Wednesday, August 31, 2011

DRAFT 8/26/2011 Version 13 Wednesday, August 31, 2011 PROJECT MOLECULE - CLIENT DRAFT Investment products: Not FDIC insured • No bank guarantee • May lose value Please see important information at the end of this presentation. J.P. Morgan EFTA_R1_02036109 EFTA02693048 Agenda A unique opportunity A unique approach How would it work Donor case studies Investments Philanthropy • Next steps • Appendix J.P Morgan 1 EFTA_R1_0203611 0 EFTA02693049 Executive Summary Opportunity The Gates Foundation has established a leadership position in global philanthropy with over $25Bn made in commitments since its inception in 1994 • There is an opportunity for the Gates Foundation to provide transformational philanthropic leadership for unprecedented dollars committed via the Giving Pledge and by other donors • Donors globally have expressed strong interest in collaborating with the Gates Foundation to optimize philanthropic strategy and impact • J.P. Morgan can establish an institutional bridge to link donors globally with forums processes for donor engagement, collaboration, and pooled giving • J.P. Morgan can support the philanthropic missions of the Gates Foundation and collaborating donors with global reach and world class capabilities in investment management, individual wealth planning, fiduciary governance • and perpetuate the institutional framework to sustain these missions in the future J.P Morgan 2 EFTA_R 1_020361 1 1 EFTA02693050 Executive Summary Objectives • Enable collaboration of donors with the Gates Foundation • Leverage the Gates Foundation's philanthropic expertise and execution on behalf of broader donor pool • Leverage J.P. Morgan's global reach, infrastructure investment management and individual wealth structuring capabilities • Create a structure for governance of individual and pooled philanthropy and investing • Allow for perpetual operation and governance succession • Provide advisory committee opportunities, targeted forums, and focused engagement with the Gates Foundation for significant donors • Optimize structure, flexibility and tax benefits for global donors (as appropriate) • Accept, manage and liquidate unique and/or illiquid assets • Extend global networks, collaboration and philanthropic impact J.P Morgan 3 EFTA_R1_02036112 EFTA02693051 Structure Recommended structure The Gates & J.P. Morgan Charitable Giving Fund The Gates & J.P. Morgan Charitable Giving Fund (Sponsoring public organization) (Donor Advised Fund subaccounts) J.P.Morgan US Its Donor B Conduk US Donor C Conduit (Type I Supporting Organizations) lA * Tax neutral jurisdiction The Gates & J.P. Morgan Charitable Giving Fund (Foreign* private charitable foundation) The Gates & J.P. Morgan Charitable Giving Fund (Domestic qualifying entity) International Int'l mE Donor Donor Country Country A B A B Conduit Conduit Conduit Conduit (Offshore donors) (Domestic donors) "WODonors 4 EFTA_R1_02036113 EFTA02693052 Structure Benefits and attributes of recommended structure • A groundbreaking structure combines positive attributes of public and private philanthropic vehicles for U.S. donors and customized solutions for international donors U.S. public charity benefits • Maximizes U.S. tax deductibility • Accommodates donations from private foundations • Avoids private foundation constraints 5% annual payout 2% excise tax Restrictive self dealing rules • Donor Advised Fund option preserves anonymity • Supporting organization allows for donor board positions Note: J.P. Morgan Chase will provide broad public fundraising International entity benefits* • Structure in a tax neutral jurisdiction will provide maximum flexibility for appropriate donors • Country-specific entity options to meet donors' tax and regulatory considerations • Facilitates cross border philanthropic giving and collaborative partnerships • Charitable foundation permits donor anonymity Structural benefits Allows for participation by broad range of donors and pledged giving • Provides framework for social impact investing • Supports donor collaboration and access to expertise Provides professional institutionalized framework for longevity and board succession Investment benefits Tailored investment recommendations allowing each donor to receive customized portfolio construction and to make asset allocation recommendations • Investment performance of one donor's contributions is segregated from other pools, minimizing drawdowns and preserving grant-making ability • Allows diversification requirements to be more easily met and a longer timeline for liquidations relative to private foundations J.P Moraan Foreign private charitable foundations and country-specific entities 5 EFTA_R1_02036114 EFTA02693053 Governance Legal and organizational structure - U.S. The Gates & J.P. Morgan Charitable Giving Fund (Sponsoring Public Organization) Investment Committee (Board & advisory members) • Oversees investment assets • Formulates overall investment policies and guidelines • Monitors the portfolio for compliance with policies and for meeting performance objectives Strategic Program / Grant and Distribution Committee (Board & advisory members) • Review at a strategic level the charity's program initiatives to assure they support the mission • to due diligence on and direct funds towards selected charitable recipients Management and Governance Committee (Board & advisory members) Assists Board in fulfilling oversight responsibilities and in achieving charitable purpose Reviews governance, compensation, personnel policies Executive Director • Committee member with day-to-day oversight • Staff management • Strategic development /decision making Finance / Audit Committee (board and advisory members) • Oversight responsibility regarding financial reporting, internal control, and audit process • Reviews spending policy and budget • Monitors for compliance • Sets officer compensation Donor Advised Fund DAF subaccounts 10 Type I Supporting Organizations (5.O.) (5100MM+ donors) US Donor A Conduit US Donor B Conduit US Donor C Conduit Various S.O. committees J.P. Morgan •A majority of the directors of the 5.O. board must be appointed or elected by the Sponsoring Public Organization 6 EFTA_R1_02036115 EFTA02693054 Structure Managing risk and fiduciary responsibilities for over 160 years Overall Portfolio Risk Management • Liquidity • Transparency • Stress testing • Drawdown • Annual potential loss J.P Morgan The Gates & J.P. Morgan Charitable Giving Fund The Gates & J.P. Morgan Charitable Giving Fund (Sponsoring public organization) OoOO 10 (Donor Advised U.S. Donor A Conduit U.S. U.S. Donor B Conduit estricted Priva tock Equl U.S. Donor The Gates & J.P. Morgan Charitable Giving Fund (Foreign* private charitable foundation) Intl Donor The Gates & J.P. Morgan Charitable Giving Fund (Domestic qualifying entity) International Donor (Offshore donors) (Domestic donors) Commodity Commercial EM Equi Portfolio Real Estate Portfolio (Type I Supporting Fund subaccounts) Organizations) * Tax neutral jurisdiction. Country A Conduit Hedge Restricted Funds stock 7 EFTA_R1_02036116 EFTA02693055 Case Study Three donors - Three pathways Case Study 1: Donor U.S. Individual Assets S10Bn of restricted stock Contribution World Class Restricted Stock Management Investment Specialists Investments management Asset Allocation Customized Portfolio Construction Contribution During Liquidation Fully Diversified Case Study 2: U.S. Family Case Study 3: Non-U.S. Family S300MM of LP interest in a S400MM of illiquid commercial private equity fund Private Equity Group Willamette Management Duff and Phelps OUR APPROACH TO INVESTING Manage Risk of Concentrated Assets Generate liquidity 10% Ss: 3 I% 6% 10% 13,91rilik 3% 10%3% 2% s% 13% 3% 3% 8% 4% 10% real estate Real Asset Group Cassie Turley Incorporate Tactical Shifts Invest in World Class Money Managers 13%1 2% sissa.....„ 50% 7% 3% • US Equity •International Equity Hedge Funds •PE Real Estate • Commodities US Fixed Income • Non-US Fixed Income Cash • Restricted Stock Morgan 3% 8 EFTA_R1_02036117 EFTA02693056 Individual philanthropists can leverage the deep resources and experience of the Gates Foundation and J.P. Morgan to forge powerful global partnerships in philanthropy Case Study 1: Donor U.S. Individual Assets S10Bn of restricted stock Philanthropic Objectives Philanthropy: S100MM annually for health S100MM Philanthropic Expertise Bill and Melinda Gates Foundation A Adjust Strategy The Phdanthropv Centre at J.P. Morgan J.P. Morgan Case Study 2: U.S. Family 4300MM of LP interest in a private equity fund S2OMM annually for health, education globally $20MM $150M111 Collaborative Philanthropy SISOMM Purchase oral polio vaccines (OPV) in Afghanistan $40MM Purchase oral polio vaccines (OPV) in Pakistan S20MM Finance the surveillance network in Pakistan S20 MM Deliver MenAfrVac in African meningitis belt • $3omm Purchase rotovirus vaccine in Latin America for 3 years Case Study Case Study 3: Non•U.S. Family S400MM of illiquid commercial real estate S3OMM annually for healthcare for children in Africa $30MM Global Donor Reach • The Gates Foundation's existing network will be augmented by J.P. Morgan's global business presence and outreach • J.P. Morgan will access broad donor support from the firm's global client relationships • Over 160 years of experience underpins J.P. Morgan's fiduciary stewardship of client assets • The philanthropy experts serving Morgan's clients reflect a 50 year tradition of supporting client's philanthropic endeavors, distributing an average of S100MM annually from a base of 528n of charitable trusts and foundations 9 EFTA_R1_02036118 EFTA02693057 Harnessing a global network of investment insight and solutions With over a century of experience serving our clients, we have built a formidable cache of global resources Investments J.P. Morgan Hedge Fund Advisory