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AMERICAN INSTITUTE OF GRAPHIC ARTS FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2011 AND 2010 AND INDEPENDENT

AUDITORS REPORT

AMERICAN INSTITUTE OF GRAPHIC ARTS

TABLE OF CONTENTS Page Independent Auditors Report Financial Statements Statements of Financial Position Statements of Activities Statements of Cash Flows Notes to Financial Statements 2 3 4 5 1

INDEPENDENT AUDITORS REPORT

To the Board of Directors American Institute of Graphic Arts We have audited the accompanying statement of financial position of the American Institute of Graphic Arts (AIGA) as of September 30, 2011, and the related statements of activities and cash flows for the year then ended. These financial statements are the responsibility of AIGAs management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior years summarized comparative information has been derived from AIGAs fiscal 2010 financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of AIGAs internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 2011 financial statements referred to above present fairly, in all material respects, the financial position of The American Institute of Graphic Arts as of September 30, 2011, and the changes in its net assets and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

January 23, 2012

AMERICAN INSTITUTE OF GRAPHIC ARTS STATEMENTS OF FINANCIAL POSITION

September 30, 2011 2010 ASSETS Cash and cash equivalents Accounts receivable Prepaid expenses and deposits Investments Property and equipment, net Mortgage financing cost, net $ 754,085 $ 651,402 213,343 43,049 316,265 164,366 2,422,069 2,580,154 2,340,195 2,464,149 49,922 55,738 $ 6,095,879 $ 5,958,858

LIABILITIES AND NET ASSETS Liabilities Line of credit payable Accounts payable and accrued expenses Deferred revenue Mortgage payable

326,900 $ 326,900 624,291 393,603 2,340,665 1,829,346 1,309,846 1,419,215 4,601,702 3,969,064

Net assets Unrestricted Undesignated Board designated

777,896 339,000 1,116,896

1,279,677 344,958 1,624,635

Temporarily restricted Permanently restrcted Total net assets

277,281 265,159 100,000 100,000 1,494,177 1,989,794 $ 6,095,879 $ 5,958,858

See notes to financial statements. 2

AMERICAN INSTITUTE OF GRAPHIC ARTS STATEMENTS OF ACTIVITIES (With comparative amounts for 2010)

Year Ended September 30, 2011 Temporarily Permanently Unrestricted Restricted Restricted Revenues Membership dues Programs Publications Grants and contributions Special events (net of direct donor benefits of $58,680) Investment return Miscellaneous Total revenues Expenses Program services Management and general Fund raising Total expenses Change in net assets Net assets Beginning of year End of year $ 3,323,885 $ 2,058,947 19,061 141,050 (2,162) 162,028 5,702,809 - $ 18,044 (5,922) 12,122

Total

2010

- $ 3,323,885 $ 3,146,912 2,058,947 1,982,050 19,061 8,632 18,044 244,863 141,050 (8,084) 227,085 162,028 168,179 5,714,931 5,777,721

4,983,120 711,726 515,702 6,210,548 (507,739)

12,122

4,983,120 711,726 515,702 6,210,548 (495,617)

5,139,179 480,620 267,663 5,887,462 (109,741)

1,624,635 1,116,896

265,159 277,281

100,000 100,000

1,989,794 $ 1,494,177

2,099,535 $ 1,989,794

See notes to financial statements. 3

AMERICAN INSTITUTE OF GRAPHIC ARTS STATEMENTS OF CASH FLOWS

Year Ended September 30, 2011 2010 Cash flows from operating activities Change in net assets Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities Depreciation and amortization Net realized and unrealized (gain) loss on investments Changes in operating assets and liabilities Accounts receivable Prepaid expenses and deposits Accounts payable and accrued expenses Deferred revenue Net cash provided by (used in) operating activities Cash flows from investing activities Proceeds from sale of investments Purchase of investments Acquisition of property and equipment Net cash provided by investing activities Cash flows from financing activities Proceeds from line of credit Principal payments on mortgage Net cash provided by (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Supplemental cash flow disclosure Cash paid for interest $ (495,617) $ (109,741)

143,171 82,112 (170,294) (151,899) 230,688 511,319 149,480

171,028 (153,661) 46,804 60,182 (25,659) (422,611) (433,658)

