Charitable Foundation Fund - A Consideration For Enlightened Capitalism

CHARITABLE FOUNDATION HEDGE FUND
The Charitable Foundation Hedge Fund (CFHF) is an income generating

charitable investment that benefits communities through direct cash
dispersal and asset purchases/endowments. The principle investment
will grow and provide tax free income to it’s investors through
aggressive fund management and a well diversified portfolio.
The purpose as a charitable trust will give direct cash advantage to

municipal and provincial/state entities that can benefit according to the
mandates of the funds’ charter. The direct investment in community
would qualify the investor’s for some form of attractive tax exemption.
BASIC STRUCTURE
A pool of monetary assets, which are then converted into monetary

instruments for profit, will be used to provide assets and growth to the
initial investors, as well as securing real-estate and money for housing
development or other needed services. Strict oversight by government
and community will ensure the most ethical use of this instrument for
all parties involved.
THE FUND
The fund will be structured to receive large investments; these

investments are in turn weighted in a group portfolio that invests in
the following:
• Stock Market Securities (Domestic and Foreign)

• Bond’s
• Futures of Commodities and Currency
• Commercial Real Estate Development
• Residential Real Estate Development
• Long Term Real Estate Raw Acreage Purchase’s
• Underwriting of New Business Development
• Underwriting of Old Business Asset Gathering
Trading in open international marketplaces with every imaginable type

of instrument gives the managers the greatest latitude in securing the
best profitability for the investor and the benefactor. Funds of this type
can show (rarely) up to %40 income per year to the investor, though a
reasonable expectation for our model could be around 4-8 percent per
year.
Morgan Boardman ● 1351 Rialto Ln, Santa Barbara, Ca. 93105 ● 805-889-7012
● kaiyotifilm@gmail.com ●
ALL RIGHTS RESERVED CFHF™ ®© 2007
Underwriting of new business development will be in the form of

underwriting bond and stock issue, and the development of medium
risk products/segments for existing esteemed commercial ventures.
The underwriter (CFF) then becomes the sole beneficiary of the bond
issue. It would be desirable to only underwrite ventures that could
receive triple ‘A’ rating for insurance.
Old business asset gathering is performed through recognizing fallow

assets in underperforming companies that can be revitalized or
recycled. Of keen interest in this area are fallow real estate assets that
are currently zoned as commercial use that could be rezoned 20-30
years later as either mixed use or residential.
A portion (25-50%) of the fund will be dedicated to purchasing

reclaimable or new acreage/buildings that are placed into trust for use
by the charitable aspect of the fund. These assets shall remain in use
for as long as the needs continue in the community. There will be very
strict guidelines dictating under what conditions the properties may be
sold, and what portion of the capitol/ and gains will revert back to the
fund itself.
The commitment to the fund is irrevocable; however the investor’s

position in the fund may be sold to a third party under the same
guidelines as secondary market bond sales. Additionally the assets can
be assigned to the heirs of the investors estate into perpetuity,
therefore allowing the heirs to actualize any profit from the sale of
long-term real estate purchased on behalf of the charity by the CFF,
and when and if that should occur.
THE PROCEEDS
Growth and Income will be distributed to the investors, tax-free, with

