AMERICAN INSTITUTE OF GRAPHIC ARTS

FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2010 AND 2009

AND

INDEPENDENT AUDITORS’ REPORT

 AMERICAN INSTITUTE OF GRAPHIC ARTS

TABLE OF CONTENTS

Page

Independent Auditors’ Report 1

Financial Statements

Statements of Financial Position 2

Statements of Activities 3

Statements of Cash Flows 4

Notes to Financial Statements 5

 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, 2010, and the related statements of activities and cash
flows for the year then ended. These financial statements are the responsibility of AIGA’s
management. Our responsibility is to express an opinion on these financial statements based on our
audit. The prior year’s summarized comparative information has been derived from AIGA’s fiscal
2009 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 AIGA’s 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 2010 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, 2010, 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 25, 2010

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STATEMENTS OF FINANCIAL POSITION

September 30,
2010 2009
ASSETS
Cash and cash equivalents $ 651,402 $ 558,844
Accounts receivable 43,049 89,853
Prepaid expenses and deposits 164,366 224,548
Investments 2,580,154 2,836,768
Property and equipment, net 2,464,149 2,597,614
Mortgage financing cost, net 55,738 61,553
$ 5,958,858 $ 6,369,180

LIABILITIES AND NET ASSETS

Liabilities
Line of credit payable $ 326,900 $ 76,900
Accounts payable and accrued expenses 393,603 419,262
Deferred revenue 1,829,346 2,251,957
Mortgage payable 1,419,215 1,521,526
3,969,064 4,269,645

Net assets
Unrestricted
Undesignated 1,279,677 1,463,551
Board designated 344,958 309,608
1,624,635 1,773,159
Temporarily restricted 265,159 226,376
Permanently restricted 100,000 100,000
Total net assets 1,989,794 2,099,535
$ 5,958,858 $ 6,369,180

See notes to financial statements.

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STATEMENTS OF ACTIVITIES
(With comparative amounts for 2009)

Year Ended September 30, 2010

Temporarily Permanently
Unrestricted Restricted Restricted Total 2009
Revenues
Membership dues $ 3,146,912 $ - $ - $ 3,146,912 $ 3,415,696
Programs 1,982,050 - - 1,982,050 1,426,094
Publications 8,632 - - 8,632 17,200
Grants and contributions 173,470 71,393 - 244,863 44,495
Special events (net of direct donor benefits
of $135,819 in 2009) - - - - 193,134
Investment return 226,121 964 - 227,085 (139,113)
Miscellaneous 168,179 - - 168,179 109,834
5,705,364 72,357 - 5,777,721 5,067,340
Net assets released from restrictions -
satisfaction of program restrictions 33,574 (33,574) - - -

Total revenues 5,738,938 38,783 - 5,777,721 5,067,340

Expenses
Program services 5,139,179 - - 5,139,179 4,975,075
Management and general 480,620 - - 480,620 487,272
Fund raising 267,663 - - 267,663 615,403

Total expenses 5,887,462 - - 5,887,462 6,077,750

Change in net assets (148,524) 38,783 - (109,741) (1,010,410)

Net assets
Beginning of year 1,773,159 226,376 100,000 2,099,535 3,109,945
End of year $ 1,624,635 $ 265,159 $ 100,000 $ 1,989,794 $ 2,099,535

See notes to financial statements.

