RI FINANCIALS UPDATE

While we wait for Rotary’s independent auditors to complete the audit of Rotary’s 2008-09 financial statements, preliminary results indicate that Rotary International and The Rotary Foundation have weathered the recent financial crisis with less damage than we had feared. RI’s investment losses dropped from over US$26 million in February to approximately $12 million for the fiscal year ended 30 June 2009. The Rotary Foundation, which had suffered more severely in the investment markets, also recouped some of its losses by year-end — going from over $222 million in losses in February to $164 million for the year. These reversals, along with 2008-09 spending reductions, enabled the Foundation Trustees to reinstate an additional $2.3 million in Matching Grant funds for 2009-10, an action that will strengthen Rotarians’ humanitarian efforts this year.

We have seen even more encouraging news in July and August, when market upturns further improved both RI’s and the Foundation’s investments. These recent gains continue to offset the unrealized losses we recorded last fiscal year.

Some Rotarians have suggested that the Foundation consider investing the Annual Programs Fund more conservatively. Historically, our investment strategy had been extremely successful, enabling the Foundation to finance its administrative and fund development expenses for more than 20 years and to direct almost $100 million of investment earnings to Children’s Opportunity Grants, PolioPlus , and Matching Grants. However, as mentioned in my 3 June letter , the current financial situation may prevent us from funding these expenses with investment returns for the next few years. In response to this, the Investment Advisory Committee is reviewing the fund’s investment policy statement to address the increased risk and volatility in the financial markets, as well as the Foundation’s return and liquidity requirements. They will report their recommendations to the Trustees at the October meeting.

In addition to a brighter investment picture, other measures are also helping to restore Rotary’s fiscal health. In June, the RI Board and the Foundation Trustees approved austere 2009-10 budgets for RI and the Foundation that include substantial reductions in both staff and volunteer spending. For example, RI President John Kenny and Foundation Trustee Chair Glenn Estess are asking many committees to meet by correspondence or video conferencing this year, a measure that will save the organization many thousands of dollars. In addition, recognizing the need to reduce costs while maintaining effective services to Rotary clubs and districts, I have eliminated staff travel wherever possible and frozen staff salaries. We are currently operating the Secretariat with fewer staff than budgeted.

Other factors are also encouraging. Small membership increases in 2008-09 have strengthened our dues base. In addition, contributions to the Foundation, excluding the Bill & Melinda Gates Foundation and Google Foundation grants, reached record levels in 2008-09 and remain strong this year. Both of these developments speak to the intrinsic value of Rotary International and The Rotary Foundation as a force for good in our world. While the worst of the economic crisis may be past, the recovery remains slow and painful. In a world marked by high unemployment, mortgage foreclosures, and failing businesses, Rotary service is needed now more than ever. The RI Board, Foundation Trustees, and Secretariat staff are all working to protect the resources that help to make this vital service possible.