net issue proceeds of N25,923,834,950.89 after deduction of N1,076,165,049.11 (representing 3.9% of the Gross Issue Proceeds), will be utilized to finance ongoing infrastructure projects within the State, which are in fulfillment of the medium to long term strategy of the State. The ODSG has embarked on a number of significantly advanced infrastructural projects in different sectors of its economy and the following is a summary breakdown of how the net proceeds will be utilized:

A. REPAYMENT OF BRIDGE FACILITIES The State secured bridge facilities totaling N10.0billion in September 2011 from the financial institutions mentioned below to strictly finance projects identified within the Bond programme. The obligations on these bridge facilities shall be repaid from the net proceeds of the Bond:

LENDER LOAN AMOUNT [N]

First Bank of Nigeria PLC 5,000,000,000.00 United Bank for Africa PLC 5,000,000,000.00 SUB TOTAL 10,000,000,000.00

B. FINANCING OF PROJECTS The bridge facilities obtained pursuant to the Programme and the balance of the proceeds from the Programme after the deduction of the facilities will be utilized in executing the underlisted projects:

TOTAL PROJECT PROJECT COST TO % OF COMPLETION S/N DESCRIPTION OF PROJECTS COST [N] COMPLETION [N] TOTAL PERIOD 1 Road Projects1 33,247,768,392.58 21,530,782,620.81 83.1 6 - 36 months 2 Water Project 2 2,934,225,785.57 2,053,958,049.90 7.9 6 - 12 months 3 Educational Projects3 1,461,183,043,.60 862,338,527.78 3.3 3 – 12 months 4 Healthcare Projects4 2,117,564,580.80 1,476,755,752.40 5.7 2 - 12 months TOTAL 39,760,741,802.55 25,923,834,950.89

Note: The bridge facilities were recently secured and are still being utilized in executing some of the projects highlighted above.

1 A description of the road projects to be executed with the bridge facilities and the balance of the issue proceeds can be found on pages 17 to 19 of this SSP.

2 A description of the water projects to be executed with the bridge facilities and the balance of the issue proceeds can be found on pages 20 to 21 of this SSP.

3 A description of the educational projects to be executed with the bridge facilities and the balance of the issue proceeds can be found on pages 22 to 23 of this SSP.

4 A description of the healthcare projects to be executed with the bridge facilities and the balance of the issue proceeds can be found on pages 24 to 25 of this SSP.

7. DESCRIPTION OF PROJECTS

The cost detail and description of the projects to be financed from the proceeds of the Bond are presented below:

7.1. ROAD PROJECTS

TOTAL PROJECT PROJECT COST TO COMPLETION S/N DESCRIPTION OF PROJECT COST [N] COMPLETION [N] PERIOD Asphalt Overlay of Estate Roads at Sunshine Garden Estate Oba 1 316,644,516.63 221,651,161.65 3 months Ile 2 Asphalt Overlay of Estate Roads at Oda Road Akure 628,251,243.79 439,775,870.65 3 months 3 Asphalt Overlay of Oke Aro/Cash Hold Adofure Road [7.11km] 490,158,301.20 364,045,530.93 4 months Rehabilitation/Asphalt Overlay of Olokuta Prison and the Ondo 4 155,719,516.75 113,746,582.28 4 months State Civil Service Commission Access Road & Premises [2.15km] 5 Asphalt Overlay of Roads in Owo/Ose [10.79km] 537,177,434.40 385,287,294.21 6 months 6 Construction of Access Road to Adaba FM Station [1.606km] 186,216,672.76 138,305,007.38 6 months Construction of New Twin Cell Box Culvert & 250m Reinforced 7 543,546,533.69 397,038,028.00 6 months Concrete Channel at Lipakal Road Ondo

Repair works on existing failed Box Culvert & Channelisation of 8 133,731,190.53 107,313,879.33 6 months Elegbin Stream at Oke Aro Road Akure 9 Asphalt Overlay of Roads in Ondo Axis [9.916km] 394,621,691.62 266,760,140.37 6 months 10 Asphalt Overlay of Roads in Ile Oluji Axis [5km] 532,856,496.48 395,759,912.48 6 months 11 Asphalt Overlay of Roads in Akure Axis [5km] 838,515,589.22 590,932,769.64 6 months Beautification of Lands adjoning Fiwasaye Girls Grammar School 12 Ilesha/Owo Highway Junction and Mini Park Opposite Bishop's 43,707,793.40 43,707,793.40 6 months Court Alagbaka Akure Asphalt Overlay of Roads in Southern Senatorial Axis 13 514,655,813.39 373,572,069.89 6 months [Okitipupa/Obonde] [7.545km] Asphalt Overlay of Roads in Southern Senatorial Axis II 14 968,388,444.69 719,231,898.03 6 months [Omotosho/Ilutitun] [21.40km] 15 Construction of Imeri Bridge over River Ose 476,285,411.07 159,883,393.01 6 months Rehabilitation/Asphalt Overlay of Oka Township Road 16 414,243,568.37 136,000,000.00 12 months [10.45km] Construction of Roads within Adekunle Ajasin University 17 823,080,679.99 593,494,218.66 12 months Akungba Akoko [9.073km] 18 Asphalt Overlay of Roads in Akoko Axis [Phase 1] [17.84km] 926,725,853.59 659,494,380.29 12 months Construction of Twin Box Culvert & 100m Channel at Idimepen 19 101,851,733.26 74,398,435.88 12 months Street Owo Construction of Twin Box Culvert & 300m Channel at Idimepen 20 208,005,629.45 151,939,422.05 12 months Street Owo Construction of Twin Box Culvert & 150m Channel at Iregun 21 121,902,115.23 121,902,115.23 12 months Street Owo Construction of Twin Box Culvert & 200m Channel At Police 22 152,446,010.06 111,355,441.31 12 months Station Owo 23 Contruction of Oda Road Junction Kajola Davog Road [3.343km] 396,440,564.52 277,508,395.16 12 months Construction of Roads in Gboluji Grammar School Ile Oluji 24 299,967,504.32 167,656,918.76 12 months [1.47km] Junction Improvement & Lay Bye for Oyemekun -Adesida Raod 25 956,875,513.65 669,812,859.56 12 months & Fiwasaye Junction Installation of Bus Stop, Bus Terminal & Shelter along Oba 26 1,361,406,052.90 1,094,861,202.20 12 months Adesida Oyemekun Road Akure 27 Dualisation of NEPA Arakale Akure [2.25km] 2,847,845,642.12 2,222,188,858.49 12 months Installation of Street Lights on Ilesha Akure/Owo Junction- 28 Oyemekun Oba Adesida-Fiwasaye Girls Grammar School/Mobil 514,079,891.85 102,815,978.05 12 months Junction Oba Airport Junction Akure [8.9km] Installation of Street Lights on Ilesha Akure/Owo Junction- 29 Oyemekun Oba Adesida-Fiwasaye Girls Grammar School/mobil 494,308,358.67 98,862,671.74 12 months Junction Oba Airport Junction Akure [8.3km] Installation of Street Lights on Itanla Ademulegun Road Idisin 30 616,663,495.77 123,332,699.16 12 months [9.75km] 31 Rehabilitation/Asphalt Overlay of Irele Township Road [5.2km] 620,368,038.18 536,760,485.87 12 months 32 Dualisation of Igbokoda Township Main Road [2.5km] 2,807,865,804.24 2,051,028,659.74 12 months 33 Construction of Oba Akoko- Ikun - Afo - Ido Ani Road 822,220,899.89 196,503,340.00 12 months

