the finances of the rotary foundation fiscal 2006-07 permanent fund committee 12 february 2007

THE FINANCES OFTHE FINANCES OFTHE ROTARY FOUNDATIONTHE ROTARY FOUNDATION

FISCAL 2006-07FISCAL 2006-07

Permanent Fund CommitteePermanent Fund Committee12 February 200712 February 2007

OVERVIEWOVERVIEW

TRF Financial GovernanceTRF Financial Governance Revenues and SpendingRevenues and Spending Net AssetsNet Assets TRF InvestmentsTRF Investments Frequently Asked QuestionsFrequently Asked Questions

TRF’s Financial GovernanceTRF’s Financial Governance

Rotary International

Corporate Member

Board of Trustees

TRF Finance Committee

General Secretary

RI CFO TRF GM

Financial Services Staff

Rotary Foundation Staff

Revenues and Revenues and SpendingSpending

2005-06 Financial Results2005-06 Financial ResultsUS$(millions)US$(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 The Rotary Foundation Revenue TrendsRevenue Trends

US$(millions)US$(millions)

162161180

138

6041

118119

154155

-40

10

60

110

160

97 98 99 00 01 02 03 04 05 06

Contributions Investment Income (Loss)

The Rotary Foundation The Rotary Foundation Contribution TrendsContribution Trends

US$(millions)US$(millions)

AP

F R

eco

rd

0

18

36

54

72

90

108

126

144

97 98 99 00 01 02 03 04 05 06

Annual Programs Fund PolioPlus Permanent Fund

Disaster Recovery Flow Through

____PEFC____

2005-06 Designation of Contributions2005-06 Designation of ContributionsUS$111.9 millionUS$111.9 million

Permanent Fund11%

PolioPlus5%

Disaster Recovery

1%

Annual Programs

Fund83%

$92.6

$12.1

$5.6

Program OperationsProgram Operations

Scholarship & grant administration for EP, HP and PP Scholarship & grant administration for EP, HP and PP programs as well as support for Rotarians who implement programs as well as support for Rotarians who implement international activities.international activities. Fund DevelopmentFund Development

Personnel services, communications, public relations, Personnel services, communications, public relations, supplies, computer support, legal counsel and recognition supplies, computer support, legal counsel and recognition (ranging from awards to events).(ranging from awards to events). General AdministrationGeneral Administration

Personnel services, communications, computer support, Personnel services, communications, computer support, audit fees, Associate Foundations and Trustee services audit fees, Associate Foundations and Trustee services (administrative support, travel, meetings and committees, (administrative support, travel, meetings and committees, e.g., Future Vision).e.g., Future Vision).

The Rotary FoundationThe Rotary FoundationExpense CategoriesExpense Categories

What the Foundation Spent in 2006What the Foundation Spent in 2006 US$128.3 million US$128.3 million

Program Awards & Expenses

84%

Humanitarian41%

GeneralAdministration

5% FundDevelopment

11%

Educational22%

PolioPlus21%

The Rotary Foundation The Rotary Foundation Total Awards & ExpensesTotal Awards & Expenses

US$(millions)US$(millions)

128128

103108111116114

139

113

80

0

30

60

90

120

150

97 98 99 00 01 02 03 04 05 06

Program Awards Program OperationsFund Dev General Administration

84%

11%5%

The Rotary FoundationThe Rotary FoundationTrends in Program SpendingTrends in Program Spending

US$(millions)US$(millions)

108110

879495

102100115

95

61

0

20

40

60

80

100

120

97 98 99 00 01 02 03 04 05 06

Educational Humanitarian PolioPlus

Permanent Fund SpendingPermanent Fund SpendingUS$(millions)US$(millions)

2.7

3.7

4.7

6.1 6.3

0.9

4.64.9

0

1

2

3

4

5

6

7

1999 2000 2001 2002 2003 2004 2005 2006

3734

292726

242324

181916

0

5

10

15

20

25

30

35

40

45

96 97 98 99 00 01 02 03 04 05 06

General Administration Fund DevelopmentPrograms Operations

Trends in Total Operating Expenses –Trends in Total Operating Expenses –by Activityby Activity

(in $millions)(in $millions)

1.8 2.1 2.2 2.9 3.1 3.4 4.6 5.5 6.0 7.6 8.72.7 3.1 3.0

3.7 3.7 3.83.2

3.54.1

5.06.1

2.62.6 2.2

2.7 2.7 2.6 2.21.9

2.3

3.1

2.1

0

5

10

15

20

25

96 97 98 99 00 01 02 03 04 05 06

Humanitarian Educational PolioPlus

Trends in Program Operations Trends in Program Operations Expenses – by programExpenses – by program

(in $millions)(in $millions)

16.915.6

12.5

10.910.09.79.59.4

7.47.87.0

Net AssetsNet Assets

Net Assets at 30 June 2006Net Assets at 30 June 2006US$637.4 millionUS$637.4 million

Annual Programs

Fund 64%

Permanent Fund28%

PolioPlus Fund

8%

$405.0$52.6

$179.6

Other Restricted of .2 million not on graphOther Restricted of .2 million not on graph

The Rotary Foundation The Rotary Foundation Net AssetsNet Assets

US$(millions) US$(millions)

