ke?eived??t'e? 09/27/2013 NATIONAL RIFLE ASSOCIATION OF AMERICA FINANCIAL STATEMENTS as of December 31, 2012 and 2011 AND REPORT THEREON Lzme?m?bozr?gl; Reteitfed me: 09/27/2013 NATIONAL RIFLE 0F TABLE OF CONTENTS Egg Report of tndependent Auditers 1 Financial Statements: Statements of Financiat Position 2 Statements of Activities 3 Statements of Cash Fiows 4 Notes to Financial Statements 5 23 Reserved Date: 09/27/2013 McGladrey tie Pollen, it? Certi?ed Pubilc Accountants 8099 Towers Crescent Dr. Ste 500 I Vi MCGlaerV og'gs?ssoosso F?93.336.6413i corn Report of Independent Auditors To the Board of Directors and Members of the National Ri?e Association of America Report on the Financial Statements We have audited the accompanying ?nancial statements of the National Rifle Association of America (NRA) which comprise the statements ct ?nancial position as of December 31, 2012 and 2011, and the related statements of activities and cash ?ows for the years then ended and the related notes to the ?nancial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these ?nancial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal controi relevant to the preparation and fair presentation of ?nancial 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 ?nancial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the ?nancial statements are free of material misstatement. An audit involves performing procedures to obtain amiit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment. including the assessment of the risks of material misstatement of the ?nancial statements, whether due to fraud or error. in making these risk assessments, the auditor considers internal controi relevant to the entity?s preparation and fair presentation of the ?nancial 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 entity?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 ?nancial statements. We believe that the audit evidence we have obtained is suf?cient and appropriate to provide a basis for our audit opinion. Opinion in our opinion, the ?nancial statements referred to above present fairly, in all material respects. the ?nancial position of the National Association of America as of December 31, 2012 and 2011, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1 to the ?nancial statements, the accompanying ?nancial statements are those of the National Rifle Association only and are not those of the primary reporting entity. The consolidated ?nancial statements of the NRA and its af?liates have been issued as the ?nancial statements of the primary reporting entity. Our opinion is not modi?ed with respect to this matter. Venanirgini March 12, 2013 Mct?zlartrey is the brand under which RSM Mc?iadroy. inc and McGladroy 3r Pollen. it? serve silents?iausiness needs. Mo mber oi RSM intemnn one! network a network of the two firms operate as separate ingot entities in an alternative practice structure. independent accounting tax and ?rms. 09/27/2013 NATIONAL RIFLE ASSOCIATION OF AMERICA STATEMENTS OF FINANCIAL FOSITEON as of December 31, 2612 and 2011 ASSETS 2012 2011 Cash and cash equivalents 6 16,176,551 8,314,408 investments 38,424,i 03 29,123,995 Piedges receivable, net 2,601,438 3,324,463 Accounts receivable, net 32,818,741 32,954,603 Dee trom af?liates 18,421,924 17,389,335 Inventories and supplies, net 11,799,972 12,269,596 Prepaid expenses 3,109,155 2,484,598 Netes receivable, net 3,064,403 3,087,653 Property and equipment, net 34,324,673 35,507,183 Other assets 5,762,576 5,431,147 Total assets 166,497,536 149,825,381 LIABILITIES AND NET ASSETS Accounts payable 19,204,025 16,973,519 Accrued liabilities 67,982,202 52,446,121 Note payable and line of credit 31,104,089 38,973,890 Defense revenue 30,985,830 25,769,095 Total iiabilities 149,276,146 144,162,625 Net assets (de?cit): Unrestricted: Un?esigeated net assets 15,594,916 9,555,576 Cumulative pension liability (37,183,583) (35,482,420) Total unrestricted net de?cit (21,588,667) (25,746,844) Temporarily restricted 5,697,033 5,377,714 Permanentiy restricted 27,713,024 26,032,866 Tetai net assets 11,221,390 5.663.756 Totai iiabilities and net assets 5 166,497,536 149,826,351 The accompanying notes are an integrai part of these ?nanciai statements. 2 Receivea?gteg b912772013 391'999'9 m?mz?vz 9992923 (3:539:11) (mm) (su'm?ez) {swash} - - iaat?seo?n} (comm) - {cos?ess?t} im?ass) {9969ch 231mm Laszu?t {5mm issmz) m?aaz?hzz - - szz'au?vzz w?zzrse arm?s: in?rm meters; Wren: un?vss?ss 210?996?99 su?sm?m su?aoo'm mm mm m?srs?v m?m?r m'zer?r mm? sea?eu'u Bae?atz?u m?ets?t m?m?z Lne'm?l. m?ms?s mama?s ass?w?u asa'ses?ec 52mm mum ?that: mama: Lez?zufi (693238) m?au?vzz - (sw'm?n) 9293992: zm?m?t - Lor?voe?r m?m?t m?mz't Maire uz?sm's swans?: sum Lss?asaz wears: - - 261mm m?m?ss mum m?sas?u m?ssr?sr 5981301 - see?m?t amm?m 9 m?mm 5 m1 W8 W3 mm Samoa-m no: mm W3 manned ue as: man Muedmm aq; Dee'wz'u m?eu?tz 3 2mm 3 (19923512) 991299! 9932mm m'uz's EM ?991% 799259?; w?ees'l (mama; urea? (39mm - (sarm'n ?9?59: - ?was; 0113991 sea?m mm'L m?m?s asl'aas't {?99m} m?szz?v lst?tIS'lSZ $125192 m?ssn?ss m?cso?as ou?aat?ez ou?m?a: meme?; me?sm 66636019 666?660? 19 w'cvz'm Lae?eu warm m?aoa?v m?ans?r oze?zss?t 0382991 m?sw?z: ?rent: mom?s un?szz?s m?m's m?m?s sunsa?rz sum?rz ?68996?: Lez?aee?rt Laz?esa?as ng?csm m?m?m scream (1.99m sarcasm - (m?su?ez) mews: Lzs?asa?s - mm amen . 5mm su'srsr: mm: aza?nzv't imam - 16a?tzr?zz aw'aat'oz - - smarts: m?m?ea 89112891 m'm?zz ssz?ase?te m?m?z - lsz?ras?i. 3 #9629519: 8 am pm W3 9W swam [mutual ma mm m: mutating?; samav 30 was VOW MILWV ma new we Wm) mm: mm Mariam mm) mm um?ma I426 main use: 'mmuleo Damn mm 148502110 Wm; :95:me wddnanp pun annual mu .1. ?:04 mo was 995W mm: mlmul sale: mm mama mp .Ww modem same we anumg NATIONAL RIFLE OF STATEMENTS OF CASH FLOWS for the years ended December 31, 2912 and 2011 Cash flows from operating activities: Change in net assets to resonate change in net assets to net cash provided by (user: in} operating activities: Depreciation and amortization Provision for tosses on piedgos receivable Provision for tosses on accounts receivable Provision for tosses on inventory Contributions pennanentiy restricted tor long-term investment Net unrealized and realized (gain) loss on investments Unraa?zed (gain) loss on derivative instrument Net loss on pension obiigation Net loss on disposal of assets Changes in assets and iiabilliiee: Decrease (increase) in pledges receivabie, net increase In accounts receivable. net {increase} decrease in due from af?liates Decrease in inventories and suppiies. net (increase) decrease in prepaid expenses increase in other assets increase (decrease) in accounts payable increase (decrease) in accrued liabilities increase (decrease) in deterred revenue Totai adjustments Net cash provided by (used in) operating activities Casi) news from investing activities: Seine oi investments Purchases of investments i?utchases of property and equipment Principal collections on notes receivable Netcasn (used in) provided by investing activities Cash tiows from ?nancing activities: Principe! payments on note payable Principal payments on line of credit Draw downs on line of credit (Principal payments};1receedstrorn life insurance policy leans Contributions permanently restricted for long-term investment Net cast) used in ?nancing activities Net increase (?wease) in cast) and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Suppierneniai discioscre oi cash iiow information: Casi: paid during tire yoarfor interest The accompanying notes are an integral part of these ?nancial statements. 