Winter 2012 - Ensuring the Future of Dance - San Francisco Ballet

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San Francisco Ballet in Tomasson’s Romeo & Juliet (© Erik Tomasson) San Francisco Ballet Endowment Report The San Francisco Ballet Endowment Foundation was established in 1980 upon receipt of two gifts totaling just under $30,000 and restricted for scholarships at the San Francisco Ballet School. The Foundation received $1.2 million from an estate over the following two years and in 1981 made its first distribution to the San Francisco Ballet Association: $50,000, which represented almost one percent of the Association’s operating budget of $5.4 million. Since then, strong investment returns and contributions, primarily from estates and from donors to the Preserving a San Francisco Jewel Campaign and Performing at the Pinnacle Campaign, have grown the Foundation’s assets significantly and increased the importance of the endowment to the Ballet’s revenue stream. The Foundation is incorporated as a separate nonprofit public benefit corporation for the purpose of holding and managing endowment funds for the benefit of the San Francisco Ballet Association. It seeks to provide the Ballet with a reliable source of support while protecting its investments against inflation and wide swings in the capital markets. A Board of Directors provides oversight of the Foundation’s assets, which are managed by professional managers or held in direct mutual funds. The Directors are advised by Hall Capital Partners on the Foundation’s investment strategies, manager selection, and long-range planning. Investment Performance The Foundation relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Foundation targets a diversified asset allocation that places emphasis on investments in equities, fixed income, and alternative investment strategies in a 40-20-40 percent ratio to achieve its long-term rate-of-return objectives within prudent risk constraints. The Foundation’s investments continued to rebound with the market, increasing by 11 percent in FY2011. Below is a summary review of the investment performance for FY11. (in thousands) Opening balance as of July 1, 2010 $77,933 Gifts and Pledge Payments to Endowment Foundation in FY2011 1,731 Investment Returns/Reinvested Gains 12,255 Transfer to San Francisco Ballet Association (4,075) Reclassification of Unrestricted Artist Reserve Fund Assets to Association* (456) Administrative Expenses, including Investment Management Fees (495) Closing balance as of June 30, 2011 $86,893 *The Artist Reserve Fund (ARF) provides grants to assist current and former Company members with educational costs and thus helps ensure a smooth transition from life as a professional dancer. Most assets in the ARF have been contributed by SF Ballet and by donated services by the Company and have, prior to FY2011, been invested alongside assets designated to the endowment. The ARF’s assets, which are not designated for the endowment, are now invested by the Association. Donations to the endowment to support the ARF remain invested within the Foundation and will continue to support dancers.
The asset allocation of the endowment changed slightly during the fiscal year in order to minimize risk and further diversify the portfolio, as noted in the following table. Alternative assets include limited partnership investments in hedge funds. Global equity includes funds that are invested in both domestic and foreign assets. The Ballet’s investment performance was comparable to that of benchmark indices. Beginning of FY2011 End of FY2011 Real Assets 0% 2.4% Alternative Assets 33.2% 30.8% Equity – Foreign 12.2% 13.9% Equity – Domestic 15.7% 17.1% Equity – Global 12.4% 9.6% Fixed Income 23.7% 22.6% Balanced (Equity and Fixed Income) 1.2% 1.3% Cash and Equivalents 1.5% 2.3% The remainder of the assets is from gifts that were designated to support specific needs of SF Ballet; each year the transfer from those gifts is applied only for the use stipulated by the donor. New Productions and Artistic Innovation 28.7% SF Ballet Orchestra and Music .2% Touring 6.7% SF Ballet School 7.9% FY2011 Transfer Center for Dance Education 2.5% Company and Artistic Excellence .1% Undesignated and Miscellaneous 53.9% Impact of Endowment on SF Ballet Association Each spring, the Foundation transfers to the Association an amount equal to five percent of the average value of the endowment as determined on March 31 of the previous three years. Because annual investment performance varies from year to year, using a multi-year average helps to minimize fluctuations in the amount transferred to the Association. In FY2011, the transfer of nearly $4.1 million represented 9.8 percent of the Association’s overall income. Assets transferred to the Association support a variety of SF Ballet needs in accordance with the instructions placed on each endowment gift by the donor. Approximately half of the Foundation’s assets are from gifts that were left undesignated by the donor, thus allowing the annual transfer to be used where most needed by SF Ballet. Budget of SF Ballet Association The charts on the following page show the Association’s sources of revenue and corresponding expenses during FY2011. The interest rate swap (shown as an expense) is used by the Ballet to limit its exposure to fluctuations in interest rates paid on debt service from its tax-exempt bond issuances. The past three years have been challenging financially for San Francisco Ballet Association, as they have been for everyone. With the generous support of our community, we have been able to financially stabilize the Association while sustaining our position as one of the world’s leading ballet companies. In FY2011 SF Ballet Association had an operating change in unrestricted net assets of approximately $660,000, exclusive of depreciation and debt service. Value of Endowment Foundation Assets by Month $100 $95 In Millions $90 $85 $80 $75 $70 Jul ‘10 Aug ‘10 Sep ‘10 Oct ‘10 Nov ‘10 Dec ‘10 Jan ‘11 Feb ‘11 Mar ‘11 Apr ‘11 May ‘11 Jun ‘11 Market Value at the End of the Month
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Winter 2012 - Ensuring the Future of Dance - San Francisco Ballet

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