EFTA02693048.pdf

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_02036110 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_R1_02036111 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 & The Gates & The Gates & J.P. Morgan Charitable J.P. Morgan J.P. Morgan Giving Fund Charitable Charitable Giving Fund Giving Fund (Sponsoring public organization) (Foreign* private (Domestic qualifying charitable foundation) entity) US International mE Its US Int'l Donor Donor Donor Donor Country Country B C A B A B Conduk Conduit Conduit Conduit Conduit Conduit (Donor Advised (Type I Supporting (Offshore donors) (Domestic donors) Fund subaccounts) Organizations) J.P.Morgan * Tax neutral jurisdiction lA Donors "WO 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 International entity benefits* • Maximizes U.S. tax deductibility • Structure in a tax neutral jurisdiction will provide maximum flexibility for appropriate donors • Accommodates donations from private foundations • Country-specific entity options to meet donors' tax and • Avoids private foundation constraints regulatory considerations 5% annual payout • Facilitates cross border philanthropic giving and 2% excise tax collaborative partnerships Restrictive self dealing rules • Charitable foundation permits donor anonymity • Donor Advised Fund option preserves anonymity • Supporting organization allows for donor board positions Note: J.P. Morgan Chase will provide broad public fundraising 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 Strategic Program / Grant and Management and Governance Finance / Audit Committee (Board & advisory members) Distribution Committee Committee (board and advisory members) (Board & advisory members) (Board & advisory members) • Oversees investment assets • Oversight responsibility regarding • Formulates overall investment policies • Review at a strategic level the charity's Assists Board in fulfilling oversight financial reporting, internal control, and guidelines program initiatives to assure they responsibilities and in achieving and audit process • Monitors the portfolio for compliance support the mission charitable purpose • Reviews spending policy and budget with policies and for meeting • to due diligence on and direct funds Reviews governance, compensation, • Monitors for compliance performance objectives towards selected charitable recipients personnel policies • Sets officer compensation Executive Director • Committee member with day-to-day oversight • Staff management • Strategic development /decision making Donor Advised Fund Type I Supporting Organizations (5.O.) (5100MM+ donors) DAF subaccounts US Donor US Donor US Donor A B C Various S.O. committees Conduit Conduit Conduit 10 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 The Gates & J.P. Morgan Charitable Giving Fund Overall Portfolio Risk The Gates & The Gates & The Gates & J.P. Morgan Charitable Management J.P. Morgan J.P. Morgan Giving Fund Charitable Charitable • Liquidity Giving Fund Giving Fund (Sponsoring public organization) (Foreign* private (Domestic qualifying charitable foundation) entity) • Transparency U.S. International • Stress testing OO Country • Drawdown U.S. Donor U.S. Donor U.S. Donor Intl Donor Donor A Conduit A Conduit B Conduit • Annual potential estricted Priva Commodity Commercial EM Equi Hedge Restricted loss Oo tock Equl Portfolio Real Estate Portfolio Funds stock 10 (Donor Advised (Type I Supporting (Offshore (Domestic donors) Fund subaccounts) Organizations) donors) * Tax neutral jurisdiction. J.P Morgan 7 EFTA_R1_02036116 EFTA02693055  Case Study Three donors - Three pathways Case Study 1: Case Study 2: Case Study 3: Donor U.S. Individual U.S. Family Non-U.S. Family S300MM of LP interest in a S400MM of illiquid commercial Assets S10Bn of restricted stock private equity fund real estate Private Equity Group Contribution World Class Restricted Stock Real Asset Group Willamette Management Management Investment Specialists Cassie Turley Duff and Phelps Investments OUR APPROACH TO INVESTING management Customized Manage Risk of Incorporate Invest in World Class Money Generate liquidity Portfolio Construction Concentrated Assets Tactical Shifts Managers Asset Allocation Contribution During Liquidation 10% 10% 3% 3% Ss: 3 % 6% I 13,91rilik 13%1 2% sissa.....