7. DESCRIPTION OF PROJECTS CONT’D

TOTAL PROJECT PROJECT COST TO COMPLETION S/N DESCRIPTION OF PROJECT COST [N] COMPLETION [N] PERIOD 34 Construction of Oke Agbe Afin - Ise, Irun, Ogbagi Road 569,606,658.08 171,270,766.74 12 months Construction of Igbokoda Ayetoro Road Phase III [Igbonla - 35 2,777,297,513.94 2,777,297,513.94 12 months Eruna][4.72km] Rehabilitation/Asphalt Overlay of Ilesha Expressway Junction - 36 1,711,499,611.50 1,020,472,224.88 14 months Oyemekun Road-Adesida Road-Fiwasaiye Junction [9.3km] Rehabilitation of Igborowo Temidayo Alaya Mesan Road in 37 657,904,537.04 232,963,720.15 15 months Ondo Township 38 Rehabilitation of Ondo Laje Road 647,661,952.86 202,576,174.66 16 months Rehabilitation of Akungba Akoko, Epinmi, Isua Road in Oka 39 1,991,042,321.77 510,822,240.17 21 months Township Dualisation of Mobil Junction-Oba Ile Akure Airport Junction 40 3,645,981,791.71 2,508,452,566.87 36 months [8.950km] SUB TOTAL 33,247,768,392.58 21,530,782,620.81

The various road and culvert projects listed above consist of:

Construction of over 20.2km new roads within the State at a total cost of N5.95billion; Dualisation of a total of 13.7km of existing roads in 3 different locations in the State at a total cost of N5.6billion; Rehabilitation and Asphalt Overlay of over 111km of existing roads in 17 different locations within the 3 Senatorial Districts at a total cost of N12.3billion; Beautification and improvement of Junctions and Areas along major roads at cost in excess of N1.0billion; Construction and repair of Twin Box Culvert and Channels on 7 different roads within the 3 Senatorial Districts at a total cost of N1.26billion; Construction of Imeri Bridge over River Ose at a total cost of N0.48billion; Installation of Street Lights on major roads within the State capital at a total cost of N1.63billion; and Installation of Bus Stops, Bus Terminals & Shelters along Oba Adesida Oyemekun Road Akure, at a total cost of N1.094billion.

Fig.1: New median along Oba Ayesida & Oyemekun Road Akure Fig.2: Asphalt overlay of road within Adekunle Ajasin University

The projects have completion periods ranging between 6 – 36 months and a number are 15% completed. N12.81billion [representing 30% of total project cost] has been paid to the various contractors as mobilization fees and the project cost to completion is N30.43billion. The current administration has indicated their resolve to ensure the completion of all these projects before the expiration of its tenure.

Fig.3: Road construction and dualisation works in different locations in the State

7. DESCRIPTION OF PROJECTS CONT’D

Fig.4: Other ongoing road projects in different locations in the State. Projects include construction of new roads, dualisation & asphalt overlay of existing roads, culverts/drainages, installation of bus shelters and street lights etc.

7. DESCRIPTION OF PROJECTS CONT’D

7.2. WATER PROJECTS

TOTAL PROJECT PROJECT COST TO COMPLETION S/N DESCRIPTION OF PROJECT COST [N] COMPLETION [N] PERIOD 1 Rehabilitation of Ifon Water Supply Scheme 559,958,769.87 391,971,138.91 6 months 2 Rehabilitation and upgrade of Ose Owo Water Supply Scheme 1,385,588,895.20 969,912,226.64 6 months 3 Rehabilitation and upgrade of Awara Water Supply Scheme 988,678,120.50 692,074,684.35 6 months

SUB TOTAL 17,395,959,148.39 16,511,352,892.72

1. Rehabilitation of Ifon Water Supply Scheme This involves the construction of a new water treatment plant with a capacity to generate 25 million litres of water per day, replacing the moribund water plant currently in the place at the location; the construction of new water reservoirs at Ifon with the capacity to hold 225 million litres; and the replacement of the existing pipelines. The new plant will serve Ifon and Ikaro towns. The N0.56 billion project was awarded to CGC Nigeria Limited while Rindex Associates are the consulting engineers. The project is 50% completed and it is expected that the plant will be completed in approximately 6 months.

