iCRROD is a new philanthropic investment platform - insurance-linked NIMCRUT (Net Income with Makeup Charitable Remainder Unitrust) which produces a guaranteed "return on donation." Do Well by Doing Good.
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New Philanthropy Investment Platform
1. The Old Philanthropy Charitable Giving Model Donorwith cash or other assets Charityuses assets to further its mission makes charitable donation provides taxdeduction for donation The Old “Risk” Investment Model InvestorMakes “risk” investment Business/Venture Business Enterprises per best terms offered pays investor dividends if profitable Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
2. The New Philanthropy Investment PlatformInsurance-Linked Charitable Remainder “Return on Donation” - iCRROD™ What if you could make a income tax deductable donation to a charitable trust, then direct a portion of the funds to be invested in worthy businesses of your choosing, and also receive a positive IRR and the realistic potential of a double-digit IRR and1-5X ROI from that charitable donation?Additionally, upon your death, your beneficiaries or a designated charity receive tax-free income twice that of the original donation. IntroducingInsurance-Linked (securitization) NIMCRUT (Net Income with Makeup Charitable Remainder Unitrust) with Return on Donation - “iCRROD™” or herein “CRD” Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
3. The New Philanthropy Investment PlatformInsurance-Linked Net Income with Makeup Charitable Remainder Unitrust (NIMCRUT) providing a securitized “Return on Donation” - iCRROD™ Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
4. Securitized NIMCRUT “iCRROD™” (CRD) Receives 5% to 50% of Value Annually3 DONOR/Trustee CRD Transfers cash or Assets to CRD Deductable Donation $100K Trustee receives cashand/or assets (sells)& re-invests 50% inBusiness & 50% in ILS Receives income taxdeduction1 Receives 5% to 50%Annual payout fromCRD current value3 Trustee pays out 5% to 50% of CRD valueeach year to Donor Pays Dividends = to % of Gross Revs. CRD Invests $50K into Businesses Insurance-LinkedSecuritization Products (ILS) CRD Invests $50K in ILS BUSINESSESVenturesofChoice Returns 100%2 Balance of Trust CHARITYReceives any assets remaining in trust when the Donor is deceased 1 This deduction may have to be spread over more than one year, if it exceeds certain percentage of income limitations. 2Protects corpus of original donation & guarantees required payouts 3Can be a credit income to beneficiary, if a deficiency exists to pay the minimum, to be made up in later years “Net Income with Makeup (NIM) Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
5. iCRROD™ Flow Chart Donate NewCo LLC Formed Advanced NIMCRUTDesign CHARITYReceives balance of assets in trust when Donor is deceased or end of trust term End of Term Donation Payout Donate Invests Qual. Accredited Investor Returns 100% of Donations Returns % Dividends Private PlacementOffering ILS Invests BUSINESSVentureEnterprises Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
6. Governance, Construction, Supporting DocumentsOrganizational Chart Third Party Providers, Advisors & Managers NewCo LLC Donor& Income Beneficiary NIMCRUT Donor Trustee(Fiduciary decision-making, investment management, CRD administration, tax matters) & communications Draft NIMCRUT Trust Incorporate LLC EntityDraft Operating AgreementDraft Reg. D 506 PPMSecurities ComplianceCorporate Admin Compliance Business Enterprise ILS CharitableBeneficiary Professional Manager of ILSSource/Manage Portfolio(acquisition, structuring, execution, administration & ongoing management)Reserve Account AdminAsset Value Protection Draft Reg. D 506 PPMSecurities ComplianceRoyalty Accounting Coordinate the Charitable Beneficiary Transfer of remaining CRD balance upon Donor death or CRD termination Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
7. Secures Required Portfolio of Benficial Interest in Death Benefit of Life Ins. Policies of People 70+ Years Old What is a Insurance- Linked Securitization (ILS) Beneficial Interest Transferred Into CRD NIMCRUT Portfolio of Senior Life Insurance Policies Which Transfer Beneficiary Interest to NIMCRUT Re-Insurance Guarantee to Pay 100% of Life Insurance Benefits in 10-Year Term Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
