UNION BANK OF NIGERIA PLC RC 6262
₦100,000,000,000 Domestic Commercial Paper Issuance Programme Union Bank of Nigeria PLC ("Union Bank", the "Issuer" or the “Bank”), a commercial bank and public limited liability company incorporated in Nigeria, has established this ₦100,000,000,000 domestic commercial paper issuance programme (the "CP Programme" or "Programme"), under which Union Bank may from time to time issue commercial paper notes ("CPs " or "Notes"), denominated in Nigerian Naira on terms as maybe agreed between the Arrangers or the relevant Dealer(s) (as defined herein) and the Issuer, in separate series or tranches subject to compliance with all relevant laws and in accordance with the terms and conditions ("Terms and Conditions") contained in this programme memorandum (the "Programme Memorandum"). Each Series and each Tranche (as defined herein) will be issued in such amounts, and will have such discounts, periods of maturity and other terms and conditions as set out in the Pricing Supplement (as defined herein) applicable to such series or tranche (the "Applicable Pricing Supplement"). The maximum aggregate nominal amount of all Notes from time to time outstanding under the CP Programme shall not exceed ₦100,000,000,000 over a three-year period that this Programme Memorandum, including any amendments thereto, shall remain valid. This Programme Memorandum is to be read and construed in conjunction with any supplement hereto and all documents which are incorporated herein by reference and, in relation to any Series or Tranche (as defined herein), together with the Applicable Pricing Supplement. This Programme Memorandum shall be read and construed on the basis that such documents are incorporated and form part of this Programme Memorandum. This Programme Memorandum, the Applicable Pricing Supplement and the CPs have not been and will not be registered with the Securities and Exchange Commission, or under the Investment and Securities Act, No. 29 of 2007. The Notes issued under this Programme shall be issued in dematerialised form, registered, quoted and traded over the counter via the FMDQ OTC PLC (“FMDQ”) platform in accordance with the rules, guidelines and such other regulation with respect to the issuance, registration and quotation of commercial paper as have and may be prescribed by the Central Bank of Nigeria (“CBN”) and FMDQ from time to time, or any other recognized trading platform as approved by the CBN. The securities will settle via the Central Securities Clearing System PLC ("CSCS"), acting as Registrars and Clearing Agent for the Notes. This Programme Memorandum and the Applicable Pricing Supplement shall be the sole concern of the Issuer and the party to whom this Programme Memorandum and the Applicable Pricing Supplement is delivered (the "Recipient") and shall not be capable of distribution and should not be distributed by the Recipient to any other parties nor shall any offer made on behalf of the Issuer to the Recipient be capable of renunciation and assignment by the Recipient in favour of any other party. In the event of any occurrence of a significant factor, material mistake, omission or inaccuracy relating to the information included in the Programme Memorandum, the Issuer will prepare a supplement to this Programme Memorandum or publish a new Programme Memorandum for use in connection with any subsequent issue of CPs. This Programme Memorandum has been prepared in accordance with the CBN Guidelines on the Issuance and Treatment of Bankers Acceptances and Commercial Papers issued in November 18, 2009, the CBN letter to all deposit money banks and discount houses dated July 11, 2016 on Mandatory Registration and Listing of Commercial Papers (together the “CBN Guidelines”) and the Commercial Paper Registration and Quotation Rules (the “Rules”) of FMDQ in force as at the date thereof. The document is important and should be read carefully. If any recipient is in any doubt about its contents or the actions to be taken, such recipient should please consult his/her banker, stockbroker, accountant, solicitor or any other professional adviser for guidance immediately. This Programme Memorandum has been seen and approved by the Board of Directors of the Bank and they individually and jointly accept full responsibility for the accuracy of all information given.
JOINT ARRANGERS / DEALERS
STANBIC IBTC CAPITAL LIMITED STANDARD CHARTERED CAPITAL & ADVISORY NIGERIA LIMITED REGISTRATION NUMBER RC1031358 REGISTRATION NUMBER RC680774
ISSUING, CALCULATION AND PAYING AGENT
STANBIC IBTC BANK PLC REGISTRATION NUMBER RC125097
THIS PROGRAMME MEMORANDUM IS DATED 28 AUGUST 2018
1 CONTENTS
DEFINITIONS AND INTERPRETATIONS 3
IMPORTANT NOTICES 6
INCORPORATION OF DOCUMENTS BY REFERENCE 7
SUMMARY OF THE PROGRAMME 8
USE OF PROCEEDS 10
REVISED CBN GUIDELINES ON ISSUANCE OF CPS 11
TERMS AND CONDITIONS OF THE NOTES 13
TAX CONSIDERATIONS 17
RISK FACTORS 18
SETTLEMENT, CLEARING AND TRANSFER OF NOTES 20
PRO FORMA APPLICABLE PRICING SUPPLEMENT 22
OVERVIEW OF UNION BANK OF NIGERIA PLC 25
INDEPENDENT AUDITOR’S REPORT 33
HISTORICAL FINANCIAL INFORMATION 35
EXTRACT FROM ISSUER'S RATING REPORT 38
LEGAL OPINION ON THE NOTES 41
GENERAL INFORMATION 53
PARTIES TO THE TRANSACTION 54
2 DEFINITIONS AND INTERPRETATIONS
In this Programme Memorandum, unless a contrary indication appears, the following expressions shall have the meanings indicated in the table below. Words in the singular shall include the plural and vice versa, references to a person shall include references to a body corporate, and reference to a gender includes the other gender.
"Agency Agreement" The Issuing, Calculation and Paying Agency Agreement dated on or about the date of this Programme Memorandum executed by the Issuer and the Issuing, Calculation and Paying Agent.
“Applicable Pricing Supplement” The Pricing Supplement applicable to a particular Series or Tranche of Notes.
“Arrangers” Stanbic IBTC Capital Limited Standard Chartered Capital & Advisory Nigeria Limited.
“BA” Banker’s Acceptance.
“Board” or “Directors” Board of Directors of the Issuer.
“Business Day” Any day (other than a Saturday, Sunday or a public holiday declared by the FGN) on which commercial banks are open for business in Lagos, Nigeria.
“Business Hours” 8.00am to 5.00pm on any Business Day or Payment Business Day, as the case may be.
“CAMA” Companies and Allied Matters Act (Chapter C20) LFN 2004.
“CBN” Central Bank of Nigeria.
“CBN Guidelines” CBN’s Guidelines on the Issuance and Treatment of Bankers Acceptances and Commercial Papers, issued on 18 November 2009, and the CBN Circular of 12 July 2016 on Mandatory Registration and Listing of Commercial Papers, as amended or supplemented from time to time.
“CGT” Capital Gains Tax as provided for under the Capital Gains Tax Act (Chapter C1) LFN 2004.
“CITA” Companies Income Tax Act (Chapter C21) LFN, 2004 (as amended by the Companies Income Tax (Amendment) Act No. 11 of 2007).
“Commercial Paper”, “CP” or Quoted unsecured commercial paper notes to be issued by the Issuer under the “Notes” CP Programme in form of short term zero-coupon notes under the CP Programme
“Conditions” or “Terms and Terms and conditions, in accordance with which the Notes will be issued, set out in Conditions” the section of this Programme Memorandum headed “Terms and Conditions of the Notes”.
“CP Programme” or “Programme” The CP Programme described in this Programme Memorandum pursuant to which the Issuer may issue several, separate series of Notes from time to time with varying maturities and discount rates, provided, however, that the aggregate Face Value of Notes in issue does not exceed ₦100,000,000,000.
“CSCS” or “Clearing Agent” Central Securities Clearing System, which is operated by Central Securities Clearing System PLC, and which expression shall include its successors or any additional or alternative clearing system or any clearing system as may otherwise be specified in the Applicable Pricing Supplement.
“CSCS Rules” The rules and operating procedures prescribed by the CSCS.
“Day Count Fraction” Such method of calculating the discount as specified in the Applicable Pricing Supplement.
“Dealers” Stanbic IBTC Capital Limited Standard Chartered Capital & Advisory Nigeria Limited any other additional Dealer appointed pursuant to the Dealer Agreement from time to time, which appointment may be for a specific issue or on an ongoing basis, subject to the Issuer’s right to terminate the appointment of any Dealer pursuant to the Dealer Agreement.
"Deed of Covenant" The Deed of Covenant dated on or about the date of this Programme Memorandum executed by the Issuer in favour of the Noteholders.
3 DEFINITIONS AND INTERPRETATIONS
“Eligible Individual Investor” or “EII” An individual (i.e. natural person upon the execution of a declaration attesting to his/her awareness of the risks involved in investing in clean CPs) investor who meets the qualification criteria prescribed by FMDQ from time to time. Clean CPs shall only be sold to Qualified Institutional Investors, and EIIs
“Event of Default” An event of default as set out in Condition 6 of the “Terms and Conditions”.
"Face Value" The par value of the Notes.
"FGN" Federal Government of Nigeria.
"FIRS" Federal Inland Revenue Service.
"FMDQ” FMDQ OTC PLC, a securities exchange and self-regulatory organisation licenced by the Securities and Exchange Commission to provide a platform for, amongst others, listing, quotation, registration and trading of debt securities.
“FMDQ Rules” The FMDQ Commercial Paper Registration and Quotation Rules, May 2017 (as may be amended from time to time) and such other regulations (including but not limited to Market Bulletins) with respect to the issuance, registration and quotation of commercial papers as may be prescribed by FMDQ from time to time.
“Force Majeure” Any event or circumstance (or combination of events or circumstances) that is beyond the control of the Issuer which materially and adversely affects its ability to perform its obligations as stated in the Conditions, which could not have been reasonably foreseen, including without limitation, nationwide strikes, national emergency, riot, war, embargo, legislation, acts of God, acts of terrorism, and industrial unrest.
“Government” Any federal, state or local government of the Federal Republic of Nigeria.
"Implied Yield" The yield accruing on the Issue Price of a Note, as specified in the Applicable Pricing Supplement.
"ISIN" International Securities Identification Number.
"Issuer", “Union Bank” or the Union Bank of Nigeria PLC. “Bank”
"Issue Date" The date upon which the relevant Series/Tranche of the Notes is issued as specified in the Applicable Pricing Supplement.
"Issue Price" The price at which the relevant Series/Tranche of the Notes is issued, as specified in the Applicable Pricing Supplement.
"Issuing, Calculation and Paying Stanbic IBTC Bank PLC as Issuing, Calculation and Paying Agent and any Agent" or "Agent" or “ICPA" or successor Issuing, Calculation and Paying Agent appointed in accordance with the "IPA" Agency Agreement.
"Joint Arranger" or "Joint Stanbic IBTC Capital Limited Arrangers" Standard Chartered Capital and Advisory Nigeria Limited
"LFN" Laws of the Federation of Nigeria 2004.
"Maturity Date" The date as specified in each Applicable Pricing Supplement on which the Principal Amount is due.
"Naira" or "₦" The Nigerian Naira, the lawful currency of Nigeria.
“NIBOR” Nigerian Inter-Bank Offered Rate
"Nigeria" The Federal Republic of Nigeria. "Nigerian" shall be construed accordingly.
"Noteholder" or "Holder" The holder of a Note as recorded in the Register in accordance with the Terms and Conditions.
"OTC" Over-the-counter.
"Payment Business Day" A day on which commercial banks are open for general in Nigeria.
“PITA” Personal Income Tax Act (Chapter P8) LFN 2004 (as amended by the Personal Income Tax (Amendment) Act of 2011).
4 DEFINITIONS AND INTERPRETATIONS
"Principal Amount" The nominal amount of each Note, as specified in the Applicable Pricing Supplement.
"Pricing Supplement" The document(s) to be issued pursuant to the Programme Memorandum, which shall provide the final terms and conditions of a specific issue of a Series/Tranche of the Notes under the Programme.
"Programme Memorandum" This information memorandum dated 28 August 2018 which details the aggregate size and broad terms and conditions of the CP Programme.
“Qualified Institutional Investor” or include banks, fund managers, pension fund administrators, insurance companies, “QII” investment/unit trusts, multilateral and bilateral institutions, registered private equity funds, registered hedge funds, market makers, staff schemes, trustees/custodians, stockbroking firms and any other category of investors as may be determined by FMDQ from time to time. Clean CPs shall only be sold to QIIs
"Register" The register of Noteholders, maintained by the Issuing, Calculation and Paying Agent.
"Registrar" The CSCS or such other registrar as may be appointed by the Issuer in respect of the Notes issued under the Programme.
"Relevant Currency" The currency in which payments in respect of the Notes of the relevant Tranche or Series are to be made as indicated in the Applicable Pricing Supplement.
"Relevant Date" The payment date of any obligation due on the Notes.
"Relevant Last Date" The date stipulated by the CSCS and specified in the Applicable Pricing Supplement, after which transfer of the Notes will not be registered.
"SEC" The Securities and Exchange Commission, Nigeria.
"SEC Rules" The Rules and Regulations of the Securities and Exchange Commission 2013, (as may be amended from time to time by the SEC), made pursuant to the Investments and Securities Act No. 29 of 2007.
"Series" A Tranche of Notes together with any further Tranche or Tranches of Notes, which are (i) expressed to be consolidated and form a single series and (ii) are identical in all respects except for their respective Issue Dates, and/or Issue Prices.
“Terms and Conditions” Terms and conditions, in accordance with which the Notes will be issued, set out in the section headed “Terms and Conditions of the Notes”.
"Tranche" Notes which are identical in all respects.
"VAT" Value Added Tax as provided for in the Value Added Tax Act (Chapter V1) LFN, 2004 (as amended by the Value Added Tax (Amendment) Act No. 12 of 2007).
"Zero Coupon Note" A Note which will be offered and sold at a discount to its Face Value and which will not bear interest, other than in the case of late payment.
