Transformational Investing

POSITIVE INVESTMENT IN PALESTINE

WHAT IS

Transformational Investing?

Transformational investing offers a positive and creative approach to a challenging situation. Beyond a simple monetary return, the outcome being sought is transformation – hope in place of fear, peace in place of violence, empowerment in place of injustice, changed lives, changed circumstances. Along with divestment/negative screening and shareholder activism, transformational investing is the third leg of the Socially Responsible Investing stool.

The Presbyterian Foundation and Presbyterian Mission Agency have developed a program of Transformational Investment to address the troubled region of Israel / Palestine, through investments in a new building for a college-based culinary school and tour guide training program, renewable energy facilities, and a microfinance initiative designed around women’s empowerment and agricultural development.

The program builds on efforts by congregations, seminaries, and other Church institutions; and follows a directive from the 220th General Assembly (2012) of the Presbyterian Church (U.S.A.). It is one more step in the long Presbyterian tradition of working to transform our world, and for which we pray each time we say “Thy kingdom come, thy will be done on earth as it is in heaven.”

TRANSFORMATION

WE BELIEVE THAT

PEACE IS POSSIBLE THROUGH

POSITIVE INVESTMENT.

Research shows that Entrepreneurship is a key driver

in the Palestine economy.

Investments will focus on1 Economic

Development2 Sustainable

Job Creation3 Peaceful

Pursuits

PROJECTS WILL...

SUPPORT COLLABORATION

MINIMIZE PALESTINIAN DEPENDENCE ON OTHERS

INVEST IN THE WEST BANK

The investment objective

is to increase the potential viability of a Palestinian state at peace

with Israel.

PC(USA) has had a

mission presence in Palestine since

1823

Research shows that Entrepreneurship is a key driver

in the Palestine economy.

PEACE

Objectives

AND

Criteria

Investment projects in this Transformational Investment program will…

+ Make a difference in the lives of those most vulnerable.

+ Preserve an effective witness to peace in the entire region.

+ Be invested in West Bank owned/sponsored initiatives or companies.

+ Result in sustainable economic development (without supporting the occupation).

+ Engage Christians in the West Bank around issues of job creation and economic development.

+ Confine business activity solely to peaceful pursuits, and refrain from allowing their products or services to support or facilitate violent acts by Israelis or Palestinians against innocent civilians, construction and maintenance of settlements or Israeli-only roads in East Jerusalem and the West Bank, the Israeli military occupation of Palestinian territory, and construction of the Separation Barrier as it extends beyond the 1967 “Green Line” into Palestinian territories.

+ Minimize or eliminate Palestinian dependence on Israel or others.

+ Offer transparency of use and impact.

+ Provide direct engagement with those who ultimately benefit.

Investment Vehicle

Congregations and other Presbyterian-related entities may participate in the program through a Revocable Charitable Trust. The Trust will be administered by the New Covenant Trust Company, a subsidiary of the Presbyterian Foundation.

BLESSED ARE THE

PEACEMAKERSFOR THEY SHALL

BE CALLED

THE CHILDREN OF GOD.

MATTHEW 5:9

BLESSED ARE THE

PEACEMAKERSFOR THEY SHALL

BE CALLED

THE CHILDREN OF GOD.

MATTHEW 5:9

INVESTMENT OPPORTUNITY 1

Education

Dar al-Kalima University College is establishing a continuous education center in Bethlehem. This investment will enable Dar al-Kalima to construct training rooms, multiple lecture and workshop rooms, administrative offices, state of-the-art commercial kitchens, and two restaurants in order to provide arts education and training, especially in the area of culinary arts and tour guiding. This project is designed to:

+ Alleviate poverty by equipping Palestinians with new skills that render them employable in a land where there is high unemployment and a stagnant labor market.

+ Train in technical skills, leadership skills and positive values such as self-confidence, self-worth, discipline, pro-activity and other abilities that are essential for job hunting and interviews. The college places a special focus on women’s education.

+ Create two hands-on training restaurants. One will serve meals to students, faculty and administration. The second, high-end restaurant will serve those visiting the campus and tourists visiting the Holy Land.

+ Attract international experts as faculty (due to the lack of local trainers and professionals in many fields).

