We are working on many issues at CIRI during this time of change. One of the first actions we have taken is one that I know is of vital importance to many shareholders—our dividend policy.

As reported to you in my last president’s message, the CIRI Board of Directors and management held a February planning retreat to develop CIRI’s next five-year plan. In the process of developing the plan, the Board also took up the issue of CIRI’s dividend policy. This is to be expected as the company’s dividend plan and its five-year business plan are interrelated. Given the importance of the dividend payments to many shareholders, I have decided to dedicate this message to discussing the dividend policy and will report on the five-year plan in next month’s newsletter.

Whether or not to declare a dividend, and in what amount, is one of the most important duties of all corporate boards. It is a duty taken very seriously by CIRI’s Board of Directors. At the Board meeting following the retreat the Board, by unanimous vote, formally adopted a new dividend policy for the company. For your convenience we have included the exact text of the policy in this issue of the newsletter. I believe the policy is instructive as to the Board’s thinking and demonstrates the careful consideration that was given to setting this policy.

The dividend policy states that the Board expects to maintain the amount paid to shareholders for regular quarterly dividends and the Christmas distribution at current levels for the next three years, with no special distributions being paid. We realize that many CIRI shareholders depend on the regular dividend stream. The new dividend policy addresses this by indicating the Board’s desire to maintain stability in the dividend level over the next three years.
The policy also recognizes the Board’s belief that dividend payments ultimately must be tied to the earnings of the company in order to sustain its long-term health. This is because growing the company (so that it may pay future dividends) requires an investment in business opportunities. We anticipate that for the next year or two we could earn less than our dividend payments. While we are strong enough financially to sustain dividends at this level now, we could not continue to make payments of this amount indefinitely without harming CIRI prospects for future growth, unless of course we increase earnings. This is our challenge—to increase earnings—and we are working hard to do just that.

It strikes me that this dividend policy establishes a balance between the payment of dividends and the need to provide capital to increase opportunities for profitable investment. But what does this really mean? Surprisingly, often it helps our understanding of business to look to our cultural traditions. For example, I come from a family of reindeer herders. Reindeer husbandry is all about balance between current needs (for food and sustenance) and future growth opportunities (for a larger herd beyond just personal needs). To be a successful reindeer herder you need both. You need to eat, but you need to save some of your animals to grow your herd. In establishing its dividend policy, the CIRI Board is acting like good reindeer herders. They are being careful stewards of the company's resources, recognizing current needs of the shareholders and the need to conserve capital for future growth. We on staff of CIRI are committed to the same.