IT’S OUR TIME TO EMPOWER · medical director of the Virgin Islands Medical Institute, which she...

2005 AARP ANNUAL REPORT

IT’S OUR TIMETO EMPOWER

Edith Williams, Richard DeCarlo, and Pat Moles:AARP Social Security volunteers on location at the U.S. Capitol.

MISSION STATEMENTAARP is dedicated to enhancing quality of life for all as we age. We lead

positive social change and deliver value to members through information,

advocacy and service.

601 E Street, NW, Washington, DC 20049

www.aarp.org

D12594 (706)

AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have independence,choice and control in ways that are beneficial and affordable to them and society as a whole. Weproduce AARP The Magazine, published bimonthly; AARP Bulletin, our monthly newspaper; AARPSegunda Juventud, our bimonthly magazine in Spanish and English; NRTA Live & Learn, our quarterlynewsletter for 50+ educators; and our website, AARP.org. AARP Foundation is an affiliated charity thatprovides security, protection, and empowerment to older persons in need with support from thousandsof volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia,Puerto Rico, and the U.S. Virgin Islands.

Photo Credits

Cover: Peter HowsonPage 6: Peter HowsonPage 7: Peter HowsonPage 14: Neil Seiffer Page 14: fotobricenoPage 15: Jay BrousseauPage 15: Joseph P. Sebo, Jr.Page 19: Paul Fetters8: Jim Burger

Design

Blattner Brunner, Inc.

2 Letter from the President

4 Letter from the Chief Executive Officer

6 Member Voices

9 2005: The Year in Review

11 It’s Our Time to Strengthen

12 It’s Our Time to Encourage

14 It’s Our Time to Address

16 It’s Our Time to Look Ahead

18 AARP’s Member Value Agenda

20 AARP’s Ten-Year Social Impact Agenda

22 Summary of 2005 AARP Consolidated

Financial Statements

24 AARP Board of Directors

28 AARP Executive Team

C O N T E N T S

2005 AARP ANNUAL REPORT | 1

AARP IT’S OUR TIME

2005 was our time to protect Social Security by defeating the idea of private accounts…to lead the way in encouraging Medicare beneficiaries to participate in the Part D prescription drug benefit… and to foster fresh ideas about the aging of society — in order to enhance the quality of life for all as we age.

Bill NovelliChief Executive Officer

Robert Hagans Chief Financial Officer

John RotherGroup Executive Officer – Policy and Strategy

Joan WiseGeneral Counsel

Dawn Sweeney President, AARP Services, Inc.

Thomas NelsonChief Operating Officer

Christopher HansenGroup Executive Officer – State and National Initiatives

Jerry Florence (deceased)

Group Executive Officer – Membership

Shereen RemezInterim Group Executive Officer – Membership

Robin TalbertExecutive Director, AARP Foundation

Kevin DonnellanInterim Chief Communications Officer

Nancy LeaMondGroup Executive Officer – Social Impact

Ellie Hollander Chief People Officer

Emilio PardoChief Brand Officer

THE AARP EXECUTIVE TEAM


Left to right: Robin Talbert, Emilio Pardo, John Rother, Shereen Remez, Thomas Nelson, Ellie Hollander, Bill Novelli,Christopher Hansen, Dawn Sweeney, Kevin Donnellan, Robert Hagans, Nancy LeaMond, (seated) Joan Wise


We spent $201 million in member services activities in 2005, an increase of 14.2 percent over 2004. This funded our continued efforts to improvecommunication with our more than 36 million members and to increase thetangible value of AARP membership. In addition, we invested $67 million inmember acquisition and development. Increasing our membership and visibilitycontinued to be a critical component of strengthening our core advocacy andresearch efforts on behalf of our members and reinforced our social impact work.

In furtherance of our social impact goals, we spent $69 million in legislation and research in 2005. These costs included funding our research information center,knowledge management group, federal and state affairs, and grassroots andelections. Some of our activities included preserving and strengthening SocialSecurity, efforts to make prescription drugs more affordable, educating membersand the public about the new Medicare Part D drug benefit, ensuring the qualityand availability of long-term care, fighting predatory lending, and preservingpension rights.

As a result of our ongoing cost-containment efforts, management and generalexpenses were held relatively steady at $169 million. This represented 18.0 percentof revenue in 2005, compared with 13.8 percent in the prior year. These costsincluded our investment in human resources, information technology, and supportservices such as finance, legal, and internal audit.