Fig.5: The source of water supply at Ifon, the New Water Treatment Building and the Clear Water Tank

2. Rehabilitation/Upgrade of Ose Owo Water Supply Scheme This involves the repair of Ose Dam constructed in 1958. the dredging and de-silting of the connected reservoir; the construction of a new water treatment plant to enhance the supply from the Water Station from 2.5million litres to 6.5million litres per day and the laying of new network pipes to replace existing ones. The communities to benefit from the project are Owo, Iyere, Emure, Poly and Ipele. The N1.38billion project was awarded to Naston Engineering Nigeria Limited and commenced in December 2010. Planet Projects Limited is the consulting engineers. The work is 38% completed and is expected to be completed in approximately 6 months.

Fig.6: A View of Ose Dam as at August 2011

7. DESCRIPTION OF PROJECTS CONT’D

Fig.7: Ongoing construction work on Filter Building Fig.8: Newly installed pressure tanks

3. Rehabilitation/Upgrade of Awara Water Supply Scheme This consists of the renovation of old infrastructure at the Asanyodi Dam constructed in 1958; the rehabilitation and expansion of the existing water treatment plant; and the construction of a new plant to enhance the current capacity of supply from the Water Station from 1.8million litres to 6.3million litres per day. The communities to benefit from the project are Ikare, Arigidi, Ugbe, Agbaluku Arigidi, Arigidi Oja and Imo Arigidi. The N0.99billion project was awarded to Naston Engineering Nigeria Limited in December 2010 while Advanced Engineering Consultants are the consulting engineers. The entire project is 40% completed and is expected to be completed in approximately 6 months.

Fig.9: Renovated Metal Infrastructure at the Dam Fig.10: New Water Treatment Station under Constriction

Fig.11: New Pressure Tanks

7. DESCRIPTION OF PROJECTS CONT’D

7.3. EDUCATIONAL PROJECTS

TOTAL PROJECT PROJECT COST TO COMPLETION S/N DESCRIPTION OF PROJECT COST COMPLETION PERIOD Renovation of old and Construction of new blocks in St. Helen’s 1 433,247,871.79 130,340,086.81 6 months Unity Secondary School Ondo Renovation of buildings at St. Peter’s Unity Secondary School 2 408,199,627.84 112,262,897.00 6 months Akure 3 Caring Heart Mega Primary School Project, Oke-Ijebu. Akure 209,153,257.97 209,153,257.97 6 months 4 Caring Heart Mega Primary School Project, Ondo 410,582,286.00 410,582,286.00 12 months SUB TOTAL 1,461,183,043,.60 862,338,527.78

1. Type 1 New Schools – Caring Heart Mega Primary School Project, Oke-Ijebu. Akure The project consists of the construction of 7 blocks of one storey building of 6 classrooms each with the capacity to accommodate 1,050 pupils. The project is 70% complete and is expected to be completed in approximately 6 months. The cost to complete the project is N0.21billion. The contract was awarded to Step Developer Nigeria Limited while Ultimate Design Consortium Limited is the consulting engineers.

Using the Caring Heart Mega Primary School Oke Ijebu Akure as a pilot scheme, the Government intends to build four [4] of the Type 1 Mega Schools in different locations in the State.

Fig.12: Ongoing works on the auditorium, blocks of classrooms and school layout

2. Type 2 New Schools – Caring Heart Mega Primary School, Ondo The project consists of the construction of 7 blocks of 3 classrooms each on 2 floors, an auditorium and a resource centre consisting of a computer room and staff room built on 2 acres of land. The school when completed will have the capacity to accommodate 525 pupils. The project is 45% complete and is expected to be completed in approximately 12 months. The cost to complete the project is N0.41billion. The contract was awarded to Dome Team Nigeria Limited while Ultimate Design Consortium Limited are the consulting engineers.

Using the Caring Heart Mega Primary School Mega Primary School Ondo as a pilot scheme, the Government intends to build eight [8] of the Type 2 Mega Schools in different locations in the State.

Fig.13: Ongoing works on blocks of classrooms in Caring Heart Mega Primary School Ondo and pile of paving blocks for flooring

7. DESCRIPTION OF PROJECTS CONT’D

3. Renovation of Old Unity Schools – St. Helen’s Unity Secondary School Ondo & St. Peter’s Unity Secondary School Akure The project consists of the renovation [reroofing, repainting, external and internal works and electrical and expansion etc] of existing structures and construction of new blocks of classrooms and administrative buildings. The two projects are currently being handled by different contractors and are 40% completed. These projects are expected to be completed in 3 months.

Fig.14: Renovation of St. Helen’s Unity Secondary School Ondo

Fig.15: Renovation of St. Peter’s Unity Secondary School Akure

7. DESCRIPTION OF PROJECTS CONT’D

7.4. HEALTHCARE PROJECTS

TOTAL PROJECT PROJECT COST TO COMPLETION S/N DESCRIPTION OF PROJECT COST COMPLETION PERIOD Construction of Additional Facilities in Mother & Child Hospital 1 216,506,534.05 151,554,574.05 6 months Akure 2 Construction of Mother & Child Hospital Ondo 400,913,300.91 280,639,310.64 6 months

3 Construction of Hospital Complex, Doctor's Qtrs, Mogue & Info 1,432,306,868.39 1,002,614,807.86 12 months Mgt. Centre for the Emergency Medical Centre Ondo 4 Rehabilitation/Upgrade of Igbotako General Hospital 67,837,877.45 41,947,059.85 12 months 2,117,564,580.80 1,476,755,752.40 SUB TOTAL

1. Additional Facilities for Mother & Child Hospital Akure

The project consists of the construction of resident doctors quarters which is 80% complete

Fig.16: The Doctor’s quarter near completion

2. Construction of Mother & Child Hospital Complex Ondo The project is 30% complete, with external and load bearing walls in place. The outstanding work consists of the construction of the critical unit block [currently at foundation level] and the various departmental blocks [which are at early stages].

