THE FINANCES OFTHE FINANCES OFTHE ROTARY FOUNDATIONTHE ROTARY FOUNDATION

FISCAL 2009-10FISCAL 2009-10

RRFC INSTITUTERRFC INSTITUTEFebruary 2011February 2011

OVERVIEWOVERVIEW

Rotary Finance Overview

Revenues and Spending

Net Assets and Operating Reserve

TRF Investments

Results 30-Nov-2010

TRF’s Finance OrganizationTRF’s Finance Organization

*Coordinates with RI Audit Committee

RI CFO TRF GM

General Secretary

Board of Trustees

Rotary International Corporate Member

InvestmentAdvisory

Committee

TRF Finance-Finance-Audit*

TRF Staff

Financial Services Staff

Rotary’s FinancesRotary’s Finances

ExpensesRelated to DuesRelated to Services & Other

Activities

ExpensesProgram Awards Program OperationsFund DevelopmentAdministration

The Rotary FoundationThe Rotary FoundationRotary InternationalRotary International

Revenue SourcesDuesServices & Other ActivitiesInvestment Income

Revenue SourcesContributionsInvestment Income

Financial GovernanceFinancial Governance

The Rotary FoundationThe Rotary FoundationRotary InternationalRotary International

RI Board of Directors - Treasurer

- RI Finance Committee – Standing Committee

TRF Board of Trustees - TRF Board Finance Committee

- TRF Investment Advisory Committee Standing Committee

- Stewardship Committee

RI Audit Committee covers both RI & TRF

Oversight by RI Operations Review Committee

Revenues and Spending2009-10 Results

And 10 Year Trends

The Rotary Foundation2010 Financial Results

US$(millions)

Investment Earnings$54.3

Contributions$268.5

Program Awards$187.0

Program Ops $17.9

Fund Dev $16.5

Revenues

$322.8

Expenses

$226.6

General Admin $5.2

Increase in Net Assets $96.2

The Rotary Foundation Revenue Trends

US$(millions)

60 41

201239

161 162180

323

138

60

-200

-100

0

100

200

300

400

01 02 03 04 05 06 07 08 09 10

Contributions Net Investment IncomeNet Investment Losses

The Rotary Foundation Contribution Revenue Trends

US$(millions)

AP

F R

ec

ord

0

50

100

150

200

250

300

01 02 03 04 05 06 07 08 09 10

Annual Programs Fund PolioPlus Gates Polio

Permanent Fund Other Flow Through

____PEFC____

The Rotary FoundationThe Rotary Foundation2009-10 Designation of Contributions2009-10 Designation of Contributions

US$268.5 millionUS$268.5 million

Other$6.0 2%

Permanent Fund$10.5

4%

PolioPlus$151.6

57%

Annual Programs Fund

$100.4 37%

Program Operations

Scholarship and 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).

The Rotary Foundation

Expense Categories

What the Foundation Spent in 2010What the Foundation Spent in 2010 US$226.6 millionUS$226.6 million

Humanitarian23%

PolioPlus53%

Fund Development

8%

General Administration

2%Other

1%

Educational13%

Program Awards & Expenses

90%

The Rotary Foundation Total Awards & Expenses

US$(millions)

116 112 110 103128 128 138

247

188

227

0

70

140

210

280

01 02 03 04 05 06 07 08 09 10

Program Awards Program OperationsFund Development General Administration

90%

The Rotary FoundationThe Rotary FoundationTrends in Awards & OpsTrends in Awards & Ops

US$(millions)US$(millions)

102 95 94 87110 108 119

228

168

205

0

40

80

120

160

200

240

01 02 03 04 05 06 07 08 09 10

Educational Humanitarian Future VisionDAF PolioPlus

The Rotary FoundationThe Rotary FoundationPermanent Fund SpendingPermanent Fund Spending

US$(millions)US$(millions)

4.7

5.66.3

0.9

4.64.9

5.7

7.5

0.4 0.20

1

2

3

4

5

6

7

8

01 02 03 04 05 06 07 08 09 10

PolioPlus Program PolioPlus Program Since Inception through June 2010Since Inception through June 2010

Total Revenues of $1,176 billionTotal Revenues of $1,176 billion

Rotarian Contributions

$53947%

TRF Contributions

$1109%

Earned Income$16814% Gates and Google

$35930%

3.4 4.6 5.5 6.17.6 8.7 9.6 10.2 9.4

7.53.7

3.23.5

4.1

5.06.1

6.77.1

6.6

5.8

2.6 2.21.9

2.3

3.1

2.12.3

2.12.2

2.2

0.10.4

2.4

9.7 10.0 10.912.5

15.716.9

18.6 19.5 18.6 17.9

0

5

10

15

20

25

01 02 03 04 05 06 07 08 09 10

Humanitarian Educational PolioPlus Other

The Rotary FoundationThe Rotary FoundationTrends in Program Operations Trends in Program Operations

Expenses – by programExpenses – by program(in $millions)(in $millions)