4 2012 zott 6 5,55?,634 (18,486,538) 2,307,274 2,867,5t5 320,495 407,463 6,588,787 6.454.795 150.090 151,200 (1,734,166; (1,232,787) (2,660,276) 1,951,313 (189,674) 1,338,503 3.781.163 14,036,169 16.070 44.615 402,620 (4&7,35ii) (6,453,565) (4,445,601) (1,032,589) 254,435 256,624 618,148 (624.557) 254.677 (331,429) (361,809) 2,236,506 (1,726,267) 3,944,592 (167,614) 5.216.735 (2,567,796) 10,435,602 17,5ee,3s4 16,043,236 (917554) 8,650,340 18,302,274 (11,313,123) (14,733,096) (1,534,834) (1,698,147) 23.250 23.417 (4,374,357} 1,664,449 (756,971) (715,173) (96,669,917) (78,379,395) steamer 72,736,262 (sermons) 3.677.055 t,734,1ao 1,232,767 (9,812,726) (1,451,434) t.856,143 (474.139) 8,314,408 8,788,547 warmest 3,314,403 1,628,115 3,748,406 69/27/2013 I NATIONAL RIFLE ASSOCIATJON OF AMERICA NOTES TO FINANCIAL STATEMENTS NATURE OF AND ACCOUNTING The Nationai Ri?e Association of America (NRA), founded in 1871, is a not-for-pro?t corporation supported by the membership fees of public-minded citizens and clubs. Its primary purpose is to protect and defend the Constitution of the United States of America, espectaiiy the poiitical, civil and inalienabie rights of the American people to keep and bear arms as a common law and Constitutional right of the individual citizen. The Board of Directors formed the institute for Legislative Action in 1975 as an internal division of the NRA. The purpose of is to prevent the passage of tens and regulations restricting ?rearms ownership, as well as pursuing changes to existing restrictions imposed by federal, state and local governments. is supported principally by contributions from NRA members. Basis of Presentation The NRA publishes ?nancial statements in the NEWS annual report that inoiude the tinanciai statements of certain af?liated entities, which are its primary ?nancial statements for the years ended December 31, 2012 and 2011. These linanciai statements for the years ended December 31, 2012 and 2011 are not intended to be the primary ?nancial statements oi the NRA and have been prepared in conformity with accounting principles that would otherwise be considered a departure from accounting principles generaliy accepted in the United States of America because certain af?liated organizations are not consoiidated. At?iiates of the NRA whose ?nancial activities are not included in these ?nancial statements of the NRA include the foliowing: the NRA Foundation, Inc. (Foundation), the NRA Civil Rights Defense Fund (CRDF), the NRA Political Victory Fund (PVF), the NRA Special Contribution Fund (SCF) and the NRA Freedom Action Foundation (FAF). 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 the reported amounts of assets and and disclosure of contingent assets and liabilities as of the date of the ?nancial statements and the reported amounts of revenue and other support and expenses during the recoding period. Actual resuits could differ from those estimates. Classi?gtion of Net Assets To identify the observance of limitations and restrictions placed on the use of the resources availabie to the NRA, the accounts of the NRA are maintained in three separate classes of net assets: unrestricted, temporariiy restricted, and permanently restricted, based on the existence or absence of donor?imposed restrictions Unrestricted net assets represent resources that are not restricted, either temporariiy or permanentty. by donor-imposed stipuiations. They are avaitabie for support of the NRA's general operations. ?Lzoiszio?occzi I RIFLE OF AMERICA NOTES TO FINANCIAL STATEMENTS Temporarily restricted net assets represent contributions and other in?ows of assets whose use by the NRA for its programs are limited by donor-imposed stipulations. These restrictions are temporary in that they either expire by passage of time or can be fuitilled and removed by actions of the NRA pursuant to those stiputaticns. Permanently restricted net assets represent endowment contributions and other in?ows of assets whose use by the NRA are limited by dononirnposed stipulations that neither expire by passage of time nor can be fulfiiled and removed by actions of the NRA pursuant to those stipulations. Cash and Cash Eguivalents Highly tiqnid investments, consisting principally of money market funds, under the control of the NRA's investment managers, are considered investments. However, the NRA considers any other investments with an original maturity of three months or less at the date of purchase to be cash equivalents. The NRA generaliy invests these excess funds in repurchase agreements for US. government securities. The maturity date of these repurchase agreements is the next day of business. Due to the short~term nature of these agreements, the NRA does not take possession of the securities, which are instead held by the NRA's principal bank from which it purchases the securities. The carrying veins of the investments approximates fair value because of the short maturity of the agencies. The NRA believes that it is not exposed to any signi?cant risk on its investments in repurchase agreements. Substantiaily all the cash and cash equivaients were held at one ?nancial institution in Virginia at December 31, 2012 and 2011. Concentrations of Credit Risk The NRA maintains a cash balance in excess of federally insured limits in an interest bearing account. The policy is to deposit funds only in ?nancially sound institutions. Nevertheiess, these deposits are subject to some degree of credit risk. investments are maintained in ?nanciai institutions. Concentrations of credit risk with respect to accounts receivable that are not collateralized are limited due to the iarge nnmber of members comprising the membership base and their dispersion across many different geographies. The NRA invests in a professionally managed portfolio that primarily contains money market funds. equity securities, ?xed income securities, and hedge fund of funds. Such investments are exposed to various risks, such as market and credit. Due to die level of risk associated with such investments, and the level of uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risk in the near term would materialiy affect investment balances and the amounts reported in the ?nancial statements. investments Investments consist primarily of money market