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Workshop A Financing the Future of healthcare Chaired by Rodney Schwartz

Workshop A Financing the Future of healthcare Chaired by Rodney Schwartz CEO and Founder, Clearly So. Workshop A Financing the Future of healthcare Chaired by Rodney Schwartz CEO and Founder, Clearly So. Noel Plumridge Healthcare Finance Journalist.

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Workshop A Financing the Future of healthcare Chaired by Rodney Schwartz

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  1. Workshop A Financing the Future of healthcare Chaired by Rodney Schwartz CEO and Founder, Clearly So

  2. Workshop A Financing the Future of healthcare Chaired by Rodney Schwartz CEO and Founder, Clearly So

  3. Noel Plumridge Healthcare Finance Journalist

  4. Health care: the current financial outlook Noel Plumridge Nottingham 17 May 2012

  5. The productivity/efficiency challenge formerly known as the “Nicholson challenge”

  6. The “Nicholson Challenge” was to save £20bn a year by 2014 £15-20bn productivity challenge Illustrative figures only

  7. Savings are needed so the NHS can re-invest in: the health of a growing population: around 1.4% per year the health of an ageing population: around 1.5% per year scientific and technological advance: around 1.5%

  8. But… how robust are these cost projections? the NHS is delivering savings; productivity is less certain 2012 budget implies real terms savings of around 3.8% per year beyond 2014 where’s the re-investment? HM Treasury has begun to grab savings before they can be re-invested

  9. How are the finances looking? 2010-11 outturn - PCTs and SHAs - £1.375bn surplus - NHS Trusts - £0.121bn surplus - FTs - £0.406bn surplus, with cash balances of £3.3bn 2011-12 quarter 3 - forecast PCT/SHA surplus - £1.498bn (1.5%) - forecast NHS Trust surplus - £0.03bn - 4 PCTs (all in London and SE) forecasting deficits totalling £82m

  10. Cost improvements “In 2010/11… overall, 23% of the savings achieved were non-recurrent. So NHS bodies will need to find this money again in 2011/12…” Main slippage areas: failing to reduce emergency admissions, failure to manage demand, failure to reduce length of stay (Audit Commission, September 2011)

  11. Tariff funding in an economic downturn PbR-funded hospitals have been drawing in funds, at the expense of non-PbR care (including primary care, community care and mental health) DH moves to shield commissioners from activity-led hospital growth Development of “best practice” tariffs Slowness in extending the scope of the tariff

  12. A new economic orthodoxy “Small government” Austerity Very low interest rates Low direct taxation, but mounting fees and charges for services Reduced role for the public sector - outsourcing and privatisation - marketisation of publicly-funded services - promotion of the “third sector” Orthodoxy driven by banks, multinationals and international consultancies - does government really want to trade with SMEs? Impervious to democratic change?

  13. The Health and Social Care Act 2012

  14. What changes now the Bill has become law? Commissioner configuration – clinical commissioning groups replacing PCTs (but with heavy scrutiny via “support organisations”) Provider configuration – no direct implications, but: - pattern of mergers and acquisitions - private sector expansion, especially in non-acute care Competition and “any qualified provider” Oversight structure – the NHS Commissioning Board replacing strategic health authorities Monitor as economic regulator

  15. Implications for social enterprise

  16. The advantages of social enterprise What are the advantages of social enterprise? Advantages for patients and service users, health and social care organisations and the third sector... ...for patients and service users Social enterprises involve patients, staff and service users in designing the services they provide.  This means that services are better tailored to meet patients' and service users' needs and are based on expert knowledge of a particular area. Social enterprises re-invest any surplus profits into the community or into service developments.  This means that social enterprises very often benefit the whole community as well as the people who use their services. Involving patients, staff and service users in designing services. ...for health and social care organisations Social enterprise offers health and social care organisations the opportunity to deliver high quality services in ways that are flexible, non-bureaucratic and have the potential to deliver good value for money.  It also allows health and social care organisations to deliver services that are tailored to their local population, and make a difference to the local community.  Because staff have a stake in social enterprise organisations, experience has shown that they are very committed to the aims of the service, and that this delivers benefits for the organisation, for example, improved staff retention. High quality services: flexible, non-bureaucratic, good value (Department of Health, 2011)

