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RF Annual Report 2001 ANNUAL REPORT ABOUT THE FOUNDATION The Rockefeller Foundation is a knowledge-based global foundation with a commitment to enrich and sustain the lives and livelihoods of poor and excluded people throughout the world. In order to maximize its resources and leverage the Foundation's strengths, grantmaking is organized around four thematic lines of work: Creativity & Culture, Food Security, Health Equity and Working Communities. A cross- theme of Global Inclusion supports, promotes and supplements the work of these themes. In addition, the Foundation supports a number of regional and special programs that are developing or in transition, among them the Africa Regional Program, Southeast Asia Regional Program, Communication for Social Change, Public/Private Partnerships and Global Philanthropy. We also offer a unique place for study and creative endeavor through our Bellagio Study and Conference Center in Northern Italy. The Foundation's strategic direction focuses explicitly on the challenges faced by poor and excluded people and affirms our assumptions about development, most notably that: For the Foundation's strategies to be most effective, poor and excluded people should have a voice in the process, we should actively find ways to unleash those voices, and such voices should be heeded; that The poor and excluded people themselves should participate in researching, planning and doing the work, and that We must seek creative ways to leverage our limited dollars in order to attract new funding from the private sector, international-aid organizations, and national, state and provincial governments. The challenges confronting poor and excluded people are too numerous, complex and massive to be addressed by any single foundation alone. A $15 million grant, or even a $50 million grant, cannot begin to address a cure for AIDS or development of new tuberculosis drugs, for example. We must continue to emphasize the creation and support of global partnerships, alliances and collaboratives to effect positive change in the daily lives of poor people. The Foundation will continue to join forces with governments, industry, other foundations and nongovernmental organizations to ensure that poor people are included in decisions that affect their lives. © 2003 The Rockefeller Foundation MISSION AND VISION As I write these words, reflecting on the Foundation's work in the year 2001, a few images recur in my mind. Some are the faces of people we're trying to help such as poor farmers in western Kenya or healthy babies whose mothers, suffering from AIDS, could greatly benefit from affordable anti-retroviral treatments. Yet I also see the recurring image of smoke rising from the ruins of the World Trade Center. Many of the Foundation's staff witnessed the collapse of the towers from our office windows. Some lost close family and friends. We all were deeply affected by the tragic events of September 11, 2001. But like so many New Yorkers, we soon found ways to respond in a positive fashion. Dozens of Foundation staffers collected supplies and worked in a SoHo warehouse distributing these supplies to rescue volunteers. Others gathered in discussion groups, drawn from both support and program staff, to work out ways of spending the $5 million we committed to the relief effort. The program they designed was closely tied to Foundation values and to our mission of improving "the lives and livelihoods of the poor and excluded." For example, we provided one set of grants in support of organizations helping the families of low-paid workers who had lost their lives or been injured or displaced. Many of the missing workers were immigrants, both legal and illegal. Other grants went to organizations helping South Asian, Arab and Muslim communities who suffered from backlash based on their background or religion. In many respects, the grants were unconventional but we were pleased to find other foundations following in our footsteps. A couple of months later a news reporter asked how the events of September 11 had changed our grantmaking. While I don't think a single event should change our fundamental strategic direction, I did cite our immediate responses, and how we had intensified some of our existing programs. For example, we fund the World Council on Religion and Peace. They have been very active in bringing religious leaders together, especially hosting discussions between Muslim, Christian and Jewish leaders from the Middle East. While it is natural to ask the question, "What can foundations do to help prevent such future acts of terrorism?" the answers can never be simple. There is rarely a direct link between terrorism and poverty and exclusion. But it is evident that terrorists draw much of their support and justification from those who are, or perceive themselves as, unjustly impoverished. It is to these people, especially in Africa, that we are devoting our funds and will continue to do so. They deserve better lives, and we will continue to help provide them with