funds, equity securities, ?xed income securities, and hedge fund of funds. Investments in money market funds, equity securities and ?xed income securities are carried at fair value as determined by an independent market valuation service using the closing prices at the end of the period. In calculating realized gains and losses, the cost of securities sold is determined by the speci?c- identitication method. To adjust the carrying value of the investments, the change in fair value is included in other changes in the statements of activities. Interest income and dividends are recorded on the accrual basis. '1101327000021"astonishedone: (59/27/2013 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Investments in investment partnerships are valued at fair value based on the applicable percentage ownership of the underlying partnerships net assets as of the measurement date, as determined by the NRA. In determining lair value, the NRA utilizes valuations provided by the fund manager of the underlying investment partnerships. The underlying investment partnerships value securities and ether ?nancial instruments on a fair value basis of accounting. The estimated fair values of certain investments of the underlying investment partnerships, which may include private placements and other securities for which prices are not readily available, are determined by the general partner of the respective other investment partnership and may not reflect amounts that coutd be realized upon immediate sale, nor amounts that ultimately may be realized. Accordingly, the estimated lair values may ditter signi?cantly from the values that would have been used had a ready market existed for these investments. The fair value of the NRA's investments in other partnerships generally represents the amount the NRA would expect to receive it it were to liquidate its investment in the investment partnerships excluding any redemption charges that may apply. Pledges Receivable Pledges receivable due in more than one year have been recorded at the present value of estimated cash flows. An allowance for uncoliectible pledges receivable is provided based upon management's judgment of potential defaults. Accounts Receivable Membership, advertising and other accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the best estimate of the amount of probable credit losses in existing accounts receivable. The NRA determines the membership accounts receivable allowance based on the aging of accounts receivable, where three or more or quarterly invoices are past due. The NRA determines all other allowances based on historical write-oil experience and speci?c identi?cation. The allowances for doubtful accounts are reviewed and accounts receivable balances are written off against the allowance when the NRA feels probable the receivable will not be recovered. inventories and Supplies inventories and supplies are stated at the lower of cost or market, using the ?rst-in. ?rst-out method. Provisions are made to reduce the inventories to net realizable value in cases of obsolescence. Progeny and Equipment Property and equipment are stated at cost, less accumulated depreciation. Donated assets are recorded at the appraised or estimated fair value at the time of donation. Expenditures for maintenance and repairs. which do not prolong the useful lives of the assets, are expensed. Depreciation is computed on the straight-line method over the assets' estimated useful lives. Buildings and improvements are depreciated over useful lives ranging from 20 to 45 years. other property and equipment is depreciated over two to ten years. The NRA capitalizes complete desktop and laptop computers greater than $509 and all other ?xed assets greater than $1,500. ?Rsceasa?oas;osmosis? '7 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO STATEMENTS Museum Collections The value of the NRA's firearms museum colieciion has been excluded from the accompanying statements of ?nancial position. Only purchases of ?rearms and other objects, and not donations, are recognized in the statements of activities. The firearms and other obiects in the NRA museum are not intended for sale or exchange and are considered to be of signi?cance for various reasons to include the historical signi?cance, previous owners and craftsmanship. Members? Dues A portion of members? dues that represents the present value of the cost of the magazine that is a bene?t of membership for the given membership term is deferred and amortized over the life of the membership. The portion considered a contribution is recorded as revenue when received. Contributions Contributions, whether unrestricted or restricted, are recognized as revenue when earned and classi?ed in the appropriate net asset category. When the temporary restrictions are met by the NRA which were speci?ed by the donor, temporarily restricted contributions are released from restriction and are recognized in the unrestricted net asset category. Revenue Recognition Program tees, advertising. member sates, and insurance administration fees are recognized as revenue when earned. Rental income is recognized on a straight-line basis over the term of the lease. Derivative Financial instruments interest rate swaps are entered into to manage interest rate risks associated with the borrowing. interest rate swaps are accounted for in accordance with the Financial Accounting Standards Board Accounting Standard Codification (the Codi?cation), Accounting for Derivative and Hedging Activities, under which the NRA is not allowed to use each flow hedging. Therefore, the interest rate swap is recorded in the statements of ?nanciai position at fair voice with fair value changes recorded as an unrealized gain (toss) on derivative instrument on the statements of activities and statements of cash ?ows (Note 8). Valuation of Long-Lived Assets NRA accounts for the valuation of tong-lived assets in accordance with the Codi?cation, Accounting for the impairment or Dispose! of Long-Lived Assets. Long-lived assets and certain identi?able intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. of long-lived assets is measured by a comparison of the carrying amount of the asset to future undiscounted net cash ?ows expected to be generated by the asset. if such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed of are reportebie at the lower of the carrying amount or fair vaiue, less cost to salt. The NRA had no impairments of iong-iived assets during 2012 or 201 t. CSL OF AMERICA NOTES TO FINANCIAL STATEMENTS Outstanding Legacies The NRA is the bene?ciary tinder various wiils and other agreements, the total reaiizable amounts of which are not presently determinable. The share of such amounts is not recorded until the NRA has an irrevocable right to the bequest and the proceeds are measurable. Functional Atlocation of Expenses The costs of providing program services and supporting activities have been