Calvert Foundation's mission is to maximize the flow of capital to disadvantaged communities in order to create a more equitable and sustainable society.
The Calvert Social Investment Foundation is a 501c3 nonprofit based out of Bethesda, Maryland. The foundation is the result of a joint effort between Calvert Investments, Ford (F), MacArthur and Mott Foundations. Calvert Foundation issues Community Investment Notes then lends money to develop homes and create jobs
Here is a comparison between the new 5-year Calvert Note, General Electric (GE) and Ford Corp. bonds:
|Calvert Social Invt Fndtn Fr 2% 09/15/2017, Ann* Cpn Blue Sky: PA, SC, VA, WA (cusip: 13161E3E5) no call features specified||-/-||100.00||2%|
|General Electric Co Nt 5.25% 12/06/2017 (cusip: 369604BC6) call protected||Aa3/AA+||118.42||1.56%|
|General Electric Capital Corp Fr 3.5%10/15/2018, Survivor Option (cusip: 36966TAF9) call protected||A1/AA+||106.77||2.29%|
|Ford Motor Co. Debt 6.5% 08/01/2018 (cusip: 345370BX7) call protected||Baa3/BB+||113.97||3.8%|
*The listing indicates Calvert Community Investment Notes pay an annual coupon, not a semi annual coupon.
The foundation's prospectus states:
In 1990, the shareholders of the Calvert Social Investment Fund, a Calvert Investments, Inc.-sponsored mutual fund, approved the investment of up to one percent of portfolio assets in direct loans to community development organizations...
Based on the success of this community investment activity, in 1995 the Foundation began to issue the Notes for sale to the general public. The Notes focus primarily on direct investment in community development organizations.
Calvert recently offered $500M senior unsecured debt in the form of Community Investment Notes.
The Notes are debt securities designed to support the growth of community-based organizations for the purposes of promoting business creation, housing development, and economic and social development of disadvantaged communities. The Notes provide a fixed rate of interest for the term of the Note. The money raised is applied toward below-market loans to non-profit community development and other social enterprises.
Of the $500M in Notes offered, $270M is designated for 'US investments,' and $180M is for 'international investments.' $50M is left for 'liquidity reserves.' The Foundation recently reported total assets of $251M and expenses of $18.7M. Average support and revenue for 2009-2011 was $20.9M.
I spoke to Calvert Foundation's investor relations and they sent the prospectus report by e-mail. I wanted to know if these Notes are rated by Moody's (MCO) or S&P.
We are not rated… we are lending affordable capital to organizations doing community development work, in America and abroad... in the past we relied solely on philanthropy, right now we are trying to bring investment capital to non profits in need of funding. -Calvert Foundation investor relations
The foundation's investor relations explained "our organization relies on interest from investments."
Two additional important facts are expressed in the prospectus:
In the past, a large number of Notes have been reinvested rather than redeemed for cash. For example, in 2009 approximately 93.6% of the total dollar amount of the Notes sold through our Definitive sales channel were reinvested; in 2010, approximately 93.5%; in 2011 approximately 92.4%...
Investors should take note of Calvert Foundation's negative change in net assets in FY 2011 (-$12,136,398), FY 2010 (- $1,205,705), and FY 2008 (-$405,491). Calvert Foundation's transfer of net assets to ImpactAssets, Inc. (-$15,142,496 in 2011 and -$6,209,667 in 2010) was largely responsible for this negative change in net assets.
ImpactAssets is a nonprofit financial services company created by Calvert Foundation.