4.4 5.1 4.6 4.9 5.7 6.6 6.3 6.3 5.7 5.2

9.611.3 12.1 11.6 12.2

13.7 12.6 13.6 14.5 16.5

9.710.0 10.9 12.5

15.7

16.9 18.619.5 18.6 17.9

23.726.4 27.6

29.0

33.637.2 37.5

39.4 38.8 39.6

0

5

10

15

20

25

30

35

40

45

01 02 03 04 05 06 07 08 09 10

General Administration Fund Development Programs Operations

The Rotary FoundationThe Rotary FoundationTrends in Total Operating Expenses –Trends in Total Operating Expenses –

by Activityby Activity(in $millions)(in $millions)

Net Assets and Operating Reserve

Net Assets at 30 June 2010Net Assets at 30 June 2010US$657.5 millionUS$657.5 million

Permanent Fund$187.2

28%

Annual Programs Fund

$329.150%

Other$11.22%

PolioPlus$130.0

20%

Rotary Foundation Net AssetsRotary Foundation Net Assets (in $millions)(in $millions)

Annual Programs

Fund$310

Permanent Fund$168

PolioPlus$78

Other$6

30 June 2009 30 June 2009

US$562 millionUS$562 million

Annual Programs

Fund$329

Permanent Fund$187

PolioPlus$130

Other$11

30 June 2010 30 June 2010

US$657 millionUS$657 million

Net Assets increased over US$95 million

Annual Programs Fund Net Annual Programs Fund Net AssetsAssets

(in $millions)(in $millions)

30 June 200930 June 2009

US$310US$310

DDF$179

WF$131

DDF$172

WF$157

30 June 201030 June 2010

US$329US$329

Net Assets increased over US$19 million

The Rotary Foundation The Rotary Foundation Net AssetsNet Assets

US$(millions) US$(millions)

537466 494

571603

637

738692

562

657

0

200

400

600

800

01 02 03 04 05 06 07 08 09 10

140 151 151 146 135 154 172 179 172

112 113 116 129 189204 176 173 183

104 50 3673

7381

11786

(42) (26)

149

151

303348 374 405

475434

329310313356

(50)

50

150

250

350

450

550

01 02 03 04 05 06 07 08 09 10

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)

104

5036

73 73 81

117

86

-26-42

-100

-50

0

50

100

150

200

01 02 03 04 05 06 07 08 09 10

Earned Income Reserve 50% Minimum Required Operating Reserve

The Rotary Foundation The Rotary Foundation Earned Income Reserve Earned Income Reserve

Balance at Year EndBalance at Year End(in $millions)(in $millions)

INVESTMENTS

Trustees’ ResponsibilitiesTrustees’ Responsibilities

Formulate investment policies

Develop investment objectives

Establish asset allocation strategies

Investment Advisory CommitteeInvestment Advisory Committee

9 members, of whom 6 are Rotarians with professional investment experience; 6-year terms

Responsibilities:

• Review and monitor investment results

• Recommend changes to investment policy and structure, as appropriate

• Recommend and approve hiring and termination of managers

• Advise Trustees on investment matters

Investment ConsultantInvestment Consultant

NEPC was appointed by TRF and RI effective 1 December 2009.

Edward O’Donnell, CFAKristin Reynolds, CFA, CAIA

Consults for RI General Fund, APF, and PF.

Annual full-retainer fee of $275,000 plus out-of-pocket expenses.

RI’s cost is estimated at $40,000

Investments at 30 June 2010Investments at 30 June 2010US$670.6 million*US$670.6 million*

Annual Programs49%

Donor Advised Fund1%

Life Income Agreements4%

PolioPlus/Gates Foundation

20%

Canada1%

Permanent Fund25%

*NOTE: These assets do not include short-term cash or contributed securities, therefore these figures will not tie to the Financials

Changes to APF & PF Investment ProgramsChanges to APF & PF Investment ProgramsCalendar Year 2010Calendar Year 2010

Hired new investment consultant with more expertise in endowment and foundation funds

Modified policy asset allocations to reduce equity risk and volatility of returns

Added real assets to provide protection against inflation

Terminated 5 managers and appointed 8 new managers

Established operating reserve and completed initial funding of US$20 million

Evolution of APF InvestmentsEvolution of APF InvestmentsTarget Asset AllocationsTarget Asset Allocations

0%

20%

40%

60%

80%

100%

1995 1997 1999 2001 2003 2005 2007 2009

U.S Equities Non-U.S. Equities Fixed Income Real Estate

Private Equity Hedge Funds Real Assets

Annual Programs FundAnnual Programs FundAsset Allocation ComparisonAsset Allocation Comparison

New Asset Allocation

Prior Asset Allocation

20%

35%

20%

30%

35%

20%

10%

10%

5%

5%

10%

U.S. Equity Non-U.S. Equity Fixed Income Real Estate Hedge Funds Real Assets

Annual Programs FundAnnual Programs FundCurrent Policy Asset AllocationsCurrent Policy Asset Allocations