AARP’s consolidated activities generated an increase in assets of $170.7million — 9.6 percent of total assets for calendar year 2005. Of this increase for the year, $42.5 million was set aside into Board-designated funds. With total assets of $1.8 billion and total liabilities of $1.4 billion, AARP ended the year with$339.1 million in net assets (19.1 percent of total assets) of which $134.3 millionwas designated by the Board for debt reduction, charitable activity, and future AARP programs.

The complete AARP 2005 Audited Financial Statements are available on theInternet at www.aarp.org/annualreport.


When I assumed the presidency of AARP two years ago, I said, “AARPhas a demonstrated history of fighting for justice and fairness for ALL those50 and older. We have the vision, we have the experience, and, most important, we have the will.”

That statement is even truer today, thanks in large part to the collaborative efforts of our volunteers and staff, whose work speaks volumes.Our efforts in 2005 further solidified our leadership in matters affecting people over 50 and, indeed, society as a whole. It is clearly our time as an

organization to lead and empower those 50+ to live their lives to the fullest.

In 2005, we made it our time to go to the front lines of the battle over the future ofSocial Security. That my presidential term coincided with AARP’s battle to strengthen SocialSecurity is one of those coincidences that leaves me feeling that nothing is coincidence. Thetiming couldn’t have been better for me personally, having spent 25 years of my professionallife working at the Social Security Administration. I believe so passionately in the program.

Social Security is at the heart of who we are as a people. It’s not just about freedom fromwant. It’s about fairness among generations. And it’s about strengthening families.

We fought for fairness not just in Social Security, but also in Medicare, another program I am passionate about. Today, millions of beneficiaries are reaping the reward of prescriptiondrugs being covered under Medicare for the first time. AARP can take credit for educatingmillions of people about the importance of enrolling in Medicare Part D. What a wonderfullegacy to be a part of!

LETTER FROM MARIE SMITH,AARP PRESIDENT 2004 –2006

Social Security is at the heart of who we are as a people.

It’s not just about freedom from want. It’s about fairness

among generations. And it’s about strengthening families.

Cora L. Christian

Cora L. Christian, M.D., MPH, of Frederiksted, Virgin Islands (VI), is on the Board Audit and Finance Committee and the AARPInsurance Trust. She is the health care quality improvementmedical director of the Virgin Islands Medical Institute, which she founded and of which she was its first executive director. Dr. Christian also is assistant commissioner of the VI Departmentof Health, medical director of Hess Oil Virgin Islands Corporation,on the board of the American Health Quality Association, and a practicing family physician. As the first native woman from the Virgin Islands to become a medical doctor, she has wonnumerous awards, including the 2003 Physician of the YearAward from the VI Medical Society and the Best Doctors inAmerica Award in 1999.

Richard Johnson

Richard Johnson of Wilmington, DE, is on the Board Committeeon Membership, the AARP Insurance Trust, and the BoardNominating Committee. He served on several task forces to helpensure the protection of older people in Delaware, including theDelaware Attorney General’s Senior Victims Task Force, the AdultProtective Services Advisory Council, and the Medicare FraudPatrol Steering Committee, and currently is a member of theboard of Helpline. Prior to retirement, Mr. Johnson was districtsales manager and director of national accounts for theMonsanto Company. He has received numerous awards,including the Governor’s Outstanding Volunteer Award, theVolunteer Leader of the Year Award and the OutstandingLeadership Award, and a Special Award of Appreciation fromAARP Delaware.

Angel Rodolfo “A.R.” Sales

Angel Rodolfo “A.R.” Sales, of Ft. Myers, FL, is on the BoardAudit and Finance Committee, the National NominatingCommittee, the AARP Services, Inc. Board, and the CEOEvaluation Committee. He retired as chief operating officer fromBest Access Systems and currently is a part-time consultant. Mr. Sales also serves on the board of directors of ADESA, Inc., aNYSE-listed vehicle marketing corporation. He previously servedon the board and executive committee of Financial ExecutivesInternational as well as numerous other boards in Indiana, wherehe maintains a part-time residence. Mr. Sales is listed in Who’sWho in America, and received a Beta Gamma Sigma HonoraryMembership from the Kelley School of Business and a NavyAchievement Medal from the U.S. Navy.

Mary C. Scott

Mary C. Scott of Bedford, TX, is on the AARP Board Committeeon Membership and the National Leadership Forum PlanningCommittee. She previously chaired the National LegislativeCouncil, a legislative advisory body to the AARP Board. She was active in the Retired Teachers Association (RTA) and chairedthe Senior Political Action Committee of Tarrant County. She also is co-founder of the Tarrant Coalition for EnvironmentalAwareness, the Nursing Home Ombudsman Advisory Council,and the Area Agency Public Policy and Legislation Committees.As a speech pathologist, Ms. Scott practiced in the Texas public schools for 24 years and was an instructor of English as a Second Language at a local college. She is also certified to teach language- and learning-disabled children.