Fig. 17: Ongoing works at the Mother & Child Complex, Ondo

3. Construction of Emergency Medical Centre Ondo The project consists of the construction of the Hospital Complex, Information Management Centre, Morgue and Doctors’ Residence. Construction has commenced on the Hospital Complex while the Information Centre is 15% completed. The Morgue is still at the foundation stage [7% completion] while the Doctors’ Residence, which consist of 10 semi-detached 2-bedroom flats & 8 semi-detached 3-bedroom flats is 12% complete.

Fig.18: Ongoing works at the Emergency Medical Centre

7. DESCRIPTION OF PROJECTS CONT’D

4. Rehabilitation/Upgrade of Igbotako General Hospital The project consists of the rehabilitation of the Hospital Complex, the Gate House, water and electricity supply facilities. Work on the Hospital Complex is 50% complete while the Gate House is 40% complete. The construction of the water supply facility [borehole] is 40% complete while the external works for the electricity supply is 80% completed.

Fig.19: Ongoing works at the Igbotako General Hospital Fig.20: Land for construction of additional buildings

8. HISTORICAL FINANCIAL INFORMATION

18.1. LETTER FROM THE REPORTING ACCOUNTANTS

8. HISTORICAL FINANCIAL INFORMATION CONT’D

8.2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

8. HISTORICAL FINANCIAL INFORMATION CONT’D

8.3. STATEMENT OF ADJUSTED ASSETS & LIABILITIES

8. HISTORICAL FINANCIAL INFORMATION CONT’D

8.4. STATEMENT OF CONSOLIDATED REVENUE FUND

8. HISTORICAL FINANCIAL INFORMATION CONT’D

8.5. NOTES TO THE FINANCIAL STATEMENTS

8. HISTORICAL FINANCIAL INFORMATION CONT’D

8.5. NOTES TO THE FINANCIAL STATEMENTS CONT’D

9. FINANCIAL FORECASTS

9.1. REPORTING ACCOUNTANTS’ REPORT

9. FINANCIAL FORECASTS CONT’D

9.2. REVENUE & EXPENDITURE FORECAST

9. FINANCIAL FORECASTS CONT’D

9.3. ASSESSMENT OF BOND - RELATED CASH FLOWS

9. FINANCIAL FORECASTS CONT’D

9.4. BASES & ASSUMPTIONS FOR REVENUE & EXPENDITURE FORECAST Bases The forecasts for the years ending 31 December 2011 - 2018 have been prepared in consistence with the accounting policies normally adopted by the Ondo State Government.

Assumptions The following assumptions were adopted in the preparation of the revenue and expenditure forecasts:

1. There will be no significant changes in Federal and State Governments’ monetary and fiscal policies during the forecast period that will adversely affect the State Government;

2. The Federation Account and Value Added Tax sharing formula would not alter significantly from those used in June 2011;

3. The Federal Government fiscal policies will not have a negative impact on income realisable from VAT allocation;

4. The statutory allocation will increase by a CAGR of 5% over the forecast period. However, there is a possibility for improvement in line with the forecast growth rate of 7% in distributable revenue to the states as estimated in the Medium Term Expenditure Framework (“MTEF”) of the Federal Government;

5. Internally generated revenues is expected to increase by a CAGR of 10% over the forecast period;

6. Personnel costs will annually increase by 10% while overhead costs are expected to decrease by 5% annually;

7. A sum of N315 million from the State’s federal allocation will be transferred monthly into a sinking fund account from November 2011 to accumulate monies towards payment of interest from the date of issue and an additional N377 million will be paid into a Sinking Fund account from year 3 ( i.e. November 2013) to accumulate monies towards principal repayment;

8. The interest on the sinking fund account will be 5% as agreed with the trustees;

9. Proceeds net of professional fees of N1.215 billion from the Bond Issue will be received in February 2012;

10. Redemption of the Bond will be by amortization over five years commencing 2015;

11. The first coupon payment shall be made in August 2012 and will be paid 6 months from the date of receipt of proceeds and semi annually thereafter;

12. The Bond proceeds shall be used to finance social projects which are expected to improve the social infrastructure and also stimulate economic activities in the State. These projects have been identified and their respective business plans will be submitted to the Securities and Exchange Commission as part of the approval process;

13. The economic and political climate of Nigeria will remain relatively stable.

10. RISK FACTORS & MITIGANTS

An investment in Bonds, as with any other investment, involves a high degree of risk. Accordingly, prospective investors should carefully consider the following risk factors together with all of the other information included in this Prospectus, and any SSP and/or Pricing Supplement prior to purchasing the Bonds.

The risks below are not the only risks facing the State. Additional risks and uncertainties not currently known to Issuer or that are currently considered immaterial may also materially and adversely affect the State. Any of the following risks could result in a material adverse effect on the State’s financial condition and ability to service debt, including the Bonds. These risks may also have a material adverse effect on the revenue, costs and other estimates and assumptions made for purposes of the financial model shown in this Prospectus, causing actual financial performance to be materially lower than those reflected in the financial model.

I. COUNTRY RISK

Political Risk: Nigeria has experienced periods of political instability since its independence in 1960. After 16 years of military rule, a democratic government was reinstated in 1999. Since then, significant progress has been made to strengthen the policy environment, economy and tackle corruption, but Nigeria’s track record under democracy is short and challenges remain. The political activity in Nigeria has heightened as the April elections have been finalised and remarkable changes witnessed in the new political space. The emergence of Mr. Goodluck Jonathan as the President of Nigeria through the election which was internationally acclaimed as free and fair highlights the political stability of Nigeria. The expectation that the various level of leadership across the country will improve has potentials to attract increased foreign direct and local investment in infrastructure. However, the changes in fiscal policies and political crises including the recurring issues of the Niger Delta and the recent uprising up north could have adverse effects on economic development and stability in the country.