  17. … one or two disadvantages VAT and competition with FTs Ownership of the NHS estate Access to capital Size and resilience Commissioner caution and vulnerability and then there’s the whole pensions and TUPE issue…

  18. Social enterprise – a transitional phase? “If you don’t do something with the commissioning environment, then in five or ten years’ time you will not be dealing with mutuals, you will be dealing with Serco, Capita and Virgin.” (Patrick Burns, Cabinet Office mutual taskforce, 2011)

  19. The current financial outlook Noel Plumridge 01904 744661 noelplumridge@aol.com

  20. Richard Todds Associate Social Finance

  21. Pradeep Jethi Co-founder and CEO Social Stock Exchange

  22. Social Stock Exchange- overviewMay 2012

  23. Disclaimer This Presentation is provided for information purposes only by the Social Stock Exchange (“SSE”) which is not authorised by the FSA or operating as a Recognised Investment Exchange (RIE) and does not constitute an offer to sell or an invitation or solicitation of an offer to buy any security.  SSE makes no representation or warranty as to the accuracy, reliability, or completeness of any of the information contained in this Presentation, and said information may not be relied upon in connection with any investment or listing decision.  This Presentation is provided on a confidential basis and may not be copied, reproduced, distributed, disclosed or published, in whole or in part, to any person for any purpose whatsoever without the prior written consent of SSE.

  24. Impact Investment – the opportunity JP Morgan report estimates an investment opportunity of between $400 billion and $1 trillion and profit opportunity of between $183 billion and $667 billion over the next decade “Impact investors earn more than good karma Commentary: The majority of social enterprises profit” November 28, 2011, Wall Street Journal Marketwatch ImpactBaseplatform – access to $7 billion for impact investments “Impact Investment ‘a burgeoning asset class’” FT, November 2010 25

  25. Agenda • What is the Social Stock Exchange? • Why is there a need for a Social Stock Exchange? • Investor appetite • Promotion of Social Enterprises • Emerging plcs: Government initiatives creating Social Enterprises • What is the opportunity for city advisers? Appendices • Operations • Team 26

  26. Background to the Social Stock Exchange • Rockefeller Foundation financed business plan idea with $500,000 grant • SSE is a project aligned with GIIN (Global Impact Investing Network), a network of international banks and foundations, such as JP Morgan, Ford Foundation, Deutsche Bank, Triodos Bank, UBS and W.K. Kellogg Foundation committed to promote impact investing • SSE’s Board has included private bankers, family offices, law firms, asset managers and Rockefeller Foundation • SSE’s support recognised by industry bodies such as Social Enterprise UK, Community Action Network as well individual social businesses • Raised £2m of commitments in 2012, lead by Big Society Capital, Panaphur Trust and Brenninkmeijer family to develop and launch the exchange • Team recruited comprising stock exchange professionals, investment bankers and asset managers in February 2012 • Offices based at The Exchange, London Bridge • Marketing to potential issuers, advisers and intermediaries ongoing 27

  27. What is the Social Stock Exchange? Partnered with an FSA authorised and regulated investment exchange (RIE), to create a specialist segment for the trading in securities of social enterprises and other social purpose businesses Its goal is to become the premier trading venue for international social businesses, enabling social impact investors to find businesses that reflect their values It is a deal aggregation platform with global visibility aimed at impact investors across private wealth managers, family offices, foundations and institutions The SSE provides a market mechanism for price discovery as well as valuation and trading of shares – and, in particular, an entry and exit route for investors’ social investments Aim to launch Q1 2013 28

  28. What is the Social Stock Exchange? 29

  29. Why use a specialist platform? Why are we better? • “Funding the dream: The government’s plan to make Britain a leader in social investment” • “The rise of social exchanges” • “Lead by example on social investment” • SSE’s goal is the ‘go to’ listings platform for impact investors and the companies they seek because we understand the sector, its international players and dynamics. • SSE is transaction focused; its operations will have a clear commercial purpose around ensuring that advisors, investors and the companies connect • Pre-launch, the SSE has appeared in the Financial Times and the Economist; awareness is being built through thought leadership (opinion pieces and commentary), marketing-led PR and stakeholder communications. Companies listing will therefore get noticed. 30