5 IMPORTANT NOTICES
This Programme Memorandum contains information provided by the Issuer in connection with the CP Programme under which the Issuer may issue and have outstanding at any time Notes up to a maximum aggregate amount of ₦100,000,000,000. The Notes shall be issued subject to the Terms and Conditions contained in this Programme Memorandum. The Issuer shall not require the consent of the Noteholders for the issue of Notes under the Programme. The Issuer accepts responsibility for the information contained in this Programme Memorandum. To the best of the knowledge and belief of the Issuer (who has taken all reasonable care to ensure that such is the case), the information contained or incorporated by reference in this Programme Memorandum is correct and does not omit anything likely to affect the import of such information. To the fullest extent permitted by law, the Arrangers and Dealers or other professional advisers make no representation, warranty or undertaking, express or implied and accept no responsibility for the contents of this Programme Memorandum or for any other statement, made or purported to be made by the Arrangers and Dealers or on their behalf in connection with the Issuer or the issue and offering of the Notes. The Arrangers and Dealers and other professional advisers accordingly disclaim all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this Programme Memorandum or any such statement. To the fullest extent permitted by law, the Arrangers and Dealers accept no responsibility for the contents of this Programme Memorandum or for any other statement, made or purported to be made by the Arrangers or on their behalf in connection with the Issuer or the Programme and offering of the Notes. The Arrangers accordingly disclaim all and any liability whether arising in tort or contract or otherwise (save to the extent precluded by law), which it might otherwise have in respect of this Programme Memorandum or any such statement. No person has been authorised by the Issuer to give any information or to make any representation not contained or not consistent with this Programme Memorandum or any information supplied in connection with the CP Programme and if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, unless explicitly delivered by the Issuer. Neither this Programme Memorandum nor any other information supplied in connection with the CP Programme is intended to provide a basis for any credit or other evaluation, or should be considered as a recommendation by the Issuer, the Arrangers or the Dealers that any recipient of this Programme Memorandum or any other information supplied in connection with the CP Programme should purchase any Notes. Each person contemplating the purchase of any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the credit worthiness, of the Issuer. Neither this Programme Memorandum nor any other information supplied in connection with the CP Programme constitutes an offer or invitation by or on behalf of the Issuer to any person to subscribe for or to purchase any Notes. The delivery of this Programme Memorandum does not at any time imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof. Investors should review, among other things, the most recent audited annual financial statements of the Issuer prior to taking any investment decision. Notes issued under the Programme shall be restricted to Qualified Institutional Investors and Eligible Individual Investors who meet the qualification criteria prescribed by FMDQ from time to time. All currency risks assumed by investors upon purchase of the Notes are borne by the individual investors. The Arrangers and Dealers and the ICPA are under no obligation to seek recovery or initiate any action against the Issuer. FMDQ OTC PLC TAKES NO RESPONSIBILITY FOR THE CONTENTS OF THIS PROGRAMME MEMORANDUM, NOR ANY OTHER INFORMATION SUPPLIED IN CONNECTION WITH THIS CP PROGRAMME, MAKES NO REPRESENTATION AS TO ITS ACCURACY OR COMPLETENESS AND EXPRESSLY DISCLAIMS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM OR IN RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS PROGRAMME MEMORANDUM.
6 INCORPORATION OF DOCUMENTS BY REFERENCE
This Programme Memorandum should be read and construed in conjunction with: 1. each Applicable Pricing Supplement relating to any Series or Tranche of Notes issued under the Programme; and 2. the audited annual financial statements (and notes thereto) and any audited interim financial statements published subsequent to such annual financial statements of the Issuer for the financial years/periods prior to each issue of Notes under this Programme, which shall be deemed to be incorporated into, and to form part of, this Programme Memorandum and which shall be deemed to modify, complete and/or supersede the contents of this Programme Memorandum as appropriate.
The Issuer may for so long as any Note remains outstanding, publish an amended and restated Programme Memorandum or a supplement to the Programme Memorandum on the occasion of any subsequent issue of Notes, where there has been:- (a) a material change in the condition (financial or otherwise) of the Issuer which is not then reflected in the Programme Memorandum or any supplement to the Programme Memorandum; or (b) any modification of the terms of the Programme, which would then make the programme materially inaccurate or misleading. Any such new Programme Memorandum as supplemented and/or modified shall be deemed to have been substituted for the previous Programme Memorandum or to have modified the previous Programme Memorandum from the date of its issue.
The Issuer will provide free of charge to each prospective investor upon request, a copy of any of the documents deemed to be incorporated herein by reference, unless such documents have been modified or superseded (and which documents may at the Issuer's option be provided electronically). Requests for such documents shall be directed to the Issuer at its specified office(s) as set out in this Programme Memorandum.
7 SUMMARY OF THE PROGRAMME
The following summary does not purport to be complete and is taken from, and is qualified in its entirety by the remainder of this Programme Memorandum and the Applicable Pricing Supplement:
1. Issuer: Union Bank of Nigeria PLC.
2. Programme Description: Domestic Commercial Paper Issuance Programme.
3. Size of Programme: ₦100,000,000,000 aggregate principal amount of Notes outstanding at any point in time.
4. Issuance in Series: The Notes will be issued in Series or Tranches, and each Series may comprise one or more Tranches issued on different dates. The Notes in each Series, each a Tranche, will have the same maturity date and identical terms (except that the Issue Dates and Issue Price may be different). Details applicable to each Series or Tranche will be specified in the Applicable Pricing Supplement
5. Arrangers: Stanbic IBTC Capital Limited; and Standard Chartered Capital & Advisory Nigeria Limited.
6. Dealers: Stanbic IBTC Capital Limited; Standard Chartered Capital & Advisory Nigeria Limited; and any other additional Dealer appointed pursuant to the Dealer Agreement from time to time, which appointment may be for a specific issue or on an ongoing basis, subject to the Issuer’s right to terminate the appointment of any Dealer pursuant to the Dealer Agreement.
7. Issuing, Calculation and Paying Agent: Stanbic IBTC Bank PLC.
8. Auditors: KPMG Professional Services.
9. Registrar/Custodian: Central Securities Clearing System PLC.
10. Solicitor: Udo-Udoma & Belo-Osagie.
11. Use of Proceeds: The net proceeds from each issue of Notes under the Programme will be used to support the Issuer's short-term financing requirements or as may otherwise be described in the Applicable Pricing Supplement.
12. Source of Repayment: The repayment of all obligations under the Programme will be funded from the cash flows of the Issuer.
13. Method of Issue: The Notes may be offered and sold by way of a fixed price offer for subscription or through a book building process and/or any other methods as described in the Applicable Pricing Supplement within Nigeria or otherwise, in each case as specified in the Applicable Pricing Supplement.
14. Maturity Date: As specified in the Applicable Pricing Supplement, subject to a minimum tenor of 15 days and a maximum tenor of 270 days (including rollover, form date of issue).
15. Interest Payments: Notes issued will be in the form of Zero Coupon Notes.
16. Default Rate: Interest rate equivalent to the daily overnight Nigerian Inter-bank Offered Rate (NIBOR) + 5% per annum or issue rate + 5% per annum (whichever is higher).
17. Issue Price: The Notes shall be issued at a discount. The effective discount will be calculated based on such Day Count Fraction as specified in the Applicable Pricing Supplement.
18. Issue Size: As specified in the Applicable Pricing Supplement.
8 SUMMARY OF THE PROGRAMME
19. Currency of Issue: The Notes issued under this programme will be denominated in Naira.
20. Redemption: As stated in the Applicable Pricing Supplement, subject to the CBN Guidelines and FMDQ Rules.
21. Rating: The Issuer has been assigned a long-term national rating of A- by Agusto & Co, BBB+ by DataPro Limited and BBB+ by Global Credit Ratings Company Limited.
Pursuant to the CBN Guidelines and FMDQ Rules, either the Issuer or the specific issue itself shall be rated by a rating agency registered in Nigeria or any international rating agency acceptable to the CBN.
A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, change or withdrawal at any time by the assigning rating agency.
22. Status of the Notes: Each Note constitutes a direct, unconditional, unsubordinated and unsecured obligation of the Issuer and the Notes rank pari passu among themselves and, save for certain debt obligations mandatorily preferred by law, pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer outstanding from time to time.
23. Quotation: The Issuer will quote all Series or Tranche issued on FMDQ’s platform or any other recognised trading platform. All secondary market trading of the Notes shall be done in accordance with the rules in relation to the quotation or listing of any Series or Tranche quoted or listed on the relevant trading platform.
24. Taxation: Refer to the section of this Programme Memorandum headed "Tax Considerations".
25. Governing Law: The Notes issued under the Programme and all related contractual documentation will be governed by, and construed in accordance with, Nigerian law.
26. Settlement Procedures: The Notes will be settled via direct debit, electronic funds transfers, NIBBS Instant Payment (NIP), NIBBS Electronic Funds Transfer (“NEFT”) or Real Time Gross Settlement (“RTGS”).
9 USE OF PROCEEDS
The net proceeds from each issue of Notes will be used to support the Issuer's short-term financing requirements or as may otherwise be described in the Applicable Pricing Supplement.
10 REVISED CBN GUIDELINES ON ISSUANCE OF CPS
BACKGROUND
In July 2009, the CBN suspended the use of Commercial Papers and Bankers Acceptances as off-balance-sheet instruments by Nigerian banks and discount houses, citing concerns over abuse of their use as financing instruments. The ban was subsequently lifted on 16 November 2009. On 18 November 2009, the CBN issued the CBN Guidelines in an attempt to facilitate the effective and efficient functioning of the Nigerian money market and provide a regulatory framework for the issuance of CPs and BAs in Nigeria.
REGULATORY FRAMEWORK
Issuance of and investment in CPs by Banks and Discount Houses in Nigeria is subject to the provisions of the CBN Guidelines and the FMDQ Rules. The provisions applicable to CPs under the CBN Guidelines are as highlighted below:
Qualification A CP qualifies as a financing vehicle if: i. the issuer has 3 years' audited financial statements, the most current not exceeding 18 months from the last financial year end; and ii. the issuer has an approved credit line with a Nigerian bank acting as an issuing and paying agent, where the bank guarantees the issue.
Size and Tenor CPs shall be issued at the primary market for a minimum value of ₦100,000,000 and multiples of ₦50,000,000 or as otherwise determined. Furthermore, they shall be issued for maturities of between 15 days and 270 days, including rollover, from the date of issue. The interest or discount element on maturing CPs may not be capitalised and rolled over.
Rating Either the issuer of CP or the specific issue shall have an investment grade rating (minimum of BBB-) by a rating agency registered in Nigeria or any international rating agency acceptable to the CBN. An indicative rating should have been obtained prior to the submission of declarations and information to the CSCS.
Investors in Bankers Acceptances and Commercial Papers CPs may be issued to and held by individuals, deposit money banks, other corporate bodies registered or incorporated in Nigeria and unincorporated bodies, non-resident Nigerians and foreign institutional investors.
Forms of Maintaining CPs Issuers and investors in CPs may issue or hold CPs in dematerialized or physical form. Issuers and investors are encouraged to issue and hold CPs in a dematerialized form.
Issuing and Paying Agent Only a deposit money bank and discount house may act as an IPA for the issuance of CP.
General Requirements i. CPs are only redeemable at maturity and as such cannot be pre-liquidated. ii. Investors may rediscount the paper with the Issuer before maturity at new market terms if the Issuer is willing to purchase the risk. iii. Any proposed issue of CPs shall be completed within the period of two (2) weeks from the date of opening of the issue for subscription. iv. All CPs issued in Nigeria shall be registered with the CSCS, which shall serve as the custodian of all issues and central depositary for all dematerialised instruments.
COMPLIANCE WITH THE CBN GUIDELINES
The Issuer has complied with all applicable provisions as stated in the CBN Guidelines. A legal opinion confirming adherence to the CBN Guidelines is incorporated on page 41 of this Programme Memorandum.
COMPLIANCE WITH SECURITIES REGULATIONS
There is no obligation for the Issuer to register the Notes with the SEC. This is by virtue of Rule 8 of the SEC Rules, which exempts short-term securities (including notes) with maturity dates not exceeding 9 months from the date of issuance from registration with the SEC.
11 REVISED CBN GUIDELINES ON ISSUANCE OF CPS
MANDATORY REGISTRATION & QUOTATION
CBN Circular of 12 July 2016 on Mandatory Registration and Listing of Commercial Papers requires CPs to be registered and quoted on Authorised Securities Exchanges. Accordingly, banks are prohibited from transacting in CPs (that are not quoted or intended for quotation on an Authorised Securities Exchange), in any capacity whatsoever, including to act as Issuer, Guarantor, Issuing, Placing, Paying and Collecting Agent (“IPCA”), Collecting and Paying Agent (“CPA”); etc.
The CBN having approved the registration and quotation rules of FMDQ OTC Securities Exchange has cleared it for the registration and quotation of CPs in Nigeria.
12 TERMS AND CONDITIONS OF THE NOTES
The following are the Terms and Conditions of the Notes to be issued by the Issuer under the Programme. The provisions of the Applicable Pricing Supplement to be issued in respect of any Note are incorporated by reference herein and will supplement these Terms and Conditions for the purposes of that Note. The Applicable Pricing Supplement in relation to any series of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the Terms and Conditions contained herein, replace or modify the following Terms and Conditions for the purpose of such series of Notes.
1. ISSUANCE OF NOTES
The Issuer may from time to time, subject to these Terms and Conditions, issue Notes in one or more Series on a continuous basis under the Programme in an aggregate principal amount not exceeding N=100,000,000,000 (one hundred billion Naira). Any Series of Notes issued under the Programme shall be constituted by, be subject to, and benefit from, the Deed of Covenant.