accounted for on a functional basis in the statements at activities. Accordingly, certain costs have been allocated among the program services and supporting activities. Tax Status The NRA is exempt from federal income taxes under Section 501(c)(4) of the internal Revenue Code and from state income taxes. The NRA activities that cause imposition of the unrelated business income tax provision of the Code result in no significant tax liability. The NRA toliows the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax bene?ts claimed or expected to be claimed on a tax return should be recorded in the ?nancial statements. Under this guidance, the NRA may recognize the tax bene?t from an uncertain tax position only if it is more-likely?than-not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the ?nancial statements from such a position are measured based on the largest bene?t that has a greater than 50% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses de~recognition, classi?cation, interest and penaities on income taxes, and accounting in interim periods. Management evaluated the tax positions and concluded that the NRA had taken no uncertain tax positions that require adjustment to the ?nancial statements to comply with the provisions of this guidance. Generatty, the NRA is no longer subject to income tax examinations by the US. federal, state or local tax aothorities for years before 2009, which is the standard statute of limitations looleback period. Subseguent Events The NRA evaluated subsequent events through March 12, 2013, which is the date the financial statements were available to be issued. investments as of December 31, 2012 and 2011 consist of: 2012 2011 Money market funds 577,396 550,378 Equity securities 16,221,786 14,042,954 Fixed income securities 9,345,767 7,476,713 Alternative investments 4,327,932 4,679,666 Other 7,951,222 2,374,284 38,424,103 $29,123,995 CSL mesamte 09/27/2013 NATIONAL ASSOCIATION OF AMER10A NOTES TO STATEMENTS Investment income (loss) for the years ended December 31, 2012 and 2011 inciudes the toiiowing: 2012 2011 Realized gains, net 9 1,208,560 2,530,535 Dividends and interest 546,185 775,749 1,754,745 3,306,284 Unrealized gains (losses), net 1,651,710 (4,481,648) 3,406,455 (1,175,364) Interest income of $120,000 and $120,000, earned from notes receivable for 2012 and 2011, respectiveiy, is included in dividends and interest. PLEDGES RECEIVABLE At December 31, 2012 and 2011, donors to the NRA have unconditioneiiy premised to give amounts as follows: 2012 2011 Within one year 3 1,063,500 1,703,090 One to five years 1,223,451 1,845,293 More than five years 1,048,313 1,620,137 3,335,264 5368,5213 Less: discount of pledges receivable (137,752) (188,38? 3,197,512 4,980,131 Less: allowance for piedges . (596,074) (1,655,668) $2,601,438 5 3,324,463 Pledges due in more than one year have been recorded at the present value of estimated cash ?ows, discounted by rates ranging from 1.02% to 4.97%. ACCOUNTS RECEIVABLE Accounts receivabie as of December 31, 2012 and 2011 consist of: 2012 2011 Membership 3 38,695,110 38,012,666 Contributions 3,172,830 2,927,393 Advertising 2,132,601 2,780,977 Other 942,063 824,706 44,942,604 44,546,242 Less: allowance for doubtful accounts 12,123,863 11,592,239 32,818,741 32,954,003 10 CSL Rosaries has 09/27/2013 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Following are the changes in the allowance for doubtful accounts during the years ended December 31, 2012 and 2011, respectively: 2012 2011 Allowance at beginning of year 11,592,239 12,929,448 Provision for losses on accounts receivable 6,588,767 6,454,795 Write-offs, net of recoveries (6,057,143) (7,792,004) Allowance at end of year 12,123,863 11,592,239 AND inventories and supplies as of December 31, 2012 and 2611 consist of: 2012 2011 Sates inventories 5,298,563 3 5,645,555 Supplies: Magazine paper 1,633,311 1,708,279 Fulfillment and promotional materials 5,228,286 5,399,214 Other 134,049 130,565 12,294,209 12,883,613 Less: obsolescence atlowarrce 494,237 674,017 11,799,972 8 12,209,596 NOTES Notes receivable as of December 31, 2012 and 2011 consist of: Interest Rate 2012 2011 NRA Special Contribution Fund 4.0% 3,000,000 3,000,000 Shooting range loans 0.0% 64,403 87,653 3,064,403 3,087,653 The note receivabte from the SCF is a demand note, collateraiized by a ?rst deed of trust on approximately 33,300 acres of land sooth of Ratcn, New Mexico. During the year ended December 31, 2012 and 2011, interest in the amount of $120,000 and $120,000 respectively, was received. The total interest receivable remaining at December 31, 2012 and 2011, respectively, is $3,639,073 and is included in other assets in the statements of financiai position. PROPERTY AND EQUIPMENT Property and equipment as of December 31, 2012 and 2011 consist of: 2012 2011 Land 3 4,902,450 4,902,450 Buildings and improvements 48,865,159 48,591,290 Furniture, ?xtures and equipment 13,196,722 12,268,575 66,964,331 65,672,315 Less: accumulated depreciation 32,639,658 30,165,132 34,324,673 35,507,183 11 L201327000021 CSL Rearrange;69/27/2013? NAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Depreciation expense for the years ended December 31, 2012 and 2011 was $2,807,274 and $2,067,515, respectively. NOTE PAYABLE AND CREDIT AGREEMENTS At December 31, 2012 and 2011, $23,391,021 and $24,147,992, respectively, was payable under a credit agreement with a bank. Under the terms of the credit agreement, the NRA pays a ?xed rate of 6.18% on the entire balance. The agreement expires on October 1, 2014. This credit agreement incorporates an interest rate swap agreement. This swap agreement is recognized on the statements of financial position in accrued liabilities at its fair value at $8,200,801 and $8,300,475 as of December 31, 2012 and 2011, respectively, Beginning September 24, 2010, the NRA maintained a $30,000,000 line of credit agreement with the same bank which reduced to $18,500,000 on April 1, 2011, and expired on September 23, 2011. As of September 24, 2011, the NRA maintained a $25,000,000 credit agreement which expired on March 31, 2012. As of April 1, 2012, the NRA maintained a $18,500,000 line of credit agreement which expired on November 29, 2012. Under the terms of this agreement the NRA made interest payments on the daily outstanding balance at a variable rate based on the 30-day rate, plus 0.75%. Beginning November 30, 2012, the NRA maintained a $18,500,000 line of credit agreement which expires on September 30, 2013. Under the terms of this agreement the NRA makes interest payments on the daily outstanding principal at a variable rate based on the 30-day rate, pins 0.70%. At December 31, 2012 and 2011, $7,713,068 and $14,825,898 was payable under the agreement at interest rates 010.91% and 1.05%, respectively. On the line of credit agreement, the NRA has pledged as collateral $30,841,966 at December 31, 2012, in cash and investments held in certain custodial accounts by the bank. For the credit agreement, the NRA has pledged as collateral a Deed of Trust on the NRA Headquarters Building. The NRA is subject to ?nancial covenants associated with the note payable and tins of credit agreements. The NRA and its consolidated af?liates must maintain minimum cash and investment balances. The aggregate maturities of such required principal payments under the above agreements at December 31, 2012 are as follows: 2013 8,523,178 2014 22,580,911 31 g104,089 interest expense for the years ended Decemberiti, 2012 and 2011, was $1,574,036 and $1,698,404, respectiveiy. 