R130523AFS Short Formx 71358 Fy13auditedfinancialstatements

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Consolidated Financial Statements and Report of

Independent Certified Public Accountants

Alzheimer’s Association

June 30, 2013 and 2012

Contents

Page

Report of Independent Certified Public Accountants 3

Consolidated Financial Statements

Statements of financial position 5

Statements of activities 6

Statements of functional expenses 8

Statements of cash flows 10

Notes to consolidated financial statements 11

Supplementary information

Consolidating statement of financial position 27

Consolidating statement of activities 28

Grant Thornton LLP

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Chicago, IL 60604-2687

T 312.856.0200

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Grant Thornton LLP

U.S. member firm of Grant Thornton International Ltd

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors

Alzheimer’s Association

We have audited the accompanying consolidated financial statements of Alzheimer’s

Association and affiliates (together, the Association), which comprise the consolidated

statements of financial position as of June 30, 2013 and 2012, and the related consolidated

statements of activities, functional expenses and cash flows for the years then ended, and the

related notes to the consolidated financial statements.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these consolidated

financial statements in accordance with accounting principles generally accepted in the United

States of America; this includes the design, implementation, and maintenance of internal

control relevant to the preparation and fair presentation of consolidated financial statements

that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on

our audits. We conducted our audits 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 consolidated financial statements are free from

material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the consolidated financial statements. The procedures selected depend on the

auditor’s judgment, including the assessment of the risks of material misstatement of the

consolidated financial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant to the Association’s preparation and

fair presentation of the consolidated financial statements in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the Association’s internal control. Accordingly, we express no such

opinion. An audit also includes evaluating the appropriateness of accounting policies used and

the reasonableness of significant accounting estimates made by management, as well as

evaluating the overall presentation of the consolidated financial statements.

Grant Thornton LLP

U.S. member firm of Grant Thornton International Ltd

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all

material respects, the consolidated financial position of Alzheimer’s Association and affiliates as

of June 30, 2013 and 2012, and the changes in their net assets and their cash flows for the years

then ended in conformity with accounting principles generally accepted in the United States of

America.

Supplementary information

Our audits were conducted for the purpose of forming an opinion on the consolidated financial

statements as a whole. The consolidating statement of financial position as of June 30, 2013,

and consolidating statement of activities for the year ended June 30, 2013, are presented for

purposes of additional analysis, rather than to present the financial position, results of

operations and cash flows of the individual entities, and are not a required part of the

consolidated financial statements. Such supplementary information is the responsibility of

management and was derived from and relates directly to the underlying accounting and other

records used to prepare the consolidated financial statements. The information has been

subjected to the auditing procedures applied in the audits of the consolidated financial

statements and certain additional procedures. These additional procedures included comparing

and reconciling the information directly to the underlying accounting and other records used to

prepare the consolidated financial statements or to the consolidated financial statements

themselves, and other additional procedures in accordance with auditing standards generally

accepted in the United States of America. In our opinion, the supplementary information is

fairly stated, in all material respects, in relation to the consolidated financial statements as a

whole.

Chicago, Illinois

October 18, 2013

Alzheimer’s Association

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

June 30,

(In thousands)

ASSETS 2013 2012

Cash 20,713$ 12,462$

Pledges receivable, net 15,897 17,180

Receivables - Chapters, net 25,971 15,293

Other receivables 1,515 1,369

Notes receivable 498 493

Inventories of education materials, at cost 304 328

Investments 47,315 54,744

Prepaid expenses 6,372 6,121

Assets held in trust 163 133

Fixed assets, net 5,807 3,481

Beneficial interest in split-interest agreements 1,498 1,285

Beneficial interest in perpetual trusts 12,999 10,591

TOTAL ASSETS 139,052$ 123,480$

LIABILITIES AND NET ASSETS

Liabilities

Accounts payable 723$ 1,149$

Grants payable, net 23,357 22,526

Deferred compensation payable 163 1,417

Accrued expenses 6,496 5,783

Self-insurance reserve 277 -

Accounts payable - Chapters 13,769 12,201

Gift annuity obligations 4,351 4,478

Deferred revenue 2,795 2,480

Deferred rent 1,968 2,088

Total liabilities 53,899 52,122

Net assets

Unrestricted 35,430 27,311

Temporarily restricted 24,811 21,876

Permanently restricted 24,912 22,171

Total net assets 85,153 71,358

TOTAL LIABILITIES AND NET ASSETS 139,052$ 123,480$

The accompanying notes are an integral part of these statements.

Alzheimer’s Association

CONSOLIDATED STATEMENT OF ACTIVITIES

Year ended June 30, 2013, with comparative totals for 2012

(In thousands)

2012

Unrestricted

Total

total*

Revenues, gains and other support

Contributions

71,423

21,958

1,589

94,970

87,598

Less contributions remitted to Chapters

(33,121)

(32,442)

Add amounts received from Chapters under shared

fundraising

49,016

38,868

Net contribution revenues

87,318

21,958

1,589

110,865

94,024

Book sales and other

10,469

14,071

Dividends and interest

1,593

748

2,341

2,041

Net assets released from restrictions

20,409

(20,409)

Total revenues, gains and other support

119,789

2,297

1,589

123,675

110,136

Expenses

Program services

Research

28,323

29,029

Public awareness and education

27,369

24,130

Chapter services

9,448

10,833

Public policy

6,227

5,811

Family and healthcare professional services

16,585

10,941

Total program services

87,952

80,744

Supporting services

Management and general

6,985

6,181

Fundraising

19,396

18,836

Total supporting services

26,381

25,017

Total expenses

114,333

105,761

Excess from operations

5,456

2,297

1,589

9,342

4,375

Other changes in net assets

Net realized and unrealized gains (losses) in value of investments

2,195

917

3,112

(912)

Change in value of split-interest agreements

(259)

(318)

(577)

(580)

Change in value of perpetual trust

882

(208)

Acquisition of dissolved chapters

1,373

270

1,682

481

Bad debt expense

(646)

(1,011)

Transfer in of net assets from AIM and AIMPAC

593

Total other changes in net assets

2,663

638

1,152

4,453

(1,637)

CHANGE IN NET ASSETS

8,119

2,935

2,741

13,795

2,738

Net assets at beginning of year

27,311

21,876

22,171

71,358

68,620

Net assets at end of year

35,430

24,811

24,912

85,153

71,358

*See complete 2012 statement of activities on page 7.