2. FORM, DENOMINATION AND TITLE 2.1 Form and Denomination 2.1.1 Unless otherwise specified in any Applicable Pricing Supplement, the Notes shall be registered electronically, serially numbered and denominated in a minimum amount of N= 100,000,000 (One Hundred Million Naira) and integral multiples of N=50,000,000 (Fifty Million Naira) thereafter; and will be sold at such discount from their face amounts as shall be agreed upon by the Dealers and the Issuer; and shall have a maturity not exceeding 270 (two hundred and seventy) days, including the roll over from the Issue Date. 2.1.2 The Notes issued under this Programme will be denominated in Naira. 2.1.3 Notes issued will be in the form of Zero Coupon Notes, and will not pay interest. 2.1.4 The Notes will be delivered to the Dealer in dematerialised (uncertificated, book entry) form; shall be registered with the CSCS, which shall serve as the custodian and central depository of the Notes; and the Dealers may deal in the Notes in accordance with CSCS procedures and guidelines. 2.2 Title 2.2.1 Title to the Notes will pass upon credit to the CSCS account of the Noteholder. 2.2.2 Transfer of title to Notes shall be effected in accordance with the rules governing transfer of title in securities held by CSCS. 2.2.3 The Issuer and the Agent may deem and treat the registered holder of any Note as indicated in the records of CSCS and the Register as the legal and beneficial owner thereof for all purposes, including but not limited to the payment of outstanding obligations in respect of the Notes, and no liability shall attach to any person for such a determination.
3. STATUS OF THE NOTES The Notes shall constitute a direct, unconditional, unsubordinated and unsecured obligation of the Issuer and the Notes rank pari passu among themselves and, save for certain debt obligations mandatorily preferred by law, pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer outstanding from time to time.
4. REDEMPTION Subject to Condition 6, the Notes are only redeemable at maturity and will be redeemed at the Face Value specified in the Applicable Pricing Supplement in accordance with the provisions of Condition 5 below.
5. PAYMENTS The Face Value of the Notes will be paid to the Noteholders whose names are reflected in the Register as at the close of business on the applicable Relevant Date(s). The registered Holder shall be the only person entitled to receive payments in respect of a Note and the Issuer will be discharged from any further obligations or liability upon payment to, or to the order of, the registered Holder in respect of each amount so paid. 5.1 Method of Payments 5.1.1 Payment of the outstanding obligation in respect of the Notes will be made by electronic funds transfer, in Naira, to the account of the Noteholder specified in the Register. 5.1.2 All monies payable in respect of the Notes shall be paid to or to the order of the Noteholders by the ICPA. Noteholders shall not be required to present and/or surrender any documents of title to the ICPA. 5.1.3 In the case of joint Noteholders, payment by electronic transfers or cheque will be made or addressed to, as the case may be, the account of the Noteholder first named in the Register. Payment by electronic transfer to the Noteholder first named in the Register shall discharge the Issuer of its relevant payment obligations under the Notes to such joint Noteholders. 5.1.4 In the case of Notes held by a nominee, the nominee shall be paid as the registered Noteholder. 5.1.5 Neither the Issuer nor its agents shall be responsible for any loss in transmission of funds paid in respect of each Note. 5.1.6 If the Issuer or the Agent is prevented or restricted directly or indirectly from making any payment by electronic funds transfer (whether by reason of strike, lockout, fire explosion, floods, riot, war, accident,
13 TERMS AND CONDITIONS OF THE NOTES
act of God, embargo, legislation, shortage of or breakdown in facilities, civil commotion, Government interference or control or any other cause or contingency beyond the control of the Issuer), the Issuer or the Agent shall make such payment by cheque (or by such number of cheques as may be required in accordance with applicable banking law and practice) and the Issuer and the Agent shall not be responsible for any delay arising from making such payment by cheque. Such payments by cheque shall be sent by post through a reputable and registered courier operator to the address of the Noteholder as set out in the Register as soon as practicable to ensure payment is received as close to the Relevant Date as possible. 5.1.7 Cheques may be posted by registered mail, provided that neither the Issuer nor the Agent shall be responsible for any loss in transmission and the postal authority shall be deemed to be the agent of the Noteholders for the purposes of all cheques posted in terms of this condition. 5.2 Payment Day Any payment in respect of the Notes shall be made on a Business Day. Where the day on or by which a payment of any amount in respect of the Notes is due to be made is not a Business Day, that payment shall be made on or by the next succeeding Business Day, unless that next succeeding Business Day falls in a different calendar month, in which case that payment shall be made or that event shall occur on or by the immediately preceding Business Day. The Noteholder shall not be entitled to any interest, return or other payment in respect of any delay in payment. 5.3 Closed Periods No Noteholder may require the transfer of the Notes (i) during the period of 5 (five) days ending on the due date for redemption in respect of that Note; or (ii) following the issuance of a default notice to the Issuer pursuant to Condition 6.2 (Action upon Event of Default).
6. EVENT OF DEFAULT 6.1 Event of Default An event of default in relation to the Notes (each an “Event of Default”) shall arise if any one or more of the following events shall have occurred and be continuing: 6.1.1 Subject to Condition 5.1.6 above, if the Issuer fails to make payment in full by the Relevant Date save for where such failure is as a result of an administrative or technical error and payment is made within ten (10) Business Days of the Relevant Date; or 6.1.2 If the Issuer fails to perform or observe any of its other obligations under the Notes and such failure has continued for a period of 15 (fifteen) days following the service on the Issuer of a written notice requiring that breach to be remedied; or; 6.1.3 Should any representation or warranty made in connection with any documentation supplied by the Issuer in connection with the Programme is in the reasonable opinion of the Arrangers materially incorrect or materially misleading; or 6.1.4 If the Issuer initiates bankruptcy or insolvency proceedings or becomes insolvent, or is provisionally or finally sequestrated, or is provisionally or finally wound up, or is unable to pay its debts as they become due, or is placed under provisional or final judicial management, or enters into a scheme of arrangement or compromise with its creditors in each case except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation on terms approved by the Noteholders; or 6.1.5 Should an order be made or the members of the Issuer pass a resolution for the winding up of the Issuer or the Issuer ceases, or through an official action of its Board threatens to cease, to carry on all or a substantial part of its business or operations; or 6.1.6 Any event occurs that may have a material adverse effect on the Issuer’s business, financial condition or assets, or its ability to perform its obligations under the Issue; or 6.1.7 If an attachment, execution or other legal process is levied, enforced upon, issued on or against a material or substantial part of any assets of the Issuer and is not discharged or stayed within 90 (ninety) days of service by the relevant officer of the court of such attachment, execution or other legal process; or 6.1.8 If a writ of execution is issued by any competent court attaching any material or substantial part of assets belonging to the Issuer and such remains unsatisfied for more than 10 (ten) Business Days after the date on which it is issued. 6.2 Action upon Event of Default 6.2.1 Upon the occurrence of an Event of Default and such Event of Default is continuing, any Noteholder may by written notice to the Issuer at its specified office(s), effective upon the date of receipt thereof by the Issuer, declare the Notes held by that Noteholder to be forthwith due and payable, provided that no such action shall be taken if it is as a result of Force Majeure or if the Issuer withholds or refuses to make any payment in order to comply with any law or regulation of Nigeria or to comply with any order of a court of competent jurisdiction. 6.2.2 Upon the occurrence of an Event of Default which results in the inability of the Issuer to make a payment on the Relevant Date, the Issuer shall pay the Noteholders interest at the Default Rate until the debt obligations to the Noteholders have been settled in full.
14 TERMS AND CONDITIONS OF THE NOTES
6.2.3 In addition, each Noteholder shall have the right to exercise all other remedies available to them under the laws of the Federal Republic of Nigeria.
7. REGISTER 7.1 The Register shall be maintained by the ICPA. The Register shall reflect each Tranche and Series, the number of Notes issued and shall contain the name, address, and bank account details of the registered Noteholders. The Register shall set out the aggregate Principal Amount of the Notes issued to such Noteholder and the date of issue. 7.2 Statements issued by the CSCS as to the aggregate number of Notes standing to the CSCS account of any person shall be conclusive and binding for all purposes save in the case of manifest error and such person shall be treated by the Issuer and the Agent as the legal and beneficial owner of such aggregate number of Notes for all purposes. 7.3 The Register shall be open for inspection during the normal business hours of the ICPA to any Noteholder or any person authorised in writing by the Noteholder. 7.4 The ICPA shall alter the Register in respect of any change of name, address or bank account number of any of the registered Noteholders of which it is notified in accordance with these Terms and Conditions.
8. NOTICES 8.1 Notices to the Noteholders 8.1.1 All notices to the Noteholders will be valid if mailed to them at their respective addresses of record in the relevant register of Notes of a Series maintained by the Agent. The Issuer shall also ensure that notices are duly given or published in a manner which complies with the rules and regulations of the CBN, the FMDQ, the CSCS or such other regulatory authority as may be applicable to the Notes. 8.1.2 Any notice shall be deemed to have been given on the second day after being so mailed or on the date of publication in national newspapers, or if published more than once or on different dates, on the date of the first publication. 8.2 Notices from the Noteholders 8.2.1 Notices to be given by any Noteholder to the Issuer shall be in writing or via electronic mail and given by lodging the same with the ICPA at its registered office. 8.2.2 Any change of name or address on the part of the Noteholder shall forthwith be notified to the Issuer and subsequently, the Register shall be altered accordingly following notifications to the CSCS.
9. MODIFICATION 9.1 The Dealers and the Issuer may agree without the consent of the Noteholders, to any modification of the Terms and Conditions which is of a formal, minor or technical nature or is made to correct a manifest error or to comply with the mandatory provisions of any law in Nigeria and which in the opinion of the Dealers is not prejudicial to the interest of the Noteholders. Notice of such modification shall be published in at least one daily newspaper of general circulation in Nigeria, and shall be deemed to have been given and received on the date of first publication. 9.2 Save as provided in Condition 9.1 above, no amendment of the Terms and Conditions may be effected unless: 9.2.1 such amendment is in writing and signed by or on behalf of the Issuer; and 9.2.2 such amendment: 9.2.2.1 if it affects the rights, under the Terms and Conditions, of all the Noteholders, is signed by or on behalf of Noteholders, holding not less than 75% (seventy five percent) of the outstanding Principal Amount of all the Notes; or 9.2.2.2 if it affects only the rights, under the Terms and Conditions, of a particular group (or groups) of Noteholders, is signed by or on behalf of the Noteholders in that group (or groups) holding not less than 75% (seventy five percent) of the outstanding Principal Amount of all the Notes held by that group. 9.3 Any such modification shall be binding on the Noteholders and shall be notified to the Noteholders in accordance with Condition 8 as practicable thereafter.
10. MEETING OF NOTEHOLDERS 10.1 The Issuer may at any time convene a meeting of all Noteholders upon at least 21 (Twenty one) days prior written notice to such Noteholders. The notice is required to be given in terms of Condition 8. Such Notice shall specify the date, place, agenda, wording of any special or extraordinary resolution sought to be passed and time of the meeting to be held, which place shall be in Nigeria. 10.2 Every director or duly appointed representative of the Issuer may attend and speak at a meeting of the Noteholders but shall not be entitled to vote, other than as a proxy or representative of a Noteholder. 10.3 Noteholders holding not less than 10% (ten percent) in Principal Amount of the outstanding Notes shall be able to request the Issuer to convene a meeting of Noteholders. Should the Issuer fail to requisition such a meeting within 10 (ten) Business Days of such a request being received by the Issuer, the Noteholders requesting the meeting may convene such a meeting. 10.4 A Noteholder may by an instrument in writing (a “Form of Proxy”) signed by the holder or, in the case of a corporation executed under its common seal or signed on its behalf by an attorney or a duly authorised officer of
15 TERMS AND CONDITIONS OF THE NOTES
the corporation, appoint any person (a “Proxy”) to act on his or its behalf in connection with any meeting or proposed meeting of the Noteholders. 10.5 Any Noteholder which is a corporation may by resolution of its directors or other governing body authorise any person to act as its representative (a “Representative”) in connection with any meeting or proposed meeting of the Noteholders. 10.6 Any Proxy or Representative appointed shall, so long as the appointment remains in force, be deemed for all purposes in connection with any meeting or proposed meeting of the Noteholder specified in the appointment, to be the Holder of the Notes to which the appointment relates and the Holder of the Notes shall be deemed for such purposes not to be the Holder. 10.7 The chairman of the meeting shall be appointed by the Issuer. The procedures to be followed at the meeting shall be as determined by the chairman subject to the remaining provisions of this Condition 10. Should the Noteholders requisition a meeting, and the Issuer fail to call such a meeting within 10 (ten) Business Days of the requisition, then the chairman of the meeting held at the instance of the Noteholders, shall be selected by a simple majority of Noteholders present in person or proxy. 10.8 At any meeting of Noteholders, two or more Noteholders present in person, by representative or by proxy, holding in aggregate not less than one third of the Principal Amount of outstanding Notes shall form a quorum. On a poll, each Noteholder present in person or by proxy at the time of the meeting shall have the number of votes equal to the number of Notes, by denomination held by the Noteholder. 10.9 If 30 (thirty) minutes after the time appointed for any such meeting a quorum is not formed, the meeting shall, if convened upon the requisition of Noteholders, be dissolved. In any other case, it shall be adjourned to such date and time not being less than 14 (fourteen) days nor more than 21 (Twenty One) days thereafter and at the same time and place. At such adjourned meeting, 2 (two) or more Noteholders present or represented by proxy holding in aggregate not less than one third of the Principal Amount of outstanding Notes shall form a quorum and shall have power to pass any resolution and to decide upon all matters which could properly have been dealt with at the original meeting had the requisite quorum been present. 10.10 A resolution in writing duly signed by seventy five percent (75%) of the Noteholders holding in aggregate not less than seventy five percent (75%) of the Principal Amount of outstanding Notes, shall be as effective for all purposes as a resolution duly passed at a meeting of the Noteholders, provided that the resolution was sent to all the Noteholders entitled to receive notice of a meeting of Noteholders. Such resolution may be contained in one document or in several documents of identical form duly signed by or on behalf of all of the Noteholders.