Mitigating Factor: Nigeria has experienced a decade of un-interrupted democratic rule for the first time since its independence in 1960. The political space has been made stronger and there is a greater will to ensure the participation of the electorate in decision making through the conduct of free and fair elections. The electorates have also been more participative in election preparations. The successful handover of government to President Goodluck Jonathan demonstrates that the Nigerian political atmosphere is maturing and further strengthens the growing confidence of the international community in Nigeria. The Nigerian political and judicial institutions continue to be strengthened in recognition that democratic governance positively impacts development. There is the expectation that this trend will continue although there can be no assurances that the political environment will remain stable.

Economic Risk: The Nigerian economy was severely impacted by the global recession which created a significant downturn in the capital markets as well as a liquidity squeeze, creating a challenging operating environment. A prolonged recession would put further constraint on business spending, investments and lending which in turn would reduce activities in the private sector, and eventually have an impact on the State’s tax revenues.

The Nigerian economy is largely dependent on oil production and the global prices of oil. According to the World Bank, oil accounts for circa 17% of Nigeria’s GDP, over 95.5% of its export earnings and approximately 81% of its budgetary earnings. Global oil prices declined significantly in 2008 resulting in decreased earnings and a subsequent devaluation of the Naira. Oil prices have however rebounded, with oil prices averaging US$77 per barrel for most of 2010, falling below the US$70 mark on only one occasion. In the latter part of 2010 (particularly in December 2010), oil prices trended up significantly. Since the beginning of 2011, oil prices have surged and crossed the US$100 mark, largely on the back of political unrest in the Middle East.

10. RISK FACTORS & MITIGANTS CONT’D

Mitigating Factor: The global financial crisis has slowed down significantly. Economies are beginning to emerge from recession and are witnessing improved performance. In Nigeria, the Jonathan administration remains committed to the wide-ranging reforms aimed at diversifying the economy and increasing macroeconomic stability. The Central Bank of Nigeria (CBN) continues to introduce reforms aimed at stimulating and stabilizing the economy and creating a secure and healthy platform for growth.

I. RISKS RELATING TO THE BONDS

a. The Bonds may not be suitable for all investors

Each potential investor in the Bonds must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

(i) have sufficient knowledge and experience to make a meaningful evaluation of the bonds, the merits and risks of investing in the Bonds and the information contained or incorporated by reference in this Prospectus or applicable SSP and/or Pricing Supplement;

(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation an investment in the Bonds and the impact the Bonds will have on its overall investment portfolio;

(iii) have sufficient financial resources and liquidity to bear all the risks of an investment in the Bonds, including Bonds with principal and interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor’s home currency;

(iv) understand thoroughly the terms of the Bonds and be familiar with the behaviour of any relevant indices and financial markets; and

(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

Some Bonds are complex financial instruments and sophisticated institutional investors generally purchase complex instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Bonds which are complex financial instruments, unless there is the expertise (either alone or with a financial adviser) to evaluate how the Bonds will perform under changing conditions, the resulting effects on the value of the Bonds and the impact this investment will have on the potential investor’s overall investment portfolio.

Structural Risks:

a) The market price of the Bonds may be volatile The market price of the Bonds could be subject to significant fluctuations in response to actual or anticipated variations in the Issuer’s operating results, adverse business developments, changes in the fiscal policies of the State, changes in financial estimates by securities analysts and the actual or expected sale of a large number of Bonds.

Each investor needs to assess the market for the right time to trade its Bonds.

10. RISK & MITIGATING FACTORS CONT’D

b) Bonds may be subject to optional redemption by the Issuer An optional redemption feature in the Bonds may negatively affect their market value. During any period when the Issuer may elect to redeem Bonds, the market value of those Bonds generally will not rise substantially above the price at which it can be redeemed. This also may be true prior to any redemption period. The Issuer may be expected to redeem Bonds when its cost of borrowing is lower than the interest rate on the Bonds. At those times, an investor generally would not be able to reinvest the redemption process at an effective interest rate as high as the interest rate on the Bonds being redeemed and may only be able to do so at a lower rate.

c) Referencing to an index may subject the Bonds to additional risk The Issuer may issue Bonds with Principal or Interest determined by reference to an index (or formula), to changes in the prices of the securities or commodities or other relevant factors. Potential investors should be aware that: they may receive no interest; they may lose all or a substantial portion of their principal; a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in interest rates or other indices; and timing of changes in a Relevant Factor may affect the actual yield to investors, even if the actual level is consistent with their expectations; i.e., in general, the earlier the change in the Relevant Factor, the greater the effect on yield.

d) Changes in interest rates may affect the price of the Bonds Where securities such as Bonds are offered with a fixed rate of interest, such securities are subject to price risk; as such securities may vary inversely with changes in prevailing interest rates. That is, where interest rates rise, prices of fixed rate securities fall and when interest rates drop, the prices increase. Accordingly, the extent of the fall or rise in the prices is a function of the existing coupon, days to maturity and the increase or decrease in the level of the prevailing interest rates. Increased interest rates which frequently accompany inflation and/or a growing economy are also likely to have a negative effect on the price of the Bonds.

Environmental Natural disasters could occur and negatively impact the expected revenue streams or Risks: destroy some of the projects under construction. This will decrease the projected cash flows which the State expects to generate. There may also be negative environmental impacts of respective projects proposed by the Ondo State Government.

Mitigating Factor: Environmental impact analyses for prospective projects will be undertaken, negative impacts identified, and the measures for managing such impact proposed and applied. Furthermore, any impact on projected revenues is mitigated by the fact that the State will service its obligations under the Bond from the State’s share of the Statutory Allocation from the Federal Account and also the funds in the sinking fund/debt reserve account.

Regulatory The Statutory and Regulatory environment will change and the policies that have created Environment: an enabling environment for the issuance of the Bonds will be amended.

Mitigating Factor: The Federal Government and the respective regulators are committed to creating and sustaining an investment-friendly environment governed by stable policies.

