THE LEUKEMIA & LYMPHOMA SOCIETY, INC.
1311 Mamaroneck Avenue
White Plains, NY 10605
MEETING OF THE FINANCE COMMITTEE
Minutes of a meeting of the Finance Committee of The Leukemia & Lymphoma Society, Inc. held
Saturday, June 25, 2005 at 11:30 a.m. at the Marriott Financial Center Hotel in New York City.
Members Present
Thomas L. Fitzpatrick, Chair
Paul J. Cienki, Vice Chair
Michael C. Copley
Paul Frimmer
John A. Geoghegan (by phone)
Lynn C. Hoover
Thomas Hunter
John B. Kelly (by phone)
Richard H. Michalik
Fred Parvey
William H. Reimers
Norbert Sieber
Jay L. Silver
Thomas R. Snyder (by phone)
Also Present
Margaret H. Anderson, National Trustee
Leslie Chambers, SVP-Field Development
Louis Degennaro. Vice President-Research
Dave Frantze, Vice Chairman
Larry Hausner, COO
John Kamins, Chairman of the Board
Robin Kornhaber, SVP-Patient Services
Marshall Lichtman, EVP-Research & Medical Programs
Jon Lowell, CIO
Jimmy Nangle, SVP-Finance
Marcie Rehmar Rogell, National Trustee
Beverly Sherbondy, SVP-Human Resources
James J. Stephanak, National Trustee
John Walter, EVP & CFO
Members Absent
Charles F. Inglefield
Mr. Fitzpatrick began the meeting by calling for and receiving approval of the current meeting agenda,
and the Minutes of the March 7, 2005 meeting.
May 2005
Mr. Fitzpatrick reviewed financial statement highlights through May 2005. Combined Cash and
Investments were $132.5 million, or $29.0 million higher than last year at this time. Net Assets were
$84.7 million, or $17.2 million greater than the previous year. Net Revenue was greater than budget by
$15.4 million, and $29.6 million greater than prior year. Net Income was $9.0 million higher than budget
and $8.7 million greater than prior year. Mr. Fitzpatrick pointed out that $1.1 million of the May year-todate budget variances in Net Revenue and Net Income were attributable to a positive mark-to-market
adjustment.
Fiscal Year 2005 (FY05) Annual Forecast
Mr. Fitzpatrick reported that Net Revenue is forecasted at a record breaking $209.5 million. This is $17.8
million better than budget, and $20.0 million greater than last year (excluding last year’s mark-to market
adjustment). Primary contributors to this positive variance are TNT $5.9 million, LTN $2.6 million,
Investment Income $2.6 million, Bequests $2.4, and pharmaceutical sponsorships $1.6 million.
Expenses are forecasted at $198.5 million, or $8.2 million over budget. This variance is primarily
composed of additional mission related expenditures of $5.3 million for Grants and $.3 million for Patient
Aid. Also contributing to the expense variance is over budget spending on the Professional Fees line of
$2.9 million which is related to pharmaceutical sponsorships $1.6 million, chapter support for increased
revenue generation $.6 million and Direct Response $.3 million.
Finance Committee Minutes
June 25, 2005
Page 2
Overall, Net Assets are expected to increase by $9.6 million in FY05. This will result in a 31.7% Net
Asset Ratio, which is 3.7% better than budget and 1.4% better than the previous year. Mr. Fitzpatrick
noted that due to stock market volatility no provision for the mark-to-market adjustment is included in the
forecast, but that current estimates indicate a positive adjustment for the fiscal year in the $1.0 million
range.
Fiscal Year 2006 (FY06) Annual Budget
Mr. Fitzpatrick reported that Net Revenue is budgeted to reach $229.5 million or 9.5% more than FY05’s
Forecast. Expenses are budgeted at $226.8 million or 14.3% greater than FY05, and the Net Asset Ratio
is budgeted at 29.0%. Mr. Fitzpatrick and Mr. Walter then discussed and responded to questions related
to the line item variance analysis and other support schedules that were previously distributed to
Committee members and incorporated as part of the Committee’s financial package. They noted that new
funding requests totaled approximately $5.6 million and were primarily driven by the need to invest in
revenue generating capacity and infrastructure in order to continue to exceed the Society’s Strategic Plan
goals. The Committee voted to approve the FY06 budget as submitted.
Mr. Walter then presented the proposed Canadian annual FY06 budget. Net revenue is budgeted at $4.4
million. This is $1.2 million, or 38.7% greater than FY05. Expense is budgeted at $4.4 million or $.7
million greater than FY04. The Committee voted to approve the Canadian FY06 budget as submitted.
Investment Subcommittee
Mr. Snyder reported the PIMCO Commodity Real Return Fund would be liquidated and the proceeds
invested in the Lehman Brothers Strategic Commodities Offshore Fund. This action was taken to reduce
the Society’s exposure to TIPS (Treasury Inflation Protected Securities) which the Investment Committee
feels are currently overvalued. Mr. Synder explained the Offshore fund was chosen to reduce the
Society’s exposure to Unrelated Business Income Tax (UBIT). Funds will also be shifted from the FAM
Global Onshore Fund to the FAM Global Offshore Fund, for the same reason.
Mr. Snyder reported on investment results as of 3/31/05. The Operating fund returned -.58% and
outperformed its tactical index, which returned -1.05%. Since inception, the Operating fund has returned
4.97% vs. 4.58% for the tactical index. The Pooled Endowment fund returned -1.83% and thus,
underperformed its tactical index which returned -1.59% for the quarter. Since inception, the Pooled
Endowment fund has returned 8.39% vs. 9.08% for its tactical index. While the Pooled Endowment
returns are below benchmark, the Society’s investment advisor ComstockCo does not recommend
changing any managers at this time.
Finance Committee Charter and Checklist
The Committee voted to approve the Finance Charter and Responsibilities Checklist that were distributed
prior to the meeting, subject to moving item nine on the Checklist from the Fall to the Spring.
FY06 Targets
Mr. Walter reviewed the three FY06 financial targets as follows: a) Total Public Support & Revenue
$229.5 million, b) Net Asset Ratio 29.0%, and c) Allocation of Program Services Expenses 75%. The
Committee voted to approve the targets as submitted.
Finance Committee Minutes
June 25, 2005
Page 3
Audit Committee
Ms. Anderson reported that KPMG presented, and the Audit Committee approved, an audit plan for
FY05. The scope of services includes:
- Audit of the Society’s consolidated financial statements and supplementary chapter information as of
and for the year ending 6/30/05.
- Audit of the financial statements of The Leukemia and Lymphoma Society of Canada as of and for the
year ending 6/30/05.
- Review of the 2005 Annual Report prior to its release.
- Review of Federal Form 990 for the year ending 6/30/05.
- Audit of the Society’s Tax Deferred Annuity Retirement Plan as of and for the year ending 12/31/05.
The fees for the above services are $195,500 plus out-of-pocket expenses, and include consolidation of
the Canadian audited financial statements.
Ms. Anderson also reported the Audit Committee approved the following:
- 12/31/04 audited pension plan statements
- Ten year audit partner rotation policy, with a two year minimum rotation out before a subsequent ten
year period can begin.
- Independent Auditor Evaluation policy
- Audit Committee Self-Evaluation policy
- Policy requiring Audit Committee approval prior to the performance of non-audit work by the
Society’s external auditors.
Mr. Fitzpatrick announced the next Finance Committee meeting would be held in Atlanta Georgia on
October 27, 2005. With no further business to discuss, the meeting was adjourned at 1:10 p.m.