Temporarily

restricted

Permanently

restricted

2013

The accompanying notes are an integral part of this statement.

Alzheimer’s Association

CONSOLIDATED STATEMENT OF ACTIVITIES

Year ended June 30, 2012

(In thousands)

Unrestricted

Total

Revenues, gains and other support

Contributions

63,964

23,310

324

87,598

Less contributions remitted to Chapters

(32,442)

Add amounts received from Chapters under shared

fundraising

38,868

Net contribution revenues

70,390

23,310

324

94,024

Book sales and other

14,071

Dividends and interest

1,470

571

2,041

Net assets released from restrictions

15,909

(15,909)

Total revenues, gains and other support

101,840

7,972

324

110,136

Expenses

Program services

Research

29,029

Public awareness and education

24,130

Chapter services

10,833

Public policy

5,811

Family and healthcare professional services

10,941

Total program services

80,744

Supporting services

Management and general

6,181

Fundraising

18,836

Total supporting services

25,017

Total expenses

105,761

(Deficiency) excess from operations

(3,921)

7,972

324

4,375

Other changes in net assets

Net realized and unrealized losses in value of investments

(809)

(103)

(912)

Change in value of split-interest agreements

(279)

(301)

(580)

Change in value of perpetual trust

(208)

Acquisition of dissolved chapters

436

481

Bad debt expense

(961)

(50)

(1,011)

Transfer in of net assets from AIM and AIMPAC

593

Total other changes in net assets

(1,411)

(18)

(208)

(1,637)

CHANGE IN NET ASSETS

(5,332)

7,954

116

2,738

Net assets at beginning of year

32,643

13,922

22,055

68,620

Net assets at end of year

27,311

21,876

22,171

71,358

2012

Temporarily

restricted

Permanently

restricted

The accompanying notes are an integral part of this statement.

Alzheimer’s Association

CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES

Year ended June 30, 2013

(In thousands)

Public Family and

awareness healthcare

and Chapter Public

professional

Management Total all

Research education services policy services Total and general Fundraising Total expenses

Salaries and related benefits 3,675$ 4,475$ 4,466$ 2,917$ 10,283$ 25,816$ 2,396$ 7,737$ 10,133$ 35,949$

Grants and funded research 15,069 - 493 808 367 16,737 - - - 16,737

Professional fees and consultants 1,724 1,859 620 1,126 1,507 6,836 867 4,784 5,651 12,487

Telephone, postage and supplies 398 3,992 405 156 512 5,463 1,629 1,222 2,851 8,314

Occupancy 775 635 765 318 1,737 4,230 156 566 722 4,952

Conferences and meetings 1,943 431 1,661 596 810 5,441 91 1,392 1,483 6,924

Printing and promotions 1,294 15,855 660 180 507 18,496 1,324 3,028 4,352 22,848

Miscellaneous 3,401 62 58 70 656 4,247 441 501 942 5,189

Total expenses before depreciation 28,279 27,309 9,128 6,171 16,379 87,266 6,904 19,230 26,134 113,400

Depreciation 44 60 320 56 206 686 81 166 247 933

Total expenses 28,323$ 27,369$ 9,448$ 6,227$ 16,585$ 87,952$ 6,985$ 19,396$ 26,381$ 114,333$

Program services Supporting services

The accompanying notes are an integral part of this statement.

Alzheimer’s Association

CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES

Year ended June 30, 2012

(In thousands)

Public Family and

awareness healthcare

and Chapter Public

professional

Management Total all

Research education services policy services Total and general Fundraising Total expenses

Salaries and related benefits 3,615$ 3,618$ 7,093$ 2,734$ 6,431$ 23,491$ 1,713$ 6,353$ 8,066$ 31,557$

Grants and funded research 12,055 12 387 593 447 13,494 - - - 13,494

Professional fees and consultants 1,809 766 664 975 1,040 5,254 501 4,355 4,856 10,110

Telephone, postage and supplies 385 3,625 287 158 370 4,825 1,654 1,435 3,089 7,914

Occupancy 1,453 580 499 349 1,465 4,346 59 356 415 4,761

Conferences and meetings 2,823 455 1,188 635 549 5,650 39 1,206 1,245 6,895

Printing and promotions 1,375 14,950 493 259 332 17,409 1,778 3,968 5,746 23,155

Miscellaneous 5,468 50 44 48 128 5,738 353 988 1,341 7,079

Total expenses before depreciation 28,983 24,056 10,655 5,751 10,762 80,207 6,097 18,661 24,758 104,965

Depreciation 46 74 178 60 179 537 84 175 259 796

Total expenses 29,029$ 24,130$ 10,833$ 5,811$ 10,941$ 80,744$ 6,181$ 18,836$ 25,017$ 105,761$

Program services Supporting services

The accompanying notes are an integral part of this statement.