11. CHANGING OF AGENT 11.1 The Issuer is entitled to vary or terminate the appointment of the Agent and /or appoint additional or other agents and/or approve any change in the office of the agent through which any agent acts, provided that there will at all times during the subsistence of the Programme, be an agent with an office. 11.2 The Agent acts solely as agent of the Issuer and does not assume any obligation towards or any relationship of agency or trust for or with any Noteholder. 12. TAXATION The Notes issued under the Programme will be Zero Coupon Notes and as such, will be offered and sold at a discount to Face Value. The Notes will thus not bear interest, and the Issuer will not be required to withhold or deduct tax from payments in respect of the Notes to the Noteholders. However, the discount on the Notes may be taxed, in the hands of the investor, in accordance with applicable Nigerian tax laws.
13. FURTHER ISSUES The Issuer shall be at liberty from time to time without the consent of the Noteholders to issue further Notes under the Programme.
14. GOVERNING LAW The provisions of the Programme Memorandum and the Notes are governed by, and shall be construed in accordance with the laws of the Federal Republic of Nigeria.
16 TAX CONSIDERATIONS
The tax consequences of investments in the Notes are broadly summarised below. The summary is not intended and should not be construed, to be tax advice to any particular subscriber. Any prospective investor who is in any doubt as to his/her tax position or who is subject to taxation in any jurisdiction other than Nigeria should consult his/her own professional advisers without delay as to the consequences of an investment in the Notes in view of his/her own personal circumstances. Neither the Issuer nor its advisers shall be liable to any subscriber in any manner for placing reliance upon the contents of this section. In relation to the taxation of corporate bonds, on 16th March, 2010, the former President of Nigeria, in exercise of his statutory powers announced the approval of a waiver of taxes, which would have otherwise been payable on all categories of bonds (including corporate bonds) and short term FGN securities. The taxes covered by the approval are taxes prescribed pursuant to the CITA, the PITA, VAT Act and the CGT Act. The Companies Income Tax (Exemption of Bonds and Short Term Government Securities) Order 2012 (“Order”), which was issued pursuant to the announcement, was gazetted on 2nd January, 2012, and is valid for a period of 10 years with effect from the commencement date of 2nd January, 2012. By virtue of the Order, income and interest earned, by corporate bodies liable to tax under the CITA, on corporate bonds from 2nd January, 2012 to 1st January 2022 are exempt from tax. The Order applies to all categories of bonds, but in relation to short term securities, the Order refers only to FGN short term securities and, therefore, it is not clear whether it extends to those issued by corporates. In addition to the waivers granted under the Order, recent amendments to the PITA include an exemption on all forms of taxes on income earned from investment made by individuals in, among other things, corporate bonds. In contrast to the Order in respect of companies that invest in corporate bonds, no limitation period applies with respect to the exemption from income tax, which has been granted pursuant to the PITA in connection with interest or income earned on corporate bonds by any individual or other bodies liable to tax under the PITA. The exemption in the PITA applies to all categories of corporate bonds, but in relation to short term securities, it is not clear whether it extends to those securities issued by corporates. The Notes being discounted instruments, no interest will be paid on the Notes and accordingly, the Notes will not be subject to the withholding of tax. This is based on section 78 of the CITA and section 70 of the PITA, which require companies to withhold tax only on interest payments. In practice, the tax authorities have also not sought to treat the discount on commercial papers as interest. In addition, the Value Added Tax (Exemption of Commissions on Stock Exchange Transactions) Order, 2014 exempts (a) commissions earned on traded value of the shares, and; (b) commissions payable to the SEC, The NSE; and the CSCS from VAT for a period of five years from the commencement date of the order i.e. 25 July 2014. Accordingly, any commission payable to the CSCS, SEC or The NSE in connection with Notes will be exempt from VAT for a period of five (5) years from the commencement date of this Order i.e. until 24 July 2019. After this date, Holders may be required to pay VAT on any commission payable to the CSCS, SEC or The NSE in connection with the Notes. This exemption only applies to trading of securities on The NSE and does not extend to the FMDQ. Therefore, Holders may have to pay VAT on fees payable in connection with Notes traded on the FMDQ. The foregoing summary does not purport to be comprehensive and does not constitute advice on tax to any actual or prospective purchaser of Notes issued under the Programme. In particular, it does not constitute a representation by the Issuer or its advisers on the tax consequences attaching to a subscription or purchase of Notes issued under the Programme. Tax considerations that may be relevant to a decision to acquire, hold or dispose of Notes issued under the Programme and the tax consequences applicable to each actual or prospective purchaser of the Notes may vary. Any actual or prospective purchaser of the Notes who intends to ascertain his/her tax position should seek professional advice from his/her preferred professional advisers as to the tax consequences arising from subscribing to or purchasing the Notes, bearing in mind his/her peculiarities. Neither the Issuer nor its advisers shall be liable to any subscriber or purchaser of the Notes in any manner for placing reliance upon the contents of this section.
17 RISK FACTORS
The following section does not describe all the risks (including those relating to each prospective investor’s particular circumstances) with respect to an investment in the Notes. The risks in the following section are provided as general information only. Prospective investors should refer to and carefully consider the risks described below and the information contained elsewhere in this Programme Memorandum, which may describe additional risks associated with the Notes. Investors should also seek professional advice before making investment decisions in respect of the Notes.
GENERAL FIXED INCOME RELATED RISKS
There may not be an active two way quote trading market for the CPs when issued, and thus the liquidity of the CPs may be limited. Therefore, Investors may not be able to sell their CPs in a transparent and efficient system. However a vibrant Over The Counter (OTC) market exists for Treasury Bills and other fixed income securities, and the continuous development and deepening of the fixed income market will help ensure increased liquidity of the CPs.
OPERATIONAL RISK
The Bank defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events such as third party fraud. This definition includes legal risk but excludes strategic and reputational risks. The Bank’s operational processes capture the following major types of losses: fraud (internal and external); fines, penalties or expenses incurred as a result of settlement delays and regulatory infractions; losses arising from litigation processes including out of court settlements; un-reconciled cash (teller, vault, ATM) shortages written off in the course of the year; losses incurred as a result of damage to the Bank’s assets; and losses incurred as a result of system downtime, malfunction or disruption. The Bank recognises the significance of operational risk, which is inherent in all areas of the Bank’s business. Any lapse due to operational risks that could result in losses could affect the Issuer’s ability to perform its obligations under the programme.
CREDIT RISK
Credit risk is the risk that a counterparty will cause a financial loss to the Bank by failing to meet contractual obligations to the Bank when due. It is the most significant risk inherent in the Bank’s business. Credit exposures arise principally from lending activities including loans and advances, and investment activities that bring debt securities and other instruments into the Bank’s asset portfolio. There is also credit risk in off-balance sheet financial instruments.
REGULATORY AND COMPLIANCE RISK
The banking industry in which the Bank operates is highly regulated. Banks and Other Financial Institutions Act, 1991, various CBN Guidelines (including the CBN Prudential Guidelines), circulars and directives contain provisions which the Bank is required to adhere to, including the requirement to meet certain capital adequacy and cash reserve requirements, failing which the Bank risks sanction by the CBN. Non-compliance by the Bank with CBN directives may result in the revocation of the Bank’s banking licence. Should the Bank lose its banking licence, it would be unable to meet its obligations under the Programme.
LIQUIDITY RISK
The Bank is exposed to two types of liquidity risk: Market/trading liquidity risk: inability to conduct a transaction at current market price because of the size of the transaction. This type of liquidity risk arises when certain assets cannot be liquidated at short notice due to market illiquidity; and Funding liquidity risk: inability to access sufficient funds to meet payment obligations in a timely manner. The management of liquidity risk arising from funding and trading is very critical to the ongoing viability of the Bank.
Liquidity risk is assessed by comparing the expected outflows with expected inflows, and liquidity risk arises when there is a mismatch between the inflow and outflow, and when there is unexpected delay in repayment of loans (term liquidity risk) or unexpectedly high payment outflow (withdrawal/call risk).
MARKET RISK
Market risk is the risk arising from adverse changes in underlying market factors such as interest rates, foreign exchange rates, equity prices, commodity prices and other relevant factors such as market volatility. The Bank’s financial condition and operating results could be affected by market risks that are outside the Bank’s control. The Bank undertakes trading and investment activities in fixed income securities such as notes, treasury bills, interbank takings and placements, as well as foreign exchange trading, all of which give rise to market risk exposure (i.e. the risk that the fair value or future cash flows of the Bank’s trading and investment positions or other financial instruments may fluctuate because of changes in market prices).
INTEREST RATE RISK
The principal risk to which the Bank’s non-trading portfolios are exposed is the risk of loss arising from fluctuations in the future cash flow or fair values of financial instruments because of a change in the market interest rate. Interest rate risk occurs when there is a mismatch between interest rate sensitive assets and liabilities. Interest rates are highly sensitive to many factors beyond the Bank’s control, including increased regulation of the financial sector, monetary policies, domestic and
18 RISK FACTORS
international economic and political conditions and other factors. Increases in interest rates may reduce the value of the Bank’s financial assets and may also reduce gains or require it to record losses on sales of its loans or securities. In addition, an increase in interest rates may reduce overall demand for new loans and increase the risk of customer default. If interest rates decrease, although this is likely to reduce the Bank’s funding costs, it is likely to compress its net interest margins, as well as adversely impact its income from investments in securities and loans with similar maturities, which could have a negative effect on it.
FOREIGN EXCHANGE RISK
Foreign currency risk is the risk that changes in foreign exchange rates would affect the value of the financial assets and liabilities as well as off-balance sheet items. This also includes positions in local currency that are indexed to foreign exchange rates. Financial instruments that are exposed to this risk include foreign currency denominated loans and advances, foreign currency denominated securities, and future cash flows in foreign currencies arising from foreign exchange transactions. Movement in exchange rates could result in further devaluation of the Naira, which may affect the value of the Bank’s foreign currency denominated assets and liabilities and have a negative impact on the Bank’s financial condition.
19 SETTLEMENT, CLEARING AND TRANSFER OF NOTES
Words used in this section shall bear the same meanings as used in the section headed "Definitions and Interpretations", except to the extent that they are separately defined in this section or the meaning if applied, would be clearly inappropriate for the context.
CLEARING SYSTEM
The Notes will be issued in dematerialised form and will not be represented by any certificate or written instrument. As stipulated by the CBN Guidelines, each Series or Tranche will be held in custody by the CSCS, either in the name of the beneficial owner or Nominee. All transactions in the Notes shall be cleared and settled electronically in accordance with the rules and operating procedures of the CSCS. Subject as aforesaid, each Tranche will be issued, cleared and transferred in accordance with the Terms and Conditions and will be settled through authorised participants who will follow the electronic settlement procedures prescribed by CSCS.
AUTHORISED PARTICIPANTS
CSCS will maintain a central securities account for banks (the "Authorised Participants") and each beneficial owner of the Notes is required to have a sub-account under the Authorised Participants. Noteholders may exercise their rights in respect of the Notes held in the custody of the CSCS only through the Authorised Participants. For purposes of Notes issued under this Programme, the Authorised Participant is Stanbic IBTC Bank PLC and any other bank or issuing house appointed by the Issuer to act as ICPA.
REGISTRATION i. The Authorised Participant shall register with the CSCS, where CP custody and depository services are required. The Authorised Participant shall complete Form: CSCS-CP001 and shall be required to submit proof of appropriate FMDQ membership along with the completed form. ii. Noteholders are required to route their account opening applications and transactions through the Authorised Participant, who will officially notify CSCS to create sub-accounts for these Noteholders and attach Noteholders' mandates to this effect. iii. The CSCS will assign a unique identification number (the "Trade Member Code") to the Authorised Participant and also provide an account number (and sub-account numbers for Noteholders) as requested by the Authorised Participant to enable them to trade the CPs. iv. The OTC Exchange shall request for the CP to be registered with CSCS, who in turn shall furnish the OTC Exchange and the Authorised Participant with the CP symbol and ISIN Codes for the registered CP, subject to receipt of CP registration fees from the Authorised Participant. v. The CSCS will re-open the existing ISIN code for all tranches with same maturity dates, however new ISIN codes will be issued for tranches with different maturity dates.
CUSTODY AND DEMATERIALISATION i. An Authorised Participant with physical CP notes may decide to dematerialise CP(s) with CSCS by completing Form CSCS-CP003. ii. All holders of CP notes must route these notes through the Authorised Participant who will then submit on the CSCS Authorised platform in dematerialized form. iii. The Authorised Participant may also decide to keep the CPs in physical form with CSCS (subject to service agreement with CSCS), acting as the Custodian for the issue. iv. The Authorised Participant can also lodge the CP(s) electronically by using the CSCS e-lodgement format. v. The Authorised Participant will advise CSCS, after dematerialisation or e-lodgement to transfer CPs to Noteholders’ (or their custodians’) accounts at CSCS before trading commences. vi. Cut-off time for e-lodgement of CPs is 10.00 a.m. on the day before the value date, and CSCS shall process the same within 24 hours of receipt.