the caveat that (15%) of the gross proceeds will be placed directly
back into use by the charitable portion of the fund. Additionally all
expenses for management of the CFF will come off the top at a five-
percent pre-gift value. This means that the cash donation becomes an
end user asset value ratio of 1:1.
In this formula if the fund’s gross profits for the year were one-million
dollars. One-hundred-fifty thousand dollars would be placed back into
use for the charity and fifty thousand would be given back to the fund
management team for their salaries/expenses, this would leave $800k
for the investors.
A. This table shows an example of cash flow:
Initial in investment: $25,000,000
Amount dedicated to property purchases (A) $12,500,000
Amount invested in Fund $12,500,000
B. This table reflects the use of profits:
Year end growth of Fund (%8) $1,000,000
Portion reinvested automatically $150,000
Portion paid to management $50,000
Amount disbursed to investor: $800,000
C. This table shows the growth of the fund’s assets
Initial investment $25,000,000
Value growth of real property (%3) $375,000
Added to real property from line 2, table ‘B’ $75,000
Added to cash investment from line 2, table ‘B’ $75,000
New N.A.V. $25,525,000
It should be noted here that while the investor receives a very modest
amount of income per year, the amount of that income grows each
year as the fund is reinvested in annually.
These tables also do not account for any profitability from the real
property purchases aside form inflation/value growth. So the entire
model can only become more profitable for all parties with the sale of
properties.
The qualification for tax exempt status in Canada is that %15 of the
gross proceeds are given to charity, if the charity is in fact the model
shown above, then the investor could enjoy growth as well as the
fund, tax-exempt. A potential to negotiate the same terms with the
federal government in the United States may provide a previously

unprecedented opportunity for the community to reinvest in itself.
The federal government’s benefit to this would come in the form of

fewer cash obligations to the public in the form of social services.
Some of the fee’s collected for the management of the fund will be
used to pay the salaries of regional managers of the charity itself, also
offsetting any expenses on the municipal level.
TAX AND GOVERNMENT
The fund will pay any applicable taxes as an entity unto itself for it’s
‘for-profit’ partners in construction and property purchasing. The
partners that provide services to the community would of course be
tax free, the general tax basis of the for profit arm would be offset by
‘losses’ in trade with the charitable partners. The investors will
however receive tax forgiveness for their personal commitment and
risk in investing with the general partner.
THE CHARITY
The benefactor of the CFF receives three types of vital assets.
• Real Estate Purchases

• Salaries of Regional and National Infrastructure
• Annual Cash Endowments
In the specific model chosen for this presentation, housing; affordable

and emergency housing are the first indicated cause for consideration.
In an effort to create a living model, with the legs to keep moving

through changes, the structure will be three tiered. The actual real
estate needed for the ongoing success of the first two tiers would be
purchased by the CFF, and placed into trust according to the guidelines
set. It would be wise to set the guidelines to protect the asset from
potential exaggerated greed enacted by over-zealous fund managers.
There are several ways in which this could be made sanely, while still
holding consideration for the initial investors.
FIRST TIER:
Short-Term (1-30 days)
Outreach/Emergency/Front-Line Services
A property purchased by the CFF and placed into trust as a long-term

asset would become the main entry point for those in need of
emergency housing or services.
These properties would attempt to address each community in relation

to their greatest needs, working intimately and humbly with existing
community assets.
Services-
• Differential Social Diagnosis
• Emergency Food and Shelter
• Assistance in Community Resource Usage
• Referral for Medical or Legal Needs
• Safe Environment for those Afflicted or Addicted
Staff-
• Caregivers sufficient for adherence to provincial/state guidelines.
• Social Worker capable of differential diagnosis and referral within
that community
• Site Management (Administrator and Assistant)
SECOND TIER
Medium Term Housing (30 days to nine months)
The second tier is for those clients, who need an intermediary safe
living environment for the following reasons:
• Sober Living Environment (for those engaged in treatment)

• Protected Living Space (for persons under threat)
• Mental Health / Dual Diagnosis Housing
• Medium Transitional Emergency Housing Needs
It is understood that some communities will already have these types

of services available; therefore the CFF would make no effort to
duplicate these services, nor take away assets from those services
already in place, by providing unwitting competition for government
funds.
Services-
• Referral for treatment and resource for recovery.

