Document No. 19

The American Radio Relay League
2002 Second Meeting of the Board of Directors

Committee Members: Director; Jay Bellows, KØQB, Chairman; Vice President Joel Harrison, W5ZN; Directors Walt Stinson, WØCP; Coy Day, N5OK; Bernie Fuller, N3EFN; and Dick Isely, W9GIG; Vice Director Jim Fenstermaker, K9JF (secretary); Executive Vice President Dave Sumner, K1ZZ; CFO Barry Shelley, N1VXY; Treasurer Jim McCobb, W1LLU; and President Jim Haynie, W5JBP (ex-officio).

Introduction

Throughout the past six months the committee has continued to work with management to ensure completion of the transition toward the new management structure and full implementation of Enterprise, DXCC and eCommerce hardware and software. The response to the efforts of the Development Office is encouraging. The reorganization of the structure Marketing, Sales and Advertising Group has already resulted in increased advertising sales and several new and promising initiatives. Market forces and the difficulty in increasing our membership base continue to be a challenge.

Year to Date Results

Again this year the financial results are running better than plan. Revenues have exceeded our plan while expenses have been under budget. Despite the increase in dues last year membership dues have been greater than planned due to a strong finish in 2001. Membership numbers in recent months have not kept up with plan and continue to be a matter of concern. Product sales have been strong. For the first time in several years advertising revenues have been above or near plan. It is well to remember that traditionally second half revenues soften and expenses tend to increase.

Computer System

The computer system upgrade is steadily moving toward full implementation this Fall. Both the Enterprise software and DXCC program are scheduled for implementation September 1, 2002. Implementation of the eCommerce will follow by one month. Logbook of the World is on track for initial implementation in September. Management has kept each of these projects under careful supervision. The projects as implemented will be the projects as envisioned with few additions. The additional costs associated with creating the missing bridge between the Front and Back Office software packages have been substantially offset by concessions from the vendors in cash and the cost of current and future services. There will be an additional expense of approximately $40,000 to cover additional functionality including the premium membership program and additional vendor services through implementation of the system.

Audit Report

The Auditor has issued the audit report for 2001. The purpose of the audit is to express an opinion to the board as to the accuracy and completeness of the financial statements provided by management and incorporated into the report. This was a "clean" opinion stating that the statements fairly present the League's financial position. There was no management letter and the report contained neither qualifications nor any notes suggesting any weakness in our reporting system or need to strengthen our internal controls.

Earlier this year as part of a regular cycle the committee determined we should invite Audit proposals from a limited number of national and regional Audit firms with non-profit association experience. The Requests for Proposals have been sent and the Audit sub-committee is currently reviewing qualifying proposals from five Audit firms. The committee will have a recommendation for further action on this matter at the Board meeting.

Investment Portfolio

The market value of the investment portfolio at the end of 2000 was approximately $12,800,000. At the end of 2001, the market value had increased to about $13,100,000, an increase of about 2%. This increase occurred in spite of a continuing decline in the market. In the intervening months a portion of this gain has been negatively affected by sudden collapse of certain companies in which we held investments. In spite of these losses the market value of our portfolio is approximately the same as one year ago.

During the past year the League's net assets have declined during this period from about $6.8 million to about $6.2 million. This was part of our three year plan to use a portion of our reserves to fund the new management structure, creation of a Development Department and the significant upgrade in our Headquarters computing system and our ability to more effectively and efficiently serve and interact with our members. The reserves of the League continue to exceed what is necessary to fund operations.

Corporate Structure

The new organizational structure authorized by the Board last year is now in place. The transition to the new executive management team has been remarkably smooth. As an extension of the reorganization the Advertising, Circulation and Publication Sales activities have been consolidated in one department to better coordinate and strengthen their effectiveness.

QST and the Web

The content and features on the Section News and Contest sites on the WebPage have continued to expand. Members have been kept advised of the new capabilities on the Web and through articles in QST. The ability to analyze contest results with an on-line relational database has been particularly popular with contesters. Staff continues to provide Section Managers with information on how to utilize the capabilities of the

Section News sites. Staff has developed a mechanism that will assure that any member who wants to receive news of their section but does not have web access will be able to receive their section news each month. Along those lines staff is taking steps to include that same Section News in the QST annual CD.

Planning

The committee has begun a discussion of how best to consider the impact of a range of contingencies as an integral part of our planning. We have made several changes in the past few years to enhance our service and programs. The need to carefully monitor our programs and activities and maintain a degree of flexibility will be become even more important since staff is planning to deliver a report at the next budget cycle for a full two-year budget plan.

Respectfully submitted,

Jay Bellows, KØQB
Chairman
July 8, 2002