„ 3% 2% s% 50% 13% 3% 3% 10% 8% 4% 10% 7% 3% Fully Diversified • US Equity •International Equity Hedge Funds •PE Real Estate • Commodities US Fixed Income • Non-US Fixed Income Cash • Restricted Stock Morgan 8 EFTA_R1_02036117 EFTA02693056  Individual philanthropists can leverage the deep resources and experience Case Study of the Gates Foundation and J.P. Morgan to forge powerful global partnerships in philanthropy Case Study 1: Case Study 2: Case Study 3: Donor U.S. Individual U.S. Family Non•U.S. Family 4300MM of LP interest in a private S400MM of illiquid commercial real Assets S10Bn of restricted stock equity fund estate Philanthropic S2OMM annually for health, S3OMM annually for healthcare for S100MM annually for health Objectives education globally children in Africa Philanthropy: S100MM $20MM $30MM $150M111 Philanthropic Expertise Collaborative Philanthropy Global Donor Reach Bill and Melinda Gates Foundation SISOMM • The Gates Foundation's existing network Purchase oral polio vaccines will be augmented by J.P. Morgan's (OPV) in Afghanistan global business presence and outreach A $40MM • J.P. Morgan will access broad donor Purchase oral polio vaccines (OPV) in support from the firm's global client Pakistan relationships Adjust • Over 160 years of experience underpins S20MM Strategy Finance the surveillance network in Pakistan J.P. Morgan's fiduciary stewardship of client assets S20 MM • The philanthropy experts serving Deliver MenAfrVac in African meningitis belt Morgan's clients reflect a 50 year • tradition of supporting client's $3omm philanthropic endeavors, distributing an Purchase rotovirus vaccine in average of S100MM annually from a base The Phdanthropv Centre at J.P. Morgan of 528n of charitable trusts and Latin America for 3 years J.P. Morgan foundations 9 EFTA_R1_02036118 EFTA02693057  Investments 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 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 Apar PARINERS APOLLO NMI J.P. Morgan Hedge Gavea Fund Advisory Group J.P. Morgan Global Highbridge Real Asset Group — Calvert The Philanthropy - INVESTMENTS IDGEWATER J.P. Morgan Private Centre at J.P. Equity Group Mor • an J.P. Morgan Global Investment Strategy Endowments & Foundations Group EAGLE I COON. MII.4.1.nol • KKR Portfolio GMAG Construction Manager Due Global Access FIDUCIARY MANAGEMENT. INC. PAULSON & CO. INC. P =RAY CAPITAL Diligence Platform NIalthews Asia Instslawne Camel Global Investment Security Capital Specialists HIV!It %%%%%%% f MARI all•If PIMCO MUM Closely Held Asset Junius CMITAt GROUP Management Group Restricted Stock Advice Lab MU: Specialists Seix Investment 1.7iliori_ol(sj S tvIE R LAKE Advisors ur• MAMMAMINI TH▪ IRD POINT MANAGEMENT IP. Morgan I As of March 31, 2011 10 EFTA_R1_02036119 EFTA02693058  Investments J.P. Morgan advises each donor as their own CIO J.P. Morgan The Gates & J.P. Morgan Charitable Giving Fund Global Head of Investment Strategy: Michael Cembalest Works with Fixed Income, Manager Portfolio Board of Directors m S.O. Investment FX and Equities: Alternatives: Selection: Construction: Committee Commodities Kevin Alger David Frame Jamie Krame Archan Basu Investment Committee Brian Carlin Committee Members The Gates & J.P. Voting The Gates & J.P. Morgan Chartable Morgan Chartable • Warren Buffett Giving Fund Donor Giving Fund Donor • George Kaiser 00: Investor Tony Werley 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. Philanthropy Morgan's rich philanthropic history and resources The Gates & J.P. Morgan Charitable Giving J.P. Morgan Fund The Philanthropy Centre Board of Directors • Diane Whitty, Co-head of the Centre Strategic Program / S.O. Strategic Program / • Jackie Elias, Co-head of the Centre Grant and Grant and Distribution Works Distribution Committee • Rebecca Eastmond, Senior Philanthropic Advisor, EMEA with Committee • Erin Hogan, Senior Philanthropic Advisor, U.S. Philanthropic Services Im1 Committee Members Potential Committee Members • Melinda Gates (Chair) • Casey Burgess, Philanthropic Advisor Dr. Anthony Lake • Connie Brandeis, Philanthropic Advisor Ray Chambers Indra K. Nooyi • Jonathan Horowitz , Philanthropic Advisor Terry Gou Susan Rice Queen Rania of Jordan Wealth Advisory Dr. Charles MacCormack • Debra Treyz, Senior Wealth Advisor Jeffery Sachs Seth Berkley • Janine Racanelli, Senior Wealth Advisor I- 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 60 Wealth Advisors worldwide Wealth Advisory resources and solutions covering over 50 countries • 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 13 EFTA_R1_02038122 EFTA02693061  Next steps August September Q4 e Determine and e finalize objectives Formal 0 Initial conceptual meeting N and terns of engagement partnership Q1 Q2 Q3 / Q4 JANUARY: N Public announcement Final legal e 0 structure Formal N Draft & file public charity Determine Board fundraising application of Directors Infrastructure build J.P Morgan 14 EFTA_R1_02036123 EFTA02693062