1. Five-Year Financial Forecast August 2007
All numbers are preliminary and unaudited.
The Rotary International by-laws require presentation of the RI Five-Year Financial Forecast at Rotary Institutes. Rotary International maintains a five-year financial forecast that is updated and reviewed by both the RI Finance Committee and the RI Board twice a year.
The following slides present Rotary International’s Five-Year Financial Forecast as presented to the 2007 Council on Legislation updated for preliminary results and Council on Legislation enactments.
All numbers are preliminary and unaudited.

2. Five-Year Financial Forecast Overview
Current Forecast Assumptions
Revenues & Expenses
Forecast Surplus/Deficit
General Surplus Fund
This presentation will cover –
 The assumptions used in developing the forecast;
 The forecast revenues and expenses for fiscal 2008 through 2012;
 The resulting surplus or deficit for each forecast year; and
 The General Surplus Fund forecast at the end of each fiscal year.

3. Five-Year Financial Forecast FY2007-08 Assumptions
Presents FY07 preliminary unaudited results
Reflects approved FY08 Budget as of July 2007
Membership Dues: FY = US$47/year $1.00 increase in 2009, 2010, and 2011
Stable Membership
Inflation: 3% general; 5% for activities requiring significant travel (fuel cost)
5% Net Investment Return
The following are the key assumptions used to develop this forecast:
 This forecast begins with RI’s preliminary unaudited operating results for fiscal year
 The forecast utilizes the approved fiscal year 2008 budget as of the July 2007 Board meeting.
 Membership dues are budgeted at US$47 for fiscal year 2008, and the forecast assumes a dues increase of $1.00 in fiscal years 2009 to 2011.
 We assume that RI’s membership will remain stable during the forecast period. (1,204,802 members includes RIBI as of 1 January 2007)
 In general, the forecast assumes that costs will increase throughout the world at an average of 3%, except for major travel budgets that are assumed to increase at 5% to reflect higher fuel cost.
 The net investment returns will average 5%, per the Code of Policies.

4. Five-Year Financial Forecast Revenues
US$ millions
This slide displays RI’s forecasted revenues by component:
First, you can see that dues are the major component of our revenues. This forecast assumes that our membership remains stable. It assumes a per capita dues increase of $1.00 per year beginning in fiscal 2009 through 2011.
 Next, you can see our revenues from the International Conventions. The 2006 convention in Malmo-Copenhagen had lower attendance (approximately 14,500) resulting in lower revenues. The 2007 convention in Salt Lake City had an attendance of approximately 15,500. Note to presenter: Revenues were slightly lower due to lower convention registration fees in 2007)
 Next, you can see the revenues for the Council on Legislation that occurs every three years. (Note to presenter: although each Rotarian pays US$1.00 per year for the cost of this event, the revenue is deferred and recognized in the year that the Council is held, which is when the expenses are recognized.)
 The next component of revenue is from Services and Other Activities. These include The Rotarian magazine; rental income from the One Rotary Center; sale of publications; and licensing fees and royalties.
 Finally, revenues include net investment returns. As previously mentioned, this forecast assumes that our investments will generate, on average, a 5% net return.
Note to presenter: As you know, the investment markets can be volatile: in prior years (fiscal 2001 and 2002), RI’s investments lost value; however, over the past ten years, RI’s average annual investment returns were over 7%. In 2007, investment returns were extraordinarily high at approximately 14%. There again we note the volatility.

5. Five-Year Financial Forecast Expenses
US$ millions
This slide presents RI’s forecasted expenses in a format consistent with the revenues.
 The expenses to operate the Secretariat worldwide are financed by revenue from dues. These costs include your Board of Directors, District Governors’ allocations, Committees, Programs and Meetings including the International Assembly, District Conference Representatives, our seven International Offices, Communications and Public Relations, Membership Services, Information Systems, Financial Services and the World Headquarters building (One Rotary Center). In 2006 and 2007, the Secretariat’s actual expenses totaled $72.3 and $72.9 million, respectively. These amounts were approximately $8 million less than budget in 2006 and $10 million less than budget in These savings resulted from implementing business process improvements as well as deferring information technology spending, realizing lower levels of District Governor spending, and operating at significantly lower staff levels than planned.
In 2008, total expenses are budgeted to increase based on executing information technology initiatives that have been deferred, increases in public relations and communications activities in support of clubs, increases in the District Governors’ allocations and filling vacant staff positions required to maintain service levels. Your Rotary senior leaders will continue their expense control vigilance while expecting excellence in service.
 Expenses related to the International convention will vary from year to year based on the location and attendance. International Conventions are intended to break even, thus, this forecast assumes that the Convention revenues equal the Convention expenses.
 Expenses related to the 2010 Council on Legislation are forecasted to equal the COL revenue. This is consistent with the actual results in 2007.
 Expenses related to Services and Other Activities are those that are covered directly by related revenues, as previously mentioned. These include the cost of The Rotarian magazine; the cost of operating One Rotary Center; the cost of publications sold; and the cost of Rotary’s captive insurance company.

6. Five-Year Financial Forecast Projected Surplus/Deficit
US$ millions
This slide presents the actual and projected surplus or deficit (i.e., the difference between revenues and expenses) for each year from fiscal 2006 through fiscal The large surpluses in 2006 and 2007 are, as mentioned previously, the result of extraordinarily strong investment returns and cost containment efforts. Also, as mentioned, total expenses are forecasted to increase in 2008 based on executing information technology initiatives that have been deferred, increases in public relations and communications activities in support of clubs, increases in the District Governors’ allocations, and filling staff vacancies required to maintain service levels.
Note to presenter: 2006 and 2007 results include an adjustment for pension liability. Effective 1 January 2008, RI is discontinuing the defined benefit plan for all new employees
Note that, while the forecasted revenues include the $1.00 per capita dues increase in fiscal years 2009 through 2011, the forecasted expenses could exceed revenues from The Board, the general secretary, and the secretariat staff are committed to continuing efforts to improve efficiencies and lower expenses without reducing services to Rotarians.
Additionally, the Council on Legislation recognized that the General Surplus Fund can be used to supplement revenues when necessary.
*Includes pension liability adjustment

7. 2008-2012 Five-Year Financial Forecast General Surplus Fund at 30 June
US$ millions
This slide presents RI’s forecasted general surplus fund at the end of each year. This fund mainly represents RI’s investments and unrestricted cash. The primary objective of the general surplus fund is to provide for the long-term financial security of RI.

8. 2008-2012 Five-Year Financial Forecast General Surplus Fund at 30 June
US$ millions
This slide now shows the total General Surplus Fund in two components.
The orange bar reflects the minimum bylaw requirement and is the amount intended to be used in the event of emergencies and unforeseen circumstances. In fiscal years 2006 & 2007 the bylaw requirement was 100% of the highest level of the prior 3 years of expenses. Starting in fiscal year 2008, the COL approved a change to the bylaws to require the general surplus fund to be at least 85% of the highest level of prior year expenses (excluding the IC and COL expenses which are self funded events).
The black line displays what the 85% level would have been in fiscal 2006 and 2007 under the new provision.
The green bar represents the forecasted excess over the bylaw requirement and will be available to fund operations, if required.
You can see that RI’s fund level is strong, and at the 85% level, is adequate to provide for RI’s long-term financial security.
*2007 COL enactment reduced this requirement from 100% to 85%