+ Provide facilities that meet or exceed international standards.

The continuous education center will provide quality training and education that empowers the voiceless through creative tools and mediums, with room for future growth. Dar al-Kalima University College is an accredited Christian university operated by the Diyar Consortium.

LEARNING

Terms

Lender Presbyterian Foundation

Borrower Bright Stars of Bethlehem (a U.S.-registered not-for-profit organization)

Guarantor Diyar Consortium

Facility + Amortizing term loan for a maximum $1,000,000.00 USD

+ Fixed annual interest rate of 1%

Funding + Initial funding of $500,000 USD.

+ Remaining $500,000 USD will be funded as monies are provided by Presbyterian congregations and institutions.

+ College also seeks grant of $400,000.

Financial Conditions + Quarterly payments with first payment due October 1, 2013.

+ First nine quarterly payments (27 months) are interest only on outstanding loan balance.

+ After nine quarters, quarterly payments are principal of 1/40th of loan funding amount plus accrued interest on outstanding loan balance.

+ After seven years from the date of the last funding, the outstanding loan balance is due in full plus accrued interest.

+ All parties must agree in writing to any changes in payment terms.

+ Prepayment with no penalty.

+ The loan is unsecured.

Required Use of Funds The loan funds are to be used exclusively for capital expenditures related to the construction of the continuous education center at Dar al-Kalima.

Conditions Precedent Receipt and satisfactory review by Lender of:

+ Annual internally prepared balance sheets and profit and loss statements while the loan is outstanding.

+ The operating budget for the fiscal year now in effect,

+ Capital budgets and project plans related to this building project,

+ All resolutions, loan documents and permits, and

+ Other items that may be required.

Reporting Requirements

+ Audited financial statements issued with an unqualified opinion by an accounting firm within 180 days of each fiscal year end.

+ Operating budget, to include balance sheet, profit and loss statement, assumptions, and planned capital expenditures within 90 days of each fiscal year-end.

Covenants Insurance certificate as evidence of in-force insurance policies covering all of Dar al-Kalima’s property and buildings.

Financial Covenants No additional indebtedness by Diyar Consortium or Bright Stars of Bethlehem without the Lender’s prior written approval, which will not be unreasonably withheld.

ENERGY

INVESTMENT OPPORTUNITY 2

Renewable Energy

This project involves the installation of grid-connected, photovoltaic power facilities to support agricultural activities near Jericho.

Around 90 percent of Palestinian energy consumption is satisfied through imports from Israel, which poses a major mid-term challenge on the stability of the local energy supply and the economy as a whole. Israeli energy prices are expected to rise considerably over the next three to five years: an initial 10 percent increase took place in March 2013, another 4 percent in March 2014 and experts forecast annual increments of at least 7 percent through 2017.

Developing solar power facilities will be instrumental in making consumer goods affordable, which in turn allows for creation of more jobs, and provision of more affordable goods to West Bank residents.

Terms

Lender Presbyterian Foundation

Borrower Arab Development Society

Facility + Amortizing term loan for a maximum $300,000.00 USD

+ Fixed annual interest rate of 4.5%

Financial Conditions* + The loan funds from the Foundation are to be used exclusively for the purchase and installation of the grid-connected photovoltaic power plant at the Borrower.

+ The Foundation will provide a 12-month grace period from the time of funding the loan until the time the first payment is due.

+ The repayment period, after the 12-month grace period, is six years.

+ The loan is unsecured.

+ Payments of principal and interest are due semi-annually.

+ There is no prepayment penalty.

Representations and Warranties

+ The Borrower will obtain all approvals and permits required for the grid-connected photovoltaic power plant; this includes, but is not limited to approval of the Palestinian Energy Authority, Jerusalem District Electric Company (JDECO), any and all Municipalities, and other required parties.

+ The Borrower will implement the grid-connected photovoltaic power plant such that all manufacturer and third-party warranties are in effect.

+ The Borrower will provide appropriate physical and technical security, including, but not limited to, security fences and a 24-hour per day security guard.

+ Borrower will maintain insurance on all property, premises and equipment including the grid-connected photovoltaic power plant.

+ No additional indebtedness by the Borrower without the Foundation’s prior written approval.