• Safe living environs conducive to recovery of all types.
• Meals
Staff-
• On site manager
• Care-Givers
• On site medical/social worker (s) as needed
Staff needs and services would be different for each type of house in
this tier. For example:
In the case of a Sober Living Environment (SLE), the persons housed

would be relatively autonomous. They would be responsible (as
tenants in a boarding-house) for their participation in the cleanliness of
the house, the maintenance and upkeep, preparation of meals.
Additionally each person would be responsible and accountable for

pursuing out-patient treatment through a twelve step program and
possibly in conjunction with other needed mental health services.
In this model a member of staff (potentially a graduate of the house)

would be on desk to monitor the safety and function of the house, as
well as a manager to oversee the administration of the house.
In the Medium Transitional Emergency Housing Needs model, the

same conditions would apply, with the exception that those in need
would make their efforts to achieve some modicum of sustainable
security for themselves. In this instance two resident managers who
are available throughout the day may suffice.
This would provide housing for those who aren’t suffering from
incapacitating challenges, which require greater attention, though this
model could be adjusted for those who are refugees, or those who are
elderly and or disabled physically.
Mental Health/ Dual Diagnosis Housing is a service that is fairly well

covered in most communities. However if a community existed where
there were not adequate services for chronically mentally ill and
disabled persons, a house that had sufficient staff could be made
available through this fund.
Many communities also provide Protected Living Space for women and
children at risk of physical threat from their current living
environments. If there was a community that did not have this kind of
resource we could work towards that end. The staffing requirements
for these types of houses would have to be sufficient to meet the
needs of the tenants in resource and providing security.
The tenants of these ‘share-houses’ would be responsible for

contributing by whatever means were available to them to the function
of the houses. This contribution would offset the overall costs of the
Tier Two housing infrastructure.
THIRD TIER
Long Term Housing (12 months to lifetime)
The purpose of the third tier is to provide long term affordable housing
to the community at large, as well as those who are referred by the
previous two tiers.
Several forms of this can be made available:
Long Term Discounted Rental: The tenant would still be under the
auspices of a boarding house tenancy, but in the instance that the CFF
would act as master tenant and the renters would be sub-lessees. The
rents would be reflective of real affordability rates for that community.
And therefore would likely operate at a loss compared to a commercial
venture; however the free and clear ownership of the land and
development itself would redirect all income to paying any
infrastructure costs or the first two tiers, thereby offsetting costs to
the entire infrastructure of the charitable aspect of the CFF on a local
level.
LONG TERM OWNERSHIP OPTIONS: In this instance the model could

be adapted for low-term cost basis purchases of land and or
construction for new properties in communities requiring affordable
housing.
The CFF would purchase land and either:
1) Develop truly affordable properties in exchange for commercial

and residential development opportunities in the same local
area. Making in essence a trade in kind or cash in lieu exchange
for rights of development.
These affordable properties would then be sold on the basis of

C.O.G.S. plus %8 (to cover the profitability of the initial
investors). The C.O.G.S. would be an actual hard-cost without
contractor mark-up. This would not indemnify the CFF from the
standard and customary practice of sub-contractors including
their own mark-ups, though every reasonable effort would be
made to provide oversight that would protect the development
from unethical collusion.
2) Sub-Divide the land, and make affordable terms of cost plus

%8 per year, and make the land available to those who have
valid need and the means to provide construction. We may in
these instances also provide the possibility of at cost
construction.
The terms of the sales would be made to be extremely reasonable and

forgiving, allowing for more than force majeure protection to the
purchaser. Generous allowances for late or missed payments without
penalty would have to be made. Any forfeiture or repossession would
have to be agreed upon by the local governing board.
In the event of repossession, the initial purchaser would be returned

their cash investment, less the %8. The property would then be resold
at a moderate increase in value, in line with inflation.
In the terms of the agreement, if the debtor died and repossession of

the property was imminent, then the CFF would not make any return
of payment. It would instead roll those funds back into the general
fund.
The percentage is suggested to meet these needs:
%3.5 would go back to the local area’s tier one and two support. %4.5
would go back to the Fund to cover the expense of lending the money.
This would be comparable to federal tax-free instruments in many
countries.
OVERSIGHT BOARD
An oversight board would have to be created for each community. The