12 '1.2013270006216351.neared Date: 09/27/2013" NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS FAIR VALUE OF FINANCIAL INSTRUMENTS The NRA follows the Codification on Fair Value Measurements, which de?nes lair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly de?ned as assumptions market participants would use in pricing an asset or liability. The three levels of the tairvalue hierarchy are described below: Level 1: Unadjusted quoted prices in active markets for identicai assets or liabilities that the reporting entity has the abliity to access at the measurement date. The types at investments included in Level include listed equities and listed derivatives. As required by the Codi?cation, the NRA does not adjust the quoted price for these investments, even in situations where the NRA holds a large position and a sale coutd reasonabty impact the quoted price. Level 2: inputs other than quoted prices within Level 1 that are observable for the asset or liability, either direotty or indirectly; and fair value is determined through the use of models or other valuation methodologies. investments which are generally included in this category include corporate bonds and loans, fess liquid and restricted equity securities and certain over?thecounter derivatives. A signi?cant adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement. Levei 3: inputs are unobservable tor the asset or liability and include situations where there is little, it any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation. investments that are included in this category generally include equity and debt positions in private companies and general and limited NRA interests in private investment funds, real estate funds, debt funds and distressed debt. In certain cases, the inputs used to measure fair value may fall into different levels at the fair value hierarchy. In such cases, on investments level within the fair value hierarchy is based on the lowest level of input lhat is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors speci?c to the investment. in determining the appropriate levels, the NRA performs a detailed analysis of the assets and iiabilities that are subject to fair value measurements. At each reporting period, all assets and liabilities for which the fair value measurement is based on signi?cant unobservable inputs are classi?ed as Level 3. The estimated fair values of the short-term ?nanciai instruments, including recsivabies and payables arising in the ordinary course of operations, approximate their individual carrying amounts due to the relatively short period at time between their origination and expected realization. The fair value of the notes payable approximates fair value as the interest rate on the underlying instruments fluctuate with market rates. 13 09/25/2013 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS The tables below present the baiances of each class of assets and liabilities measared at fair value on a recurting basis by level within the hierarchy. As of December 31, 2012 Total Level 1 Level 2 Level 3 Available-tot-sale equity securities: Consumer discretionary 1,281,633 1,281,633 3 - - Consumer staples 698,136 698,130 Energy 875,137 875,137 - Financial services 1,068,197 1,068,197 - Healthcare 1,059,697 1,059,697 - Industrials 1,237,553 1,237,553 - Information technology 1,595,859 1,595,859 - - Materials 655,322 655,322 - - Multi-strategy mutual funds 1413.105 7.418.105 - - Telecommunications 163,705 163,705 - - Utilities 168,448 168,448 - - Total evailabte~fet~sale equity securities 16,221,786 16,221,786 Avaitable-for~sale ?xed income securities: bond funds 9,345,767 9,345,767 Total avaitabte?far?sale fixed lncome securities 9.345.757 9.345367 Alternative investments: Mum-strategy fund~of-funtis 4,327,932 4,327,932 - Other investments 7,951,222 7,951,222 - Mossy market 577,396 577,396 - Total investments 6 38,424,103 34,096,171 4,327,932 6 - Other assets multi-strategy mutual funds: Deferred compensation plan 6 1,465,461 1,465,461 .. Supplemental executive retirement plan 361,332 361,332 - Total other assets 8 1,826,793 1,826,793 3 - - Total assets 6 49,250,896 6 36,588,118 3,662,778 - Interest rate swap 6 6,290,801) - (6,200,801) - Deferred compensation liability (1,463,637) - (1,463,637) - 7091199111198 (7.664.438) - - 14 NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS i As of December 31, 2011 Total Leyet 1 Levei 2 LevelB Availablefor?saie equity securities: Consumer discretionary 1,042,764 1,042 .764 6 - - Consumer staples 802,606 802,606 - Energy 996,130 996,130 - Financial services 793,079 793,079 - Healthcare 684,916 884,916 lndustrials 1,409,210 1,409,210 - lnfonnatien technoiogy 1,474,294 1,474,294 - - Matariats 510,459 510,459 - - Male-strategy mutual funds 5,582,221 5,582,221 - Telecomrnunicatiens 328,122 328,122 Utilities 219,153 219,153 - Total aveilabtefor-sale equity securities 14,042,954 14,042,954 .. Available-for?sale ?xed income securities: Multlustrategy bond funds 7,476,713 7,476,713 .. Total avaiiable-for-saie ?xed income securities 7475.713 7.476.713 ., Aitemative investments: Mum-strategy fund-attends 4,679,666 . 4,679,666 - Other investments 2,374,284 2,374,284 Money market 550,378 550,378 709' iniei'imenis 29,123,995 $24,444,329 4,679,666 - Other assets - multi-strategy mutual funds: Deferred compensation plan 6 1,114,303 1,114,303 - Supplemental executive retirement plan 381,656 361,656 - - Total other assets 1,495,959 1,495,959 Total assets 6 30,619,954 6 25,940,268 4,679,666 Interest rate swap 6 6,390,475) - 3 (6,390,475) 6 Deferred compensation IiabiIin (1 111 963) .. (1,111,963) Total liabilities (7,502,453) - $17,502,438) i - Money market funds, equity securities and ?xed income securities are classi?ed as Level 1 instruments as they are actively traded on public exchanges. 15 L20132706lidii?