10. RISK & MITIGATING FACTORS CONT’D

Credit Risk: The credit risk of any bond is that the issuer will default in its obligations and consequently, neither the semi-annual interest payments nor the re-payment of the principal at maturity will occur.

Mitigating Factor: The track record of Ondo State in fulfilling obligations is impeccable, as the State has serviced all its debt obligations without default. Payment of the coupon and principal repayment shall be by first line deduction by way of ISPO from the State’s share of the statutory allocations accruing from the Federation Account. In addition, the Bonds Law also provides for the creation of a debt service fund (“DSF”) into which monthly appropriations of the State’s IGR will be made. The amounts standing to the credit of the DSF will be utilized in meeting the State’s debt obligations

Inflation Risk: Inflation has historically been (and still is) a major concern in Nigeria. Where inflation remains above bond yields, investors stand the risk of loss in real value, if the investments are held to maturity and coupons received cannot be reinvested at higher rates.

Mitigating Factor: The State does not have control over the level of inflation in the wider economy. However, the bonds will be appropriately priced at issuance and the coupon offered by the bonds should be sufficient to provide real return over the bond’s life.

Interest Rate There is a risk that general interest rates in the economy will rise thereby making returns on Risk: the instrument unattractive and causing a decline in the value of the bond to bondholders

Mitigating Factor: The CBN, as part of its efforts to encourage credit flow, is working assiduously to stabilize interest rates. We expect the efforts of the CBN to continue to show positive results and thus prevent a huge rise in market interest rates. Furthermore, the coupon to be promised by the bond should prove more attractive to investors over time than most other available alternatives.

Volatility Risk: Traditionally, one of the reasons local pension funds and fund managers are lured to the bond market is the apparent low volatility relative to other asset classes like equities. Increased volatility may therefore dampen investor appetite for bonds generally and thus have a negative impact on value to bondholders.

Mitigating Factor: Volatility of bond prices is linked to the volatility of interest rates which the monetary authorities are working to stabilize. A stable interest rate regime in the wider economy will serve to reduce the volatility of the bonds.

Exchange Rate Investors based outside Nigeria will be exposed to possible fluctuations in the exchange rate Risk: of the Naira to the currencies of their home countries. Fluctuations in exchange rate may also hamper the completion of some of the State’s projects that require imports.

Mitigating Factor: We expect the exchange rate to be fairly stable over the medium term.

Liquidity Risk: The larger the size of a bond outstanding, the larger the number of investors likely to hold the bond and thus the larger the number of secondary trades on the bond from time to time. The FGN for example has total outstanding bond stock of N3.55 trillion and as such has achieved substantial liquidity (note that the majority of the trades are done in the OTC market). Though the market for State government bonds has continued to improve in overall liquidity, the low volume outstanding of some bond issues has resulted in illiquidity of such bonds and high costs of execution & rebalancing for players in the market.

Mitigating Factor: The proposed size of the Ondo State bond is expected to be sufficient to support some level of liquidity. Furthermore, the bond will be quoted on The Nigerian Stock Exchange (The NSE) to enhance its liquidity.

11. STATUTORY AND GENERAL INFORMATION

11.1 MATERIAL CONTRACTS The Ondo State Government has entered into the following contract that is considered material to this transaction:

A Supplemental Trust Deed dated February 14, 2011 between the Ondo State Government on the one part and Sterling Asset Management & Trustees Limited, Mainstreet Trustees & Asset Management Co. Limited and Intercontinental Trustees Limited on the other part by which the latter have agreed to act as Trustees to the sinking fund to be established in connection with the N27Billion Ondo State Fixed Rate Bond [Series 1] 2012/2019.

A Vending Agreement dated February 14, 2011 between the Ondo State Government on the one part and the Issuing Houses on the other part by which the latter have agreed to Offer for Subscription (by way of a Book Build) the N27 Billion Ondo State Fixed Rate Bond [Series 1] 2012/2019 on behalf of the State.

Save as disclosed above, the Issuer has not entered into any contract which may be deemed material in connection with the Programme.

11.2. RELATIONSHIP BETWEEN THE PARTIES As of date of this prospectus, there is no relationship that exists between the Issuer and any of its advisers except in the ordinary course of governance and administration.

11.3. CHARGES, COSTS & EXPENSES The costs, charges and expenses of and incidental to the Issue, including fees payable to SEC, the NSE, professional parties fees, brokerage commission, tax and printing & distribution expenses are estimated at N1,076,165,049.11 amounting to 3.9% of the gross Issue proceeds. These costs are payable by the State and deductible from the proceeds of the Issue.

11.4. EXTRACT FROM SUPPLEMENTAL TRUST DEED The Supplemental Trust Deed contains, inter alia, the following provisions:

2. FORM OF BONDS

2.1 Amount, Tenor and Status

2.1.1 Series Amount: The Aggregate Principal Amount of Bonds for this Series is N27,000,000,000.00 (Twenty Seven Billion Naira) comprising 27,000,000 (Twenty Seven Million) registered Bonds at a par value of N1, 000 (One Thousand Naira) each.

2.1.2 Type of Bonds: Fixed Rate Bonds.

2.1.3 Status of Bonds: The Bonds constitute senior, direct and irrevocable obligations of the State and shall rank in pari passu in all respect with the State’s existing debt obligations. The Bonds are not guaranteed by the Federal Government of Nigeria. The Series 1 Bonds qualify as securities in which trustees and pension fund administrators may invest under the Trustees Investment Act Cap. T22 LFN 2004 and the Pension Reform Act Cap P4 LFN 2004 respectively.

2.1.4 Minimum Subscription: The minimum subscription amount for the Bonds is 10,000 Units and multiples of 5,000 Units thereafter.