Board would have population strictures in place protecting the function
of the board.
Each local board should have one member of the city council, one
member of law enforcement, one representative of the Crown’s legal
system, one member of the legal community that is an advocate for
social resources, a member of the finance community, and four
members of the community at large. It would be advisable to have
these members also be participants in the recovery, or social advocacy
communities.
SUMMARY
The primary purpose of this instrument is to provide income for the

investors while generously giving to the communities that the investor
belongs to.
We provide a self sustaining private sector social service that has the
flexibility and profitability to be of continuing value to the communities
and investors alike, while freeing the burden of the Federal
Government’s obligation to communities with regard to every social
aspect from housing to medical care.
Other models may be geared towards purchasing hospitals, and or

segments of medical development. All basic social needs could
eventually be met through this model with each CFF serving the
charter of its investors group accordingly. This would give flexibility of
intent and function to the end user.
Table ‘D’ Illustration of Cash

Flow
Operation
Fund Fee’s/
Expense
Investment Income/Growth
For Investor
*Market/Bond/Futures
*Com./Res. Federal Tax Free
Development Income in Lieu of
*New Business Cash Donation to
Underwriting Foundation
Benefactors
Housing/Services
*Long-Term Equity Real

Estate Investment
*Cash Influx Quarterly
Sustainable Solution
Ownership Or Long
Longer Term Term Rental Paid
Front Line Housing/Services Entirely by User
Housing/ Portion Paid By
Services User
Free to
User

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CHARITABLE FOUNDATION HEDGE FUND

The Charitable Foundation Hedge Fund (CFHF) is an income generating

The purpose as a charitable trust will give direct cash advantage to

A pool of monetary assets, which are then converted into monetary

The fund will be structured to receive large investments; these

• Stock Market Securities (Domestic and Foreign)

Trading in open international marketplaces with every imaginable type

Underwriting of new business development will be in the form of

Old business asset gathering is performed through recognizing fallow

A portion (25-50%) of the fund will be dedicated to purchasing

The commitment to the fund is irrevocable; however the investor’s

Growth and Income will be distributed to the investors, tax-free, with

A. This table shows an example of cash flow:

Initial in investment: $25,000,000

Amount dedicated to property purchases (A) $12,500,000

Amount invested in Fund $12,500,000

B. This table reflects the use of profits:

Year end growth of Fund (%8) $1,000,000

Portion reinvested automatically $150,000

Portion paid to management $50,000

Amount disbursed to investor: $800,000

C. This table shows the growth of the fund’s assets

Initial investment $25,000,000

Value growth of real property (%3) $375,000

Added to real property from line 2, table ‘B’ $75,000

Added to cash investment from line 2, table ‘B’ $75,000

New N.A.V. $25,525,000

federal government in the United States may provide a previously

The federal government’s benefit to this would come in the form of

TAX AND GOVERNMENT

The benefactor of the CFF receives three types of vital assets.

• Real Estate Purchases

In the specific model chosen for this presentation, housing; affordable

In an effort to create a living model, with the legs to keep moving

A property purchased by the CFF and placed into trust as a long-term

These properties would attempt to address each community in relation

• Sober Living Environment (for those engaged in treatment)

It is understood that some communities will already have these types

• Referral for treatment and resource for recovery.

In the case of a Sober Living Environment (SLE), the persons housed

Additionally each person would be responsible and accountable for

In this model a member of staff (potentially a graduate of the house)

In the Medium Transitional Emergency Housing Needs model, the

Mental Health/ Dual Diagnosis Housing is a service that is fairly well

The tenants of these ‘share-houses’ would be responsible for

Several forms of this can be made available:

LONG TERM OWNERSHIP OPTIONS: In this instance the model could

The CFF would purchase land and either:

1) Develop truly affordable properties in exchange for commercial

These affordable properties would then be sold on the basis of

2) Sub-Divide the land, and make affordable terms of cost plus

The terms of the sales would be made to be extremely reasonable and

In the event of repossession, the initial purchaser would be returned

In the terms of the agreement, if the debtor died and repossession of

The percentage is suggested to meet these needs:

An oversight board would have to be created for each community. The

The primary purpose of this instrument is to provide income for the

Other models may be geared towards purchasing hospitals, and or

Table ‘D’ Illustration of Cash

*Long-Term Equity Real

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