$L Retainsattainments;* NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO FINANCIAL STATEMENTS Other investments consist of whole life insurance policies of which the NRA is the policy owner and bene?ciary. The policies are classified as Level 1 as the underlying investment is the policy cash surrendei value. Hedge fund of funds are classi?ed as Level 2 instruments as there are net asset values per share, or the equivalent, for the underlying investments. in addition, the NRA has the ability to redeem its investments at the net asset value per share at the statement of ?nancial position date or at a date in the near term. Detailed compensation plan assets are based upon the lair market value of those assets. which are observable inputs and classi?ed as Level 1. The deferred compensation liability is not puhlioally traded and is. therefore. considered Level 2. The swap agreement is valued based on quoted values stated by the bank?s mark-to-madtet estimate using stated ?xed rate and interest ratings. The interest rate is observable at commonly quoted indexes for the full term of the and is. therefore, considered a Level 2 item. The table below presents additional information regarding the hedge fund investments. Redemption 2012 2011 Unfunded Redemption Notice Fair Value Fair Value Commitments Frequency Pen?od fundnof~funds 1,653,738 2,775,600 - quarterly 65 days Mule-strategy fund-oi?funds 2,009,040 1904366 - annually 105 days Moth-strategy fund 665,154 - - daily 1 day 3 4,327,932 4,679,666 This class invests in hedge funds that pursue multiple strategies to diversify ticks and reduce volatility. The hedge fund-of-funds' composite portfolio for this class includes investments in long. short equity portfolio funds (investments in emerging markets and multiple sectois), event driven portfolio funds (investments in risk arbitrage, distressed and special situations, and opportunistic investing), relative value portfolio funds (investments in arbitrage, commodity trading advisers and market neutral strategies). and global asset allocation portfolio funds (investment in currencies, bonds, global equities and equity indices). The fair value of the investments in this class have been estimated using the net asset value per share of the investments. This class invests in hedge funds that pursue multiple strategies to diversify ticks and reduce volatility. The hedge fund-ct-iunds? composite portfolio for this class includes investments in private investment companies (investment in global, distressedlcredlt, domestic healthcare and other) and securities (common stock). The fair value of the investments in this class have been estimated using the net asset value per share of the investments. This class invests in a manage futures product that pursue multiple strategies to diversify risks and reduce volatility. The mold-strategy fund composite portfolio for this class includes investments in private investment companies (investment in currency, bonds, interest rates, commodities and other) and securities (common stock). The fair value of the investments in this class have been estimated using the net asset value per share of the investments. 16 '10. NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO STATEMENTS TEMPORARILY AND PERMANENTLY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes: 2012 2011 Education and training $1,148,844 402,020 Legislative programs 955,790 1,275,155 National Firearms Museum 772,749 113,857 Competitions 244,107 24,204 Law enforcement 111,988 84,872 Field services 82,702 89,538 Other 111,587 41,115 Other, passage of time 1,671 ,466 3,346,053 Totai 8 5,097,033 8 5,377,714 Permanently restricted net assets are restricted to investment in perpetuity, the income from which is expendable to support: 2012 2011 Legislative programs 6 10,373,832 9,263,865 National Firearms Museum 7,782,208 7,754,116 Education and training 5,113,822 5,040,474 Competitions 2,023,405 1,815,429 Law enforcement 619,205 618,205 Field services 145,138 142,638 Other 1,655,414 1,398,159 Total $27,713,024 $26,032,686 The NRA follows the Codi?cation on Endowments of Not-toruProfit Organizations: Net Asset Ciassr'?oation of Funds Subject to an Enacted Version of the Unifonn Prudent Management of institutional Funds Act, and Enhanced Disclosures for All Endowment Funds. The Codi?cation addresses accounting issues related to guidelines in the Uniform Prudent Management of institutions! Funds Act of 2006 (UPMIFA), which was adopted by the Nationai Conferences of Commissioners on Uniform State Laws in duty 2006 and enacted in the Commonweeith of Virginia on July 1, 2608 and by the State of New York on September 17, 2010. The Management of the NRA has interpreted as requiring the preservation of the fair value of original donor-restricted endowment gifts as of the date of the gift absent expiicit donor stipulations to the contrary. As a result of this interpretation, the NRA classi?es as permanently restricted net assets to) the original value of cash gifts donated to permanent endowment and the discounted value of future gifts promised to permanent endowment, net of allowance for uncoilectible pledges. The remaining portion of donor-restricted endowment funds not classified in permanently restricted net assets is classi?ed as temporarily restricted net assets until those amounts are appropriated for expenditure by the NRA in a manner consistent with the standard of prudence prescribed by UPMIFA. in accordance with the NRA considers the following factors in making a determination to appropriate or accumulate donorwrestricted endowment funds: The duration and preservation of the fund The purposes of the NRA and donor-restricted endowment fund General economic conditions The possible effect of inflation and de?ation The expected total return from income and the appreciation of investments Other resources of the NRA 17 4 2 NATIONAL RIFLE OF AMERICA NOTES TO STATEMENTS The investment poiicies of the NRA The NRA has adopted investment and spending policies for permanently restricted endowment assets that attempt to provide a predictable stream of funding to the programs supported by its endowment while seeking to maintain purchasing power of the endowment assets. The investment policy of the NRA is to achieve, at a minimum, a real (in?ation adjusted) total net return that exceeds spending policy requirements. Investments are diversi?ed both by asset class and within asset classes. The purpose oi diversi?cation is to minimize risk and to provide reasonable assurance that no single security or class of securities will have a disproportionate impact on the total portfolio. The amount appropriated for expenditure ranges from 1% to 5% of the endowment fund's fair value as of the end of the preceding year, as tong as the value of the endowment does not drop below the originai contribution(s). Ali earnings of the endowment are re?ected as temporarily restricted net assets until appropriated for expenditure in the form of program spending. The NRA's endowment is composed solely of donor restricted funds. The changes in endowment net assets for the years ended December 31, 2012 and 2011 are as follows: December 31, 2012 Temporariiy Permanently Unrestricted Restricted Restricted Lot_al Endowment net assets, beginning of year (405,905) 8 698,247 $28,032,888 $28,325,228 Interest and dividends, net 618,655 - 618,655 Net