2. INTERNET SOCIETY BOARD OF TRUSTEES PRESIDENT’S REPORT November 8- 9, 2003 Minneapolis, MN

3. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt2 Agenda 2003 Review –2001- 2003 Board Direction –2003 Major Initiatives –Planning Process & Program Review –2003 Budget and End of Year Review –2003 Key Operating Goals Review –INET’04 Review 2004 Financial Preview

4. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt3 Board Direction - 2001 - 2003 On Plan Plans focused on driving progress in 4 key areas: 1.Financials - - Good, steady progress & expected to continue Stabilize short-term Strengthen long-term 2.Strengthen ISOC governance model - Progressing well, now in 3rd and final stage. 3.Significantly increase activities in: Standards, Public Policy, Education & Publications - 1st phase well underway, and long-term program plans being developed 4.Clarify & strengthen value proposition for ISOC, for Organization Members, IM’s and Chapters - Significant advances in IM and Chapters, (IM) Member Proposal developed and will significantly strengthen Value Proposition for all members

5. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt4 2003 Review Major Initiatives - I Q1 & Q2 2003: –Launched PIR, significant support during start-up –Completed negotiations -Verisign $5M Endowment –Operating processes agreed - ISOC & PIR –.org Program funds begin flowing - $300K in April –European Chapter Coordination Council MOU –INET’04 successfully negotiated –AfNoG workshop held Resources: ISOC FTE’s = 6.5, plus 5 volunteer VP’s !! Red = not foreseen in 2003 budget and/or staff activities

6. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt5 2003 Review Major Initiatives - II Q3 & Q4 2003: –New Platinum members - Sida (Educ), Afilias (Pub Pol) –More.org Program Funds - $800K in August –WALC (Latin American NTW) –SeINIT - EU Security Initiative –Workshop Portal –WSIS Support (significantly increased support) –PIR Board elections –(IM) Membership Proposal –IETF ADVCOMM Note: ISOC FTE’s = 8.5, plus 5 volunteer VP’s (today = 2) Red= not foreseen in 2003 budget and/or staff activities

7. 2003 Review Planning Process & Program Review

8. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt7 2003 Program Planning Process Phased Approach May - July: 1st phase ISOC’s Planning Process –Phase I: Q3/Q4 ‘03 - Programs =Bid-defined and infrastructure building (largely based on existing plans) Directional statements prepared by ExComm, ISOC staff, VP’s, etc. Input and reviews with PIR Chair, PIR President and PIR Board to enable both orgs. to begin funding programs. ISOC BoT Review - July 2003 –Phase II: 2004 & beyond = strategic planning process began June, on-going Note: Funding expected from multiple sources:.org, existing Platinums and new Platinums: Sida, Afilias, etc.

9. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt8 2003 Program Funding: A Recap ISOC’s 2003 budget (dev’d prior to start of PIR operations) expected total available for programs of $422K. Net cont’n. from PIR (after dir. exp.) of $170K. In April, PIR donated $200K to ISOC for Open (RFC) Standards activities and $100K for Education Program Dev’t. –Educ. Grant enabled ISOC to hire 2 prog. Mgrs (per budget) In July PIR resolved to contribute an add’l. $800K to ISOC for program development, bringing total to $1.1M! New Platinum members also aided program efforts: Sida, Afilias

10. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt9 Program Planning Process Key Programs - Q3/Q4’03 EDUCATIONPUBLIC POLICYSTANDARDSCOMM’Y & OUTREACH NTW’s, Reg’l Workshops, etc. Internet Policy & Policy Portal Phase 1 (& 2) Internet Stds. Advisories Buildup Chapter I/Struct/systems - Comm’y. Bldg. Upgrade NTW Matls.- IPv6, IPSec Seminars: VoIP *Seminars: IDN, Security * Polls & Polling system Workshops Toolkit & Portal Bulletins/White Papers RFC Ed. SupportAnnual Report ISOC/ACM Rpt.?? TBR: IEEE coop’n ? Hall of Fame * Planned for Tunis but cancelled Italics = Phase II

11. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt10 Annualized Forecast - Sept. 03 2003 Program Fund Disposition - K$.ORG & All ‘Program’ Funding - $1.7M $200K $420K $503K.ORG Funds $1.1M $513K$620K $603K

12. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt11 Recap:.ORG Division of Responsibilities PIR: –manage registry, set registry policy, develop new products & services, registrar relations, marketing, communications, Advisory Council, etc. ISOC: –program dev’t. & marketing outreach building on ISOC’s established knowledge, credibility and channels Afilias: –back-end service provider Source: ISOC President’s Report: ISOC - PIR Joint Board meeting November 2002

13. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt12 2003 Key changes: Program Funding vs. Budget In October PIR President and Chair indicated they expect an add’l $700K to be available in December ‘03 Assuming PIR Board approval, ISOC will recognize this additional revenue in 2003 as a donation (due to now common understanding on roles). Projected Program Funding in 2003: –Platinums: $ 0.5M –.org : $ 1.8M (from $422k in budget) Note: 2003 = start-up year for PIR and additional.org funding VERY welcome but has made planning and operating to original budget more difficult

14. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt13 2003 Key Changes Operating Model With increased funding, comes increased deliverables and increased expectations. With significant injection of funds, (many) programs and new resources (internal & external), all ISOC processes and systems under pressure to evolve (while delivering). Volunteer model is, not at all unexpectedly, under some pressure - mainly affecting VP structure. ISOC must move to a more business-like structure. Altogether transition is working well, but not w/o some start-up problems. 2004 Budget = critical review of infra-structure reqmt’s.

15. Internet Society Board of Trustees 2003 Financial Review 8 November 2003 BoT Meeting/ Minneapolis, MN

16. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt15 2003 Year End Forecast from July ‘03 BoT Revenues –Organizations: challenging target, today’s running rate = $0.8M vs.budget of $1.3M. Reminder - at a P&L level this means we need to bring in approx. $1.5M in new org. member revenues before year end, unless Platinum –Platinum revenue: expect to meet or exceed budget –Program revenues expected to offset any organizational member shortfall and will have significant added benefit of increasing ISOC’s visibility, thereby aiding future org. member recruitment efforts Nov. ‘03 Update = Commentary above still valid today, and.org revenues continue to increase significantly

17. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt16 2003 Year End Forecast (cont’d) from July ‘03 BoT Expenses –Non.org Expenses are on track (in fact are under budget), but.org expenses will be higher given higher level of surplus avail. for programs - however they will also be net positive –Revenue recognition tied to expenses –ISOC’s PIR governance - related expenses to be recouped Cost savings budget of $126K on track (and better than original target of $100K) Nov. ‘03 Update:PIR’s contributions to be donations and recognized immediately given (now) common understanding of model. All else consistent w/ above.

18. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt17 2003 Year End Forecast (cont’d) from July ‘03 BoT Summary –Org. Revenues continues to be very aggressive given economic and world conditions, therefore actively positioning.org surplus/programs to better and more broadly position ISOC & PIR for the future. –Fully expect to meet budgeted surplus. –Working to further diversify our revenue stream: Seinit (thanks to Latif Ladid ), US Cybersecurity & EU security efforts, etc. Nov ‘03 Update: Commentary above still valid today.

19. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt18 Going forward from July ‘03 BoT Board support/commitment –Suggest I contact each board member individually to see how they can support fundraising, how staff can help, etc. –Goal is additional $50K min. per Trustee. Success here would mean another $750,000 and would make an ENORMOUS difference in operations. Continue relentless focus on Costs and Revenues Identify and pursue new creative revenue streams and roles for ISOC consistent with our values & purposes Success of.org initiative shows potential for such opportunities Nov ‘03 Update: Fundraising efforts in Point 1 above seriously behind. All others still valid today.

20. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt19 2003 Budget vs. Forecast K$ YTD YTD YTD EOY EOY EOY Budget Actuals Variance Bud F/C Variance REVENUES Plat Rev - 185 +185 250 635 +385 Org Rev 975 462 (513) 1,300 725 (575) PIR Prog/Gov/Grant 386 600 +214 422 1,400** +978 IM & Misc Rev 95 211 +116 100 215 +115 Total Rev 1,456 1,458 + 2 2,072 2,975 +903 EXPENSES Dir.exps.- Standards 657 618 +39 870 850 +20 Dir.exps.-E & T 143 332 (189) 164 456 (292) Dir.exps.- Pub Pol 124 148 (24) 165 326 (161) Dir.exps.- PIR 208 77 131 208 76 +132 G&A/Gov 368 373 ( 5) 467 497 (30) Total Exp 1,500 1,548 (48) 1,874 2,205 (331) Net Surplus(loss) (44) ( 90) (46) 198 770 572 * Strong likelihood this will increase to $1.8 bringing surplus to approx. $1.1M.

21. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt20 ISOC Total Revenues, Expenses and Net Asset Trends - Good Progress Source: Mike Conn’s Treasurer Report 2003 F/C

22. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt21 2003 Budget by Pillar Org.rev 1,190 165 195 - 1,550 Total Revs 1,290 255 247 280 2,072 Expenses-Dir 870 164 164 209 1,407 Expenses-G&A 288 54 56 69 467 Total Expenses 1,158 218 220 278 1,874 Budgeted Surplus 132 37 27 2 198 EOY F/C Surplus 281 286 201 2 770** STDSEDUC PUBLIC POLICY TOTAL PIR ** could be as high as $1.1M depending upon.org surplus and programs

23. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt22 2003 YTD Budget vs. Sept. Actual - Revenue REVENUES: ORG. Revenues = ($513K) Platinum Rev. = +$185K * PIR Prog/Gov/Grant = +$214K NDSS’03 = +$36K IM & Misc. rev. = +$80K Total revenue impact = +$2K * Afilias upgraded to Platinum - Public Policy Sida became a Platinum Education member

24. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt23 2003 YTD Budget vs. Sept. Actual - Expense Direct EXPENSES = ($43K) : –E & T Educ & Trng. programs, etc. =($170K) –Public Policy IM/Chapter support = ($15K) Publications = ($10K) increased effort to improve visibility. Re-classification of salaries into projects = +133K G&A = ($5K) –Legal=($15K) sublease documentation & CEO contract –BoT teleconferences=($10K) –Deprec.=+$20K inventory revealed obsolete asset Total Expense Impact = ($48K)

25. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt24 2003 YTD Actuals By Pillar PUBLIC POLICY TOTAL EDUCSTDS Org. Revenues Total Revenues Expenses-Direct Expenses-G&A Total Expenses Actual Surplus(loss) YTD Variance 370 108 169 647 685 396 277 100 1,458 618 332 148 77 1,175 232 67 51 23 373 850 399 199 100 1,548 (166) (2) 78 - (90) (136) 45 47 (2) (46) PIR

26. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt25 Note: Assumes $300K from PIR in December 2003 not $700K.

27. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt26 Barcelona INET/IGC’04 Update April’03 ExComm expressed concern re; progress of INET’04 Board committee. CEO tasked to prepare proposal. LOI successfully concluded with IGC in July 2003 BoT Approved 7/03 - met all BoT conditions, incl. Financials After slow start and w/ significant effort by ISOC staff, two Board members and VP Public Policy, INET/IGC’04 now back on track –Call for Papers to be issued week 2 Nov’03, automated web-based process –Relationship solid between IGC and ISOC Program Committee Chair and Organizing Committee Chair appointed. –PC Chair: Artur Serra (key individual behind ISOC/IGC collaboration) –OC Chair: Rosa Delgado More in tomorrow’s session

28. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt27 Key Operating Goals 2003 President’s Operational Goals 1.Cash reserves >= 2 mos. Op. Expenses - on track 2.Revenues and Surplus >= Budget - challenge in Org. revs. but overall surplus will be met 3.With VP’s, build effective Pub Pol Init. - on track 4.CEO executes effective review for PIR - on track 5.Effectively involve Trustees in fund-raising - needs more involvement/depends on all of us 6.Plan/decision for INET 2004 by Sept. ‘03 - done & back on track 7.With VP’s, ISOC participation in min. of 2 regional conferences - WALC, AfNog, (almost Tunis) 8.Individual Members and Chapters - on track

29. Internet Society Board of Trustees 2004 Financial PREview 8 November 2003 BoT Meeting/ Minneapolis, MN

30. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt29 2004 FINANCIAL PREVIEW Still too many unknowns to create budget: –.ORG Contributions could be $1.4M - $1.9M but won’t be confirmed by new PIR BoT until mid-December at the earliest –Individual Member Assumptions not yet built in –New opportunities to work with IETF on Publications and/or Knowledge extraction but model not yet known –Need to complete infrastructure and resource evaluations

31. 8-9 Nov 2003BoT Pres. Rpt Nov03.ppt30 2004 Budget PREVIEW