Alzheimer’s Association

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended June 30,

(In thousands)

2013

2012

Reconciliation of change in net assets to net cash

provided by operating activities

Change in net assets

13,795

2,738

Adjustments to reconcile change in net assets to net cash (used in)

provided by operating activities

Depreciation

933

796

Net realized and unrealized (gains) losses in value of investments

(3,112)

912

(Increase) decrease in pledges, chapter receivables, other receivables

and notes receivable

(9,546)

5,472

Increase in inventories and prepaid expenses

(227)

(2,176)

Increase (decrease) in payables, accrued expenses and chapter obligations

1,709

(3,536)

Increase (decrease) in deferred revenue

315

(1,516)

Decrease in deferred rent

(120)

(244)

(Increase) decrease in beneficial interest in split-interest agreements

(213)

155

Change in value of perpetual trusts

(2,408)

208

Decrease in gift annuity obligations

(127)

(257)

Contributions restricted for long-term investment

(1,589)

(324)

Net cash (used in) provided by operating activities

(590)

2,228

Cash flows from investing activities

Purchase of fixed assets

(3,259)

(1,035)

Proceeds from sale of investments

23,296

53,520

Purchases of investments

(13,105)

(53,648)

Net cash provided by (used in) investing activities

6,932

(1,163)

Cash flows from financing activities

Proceeds from contributions restricted for

Long-term investment

1,589

324

Investment subject to annuity agreement

792

838

2,381

1,162

Other financing activities

Payment of annuity obligations

(472)

(474)

Net cash provided by financing activities

1,909

688

NET CHANGE IN CASH

8,251

1,753

Cash at beginning of year

12,462

10,709

Cash at end of year

20,713

12,462

The accompanying notes are an integral part of these statements.

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013 and 2012

NOTE A - ORGANIZATION AND BASIS OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of the Alzheimer’s Association,

Alzheimer’s Impact Movement (AIM) and Alzheimer’s Impact Movement Political Action Committee

(AIMPAC) (together, the Association). AIM and AIMPAC became controlled entities in fiscal year 2012 and

their activity is included in the fiscal year 2012 and 2013 results. All significant intercompany balances and

transactions have been eliminated in consolidation.

The Alzheimer’s Association, incorporated as the Alzheimer’s Disease and Related Disorders Association,

Inc., is a not-for-profit, tax-exempt organization dedicated to achieving its mission: to eliminate Alzheimer’s

disease through the advancement of research, to provide and enhance care and support for all affected, and

to reduce the risk of dementia through the promotion of brain health. The Association’s mission is carried

out through research, education, public awareness, advocacy, programs and services. The Association’s

primary sources of revenue and support are contributions from the public, corporations and foundations.

AIM is a nonpartisan, nonprofit advocacy organization working in strategic partnership with the Alzheimer’s

Association to make Alzheimer’s disease a national priority. The organization’s mission is to advocate for the

advancement of public policy, in order to eliminate Alzheimer’s disease through the advancement of research,

to enhance care and support for all affected and to reduce the risk of dementia.

AIMPAC is a voluntary, non-partisan political action committee to support and elect federal congressional

candidates who are committed to ending Alzheimer’s disease in our lifetimes. AIMPAC, the political arm of

AIM, is integral in educating members of Congress about critical Alzheimer’s issues in support of the policy

priorities of the Alzheimer’s Association; to fight for a better life for the millions of Americans who live with

Alzheimer’s; and to ensure the voice of the Alzheimer’s community is heard in the halls of Congress.

In addition, the Association oversees the operations and activities for 18 National Chapters to facilitate

strategic alignment, delivery on the overarching Association-wide strategic objectives and priority activities,

and to ensure coverage for all geographic territories. Their activity is included in the consolidated financial

statements and consists of incremental revenues of $10.8 million and expenses of $7.3 million as of June 30,

2013, and revenues of $3.2 million and expenses of $2.9 million as of June 30, 2012.

There were 62 local chapters supported by the Association as of June 30, 2013. The accounts and operations

of the local chapters are appropriately not included in the Association’s consolidated financial statements.

Eight chapters dissolved and/or disaffiliated from the Association during the year ended June 30, 2013. Two

chapters dissolved during the year ended June 30, 2012.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Contributions and Presentation

All contributions are considered available for the general programs of the Association unless specifically

restricted by the donor. The Association reports monetary gifts as temporarily restricted support if they are

received with donor stipulations that limit the use of donated assets or are subject to time or legal restriction.

A donor restriction expires when a stipulated time or legal restriction ends or when a purpose restriction is

accomplished. Upon expiration, temporarily restricted net assets are reclassified to unrestricted net assets and

reported in the consolidated statements of activities as net assets released from restrictions.

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

For discounting purposes, pledges receivable are classified as either collectible in one year or less or

collectible in multiple years. Those receivables deemed collectible in one year or less are stated at their full

face value. Those classified as multi-year pledges are stated at their net present value, using a risk-adjusted

discount rate.

Permanently restricted net assets are those assets for which donors require the principal of the gift to be

maintained in perpetuity.

Under the Shared Fundraising (SFR) policy, the Association and chapters share all unrestricted contributed

revenue received by either party from the chapter’s geographical area based on a predetermined sharing

percentage. The amount due from the chapters under SFR is reported as Receivables - Chapters. The

amount due to the chapters under SFR is reported as Accounts Payable - Chapters.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally

accepted in the United States of America requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities at the date of the consolidated financial statements. Estimates

also affect the reported amounts of revenues and expenses during the reporting period. Although estimates

are considered to be fairly stated at the time the estimates are made, actual results could differ from those

estimates.

Allowances for Uncollectible Amounts

The Association evaluates the collectability of its chapter receivables and pledges receivable based on the

length of time the receivable is outstanding, historical experience, and an assessment of business and

economic conditions. The receivables are charged to the allowance for uncollectible amounts when they are

deemed uncollectible.

