Pooling, Aggregation and Integration: Strategies for Small Issuers to Increase Their Volume Presented by: Lori Scott Calvert Foundation May 22, 2006 New York

Calvert Foundation  Started by founders of Calvert Group, a separate mutual fund company known for socially screened investments  Desire to create a broadly available investment product that benefits low income people  501(c)3, operating nonprofit  1995 launched innovative Calvert Community Investment Note: retail & available nationally

 Calvert Community Investments  2,200 Investors  $95 Million CCI  $83 Milln Portf.  198 Groups Repaid Calvert Community Investments Framework Reduces risk  Security enhancement (loan loss reserves, sub-debt, net assets)  Portfolio diversification Provides transparency  Due diligence and monitoring  Social impact reporting Provides professional management  Financial administration  Legal structuring Individuals Foundations/ Donor Advised Foundations/ Donor Advised Corporations Religious organizations Religious organizations Community development loan funds Community development loan funds Community development corporations Community development corporations Micro-finance institutions Micro-finance institutions Non-profit facilities / Coop’s Non-profit facilities / Coop’s Social enterprises Social enterprises Investment dollars Investment dollars Loans  INVESTORS  BORROWERS

Investment Options Investors can choose an interest rate between 0-3% Investment terms:1 -10 yrs $1000 minimum Target the principal to 9 geographic areas, investments over $25,000 can be custom targeted to specific groups. Investors can purchase electronically through DTC, similar to bonds & mutual funds.

Replicating this Model…. For clients who want to raise capital with their own note, Community Investment Partners offers…. Private Label Community Investment Note Calvert Community Investment Note (CCI Note) is wrapped in customized marketing materials On Calvert Foundation’s balance sheet Pro: speed, registered con: up front marketing costs, limited size Independent Offering Fully customized offering Off Calvert Foundation’s balance sheet Pro: tailored to your market; Con: expense to design and sell, registration and legal costs

Another Capital Model: SEA Corp  10 CDCs created a nonprofit to jointly raise predevelopment capital: reach new investors, reduce investor risk  Calvert Foundation, through Community Investment Partners, was interested in testing new models for raising flexible capital for community development purposes for clients  Calvert Foundation created investment offering and manages ongoing sales, and provides professional management for loans and investments

Description of the SEA Corp Model  Established a 501(c)3 entity to house loan fund  SEA Corp raises capital from individual and institutional investors and on-lends all of that capital to members  Total investor funds/loan fund = $3.025 million  11 investors: $25k - $2 mill, avg 3%, yrs  11 loans : $137k - $625k, avg 4%, max 3 yr term, all structured as general recourse, not targeted to any specific housing project  Governed by Board of Directors composed of SEA Corp members, Loan Committee has one non-member  Calvert Foundation fees: 1 – 2% “Success Fee” for raising capital, 1% annual administration fee

Implementation Lessons  Track record: No loan defaults to date, 2 investors repaid, members have made individual relationships with new investors  Initiating second round of raising capital now  Critical success factors: loan policies, underwriting, involved Loan Committee, on-going monitoring, commitment to transparency  Obstacles/limitations to collaborating, pooling, aggregating, integrating: Local access to better pre-development resources Small size of pool makes it expensive to run Co-dependency of members in model is really untested…