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pays investor dividends if profitable
per best terms offered
The Old “Risk” Investment ModelInvestor
Makes “risk” investment
Business/Venture
Business Enterprises
Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
provides taxdeduction for donation
The Old Philanthropy Charitable Giving Model
Charityuses assets to
further its missionmakes charitable
donation
Donorwith cash or other assets
IntroducingInsurance-Linked (securitization) NIMCRUT (Net Income with Makeup Charitable Remainder Unitrust) with Return
on Donation - “iCRROD™” or herein “CRD”
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 and 1-5X 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.
Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
The New Philanthropy Investment PlatformInsurance-Linked Charitable Remainder “Return on Donation” - iCRROD™
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
CHARITYReceives any
assets remaining in trust when the
Donor is deceased
Bala
nce
of Tr
ust
CRD
Inve
sts $
50K
in
ILS
CRD Invests $50K into
Businesses
1 This deduction may have to be spread over more than one year, if it exceeds certain percentage of income limitations.
Securitized NIMCRUT “iCRROD™” (CRD)Receives 5% to 50% of Value
Annually3
Retu
rns 1
00%
2
Pays Dividends = to % of Gross
Revs.
Deductable Donation $100K
DONOR/Trustee Transfers cash or Assets to CRD Receives income taxdeduction1 Receives 5% to 50%Annual payout fromCRD current value3
CRD Trustee receives cashand/or assets (sells)& re-invests 50% inBusiness & 50% in ILS Trustee pays out 5% to 50% of CRD valueeach year to Donor
BUSINESSESVentures
ofChoice
Insurance-Linked
Securitization Products
(ILS)
2 Protects corpus of original donation & guarantees required payouts3 Can 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
BUSINESS
VentureEnterprises
NewCoLLC
Formed
iCRROD™ Flow Chart
Advanced
NIMCRUTDesign
Payout
Donate
Donate
PrivatePlacemen
tOffering
ILS
Invests
Qua
l. A
ccre
dite
d In
vest
or
Inve
sts
Retu
rns %
Divi
dend
sReturns 100% of
Donations
CHARITYReceives balance of assets in trust when Donor is
deceased or end of trust term
End of Term Donation
Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
Governance, Construction, Supporting DocumentsOrganizational Chart
NewCo LLC Donor& Income Beneficiary
Incorporate LLC EntityDraft Operating Agreement
Draft Reg. D 506 PPMSecurities Compliance
Corporate Admin Compliance
Business Enterprise
Draft Reg. D 506 PPMSecurities Compliance
Royalty Accounting
Third Party Providers, Advisors & Managers
Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
ILS
Professional Manager of ILSSource/Manage Portfolio
(acquisition, structuring, execution, administration & ongoing management)Reserve Account AdminAsset Value Protection
NIMCRUT
Donor Trustee(Fiduciary decision-making, investment management,
CRD administration, tax matters) &
communicationsDraft NIMCRUT Trust
CharitableBeneficiary
Coordinate the Charitable Beneficiary Transfer
of remaining CRD balance upon Donor death or CRD termination
Beneficial Interest Transferred Into CRD
Re-Insurance Guarantee to Pay 100% of Life Insurance Benefits in 10-Year Term
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)
Portfolio of Senior Life Insurance Policies Which Transfer Beneficiary Interest to NIMCRUT
NIMCRUT
Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
Insured Dies 1 Yr
$750,000
$250,000
$1,000,000
$500,000
Insured Dies 18 Months
Initial Donation $ -5,000,000
At End of Term Re-insurance Pays all Policies that have not Matured – 100% Guaranteed
As Insured's Die Policies Pay to
Beneficiary CRD
Increasing Return Balance
$1,000,000* $ 1,000,000
$500,000* $ 1,500,000
NIMCRUT
$3,500,000* $ 5,000,000
ILS Return on Donation
Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
* Less premiums & administrative fees to manage and maintain ILS,s
ILS
Re-Insurance
Benefits & Features
Donor Immediate Income Tax Deduction for Donation 50% of Donation goes to invest in donorselected businesses and ventures 100% of Donation is securitized & returns aredirected to the CRD and passed on to Charityand become income back to Donor Potential of life-long annual income stream& Attractive IRR & ROI
NIMCRUT Has a re-insured guarantee (via ILS) to protect corpus of CRD & payouts to donor & charity. Aspolicies mature, a large % goes back into the CRD& a portion goes to a maintenance side account. Funds continue to accumulate and grow through-out the life of the CRD from % of annual GrossRevenues designated from Business (as a pro-rata %of investment)
Businesses of Choice Receives 50% of a Donors contribution tothe CRD
Businesses pay CRD agreed % of annual Gross Revenues, which grows tax free and paysincome to Donor
No equity or debt obligation incurred, just Royalty Agreement to CRD
Charity &/or Other Beneficiary(s) Guaranteed (reinsured) donation of anyremaining accumulation from the RevenueSharing, ILS and any balance of the originaldonation upon the maturity of the CRD orupon the early death of the donor
Allows future contributions of cash or assets Allows deferral of required payouts if ILS and/or Business contributions are less than enoughto pay the minimum payout of CRD annual value
Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
Is able to direct remainder income to charity& beneficiaries of choice
May benefit from additional investments
as Donors have the flexibility to contributefuture cash or assets which CRD could re-invest
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.
Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
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.
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 applicableexemptions 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.
Pro forma Returns for Donor(s)
Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
Contact:James R (Jim) Nash
Venture Funding Advisors, LLCLaguna Niguel, CA
jrnash@VFundAdvisors.comwww.VFundAdvisors.comwww.iCapVentures.com
(949) 485-5252
Confidential Patent Pending Copyright 2009 Venture Funding Advisors, LLC
The New Philanthropy Investment PlatformInsurance-Linked Net Income with Makeup Charitable Remainder Unitrust
(NIMCRUT) providing a securitized “Return on Donation” - iCRROD™