appreciation - 1,751,074 - i,751,074 Contributions - 1,680,138 1,880,138 Amount appropriated for expenditure - (608,819) - (608,819) Other changes 380,880 (380,880) - - Endowment net assets, and of year (25,025) 2,076,277 $27,713,024 $29,764,278 December 31, 2011 Temporarily Permanently Unrestricted Restricted Restricted Endowment net assets, beginning of year (20,337) 1,695,382 $24,320,099 $25,995,144 Interest and dividends, net 620,185 - 620,165 Net depreciation - (1 ,221,3t7) (1,221,317) Contributions - - 1,712,787 1 [112,787 Amount appropriated for expenditure - (781,551) - (781,551) Other changes (385,568) 385,568 - - Endowment net assets, and of year (405,905) 898,247 $26,032,886 $26,325,228 The related assets are included in due from af?liates, investments and pledges receivable. From time to time, the fair value of assets associated with individuai donor-restricted endowment funds may fall beiow the level that the donor or requires the NRA to retain as a fond of perpetual duration. ln accordance with accounting principles generally accepted in the United States, deficiencies of this nature that are reported in unrestricted net assets as of December 31, 2012 and 2011, were $25,025 and $405,905, respectively. The de?ciencies in the donor-restricted endowment funds at December 31, 2012 and 2011, resulted from unfavorable market ?uctuations and the continued appropriation of endowment assets, which was deemed prudent by the NRA. 18 11. Received NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO STATEMENTS RETIREMENT PLANS Certain NRA employees participate in a non-contributory, de?ned bene?t retirement plan (the Plan). Bene?ts under the Plan are generally based on years of service and ?nal average pay. The policy is to fund pension costs as accrued. Effective January 1, 2008, the NRA amended the Pian so that employees hired on or after January 1, 2008, will not be eligible to participate in the Plan. The primary investment objectives of the Plan are to provide a long-term, riskeontrolled approach using diversi?ed investment options. The NRA may consider all asset classes allowed by the Employee Retirement income Security Act of 1974 and other applicable law as acceptable investment options, The net periodic pension costs for the years ended December 31, 2012 and 2011 consist of the following: 2012 2011 Service cost - bene?ts earned during the year 6 3,382,396 8 2,955,018 Interest cost on protected benefit obligation 4,408,597 4,355,361 Return on plan assets (3,926,614) (3,554,652) Recognized net actuarial loss 2,596,369 1,203,829 Net amortization and deferral 109,635 120,815 Net periodic benefit cost 6,570,383 5,080,371 The toliowing table sets forth the de?ned benefit pension plan?s funded status and the amount of accrued pension costs for the plan years ended December 31, 2012 and 2011 (utilizing a measurement date of December 31): 2012 2011 Change in benefit obligation: Projected bene?t obligation at beginning of year 94,237,584 77,625,400 Service cost 3,382,396 2,995,018 interest cost 4,408,597 4,355,361 Actuarial loss 7,237,819 11,718,860 Benefits paid (1,934,802) (1,816,995) Projected benefit obligation at and ot year 107,331,594 94,237,584 Change in plan assets: Fair value oi plan assets at beginning of year 50,971,376 46,881,278 Actual return (loss) on plan assets 6,677,266 (87,361) Employer contributions 4,955,728 5,994,454 Bene?ts paid (1,934,802) (1,816,995) Fair value of plan assets at end of year 60,669,568 50,971,376 Accrued pension costs re?ected in the statements of ?nancial position in accrued liabilities (46,662,026) (43,266,208) Accumulated benefit obligation 6 (92,945,040) (80,189,987) 19 i NATIONAL RIFLE ASSOCIATION OF AMERICA NOTES TO STATEMENTS 2012 20i1 Amounts recognized in unrestricted net assets: Total net toss 36,161,803 34,271,005 - Prior service cost 1,021,780 1,131 ,415 Total 37,183,583 35,402,420 The estimated net loss and prior service cost for the de?ned pension plan that will be amortized from net assets into the net periodic benefit cost over the next year are $100,583 and $109,635, respectively. The foilowing weighted-average assumptions were used in calculating the above bene?t obligations, net periodic bene?t cost and fair value of plan assets at December 31, 2012 and 2011: 2012 2011 Discount rate used to determine bene?t obligation 4.25% 4.75% Discount rate used to determine net periodic bene?t cost 4.75% 5.75% Rate of compensation increase used to determine bene?t obligation 4.00% 4.00% Rate of compensation increase used to determine periodic bene?t cost 4.00% 5.00% Expected return on plan assets 8.00% 8.00% The basis used to determine the overall expected longterm rate of return on assets utilizing the target asset allocations established within the plan is based on historical returns. The asset allocation strategy is based on several factors including: - The relationship between the current and projected assets of the Plan and the projected actuarial liability stream; - The historical performance of capital markets adjusted for the perception of future short? and long?term capital market performance; I The perception of future economic conditions, including in?ation and interest rate assumptions. The asset allocation strategy shall identify target allocations to eligible asset classes and, where appropriate, suitable ranges within which each asset class can ?uctuate as a percent of the total fund. Each asset class is to remain suitably invested at all times in either cash (or cash equivalents) or permitted securities within each asset class. The asset classes may be rebalanced from time to time to take advantage ot tactical mlsvaluations across major asset classes or investment styles, or to align the current asset mix with strategic targets. At December 31, 2012 and 2011, the fair value and the asset aliocation ot the NRRs pension plan assets was as follows: 2012 2011 Asset category: Mutt-strategy equity PSAs $34,630,432 57% $28,740,244 56% Mutti-etrategy ?xed income PSAs 22,982,842 38 9,241,746 38 Real estate 3,056,294 5 2,989,386 6 $60,669,568 100% $50,971,376 100% The fair value hierarchy for the NRA Employee Retirement Plan (De?ned Bene?t Plan) as of December 31, 2012 and 2011 shows total Pian assets 01860669568 and $50,971,376, respectively, as Level II assets. 20 ?00/270013? 