2.1.5 Tenor: The period from the Allotment Date to the Maturity Date, that is, 7 (seven) years.

2.1.6 Tax Considerations: The Series 1 Bonds shall be exempt from all forms of taxation in the Federal Republic of Nigeria. Accordingly, all payments made to Holders shall be free and clear of withholding, or any deductions at source or otherwise and/or State and Federal income and capital gains or other taxes.

11. STATUTORY AND GENERAL INFORMATION CONT’D

5. REPRESENTATIONS AND UNDERTAKINGS

5.1 Representations and Warranties

The Issuer represents and warrants to the Holders that each of the Representations and Warranties stated in clause 14 of the Programme Trust Deed is valid and of effect as at the date of this Deed. Furthermore, the Issuer represents and warrants to the Holders that no Event of Default has occurred or is continuing.

5.2 Undertakings

5.2.1 The Issuer undertakes that it shall ensure that the Series 1 Sinking Fund account is credited with the sum of N315,000,000.00 ( Three Hundred and Fifteen Million Naira only) on a monthly basis throughout the tenor of the Bonds in accordance with the terms of the ISPO, duly approved by the Honourable Minister for Finance through the letter dated November 28, 2011.

5.2.2 The Issuer undertakes that it shall ensure that the Series 1 Sinking Fund account is credited with an additional sum of N377,132,360.59 ( Three Hundred and Seventy Seven Million One Hundred and Thirty Two Thousand Three Hundred and Sixty Naira and Fifty Nine kobo only) on a monthly basis commencing from the 25th month to the Maturity date in accordance with the terms of the above mentioned ISPO.

5.2.3 The Issuer irrevocably undertakes not to revoke or modify the terms of the ISPO throughout the tenor of the Series 1 Bonds without the prior written consent of the Trustees.

5.2.4 The Issuer shall submit a copy of the Appropriation Law for each year that the Series 1 Bonds remain outstanding to the Trustees within five (5) Business Days of the enactment of same.

11. STATUTORY AND GENERAL INFORMATION CONT’D

11.5. REMITTANCE TO THE SINKING FUND The following table indicates the amounts to be transferred to the Sinking Fund for the purpose of servicing interest and principal payments (The table reflects the coupon price at the upper end of the indicated price range).

Monthly Deduction Schedule Month Monthly Deduction (N) Month Monthly Deduction (N) Month 1 315,000,000.00 Month 43 692,132,360.59

Month 2 315,000,000.00 Month 44 692,132,360.59 Month 3 315,000,000.00 Month 45 692,132,360.59 Month 4 315,000,000.00 Month 46 692,132,360.59 Month 5 315,000,000.00 Month 47 692,132,360.59 Month 6 315,000,000.00 Month 48 692,132,360.59 Month 7 315,000,000.00 Month 49 692,132,360.59 Month 8 315,000,000.00 Month 50 692,132,360.59 Month 9 315,000,000.00 Month 51 692,132,360.59 Month 10 315,000,000.00 Month 52 692,132,360.59 Month 11 315,000,000.00 Month 53 692,132,360.59 Month 12 315,000,000.00 Month 54 692,132,360.59 Month 13 315,000,000.00 Month 55 692,132,360.59 Month 14 315,000,000.00 Month 56 692,132,360.59 Month 15 315,000,000.00 Month 57 692,132,360.59 Month 16 315,000,000.00 Month 58 692,132,360.59 Month 17 315,000,000.00 Month 59 692,132,360.59 Month 18 315,000,000.00 Month 60 692,132,360.59 Month 19 315,000,000.00 Month 61 692,132,360.59 Month 20 315,000,000.00 Month 62 692,132,360.59 Month 21 315,000,000.00 Month 63 692,132,360.59 Month 22 315,000,000.00 Month 64 692,132,360.59 Month 23 315,000,000.00 Month 65 692,132,360.59 Month 24 315,000,000.00 Month 66 692,132,360.59 Month 25 692,132,360.59 Month 67 692,132,360.59 Month 26 692,132,360.59 Month 68 692,132,360.59 Month 27 692,132,360.59 Month 69 692,132,360.59 Month 28 692,132,360.59 Month 70 692,132,360.59 Month 29 692,132,360.59 Month 71 692,132,360.59 Month 30 692,132,360.59 Month 72 692,132,360.59 Month 31 692,132,360.59 Month 73 692,132,360.59 Month 32 692,132,360.59 Month 74 692,132,360.59 Month 33 692,132,360.59 Month 75 692,132,360.59 Month 34 692,132,360.59 Month 76 692,132,360.59 Month 35 692,132,360.59 Month 77 692,132,360.59 Month 36 692,132,360.59 Month 78 692,132,360.59 Month 37 692,132,360.59 Month 79 692,132,360.59 Month 38 692,132,360.59 Month 80 692,132,360.59 Month 39 692,132,360.59 Month 81 692,132,360.59 Month 40 692,132,360.59 Month 82 692,132,360.59 Month 41 692,132,360.59 Month 83 692,132,360.59 Month 42 692,132,360.59 Month 84 692,132,360.59

12. PROCEDURE FOR APPLICATION AND ALLOTMENT

12.1 APPLICATION 1. Qualified Investors are hereby invited to apply for Units of the Bond through the Book Runners.

Lead Book Runner Radix Capital Partners Limited Co-Book Runners FBN Capital Limited, FCMB Capital Markets Limited, Fidelity Bank PLC, Longterm Global Capital Limited, Skye Financial Services Limited, Stanbic IBTC Bank PLC, Standard Chartered Bank Nigeria Limited and Union Capital Markets Limited

The investors that are permitted to participate in this Book Building are High Networth Individuals (that is, individuals with a minimum net worth of N300 million) and Qualified Institutionals which includes Fund Managers, Pension Fund Administrators, Insurance Companies, Unit Trusts, Multilateral and Bilateral Institutions, Registered and/or Verifiable Hedge Funds, Market Makers, Staff Schemes, Trustees/Custodians and Stockbroking firms as stipulated by Rule 78(C)(2) of the Rules and Regulation of the Securities and Exchange Commission.

