Perhaps more than any other program, First Bridge Foundation’s Enhanced Market Link Note is truly ground-breaking. While Market Linked Notes are not new and have been around for over 20 years, they have never been applied toward the process of making a charitable donation.
|Maturity Date||7 Years|
|Return of Principal||100%|
|Participation in the Upside of the Market||50% – 70%|
|Contribution Amount||20% – 25%|
|Tax Write-off||20% – 25%|
- 100% of principal returned at maturity in seven (7) years.
- 50% to 70% stock market participation – based on the Standard and Poor 500 Index
- Tax write-off equal to 20 to 25% of the capital contribution
- Leveraging of the donation through First Bridge Foundation’s connections.
Market Linked Notes are flexible, financially engineered investment products that help investors increase diversification while potentially optimizing the risk/return profile of their portfolios.Description
The two primary characteristics that make up a standard MLN are (a) some form of a debt instrument (such as bonds) and (b) a derivative component (such as equity based Call Options).
First Bridge Foundation’s Enhanced Market Linked Note (EMLN) provides the following:
Preservation of Principal
Once the EMLN has been issued, the proceeds are used to purchase a blended bond portfolio comprised of government guaranteed bonds and non-guaranteed corporate bonds. 100% of the return of principal will come from these bonds when they mature.
The bonds will be purchased through a large full service brokerage firm or a Registered Investment Advisory firm and will be diversified to the fullest extent possible. An important feature of the EMLN is that the bond portfolio will be held in a segregated trust account at the full service brokerage firm and will not be used by the recipient charity for any of its activities. It’s only purpose will be to assure a return of principal to the donor at maturity.
Growth – The S&P Growth Component
The First Bridge Foundation Enhanced Market Linked Note, as part of the agreement between the donor and First Bridge, will use the proceeds of the donation to purchase long-term options on the Standard & Poor 500 Index; widely regarded as the best single gauge of large cap U.S. equities. This feature provides a donor with an opportunity to achieve market upside with no downside risk. Should the market decline during the seven-year period, the donor would still receive a return of principal, backed by the previously described bond portfolio. However, should the market advance, we have estimated that the donor will receive 50% to 70% of the market upside (based on the Standard and Poor 500 Index).
While the average Market Linked Note only provides a return of principal and market upside, the First Bridge Foundation Enhanced Market Linked Note will enable donors to receive an estimated 20% to 25% tax write off; the amount contributed to First Bridge Foundation. Finally, First Bridge Foundation’s ability to leverage a donation through its sister organization (Pure Charity) that specialize in crowd-funding and social media technology has the ability to increase the value of the donation dramatically.
Comparison of Market Linked Notes
|Standard MLN||First Bridge EMLN|
|Preservation of Principal||Yes||Yes|
|Market Growth (S&P 500 Index)||Yes||Yes|
|Support of a Chosen Charity||No||Yes|
|Ability to Leverage Donatin||No||Yes|