Group Gavea Highbridge J.P. Morgan Private Equity Group Global Investment Strategy Portfolio Construction Manager Due Diligence Security Capital Junius Restricted Stock Specialists J.P. Morgan Global Real Asset Group The Philanthropy Centre at J.P. Mor • an J.P. Morgan Endowments & Foundations Group GMAG Global Access Platform Global Investment Specialists Closely Held Asset Management Group Advice Lab IP. Morgan I As of March 31, 2011 Worldwide network of investment professionals operating in 23 countries' Real-time access to local markets and investment opportunities Hundreds of millions invested each year in research programs globally ▪ Majority interest in Gavea Investimentos, one of Brazil's largest alternative asset managers ▪ Investing in Asia since 1972 and on the ground in Europe for more than 135 years A ARTISAN FUNDS GIFFORD — Calvert - INVESTMENTS FIDUCIARY EAGLE MANAGEMENT. INC. Instslawne Camel NIalthews Asia %%%%%%% f MARI all•If PIMCO Seix Investment Advisors ur• 1.7iliori_ol(sj MAMMAMINI Apar PARINERS APOLLO NMI IDGEWATER ICOON. MII.4.1.nol • KKR PAULSON & CO. INC. HIV! It MUM P =RAY CAPITAL CMITAt GROUP S tvIE R LAKE TH▪ IRD POINT MU: MANAGEMENT 10 EFTA_R1_02036119 EFTA02693058 Investments J.P. Morgan advises each donor as their own CIO J.P. Morgan Global Head of Investment Strategy: Michael Cembalest Fixed Income, Manager FX and Equities: Alternatives: Selection: Commodities Kevin Alger David Frame Jamie Krame Brian Carlin The Gates & J.P. Morgan Chartable Giving Fund Donor Investor The Gates & J.P. Morgan Charitable Giving Fund Works with Portfolio Board of Directors m S.O. Investment Construction: Investment Committee Committee Archan Basu The Gates & J.P. Morgan Chartable Giving Fund Donor 00: Tony Werley Committee Members Voting • Warren Buffett • George Kaiser Non-voting • Ted Forstmann • Lee Cooperman • Mike Cembalest • David Rubenstein • Mary Erdoes The Gates & J.P. Morgan Chartable Giving Fund Donor J.P Morgan 11 EFTA_R1_02036120 EFTA02693059 The Gates & J.P. Morgan Charitable Giving Fund will benefit from J.P. Morgan's rich philanthropic history and resources J.P. Morgan The Philanthropy Centre • Diane Whitty, Co-head of the Centre • Jackie Elias, Co-head of the Centre • Rebecca Eastmond, Senior Philanthropic Advisor, EMEA • Erin Hogan, Senior Philanthropic Advisor, U.S. Philanthropic Services • Casey Burgess, Philanthropic Advisor • Connie Brandeis, Philanthropic Advisor • Jonathan Horowitz , Philanthropic Advisor Wealth Advisory • Debra Treyz, Senior Wealth Advisor • Janine Racanelli, Senior Wealth Advisor Works with Im1 Philanthropy The Gates & J.P. Morgan Charitable Giving Fund Board of Directors Strategic Program / S.O. Strategic Program / Grant and Grant and Distribution Distribution Committee Committee Committee Members • Melinda Gates (Chair) I-Potential Committee Members Dr. Anthony Lake Ray Chambers Indra K. Nooyi Terry Gou Susan Rice Queen Rania of Jordan Dr. Charles MacCormack Jeffery Sachs Seth Berkley And will build on the successful Gates Foundation and J.P. Morgan partnership efforts in areas of global health and education J.P Morgan 12 EFTA_R1_02036121 EFTA02693060 Philanthropy J.P. Morgan's global Wealth Advisory team provides global reach and deep experience in advising clients on customized giving strategies Donor requirements Structuring and tax concerns Time horizon - Pay down or in perpetuity • Wealth to be allocated to philanthropic endeavors One or multiple generations • Timing of donations Source of funding One-time or overtime Cash During life or at death Public securities • Degree of control to be maintained over invested assets Private company stock and philanthropic grants Illiquid assets • Choice of charitable legal entity Planning across boarders for families in • Governance options multi-jurisdictions Family Experts - Individual or shared Wealth Advisory resources and solutions • Average of 17 years experience as tax, trust, and estate planning lawyers • Deep expertise in optimizing tax benefits for donors • Multi-jurisdictional expertise and integrated approach to multi-jurisdictional wealth planning • Provide integrated solutions for lifetime and testamentary planning Work in partnership with network of advisors in generating and sharing wealth planning solutions Advice Lab is dedicated to developing leading-edge, world class intellectual capital and analytical tools around the unique challenges wealthy families face, including taxes and gifting J.P. Morgan 60 Wealth Advisors worldwide covering over 50 countries 13 EFTA_R1_02038122 EFTA02693061 Next steps e e 0 N N e 0 N Draft & file public charity application August Initial conceptual meeting Q1 JANUARY: Public announcement Infrastructure build J.P Morgan September Determine and finalize objectives and terns of partnership Q2 Final legal structure Determine Board of Directors Q4 Formal engagement Q3 / Q4 Formal fundraising 14 EFTA_R1_02036123 EFTA02693062