643,935 (567,962) (13,401) 62,572

1,454,665 (1,044,390) (31,748) 378,527

(109,369) (109,369) 102,683 651,402 754,085 $

250,000 (102,311) 147,689 92,558 558,844 651,402

105,109 $

110,052

See notes to financial statements. 4

AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

1 - ORGANIZATION American Institute of Graphic Arts (AIGA), the professional association for design, was founded in 1914. Its mission is to advance designing as a professional craft, strategic tool and vital cultural force. It provides leadership in the exchange of ideas and information, the encouragement of critical analysis and research, and the advancement of education and ethical practice. As of October 1, 2010, AIGA had 23,298 members: 8,082 professional members, 783 educators, 2,414 associate members and 12,019 student members. AIGA had 65 chapters as of October 1, 2010, and added one during the course of the year: AIGA San Antonio. The accompanying financial statements do not include the financial position or the change in net assets and cash flows of these chapters, each of which is an autonomous corporation organized under the laws of the state in which it is located. AIGAs revenues are primarily derived from membership dues and various programmatic activities it carries out. AIGA offered the following programs during its 2011 fiscal year: New Contexts/New Practices, October 8-9, 2010 (Design Educators conference), Raleigh (233 attendees) Gain: AIGA Design and Business Conference, October 14-16, 2010, New York (760 attendees) Bright Lights: The AIGA Awards, April 7, 2011, New York (303 guests) AIGA Leadership Retreat, June 2-4, 2011, Minneapolis (236 attendees) Business Perspectives for Creative Leaders, July 24-29, 2011, at Yale School of Management (34 attendees) Deferred revenue and prepaid expenses were recorded for Pivot: AIGA Design Conference held in Phoenix on October 13-16, 2011.

AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

1 - ORGANIZATION (Continued) 365: AIGA Design Competitions received 1,162 entries; 50 Books/50 Covers received 679 entries; Making the Case received 58 entries. Exhibitions in AIGAs gallery included:

365: Annual Design Exhibition 31, October 1 - November 24, 2010 10th AGDA (Australian Graphic Design Association) National Biennial Awards, December 9, 2010 - February 25, 2011 50 Books/50 Covers of 2009, December 9, 2010 - April 8, 2011 Books from St. Gallen, June 16 - July 22, 2011 365: Design Effectiveness, September 14 - November 23, 2011
National sponsors for the year were Adobe Systems, the official sponsor for design solutions; Aquent, the official sponsor for professional development; and Shutterstock, the official sponsor for creative inspiration.

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting and Presentation AIGAs net assets, revenues, expenses, gains and losses are classified, based on the existence or absence of donor-imposed restrictions, into the following three categories: Unrestricted net assets - Unrestricted net assets represent the portion of expendable funds available for the support of all AIGAs operations. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that may or will be met, either by action of AIGA and/or the passage of time. When a restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.

AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Accounting and Presentation (Continued) Permanently restricted net assets - Net assets subject to donor-imposed stipulations that must be maintained permanently by AIGA. Generally, the donors of these assets would permit AIGA to use all or part of the income earned on any related investments for general or specific purposes. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents Cash balances in banks are insured by the Federal Deposit Insurance Corporation subject to certain limitations. For purposes of the statement of cash flows, AIGA considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Investments Investments are stated at fair value. U.S. generally accepted accounting principles (GAAP) establish a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Under GAAP, the three levels of the fair value hierarchy are described below: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that AIGA has the ability to access. Level 2: Inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Unobservable inputs that reflect managements own assumptions. Property and Equipment Property and equipment are stated at cost or, if donated, at the estimated fair market value of the assets at the date of donation. Costs for repairs and maintenance are charged to expense as incurred. All plant assets, other than land, are depreciated over their estimated useful lives using the straight-line method. Estimated useful lives used to calculate depreciation are as follows: Building and improvements Furniture, fixtures and equipment Computer equipment 30 years 5 years 3 years

Deferred Revenue and Related Expenses Revenue received and expenses paid in the current period for publications, conferences, exhibitions, programs and other events scheduled to take place in the subsequent period are deferred on the statement of financial position. The majority of non-membership deferred revenue and related expenses relate to the national conference which is held in October, subsequent to the fiscal year. Membership dues are allocated to the period to which they relate and are recognized accordingly. Membership dues billed and received in advance are reflected as deferred revenue in the statement of financial position. Donated Materials and Services Donated materials, generally printing and paper supplies, are estimated at $413,091 and $108,756 for the years ended September 30, 2011 and 2010, respectively. Such donations are recorded in the statement of activities as program revenue, with an offset to program expenses as donors of such items receive commensurate value in return. Volunteer officers and committees which serve without remuneration play an important role in the functioning of AIGA. No amounts have been reflected in the financial statements for such donated services, as they do not meet the criteria for recognition.

AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Functional Allocation of Expenses Expenses have been charged to program or supporting services, either directly when identifiable, or indirectly based on managements estimation of the services benefited. In 2011, AIGA made significant expenditures for a website redesign. Such expenditures were charged to management and general expenses as they were deemed to support the overall organization instead of specific programs. Summarized Comparative Information The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with GAAP. Accordingly, such information should be read in conjunction with AIGAs financial statements for the year ended September 30, 2010 from which the summarized information was derived. Income Taxes AIGA is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and is classified as a publicly supported organization as described in Section 509(a). AIGAs tax filings prior to 2008 are no longer subject to examination by tax authorities. Subsequent Events These financial statements were approved by management and available for issuance on January 23, 2012. Management has evaluated subsequent events through this date.

