Gates Foundation receives $30.7 billion pledge

The Oracle of Omaha, as Buffett is known due to his stock picking ability, on Sunday posted letters on his company's Web site pledging to give away over $37 billion to five charitable foundations.

The largest donation will nearly double the size of the Bill & Melinda Gates Foundation's assets to around $65 billion, and make it the biggest charitable foundation in the world. The former number one, the Stichting INGKA Foundation, is a Netherlands-registered charity established by Ingvar Kamprad, founder of Swedish home furnishings giant IKEA. Its assets have been estimated at $36 billion.

In the first year alone, Buffett's initial contribution will allow the foundation to increase its annual giving by $1.5 billion.

"I greatly admire what the Bill & Melinda Gates Foundation is accomplishing and want to materially expand its future capabilities," Buffett said in the letter. "You have committed yourselves to a few extraordinarily important but underfunded issues, a policy that I believe offers the highest probability of your achieving goals of great consequence."

Bill and Melinda Gates quickly responded to Buffett's generosity.

"We are awed by our friend Warren Buffett's decision to use his fortune to address the world's most challenging inequities, and we are humbled that he has chosen to direct a large portion of it to the Bill & Melinda Gates Foundation," they said in a letter, adding they have enjoyed a "special" 15-year friendship with him. Bill Gates has played bridge with Buffett for years, and last December, the two anted up $1 million to fund a program to teach the card game to junior high school students in the U.S.

Gates also sits on the board of directors at Berkshire Hathaway.

Buffett pledged to give the foundation 10 million shares of stock in the company he runs his investments through, Berkshire Hathaway, in allotments over a stretch of time. The initial contribution to be made in July of 2006, will be 500,000 shares of B class stock in Berkshire Hathaway, he said in the letter. Each July thereafter, 5 percent of remaining shares will be handed over to the foundation.

The billionaire cited only a few caveats to his largesse, including a stipulation that his shares only continue to be given to the foundation so long as either Bill or Melinda Gates remain alive and active in its operations. The foundation must also satisfy legal requirements to qualify Buffett's gift as charitable so it is not subject to taxes.

In separate letters to four other charitable foundations set up in the names of his wife and three children, Buffett pledged an additional 2.05 million shares of stock worth about $6.3 billion based on the closing price Friday.

It's unclear why Buffett chose to set aside the bulk of his fortune to a non-family foundation. But the answer may be his belief in focusing efforts to achieve greater success, an idea he cited in the donation letters he wrote to each of his children.

"Focus the new funds and your energy on a relatively few activities in which [your foundation] can make an important difference," Buffett wrote. "Conversely, avoid making small contributions to the multitude of worthwhile activities that have many possible funders and that would likely proceed without your help. Consider working with your siblings on important projects."

The Bill & Melinda Gates Foundation has given funding to various causes, including the fight against Tuberculosis and HIV/AIDS, finding cures for cervical cancer and other diseases, providing computers to schools in the U.S., U.K., Chile, Mexico and elsewhere, and much more.

The foundation said it owned assets worth around $35 billion in its 2005 annual report. By comparison, the Ford Foundation held assets of $11.4 billion at the end of last year, while the widely-known Nobel Foundation, which announces the annual peace prize winners, had $450 million.