You'll forgive us a little flag waving.

Supporting higher education isn't a new idea.

Millions of people make contributions; so do hundreds of companies.

But in today's tough economic climate colleges need more support than ever. Funds for bricks and mortar aren't enough. Colleges need help in preparing students to succeed in this technological age — both on campus and in the work force.

That requires funds for new computer-related courses and high-technology programs in management, engineering

and science. This kind of support enriches the curriculum for all students, including those in liberal arts.

IBM contributed more than $82 million to hundreds of schools last year, some of them represented here. Our "2 to 1" Matching Grant Program generated another $12 million: $4 million from our employees was matched by $8 million from IBM.

Education is important to all of us. We all depend on the students, and the ideas, coming out of America's colleges and universities. It's only fair that they can depend on us.

©Copyright IBM Corporation 1986

KISSINGER

*Continued from Page 32*

tional Bank of Chicago) and two other
consultants. The Washington office is
run by General Scowcroft and has
three researchers and four clerks. In-

cluding Mr. Kissinger's bodyguards,
this brings Kissinger Associates to
about 25 people. In addition, Mr. Kiss-
singer has a separate Washington of-

fice from which he runs his "private"
affairs, such as speechmaking. He
speaks for a fee about 20 times a year
— his charge is usually $20,000 — and
makes another 20 or so free appear-
ances for various causes and political
fund raising.

The firm's board of trustees reads
like an international "Who's Who." It
includes William D. Rogers, a former

Under Secretary of State and now a
Washington lawyer; Saburo Okita,
former Japanese Foreign Minister;
Pehr Gyllenhammar, chief executive
officer of Volvo; William E. Simon,
former Treasury Secretary; Sir Y.K.
Kan, former chairman of the Bank of
East Asia; Robert O. Anderson, for-
mer chairman of Atlantic Richfield;
Lord Roll, chairman of S.G. Warburg
& Company, and Edward L. Palmer,
former chairman of the executive
committee of Citibank. Many of the
trustees help the firm obtain clients.

According to various members of
the firm, it has 25 to 30 clients, each
paying slightly more than $150,000
yearly for varying services. Gross in-
come thus apparently approaches $5
million a year.

The maximum amount of service
seems to be four planning meetings a
year between Kissinger Associates
and the top management of a client,
plus telephone calls. That is the case
with the H.J. Heinz Company, accord-
ing to sources there. The minimum
appears to be $150,000 for a few tele-
phone calls plus a visit by a chief ex-
ecutive officer of a client to Mr. Kiss-
singer's office. Such is the case with
the International Energy Corporation
of Stamford, Conn., according to a
source close to that company. The ex-
tent of the service sometimes seems
to depend on how much the client de-
mands.

"You have to remember that the fee
is not compulsory," Mr. Kissinger
says, "so you have to assume that if it
isn't worth their while, they wouldn't
pay it."

HENRY KISSINGER'S L-
shaped office is decorated
with plants, photographs and
paintings, with a desk at one end and
a sitting area at the other. The inter-
view, most of which Mr. Eagleburger
sat in on, ranged over Mr. Kissinger's
activities.

Mr. Kissinger said the firm began
by doing only general analysis of in-
ternational affairs. Then, with the
addition of Messrs. Scowcroft, Eagle-
burger and Stoga, it got into "much
more detailed analysis of interna-
tional politics and economic problems
in relation to business activities." As
they got to know their clients better,
"we could bring our analyses to bear
on more specific issues and give them
our opinion on how to handle it." He
declined to discuss any specific ad-
vice given to any client, save to say
that he told some that, contrary to the
judgment of many banks, the interna-
tional debt crisis was going to get
worse, not better. Several executives
of his client firms stated that Mr. Kiss-
singer had advised them against in-
vesting in South Africa, yet he has
taken a public position against eco-
nomic sanctions there. Asked about
this, Mr. Kissinger said only, "I don't
think I should comment." Then, sit-
ting back and reflecting on the work
he does, he added, "You have to
remember that many of these busi-
nesses have no experience whatever
in dealing abroad."