2. Applications/Orders for the Bonds being offered must be made in accordance with the instructions set out in the Commitment Form. Investors must carefully follow all instructions as applications which do not comply with the instructions may be rejected.

3. The Book Build period for the Bonds now being offered will open on December 30, 2011 and close on January 31, 2012. Applications/Orders must be for a minimum of 10,000 Units and in multiples of 5,000 thereafter. The Participation Amount(s) and the Bid Coupon Rate must be entered on the Commitment Form.

4. The completion of a Commitment Form is a confirmation by each Participant that the Order is irrevocable and creates a binding obligation on the Participant which, to the fullest extent of the law, shall not be capable of recession or termination by any Participant.

5. Participants may order Bonds at any coupon rate within the Coupon Band subject to the Minimum Participation Amount and the terms and conditions stated on the Commitment Form.

6. A corporate applicant should affix its seal in the box and state its Incorporation (RC) Number or in the case of a corporate foreign subscriber its appropriate identification number in the jurisdiction in which it was constituted.

7. Upon the completion and submission of the Bid/Commitment Form, the Bidder/Participant is deemed to have authorised the Issuer and the Issuing Houses/Book Runners to effect the necessary changes in the Red Herring Prospectus as would be required for the purposes of filing the Final Prospectus with the SEC, without prior or subsequent notice of such changes to the Bidder. The Bid/Commitment Form shall be considered as the Application Form for the purposes of registration of the Final Prospectus with the SEC.

8. Bidders/Participants Applicants shall not be entitled to withdraw/modify Bids after the Bid/Issue Closing Date.

9. Bidders/Participants have the option to make a maximum of 3 (three) Orders on a Commitment Form. Such options shall not be considered multiple applications.

10. The Commitment Form presents the Bidder/Participant with the opportunity of indicating 3 (three) Bid Coupon Rates within the Coupon Band and Participation Amounts for each option. The Bid Coupon Rates and the Participation Amounts submitted by the Bidder/Participant in the Commitment Form will be regarded and treated as optional demands from the Bidder/Participant and will not be culminated.

12. PROCEDURE FOR APPLICATION AND ALLOTMENT CONT’D

11. Bidders/Participants must not submit another Commitment Form after the submission of a Commitment Form to a Book Runner or Stockbroker. The submission of a second or other Commitment Form(s) to either the same Book Runner/Stockbroker will be treated as multiple Bids/Orders. Multiple or suspected multiple Bids/Applications will be rejected.

12. Following the determination of the Coupon Rate, the maximum Participation Amount specified by a Participant at or below the Clearing Price will be considered for allocations of Bonds, provided that the allocation will be made based on the clearing price and all other order(s), irrespective of the corresponding Bid Coupon Rate(s), will automatically become invalid.

13. The Issuer in consultation with the Book Runners reserves the right not to proceed with the Issue at anytime including after the Bid/Issue Opening Date but before the Allotment Date without assigning any reason thereof.

12.2 PAYMENT INSTRUCTIONS Successful Participants must ensure that payment of the Participation Amount is received by February 14, 2012 (Pricing Date + 2) via the CBN Interbank Funds Transfer System (CIBFTS), Nigerian Interbank System Electronic Transfer (NEFT) or Real Time Gross Settlement System (RTGS) in the following designated Issue Proceeds Account domiciled with the receiving banks:

BANK ACCOUNT NAME ACCOUNT NO. SORT CODE United Bank for Africa PLC ODSG Bond Proceeds Account 1015675960 033180560

12.3 ALLOTMENT 1. On the Pricing Date, the Issuing Houses/Book Runners will analyze the demand at respective coupon levels and, in consultation with the Issuer, finalize the Coupon Rate and the allotment to each Participant. Allocation Confirmation Notices will be sent to successful Participants.

2. The Issuer and the Issuing Houses/Book Runners reserve the right to accept or reject any Bid/Application in whole or in part for having not complied with the terms and conditions of the Issue.

3. Allotment of the Bonds will be effected only upon clearance of the Final Prospectus by the Commission. Allotment will be effected in the following manner:

(a) Allotment of Bonds in Certificate Form Bond Certificates in respect of allotted Bonds will be dispatched by registered post to the addresses specified on the Bid/Application Form, to the Bidders/Applicants who have elected to receive the Bonds in physical form; not later than 15 (fifteen) Business Days from the Allotment Date.

(b) Allotment of Bonds Electronically (E-Allotment) Bidders/Applicants who elect to receive the Bonds electronically must specify the Bidder/Applicant’s CSCS Account Number, the Primary Dealer or Stockbroking Firm and the CHN in the spaces provided on the Bid/Application Form.

12. PROCEDURE FOR APPLICATION AND ALLOTMENT CONT’D

Please note that Bidders/Applicants must ensure that the name specified in the Bid/Application Form is exactly the same as the name in which the CSCS Account is held. In case the Bid/Application Form is submitted in joint names, it should be ensured that the Beneficiary CSCS Account is also held in the same joint names and are in the same sequence in which they appear in the Bid/Application Form.

12.4 DETAILS OF BANK ACCOUNTS 1. Bidders/Applicants are required to indicate their bank account details in the space provided on the Bid/Commitment Form for the purposes of refund of return/excess monies plus accrued interest, Coupon and Principal repayments (as the case may be).

2. Participants are advised to ensure that the bank account details provided on the Bid/Commitment Form are accurate. These bank account details shall be used by the Registrar for the payments stated in 15.4.1 above in connection with the Bonds.

3. Failure to provide correct bank account details could result in delays in the credit of the payments stated in 15.4.1 or the issuance of cheques/warrants which shall be sent to the addresses specified by the affected Participant by registered post. The Issuer, Issuing Houses, Receiving Banks, Trustees and Registrar shall not have any responsibility, nor will any of these stated parties undertake any liability for the same.

13. APPLICATION FORM