Culberto “José” Maldonado

Culberto “José” Maldonado of Colorado Springs, CO, is on the Board Committee on Membership and the AARP InsuranceTrust. He retired as human resources director of two businessesand a school district in Colorado Springs. Mr. Maldonado retiredfrom the U.S. Air Force after 22 years of service, where his last assignment was assistant professor at the U.S. Air ForceAcademy in Colorado Springs. He was a member of the board of directors of Pikes Peak Hospice, and a member of theColorado Springs Medical Ethics Committee and the AreaAgency on Aging. Among his awards are volunteer recognitionawards from the League of United Latin American Citizens(LULAC) and numerous commendations from the Air Force.

Mary Jane O’Gara

Mary Jane O’Gara of Omaha, NE, is on the Board Committee on Membership and the National Leadership Forum PlanningCommittee. She was appointed by the Governor of Nebraska to represent consumers on a Women’s Health and HumanServices Council. She previously was a member of the AmericanDiabetes Association Board and the Omaha Press Club. In 1990,Mrs. O’Gara retired from the Omaha Public Schools as assistant director of public relations. Prior to that, she was a journalist and freelance writer who published numerous magazine andjournal articles. Mrs. O’Gara also collaborated in authoring abook on specific learning disabilities that is still used in the training of teachers. She received a national award for her work with the Omaha Public Schools.


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Thomas “Byron” Thames

Thomas “Byron” Thames, M.D., of Orlando, FL, is on the Board Governance Committee, the AARP Insurance Trust, and the AARP Services, Inc. Board. He is medical director of the Employee Clinic at Florida Hospital in Orlando, the DardenEmployee Clinic, and COMPNET, and is medical consultant totwo health care systems. Dr. Thames consults on medical issuesto the Area Agency on Aging (AAA) for Central Florida, theRetired Senior Volunteer Program (RSVP), and the SeniorResource Alliance, and is the medical provider for the AAAMedical Mobile Clinic for the Elderly. Among his awards are theArt of Medicine Award from the Florida Academy of FamilyPhysicians, the Florida Family Physician of the Year Award, andthe Distinguished Medical Alumni Award from Duke University.

Charles Leven

Charles Leven of Millbrook, NY, serves as Vice President–BoardGovernance and, in that capacity, chairs the AARP Board ofDirectors and the Board Governance Committee. He also chairsthe CEO Evaluation Committee. Mr. Leven’s other volunteeractivities include membership on the Attorney General’s CrimeVictim’s Board and the Dutchess 2000 Health Care PlanningBoard. He also is a member of the New York State Departmentof Aging Advisory Board. Prior to his retirement in 1994, Mr. Leven held a variety of positions in retail management,including senior vice president of operations for Saks FifthAvenue and Abraham & Straus. Among his numerous awards are recognitions by the Suffolk County Boy Scouts and the National Retail Merchants Association.

N. Joyce Payne

N. Joyce Payne, Ed.D., of Washington, DC, is on the BoardCommittee on Membership and the AARP Foundation Board of Trustees. Dr. Payne is director of the human resources and minority programs for the National Association of StateUniversities and Land-Grant Colleges. She founded the ThurgoodMarshall Scholarship Fund, which has awarded over $42 millionin scholarship assistance and capacity-building support. Dr. Paynealso founded and chairs the board of directors for the G. JamesGholson Endowment Fund and chaired the board of trustees of the University of the District of Columbia Board. Among hernumerous honors are an honorary doctorate degree from LincolnUniversity, a Presidential Leadership Award from Delaware StateUniversity, and a fellowship from the Ford Foundation.


Bonnie M. CramerBonnie M. Cramer, of Raleigh, NC, is on the Board GovernanceCommittee and the AARP Insurance Trust. She retired from a 30-year career with the North Carolina state government’sDepartment of Health and Human Services and the Governor’sOffice of State Budget and Management. Ms. Cramer was amember of the board of directors for the National Association of State Units on Aging and on the advisory committee for theNational Center on Elder Abuse. She has received many awards,including the Ewald B. Busse Award for Health Care Leadershipfor Older Adults from the Division of Aging, a Public ServiceAward from the North Carolina Association for Home Care, anda Leadership in Aging Award from the Duke University Centerfor Aging.