3 - PREPAID EXPENSES AND DEPOSITS Prepaid expenses and deposits consisted of the following: September 30, 2011 2010 Gain: AIGA Business and Design Conference Pivot: AIGA Design Conference Other conferences Bright Lights award event 50 Books/50 Covers catalog Other prepayments 258,157 58,108 $ 316,265 $ $ 55,135 11,929 25,432 339 71,531 $ 164,366

AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

4 - INVESTMENTS AND INVESTMENT RETURN AIGAs investments, which are considered to be Level 1, consisted of the following: September 30, 2011 2010 Common stock Preferred stock Mutual funds Short-term deposits $ 1,746,659 446,529 152,060 76,821 $ 2,422,069 $ 1,782,166 426,283 154,706 216,999 $ 2,580,154

The investment return is summarized as follows: Year Ended September 30, 2011 2010 Interest and dividends Net unrealized gain (loss) on investments Net realized gain (loss) on sale of investments 74,028 (139,866) 57,754 $ (8,084) $ 73,424 206,463 (52,802) $ 227,085 $

AIGA invests in various investment securities in accordance with a board-adopted investment risk strategy. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statement of financial position.

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AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

5 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following: September 30, 2011 2010 Land Building Building improvements Office machinery and equipment Furniture and fixtures Less - Accumulated depreciation 388,800 806,200 2,679,581 599,887 297,668 4,772,136 2,431,941 $ 2,340,195 $ 388,800 806,200 2,667,933 598,134 297,668 4,758,735 2,294,586 $ 2,464,149 $

6 - MORTGAGE FINANCING COST Mortgage financing cost, which represents the unamortized balance of expenses incurred associated with the March 2006 refinancing, is amortized over the life of the loan and consisted of the following: September 30, 2011 2010 Legal fees Other Less - Accumulated amortization $ 5,073 82,168 87,241 $ 5,073 82,168 87,241

37,319 $ 49,922

31,503 $ 55,738

Amortization expense for each of the years ended September 30, 2011 and 2010 was $5,816.

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AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

7 - LINE OF CREDIT PAYABLE AIGA has a $500,000 line of credit with a bank, payable on demand. Interest is determined based on the prime rate plus 1%. The interest rate at both September 30, 2011 and 2010 was 4.25%. Interest expense for fiscal 2011 and 2010 was $ 14,086 and $11,932, respectively.

8 - DEFERRED REVENUE Deferred revenue consisted of the following: September 30, 2011 2010 Conferences Membership dues $ 998,432 1,342,233 $ 2,340,665 $ 568,410 1,260,936 $ 1,829,346

9 - MORTGAGE PAYABLE AIGA has a 15-year mortgage loan agreement with Citibank, N.A. for $1,900,000, at a fixed interest rate of 6.69%, that matures on April 1, 2020. Future annual principal payments are as follows:

Year Ending September 30, 2012 2013 2014 2015 2016 Thereafter $ 116,915 124,981 133,603 142,820 152,673 638,854 $ 1,309,846

Interest expense on the mortgage debt for the years ended September 30, 2011 and 2010 was $91,023 and $98,120, respectively.

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AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

10 - AIGA LEGACY CAMPAIGN The AIGA Legacy Campaign is the banner under which a variety of funds have been created to channel charitable gifts toward the challenges facing the profession. The funds to which people giving to the campaign can commit their donations include funds in support of AIGAs archives and scholarship programs, as well as the AIGA Legacy Fund (for special projects), the Legacy Endowment (to secure the future of AIGA), the Diversity Fund, the Winterhouse Design Writing & Criticism Awards and the AIGA Disaster Relief Fund. Board-designated net assets consisted of the following: September 30, 2011 2010 AIGA Legacy Fund Archives Funds Scholarship Funds Legacy Endowment Diversity Fund Denver Archives $ 105,924 38,007 49,042 44,300 14,577 87,150 $ 339,000 $ 105,924 38,007 55,000 44,300 14,577 87,150 $ 344,958

11 - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets consisted of the following: Program Scholarship Funds Disaster Relief Fund Winterhouse Design Writing and Criticism Awards Archives Funds AIGA Legacy Fund Diversity Fund Legacy Endowment Total $ September 30, 2011 2010 37,136 9,087 $ 40,968 9,087

33,106 1,575 194,301 975 1,101 $ 277,281

33,106 226 179,701 974 1,097 $ 265,159

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AMERICAN INSTITUTE OF GRAPHIC ARTS NOTES TO FINANCIAL STATEMENTS

12 - PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets are restricted to investments held in perpetuity, the income from which is expendable to support the Henry Wolf AIGA Scholarships.

13 - RETIREMENT PLAN AIGA has a defined contribution retirement plan that covers substantially all full-time employees. Contributions, which are made entirely by AIGA, will vary each year and are determined by the Executive Director, as part of AIGAs budget, approved annually at the Board of Directors meeting. Expense for the years ended September 30, 2011 and 2010 was $63,716 and $25,862, respectively.

14 - RELATED PARTY TRANSACTIONS AIGA provides management and personnel services to AIGAs New York Chapter. Fees and expenses billed by AIGA were as follows: Year Ended September 30, 2011 2010 Management fees Payroll and related benefits $ 12,000 159,356 $ 171,356 $ 12,000 162,932 $ 174,932

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