State Specific Considerations
The SEC explains:
Every state has its own securities laws-commonly known as "Blue Sky Laws"-that are designed to protect investors against fraudulent sales practices and activities. While these laws can vary from state to state, most states laws typically require companies making small offerings to register their offerings before they can be sold in a particular state. The laws also license brokerage firms, their brokers, and investment adviser representatives. -SEC.gov
There are many state specific considerations detailed in the prospectus. Here is a brief review of some of the details. These are abbreviated, please do not rely on these notations to invest, simply request a prospectus from Calvert Foundation:
|State||Calvert Foundation State Specific Info.|
|PA||Blue sky law, and|
"On February 26, 2007, the Foundation extended a rescission offer to 31 investors in Pennsylvania for $419,872 that was transacted during a period of oversell in 2005. The Foundation received eight affirmative responses from Note holders. Refunds were processed and mailed on or before April 13, 2007."
|SC||Blue sky law|
|VA||Blue sky law|
Blue sky law
"ANY PROSPECTIVE PURCHASER IS ENTITLED TO REVIEW FINANCIAL STATEMENTS OF THE ISSUER WHICH SHALL BE FURNISHED UPON REQUEST. RECEIPT OF NOTICE OF EXEMPTION BY THE WASHINGTON ADMINISTRATOR OF SECURITIES DOES NOT SIGNIFY THAT THE ADMINISTRATOR HAS APPROVED OR RECOMMENDED THESE SECURITIES..."
"THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION FROM REGISTRATION UNDER SECTION 37(H) OF THE ALABAMA SECURITIES ACT AND SECTION 3(A)(4) OF THE SECURITIES ACT OF 1933. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT BEEN FILED WITH THE ALABAMA SECURITIES COMMISSION OR WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION..."
"IN ARIZONA, THE EFFECTIVE TERM FOR THE OFFER, SALE AND RENEWAL OF THE INVESTMENT NOTES IS ONE YEAR, WITH THE OPTION TO RENEW FOR CONSECUTIVE ONE-YEAR PERIODS AS PROVIDED UNDER SECTION 44-1899..."
|District of Colombia|
"THESE SECURITIES ARE OFFERED FOR SALE IN THE DISTRICT OF COLUMBIA PURSUANT TO REGISTRATION WITH THE DISTRICT OF COLUMBIA DEPARTMENT OF INSURANCE AND SECURITIES REGULATION, BUT REGISTRATION IS PERMISSIVE ONLY AND DOES NOT CONSTITUTE A FINDING THAT THIS PROSPECTUS IS TRUE, COMPLETE, AND NOT MISLEADING, NOR HAS THE DEPARTMENT OF INSURANCE AND SECURITIES REGULATION PASSED IN ANY WAY UPON THE MERITS OF, RECOMMENDED, OR GIVEN APPROVAL TO THESE SECURITIES..."
"THESE SECURITIES HAVE NOT BEEN REGISTERED IN THE STATE OF FLORIDA. THE SECURITIES WILL BE SOLD PURSUANT TO THE ELEEMOSYNARY EXEMPTION IN FLORIDA STATUTES SECTION 517.015(9)..."
"THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES COMMISSIONER OF THE STATE OF GEORGIA. THE SECURITIES COMMISSIONER, BY ACCEPTING REGISTRATION, DOES NOT IN ANY WAY ENDORSE OR RECOMMEND THE PURCHASE OF ANY OF THESE SECURITIES... THE FOUNDATION HAS REGISTERED TO SELL UP TO $2.5 MILLION OF THE NOTES IN THE STATE OF GEORGIA, PURSUANT TO A 2007 NEW ISSUE OF $2.5 MILLION..."
"THE INDIANA SECURITIES DIVISION HAS NOT IN ANY WAY PASSED UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, THE SECURITIES OFFERED, OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS"
"THESE SECURITIES ARE ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM REGISTRATION UNDER SECTION KRS 292.400(9) OF THE KENTUCKY SECURITIES ACT."
"THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES COMMISSIONER OF THE STATE OF LOUISIANA..."
"THESE SECURITIES ARE EXEMPT FROM REGISTRATION IN THE STATE OF MARYLAND PURSUANT TO AN ELEEMOSYNARY EXEMPTION ORIGINALLY GRANTED MAY 20, 1997..."
"THESE SECURITIES ARE OFFERED PURSUANT TO EXEMPTION MCL 451.2201(G) OF THE MICHIGAN UNIFORM SECURITIES ACT..."