Fair Value of Financial Instruments

Accounting principles generally accepted in the United States of America define fair value, establish a

framework for measuring fair value, establish a fair value hierarchy based on the inputs used to measure fair

value and specify disclosure requirements for fair value measurements. Furthermore, the Association

maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the

observable inputs be used when available.

Observable inputs are inputs that market participants would use in pricing the asset or liability based on

market data obtained from independent sources. Unobservable inputs reflect assumptions that market

participants would use in pricing the asset or liability based on the best information available in the

circumstances. The fair value hierarchy is broken down into three levels based on the transparency of inputs

as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the report date. A

quoted price for an identical asset or liability in an active market provides the most reliable fair value

measurement because it is directly observable to the market.

Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly

observable as of the report date. The nature of these securities includes investments for which quoted prices

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

are available but that are traded less frequently and investments that are fairly valued using other securities,

the parameters of which can be directly observed.

Level 3 - Securities that have little to no pricing observability as of the report date. These securities are

measured using management’s best estimate of fair value, where the inputs into the determination of fair

value are not observable and require significant management judgment or estimation.

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market

participants use to make valuation decisions, including assumptions about risk. Inputs may include price

information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A

financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is

significant to the fair value measurement. However, the determination of what constitutes “observable”

requires significant judgment by the Association. The Association considers observable data to be that

market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary,

and provided by independent sources that are actively involved in the relevant market. The categorization of

a financial instrument within the fair value hierarchy is based upon the pricing transparency of the instrument

and does not necessarily correspond to the Association’s perceived risk of that instrument.

Valuation of Investments and Financial Instruments

Investments with values that are based on quoted market prices in active markets and are, therefore, classified

within Level 1, include active listed equities and fixed income funds. The Association does not adjust the

quoted price for such instruments, even in situations where the Association holds a large position and a sale

could reasonably impact the quoted price.

Investments that trade in markets that are not considered to be active, but that are valued based on quoted

market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified

within Level 2. Level 2 investments include U.S. Government agency securities.

Investments and financial instruments classified within Level 3 have significant unobservable inputs, as they

trade infrequently or not at all. The valuation of the beneficial interest in the split-interest agreements and

perpetual trusts falls under Level 3, as there are no significant observable inputs. The trust valuations are

based on assumptions about the present value of distributions to be received from the trusts.

The inputs used by the Association in estimating the Level 3 beneficial interests in split-interest agreements

and perpetual trusts include mark-to-market adjustments, annuitant life expectancy and future asset growth.

Assumptions used by the Association due to the lack of observable inputs may significantly impact the

resulting fair value of the investments and beneficial interest in the split-interest agreements and beneficial

trusts and, therefore, the Association’s results of operations.

Assets Held in Trust

Investments held in trust are carried at fair value. The investments represent contributions to 457(b) plans

for key employees. See note G for additional information about the terms of these plans.

Fixed Assets

Building, furniture, equipment and leasehold improvements are stated at cost or, if donated, at fair market

value at the date of donation. Depreciation on furniture and equipment is provided on a straight-line basis

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

over the estimated useful lives (three to seven years) of the assets. Depreciation on the building is provided

on a straight-line basis over the estimated useful life (39 years). Amortization of leasehold improvements is

provided on a straight-line basis over the remaining life of the lease (up to 15 years).

Notes Receivable

Credit is extended to chapters for loans receivable based on evaluation of the chapters’ financial condition

and collateral is not required. Loans receivable are stated at amounts due. The Association evaluates the

collectability of its loans receivable based on the length of time the receivable is outstanding and an

assessment of business and economic conditions. Accounts outstanding longer than the contractual payment

terms are considered past due. The Association maintained no past due loans receivable for the years ended

June 30, 2013 and 2012. The Association did not record an allowance for doubtful accounts based on an

assessment of the nature of the loans receivable.

Grants Payable

The Association awards research grants generally covering a period of one to three years. Grant expense is

recorded as an unconditional promise to give upon approval of the grant.

Deferred Revenue

Registration fees received for conferences to be held in a subsequent period are recognized as deferred

revenue. These fees are recorded as unrestricted revenues in the period in which the conference is held.

Advertising Expense

Advertising expense is recorded in the period in which the advertising first takes place. Advertising expense

was approximately $10,382,000 and $10,355,000 for the years ended June 30, 2013 and 2012, respectively.

Income Taxes

The Association and AIM have received favorable determination letters from the Internal Revenue Service,

stating that they are exempt from federal income taxes under the provisions of section 501(a) of the Internal

Revenue Code of 1986 (IRC), as organizations described in sections 501(c)(3) and 501(c)(4), respectively,

except for income taxes pertaining to unrelated business income. AIMPAC is a political action committee

organization exempt from federal taxes under Section 527 of the IRC. The Financial Accounting Standards

Board issued guidance that requires tax effects from uncertain tax positions to be recognized in the

consolidated financial statements only if the position is more likely than not to be sustained if the position

were to be challenged by a taxing authority. Management has determined there are no material uncertain

positions that require recognition in the consolidated financial statements and as such, no provision for

income taxes is reflected. Additionally, there is no interest or penalties recognized in the consolidated

statements of activities or statements of position. Aside from the current year, the tax years ending 2009,

2010 and 2011 are still open to audit for both federal and state purposes.

Reclassifications

Certain reclassifications have been made to the 2012 consolidated financial statements to conform to the

2013 presentation.

