Sierra Club Financial Report

Sierra, Sept, 1999

Pursuant to provisions of sections 6321 and 6322 of the California Corporations Code, the following information is furnished as an annual report:

The Club's complete financial statements for the fiscal years ended December 31, 1998, and December 31, 1997, together with the report of KPMG LLP, independent auditors, are available on request from Sierra Club headquarters at 85 Second Street, San Francisco, California 94105-3441.

The membership list of the Sierra Club is on file at the Club's headquarters at 85 Second Street, San Francisco, California 94105-3441.

There are no transactions to disclose that constitute a conflict of interest involving directors or officers; no member has voting power of 10% or more.

The books of account and minutes of meetings of the Board of Directors are available for inspection by members on written request at the Club's headquarters at 85 Second Street, San Francisco, California 94105-3441.

INDEPENDENT AUDITORS' REPORT The Board of Directors Sierra Club:

We have audited the accompanying statements of financial position of Sierra Club as of December 31,1998 and 1997, and the related statements of activities and cash flows for the years then ended, These financial statements are the responsibility of the Club's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sierra Club as of December 31, 1998 and 1997, and the changes in its net assets and its cash flows for the years then ended in conformity with generally accepted accounting principles.

KPMG LLP San Francisco, California April 16, 1999

TREASURER'S LETTER

The Sierra Club completed fiscal year 1998 with a remarkable contribution to net worth of $4,733,400. We have now completed our fourth year in a row with a positive contribution to net worth.

The Sierra Club has overcome a significant hurdle in the restoration of our financial health in 1998 by eliminating the deficit in our working capital, which had occurred because of several years of operating deficits during the early 1990s, This recovery is due in large part to the hard work and diligence of both staff and volunteers who have closely managed our operating budget and resources.

Total revenues, including fundraising reimbursements, were $56,493,000 and total expenses were $51,759,600 for the fiscal year ending December 31, 1998. Revenues and associated expenses were higher than anticipated due in part to restricted moneys raised and spent for the Environmental Public Education Campaign (EPEC) and the Environmental Voter Education Campaign (EVEC). In recent years we have funded a significant portion of our conservation programs through the EPEC and EVEC funding. Also helping to increase the Sierra Club's net assets are the growth in the Life Member Program and Fund and the Board Restricted Investment Fund.

The Sierra Club continues to strengthen its position as the leading grassroots- based environmental advocacy organization in North America. That position has attracted significant increases in the support we receive from members, donors, and the foundation community, which has aided in strengthening our financial position and the delivery of our critical programs. The Sierra Club continues to actively engage those in Congress, state legislatures, and federal and state administrations who would roll back more than three decades of progress in environmental policies and protection of public lands, including national, state, and local parks, wildlife refuges, and public forests. In 1998 the Club expended $2,748,000 on Environmental Public Education Campaign activities and $3,766,000 on Environmental Voter Education Campaign activities.

The Club's financial results continue to be boosted by excellent returns on our investments and generous contributions and bequests from Club members and friends. Also noteworthy in 1998 was the good financial performance by our Outings and Books Programs, which have recovered following some very difficult operating years. Membership recruitment and retention programs have been doing extremely well, improving each of the last three years.

1998 was also a very successful year for the Club's Major Giving Program. It has matured into an integrated effort that focuses on a continuing and nurturing stewardship of our donor community. This program continues to provide vital fundraising success on behalf of the Sierra Club. The Major Giving Program is overseen by a joint Sierra Club/Sierra Club Foundation committee.