REDEMPTION i. No transactions or trades may be effected for any CPs two (2) working days prior to its maturity date as the register closes two (2) working days before the Maturity Date. ii. The Authorised Participant will submit a letter to CSCS confirming the intention of the Issuer to repay the Noteholders on the Maturity Date by 12.00 noon on the date which is two (2) working days before the Maturity Date. iii. CSCS shall expunge (knock-off) matured CPs on the Maturity Date or Redemption Date of the CP. iv. The Maturity Date shall be on a Payment Business Day, however if the Maturity Date falls on a public holiday, payment will be made on the ensuing working day.
ROLL-OVER i. Every roll-over of a CP shall be treated or classified as a fresh/separate CP.
20 SETTLEMENT, CLEARING AND TRANSFER OF NOTES
ii. Upon granting approval for rollover, the OTC Exchange shall request for the rollover CP to be registered with CSCS, who in turn shall furnish the OTC Exchange and Authorised Participant with the new CP symbol and ISIN Codes, subject to receipt of CP rollover fees from the Authorised Participant. iii. CSCS shall expunge the existing CP symbol and ISIN from the system and replace with new codes.
DEFAULT i. Where the Issuer is unable to repay the Noteholders and the CP will be in default status, the Authorised Participant shall notify CSCS, FMDQ, as well as the Noteholders, latest two (2) Business Days before the Maturity Date, latest by 3.00pm. ii. CSCS shall make public the default status to the market latest by the date which is one (1) Business Day before the Maturity Date. iii. In case of (i) above, the CP must remain with the CSCS until the ICPA pays off the Noteholders and notifies CSCS and the FMDQ (if applicable, in the event of a quoted CP) with evidence. iv. Thereafter, CSCS will notify the public and expunge the CP from the CSCS depository accordingly.
SECONDARY MARKET TRADING (OTC) GUIDELINES i. Standard settlement cycle is T+2. ii. The OTC Exchange shall submit the confirmed CP trade details on trade day in the specified format via the CSCS authorised platform, based on the following settlement timelines: a. Same Day Settlement: 12.30 p.m. b. T+1 or T+2 Settlements: 3.00 p.m. iii. The CSCS shall deliver securities and send confirmation of transfers via the CSCS authorised platform by 2.00 p.m. on the settlement date to the Nigeria Inter-Bank Settlement System ("NIBSS") and to the FMDQ (if the CP is quoted) simultaneously. The Authorised Participant shall state the particular account number where the CP(s) will be settled. iv. NIBSS shall transfer settlement amounts to respective accounts and send confirmation to the CSCS, the OTC Exchange or the Authorised Participant simultaneously. v. Transactions for standard settlement (T+2) shall stop five (5) Business Days before the Maturity Date. Therefore, the last applicable settlement shall be before close of business on the date which is five Business Days before the Maturity Date.
REPORTING i. The CSCS shall effect the transfer of CPs on the settlement date as advised by the Authorised Participant or the FMDQ and keep records of consideration for each transaction. ii. The CSCS will advise the Authorised Participant or the FMDQ for onward communication to the Authorised Participant, as applicable, of successful and failed transactions on each settlement day. iii. The Authorised Participant can visit the CSCS website (www.cscsnigeriaplc.com) to ascertain its CP balances after each day's trade. This is available only to the institutions that subscribe to the CSCS online service.
TRANSFER OF NOTES
Title to beneficial interest in the Notes will pass on transfer thereof by electronic book entry in the securities accounts maintained by the CSCS and may be transferred only in accordance with rules and operating procedures of the CSCS.
CASH SETTLEMENT
Transaction parties will be responsible for effecting the payment transfers via Real Time Gross Settlement, National Electronic Funds Transfer or any other transfer mode agreed by the transaction parties and recognised by the CBN.
21 PRO FORMA APPLICABLE PRICING SUPPLEMENT
UNION BANK OF NIGERIA PLC RC 6262
Issue of [Aggregate Nominal Amount of Series/Tranche] [Title of Notes] Under its ₦100,000,000,000 Multicurrency Commercial Paper Issuance Programme
This Applicable Pricing Supplement must be read in conjunction with the Programme Memorandum, dated 28 August 2018 prepared by Union Bank of Nigeria PLC in connection with its ₦100,000,000,000 Multicurrency Commercial Paper Issuance Programme, as amended and/or supplemented from time to time (the "Programme Memorandum"). Any capitalised terms not defined in this Applicable Pricing Supplement shall have the meanings ascribed to them in the Programme Memorandum. This document constitutes the Applicable Pricing Supplement relating to the issue of Commercial Paper Notes ("CP Notes" or the "Notes") described herein. The Notes described herein are issued on and subject to the Terms and Conditions as amended and/or supplemented by the Terms and Conditions contained in this Applicable Pricing Supplement. To the extent that there is any conflict or inconsistency between the contents of this Applicable Pricing Supplement and the Programme Memorandum, the provisions of this Applicable Pricing Supplement shall prevail.
PARTIES
1. ISSUER Union Bank of Nigeria PLC
2. ARRANGERS AND DEALERS Stanbic IBTC Capital Limited Standard Chartered Capital & Advisory Nigeria Limited
3. ISSUING, CALCULATION AND PAYING AGENT Stanbic IBTC Bank PLC
4. SPONSOR TO THE QUOTATION ON FMDQ Stanbic IBTC Capital Limited Standard Chartered Capital & Advisory Nigeria Limited
5. AUDITORS KPMG Professional Services
6. REGISTRAR/CUSTODIAN Central Securities Clearing System PLC
7. SOLICITOR Udo-Udoma & Belo-Osagie
PROVISIONS RELATING TO THE NOTES
8. SERIES NUMBER [ ]
9. TRANCHE NUMBER [ ]
10. PROGRAMME SIZE [ ]
(a) PROGRAMME SIZE [ ]
(b) ISSUED AND OUTSTANDING AT THE DATE OF [ ] THE PRICING SUPPLEMENT
11. AGGREGATE NOMINAL AMOUNT [ ]
12. FACE VALUE [ ]
13. DISCOUNTED VALUE [ ]
14. NOMINAL AMOUNT PER NOTE [ ]
15. ISSUE PRICE [ ]
22 PRO FORMA APPLICABLE PRICING SUPPLEMENT
16. TENOR [ ]
17. MATURITY DATE [ ]
18. FINAL REDEMPTION AMOUNT [ ]
19. SPECIFIED DENOMINATION [ ]
20. SPECIFIED CURRENCY [ ]
21. STATUS OF NOTES [ ]
22. FORM OF NOTES [ ]
23. SOURCE(S) OF REPAYMENT [ ]
24. LISTING [ ]
25. TAXATION [ ]
26. METHOD OF OFFER [ ]
27. BOOK CLOSED PERIOD The Register will be closed from [ ] to [ ] (until the Maturity Date)
ZERO COUPON NOTES
28. (a) DISCOUNT RATE ("DR") [ ]
(b) IMPLIED YIELD [ ]
(c) ANY OTHER FORMULA OR BASIS FOR [ ] DETERMINING AMOUNT(S) PAYABLE
29. DAY COUNT FRACTION [ ]
30. BUSINESS DAY CONVENTION [ ]
PROVISIONS REGARDING REDEMPTION
31. REDEMPTION/PAYMENT BASIS [Redemption at par] [other (specify)]
32. ISSUER'S EARLY REDEMPTION [Applicable/Not applicable]
33. ISSUER'S OPTIONAL REDEMPTION [Applicable/Not applicable]
34. OTHER TERMS APPLICABLE ON REDEMPTION [ ]
GENERAL
35. OFFER OPENS [ ]
36. OFFER CLOSES [ ]
37. ALLOTMENT DATE [ ]
38. NOTIFICATION OF ALLOTMENT All applicants will be notified through an email and/or telephone of their allotment by no later than [ ]
39. PAYMENT DATE [ ]
40. ISSUE DATE [ ]
41. DETAILS OF BANK ACCOUNT(S) TO WHICH [ ] PAYMENTS ARE TO BE MADE IN RESPECT OF THE NOTES
42. SETTLEMENT PROCEDURES AND SETTLEMENT [ ] INSTRUCTIONS
43. DELIVERY DATE [ ]
23 PRO FORMA APPLICABLE PRICING SUPPLEMENT
[MATERIAL ADVERSE CHANGE STATEMENT] [Except as disclosed in this document,] there has been no significant change in the financial position of the Issuer since [insert date of last audited accounts or interim accounts (if later)] and no material adverse change in the financial position or prospects of the Issuer since [insert date of last published annual accounts.]
RESPONSIBILITY The Issuer and its Board of Directors accept responsibility for the information contained in this Applicable Pricing Supplement, which when read together with the Programme Memorandum [and supplemental Programme Memorandum, if any], contains all information that is material in the context of the issue of the Notes. Signed at ______on this ______day of ______[ ]
For and on behalf of Union Bank of Nigeria PLC
______Name Name Capacity: Director Capacity: Director Who warrants his/her authority hereto Who warrants his/her authority hereto
24 OVERVIEW OF UNION BANK OF NIGERIA PLC
1. History and Overview of Union Bank of Nigeria PLC
Union Bank was first established in 1917 and is a long standing and respected financial institution in Nigeria. Union Bank is a commercial bank with an international banking subsidiary in the United Kingdom.
As at 31 December 2017, the shareholding structure of the Bank consists of:
Union Global Partners Limited (UGPL) (65.31%): UGPL is a consortium of local and international investors
Atlas Mara Limited (24.01%): Atlas Mara Limited is a private equity firm
Diverse base of other shareholders (10.62%)
The Bank offers a portfolio of banking and other financial services to individual, SME, commercial and corporate clients. The Bank serves approximately four million customers, leveraging a mix of branches and a network of alternative channels including multi-channel digital banking platforms such as mobile, online, POS terminals and ATMs. The Bank has a strong geographic network in Nigeria comprising 350 sales and service centres and 950 ATMs as at 31 December 2017. The Bank had 2,645 full time employees as at 31 December 2017.
The Bank’s business model covers Retail Banking, Commercial Banking, Corporate Banking and Treasury segments, through which the Bank provides a range of products and services, including deposit products (current and savings accounts and term deposit accounts), loans and advances, corporate and trade services, electronic banking services, money market activities, foreign exchange services, funds transfer services and bank guarantees.
Over the years, the Bank has built a strong and resilient institution, leveraging a strong customer base cultivated by its customer-focused acquisition and retention strategy and maintaining positive financial performance in the face of a challenging operating environment. The Bank intends to continue to strengthen its product offering and service delivery capabilities, to position the Bank as a market leader for transaction banking and superior client service in Nigeria. The Bank’s key aim is to become the leading mid-tier bank by 2018.
The Bank has made significant investments in people, processes and technology in recent years, reinforcing its position as a simpler, smarter bank. Over the last two years, the Bank has won a series of awards including “The Fastest Growing Retail Bank” by International Finance Magazine (2017); “Most Improved Bank in Retail Banking” by Business Day (2016); “Best Bank to Support Nigeria’s Small and Medium Scale Enterprises” by Business Day (2016); “Brand Evolution of the Year” and “Iconic Brand of the Year” by Marketing World Awards (2017). The Bank was also named as “Top 10 Best Companies to Work for in Nigeria” by Jobberman (2017).
The Bank’s consolidated gross earnings for the years ended 31 December 2017, 2016 and 2015 were₦163.8 billion, ₦129.6 billion and ₦117.2 billion, respectively. The Bank’s consolidated assets as at 31 December 2017, 2016 and 2015 were ₦1,455.1 billion, ₦1,252.6 billion, and ₦1,049.7 billion, respectively, reinforcing the Bank’s position as a solid mid-tier bank.
2. Union Bank’s Key Business Activities
The Bank offers a portfolio of banking and other financial services to individual, SME, commercial and corporate clients. The Bank serves approximately 4.3 million customers, leveraging a mix of branches and a network of alternative channels including multi-channel digital banking platforms such as mobile, online, POS terminals and ATMs. The Bank has a strong geographic network in Nigeria comprising 300 sales and service centres and 950 ATMs as at 31 March 2017. The Bank had 2,645 full time employees as at 31 December 2017.
The Bank’s operations are made up primarily of its retail, commercial, corporate banking and and treasury business. The Bank has the following strategic business segments, which are its reportable segments in its Financial Statements:
Corporate Banking: The Corporate Banking business segment caters to large corporate clients with turnover of above ₦10 billion, with focus on high traction industries including oil and gas, telecom, general commerce, manufacturing, fast- moving consumer goods, agriculture, aviation and maritime. Products and services offered include transactional banking products, cash management solutions, trade, working capital finance, investment management, overdrafts, loans and advances and foreign exchange services. Clients are serviced through dedicated relationship managers and a strong electronic platform.
Commercial Banking: The Commercial Banking business segment focuses on meeting the banking needs of corporates with annual turnover of between ₦2 billion and ₦10 billion. Priority sectors for the commercial banking business include general commerce, manufacturing, agribusiness, construction, education, religion and the public sector. Product offerings to this segment include loans and advances, equipment leasing, local purchase order financing, value chain products, trade financing and cash management solutions. Clients are serviced via a wide commercial hub network of relationship managers and a strong online presence.
Retail Banking: The Retail Banking segment focuses on identified meaningful sub-segments within mass retail, mass affluent and SME customers with annual turnover of less than ₦2 billion. The Bank provides retail customers with deposit, asset and electronic banking products, combined with complementary white label products.
Treasury: Treasury supports clients in all segments of the Group such as affluent and high net worth individuals, commercial clients, corporates and non-banking financial institutions. Client offering is composed of a diversified
25 OVERVIEW OF UNION BANK OF NIGERIA PLC
portfolio of products and services including issuance of short term notes, investment management (money market products), fixed income sales and trading.