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

NOTE C - PLEDGES RECEIVABLE

Pledges receivable, net of estimated uncollectible amounts and discounted to present value, are due to be

collected as follows at June 30 (in thousands):

2013 2012

Less than one year $12,443 $13,112

One to five years 4,362 4,985

16,805 18,097

Less

Unamortized discount (324) (429)

Allowance for uncollectible amounts (584) (488)

Total $15,897 $17,180

As of June 30, 2013, discount rates on pledges receivable ranged from 1.66% to 5.15%.

NOTE D - INVESTMENTS

The fair value of investments is as follows at June 30 (in thousands):

2013 2012

Short-term reserves and cash $ 219

$ 114

Fixed income funds 19,139

25,769

Equities funds 27,560

27,296

U.S. government agency securities 397

1,565

Total $47,315

$54,744

Investment fees incurred totaled approximately $112,000 and $97,000 at June 30, 2013 and 2012, respectively,

which were netted with dividends and interest income.

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables summarize assets by fair value hierarchy levels as of June 30 (in thousands):

2013

Level 1 Level 2 Level 3 Total

Fixed income funds $19,139 $ - $ - $19,139

Equities funds 27,560 - - 27,560

U.S. government agency securities - 397 - 397

Beneficial interest in split-interest agreements - - 1,498 1,498

Beneficial interest in perpetual trust - - 12,999 12,999

Total $46,699 $397 $14,497 $61,593

2012

Level 1 Level 2 Level 3 Total

Fixed income funds $25,769 $ - $ - $25,769

Equities funds 27,296 - - 27,296

U.S. government agency securities - 1,565 - 1,565

Beneficial interest in split-interest agreements - - 1,285 1,285

Beneficial interest in perpetual trust - - 10,591 10,591

Total $53,065 $1,565 $11,876 $66,506

The following table summarizes the changes in fair values associated with Level 3 assets (in thousands):

Beneficial

interest in

split-interests

perpetual

agreements

trust

Total

Balance, June 30, 2011 $1,440

$10,799

$12,239

Additions 32

Unrealized loss (5)

(208)

(213)

Payments received (182)

(182)

Balance, June 30, 2012 1,285 10,591

11,876

Additions 356

1,526

1,882

Unrealized gain 90

882

972

Payments received (233)

(233)

Balance, June 30, 2013 $1,498 $12,999

$14,497

All net realized and unrealized gains (losses) in the table above are reflected in the accompanying consolidated

statements of activities. Net unrealized gains (losses) relate to those investments held by the Association at

year-end.

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

NOTE F - NOTES RECEIVABLE

The Association issued two loans receivable for $400,000 and $50,000 to the San Diego Alzheimer’s Chapter

and Western and Central Washington State Alzheimer’s Chapter, respectively, during fiscal year 2012.

Additional loans of $255,000 were issued to Western and Central Washington State Alzheimer’s Chapter

during fiscal year 2013. The loans are interest free. Principal payments of $11,000 are due monthly through

June 2015 from the San Diego Alzheimer’s Chapter. A principal payment of $22,500 is due July 15, 2013,

and principal payments of $33,500 are due monthly August 2013 through December 2013 from the Western

and Central Washington State Alzheimer’s Chapter.

In addition, the Association received a note receivable from a donor during 2012. The note has a face value

of $44,000. Using a discount rate of 3.16%, the note receivable is shown at a net value of $43,000 as of June

30, 2013 and 2012. Interest-only monthly payments of $200 are due from July 2012 through June 2014, with

a final balloon payment of $38,000 due June 30, 2014.

Proceeds from notes receivable are due as follows (in thousands):

Years ending June 30,

2014 $365

2015 133

Total $498

NOTE G - DEFERRED COMPENSATION

Effective September 2006, a 457(f) deferred compensation agreement was entered into with the Association’s

current Chief Executive Officer. The contract was revised in September 2008. Under the current agreement,

the Association provides for deferred compensation of $225,000 per year. The amount of $225,000 due

under the agreement was accrued, and the total amount of the agreement of $1.5 million was paid in fiscal

year 2013, thereby reducing the 457(f) deferred compensation payable to $0 at June 30, 2013.

The Association maintains 457(b) deferred compensation plans for key employees, which provide that a

certain percentage of the key employee’s salary be accrued for the benefit of the participant. These plans are

provided for currently. The amounts of $163,000 and $133,000 due under the plans were accrued and

included in deferred compensation payable at June 30, 2013 and 2012, respectively, and the related

investments are included in assets held in trust on the consolidated statements of financial position.

Deferred compensation payables at June 30, 2013 and 2012, are as follows (in thousands):

2013 2012

457(f) plan $ - $1,284

457(b) plans 163 133

Deferred compensation payable $163 $1,417

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

NOTE H - FIXED ASSETS

At June 30, 2013 and 2012, fixed assets, and the related accumulated depreciation, were as follows (in

thousands):

2013 2012

Land and building $ 600 $ -

Leasehold improvements 4,026 4,004

Equipment and software 10,625 9,653

Furniture and fixtures 1,702 1,556

Total 16,953 15,213

Less accumulated depreciation (13,009) (12,089)

Equipment not in service 1,863 357

Fixed assets, net $ 5,807 $ 3,481

NOTE I - PERPETUAL TRUSTS AND SPLIT-INTEREST AGREEMENTS

The Association is a beneficiary of perpetual trusts administered by independent organizations. Under the

terms of the trusts, the Association has irrevocable rights to receive portions of the income earned on the

trust assets in perpetuity. The Association’s beneficial interest in the trusts, at fair value, totaled

approximately $12,999,000 and $10,591,000 at June 30, 2013 and 2012, respectively.