That lack of knowledge and its at-
tendant vulnerability came crashing

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down on American businessmen with the double blows of the Arab oil boycott of 1973 and the fall of the Shah of Iran in 1979. This is when the international consulting business took hold, when corporations started searching for people who might be able to give them some forewarning of catastrophe and some way to take advantage of all of those petrodollars in the hands of oil-producing states.

It was then that political-risk analysis became fashionable in a big way, with the use of inside staffs and outside experts. After the Iranian upheaval, many of these experts formed a group called the Association of Political Risk Analysts. According to Joan Walsh Cassedy, executive director of the group, it swelled to about 400 members, essentially staff-level people, from major corporations and consulting firms. However, with so much money to be made, people with far more formidable credentials were needed. Who better than former senior Government officials — even though many of them had been responsible for failing to foresee catastrophes in the first place. (Many of the major multinational oil companies had been much more on top of events than Government experts.)

There were a number of risk-analysis publications, but corporate leaders wanted more, especially "inside information." Reflecting on this, a senior executive in a multinational company, who once served in Government, said, "The bosses simply did not understand that being in Government and even having access to the most highly classified intelligence and the cables from embassies does not provide any advantages over a careful reading of the best newspapers, and maybe less than that, because the solid newspaper articles are built on inside information plus talking to foreign officials who might be more frank with a reporter than a Government official." As this executive saw it, "The C.E.O.'s needed someone to look in the eye and put questions to."

This need has been far greater on the part of American businessmen than their Western European and Asian counterparts, according to a number of international consultants. "American businessmen don't know as much about how our Government works or how foreign governments work compared to their foreign competitors,"

said one senior international consultant. "It's a cultural thing. They see the Government as the enemy. European and Japanese businessmen work in environments where there is a more intimate relationship between government and business."

Besides inside information, the executives, according to Robert D. Hormats, a vice president of Goldman, Sachs & Company and a former high-level bureaucrat, have been looking for such things as "a second opinion about a country or an issue from someone with a general sense of the environment." Hiring an authoritative outside consultant, he said, establishes "due diligence," to show that steps have been taken to secure reasonable judgment about a situation before making an investment. "If anything went wrong, the executives were protected," he said.

And, of course, these international consultants do have contacts. Mr. Helms, as a former Ambassador to Iran, certainly knew who to talk to there. Richard V. Allen, fresh out of the Nixon White House, where he worked on trade issues among other matters, knew the people here and in Japan to talk to about trade matters. The superstar international consultants were certainly people who would get their telephone calls returned from high American Government officials and who would also be able to get executives in to see foreign leaders.

THOSE WHO HIRE Henry Kissinger give him rave reviews. "He's terrific, direct, enthusiastic, has unique insight and judgment and participates actively and constructively in meetings," says James D. Robinson 3d, chief executive officer of American Express. "Having him as a speaker at a luncheon or dinner is an effective way to gather in clients."

This view is seconded by Peter M. Dawkins, a managing director at Shearson Lehman, who added that the people at these affairs love it when "Henry reveals some aspects and facets of the things which are not normally part of the public domain."

Peter J. Solomon, vice chairman of Shearson Lehman, says, "Henry is helpful to us not in specific transactions, which he may be, but because part of the reason one uses an investment banker like Shearson Lehman

2

term, so that it did not look as if I were using my governmental contacts.

3. K: The board has a very structured agenda and so, its subjects are very precisely defined. My consulting goes beyond the board's agenda.

B: Yes.

K: Part of the consulting is with Shearson, Lehman. And I'm not on the board at Shearson, Lehman. So there is in fact next to no overlap between what I consult about and what goes before the board.

4. K: But there was actually a rather...I saw one report which left the impression that I went to Japan to make introductions for Jim Robinson. That is absolutely not true. He had his appointments with the people he wanted to see. I made the appointments with people I normally see on my own. He came along on some, but not all of my appointments that dealt with foreign policy. I came along on some, but by no means all of his business appointments.

Where I had been the initiator of the introduction of the meetings, I was the chief interlocutor, and I talked about my casual agenda. Where he had made the appointment, he was the chief interlocutor. So it really was a way by which I helped him understand the Japanese political

3

situation and he helped me understand some of the business thinking. The Chairman of American Express doesn't need me to make introductions. His knowledge of the economics and business side of the problem and my knowledge of the politics of the problem enabled us then to make a joint assessment of what the future of American-Japanese relationships were, and in some specific areas, discuss what the role of American Express was in this. We were not there to negotiate anything.

5. B: Now, were you there in your role as a board member or as a consult or as a friend of Mr. Robinson's on...

K: I would think as a consultant and as a board member. I was introduced as a board member.

B: Right.

K: In addition I attended a number of lunches for business and governmental leaders which were entirely arranged by American Express and where I even didn't know the guestlist ahead of time.

6. K: I'm not weighed down but they send very detailed documents before meetings, and I feel I have an obligation to read them and to study them. I feel I have, not only a legal obligation, but a moral obligation to do the best I can.

4

7. K: No. I know board members of many companies who are also consultants. Why should it be a conflict of interest? I mean, as a director you have a moral obligation and a legal obligation to maximize shareholder return and profit; as a consultant, I assume you have the same obligation to help the company.

(from p. 21/
rewrite)

8. K: In order to avoid any confusion between the institutional side of Kissinger Associates and my role as director of American Express I do all the consulting for American Express alone without involving my associates. Projects involving Shearson Lehman are handled institutionally.

James Stern Zisson
Second Vice President/
Financial Consultant

April 21, 1986

Dr. Henry Kissinger
Kissinger Associates
350 Park Avenue
New York, New York 10019

Dear Dr. Kissinger,

I read, with great interest, Sunday's New York Times Magazine piece on your most recent activities, which mentioned your connection with Shearson Lehman Brothers more than once.

I wonder if you recall my grandfather, Arthur Stern (and his partner Lawrence Ascher). Before his passing in 1978, Arthur had mentioned to me, with great pride, that you had spent a brief period of time working at Ascher-Stern Brush Co. prior to entering Harvard many years ago as one of your first job experiences here.

We have met very briefly in New York in 1980, and I wanted to bring you up-to-date on my investment activities with substantial private, pension and institutional clients as I thought they might well be of some interest and benefit to you, and perhaps some of your associates.

JSZ/tas
encl:

777 South Flagler Drive
Suite 800
W. Palm Beach, FL 33401

305 650 7539
800 327 6322 Nat'l. WATS
800 432 3735 Fla. WATS

SHEARSON
LEHMAN
BROTHERS

An American Express company

Member of all principal security,
option, and commodity exchanges.

SHEARSON
LEHMAN
BROTHERS

An American Express company

R

WHY NOT INVEST WITH THE BEST?

I. What We Seek - Outstanding and Consistent Investment Results.

My goal is to help my clients achieve the best available net returns with their investable assets, (after all fees and after taxes), while assuming the lowest amount of risk. Put more plainly, my clients seek:

1. MAXIMUM HORSEPOWER

2. MINIMUM FLAMMABILITY

with their investment portfolios, on a risk-adjusted basis, with liquidity.

They share a common interest in smart portfolio management of their "serious" funds. They are also willing to assume additional risk on a trading basis with individual stocks and options with their "speculative" funds but they don't confuse the two types of funds - they allocate their assets accordingly.

They tend to get exceptional results because they place their "serious" funds with the most exceptional, proven risk-averse money managers available that meet their requirements. We also have done very well with "speculative" trading funds.

I'd like to make it very clear that these are objectives and not guarantees. Investing for superior returns is never a riskless transaction. The fact that a top-performing money manager we work with has had 1 down year in the last 20 or has tripled client's funds within the last 3 years, does not insure you will be as fortunate using same manager in future.

What we can tell you is how well they've done in the past, how much risk they've taken to accomplish their results, what kind of investment strategy is utilized and most importantly, who would be best "fit" for your needs including personal "chemistry".

What we also tell our clients is how well their account is performing vs. comparable managers (and the markets), on an ongoing basis. If something is out-of-line, we question it thoroughly and will not hesitate to switch advisors, should a significant change occur in personnel, or if relative performance is not what it should be.