Yash Aggarwal

Yash Aggarwal, Ph.D., JD, of New City, NY, serves on the BoardAudit and Finance Committee and the AARP Insurance Trust. In 2002, Dr. Aggarwal founded IndiaPAC — India-U.S. PoliticalAction Committee — to foster better relations between theUnited States and India. Previously, he chaired the Asian-American Coalition, a nonprofit public interest organization that facilitated the integration of Asian Americans into themainstream. He is also on the board of Worldfest, NY, Inc. Dr. Aggarwal retired from MetLife, where he was a financialplanner and risk manager. Prior to that, he was president and board chair of Sensearth, Inc., a corporation providingconsulting services on seismic risk. Among his many awards andcitations is an award for exemplary service from Respect AgeInternational in 2001.

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THE AARP BOARD OF DIRECTORS

Marie F. SmithMarie F. Smith of Maui, HI, is AARP’s 21st President. She brings

a wealth of leadership experience in Social Security and a

commitment to women’s, multiethnic, and aging issues. During

her presidency, she is emphasizing retirement security issues.

Ms. Smith held several senior managerial positions with the Social

Security Administration, including director of Manpower

Management and Organization Planning. She is a member of

Zonta International in Washington, DC. Among her numerous

citations and awards are the Woman of Excellence Award from

the Commission on the Status of Women. Ebony magazine

recently cited her as one of America’s 100 most influential leaders,

and she is listed in Who’s Who in American Women, 2004.

Erik D. Olsen

Erik D. Olsen, D.D.S., of Glenbrook, NV, is AARP’s President-electand will become AARP’s 22nd National President in May 2006. He currently serves on the AARP Audit and Finance Committee, is co-chair of the AARP Insurance Trust, and is an ex-officio member of the Board Nominating Committee. Dr. Olsen was an executive committee member of the Secretary’s AdvisoryCommittee on Regulatory Reform for the Department of Healthand Human Services (HHS). In 1992, he retired as president andCEO of Delta Dental Plan of California. Dr. Olsen’s recognitionsinclude induction into the Delta Dental Association Hall of Fameand receipt of the first Hillenbrand Fellowship in DentalAdministration.

Nelda Barnett

Nelda Barnett of Owensboro, KY, is vice chair of the AARPFoundation Board of Trustees and is a member of the BoardGovernance Committee. She has 36 years of experience in humanservices, with the majority of that time devoted to helping olderAmericans. She was director of the Area Agency on Aging (AAA)and, in 1999, retired as director of Maplebrook Village, ChristianChurch Homes of Kentucky. She currently is a volunteer with both organizations. Mrs. Barnett received the Mayor’s Award forExcellence, the highest honor bestowed upon an individual ororganization by the City of Owensboro, the Elizabeth MundayAward in recognition of her work for seniors, and theThoroughbred Award for Outstanding Advocacy on Behalf of the Elderly from the Kentucky Association for Gerontology.

The AARP Board of Directors

1. Marie F. Smith

2. Erik D. Olsen

3. Nelda Barnett

4. Lavada E. DeSalles

5. Joanne Disch

6. W. Lee Hammond

7. Jennie Chin Hansen

8. Douglas C. Holbrook

9. Clarence Pearson

10. Mary C. Scott

11. Culberto “José” Maldonado

12. Mary Jane O’Gara

13. Cora L. Christian

14. Richard Johnson

15. Angel Rodolfo “A.R.” Sales

16. Thomas “Byron” Thames

17. Charles Leven

18. N. Joyce Payne

19. Bonnie M. Cramer

20. Yash Aggarwal

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Jennie Chin HansenJennie Chin Hansen of San Francisco, CA, chairs the AARPFoundation Board of Trustees and is on the Board Committee onMembership. She recently retired as executive director of On Lok,Inc., a family of nonprofit organizations providing primary, acute,and community-based long-term care services to older people inSan Francisco. The On Lok model is a national prototype nowbeing emulated in all 50 states. Ms. Hansen is a nursing facultymember at San Francisco State University and a senior fellow atthe Center for the Health Professions at the University ofCalifornia. She has received numerous awards, including the2002 Gerontological Society of America’s Maxwell Pollack Award for Productive Aging and the Silver SPUR Award from the San Francisco Urban Planning and Research Organization.

Douglas C. Holbrook

Douglas C. Holbrook of Fredericksburg, VA, serves as VicePresident–Secretary/ Treasurer and, in that capacity, chairs theBoard Audit and Finance Committee. He also is chair of theNational Leadership Forum Planning Committee and a memberof the CEO Evaluation Committee. Mr. Holbrook was appointedsecretary–treasurer of the American Postal Workers Union(APWU) in 1981, where he was re-elected in every nationalAPWU election since 1983. He retired as chief financial officerafter serving his fifth term. Extremely active in the AmericanDiabetes Association (ADA), Mr. Holbrook has been responsiblefor a strong, supportive alliance between the American PostalWorkers Union and the ADA. He received numerous awardsfrom the Juvenile Diabetes Association and the ADA.