3. BOARD OF DIRECTORS AND MANAGEMENT TEAM OF UNION BANK
BOARD OF DIRECTORS
Cyril Odu — Chairman
Mr. Cyril Odu joined the Board in 2012 and was appointed Chairman of the Board of Directors in November 2015. Prior to his appointment as Chairman, Mr. Odu was the Chairman of the Bank's Risk Management Committee and served as a member of the Finance and General Purpose and Credit Committees. Mr. Odu has nearly 45 years of professional, managerial and director level experience. His 40-year distinguished career at Exxon Mobil saw him rise from trainee to Vice Chairman of the Board of Mobil Producing Nigeria and Chief Financial Officer of Exxon Mobil Upstream Companies in Nigeria, making him the highest ranking Nigerian in the organisation until his retirement in 2012. In 2008, he served on a presidential committee tasked with accelerating the expansion of Nigeria's power infrastructure. After his retirement from Exxon Mobil in 2012, Mr. Odu joined African Capital Alliance and is currently Chief Executive Officer of the firm. He has a BSc (Hons) in Geology from the University of Ibadan (1972) and an MBA from Texas Southern University (1980). Emeka Emuwa – Chief Executive Officer
Mr. Emeka Emuwa was appointed Chief Executive Officer of Union Bank of Nigeria PLC in November 2012. Prior to joining Union Bank, Mr. Emuwa had a distinguished 25-year career at Citi, one of the world’s leading financial institutions. While at Citi, he led the bank's franchises in several Francophone and Anglophone African countries before his appointment as the first Nigerian Country Officer and Managing Director of Citi in Nigeria in 2005 – a role he held until his appointment as Chief Executive Officer for Union Bank. He is a Director of Africa Finance Corporation and a Fellow of the Chartered Institute of Bankers Nigeria. Chairman of Accion Microfinance Bank Nigeria and Junior Achievement Nigeria. He is also a former Director of the American Business Council. Mr. Emuwa is a graduate of Finance from the University of Lagos (1982) and holds an MSc. in Management from Purdue University’s Krannert School of Management (1984). Oyinkansade Adewale – Chief Financial Officer
Mrs. Oyinkan Adewale was appointed as Executive Director/Chief Financial Officer of Union Bank in October 2012. She is a chartered accountant and financial control expert with over 35 years of experience in the audit and financial sectors. Mrs Adewale trained at Coopers and Lybrand, where she worked for eight years till 1989 and from where she proceeded to Nigerian International Bank Limited (a subsidiary of Citigroup), where she worked till 2003. Mrs Adewale was an Executive Director at Citi and Chief Financial Officer for West Africa, covering seven countries. Mrs. Adewale is a Fellow of the Institute of Chartered Accountants of Nigeria and has held several board and executive positions throughout her career. In 2009, the CBN appointed her as an Executive Director and Chief Financial Officer of Oceanic Bank Nigeria Limited with oversight of all the bank’s 13 subsidiaries, the Risk Management Group, Finance Group and Strategic Planning. She also served as Integration Manager in the merger between Oceanic Bank and Ecobank Nigeria. Mrs. Adewale co-founded SIAO, a leading indigenous accounting firm in Nigeria and was pioneer Managing Director/Chief Operating Officer of Renaissance Group, Africa. Mrs. Adewale is a 1980 graduate of the University of Ibadan. She has attended management and leadership programmes at the IMD, Lausanne, INSEAD, Fontainebleau and Oxford Said Business School. Kandolo Kasongo – Chief Risk Officer and Compliance Executive
Mr. Kandolo Kasongo joined the Bank as an Executive Director and Chief Risk Officer in 2013 and has built a 30-year career in the banking industry. He commenced his career, in the area of risk management, at Citibank as Head of Risk and Senior Credit Officer for East, West and North/West Africa successively, based in Johannesburg, Abidjan/Lagos and Cairo. After 27 years at Citigroup, Mr Kasongo then moved to Barclays Bank as Risk Director for Global Retail and Commercial Banking where he had oversight for 14 African countries, the Middle East, India, Pakistan, and Russia. In April 2009 he took up the position of Credit Head for Stanbic IBTC Bank PLC before joining Union Bank. Mr Kasongo is a 1977 graduate of Faculte Universitaire Catholique de Mons (Belgium). Emeka Okonkwo – Head, Corporate and Investment Banking
Mr. Emeka Okonkwo joined the Bank in 2013 as an Executive Director, heading the Bank’s Corporate Banking and Treasury business. His career in the banking industry commenced 25 years ago as an officer in Citigroup Nigeria across varying departments such as Corporate Finance, Credit Risk Management, Marketing, Treasury and Strategic Management in Nigeria and London. In 2009, he was appointed to the board of Citigroup Nigeria as an Executive Director for Commercial Banking and Global Subsidiaries and also headed the Global Banking Division of Citigroup Bangladesh where he had responsibility for client relationships within the corporate, financial institutions, public sector and global subsidiaries in the country. Mr. Okonkwo has a Bachelor’s degree in Civil Engineering from University of Nigeria, Nsukka (1986) and a Master of Science in Construction Management from the University of Lagos (1988). He also holds an MBA from Warwick Business School, UK (2014). Adekunle Sonola — Head, Commercial Banking
Mr. Adekunle Sonola, has been Executive Director at the Bank since July 2015. Before joining the Bank, Mr. Sonola held various positions in Guaranty Trust Bank, including Managing Director and Group Chief Executive Officer of the Guaranty
26 OVERVIEW OF UNION BANK OF NIGERIA PLC
Trust Bank (Kenya), Executive Director of Guaranty Trust Bank (Kenya) Limited, Group Head of Corporate Banking Mainland, General Manager, Deputy General Manager and Senior Manager of Institutional Banking Division at Guaranty Trust Bank PLC. Mr. Sonola also served as the Head of Client Coverage, Head of CIB Coverage and Distribution, and Head of Corporate & Institutional Banking at Stanbic IBTC Holdings PLC. He holds a first degree in law from University of Ife (1990) and received an MBA from Durham University in 1999. Nath Ude – Head, Service and Technology
Mr. Ude joined Union Bank in January 2017 to head Service and Technology. He is a seasoned banker with over 25 years’ experience in both international and Nigerian banking environments. He started his banking career with Citibank in 1990, where he held various roles within operations process management, service quality, cash management, controls and general management in Nigeria, South Africa and India. Mr. Ude left Citibank in 2004 to join Standard Chartered Bank, South Africa where he was the Country Head, Technology and Operations (Wholesale and Consumer Banking). He later left Standard Chartered Bank to join First City Monument Bank in 2007 as Group Head of Operations, before assuming the position of Divisional Head of Operations and Business Support. He holds a Bachelor’s Degree in Finance from University of Nigeria Nsukka (1987) and an MBA from Bayero University, Kano (1999). Obafunke Alade-Adeyefa – Non–Executive Director (Independent)
Mrs Obafunke Alade-Adeyefa was appointed to the Board of Union Bank in April 2017. She commenced her career as an accountant with Peat, Marwick, Ani, Ogunde & Co from July 1982 to April 1986. She joined First City Merchant Bank Limited as an Assistant Manager, Treasury in May 1986, where she worked until joining Marina International Bank Limited (Merchant Bankers) in April, 1990. At Marina International Bank Limited, Mrs. Alade-Adeyefa rose to the rank of Group Head, Corporate Banking and Capital Markets Group, before leaving in May of 1996. Mrs Alade Adeyefa acted as Head of Treasury at Texaco Overseas (Nigeria) Petroleum Unlimited from June 1996 to December 2001. Prior to joining Union Bank, she worked with Chevron Nigeria Limited for 15 years during which time Mrs Alade-Adeyefa acted as Managing Director and Chief Executive Officer of Chevron Nigeria Closed Pension Fund Administrator Limited from June 2008 to December 2016. Mrs Alade-Adeyefa serves as a Non-Executive Director on the Board of Linkage Assurance PLC. and is the Treasure of Child Lifeline. Mrs Alade-Adeyefa holds a Bachelor of Science degree in Economics from Obafemi Awolowo University, Ile-Ife (1981). She is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN). Beatrice A. Hamza Bassey – Non–Executive Director
Mrs. Beatrice A. Hamza Bassey is Group Managing Director and General Counsel at Atlas Mara Limited since February 2015 and also serves as its Chief Compliance Officer. Prior to joining Atlas Mara, Mrs. Hamza Bassey was a Partner at the Wall Street Law firm of Hughes Hubbard & Reed LLP, where she was member of the Executive Committee and chaired its Africa Practice Group. She has spent over two decades representing a roster of corporate entities in compliance and corporate governance matters and counselled Corporate Boards and Audit Committees. She has also designed and implemented compliance programs for several financial institutions and of NYSE, FTSE and CAC 40 companies, as well as several companies across Africa, and led regulatory interactions on behalf of those corporations in the US, Europe and across Africa. Just before joining Atlas Mara, she was representing the Trustee for the liquidation of Lehman Brothers, Inc. where she oversaw the allocation and return of billions of US Dollars in customer property to former customers of Lehman Brothers. Beatrice has garnered many international accolades for her work, and has been profiled by Forbes Africa and CNN's African Voices, as a top African lawyer. She has been a Non-Executive Director at Union Bank since July 2015 and BancABC Botswana. She also served as a Board Member at Banque Populaire du Rwanda S.A as well as several other Boards in the United States and Africa. She is a member of the American Bar as well as the Nigerian Bar. Mrs. Hamza-Bassey received her first degree in Law (LLB) from University of Maiduguri, Nigeria in 1994. She received her Bachelors of Law from Nigeria Law School in 1995 and received her L.L.M. from Harvard Law School in 1998. John C. Botts – Non–Executive Director
Mr John Chester Botts, CBE, is a senior adviser to Allen & Company Advisers LLC and Corsair Capital LLC. Other directorships include Brait SE and several private companies. He was formerly the CEO of Citicorp’s Investment Bank in Europe, Africa and Middle East, Former Chairman of United Business Media PLC and Euromoney Institutional Investor PLC and director of Songbird Estates PLC. He is a Trustee of the Tate Foundation, the Cleveland Clinic Foundation and Chairman of Glyndebourne Productions Limited.
He graduated with a B.A. from Williams College, Massachusetts in 1962.
Richard Burrett – Non–Executive Director
Mr. Richard Burrett is a Principal at Earth Capital Partners LLP. He is responsible for renewables investment, investment management, and the firm’s relations with the project finance banking community and supports implementation of the sustainability strategy. Prior to that, Mr. Burrett served as the Head of Structured Finance, Head of Corporate Banking, Managing Director, Global Head of Project Finance and Global Head of Sustainability at ABN AMRO Bank. He spent 20 years at ABN AMRO Bank, starting in credit analysis and working through project finance, corporate banking, Head of Project Finance, Head of Structured Finance, UK Head of Corporate Banking, Global Head of Project Finance and Structured Debt Organisation and ultimately originated the Sustainable Development Strategy for the group. He has been a Director at Union Bank of Nigeria PLC since January 2013. He is an external board member of Forest Renewables (part of the Scottish Forestry Commission), looking to develop the renewable energy potential of its national forestry estate. Mr. Burrett was Co-Chair of the United Nations Environment Programme Finance Initiative (UNEPFI) from 2009 to 2012. He has over 30 years’ experience in International Banking with a deep understanding of project finance and sustainability.
27 OVERVIEW OF UNION BANK OF NIGERIA PLC
He graduated from Durham University with an MBA in 1993 and a BA (Hons) in German language with Italian, also from Durham University in 1982. He is a Fellow of the Cambridge University Programme for Sustainability Leadership. Ian Clyne – Non–Executive Director
Mr. Ian B. Clyne has over 35 years International Banking experience having worked in 10 countries in Asia/Pacific, Europe/Central Europe, and Australia. Mr. Clyne has successfully lead major "Transformation & Modernisation" Programs in Banks in Papua New Guinea, Poland, Italy and Indonesia. His most recent role was Group CEO & MD of Bank South Pacific Ltd (BSP) from 2008-13. Mr. Clyne was Chief Risk Officer & Exec. Director of ING Bank Slanski in Poland, Country Manager & MD of ING Group Italy, President Director & CEO of LippoBank Tbk Indonesia. He had previously worked as Head of Project & Structured Finance Advisory Asia for ING Group, and Head of Project Finance Natural Resources for Banque Indosuez in France. Mr. Clyne also spent several years as the CEO of Asset Based Finance Companies in China, Hong Kong, PNG, and Australia. Mr. Clyne was awarded the Queen Elizabeth 2nd "Diamond Jubilee" Medal for services to PNG in 2012. He joined the UBN Board in 2014. He is also currently a Non-Executive Director of GeoPacific Resources Ltd in Australia He holds a Bachelor of Business Management Studies from the Curtin University, Perth, Western Australia (also known as the University of Technology, Perth, Australia) which he received in 1978. Furera Isma Jumare– Non–Executive Director (Independent)
Mrs Jumare was appointed to the Board of Union Bank in February 2017. Her career spans across the banking sector including the Central Bank of Nigeria for 21 years across the following roles including Senior Supervisor/ Agricultural Credit Officer from 1988 to 1991, Assistant Agricultural Credit Manager from 1991 to 1995, Manager/Senior Manager from 1995 to 1997 and Senior Bank Examiner from 2008 to 2009. After her time at the CBN, Mrs Jumare served as the Chief Executive Officer of Micro Development Consulting Limited (MCDL) focusing on research, project management and capacity development. She holds a Bachelor of Science (B.Sc.) degree in Botany from Ahmadu Bello University, Zaria (1984) as well as the following Masters degrees; Crop Physiology from Ahmadu Bello University, Zaria (1989), Rural development from Ahmadu Bello University,Zaria (2006) and International Development Management from University of Manchester, Manchester, England (2008) Mrs Jumare has served as Member, Kaduna State Council on Agriculture Fellow, Institute of Management Consultants (IMC) Member, Kaduna State Microfinance Policy Implementation Committee Associate Member, Women in Business, Management and the Public Sector (WIMBIZ). Richard Kramer (OFR) — Non-Executive Director
Mr. Richard (Dick) Lee Kramer is the Chairman, Partner and Founder of African Capital Alliance. Previously, Mr. Kramer was Managing Partner at Arthur Andersen Nigeria, which he started in 1978, and he has helped many foreign companies enter Nigeria successfully. Mr. Kramer also serves as Chairman of Capital Alliance Nigeria Limited and SWIFT Networks Limited. He is a Non-Executive Director of Union Bank of Nigeria PLC. He serves as a Member of Africa Council at Emerging Markets Private Equity Association. He served on the Lagos Business School Advisory Board. He was formerly the Vice Chairman of the Nigerian Economic Summit Group. Mr. Kramer is a United States Certified Public Accountant and a Nigerian Chartered Accountant. He holds an M.B.A. degree from Harvard Business School (1958) and an Accounting degree from Kansas University (1956). Taimoor Labib – Non–Executive Director
Mr. Taimoor Labib has 20 years of direct private equity and mergers and acquisition experience. He began his career with Bear Stearns (New York) from 1998 to 2000 and The Carlyle Group (Washington, DC) from 2000 to 2003. Mr Labib currently serves regional Head of Middle East & North Africa Private Equity & Head of Global Private Equity Portfolio Management at Standard Chartered Private Equity. He holds a Bachelor of Science degree from Carnegie Mellon University (1997). Mr Labib is a member of Standard Chartered Bank’s global principal finance management committee, all regional private equity investment committees, and the global exit committee.
