60 Years of the Calouste Gulbenkian Foundation Annual Report 2016 Annual Report 2016 60 Years of the Calouste Gulbenkian Foundation Message from the President Departments Programmes Initiatives 222 004 — 017 034 — 099 102 — 195 196 — 201 Budget Implementation Table of and Activities 036 102 192 Contents Art Library Gulbenkian Human Development Gulbenkian Cities Initiative 230 Programme Financial Statements Support to the 046 196 Auditor’s Report Board of Trustees Instituto Gulbenkian de Ciência 118 Gulbenkian Oceans Initiative Gulbenkian Education for Culture 314 018 — 033 054 and Science Programme Internal Audit Committee’s Calouste Gulbenkian Museum Delegations Report and Opinion 020 130 202 — 221 Secretary-General 070 Gulbenkian Innovation in Health 319 Scholarships Department Programme 204 Partnerships 028 France Office of the President 078 140 321 Armenian Communities Department Gulbenkian Portuguese Language 215 Board of Trustees and Culture Programme United Kingdom Secretary-General 086 Internal Audit Committee Music Department 150 Gulbenkian Partnerships 322 for Development Programme Heads of Departments, Programmes and Initiatives 166 Gulbenkian Empowering 324 New Generations Programme Useful Information 182 Cidadania Ativa eea Grants Programme MESSAGE FROM THE PRESIDENT Message from the President 7 this is my last annual report as President of the Calouste Gulbenkian Foundation. I therefore consider it appropriate to take stock of the last five years, which I have had the honour to share with my colleagues on the Board of Trustees, who have, in turn, benefited from the support of all the Foundation’s collaborators. When I began my mandate in 2012, Portugal was living through one of the most serious crises in its contemporary history. For this reason, I argued that the Foundation’s role in a globalised world should focus on forging a closer relationship with the Portuguese people. I have also stated that the first and permanent concern of the Foundation will always be to ensure its long term viability. The extent, soundness and profitability of its assets should be our first priority. Likewise, the sustainability of its fixed cost structure is essential to providing the agility that is indispensable in uncertain and troubled times such as those in which we live. I. Evolution of the Capital Fund The Foundation’s assets, as measured by its capital fund, decreased from €2,645 million in 31 December 2011 to €2,522 million in 31 December 2016. It should be noted that the international accounting criteria (ifrs) adopted by the Foundation imposed a change in accounting for one of the subsidiaries in the area of petroleum products in 2015, reducing the value of the capital fund reported in accounts by 100 Awarding of Honor- million euros. Without this change in accounting standards, the capital fund would have remained ary Membership of practically constant between 2012 and 2016. the Order of Free- dom to the Calouste The main factors in this were the performance of assets held by the Foundation, which generat- Gulbenkian Founda- ed income valued at 2,777 million euros in December 2016, and increased pension liabilities of 290 tion by the President of the Portuguese million euros in December 2016. Republic, Marcelo Rebelo de Sousa, 20 July, 2016. Table 1 – Contributions to the Capital Fund © FCG/Márcia Lessa 2 940 000 286 810 2 645 540 38 930 2 640 000 2 620 000 2 600 000 327 260 8 960 2 532 670 2 520 000 120 300 20 000 0 Capital Transfer to the Effect Other Actuarial Other Capital Fund Capital Fund Partex changes in deviations Fund 2011 without Partex without fair value 2016 dividends dividends 8 Calouste Gulbenkian Foundation Annual Report 2016 Message from the President 9 The Foundation has two large income generating assets. The first is a portfolio of financial assets, In 2013, Partex B.V., a Dutch-based holding company, was created for holdings in oil and gas valued at the end of 2016 at 2,247 million euros. The second is a group of holdings in companies en- companies previously located in offshore areas. It was also decided that all service activities involv- gaged in the exploration and/or production of oil and gas, which are held through Partex, a company ing sales of oil and gas, when received as dividends from the subsidiaries, should be transferred to wholly owned by the Foundation, valued at the end of 2016 at 495 million euros. Partex Portugal sa. The capital fund corresponds to the difference between assets and liabilities. The assets of the Table 2 – Evolution of Partex Foundation consist mainly of income-generating assets. On the other hand, the liabilities mostly reflect pension liabilities whose value, when compared to the beginning of 2012, increased by an 1 200 000 1 120 340 estimated 100 million euros as a result of the falling discount rate on future pension liabilities which 1 100 000 accompanied the decline in interest rates on financial markets. As interest rates recover on low-risk 1 000 000 -327 260 bond markets, a reduction in such pension liabilities will occur. 