the knowledge, technology and resources to help them improve their circumstances. © 2003 The Rockefeller Foundation Beyond the war on terrorism is a larger war—on poverty, hunger and disease. And here, we believe, we can make a significant difference. In West Africa the new rices we have helped to develop are spreading rapidly, tripling yields and bringing several countries toward self-sufficiency. Our funding of research on HIV-AIDS vaccines, for microbicides and for new drugs against tuberculosis is showing promise. At year-end we helped launch a new interfoundation partnership committed to providing $100 million for the treatment of HIV-AIDS infected pregnant women in Africa. These are examples of big philanthropy. We know from experience that it can often transform the lives of poor and excluded people. But I believe that equally powerful is our support for countless individuals in local communities, in the United States and in other nations, who through their skills, their abilities and their sheer energy can be forces for change for the good. In the words of one of the Foundation's trustees, Stephen Jay Gould, writing in The New York Times following the September attacks: "Good and kind people outnumber all others by thousands to one. The tragedy of human history lies in the enormous potential for destruction in rare acts of evil, not in the high frequency of evil people. Complex systems can only be built step by step, whereas destruction requires but an instant. Thus, in what I like to call the Great Asymmetry, every spectacular incident of evil will be balanced by 10,000 acts of kindness, too often unnoted and invisible as the 'ordinary' efforts of a vast majority." This is where our hope lies. Gordon Conway April 2002 © 2003 The Rockefeller Foundation THE BOARD OF TRUSTEES James Orr III Linda Hill Chair Wallace Brett Donham The Rockefeller Foundation Professor of Business Administration Chairman and Chief Harvard Business School Executive Officer Harvard University United Asset Management Boston, Massachusetts Corporation Boston, Massachusetts David Lawrence Chairman and Chief Ela Bhatt Executive Officer Founder Kaiser Foundation Health Self Employed Women's Plan, Inc. and Hospitals Association Oakland, California Bhadra, Ahmedabad, India Jessica Mathews Gordon Conway President President Carnegie Endowment for The Rockefeller Foundation International Peace New York, New York Washington, D.C. David de Ferranti Mamphela Ramphele Vice President, Latin Managing Director America and the Caribbean The World Bank Regional Office Washington, D.C. The World Bank Washington, D.C. Frederick Boyd Williams Rector William Foege Episcopal Church of the Presidential Distinguished Intercession Professor of International New York, New York Health Rollins School of Public Dr. Vo-Tong Xuan Health Rector Emory University An Giang University Atlanta, Georgia Long Xuyen City, An Giang Vietnam Antonia Hernandez President and General Counsel Mexican American Legal Defense and Educational Fund Los Angeles, California © 2003 The Rockefeller Foundation FINANCIAL REPORT The year 2001 will long be remembered as one in which the ability of long- term investors to "stay the course" was challenged on numerous fronts, all compounded by the shocking terrorist attacks on New York and Washington, D.C. The events of September 11 destroyed any chance of the United States avoiding a recession following the longest period of prosperity in its history. The U.S. equity markets experienced a second year of double-digit declines, and all major world economies were simultaneously in a recession for the first time since 1973-74. U.S. equities, as measured by the Russell 3000 index, declined 11.5 percent, and developed international markets, as measured by the EAFE index, declined 21.4 percent. The Rockefeller Foundation's portfolio, which declined 6.7 percent for the year, benefited from its broad diversification and, particularly from an average 24 percent exposure to bonds and its commitment to real estate. The portfolio's return for the five-year period ending in 2001 averaged 8.8 percent. In the equity portfolio, strong active management and commitments to value managers provided some protection. The chart below illustrates the benefits of diversification as equity and fixed income alternated in generating returns from quarter to quarter during 2001. While the overall U.S. equity market declined 11.5 percent, there was significant divergence in the performance of various sectors of the market. The NASDAQ index of technology stocks declined 20.8 percent, while small and mid-sized value stocks, as measured by the Russell 2000 Value index, generated a positive return of 14.0 percent. The performance of growth versus value stocks shifted several times during the year, but for the year overall value stocks continued the leadership begun in 2000 as shown in the chart below. 2001 1999 2000 (%) (%) (%) Russell 3000 6.7 8.1 -4.3 Value Russell 3000 33.8 -22.4 -19.6 © 2003 The Rockefeller Foundation Growth U.S.
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