MANAGEMENT TEAM – IN ADDITION TO THE EXECUTIVE DIRECTORS LISTED ABOVE
Carlos Wanderley – Head, Retail Banking
Mr. Wanderley joined Union Bank in February 2015 to head its retail banking business, including the small, medium and enterprise businesses. Under his leadership, Union Bank’s retail business has seen significant growth on all relevant retail banking indicators across customers, products, and channels. The Bank is now recognised as the most improved retail bank in Nigeria and it continues to garner accolades from clients and the market at large. He gained his international reputation as a customer-centric business manager while working for Gillette and HSBC. Mr. Wanderley began at Gillette in Economics and Finance, later moving to Sales and Marketing and General Management. He later joined HSBC in a senior executive position in charge of their European and Latin American Retail operations. Carlos’ career has spanned more than thirty years, working in many different countries and cultures. Carlos holds a bachelor’s degree in Economics from Federal University of Rio de Janeiro (1989), a post graduate degree in Human Resources and Finance from UCLA Anderson School of Management (1990) and an MBA from University of Sao Paulo (1995).
28 OVERVIEW OF UNION BANK OF NIGERIA PLC
Joe Mbulu – Head, Transformation
Mr. Mbulu joined the Bank in August 2014, to direct and lead the transformation of Union Bank. He has over 25 years professional experience with world-class competences in financial management & analysis, organizational & business transformation, strategy/operational consulting and project/program management in the financial services, information, pharmaceutical, manufacturing and media industries. Prior to joining Union Bank, Mr. Mbulu was the Chief Operating Officer for the Domestic Bank business unit of Ecobank Transnational (“ETI”), where he coordinated strategy formulation and execution for the banking group’s retail, SME, local corporate and public sector businesses. Before ETI, Joe led Strategy & Business Transformation at former Bank PHB. He also served as the Vice President responsible for Business Transformation in the global Finance Organization at Nielsen in New York. Joe holds an MBA from the Wharton School of Business, Pennsylvania (2001), an MSc in Finance from Lincoln University, Pennsylvania (1999), and BSc in Agricultural Economics from the University of Benin (1991). Miyen Swomen – Head, Human Resources
Mr. Swomen was appointed Head of Human Resources for Union Bank in July 2014. He leads the transformation of the Human Resources function and the Bank’s workforce and is a member of the Executive Team. With over 25 years of experience, Mr. Swomen has led and championed several successful change management initiatives in national and multinational companies in large scale complex technology implementations and people transformation efforts. Having garnered significant consulting experience in Change Management, Human Capital and Resource Management as well as managing various Sales Campaigns and Marketing, working with May & Baker Nigeria PLC for 6 years before moving into Management Consulting with Accenture, he moved on to a career in banking, serving as Head of Human Resources for a few Nigerian Banks. Mr. Swomen graduated from Ahmadu Bello University School of Pharmacy in 1991. Lola Cardoso – Head of Group Corporate Strategy and Innovation
Mrs. Cardoso joined Union Bank in August 2013 to drive the Bank’s strategy, anchor its overall transformation and support execution bank wide. With over 18 years of experience providing strategic advice to corporate, start-up, and public sector organisations, she continues to drive Union Bank’s strategic growth priorities and support critical efforts aligned to growth including sustainability and innovation. Prior to Union Bank, Mrs. Cardoso was a Director of Strategic Planning at A.T. Kearney, a global management consulting firm advising the world’s leading organizations on CEO-agenda issues focused on strategy, operations, and technology. She has over 10 years consulting experience focused on strategy, transformation and organizational change and spanning various industries including banking. She also worked at Dupont where she advised businesses and equity affiliates on financing strategies. She started her career as an investment banker in New York at Solomon Brothers and also worked at Lehman Brothers. Lola obtained a Bachelor of Business Administration in Finance and Business Economics, Summa Cum Laude from Ohio University in 1997 and an MBA from the Ross School of Business, University of Michigan in 2001. Chuka Emerole – Treasurer
Mr. Emerole joined Union Bank in 2014 as the Treasurer. Since joining the Bank, Mr. Emerole has led its treasury transformation specifically around people, process and technology. This transformation significantly improved Union Bank’s ranking on top traders by Financial Markets Dealers Quotations from 20th position in 2014 to top 10 in 2016. Prior to joining Union Bank, Mr. Emerole was the Regional Head of Asset and Liability Management West Africa at Standard Chartered Bank. He has over 17 years of experience in banking and treasury having worked at Standard Chartered and Kakawa Discount House Limited with focus on balance sheet management, liquidity, interest rate and credit risk management. He holds an M.Sc in International Securities, Investment and Banking from the University of Reading, U.K (2004) and a B.Sc. in Economics from the University of Ibadan (1999).
4. SUBSIDIARIES
As at the date of this Prospectus, the Issuer had two subsidiaries:
Subsidiaries Address % Shareholding UBN Property Company PLC. Stallion Plaza (3rd floor), 36 Marina Lagos 39.01% Union Bank UK PLC. 1 King's Arms Yard, London 100.00%
5. CORPORATE GOVERNANCE
Corporate Governance practices in Union Bank of Nigeria PLC are in compliance with the Central Bank of Nigeria Code of Corporate Governance of 2014, the Securities and Exchange Commission, Code of Corporate Governance of 2003, the Banks’ and Other Financial Institutions Act of 1991 (as amended) and other relevant statutes, which provide guidance for the governance of the Bank, compliance with regulatory requirements as well as, the core values upon which the Bank was founded. These codes and statutes are geared towards ensuring the accountability of the Board of Directors (“the Board”) and Management to the stakeholders of the Bank in particular and emphasize the need to meet and address the interests of a range of stakeholders, to promote the long term sustainability of the Bank.
29 OVERVIEW OF UNION BANK OF NIGERIA PLC
Union Bank is committed to the best corporate governance practices and believes that adherence and commitment to high governance principles and standards is the panacea for effective control and management of the Bank. The Bank is committed to the highest ethical standards and transparency in the conduct of its business. In compliance with the requirements of the CBN, the Bank undertakes periodic internal reviews of its compliance with defined corporate governance practices and submits reports on the Bank’s compliance status to the CBN. An annual Board appraisal review is also conducted by an independent consultant appointed by the Bank, whose report is submitted to the CBN and presented to shareholders at the AGM of the Bank, in compliance with the provision of the CBN Code of Corporate Governance.
6. SECURITIES TRADING POLICY
The Bank has developed a Securities Trading Policy in line with the Codes of Corporate Governance of the CBN and SEC respectively, and Section 14 of the Amendment to the Listing Rules of The Nigerian Stock Exchange. The Policy restricts the Bank’s Directors, staff, shareholders, key management personnel, third party services provider or any other connected persons who have direct or indirect access to the Bank’s insider information from dealing in the Bank’s securities. It also prohibits the trading of the Bank’s securities during ‘close’ periods. The policy is designed to ensure that its compliance is monitored on an on-going basis.
7. COMPLAINTS MANAGEMENT POLICY
The Bank’s Complaint Management Policy has been prepared pursuant to the Rules Relating to the Complaint’s Management Framework of the Nigerian Capital Markets issued by the SEC on 16 February 2015. The Policy applies strictly to the Bank’s shareholders and provides an avenue for them to make complaints regarding their shareholding and relationship within the Bank. The Complaints Management Policy aims to promote and safeguard the interest of the Bank’s shareholders and investors, with its primary objective of ensuring that the activities of the Board and management are in the best interest of the Bank and its shareholders. The policy sets out the process and channels through which shareholders can submit their complaints, and the process for managing these complaints. The Registrar and Company Secretary are jointly responsible for the implementation of this policy.
8. REMUNERATION POLICY FOR DIRECTORS AND SENIOR MANAGEMENT
The Bank’s Remuneration Policy for directors and senior management is geared towards attracting, retaining and motivating the best talent and enables the Bank achieve its financial, strategic and operational objectives. The policy sets out amongst others, the structure and components of the remuneration packages for Executive and Non-Executive Directors, and ensures that the remuneration packages are in compliance with the CBN and SEC Code of Corporate Governance.
9. GOVERNANCE STRUCTURE
The Bank’s governance bodies, composition and their respective meeting attendance schedules are captured below:
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the Bank, and comprises a Non-Executive Chairman, Nine Non- Executive Directors, the Chief Executive Officer and six Executive Directors who are listed below: S/N NAME CC FGP ESC RMC RNC AC 1 Cyril Odu 2 Emeka Emuwa M M M M 3 Oyinkansade Adewale M M 4 Kandolo Kasongo M M 5 Emeka Okonkwo M M 6 Adekunle Sonola M M 7 Nath Ude M M 8 Richard Kramer C M 9 John C. Botts M M M C 10 Richard Burrett C M M M 11 Ian Clyne M C M M 12 Beatrice A Hamza Bassey M M M M 13 Obafunke Alade-Adeyefa M M C 14 Furera Isma Jumare C M M 15 Taimoor Labib
RMC – Board Risk Management C – Board Committee CC – Board Credit Committee Committee Chairman FGP – Board Finance & General Purposes Committee RNC – Board Remuneration Committee M – Board Committee Member ESC – Board Establishment and Services Committee AC – Board Audit Committee
30 OVERVIEW OF UNION BANK OF NIGERIA PLC
The responsibility of each Board Committee is set out below:
Committee Responsibility Board Credit • Consider and approve credits and other credit related matters within its set limit Committee • Review and recommend credits and other credit related matters above its limit to the Board for consideration and approval • Review the credit portfolio • Serve as a catalyst for the Bank’s credit policy changes from the Credit Committee to the Board Board Finance & • Review and report to the Board on the Bank’s financial projections, capital and operating General Purposes budgets, progress of key initiatives, including actual financial results against targets and Committee projections • Review and recommend to the Board, the Bank’s capital structure, including, but not limited to, allotment of new capital, debt limits and any changes to the existing capital structure • Review and recommend to the Board the Bank’s annual plan for the allocation of capital and material changes during the course of the year • Formulate guidelines from time to time on cost control and reduction, consistent with maximum efficiency, and make appropriate recommendations to the Board • Review major expense lines, as warranted, approve expenditures within the Committee’s approved limits and review and recommend for Board approval any expenditures beyond the Committee’s approved limits • Review and report to the Board on the Transformation programme against goals, including timing, budget, quality of delivery, and tradeoffs between transformation plans and business as-usual (if required) • Review and recommend for Board approval, the Bank’s Transformation budget and any associated expenditures beyond that delegated to management • Review and provide feedback to the Board on the development of the Bank’s strategic planning process and performance objectives to ensure the achievement of the financial targets expected by shareholders • Review and report to the Board on the effectiveness of the Bank’s strategic planning and implementation monitoring process • Review and provide feedback to the Board on high-impact initiatives not otherwise managed by another committee that may have a material impact on the Bank’s finances, regulatory relationships, customers and/or infrastructure • Review and recommend for Board approval any transactions associated with high-impact initiatives and any associated expenditures beyond that delegated to management • Review and recommend for Board approval any change to the delegation of authorities to management and management committees on financial matters • Review and recommend for Board approval the Bank’s dividend policy, including amount, nature and timing Board Establishment • Consider and approve appointments, promotions and discipline of Principal Managers and Services and above; Committee • Review and recommend appointments, promotions and discipline of Assistant General Managers and above, to the Board for consideration and approval. • Consider and recommend compensation increments for Principal Managers and above to the Board for consideration and approval. • Consider and review staff compensation, welfare and industrial relations matters and make appropriate recommendations to the Board from time to time. • Articulate and recommend strategic and succession plans for the Bank, to the Board from time to time. • Review and report to the Board, annually, on the broad key performance indicators set by executive management for staff groups below the executive management level (“Staff”) to achieve that year’s business and financial goals. • Review and report to the Board, on the annual performance evaluations of Staff conducted by management for the prior year’s performance and the overall outcome of the annual performance process. • Review and report to the Board annually, the overall training policy and program for Staff and any changes as they arise to achieve business and financial goals. • Review and recommend to the Board approval of the remuneration policy, annual quantum, structure, and distribution of compensation (including base, overall annual bonus pool and awards, and benefits in kind) for Staff and changes thereto.