The Association is the beneficiary of charitable lead and remainder trust agreements held by independent

trustees. Under the terms of the agreements, the Association has an unconditional right to receive all or a

portion of specified cash flows from the agreements. The agreements are valued at fair value based upon

expected future cash flows and discounted present value at a risk-adjusted rate. As of June 30, 2013 and

2012, the Association applied a discount rate of 1.66% and 3.16%, respectively. The Association’s beneficial

interest is $1,498,000 and $1,285,000 at June 30, 2013 and 2012, respectively.

The Association also has charitable gift annuity arrangements in which donors have contributed assets to the

Association in exchange for a promise to pay a fixed amount for a specified period of time back to the donor.

Gift annuity obligations represent the present value of future cash flows expected to be paid by the

Association to the donors under these arrangements. Funds of approximately $4,351,000 and $4,478,000 at

June 30, 2013 and 2012, respectively, have been segregated in separate accounts, the use of which is limited to

meeting the gift annuity obligations.

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

NOTE J - SELF-INSURANCE RESERVE

The Association maintains a self-insured program for medical coverage as part of its employee benefits plan.

Blue Cross Blue Shield of Illinois provides claims administration as well as both individual and aggregate

stop-loss coverage. Funding for this program is obtained through both employee and employer contributions

for medical coverage and through earnings on designated assets held to pay claims. Prior to July 1, 2012, this

coverage was provided by Blue Cross Blue Shield of Illinois on a fully insured basis. Investments designated

by the Association for the insurance program amounted to approximately $277,000 and $-0- as of June 30,

2013 and 2012, respectively, and were included in unrestricted net assets. As of June 30, 2013 and 2012, the

actuarially determined liability associated with this program was approximately $277,000 and $-0-,

respectively, and is determined as an estimated liability for self-insured claims in the accompanying

consolidated statements of financial position.

NOTE K - GRANTS PAYABLE

Grants payable are discounted to present value. They are due to be disbursed as follows at June 30 (in

thousands):

2013

2012

Less than one year $17,560

$14,570

One to five years 5,932

8,251

23,492

22,821

Less unamortized discount (135)

(295)

Grants payable, net $23,357

$22,526

As of June 30, 2013 and 2012, discount rates on grants payable ranged from 1.66% to 3.16% and 2.96% to

3.16%, respectively.

NOTE L - GIFTS-IN-KIND AND CONTRIBUTED SERVICES

Gifts-in-kind and contributed services are reflected as expenses and contributions at their estimated fair value

at date of the gift or service. During 2013, the Association received approximately $3,513,000 in gifts-in-kind

and contributed services. Of these non-monetary transactions, the Association recorded services valued at

approximately $3,137,000 as program expense for the medical science research grants review process and

gifts-in-kind of approximately $376,000 as fundraising expenses. During 2012, the Association received

approximately $5,570,000 in gifts-in-kind and contributed services. Of these non-monetary transactions, the

Association recorded services valued at approximately $5,259,000 as program expense for the medical science

research grants review process and gifts-in-kind of approximately $311,000 as fundraising expenses.

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

NOTE M - ALLOCATION OF JOINT COSTS

For the years ended June 30, 2013 and 2012, the Association incurred expenses of approximately $15,083,000

and $15,414,000, respectively, related to the distribution of informational materials that included fundraising

appeals. The Association allocated these costs as follows for the years ended June 30 (in thousands):

2013

2012

Public awareness and education $ 8,832

$ 8,181

Fundraising 3,776

4,528

Management and general 2,475

2,705

Total $15,083

$15,414

NOTE N - RETIREMENT PLANS

The Association has a defined contribution retirement plan covering substantially all of its full-time

employees. Effective May 1, 2001, the Association contributes, at a minimum, an amount equal to 6% of the

annual compensation of the plan’s participants to the defined contribution plan. Also effective May 1, 2001,

the Association matches 100% of an employee’s contribution up to 5% of the employee’s annual

compensation.

The Association’s policy is to fund retirement plan costs as they are accrued. Contribution expense related to

the defined contribution plan totaled approximately $2,297,000 and $2,042,000 for the years ended June 30,

2013 and 2012, respectively.

NOTE O - COMMITMENTS - OPERATING LEASE OBLIGATIONS

The Association currently has a 15-year operating lease agreement for office space in Chicago, Illinois, that

expires on March 31, 2018. This lease agreement includes inducements totaling approximately $3,166,000 for

leasehold improvements. The lease inducements are reflected as deferred rent in the accompanying

consolidated statements of financial position and are being amortized on a straight-line basis over the term of

the lease agreement.

The Association also has a 10-year operating lease agreement for office space in Washington, D.C., that has

been accounted for as an operating lease in the accompanying consolidated financial statements. The current

lease is effective September 1, 2010 through November 30, 2020. The Association has also entered into 18

short-term leases for the National Chapters. These offices replaced dissolved or disaffiliated chapters. The

leases range in length from 12 to 90 months.

Rental expense under the lease agreements totaled approximately $1,501,000 and $1,279,000 for the years

ended June 30, 2013 and 2012, respectively.

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

Operating lease obligations for office equipment, including copiers and mailing systems, are also included in

the obligations stated below.

Subsequent to year-end, the Association entered into additional property rental lease agreements (see note V).