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STATEMENTS OF CASH FLOWS

Year Ended September 30,

2010 2009
Cash flows from operating activities
Change in net assets $ (109,741) $ (1,010,410)
Adjustments to reconcile change in net assets to net cash
used in operating activities
Depreciation and amortization 171,028 169,724
Net realized and unrealized (gain) loss on investments (153,661) 206,785
Changes in operating assets and liabilities
Accounts receivable 46,804 61,187
Prepaid expenses and deposits 60,182 65,478
Accounts payable and accrued expenses (25,659) 39,294
Deferred revenue (422,611) 115,394
Net cash used in operating activities (433,658) (352,548)
Cash flows from investing activities
Proceeds from sale of investments 1,454,665 1,406,261
Purchase of investments (1,044,390) (1,023,762)
Acquisition of property and equipment (31,748) (162,064)
Net cash provided by investing activities 378,527 220,435
Cash flows from financing activities
Proceeds from line of credit 250,000 76,900
Principal payments on mortgage (102,311) (95,708)
Net cash provided by (used in) financing activities 147,689 (18,808)
Net increase (decrease) in cash and cash equivalents 92,558 (150,921)
Cash and cash equivalents, beginning of year 558,844 709,765
Cash and cash equivalents, end of year $ 651,402 $ 558,844
Supplemental cash flow disclosure
Cash paid for interest $ 110,052 $ 108,826

See notes to financial statements.

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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, 2009, AIGA had 20,700 members: 8,460 professional members, 860 educators,
2,180 associate members and 9,200 student members.

AIGA had 64 chapters as of October 1, 2009, and added one during the course of the year: AIGA
Alaska. 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.

AIGA’s revenues are primarily derived from membership dues and various programmatic
activities it carries out. AIGA offered the following programs during its 2010 fiscal year:

● “Make/Think: AIGA Design Conference”, October 8-11, 2009, Memphis (1,400

attendees)

● Aspen Design Summit, November 11-14, 2009, Aspen (70 attendees)

● Response ability, May 15-16, 2010 (a Design Educators conference), Toledo (96
attendees)

● AIGA Leadership Retreat, June 3-5, 2010, Chattanooga, Tennessee (235 attendees)

● Business Perspectives for Creative Leaders, July 25-30, 2010, at Yale School of
Management (35 attendees)

Deferred revenue and prepaid expenses were recorded for “New Contexts/New Practices”, a
Design Educators conference, held in Raleigh on October 8-9, 2010, and “Gain: AIGA Business
and Design Conference”, held in New York City on October 14-16, 2010.

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NOTES TO FINANCIAL STATEMENTS

1 - ORGANIZATION (Continued)

“365: AIGA Design Competitions” received 2,490 entries; “50 Books/50 Covers” received 800
entries. Exhibitions in AIGA’s gallery included:

● “365: Annual Design Exhibition 30”, September 18-November 25, 2009

● “50 Books/50 Covers of 2008”, December 10, 2009-February 19, 2010

● “365: AIGA Year in Design”, compiling the results of AIGA’s 2009

competitions, which was published as a digital edition by AIGA in February 2010

● “Design Journeys: You are Here”, May 20-August 6, 2010

● “I.D. Annual Design Review”, August 30-September 10, 2010

National sponsors for the year were Adobe Systems, the official sponsor for design solutions, and
Aquent, the official sponsor for professional development.

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Presentation

AIGA’s 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 AIGA’s 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.

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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.

Concentrations of Credit Risk for Cash

Cash balances in banks are insured by the Federal Deposit Insurance Corporation subject to
certain limitations.

Cash and Cash Equivalents

Cash and cash equivalents consist principally of demand deposit and money market accounts with
original maturities of three months or less when purchased.

Investments
Investments are stated at fair value. 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.
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 management’s own assumptions.
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NOTES TO FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 30 years

Furniture, fixtures and equipment 5 years
Computer equipment 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 $108,756 and $168,298
for the years ended September 30, 2010 and 2009, 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.

Functional Allocation of Expenses

Expenses have been charged to program or supporting services, either directly when identifiable,
or indirectly based on management’s estimation of the services benefited.

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NOTES TO FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 AIGA’s financial statements for the year ended September 30, 2009 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).

AIGA’s tax filings prior to 2006 are no longer subject to examination by tax authorities.

Subsequent Events
These financial statements were approved by management and available for issuance on
January 25, 2011. Management has evaluated subsequent events through this date.

