December 18, 2008 Dear Trustees, Managing Committee members, and staff of the American School, We are all concerned about the state of the economy and, specifically, about how the American School is faring in this turmoil. We can assure you that the School is strong; its programs and activities in Greece are continuing with as much energy as ever; the fundraising has been remarkably successful over the past months; and the future still looks very bright. In the short-term, however, we are facing some financial challenges. With the help of loyal supporters, these challenges will be met with the same inspired leadership the Board, Managing Committee, and staff have provided in the past. The ASCSA endowment has seen a decrease of over 25% in this calendar year through November 30, a better performance than many major institutions and considerably better than the S&P 500. We will know the final end-of-year performance by mid-January, and we will keep you informed. It is worth keeping in perspective the news of the loss in the endowment and remembering that the School’s endowment saw unprecedented increases over the past decade, rising from $98,848,816 in 1998 to $186,236,060 on June 30, 2008 – an increase of 88%. We are still in a remarkably healthy position, and the situation will improve over the long-term.  Our concern for preserving the endowment is acute, however, since the American School, unlike many larger educational institutions, is so heavily reliant on its endowment to support its operating budget. Approximately two-thirds of the budget is covered by endowment income. Board members are meeting regularly to discuss issues of the endowment investments, to consider the budget principles (e.g., the spend rate which is now calculated as 4.5% of a 5-year rolling average of endowment performance), and to determine the endowment income for the next budget cycle(s). It is clear that budget cuts will be needed over at least the next two years, a situation all institutions are facing. These will be done in accordance with the governance structure of the School, with the Chair of the Managing Committee working with the Director in Athens, the Administrative Director, and other senior staff to find the required economies and with the Managing Committee recommending a balanced budget to the Board of Trustees. At the same time, additional sources of income will need to be found, both earned revenue and donated revenue, especially gifts and grants to boost the endowment that is so critical to the School’s operation. We will depend on the talents, energy, and assistance of everyone associated with the School to devise solutions to these endowment and budget issues.  With regard to the recently launched Capital Campaign, we are mindful of the daunting task of moving forward in the midst of such economic uncertainty. Because of the initial successes of the early stage of the campaign, with over $18 million in designated pledges and gifts, the decision was made to continue with the Preparation and the Leadership Phases during which the fund raising infrastructure is being put in place, major gifts from donors closest to us solidified, and potential new donors cultivated for the future.  The challenge at this point will be to maintain some modest momentum and to try gently to bring pledges to fruition when the time is right for each donor. At the end of the Leadership Phase (at the end of August 2010) we will have an opportunity to evaluate where we stand with regard to gifts and pledges. Depending on the percentage of the goal met, we will have the option at that point of stretching out the timetable for the campaign or moving forward with the Public Phase as planned. Similarly, the Master Planning Committee is continuing the process of evaluating the facilities needs of the School and working with the architects in Athens to develop concept drawings and options for needed improvements. The Board has resolved that no construction will be undertaken without funding in-hand for the full costs of the building, as well as endowment for its on-going operation. We anticipate that finding the funding for these building and renovation projects will be impacted by the economic situation. Nevertheless, the Master Planning Study is proceeding so that we are prepared with plans when the financial situation improves and we are able to fund the most pressing of these projects.  The School is fortunate to have the loyal support and counsel of the ASCSA Board of Trustees, the Gennadius Library Board, and the Managing Committee, and the dedication and energy of an outstanding staff. We are more grateful than ever to the School’s donors and friends whose contributions over more than a century and a quarter have made it the leading institution it is today. The American School faced much greater challenges in its past – it will weather this storm too and emerge from it stronger and more resilient, with a clarity of purpose and a renewed sense of its potential for greater accomplishments. We would be happy for any comments and advice, and we thank you for your support and dedication to the School.  James R. McCredie President, ASCSA Board of Trustees Charles K. Williams, II Chairman, ASCSA Board of Trustees