[Ip-health] WSJ: Warren Buffett Gives $30 Billion to Gates Foundation

[Amy Nunn]

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Warren Buffett Gives $30 Billion to Gates Foundation

Berkshire Hathaway Chairman Donates 85% of His Stock Holdings To Five
Charitable Organizations



By KAREN RICHARDSON
June 26, 2006;

In a dramatic shift in his philanthropic plans that will create a colossus
in the world of giving, Berkshire
<http://online.wsj.com/quotes/main.html?type=djn&symbol=brka>  Hathaway Inc.
Chairman Warren Buffett, the world's second-richest man, plans to give away
the bulk of his fortune to the Bill & Melinda Gates Foundation, run by the
world's richest man.

The gift, valued today at more than $30 billion, will create a philanthropic
organization with potential to significantly shape social issues including
child mortality, disease control and education. The Gates Foundation, headed
by Microsoft <http://online.wsj.com/quotes/main.html?type=djn&symbol=msft>
Corp. Chairman Bill Gates and his wife, Melinda, already has assets valued
at $30 billion, meaning it is on course to double in size.

Combining the two fortunes will create a $60 billion philanthropic vehicle
that will dwarf the $11 billion Ford Foundation, the $8.3 billion Lilly
Endowment and the $5.5 billion Andrew W. Mellon Foundation. By comparison,
the United Nations and its agencies spend about $12 billion per year.

The agreement has the potential to mark the beginning of a new era of
megafoundations. Mr. Buffett's gift to Mr. Gates is "revolutionary," says
Daniel Borochoff, president of the American Institute of Philanthropy, a
watchdog group based in Chicago. "Rather than competing, they are going to
pool their resources for common causes. They are going to affect millions of
lives."

Mr. Borochoff said that many charities might even redirect their missions to
causes that the Gates Foundation supports -- which now include tackling
malaria and AIDS in Africa and raising U.S. high school graduation rates.
But he warned the enlarged Gates Foundation will need to practice care in
fragile places, making sure to stimulate self-sufficiency rather than
fostering dependence or the kind of corruption that often follows aid.

Mr. Buffett, 75 years old, will give away about 85% of his Berkshire
Hathaway stock, currently valued at about $44 billion, to the Gates
Foundation and four other foundations, beginning in July, according to a
Berkshire Hathaway statement. About five-sixths of the allocated Berkshire
Class B shares will go to the Gates Foundation. Mr. Gates is a member of
Berkshire Hathaway's board. At Friday's 4 p.m. price, the 10-million-share
allotment was valued at $30.7 billion.

The gift was large enough even to impress Mr. Gates. "We are awed by our
friend Warren Buffett's decision to use his fortune to address the world's
most challenging inequities," the Microsoft chairman said in a statement
also released by Berkshire, "and we are humbled that he has chosen to direct
a large portion of it to the Bill & Melinda Gates Foundation."

While his decision to give to charity during his lifetime is new, Mr.
Buffett's decision against bequeathing most of his wealth to his children
isn't. He has long argued that children of wealthy parents can be sapped of
motivation and spoiled if they inherit all of their family's riches.

Mr. Buffett also made pledges to the Susan Thompson Buffett Foundation,
named after his late wife; the Howard G. Buffett Foundation, run by his
elder son; the Susan A. Buffett Foundation, run by his daughter, and the
NoVo Foundation, run by his younger son, Peter, and Peter's wife, Jennifer.

Mr. Buffett will give 5% of the designated shares to each recipient this
year, then 5% of the residual shares each year until either his death or
until certain conditions are no longer met. In the case of the Gates's
foundation, one condition requires that either Mr. or Mrs. Gates is alive to
set and administer the foundation's policies, according to a letter Mr.
Buffett sent to the foundation dated June 26, 2006. After Mr. Buffett's
death, his estate will distribute the remaining earmarked shares in an
as-yet undisclosed manner.

News of the gift was earlier reported on Fortune.com by Carol Loomis, the
magazine's editor-at-large and a longtime friend of Mr. Buffett. She is also
an investor in Berkshire and a director of the Susan Thompson Buffett
Foundation.

Mr. Buffett, who owns only Berkshire Class A shares, will convert them into
the B shares he needs for the gifts. One A share is convertible into 30 B
shares. On Friday, Berkshire Class A shares closed up 0.13%, or $120, at
$92,100 on the New York Stock Exchange. The Class B shares closed up 0.16%
at $3,071.01.

Mr. Buffett's decision to give away his fortune while he is alive was driven
by the 2004 death of his wife, Susan, and the greater scale and ability of
the Gates's Foundation to put his wealth to charitable use sooner than the
smaller Susan Thompson Buffett Foundation, set up by him and his wife some
40 years ago. Mr. Buffett had expected his wife to outlive him and kick
their philanthropic pursuits into high gear after his death. Because she
died before him, he felt she would approve if he started giving early. Mrs.
Buffett "would really have stepped on the gas," Mr. Buffett told Fortune
Magazine, which his assistant confirmed was accurate.

The Susan Thompson Buffett Foundation, which has $270 million in assets,
will receive one million Class B shares, or about $3.1 billion at current
prices. The foundation has focused on reproductive health, family-planning
and abortion-rights causes. It has focused preventing the spread of nuclear
weapons, an issue of great concern to Mr. Buffett. The rest -- 1.5 million
shares -- will be divided equally among the three foundations headed by his
three children, Susie, 52; Howard, 51; and Peter, 48. Mr. Buffett owns about
31% of Berkshire Hathaway, or 475,000 shares.

The Susan Thompson Buffett Foundation has been a quiet force in the
controversial area of population control, making substantial donations to
supporters of abortion rights, such as the Center for Reproductive Law and
Policy, the National Abortion Rights Action League and Planned Parenthood.
The foundation also has given money for the development of mifepristone, the
key ingredient in RU-486, also known as the "abortion pill."

Mr. Buffett has long espoused waiting until his death before donating to
philanthropy. He reasoned he could increase his total wealth while he was
alive, putting him in a position to leave even more later.

The Gateses have credited Mr. Buffett for inspiring them to set up their
foundation, which has given away $8 billion in the past 12 years. Its focus
has been on world-health programs and U.S. education.

Mr. Buffett will become a trustee of the Gates's foundation, but he said he
doesn't plan to change the organization's decision-making process. At
current prices, the value of Mr. Buffett's total donation is about $37
billion. While he expects some of the smaller foundations will sell some of
his shares "relatively soon" to raise cash to give away, he told Fortune he
doesn't believe the selling will depress Berkshire's share price
significantly over time.

Some investors yesterday didn't seem concerned about how this would affect
their stakes. "I'm really happy for him personally," said Kenneth Shubin
Stein, who runs Spencer Capital Management, a New York hedge fund with a
stake in Berkshire.

Mr. Buffett, who works out with a personal trainer three times a week to
help offset his diet of largely red meat and potatoes, said his decision to
give away his wealth now had nothing to do with his health. In each of his
letters to the five foundations, Mr. Buffett assured the recipients: "My
doctor tells me I'm in excellent health, and I certainly feel that I am."



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