"IN ORDER TO REMAIN IN COMPLIANCE WITH POLICIES ESTABLISHED BY THE OHIO DIVISION OF SECURITIES, AUTOMATIC ROLLOVER AT MATURITY (AS DISCUSSED ON PAGES 3 AND 6) WILL NOT BE OFFERED TO OHIO INVESTORS..."
"IN ORDER TO REMAIN IN COMPLIANCE WITH POLICIES ESTABLISHED BY THE OREGON DIVISION OF FINANCE AND CORPORATE SECURITIES, AUTOMATIC ROLLOVER AT MATURITY (AS DISCUSSED ON PAGES 3 AND 6) WILL NOT BE OFFERED TO OREGON INVESTORS...."
"IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED...."
"On January 6, 2006, the Foundation extended a rescission offer to four investors in Wisconsin for $16,114.15 in Notes that were sold during a period of lapsed registration. Three investors responded, with one accepting the rescission offer. A refund was processed and mailed on January 23, 2006."
Many Seeking Alpha readers are quick to point out that the rate of inflation competes with fixed income. Investors who are concerned about the effect of inflation could designate fixed income towards inflation protected income funds, or favored stocks. Income generated by these Notes is taxable:
The principal amount of a Note is not tax-deductible, and all interest paid or accrued on the Notes is taxable as ordinary income to investors. If a Definitive Note investor opts to irrevocably donate earned interest to the Foundation, such a donation may be tax- deductible as a charitable contribution.
Additionally a balanced portfolio needs to consider the fact these Notes do not have a credit rating. The credit worthiness of Calvert Foundation can not be determined. For this reason Calvert Foundation's form 990 may provide important information for investors.
Calvert Foundation 990
The most recent tax form is from 2010.
- Ten directors who spend an hour per week received no reportable compensation.
- Two senior V.P.s worked 45 hours a week and received no reportable compensation.
- The nine highest paid employees averaged $143,344 in reportable compensation and average of $21,800 in "other compensation from the organization and related organizations.
- Two independent contractors in 2010 received an average of $162,000 for investment consulting.
- Public support fluctuated between $9M and $15.5M from 2006-2010:
Gifts, grants, contributions, and membership fees:
The 990 shows Calvert Foundation provided program services in the form of lending and advisory services across the world.
|Central America & Caribbean||$7.8M|
|East Asia & Pacific||$6.1M|
|Middle East / North Africa||$1.8M|
|North America (Outside of the US)||$2.3M|
|Russia & Newly Independent States||$12M|
Though Calvert Investments and Calvert Foundation are separate, Calvert Investments' founder D. Wayne Silby is co-chair of the foundation. Philanthropic investors who give to charity might consider these Notes as a way to support good causes, while retaining capital.
Compared to Calvert Foundation Community Investment Notes, Calvert Investments' Social Index A (CSXAX) has a 4.7% front end load and is only rated two stars by Morningstar (MORN). Calvert Government Class A (CGVAX) is rated five stars and has a 3.7% front end load. I tend to avoid mutual funds with front end loads.
Calvert Foundation Community Investment Notes may be a worth while consideration for institutions focused on socially responsible investments. Individuals and institutions should consult a financial advisor to determine a course of action and proper allocation, and keep in mind any unsecured senior debt carries risk of default. Calvert Community Investment Notes carry a penalty for early redemption and Book-Entry notes cannot be redeemed early (unless the Foundation repurchases them.)
Please note this is not a recommendation to buy, or an endorsement of Calvert Community Investment Notes, Calvert Investment products or ImpactAssets' services. If you have any additional considerations regarding Calvert Foundation Community Investment Notes please leave a comment below.
Additional disclosure: I am long Ford Motor Co. Debt 6.5% 08/01/2018. I am considering Calvert Community Investment 2% 2017 Notes. I hold no Calvert Investment funds and have no near-term plans on them.