553607 587 593

537

466494

571603

637

0

200

400

600

97 98 99 00 01 02 03 04 05 06

INVESTMENTSINVESTMENTS

Parties Responsible for TRF InvestmentsParties Responsible for TRF Investments

Investm ent ConsultantHew itt Investm ent Group

Custodian BankM ellon Bank

Investm ent M anagers

Staff

TRF Finance Com m ittee

The Board of Trustees

Trustees’ ResponsibilitiesTrustees’ Responsibilities

Formulating investment policiesFormulating investment policies Developing investment objectivesDeveloping investment objectives Allocating assets among the managersAllocating assets among the managers Monitoring investment managersMonitoring investment managers Adding, replacing or eliminating managers Adding, replacing or eliminating managers

when appropriatewhen appropriate

Source: The Rotary Foundation Code of Policies – sections 18.020, 18.030, 18.040, 18.050, 18.060, 18.070, 18.080, 18.090

Investments at 30 June 2006Investments at 30 June 2006US$674.5 millionUS$674.5 million

Annual Programs

65%

Life Income Agreements

3%PolioPlus

8%Canada

1%

Permanent Fund23%

Investment StructureInvestment Structure

U.S Equity PoolIndex Fund 20%Enhanced Index Fund 20%Large Cap Value 20%Large Cap Growth 20%Small Cap Value 10%Small Cap Growth 10%

Fixed Income PoolActive Manager 50%Active Manager 50%

Non-U.S. Equity PoolActive Manager 50%Active Manager 50%

Real EstateActive Manager 50%Active Manager 50%

Private EquityActive Manager 62%Active Manager 38%

Mellon BankCustodian Bank Services

Hedge Fund PoolFund of Funds 100%

Asset Allocation of APF Investments* Asset Allocation of APF Investments* US$438.7 million at 30 June 2006US$438.7 million at 30 June 2006

U.S. Stocks48% Non-U.S.

Stocks18%

Bonds22%

Real Estate10%

Hedge Funds2%

* Excludes RF (Canada)

Asset Allocation of Permanent Fund InvestmentsAsset Allocation of Permanent Fund InvestmentsUS$153.6 million at 30 June 2006 *US$153.6 million at 30 June 2006 *

U.S. Stocks56%

Non-U.S. Stocks

19%

Hedge Funds2%

Bonds12%

Real Estate11%

* Excludes Split-Interest Agreements

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

Bonds100%

Frequently Asked Frequently Asked QuestionsQuestions

Unique Qualities of The Rotary Unique Qualities of The Rotary FoundationFoundation

The MissionThe Mission & Scope & Scope

The Expenditures CycleThe Expenditures Cycle & & SHARE ProgramSHARE Program

Recognition ProgramsRecognition Programs

Volunteer StructureVolunteer Structure

84%86%84%85%85%88%88%

90%90%86%86%

Minimum 65%

77%77%80%82%81%

85%83%79%81% 80%80%

0%

20%

40%

60%

80%

100%

96 97 98 99 00 01 02 03 04 05 06

Total Program Spending Benchmark Without Polio

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

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

The Rotary Foundation The Rotary Foundation Investment Results - All FundsInvestment Results - All Funds

US$(millions)US$(millions)

42.750.2

-11.9 -10.5

-66.0

-49.1

27.1

1.4

73.6

5.4

-40.0

-13.8

44.751.3

86.784.3

16.4

62.4

18.9

30.1

-80

-60

-40

-20

0

20

40

60

80

100

97 98 99 00 01 02 03 04 05 06

The Rotary FoundationThe Rotary FoundationInvestment ReturnsInvestment Returns

Annual Programs FundAnnual Programs Fund

7.9%

-15%

-5%

5%

15%

25%

97 98 99 00 01 02 03 04 05 06

APF Benchmark Avg Annual Return

The Rotary FoundationThe Rotary FoundationInvestment ReturnsInvestment Returns

Permanent FundPermanent Fund

7.9%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

97 98 99 00 01 02 03 04 05 06

Permanent Fund Benchmark Avg Annual Return

The Rotary FoundationThe Rotary FoundationInvestment ReturnsInvestment Returns

PolioPlus FundPolioPlus Fund

5.2%

0%

2%

4%

6%

8%

10%

12%

97 98 99 00 01 02 03 04 05 06

PolioPlus Benchmark Avg Annual Return

What expenses are covered by theWhat expenses are covered by the

SHARE three year investment cycle?SHARE three year investment cycle?

ExpensesExpenses

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

91.1

16.9

13.76.6

0

45

90

135

06

Program Awards Program OperationsFund Dev General Administration

37.2

128.3

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

Annual Programs FundAnnual Programs Fund

140 151 151 146 135

112 113 116 129189

104 50 3673

7381

149

151

0

50

100

150

200

250

300

350

400

450

01 02 03 04 05 06

District Designated Fund World Fund Earned Income Reserve

The Rotary FoundationThe Rotary FoundationAnnual Programs Fund by ComponentAnnual Programs Fund by Component

(in $millions)(in $millions)

356314 303

348373

405

How was the World Fund spent inHow was the World Fund spent in

the last fiscal year (FY06)?the last fiscal year (FY06)?  

Annual Programs FundAnnual Programs Fund

World Fund was spent as follows:World Fund was spent as follows:

Humanitarian ProgramsHumanitarian Programs $23.3M $23.3M Educational Programs Educational Programs 4.5M 4.5M

PolioPlusPolioPlus 0.0M0.0M

TotalTotal $27.8M$27.8M

How was the DDF spent in the lastHow was the DDF spent in the last

fiscal year (FY06)?fiscal year (FY06)?  

Annual Programs FundAnnual Programs Fund

District Designate Funds were spent District Designate Funds were spent as follows:as follows:

Humanitarian ProgramsHumanitarian Programs $18.7M $18.7M Educational Programs Educational Programs 15.5M 15.5M

PolioPlusPolioPlus 1.5M1.5M

TotalTotal $35.7M$35.7M