8. Increasing Return Balance Initial Donation $ -5,000,000 $1,000,000* $ 1,000,000 $ 1,500,000 $500,000* $1,000,000 $250,000 $500,000 $750,000 ILS Return on Donation NIMCRUT Re-Insurance Insured Dies 1 Yr $ 5,000,000 $3,500,000* ILS As Insured's Die Policies Pay to Beneficiary CRD * Less premiums & administrative fees to manage and maintain ILS,s Insured Dies18 Months At End of Term Re-insurance Pays all Policies that have not Matured – 100% Guaranteed Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
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10. Q & A Q. Would investment in a Business create UBTI to the CRD? A. The Business would be taxable on its own income. Dividends paid by Business, however, would not be unrelated business income to the CRD by virtue of § 512(b)(1) of the Internal Revenue Code. (see next slide for specific code language). Q.What are the Tax ramifications on CRD distributions? A.Distributions from unitrusts are first ordinary income, then capital gain, then tax-free income and finally corpus. Q. How are the premium payments and administrative fees on the ILS paid? A. If Life Settlement maturity occurs during the term, these costs are covered out of the maturity, if not, the costs become the obligation of the CRUT (first) then Donor, or a LS is sold short or term. Q. With multiple CRD Donors, how does the Business determine the payout to each CRD? A.The total Royalty percentage is backed into from the pro forma financials and/or existing financials of the business. The business determines how much capitalization is required and what percentage of their gross revenues they are willing to pay out for that investment. That percent is then extrapolated into a percentage per thousand (or ten-thousand, etc.) of the whole of the capitalization required. This then becomes the Royalty percentage per thousand for each CRD investor. Q. How can a ILS be created for small CRD investments? A. Each CRD will be a Sub-Trust under a Master Trust which holds a large portfolio of life settlements – each CRD then becomes a pro-rata owner/beneficiary of the Master Trust assets. Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
11. Key Functional & Regulatory Information A fundamental principle of a NIMCRUT design is to take full advantage of the opportunity to write your own accounting rules into the trust document, to achieve the donor's planning objectives, and to build flexibility into the investment and administration of the trust. See Advanced NIMCRUT Design for further details (see section on treatment of Zero Coupon Bonds which would also apply to a ILS). Section 512(b)(1) of the Code Generally Applicable Exemptions. The following are generally applicable exemptions to UBTI treatment. a. Passive Investment Income. Passive investment income is not UBTI unless it is derived from a leveraged investment or a controlled entity. §512(b). Passive investment income includes: i. Interest, dividends, and annuities. §512(b)(1). iii. Royalties. §512(b)(2). Per the following Gift Law ruling, a CRD can freely invest in a for-profit Business without creating UBTI, if the rules are followed. This ruling sets precedent for the CRD to directly invest into, start-ups & be a shareholder in a for-profit entity and have dividends paid back to it without incurring a UBTI event. http://www.aarpgift.org/giftlaw/glawpro_plr.jsp?WebID=GL2002-0431&ID=200252096. However, the CRD investment in a for-profit company may fall under SEC rules requiring it to qualify as an Accredited Investor. This can be accomplished easily enough as the CRD can be carefully structured similar to a charitable remainder mutual fund with multiple donors in order to qualify for the $5M in total assets required, and/or under a Reg. D exempt PPM, up to 35 non-accredited investors would be allowed. The Donor can also be a corporation, partnership or limited liability company formed of multiple people to meet the $5M minimum of assets required.
12. Pro forma Returns for Donor(s) Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
13. The New Philanthropy Investment PlatformInsurance-Linked Net Income with Makeup Charitable Remainder Unitrust (NIMCRUT) providing a securitized “Return on Donation” - iCRROD™ Contact: James R (Jim) Nash Venture Funding Advisors, LLCLaguna Niguel, CAjrnash@VFundAdvisors.comwww.VFundAdvisors.comwww.iCapVentures.com(949) 485-5252 Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC