THE FINANCES OF THE ROTARY FOUNDATION FISCAL RRFC INSTITUTE March 2007

OVERVIEW TRF Financial Governance TRF Financial Governance Revenues and Spending Revenues and Spending Net Assets and Operating Reserve Net Assets and Operating Reserve TRF Investments TRF Investments Frequently Asked Questions Frequently Asked Questions

TRF’s Financial Governance Rotary International Corporate Member Board of Trustees TRF Finance Committee General Secretary RI CFOTRF GM Financial Services Staff Rotary Foundation Staff

Revenues and Spending

Financial Results US$(millions) Investment Earnings $50.2 Contributions $111.9 Program Awards $91.1 Program Ops $16.9 Fund Dev $13.7 Expenses Revenues $162.1$128.3 G&A $6.6 Net Increase $33.8

The Rotary Foundation Revenue Trends US$(millions)

The Rotary Foundation Contribution Trends US$(millions) ____PEFC____

Designation of Contributions US$111.9 million $ 92.6 $12.1 $5.6

 Program Operations Scholarship & grant administration for EP, HP and PP programs as well as support for Rotarians who implement international activities.  Fund Development Personnel services, communications, public relations, supplies, computer support, legal counsel and recognition (ranging from awards to events).  General Administration Personnel services, communications, computer support, audit fees, Associate Foundations and Trustee services (administrative support, travel, meetings and committees, e.g., Future Vision). The Rotary Foundation Expense Categories

What the Foundation Spent in 2006 US$128.3 million General Administration 5% Fund Development 11% Educational 22% PolioPlus 21%

The Rotary Foundation Total Awards & Expenses US$(millions) 84% 11% 5%

The Rotary Foundation Trends in Program Spending US$(millions)

Permanent Fund Spending US$(millions)

PolioPlus Program 1985 through June 2006 Total Revenues of $647 Million $416 $78 $153

PolioPlus Program 1985 through June 2006 Total Expenditures of $591 Million $535 $37 $19

Trends in Total Operating Expenses – by Activity (in $millions)

Trends in Staff Levels – by Activity

Trends in Program Operations Expenses – by program (in $millions)

TRF Total Operating Expenses by Source (in $millions)

Net Assets and Operating Reserve

Net Assets at 30 June 2006 US$637.4 million $405.0 $52.6 $179.6 Other Restricted of.2 million not on graph

The Rotary Foundation Net Assets US$(millions)

Operating Reserve Definition The Foundation’s operating reserve is the earned income balance of the Annual Programs Fund adjusted for any unspent reserve allocations. The Foundation’s operating reserve is the earned income balance of the Annual Programs Fund adjusted for any unspent reserve allocations. TRF Code of Policies Section

The Rotary Foundation Annual Programs Fund by Component (in $millions)

TRF Operating Reserve Policy The Foundation shall maintain an operating reserve equal to the sum of : The Foundation shall maintain an operating reserve equal to the sum of : (1) budgeted operating expenses for the current year, (2) forecasted operating expenses* for the next two fiscal years, and (3) 50% of the budgeted Annual Programs Fund awards for the current year. * Operating expenses include fund development and administrative expenses. * Operating expenses include fund development and administrative expenses. TRF Code of Policies, section TRF Code of Policies, section

INVESTMENTS

Parties Responsible for TRF Investments

Trustees’ Responsibilities Formulating investment policies Formulating investment policies Developing investment objectives Developing investment objectives Allocating assets among the managers Allocating assets among the managers Monitoring investment managers Monitoring investment managers Adding, replacing or eliminating managers when appropriate Adding, replacing or eliminating managers when appropriate Source: The Rotary Foundation Code of Policies – sections , , , , , , ,

Investments at 30 June 2006 US$674.5 million

Investment Structure U.S Equity Pool Index Fund 20% Enhanced Index Fund 20% Large Cap Value 20% Large Cap Growth 20% Small Cap Value 10% Small Cap Growth 10% Fixed Income Pool Active Manager 50% Non-U.S. Equity Pool Active Manager 50% Real Estate Active Manager 50% Private Equity Active Manager 62% Active Manager 38% Mellon Bank Custodian Bank Services Hedge Fund Pool Fund of Funds 100%

Asset Allocation of APF Investments* US$438.7 million at 30 June 2006 * Excludes RF (Canada)

Asset Allocation of Permanent Fund Investments US$153.6 million at 30 June 2006 * * Excludes Split-Interest Agreements

Asset Allocation of PolioPlus Fund Investments US$52.3 million at 30 June 2006

Frequently Asked Questions

How does The Rotary Foundation’s financial performance compare with other charities and non-profit organizations?

Unique Qualities of The Rotary Foundation The Mission & Scope The Mission & Scope The Expenditures Cycle & SHARE Program The Expenditures Cycle & SHARE Program Recognition Programs Recognition Programs Volunteer Structure Volunteer Structure

The Rotary Foundation Charity Navigator Rating Exceptional Exceeds industry standards and performs better than most charities in its cause.

Comparisons, continued:  U.S. Better Business Bureau Wise Giving Alliance Finance Standard 8: “at least 65% of a charity’s total expenses be spent on program activities”  Program activities include both awards and operating expenses, both identified as program services by the IRS Form 990.  Source: The U.S. Better Business Bureau Wise Giving Alliance Standards for Charity Accountability.

Program Spending as a % of Total Spending Program Spending as a % of Total Spending

Why do the Trustees invest the Foundation’s assets in the equity markets? ….. and what have the results been?

The Rotary Foundation Investment Results - All Funds US$(millions)

The Rotary Foundation Investment Returns Annual Programs Fund

The Rotary Foundation Investment Returns Permanent Fund

The Rotary Foundation Investment Returns PolioPlus Fund

THE FINANCES OF THE ROTARY FOUNDATION FISCAL RRFC INSTITUTE March 2007

Questions Submitted by Regional Rotary Foundation Coordinators

What expenses are covered by the SHARE three year investment cycle? SHARE three year investment cycle? Expenses

The investment income from the 3 year SHARE cycle covers ALL program operating, fund development and gen. admin. expenses

When Rotary’s Senior Leaders say: “The Foundation is a terrific organization because 100% of your donation is spent on programs. Your donation is held for three years and the earnings are used to pay for operating expenses.” Are these statements still true? YES!

The Rotary Foundation Comparisons of Annual Programs Fund Contributions to Program Awards (in $millions)

The Rotary Foundation Net Investment Return and Operating Expenses (in US$ Millions) * These earnings accumulate in TRF’s Operating Reserve. Between 1997 and 2000 the Trustees used $99.3 million for program awards

Expenses How does the level of expenditure on “Fund Dev & Donor Ops” reflect in “Fund Dev & Donor Ops” reflect in the income stream changes? the income stream changes?

Contributions vs. Fund Development Expenses US $ (millions)

Fund Development Metrics

Fund Development Metrics Life Income Agreements Number of Agreements with TRF Cumulative Totals As of 30 June As of 30 June As of 30 June As of 30 June As of 30 June 2006* 287 * Note: Year numbers are preliminary

Do we really spend $37.2 million in expenses to award $91.1 million in TRF programs? Expenses  First, of the $37.2 million, only $16.9 million, the program operating expenses, directly support program awards. Also, much of the operating expense is supporting program awards for future years.  Second, the $91.1 million in program awards excludes all flow through activity  Spending performance compares favorably to charitable giving standards No!

How was the World Fund spent in the last fiscal year (FY06)? How was the World Fund spent in the last fiscal year (FY06)? Annual Programs Fund

The Rotary Foundation Annual Programs Fund by Component (in $millions)

How was the World Fund spent in the last fiscal year (FY06)? the last fiscal year (FY06)? Annual Programs Fund World Fund was spent as follows: Humanitarian Programs$23.3M Educational Programs 4.5M PolioPlus 0.0M Total$27.8M Total$27.8M

How was the DDF spent in the last fiscal year (FY06)? fiscal year (FY06)? Annual Programs Fund District Designate Funds were spent as follows: Humanitarian Programs$18.7M Educational Programs 15.5M PolioPlus 1.5M Total$35.7M Total$35.7M

Regarding the District Designated Funds (DDF), do we apply pressure to the districts to utilize these unused funds?  No, the Trustees do not apply pressure. Instead, the Trustees offer incentives to utilize these funds, e.g., World Peace Centers, Low Income Scholarships and PolioPlus Partners.  This subject is being addressed in the Future Vision survey. Annual Programs Fund

Why are information systems costs so high and rising?

Information Systems Costs (in $ millions)

Information Systems Costs (in $ millions)