PRIVATE & CONFIDENTIAL Socially Responsible Investment Using retail eligible bonds 8 th October 2014

Socially Responsible Investment  Opportunity  Investor base  Using the Retail Charity Bond Platform  The benefits for housing associations

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 Greater grass roots involvement

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

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