EMPOWERMENT

INVESTMENT OPPORTUNITY 3

Microfinance

The Palestinian economy is challenged with high unemployment rates. Unemployment rates in the West Bank approximate 25 percent overall with 30 percent and 50 percent rates for women and recent college graduates respectively. This is especially concerning given that over 75 percent of the Palestinian population is under the age of 35. High levels of unemployment create significant obstacles to economic growth and job creation.

This program will launch a microfinance initiative with The National Bank (TNB). Microfinance programs appear to be well suited for Palestine. The literacy rate in the West Bank is high at over 95 percent and the Palestinian people are creative, industrious and responsible. Citizens often need only a small amount of capital to start a business or to take their existing business to another level. Recent studies show that small investments play a major role in creating jobs and building infrastructure. This initiative will focus on women borrowers and on agricultural projects.

The National Bank has a solid track record of success with microfinance in the region. Historic loan losses related to microfinance are small relative to other loans. The National Bank has represented that less than 2 percent of microfinance loans are considered non-performing loans.

Terms

Facility + The Foundation will deposit $250,000 USD with the The National Bank (TNB) for the microfinance program for a minimum of five years.

+ TNB will leverage the $250,000 USD into a microfinance loan program of $500,000 USD.

Financial Conditions + At least 51 percent of the microfinance loans will be made to women, with a target of 80 percent.

+ The minimum microfinance loan is $1,500 USD.

+ The maximum microfinance loan is $20,000 USD.

+ TNB will be responsible for promoting the program, identifying and qualifying loan recipients and all loan administration.

+ The maturity of each microfinance loan will be at the discretion of the TNB.

+ The Foundation will assume 80 percent of the risk of the microfinance loan program.

+ The microfinance program’s loan rates will be one-third to one-half of market rates.

+ The Foundation shall receive 4 percent from the program after any loan write offs.

+ The Foundation will have access to all loan documentation to understand and communicate the program’s impact and to monitor compliance.

+ TNB will provide the Foundation with detailed quarterly reporting on the status of the program.

IN THE SAME WAY, LET YOUR LIGHT SHINE BEFORE OTHERS,

SO THAT THEY MAY SEE YOUR GOOD WORKS

AND GIVE GLORY TO YOUR FATHER WHO IS IN HEAVEN.

MATTHEW 5:16

Presbyterians have been actively engaged in mission in the Middle East since 1823 – building schools, colleges, seminaries, and hospitals; ministering alongside the churches in the region which have existed there since the first days of Christianity. We’ve been working for peace in Israel/Palestine since the war in 1948-1949, with specific attention to refugee relief and resettlement, vocation and self-development, education, peace and justice.

While the issues in play are complex, the viewpoints numerous, and the means of resolution elusive, Presbyterians have consistently joined in hope and prayer for a peaceful, just, and equitable resolution to the conflict. General Assemblies have repeatedly and consistently recognized:

+ Israel’s right to exist as a sovereign state within secure, internationally recognized borders

+ Palestinians’ right to self-determination, including the right to establish a neighboring independent, sovereign state

+ The desire of all to establish a just and durable peace – to which the end of occupation is essential

Transformational Investment in the West Bank is one means of working toward these goals. The 220th General Assembly (2012) called for this approach to “make a difference in the lives of those who are most vulnerable,” to “help in the development of a viable infrastructure for a future Palestinian state,” and to aid in job creation and economic development, while preserving an effective witness to peace in the region. We believe that these initial investments will accomplish just that.

Will your congregation join us in this transformative work? The Presbyterian Foundation and Presbyterian Mission Agency have committed to invest up to $1.5 million in these efforts from the denomination’s Creative Investment Fund. Our partners in the region have the capacity to do even more should more investment be available. Several congregations have already committed to invest, and we hope that many more will join in. Please consider whether funds in your congregation might be available for – and put to good use through – participation in this effort.

Won’t you join us?

In Christ,

A CALL FOR

Involvement & Investment

Tom Taylor, President & CEOPresbyterian Foundation

Linda B. Valentine, Executive DirectorPresbyterian Mission Agency

200 East Twelfth Street

Jeffersonville, IN 47130

800-858-6127

www.PresbyterianFoundation.org

FDN 36-14-01