  30. What are investors demanding in today’s markets? • Foundations and Charities • Interest in mission connected investing growing – see More for Mission and the Global Impact Investing Network.  • Family Offices and HNWI’s • Initiatives such as GIIN are backed by leading family offices such as Sainsburys, Skoll, Omidyar and investment collaboration such as Toniic • Seeking direct investments into social ventures that generate social and financial impact • Private Wealth Managers such as LGT, UBS, Hoare & Co, Coutts, Barclays • Creating or seeking focused social investment product for their clients.  • Looking for: • Co-mingled funds including EIS and VCT • Liquidity • Ability to mark to market • Diversification • Panel approved social investment products and fund of funds • Retail investors • Looking for transparent and easy to find social investment opportunities • Over 40 community share issues in recent years 31

  31. “Impact investors need a collective, legitimate voice to advocate for this type of investing and recruit other investors to orient themselves toward impact.” Chris FoySainsbury Family Investments Impact Investor Universe – a sample Acumen Fund Annie E Casey Foundation Lunt Family Office Big issue Invest Bill & Melinda Gates Foundation Capricorn Investment Group Citi Foundation Deutsche Bank DoenFoundation Esmée Fairbairn Ford Foundation Gatsby Charitable Trust Generation IM Gray Ghost Ventures JP Morgan JRCT Morgan Stanley OmidyarNetwork Packard Foundation Prudential The Rockefeller Foundation Root Capital Sarona Asset Management TIAFF-CREF The Tony Elmelu Foundation Triodos Investment Management UBS W.K Kellogg Foundation Wolfensohn & Company 32

  32. Circle Holdings plc Existing plcs – what could the SSE offer? Social Impact agenda below the radar: • SSE provides platform to highlight this Principal asset is its holding in Circle, an employee co-owned healthcare provider. Circle is 50.1 per cent owned by Circle Holdings and 49.9 per cent owned by the Circle Partnership which is 100 per cent beneficially owned by Circle's clinicians and employees. Objective is to redefine secondary healthcare delivery in the UK. It benefits from a unique operating model, whereby clinicians are empowered to achieve high levels of patient care and efficiency, through co-ownership and active participation in managing operations. Circle’s mission is to “run great hospitals dedicated to our patients. By putting doctors and nurses in charge of our hospitals, and making all employees owners, we empower our people to go the extra mile for our patients.” 33

  33. Good Energy Group plc Existing plcs – what could the SSE offer? Investor base aligned with social mission? • SSE listing could promote the company to Impact Investors Purpose has always been to empower individuals, businesses and communities to make a difference through their energy supply. Core business is trading 100% renewable electricity; have over 28,000 customers and source power from a growing community of over 12,000 independent generators across Britain. Support over 600 renewable heat generators. Investing in new sources of renewable capacity for the country; have own wind farm in Delabole Cornwall and are planning to add a further 50MW over the next five years 34

  34. Emerging plcs….. Social Finance is gaining momentum Government support for outsourcing of public services DoH’s Right to Run: £1bn of community health services transferred and delivered by emerging social enterprises The Public Services (Social Value) Bill - an opportunity for social enterprises to deliver more public services Growing number of innovative businesses addressing social challenges “..approximately 62,000 social enterprises in the UK contributing at least £24bn to the economy. Social enterprises are estimated to employ 800,000 people. We believe the true picture is that the social enterprise sector is bigger than this data suggests.” Social Enterprise UK Increasing retail investor interest Community Share Issues : £44m raised through 41 issues 35

  35. Social Businesses looking to use the Capital Markets in innovative ways Golden Lane Housing was established by Mencap in 1998 and was “formed to help tackle the immense problems that people with a learning disability face when making choices about where, with whom and how they wish to live their lives.” • Golden Lane Housing (GLH) is the leading national charity specialising exclusively in housing people with a learning disability. • GLH helps people with a learning disability in a number of ways, including; providing high quality rented housing tailored to meet and individuals specific needs; family and shared ownership; helping families make long term plans through the use of legacies and family trusts; offering general advice and guidance. • Golden Lane Housing has invested over £60 million to provide 1,000 people with suitable supported living accommodation. Golden Lane has a highly diverse portfolio geographically and by type. To date, the existing portfolio has a value of £74 million and they now want to acquire a greater number of residential properties with a capital raise of £30m. Social investment options include issuing a bond, or alternatively, a REIT where investors get exposure to a modest yield based on the rental value of the estate, and the underlying capital growth in the residential property portfolio. The charity would co-own its estate with social investors. 36