3 - PREPAID EXPENSES AND DEPOSITS

Prepaid expenses and deposits consisted of the following:

September 30,
2010 2009
“Gain: AIGA Business and Design Conference” $ 55,135 $ -
“Make/Think: AIGA Design Conference” - 131,403
Other conferences 11,929 37,374
“Bright Lights” award event 25,432 -
“50 Books/50 Covers” catalog 339 -
Other prepayments 71,531 55,771
$ 164,366 $ 224,548

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NOTES TO FINANCIAL STATEMENTS

4 - INVESTMENTS AND INVESTMENT RETURN

AIGA’s investments, which are considered to be Level 1, consisted of the following:

September 30,
2010 2009
Common stock $ 1,782,166 $ 2,534,348
Preferred stock 426,283 -
Mutual funds 154,706 130,888
Certificate of deposit - 49,327
Short-term deposits 216,999 122,205
$ 2,580,154 $ 2,836,768

The investment return is summarized as follows:

Year Ended September 30,

2010 2009

Interest and dividends $ 73,424 $ 67,672

Net unrealized gain on investments 206,463 356,416
Net realized loss on sale of investments (52,802) (563,201)
$ 227,085 $ (139,113)

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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NOTES TO FINANCIAL STATEMENTS

5 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

September 30,
2010 2009

Land $ 388,800 $ 388,800

Building 806,200 806,200
Building improvements 2,667,933 2,667,933
Office machinery and equipment 598,134 566,386
Furniture and fixtures 297,668 297,668
4,758,735 4,726,987
Less - Accumulated depreciation 2,294,586 2,129,373
$ 2,464,149 $ 2,597,614

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,
2010 2009
Legal fees $ 5,073 $ 5,073
Other 82,168 82,168
87,241 87,241
Less - Accumulated amortization 31,503 25,688
$ 55,738 $ 61,553

Amortization expense for each of the years ended September 30, 2010 and 2009 was $5,815.

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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, 2010 and 2009 was 4.25%.
Interest expense for fiscal 2010 and 2009 was $11,932 and $476, respectively.

8 - DEFERRED REVENUE

Deferred revenue consisted of the following:

September 30,
2010 2009
Conferences $ 568,410 $ 1,086,494
Membership dues 1,260,936 1,165,463
$ 1,829,346 $ 2,251,957

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,
2011 $ 109,369
2012 116,915
2013 124,981
2014 133,603
2015 142,820
Thereafter 791,527
$ 1,419,215

Interest expense on the mortgage debt for the years ended September 30, 2010 and 2009 was
$98,120 and $105,245, respectively.

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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 AIGA’s 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,
2010 2009

AIGA Legacy Fund $ 105,924 $ 47,500

Archives Funds 38,007 47,460
Scholarship Funds 55,000 53,198
Legacy Endowment 44,300 44,300
Diversity Fund 14,577 30,000
Denver Archives 87,150 87,150
$ 344,958 $ 309,608

11 - TEMPORARILY RESTRICTED NET ASSETS

Temporarily restricted net assets consisted of the following:

September 30,
Program 2010 2009

Scholarship Funds $ 40,968 $ 140,670

Disaster Relief Fund 9,087 9,087
Winterhouse Design Writing
& Criticism Awards 33,106 42,024
Archives Funds 226 6,888
AIGA Legacy Fund 179,701 25,867
Diversity Fund 974 1,840
Legacy Endowment 1,097 -
Total $ 265,159 $ 226,376

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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, are budgeted and approved annually at the
discretion of the Board of Directors. Expense for the years ended September 30, 2010 and 2009
was $25,862 and $78,865, respectively.

14 - RELATED PARTY TRANSACTIONS

AIGA provides management and personnel services to AIGA’s New York Chapter. Fees and
expenses billed by AIGA were as follows:

Year Ended September 30,

2010 2009

Management fees $ 12,000 $ 17,820

Payroll and related benefits 162,932 162,614
$ 174,932 $ 180,434

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