31 OVERVIEW OF UNION BANK OF NIGERIA PLC
Committee Responsibility • Review and report to the Board annually, the total cash compensation package for Staff to ensure it will attract, retain and motivate key talent who add value to the Bank based on individual and team contributions. • Review and recommend for approval of the Board, the severance policy for Staff. • Review and recommend for Board approval, the Bank’s organisational structure, key human capital policies and practices, including those affecting compensation, welfare, performance management, career management and transfer to ensure the optimal mix of talent. • Review and recommend for Board approval, the Bank’s staff optimization plan and strategy. • Review and recommend for Board approval, revision of salaries and service conditions for Staff. • Review and approve, as needed, the recruitment, promotions and severance of senior officers on Principal Manager grade. • Review and recommend for Board approval, as needed, the recruitment, promotions and severance of senior officers on Assistant General Manager grade and above. • Review and recommend for Board approval, the Bank’s Succession Plan for senior officers on Assistant General Manager grade and above and any proposed amendments. • Review and recommend for Board approval, any policies not otherwise contemplated herein relating to Staff and, as necessary and appropriate, Support Staff. • Review and recommend for Board approval, the Bank’s Culture Program, including mission statements, core values, and the incentives to align Staff towards the Bank’s near and medium term strategic objectives. • Review and report to the Board annually or as needed, the progress of the Culture Program and its effectiveness in driving the desired Staff behaviour and performance. • Review and recommend for Board approval annually or as needed, the overall strategies with Staff Unions and relationships with the Bank’s Staff. • Review and advise the Board annually or as needed, the strategy for and engagement of service providers of Support Staff, including the overall cost, performance and effectiveness of outsource firms in delivering cost effective, high quality service to the Bank’s customers. • Review and report to the Board annually or as needed, the progress of outsourcing solutions and their effectiveness in delivering against the Banks’ Transformation strategy. Board Risk • Develop an organization-wide risk management framework Management • Exercise a board oversight function on all risk related issues Committee • Ensure compliance with the bank’s organization-wide policies and framework covering all risk types (credit, market, assets and liabilities, strategic, legal, human resources etc) • Ensure compliance with all statutory and regulatory requirements • Consider departmental reports and advise management on risks Board Remuneration • Consider and recommend the appointment of Executive Management and Non- Committee Executive Directors for Board consideration and approval • Consider, approve and recommend the performance parameters for Executive Management • Consider and recommend compensation for Executives and Executive Management • Consider and review the performance of the Chief Executive Officer Board Audit Committee • Review the Bank’s accounting and financial reporting functions • Review the Bank’s accounting system • Review the Bank’s internal control structures • Review the Bank’s internal control systems and processes • Recommend the appointment, remuneration and removal of external auditors to the Board • Review and recommend the audited financial statements to the Board for approval
32 INDEPENDENT AUDITOR’S REPORT
33 INDEPENDENT AUDITOR’S REPORT
34 HISTORICAL FINANCIAL INFORMATION
The financial information set out on pages 35 to 37 of this Programme Memorandum has been extracted from the audited annual financial statements of the issuer and is available at the specified office(s) of the issuer. This section should be read and construed in conjunction with the audited financial statements for the years ended 31 December 2017, 31 December 2016, 31 December 2015 (restated) and with any audited interim financial statements published subsequently, for the financial year prior to each issue of Notes under this Programme.
Income Statement for the 3 years ended 31 December 2017, 2016 and 2015 Restated Dec-17 Dec-16 Dec-15 N'm N'm N'm
Interest and similar income 124,549 99,721 90,902 Interest expense and similar charges (57,880) (34,682) (35,219) Net interest income before impairments of advances 66,669 65,039 55,683 Loan impairment charges (25,609) (17,879) (9,948) Net interest income after impairment charges 41,060 47,160 45,735 Net Fee and commission income 10,207 10,577 7,697 Net gains on financial instruments classified as held for trading 9,129 5,089 5,231 Derivative income 362 2,572 1,820 Foreign exchange income 1,619 2,024 124 Other Operating income 17,978 9,623 11,295 Operating Income 80,355 77,045 71,902 Net impairment write-back on other assets 292 693 704 Net operating income after impairment write-back on other assets 80,647 77,738 72,606 Employee benefit expenses (29,557) (31,234) (30,041) General and administrative expenses (29,533) (25,860) (23,823) Depreciation (4,572) (3,806) (3,214) Amortisation (1,466) (1,100) (772) Profit before income tax 15,519 15,738 14,756 Income tax (911) (347) (552) Profit for the year 14,608 15,391 14,204
Other comprehensive income: Items that will never be reclassified to profit or loss Re-measurement of defined benefit liabilities - 305 - Items that may be subsequently reclassified to profit or loss Unrealised net gains arising during the year before tax 7,862 1,939 7,400 Foreign currency translation differences for foreign operations 2,144 7,746 982 Other comprehensive income for the year, net of tax 10,006 9,990 8382 Total comprehensive income for the year 24,614 25,381 22,683
35 HISTORICAL FINANCIAL INFORMATION
Statement of Financial Position as of 31 December 2017, 2016 and 2015
Restated 31 Dec. 2017 31 Dec. 2016 31 Dec. 2015 Assets N'm N'm N'm
Cash and balances with the Central bank 274,792 161,841 141,798 Cash and balances with other Banks 66,961 24,139 34,189 Loans and advances to banks 132,200 105,409 38,073 Loans and advances to customers 517,103 507,190 366,721 Investment in equity accounted investee - - 24 Financial assets held for trading 20,076 8,323 - Derivative assets held for risk management 1,297 2,747 1,820 Investment securities 239,654 234,909 295,670 Trading properties 1,153 2,309 3,177 Investment properties 4,951 4,347 4,546 Property and equipment 55,986 52,800 52,611 Intangible assets 4,344 3,374 3,749 Deferred tax assets 95,875 95,910 95,883 Other assets 40,399 47,344 11,073 Defined benefit assets 352 1,643 - Assets classified as held for sale 397 397 397 Total assets 1,455,540 1,252,682 1,049,731
Liabilities
Derivative liabilities held for risk management 972 13 - Deposits from banks 100,131 90,266 44,091 Deposits from customers 802,384 658,444 570,639 Current income tax liabilities 524 465 382 Deferred tax liabilities 259 101 - Other liabilities 111,461 141,404 107,533 Employee benefit obligations 857 805 4,267 Other borrowed funds 93,211 89,514 76,059 Total liabilities 1,109,799 981,012 802,971
Equity Share capital 14,561 8,468 8,468 Share premium 187,091 391,641 391,641 Retained earnings (14,384) (244,183) (242,063) Other components of equity 152,642 110,633 83,377 Non-controlling interest 5,831 5,111 5,337 Total equity 345,741 271,670 246,760 Total equity and liabilities 1,455,540 1,252,682 1,049,731
36 HISTORICAL FINANCIAL INFORMATION
Statement of Cash Flows for the 3 years ended 31 December 2017, 2016 and 2015
31 Dec- 31 Dec- 31 Dec- 2017 2016 2015 N'm N'm N'm
Cash flows from operating activities Profit before income tax 15,519 15,738 14,862 Adjustments: Loan impairment charges 19,663 16,582 9,948 Net reversal of impairment on other assets (292) (693) (504) Write off: intangible assets and property and equipment 136 217 - Depreciation and amortisation charges 6,038 4,906 3,977 Interest paid on borrowings 11,905 9,929 8,683 Dividend income from equity investment (1,033) (765) (686) Revaluation gains on investment properties (200) - - Gain on disposal of trading properties (238) (90) (728) Gain on disposal of equity investment and subsidiaries - (665) 139 Gain on disposal of property and equipment (1,769) (2,562) (1,660) Contributions to defined contribution plans 726 722 644 Increase in liability for defined benefit plans 745 464 4,347 51,200 43,783 39,022 Changes in: Cash and balances with the Central bank (restricted cash) (96,339) (27,341) (14,237) Loans and advances to customers (29,576) (157,051) (63,872) Financial assets held for trading (11,753) (8,323) 745 Other assets 6,195 (4,704) (3,176) Derivative assets held for risk management 1,450 (927) (1,813) Derivative liabilities held for risk management 959 13 (7) Deposits from banks 9,865 46,175 (17,799) Deposits from customers 143,940 87,805 43,022 Other liabilities (28,355) 29,588 6,608 47,586 9,018 (11,507) Payment from defined contribution plan (754) (722) (623) Payment from defined benefit plan (669) (1,343) (7,626) Income taxes paid (659) (269) (1,051) Net cash generated from/(used in) operating activities 45,504 6,684 (20,807)
Cash flows from investing activities Net (Acquisition)/proceeds of investments securities 3,924 35,653 (7,543) Net (Acquisition)/proceeds of investments & trading properties 1,263 1,157 (519) Purchase of Property and equipment and intangible assets (12,572) (9,791) (8,755) Proceeds on disposal of subsidiaries - 3,006 3,596 Dividend income on equity investments 1,033 765 686 Proceeds from sale of property and equipment 4,169 5,271 3,438 Net cash used in investing activities (2,183) 36,062 (9,097)
Cash flows from financing activities Proceed from issue of shares 49,164 - - Proceed/(repayment) of borrowings (8,208) 3,526 (10,759) Net cash generated from financing activities 40,956 3,526 (10,759)
Cash and cash equivalents at the beginning of the year 136,194 82,252 121,960 Net increase/(decrease) in cash and cash equivalents 84,277 46,272 (40,663) Effect of exchange rate fluctuations on cash and cash equivalents 2,106 7,670 955 Cash and cash equivalents at the end of the year 222,577 136,194 82,252
37 EXTRACT FROM ISSUER'S RATING REPORTS
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40 LEGAL OPINION ON THE NOTES
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GENERAL INFORMATION
Authorisation
The establishment of this CP Programme and the issuance of Notes thereunder was approved by the resolution of the Board of Directors Union Bank of Nigeria PLC dated 08 August 2018.
Going Concern
The Directors have made an assessment of the Issuer's ability to continue as a going concern and have no reason to believe the Issuer will not remain a going concern in the year ahead. If any event occurs as a result of which the above statement is no longer true and accurate, the Issuer will give notice thereof to the Noteholders in accordance with Condition 8.
Auditors
KPMG Professional Services acted as auditors of the annual financial statements of the Issuer for the financial years ended 31 December 2017, 2016 and 2015. The auditors have in respect of those years for which they were responsible for the audit, issued unqualified reports.
Litigation
As at January 2018, a total of 837 cases were instituted by, and against, the Bank. The Bank is a claimant in 45 of those 837 cases and a defendant in the others. The total value of the Bank’s claim in these cases is N10,914,958,277.40. In the 792 cases in which the Bank is a defendant, the total claims against the Bank are set out below: i. claims in Naira – N268,515,670,723.89; ii. claims in Dollars – $8,161,313.21; iii. claims in Pounds – £3,968,247,942.89; and iv. claims in Swiss Francs – CHF5,701,557.50. Of these 792 cases, the Bank has counterclaimed for a total sum of N16,437,120,571.50 and $10,103,939.55 in 176 of the cases in which it is a defendant. The directors of the Bank hold the view that the Bank stands a chance of successfully challenging a substantial number of these claims and have, therefore, made a provision for the sum of N2,980,000,000 in its audited financial statements for the year ending 31st December, 2017 as the contingent liability that may arise in connection with the claims brought against it. The directors deemed this level of contingency sufficient to cover any successful claim which may be made against the Bank.
Material Contracts
The following agreements have been entered into and are considered material to this Programme: i. An Agency Agreement between the Issuer and Stanbic IBTC Bank PLC; ii. A Deed of Covenant dated 28 August 2018 executed by the Issuer as a deed poll in favour of the Noteholders; and iii. A Dealer Agreement between the Issuer and the Arrangers and Dealers. Other material contracts in respect of any issuance of Notes under the Programme will be disclosed in the Applicable Pricing Supplement issued in respect of that Series or Tranche.
Ultimate Borrower
The Issuer is the borrower in respect of the Notes.
Banking Sector Reforms
The liabilities of the Issuer to the Noteholders as the issuer of the Notes will not be affected should the Issuer divest itself of its non-banking subsidiaries, or undergo any other form of reorganisation in order to conform to any regulation issued by the CBN.
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PARTIES TO THE TRANSACTION
ISSUER Union Bank of Nigeria Registered Office: Stallion Plaza 36 Marina, Lagos Nigeria Tel No: +234 1 2716800 Contact: Chuka Emerole
AUDITORS TO THE ISSUER KPMG Professional Services Registered Office: KPMG Tower Bishop Aboyade Cole Street Victoria Island, Lagos Nigeria Tel No: +234 1 2805973 Contact: Kabir Okunlola
LEGAL COUNSEL Udo Udoma & Belo-Osagie Registered Office: St. Nicholas House (12th Floors) Catholic Mission Street Lagos-Island, Lagos Nigeria Tel No: +234 1 4622307-11 Contact: Yinka Edu
ARRANGERS
Stanbic IBTC Capital Limited Registered Office: 3rd I.B.T.C. Place Walter Carrington Crescent Victoria Island, Lagos Nigeria Tel No: +234 1 422 8139 Contact: Kobby Bentsi-Enchill
Standard Chartered Capital & Advisory Nigeria Limited Registered Office: 12th Floor, SCBN Towers 142 Ahmadu Bello Way Victoria Island, Lagos Nigeria Tel No: +234 1 236 8242 Contact: Samuel Sule
ISSUING, CALCULATION AND PAYING AGENT
Stanbic IBTC Bank PLC Registered Office: I.B.T.C. Place Walter Carrington Crescent Victoria Island, Lagos Nigeria Tel No: +234 1 422 8291 Contact: Yewande Adedayo
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