  36. Conclusion • A unique branded venue where investors can go to buy, sell and hold impact investments • Unlocks investor capital • Brings new business sector together with traditional capital market structures 37

  37. APPENDIXA. OperationsB. Team 38

  38. How will the Social Stock Exchange Operate? Not new exchange infrastructure, rather working in partnership with an existing RIE. SSE builds a new interface onto that technology platform Goal is a quote driven, market-maker backed trading system with visible screen based pricing Financial disclosures and Prospectus must conform to FSA requirements with companies required to make an application to UKLA if full list; application to corporate advisor network if quoted company – responsibility of our RIE partner There are no direct admissions to the exchange – all companies will have to be admitted via a regulated investment bank/corporate advisor Issuers must prepare a Social Prospectus and have it audited by a competent individual Targeted sectors include affordable housing, social transport, ethical consumerism, clean-tech, recycling, regeneration, public health, education, sustainable forestry and organic agriculture In time, we believe that investors looking to create a portfolio of social businesses will find the SSE the best port of call to look at and find exactly what they are looking for 39

  39. SSE Listing Process 4-6 weeks 4-6 weeks 2-3 weeks Phase 1 • Preparation Phase 2 • Review & Marketing Phase 3 • Offering Phase 4 • Pricing & Close • Organisational meeting • Due diligence • Admission document drafting • Legal and accounting preparation • Valuation & proposition • Analyst presentation & roadshow • Analyst briefing • Decision to launch • Release of pre-deal research • Size & price • Documentation • Roadshow • Bookbuilding • Pricing • Allocation • Trading & stabilisation • Closing • Research coverage • Aftermarket Application fee Appoint Advisor • Social prospectus • Publish prospectus • Disclosure • Theory of change • Accounting for value • Principles of disclosure • Statement of the basisof adherence • Optional information on Intentionality 40

  40. The Social Stock Exchange Team Mark Campanale, Co-founder & Business Development Director Mark is responsible for business development for companies seeking to list on the SSE, as well as promoting the platform to corporate advisors and investors. Mark’s background is in asset management, as a co founder of the Ecology Funds at Jupiter in 1989, then the Global Care Funds at Henderson Global Investors through to the Sustainable Future Funds for AMP Capital. Since 2007, Mark has specialised in impact investing and corporate advisory to businesses in the social and environmental markets. mark@socialstockexchange.com Tel: + 44 7714 415 262 Jon Grayson Jon has joined the SSE team to help set up and run the key operational systems, both internal processes and external trading systems with the platform provider and FSA interface. He is a sustainable finance specialist having worked with clients across government, leading environmental and civil society organisations and the private sector. Jon co-founded EnviroMarket in 2005 following previous career as a strategy consultant with Mars & Co and equity research analyst with DLJ. jon@socialstockexchange.com Tel: +44 7808 161 000 Alison Fort Alison joined the SSE to extend its business development function. Alison is a corporate finance specialist and has worked across multiple industries and geographies with companies of all sizes and stages of development. She started her career in the Corporate Advisory team at Deutsche Bank and more recently was a founder of Four Elements Capital, a specialist corporate finance advisory boutique advising companies in the environmental markets and social impact sectors. alison@socialstockexchange.com Tel: +44 7880 730 076 Pradeep Jehti, Co-founder & CEO Pradeep spent three years at the London Stock Exchange as New Product Development Manager and has direct experience of setting up new exchange ventures as well as an understanding of their technical and regulatory requirements. Prior to his career at the LSE, Pradeep was Founder and Head of FTdynamo.com, a Financial Times business and management information portal. Pradeep has previously worked as a consultant to the UK Government on social stock exchanges and regularly speaks at conferences on – and advises on – the social impact investing and social enterprise marketplace. pradeep@socialstockexchange.com Tel: +44 7968 030 720 41

  41. Lunch and Marketplace

  42. Workshop A Financing the Future of healthcare Chaired by Rodney Schwartz CEO and Founder, Clearly So

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