B2: Raising finance through social investment

Speakers: Phil Caroe Chief Operating Officer, Allia Henrietta Podd Head of Debt Advice and Origination, Canaccord Genuity

Chair: Sam Wotton Policy Officer, National Housing Federation

PRIVATE & CONFIDENTIAL

Socially Responsible Investment Using retail eligible bonds 8th October 2014

Socially Responsible Investment Opportunity

Investor base

Using the Retail Charity Bond Platform The benefits for housing associations

A largely untapped market

A largely untapped market A very wide investor base

SRI funds run by household name managers Retail investors Conventional wholesale investors

Shortage of investments with positive social impact Most funds negatively vet Positive impact funds out perform

Need conventional investment A normal listed bond or equity Generating a commercial return Plus as social impact statement

Socially Responsible Investment

(1) Sallie Krawcheck, former head of Bank of America's global wealth and investment management division at

Reuters Global Wealth Management Summit Reuters 7 June 2013 (2) EIRIS estimate as at 30th June 2013 based on around 80 UK domiciled green and ethical retail funds

"The first 600 times I heard about impact investing, I thought 'tree huggers’. But the ability to use one's capital to support what one believes in without giving up performance is becoming increasingly appealing." (1)

Ethical/ ESG Market

£12.2bn + (2)

Positively vetted social

impact investors

Housing associations are ideal candidates

Commercially run for social benefit − Non distributing − Clear social/charitable purpose − Well managed − With additional social benefit

Strong credits

− Good operating ratios − Income generating and Asset backed − Regulated

Mainstream

− Borrow from banks − Issue bonds

Socially Responsible Investment

Simple

Cheap

Flexible

Tapping into the widest possible market Looking for medium term investments with social impact

Retail investors

Family offices

Retail bond funds

SRI bond funds

Wholesale investors

Pension Funds

Charities & Foundations

• Commercial return • Medium dated (7-15

years) • Normal bond or

equity • Listing on stock

exchange • Small denomination • Social impact

statement • No need for rating • No need for security

Wide distribution Institutional SRI Funds and Charity Fund Managers and Retail Distributors

Killik & Co

The SRI Bond Market Expanding the Investor Base

Investors in A2D’s last retail eligible bond issue Golden Lane Retail Charity Bond

Institution 8%

SRI Fund/Manager

36%

Retail Wealth 12%

Execution only Brokers

32%

Stockbrokers 12%

Greater grass roots involvement

Stockbroker 18%

Retail Wealth 24%

Execution-Only Broker

1%

Institution 44%

SRI Fund 13%

Available for large and small transactions

Direct own name issue

Own name bond issue

Unsecured

Can be used anywhere in group for any purpose

Cost effective at £50m +

Rating preferred

6-8 week lead time

Simple covenants

Accessible through two routes

Borrowing through Retail Charity Bonds

Loan with RCB plc but own branding on bond issue

Unsecured

Can be used for non core, charitable/community activities

Cost effective at £10m +

No rating required

8-10 week lead time

Simple covenants

Retail Charity Bonds

Raising £10-50m unsecured loan finance from ethical investors through bonds listed on London Stock Exchange

The purpose

Retail Charity Bonds

Established charitable organisations Strong credit worth Seeking £10-50m for charitable purposes Typically looking to acquire capital assets,

invest in facilities or finance existing assets more efficiently

Who it’s for

Retail Charity Bonds

Established issuing structure Independent review process Standardised documentation Bond administration managed by Allia

What it offers

Retail Charity Bonds

How it works

Investors

Investments in bonds

Retail Charity Bonds PLC Charity

Loan

Loan interest and principal + fees

Bond interest and principal

Allia (Servicer)

Retail Charity Bonds

Golden Lane Housing Bond

Providing homes for people with a learning disability

Offered 4.375% for 7 years

Raised £11m in 8 days 60% retail, 40%

institutional

Simple

What is the relevance to housing associations

Bond Issue…..BUT with no security

7 to 12 Year Term

Available in small & large amounts

Cheap Funding for development

Funding for Commercial activities

4 to 4.5% fixed

Can be lent anywhere in group

Lightly covenanted

Value from unchargeable assets

Flexible Makes use of social

value added

A large market

Accessed widely through retail eligible products

Directly or through Retail Charity Bonds

Simple, flexible and cost effective

Maximising use of social value

Summary

Important Notice

Neither the whole nor any part of the information in this pitch/presentation may be disclosed to, or used or relied upon by, any other person or used for any other purpose and, in particular, should not be distributed outside the United Kingdom, without the prior written consent of Canaccord Genuity. The material contained herein may include unpublished price sensitive information, the misuse of which may result in criminal and/or civil proceedings against you. None of the information on which this pitch/presentation is based has been independently verified by Canaccord Genuity or any of its connected persons. Accordingly, neither Canaccord Genuity nor any of its connected persons accepts any liability or responsibility for the accuracy or completeness of, nor makes any representation or warranty, express or implied, with respect to, the information on which this pitch/presentation is based or that this information remains unchanged after the issue of this pitch/presentation. No duty of care or otherwise is owed by Canaccord Genuity or any of its connected persons to any other person in relation to this pitch/presentation. The valuation in this pitch/presentation has been prepared on the bases and assumptions described herein. This pitch/presentation is not intended to provide the basis of any investment decision and should not be considered as a recommendation by Canaccord Genuity or any of its connected persons to any recipient of the pitch/presentation. No person has been authorised to give any information not contained in this pitch/presentation. Nothing in this pitch/presentation is, or should be relied on as, a promise or representation as to the future. This pitch/presentation may only be communicated in the United Kingdom to: investment professionals, such persons having professional experience in matters relating to investments of this kind and who fall within Article 19 of the Financial Conduct and Markets Act 2000 (Financial Promotions) Order 2005 (the “FPO”); High net worth companies or high net worth unincorporated associations falling within Article 49 of the FPO; Persons who are already shareholders of the Company within article 43 of the FPO; and Any other person to whom this promotion may lawfully be directed. This document will only be available to the categories of persons in the United Kingdom described above and any other person should seek their own independent legal, investment and tax advice as they see fit. In this notice, “Canaccord Genuity” means Canaccord Genuity Limited and “its connected persons” means, the holding company of Canaccord Genuity Limited, the shareholders, subsidiaries and subsidiary undertakings of that holding company and their respective directors, officers, employees and agents of each of them. Distributed in the UK by Canaccord Genuity Ltd. Canaccord Genuity is authorised and regulated by the Financial Conduct Authority ('FCA') (with firm reference number 182011) and is a member of the London Stock Exchange. The FCA's principal place of business if at 25 North Colonnade, London, E14 5HS.

B2: Raising finance through social investment

Speakers: Phil Caroe Chief Operating Officer, Allia Henrietta Podd Head of Debt Advice and Origination, Canaccord Genuity

Chair: Sam Wotton Policy Officer, National Housing Federation