Future rental commitments, as of June 30, 2013, for all non-cancelable operating leases are as follows (in

thousands):

Years ending June 30,

2014 $1,978

2015 1,751

2016 1,666

2017 1,573

2018 1,316

Thereafter 1,164

Total $9,448

NOTE P - TEMPORARILY RESTRICTED NET ASSETS

Temporarily restricted net assets are available for the following purposes at June 30 (in thousands):

2013 2012

Research $18,565

$18,420

Miscellaneous projects 2,909

1,427

Time restricted 3,337

2,029

Total $24,811

$21,876

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

NOTE Q - PERMANENTLY RESTRICTED NET ASSETS

Permanently restricted net assets are restricted to investment in perpetuity. Permanently restricted net assets

were as follows as of June 30 (in thousands):

2013

2012

John P. Green, Jr. Charitable Foundation Trust $ 8,323

$ 7,657

Evelyn T. Stone Memorial Fund 2,727

2,580

George Graff Perpetual Trust 1,263

1,210

Samuel A. Blank Research Fund 1,256

1,255

National Alzheimer’s Research Fund Endowment 1,000

1,000

Stephanie Aschemeyer Endowment Fund 897

897

John Lyman Bogert Memorial Research Fund 750

750

Harold W. and Georgiana Spaght Memorial Fund 601

601

Edward P. and Mary Klein Smith Foundation 538

Sandra E. Lamb Charitable Trust 508

Mary J. Wickstrom Estate 500

500

Hindenburg Perpetual Trust 467

388

Alburger Perpetual Trust 454

433

George F. Berlinger Memorial Fund 450

450

I.J. Berkson Research Fund 437

437

Edna Curl Endowment Fund 411

411

Ruth Templeton Henney Alzheimer’s Research Foundation 361

361

Norman Gotlieb and Bertha Chrystall Gotlieb Fund 340

330

Evelyn Schwartz Endowment 278

244

Willis Trust 274

William Edmonson Trust 260

236

Mr. and Mrs. Neil Bluhm Pilot Research Grant Fund 251

251

The Blum-Kovler Foundation Pilot Research Grant Fund 250

250

Arthur and Josephine Lowell Charitable Foundation Trust 224

223

Bertis Westfall Charitable Trust 219

Donald R. McLennan Jr. Research Fund 212

212

Ruth Bates Charitable Trust 167

157

Sara & Soloman Hartman Family Charitable Trust 154

143

David Finkle Pilot Research Grant Fund 153

153

Sperry Charitable Trust 147

144

Robert and Marie Leonard 141

Omens/Normand Research Fund 120

120

Marian Burke Research Scholarship Fund 120

120

The Plotkin-Wollin Research Fund 119

119

Helen and Philip Brody Pilot Research Grant Fund 100

100

Plumsock Fund 100

100

Individual funds less than $100 340

339

Total $24,912

$22,171

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

NOTE R - NET ASSETS RELEASED FROM RESTRICTIONS

Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by

occurrence of other events specified by the donors as follows for the years ended June 30 (in thousands):

2013 2012

Purpose restrictions accomplished

Research $19,853 $14,024

Miscellaneous projects 556

1,821

Time restricted - 64

Total net assets released from restrictions $20,409 $15,909

NOTE S - ENDOWMENT NET ASSETS

Permanently restricted net assets are restricted as investments in perpetuity. The Association’s endowment

only consists of donor-restricted endowment funds. Net assets associated with the Association’s endowment

funds are classified and reported based on the existence of donor-imposed restrictions. Donors restrict the

earnings of some of the Association’s endowment funds to fund the Association’s research program. In

accordance with donor stipulations, the income generated from these assets is restricted for research

(approximately 47%) or not purpose restricted (approximately 53%).

The Association accounts for endowment net assets by preserving the fair value of the original gift as of the

gift date of the donor-restricted endowment fund absent explicit donor stipulations to the contrary. As a

result, the Association classifies as permanently restricted net assets (1) the original value of gifts donated to

the permanent endowment, (2) the original value of subsequent gifts to the permanent endowment and

(3) accumulations to the permanent endowment made in accordance with the direction of the applicable

donor gift instrument at the time the accumulation is added to the endowment fund. The Association

considers the following factors in making a determination to appropriate or accumulate donor-restricted

endowment funds:

· The duration and preservation of the fund.

· The purposes of the Association and the donor-restricted endowment fund.

· General economic conditions.

· The possible effects of inflation and deflation.

· The expected total return from income and the appreciation of investments.

· Other resources of the Association.

· The investment policies of the Association.

The Association has adopted an investment policy that attempts to provide a predictable stream of funding to

programs supported by its endowment while seeking to maintain the purchasing power of the endowment

assets. As of June 30, 2013, endowment assets only include those assets of donor-restricted funds that the

Association must hold in perpetuity, as the Association does not have any Board-designated endowment

funds. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a

manner that is intended to provide adequate liquidity, maximizing returns on all funds invested and achieving

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

full employment of all available funds as earning assets. The Association has an active Finance Committee

and Investment Sub-Committee that meets regularly to ensure that the objectives of the investment policy are

being met, and that the strategies used to meet the objectives are in accordance with the investment policy.

The Association’s policy is to appropriate spending amounts deemed prudent for donor-restricted funds.

Changes in endowment net assets for the fiscal years ended June 30, 2013 and 2012, are as follows (in

thousands):

Temporarily Permanently

Unrestricted restricted restricted Total

Endowment net assets, June 30, 2011 $ - $ - $11,256 $11,256

New gifts - - 324 324

Dividends and interest - 379 - 379

Net depreciation (realized and unrealized) - (187) - (187)

Appropriation - (160) - (160)

Endowment net assets, June 30, 2012 - 32 11,580 11,612

New gifts - - 334 334

Dividends and interest - 459 - 459

Net appreciation (realized and unrealized) - 889 - 889

Appropriation - (639) - (639)

Endowment net assets, June 30, 2013 $ - $ 741 $11,914 $12,655

From time to time, the fair value of assets associated with individual donor-restricted endowment funds may

fall below the level that the donor or state law requires the Association to retain as a fund of perpetual

duration. Deficiencies of this nature are reported in unrestricted net assets. There was no deficiency as of

June 30, 2013 and 2012.