1 NATIONAL RIFLE OF AMERICA NOTES TO FINANCIAL STATEMENTS Inputs include quoted prices for sirnilar assets or liabilities in active markets, quoted prices for identical or similar assets in inactive markets, inputs other than quoted prices that are observable for the asset or and inputs that are derived principally from or corroborated by observable market data by correlation or other means. The Plan?s investments are pooled separate accounts (PSAs). The lair value of a PSA is based on the underlying assets in the PSA and the number of units in each PSA owned by the Plan as a percentage of the total number of units in the PSA. A valuation agent is selected by Principal Life insurance Company for each PSA. The valuation agent calculates the net assets of the account on each open market day. The NRA contributes to the plan based on actuariaily determined amounts necessary to provide assets suf?cient to meet bene?ts to be paid to plan members. NRA annually funds the minimum required contribution. Expected contributions tor the plan year ending December 31, 2013 are $5,852,063. The following pian year bene?t payments, which reflect expected future service, as appropriate, are expected to be paid over the next 10 ?scal years: 2013 0 3,100,000 2014 3.270.000 2015 3,650,000 2016 3,840,000 2017 0 4,000,000 2010?2022 (total) 0 20,550,000 In addition, in 1907, the NRA established a 401(k) plan for empioyees. The plan, available to all employees after 90 days of service, permits participants to contribute a portion of their salary on a pro?tax basis. The NRA matches participant contributions based on plan provisions. Participants are 100% vested in employer contributions after three years of service. The vested balance is avaiiabte to participants at termination, retirement, death, hardships or through eligible loans. Employer contributions to the 401(k) plan totaled $1,625,393 and $1,785,684 for the years ended December 31, 2012 and 2011, respectiveiy. The NRA also maintains a deferred compensation agreement (the Agreement) for certain of?cers and employees. The Agreement is offered at the sole discretion of its Board of Directors, which may amend or terminate the Agreement at any time. The Agreement is funded through whole the insurance policies on the plan beneficiaries. The NRA is the policy owner and bene?ciary. Currently, several key employees are enrolled in the Agreement. Management believes that no unfunded liability exists under the Agreement. At December 31, 2012 and 2011, the NRA had assets relating to the cash surrender values of the whole life insurance policies of $7,951,222 and $6,119,396, respectively. At December 31, 2012 and 2011, the NRA had leans against the whole lite insurance policies of $0 and $3,745,112, respectively, with the not included in investments on the statement of ?nancial position. The policies served as the underlying collateral for the loans and interest on the loans accrued at The NRA had an accrued postretirement liability of $5,403,366 and $4,130,193 at December 31, 2012 and 2011, respectively. Deferred compensation expense for the years ended December 31, 2012 and 2011 was $809,776 and $1 ,125,958. respectively. The NRA has established a 457(b) deferred compensation ptan for the benefit of certain employees. This pian is employee funded, and therefore, the NRA did not contribute to this plan during the years ended December 31. 2012 and 2011. At December 31, 2012 and 2011, the NRA held assets, and had related obligations, relating to this plan of approximately $1.5 million and $1.1 million, respectively. 21 12. i3. "L20132?7?osusz?i'es1?. Rece1vedDate09/27/2013 NATIONAL ASSOCIATION OF AMERICA NOTES TO STATEMENTS The NRA has atso established a 457(1) supplemental executive retirement plan for the bene?t of certain executives. At December 31, 2012 and 2011, the NRA held assets, and had related obligations, relating to the plan of approximately $360,000 and $380,000, respectively. The NRA incurred deferred compensation expense of $134,000 and $134,000 for the years ended December 31, 2012 and 2011, respectively. For both plans, the assets are included in other assets and the liabilities are included in accrued liabilities on the statements of financiai position. RENTAL AS LESSOR The NRA leases a portion of its headquarters building to tenants under various operating leases. These leases inolsde renewal options and escalation ciauses amt require that the tenants pay for their prorated share of the building operating expenses. The toliowing is a schedule of minimum future rentals on noneanceliabie operating ieases as of December 31, 2012: 2013 1,040,226 2014 504,444 2015 318,064 2016 257,790 Total minimum future rentals 2,120,524 Totai rental income for the years ended December 31, 2012 and 2011 was $1,165,916 and $1,297,941, respectively. OPERATING LEASES AS LESSEE The NRA leases warehouse, of?ce space and equipment under noneancellable operating losses with terms expiring through 2016. The lease agreements for various office space include renewal options and escalation clauses and inquire that the NRA pay for shared operating expenses. The annuai minimum payments related to these obligations as of December 31, 2012 are as follows: 2013 008,854 2014 541,643 2015 226,594 2016 123,584 Total minimum payments required 1,802,675 Total lease expense for the years ended December 31, 2012and 2011 was $973,362 and $821,845, respectively. 22 14. L201327000021CSLRece1ved Date: 09/27/2013 NATIONAL ASSOCIATION OF AMERICA NOTES TO STATEMENTS RELATED PARTIES The NRA is af?liated with the Foundation, the CRDF, SCF and the FAF by virtue of the control vested with the NRA's Board of Directors to appoint the Board of Trustees of each affiliate. The PVF is a separately unincorporated potitical action committee of the NRA whose live of?cers are NRA empioyees. The NRA provides certain benefits is the af?liates at no cost, among which are the use of of?ce space and olhetr administrative and support services. Management has determined that the fair value of these bene?ts is minimal, and accordingly, no amounts are re?ected in these ?nancial statements. The Foundation reimburses the NRA for certain expenses, such as salaries, benefits, and general operating expenses, paid by the NRA on the Foundation?s behalf. As of December 31, 2012 and 2011, $16,944,017 and $16,601,319 respectively, was owed to the NRA and included in due from af?liates for reimbursements and pass through funds still held by the Foundation. in addition, certain quali?ed NRA programs were funded by Foundation grants totaling $13,518,518 and $11,752,195 for the years ended December 31, 2012 and 2011, respectively. The CRDF reimburses the NRA for general operating expenses paid by the NRA on the CRDF's behalf. As of December 31, 2012 and 2011, $3,088 and $8,990, respectively, was owed to the NRA for general operating expenses and included in due from af?liates. Ail permanent employees of the SCF are maintained as employees of the NRA and the SCF reimburses the NRA for the total employee costs including benefits. The SCF reimburses the NRA for certain other expenses paid by the NRA on the behalf. As of December 31, 2012 and 2011, $1,474,819 and $779,026, respectively, was owed to the NRA for salaries, insurance and bene?ts not of certain other expenses owed by the NRA to the SCF and included in due from af?liates. The NRA paid administrative and fundraising expenses of $4,970,338 and $569,996 for the years ended December 3t, 2012 and 2011, respectively, on behalf of the PVF. 23