900 000 224 940 800 000 102 320 II. Intervention Strategy 700 000 600 000 495 450 An assessment of the intervention strategy of the Calouste Gulbenkian Foundation was initiated 500 000 in 2015, with the main objective of adapting it to new cultural, social and economic challenges and 297 630 ensuring that it continues to be a philanthropic institution of reference. We intend to give greater coherence to the Foundation’s ultimate role of contributing to a more 0 Partex Variation in Effect Dividends Partex just, cohesive, equitable and sustainable society and preparing the citizens of the future. Indeed, 2011 Fair Value OLNG (IFRS) 2016 the topic of inequality had already attracted our attention, with the organisation in 2015 of two very well-attended conferences with Thomas Piketty and Joseph Stiglitz, which filled the Grand Auditorium Over the last five years, the portfolio of financial assets has performed satisfactorily, following and the adjacent areas of our Congress Centre. overall market trends. The average annual income was 8.3%, largely exceeding the long-term objec- During 2017, some of the proposals that emerged from this process will begin to be tested, though tive defined by the Foundation at 4.5% above the average annual inflation of the period (estimated, with the incrementalism of an institution with 60 years of history, and never abandoning its founding in the last five years, at 0.6%). vocation for social innovation and developing new solutions to new problems. Until mid-2013, the portfolio was managed by specialised external agencies, most of them hired The scope and complexity of such a process has led to the development of a model for internal under discretionary management arrangements that gave them freedom to make managerial deci- and external consultation, making it possible to redefine the priorities of the Foundation’s long- sions within the limits established by the Foundation’s general guidelines. term strategy, reconciling the stability of our operations and the preservation of our legacy with the As of July 2013, with the support of an external consultant, the Foundation has broadly defined evolving needs of the society we serve. It was further decided that the organisation and processes of an investment policy for the portfolio to be managed passively, meaning that financial assets held the Foundation should reflect the increasing centrality of the digital universe. should aim to replicate the performance of the most important international stock indexes, investing In that context, all the Foundation’s Programmes were evaluated by a competitively selected in the most representative securities. On the other hand, more specialised managers were hired with international consultancy firm, allowing for a new organisation and agenda for the distributive area specific mandates. Bearing in mind that, from historical data and in general, the valuation perfor- in Portugal to be prepared while maintaining continuity. Three strategic axes were defined – Cohesion mance of assets in discretionary management of institutional investors is no more favourable than and Integration; Systems and Resources Sustainability; Knowledge – which are deployed across eight passive management, in this way, the management costs incurred became lower. thematic areas: Welfare; Early Childhood and Seniors; Innovation and Social Investment; Migration; The low interest rates observed in recent years have justified an increased role for equity invest- Health Challenges; Intergenerational Justice; Natural Resources; Education and Talent; and New ment within the portfolio’s investment policy. Knowledge Frontiers. Also forming part of this portfolio are some investments with lower levels of liquidity made be- The activities of the uk Branch, which aim to contribute to the long-term improvement of social fore 2012, essentially corresponding to investments in funds with investments in real estate assets in well-being by creating social, cultural and environmental value, particularly in the most vulnerable Portugal, or in renewable energies, the divestment of which, as a rule, is taking place as the respective parts of the population, should align closely with distributive activity in Portugal. funds reach their settlement dates. Distributive areas should be more focused and interconnected, not only with each other but also Finally, as the holdings and corresponding revenues in oil and gas companies are denominated in terms of direct activities,