November update on global financial markets

Rotary International News
November 2008

Dear Rotarians,

The crisis in global financial markets continues and the value of Rotary’s investments has declined in line with the markets. The performance of our funds for the first fiscal quarter ended 30 September was as follows:

Rotary International
General Fund: -9.4%

The Rotary Foundation
Annual Programs Fund: -9.6%
Permanent Fund: -10.1%
PolioPlus funds: 0.9%

Most of the losses to date are due to declines in the market prices of the securities held (often referred to as unrealized losses*) and would only be realized if the securities are sold. To date, this has not been necessary. Given the global economic recession, it may be some time before we can fully recover these losses. All money for the eradication of polio is invested in U.S. Treasury securities and generates positive returns.

Rotary’s cash flows continue to be strong and have been sufficient to pay for all operating and program expenses without having to sell investment securities at a loss. Both the Rotary Foundation Trustees and the RI Board of Directors made decisions at their recent board meetings consistent with this year’s budgets and plans. Additionally, they are monitoring the financial reserves closely and took the following actions:

At their October meeting, the Trustees restored the Foundation’s operating reserve to its minimum required level and requested staff to prepare a contingency plan that includes options for reducing expenditures, if necessary.

At its November meeting, the RI Board restored the investment earnings reserve to its maximum level. This reserve covers operating expenses during periods when investment earnings drop below budget. Additionally, the RI Finance Committee identified several cost-cutting measures for consideration when preparing the budget for fiscal 2009-10.

As noted in my communication of 29 September, Rotary’s senior leaders, the Financial Services staff, Rotary’s investment consultant, and I continue to closely monitor the financial markets.

We are taking all possible steps to ensure that Rotary remains financially strong in this difficult economic environment.

Sincerely,

Ed Futa
General Secretary,
Rotary International

For more information on unrealized gains and losses