Shearson Lehman Brothers Inc.
777 South Flagler Drive
Suite 800
West Palm Beach, FL 33401

305 650 7500
800 327 6322 U.S. WATS
800 432 3735 FLA WATS

Now, I think, in light of what is on previous page, you want to ask
yourself some serious questions:

1. Have your funds consistently done as well as those in "Excellent" and "Best & Brightest" categories over same time periods?

2. Or put another way, has your serious money doubled and tripled, on a total return basis within the last 3-5 years?

3. If it hasn't, I'm not surprised. The fact is that among professional money managers (and mutual funds) only the top 2% are in the "Excellent" and "Best and Brightest" categories, on a risk-adjusted basis. So it's clearly very difficult to get these kinds of returns over time and on a consistent basis, and you've been very fortunate if you've equalled or exceeded these.

## IV. What I Do - "FIT" CLIENT WITH BEST MANAGER.

I continuously screen, match and monitor only the "Excellent" and "Best & Brightest" category money managers (and funds) for my clients. Why would you want to be with anyone not as good as these money managers who have proven themselves to be?

Within the last twelve months the top managers I monitor and work with have produced net total return results of 40%-70%. This is, of course, an aberration due to recent market strength. More typically, during the last 5 years the same money managers have averaged 20%-37% per year or doubled and tripled client's assets within last 3-5 years.

What will happen in the next year, next 3-5 years? Frankly, I'm not sure. As I mentioned previously and it bears repetition now, there are no guarantees overt or implied. I do know that the outlook for inflation seems to preclude getting these kinds of returns in real estate at this point, that limited partnerships don't have the liquidity that clients have with money managers, not to mention risk of audit, and that very few clients can achieve this kind of net returns in their own businesses. Unless you feel that further interest rate drops will be as significant as ones occuring over last twelve months, you won't get this kind of total return, after taxes, with fixed income vehicles either.

What I am sure of is that my clients do have the benefit and inherent advantage working with the best and brightest money manager in this country and that allows me to sleepwell (and to eat well too). What I look for, and find, are the Pete Roses' and Jimmy Connors' of the money management business (not the "rookie of the year"), and put them to work on my client's behalf. Do they win every game? No. Do they walk on water? No. But given the opportunity, why would you want to be investing with anyone of a lesser caliber? Why not INVEST WITH THE BEST?

What I don't do is initiate transactions for you. As designated broker I execute your money manager's orders on your behalf. The only incentive/reason he has for a transaction is to make you money and protect your assets because that's the basis of his compensation. This arrangement allows me to monitor your account on a continuous basis, and to put the brakes on, if at any point, something seems inappropriate.

Once my clients have positioned their "serious" funds with the best money manager for them, I do enjoy working directly with them with "speculative" funds in taking advantage of various special situations, trading opportunities, and option strategies.

I do a great deal of original research, am a voracious consumer of my firm's and other firm's research. I subscribe to 15 top investment advisory publications. I watch 2 hours of business news each day and read five newspapers each morning. I love the market and I love what I do.

What am I looking for? The best and brightest ideas and themes that will be of benefit to my clients. Obviously, having relationships with the top money managers and seeing what they're doing for their accounts also gives me some very good ideas from time to time.

## V. What to Do Now - ACT

If this approach makes sense to you and if you're serious about working with the top money managers in the country, specifically the one/s who would serve your objectives best in order to maximize your assets while controlling risk, we should get together now. We'll assess and review your current investment position, get a clear picture of your goals and objectives and identify and implement the most appropriate way to execute that's calibrated to your needs.

I see other clients (and brokers) relying on hot "tips", takeover stories, men's room advisors, etc. Most of the time, they're wrong, most of the time they get burned. We don't do that with "serious" money, and as a result, most of my clients, most of the time, do well because they are working with the most exceptional managers available in a very well-thought out and prudent fashion that I continuously monitor for them.

Above all, we are very focused on avoiding big mistakes, which I believe to be the other key to long-term investment success. This approach has worked extremely well for institutions and foundations, like Harvard University, the Whitney Museum, New York State Teachers' Pension Fund, and others who can't afford major mistakes with their endowments, and yet need to have their assets working hardest for them. You can and should be using same principals on your own behalf.