U.S. Equities20%

Non-U.S. Equities

20%

Fixed Income35%

Real Estate10%

Hedge Funds5%

Real Assets10%

Annual Programs Fund - PhaseAnnual Programs Fund - Phase I I

Building Operating ReserveBuilding Operating Reserve

40%

35%

25%

Equities Fixed Income

Alternatives

29%

71%

Funded Unfunded

Programs Operating Reserve

Annual Programs Fund - PhaseAnnual Programs Fund - Phase II II> 50% Funded Operating Reserve> 50% Funded Operating Reserve

45%

20%

35%

Equities Fixed Income

Alternatives

60%40%

Funded Unfunded

Programs Operating Reserve

TRF - Annual Programs Fund TRF - Annual Programs Fund Investment ReturnsInvestment Returns

Evolution of Permanent Fund InvestmentsEvolution of Permanent Fund InvestmentsTarget Asset AllocationsTarget Asset Allocations

0%

20%

40%

60%

80%

100%

1995 1997 1999 2001 2003 2005 2007 2009

U.S Equities Non-U.S. Equities Fixed Income Real Estate

Private Equity Hedge Funds Infrastructure Real Assets

Total Fund Asset Allocation – Permanent FundTotal Fund Asset Allocation – Permanent Fund

Current Asset Allocation

Prior Asset Allocation

30%

30%

25%

25%

15%

10%

7%

12%

7%

13%

7%

5%

9%

5%

US Equity Non-U.S. Equity Fixed Income Real Estate Infrastructure

Private Equity Hedge Fund Real Assets

Permanent FundPermanent FundCurrent Policy Asset AllocationsCurrent Policy Asset Allocations

U.S. Equities30%

Non-U.S. Equities25%

Fixed Income15%

Real Estate7%

Hedge Funds7%

Real Assets9%

Private Equity7%

Permanent Fund Spending RatesPermanent Fund Spending Rates

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

1995-00 2000-03 2003-04 2004-07 2007-08 2008-10 2010-11

Program Awards Program Operations General Administration

Fund Development Investment Fees

TRF Permanent Fund TRF Permanent Fund Investment ReturnsInvestment Returns

0.6%

-30%

-20%

-10%

0%

10%

20%

30%

01 02 03 04 05 06 07 08 09 10 11 NovYTD

PF Benchmark Avg Annual Return

TRF PolioPlus Fund* TRF PolioPlus Fund* Investment ReturnsInvestment Returns

4.3%

0%

2%

4%

6%

8%

10%

12%

01 02 03 04 05 06 07 08 09 10 11 NovFYTD

PolioPlus Benchmark Avg Annual Return

* Excludes Gates Gift

THE ROTARY FOUNDATION THE ROTARY FOUNDATION RESULTS RESULTS FOR THE FIVE MONTHS ENDEDFOR THE FIVE MONTHS ENDED

30 November 201030 November 2010

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2006 2007 2008 2009 2010

Annual Programs Fund Permanent FundDisaster Recov/ Named Gifts Donor Advised FundPolioPlus PolioPlus (BMG & Google)Budget

The Rotary FoundationThe Rotary Foundation Contribution TrendsContribution Trends

Total Contributions for the Five Months Ended 30 NovemberTotal Contributions for the Five Months Ended 30 NovemberUS$ (thousands)US$ (thousands)

(175,000)(150,000)(125,000)(100,000)(75,000)(50,000)(25,000)

025,00050,00075,000

2006 2007 2008 2009 2010

Net Investment Return Budget

The Rotary FoundationThe Rotary Foundation Net Investment ReturnNet Investment Return

For the Five Months Ended 30 NovemberFor the Five Months Ended 30 NovemberUS$ (thousands)US$ (thousands)

0

20,000

40,000

60,000

80,000

100,000

2006 2007 2008 2009 2010

Fund Dev & GA Program Operations Program Awards Budget

The Rotary FoundationThe Rotary Foundation Expense TrendsExpense Trends

Total Awards and Expenses for the Five Months Ended 30 November Total Awards and Expenses for the Five Months Ended 30 November US$ (thousands)US$ (thousands)

Here is the way to quickly access financial Here is the way to quickly access financial information for both Rotary International and The information for both Rotary International and The Rotary Foundation:Rotary Foundation:

•Go to Rotary’s website: Go to Rotary’s website: http://www.rotary.orghttp://www.rotary.org

•Click on the first tab - “Click on the first tab - “About UsAbout Us” and you will see another ” and you will see another tab - “tab - “FinancialsFinancials” ”

•Click on “Click on “FinancialsFinancials” and you will see general financial ” and you will see general financial information and a menu with several options that include information and a menu with several options that include Rotary’s investment philosophy, Frequently Asked Questions Rotary’s investment philosophy, Frequently Asked Questions (FAQ) and Download Documents.  (FAQ) and Download Documents. 

•If you click on If you click on Download ResourcesDownload Resources, you can find RI’s and , you can find RI’s and TRF’s financial statements, annual reports, government filings TRF’s financial statements, annual reports, government filings and more. and more.