NOTE T - CONCENTRATION OF CREDIT RISK

Certain financial instruments subject the Association to credit risk. Those financial instruments consist

primarily of cash, accounts receivable, beneficial interest in split-interest agreements and investments. The

Association maintains its cash balance in financial institutions which, at times, may exceed federally insured

limits. The Association has not experienced any losses in such accounts and believes it is not exposed to any

significant credit risk on cash. Concentration of credit risk with respect to receivables is limited due to the

large number of accounts and low average cash balance. Concentration of credit risk with respect to the

beneficial interest in split-interest agreements is limited through the diversification of the trust assets. The

Association’s investment policy also stipulates appropriate diversification of investment balances. As of

June 30, 2013 and 2012, the Association had no significant concentration of credit risk in investments.

Alzheimer’s Association

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2013 and 2012

NOTE U - ACQUIRED NET ASSETS

The Association acquired seven chapters during the year as a result of chapter dissolution. No consideration

was provided as a result of the transaction.

The following table summarizes the estimated fair values of the assets and liabilities at the acquisition date (in

thousands):

Cash $ 616

Accounts receivable 124

Investments 431

Prepaid expenses 30

Other 274

Land 160

Building 440

Total identifiable assets acquired 2,075

Accounts payable (18)

Accrued expenses (77)

Notes payable (298)

Net assets acquired $1,682

As a result, the net value is recorded as an acquisition of dissolved chapters during fiscal year 2013.

NOTE V - SUBSEQUENT EVENTS

The Association evaluated its June 30, 2013, consolidated financial statements for subsequent events through

October 18, 2013, the date the consolidated financial statements were available to be issued. The Association

is not aware of any subsequent events that would require recognition or disclosure in the consolidated

financial statements with the exception of the following event:

Effective July 1, 2013, the Association acquired four additional dissolved chapters for no consideration,

which became National Chapters. The fair value estimate of the assets and liabilities acquired is not yet

completed. In relation to the acquisitions, the Association entered into 15 property rental lease agreements

for the four new National Chapters. The future additional rental commitments are as follows (in thousands):

Years ending June 30,

2014 $ 245

2015 226

2016 207

2017 155

2018 154

Thereafter 406

Total $1,393

SUPPLEMENTARY INFORMATION

Alzheimer’s Association

CONSOLIDATING STATEMENT OF FINANCIAL POSITION

Year ended June 30, 2013

(In thousands)

Alzheimer's

ASSETS

Association

AIM

AIMPAC

Eliminations

Consolidated

Cash

20,099

426

188

20,713

Pledges receivable, net

15,897

Receivables - Chapters, net

25,971

Other receivables

1,564

(50)

1,515

Notes receivable

498

Inventories of education materials, at cost

304

Investments

47,315

Prepaid expenses

6,372

Assets held in trust

163

Fixed assets, net

5,807

Beneficial interest in split-interest agreements

1,498

Beneficial interest in perpetual trusts

12,999

TOTAL ASSETS

138,487

427

188

(50)

139,052

LIABILITIES AND NET ASSETS

Liabilities

Accounts payable

723

Grants payable, net

23,357

Deferred compensation payable

163

Accrued expenses

6,495

(50)

6,496

Self-insurance reserve

277

Accounts payable - Chapters

13,769

Gift annuity obligations

4,351

Deferred revenue

2,795

Deferred rent

1,968

Total liabilities

53,898

(50)

53,899

Net assets

Unrestricted

34,866

376

188

35,430

Temporarily restricted

24,811

Permanently restricted

24,912

Total net assets

84,589

376

188

85,153

TOTAL LIABILITIES

AND NET ASSETS

138,487

427

188

(50)

139,052

Alzheimer’s Association

CONSOLIDATING STATEMENT OF ACTIVITIES

Year ended June 30, 2013

(In thousands)

Temporarily

Permanently

AIM

AIMPAC

Eliminations

Unrestricted

restricted

Total

Unrestricted

Consolidated

Revenues, gains and other support

Contributions

70,977

21,958

1,589

94,524

1,082

172

(808)

94,970

Less contributions remitted to Chapters

(33,121)

Add amounts received from Chapters under shared

fundraising

49,016

Net contribution revenues

86,872

21,958

1,589

110,419

1,082

172

(808)

110,865

Book sales and other

10,469

Dividends and interest

1,593

748

2,341

Net assets released from restrictions

20,409

(20,409)

Total revenues, gains and other support

119,343

2,297

1,589

123,229

1,082

172

(808)

123,675

Expenses

Program services

Research

28,323

Public awareness and education

27,369

Chapter services

9,448

Public policy

5,650

1,254

131

(808)

6,227

Family and healthcare professional services

16,585

Total program services

87,375

1,254

131

(808)

87,952

Supporting services

Management and general

6,962

6,985

Fundraising

19,396

Total supporting services

26,358

26,381

Total expenses

113,733

1,277

131

(808)

114,333

Excess (deficiency) from operations

5,610

2,297

1,589

9,496

(195)

9,342

Other changes in net assets

Net realized and unrealized gains in value of investments

2,195

917

3,112

Change in value of split-interest agreements

(259)

(318)

(577)

Change in value of perpetual trust

882

Acquisition of dissolved chapters

1,373

270

1,682

Bad debt expense

(646)

Total other changes in net assets

2,663

638

1,152

4,453

CHANGE IN NET ASSETS

8,273

2,935

2,741

13,949

(195)

13,795

Net assets at beginning of year

26,593

21,876

22,171

70,640

571

147

71,358

Net assets at end of year

34,866

24,811

24,912

84,589

376

188

85,153

Alzheimer's Association

R130523AFS Short Formx 71358 Fy13auditedfinancialstatements

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