Clarence Pearson

Clarence Pearson of New York, NY, serves on the BoardGovernance Committee and the AARP Foundation Board ofTrustees. Mr. Pearson is senior advisor to the World HealthOrganization Office at the United Nations, where his focus isglobal aging. He is on the advisory panel of the InternationalExecutive Service Corps and the board of overseers forDartmouth Medical School, among others. He has received theInternational Health Lifetime Achievement Award from theAmerican Public Health Association and the DistinguishedAlumni Award from the School of Public Health at the Universityof North Carolina at Chapel Hill. Mr. Pearson is an adjunctprofessor of community health at the Robert Wood JohnsonMedical School and adjunct professor of education at theTeachers College, Columbia University.

Lavada E. DeSalles

Lavada E. DeSalles of Sacramento, CA, is chair of the AARPInsurance Trust and vice chair of the Board GovernanceCommittee. After 32 years of service with the State of CaliforniaEmployment Services, Mrs. DeSalles retired in 1994 as executivedirector of the Governor’s Task Force for Employment of OlderWorkers. She was a member of the International Association ofPersonnel in Employment Security, the National Forum for BlackPublic Administrators, and the African American LeadershipAssociation. Mrs. DeSalles has received the Los Angeles Mayor’sCertificate of Appreciation presented by the late Tom Bradley, aCertificate of Special Recognition from Congresswoman MaxineWaters, and an Outstanding Achievement Award from theAfrican American Leadership Association.

Joanne Disch

Joanne Disch, Ph.D., R.N., FAAN, of Minneapolis, MN, is chair of the National Nominating Committe, and vice chair of the Board Audit and Finance Committee, and serves on theCEO Evaluation Committee. She is professor and director of theKatharine J. Densford International Center for Nursing Leadershipand the Katherine R. and C. Walton Lillehei Chair in NursingLeadership at the University of Minnesota School of Nursing. Dr. Disch serves on the boards of directors for the AmericanAcademy of Nursing and Allina Health System, and wasappointed to the Governor’s Commission on Health Care Costs.She also was honored with the establishment of the JoanneDisch Excellence in Medical Nursing Practice Award from theHospital of the University of Pennsylvania.

W. Lee Hammond

W. Lee Hammond of Salisbury, M.D., is Vice President–Membership. In that capacity, he chairs the Board Committee on Membership, and serves on the National NominatingCommittee. He is a member of the Maryland Commission on Aging and the Maryland Innovations in Aging Services Grant Program Advisory Council. Mr. Hammond retired from a 30-year career with the Wicomico County Maryland Board ofEducation as a school administrator. For that work, he receivedthe Governor’s Citation for Work in Education and an HonoraryLife Membership in the Maryland Congress of Parents andTeachers. In recognition of his volunteer service, Mr. Hammondreceived the Governor’s Salute to Excellence and was elected tothe Maryland Senior Citizens Hall of Fame.

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i am proud to have served an organization whose time

has truly come. AARP has taken a leadership role, working to

empower people to bring about a society in which we ALL age

with dignity and purpose. That means you. That means me.

As my presidency comes to an end and I reflect on the past two years, I am humbled bythe impact this organization has had on my life and the lives of millions of Americans. Ouraccomplishments over the past two years have been staggering. Let me highlight just a few:

n We responded decisively after hurricanes Katrina and Rita with prompt on-the-groundsupport and AARP Foundation funding for 41 local groups in Alabama, Louisiana,Mississippi, and Texas less than three weeks after the hurricanes.

n We strengthened our voice on international aging issues and conducted ground-breaking research to compare retirement trends across different countries. We also convened important international conferences on issues such as long-term care, private and public pension systems, and livable communities.

I am proud to have served an organization whose time has truly come. AARP has taken aleadership role, working to empower people to bring about a society in which we ALL agewith dignity and purpose. That means you. That means me. And that means our children andgrandchildren, as well. Dignity and purpose are why AARP fights for Social Security, as well asfor older workers, private pensions, health care reform, drug affordability, and age-friendlycommunities where people can continue to live independently. We pledge to use “the powerto make it better” to ensure that people 50+ have independence, choice, and control in waysthat are beneficial and affordable for them and all of society.

Marie F. SmithPresident, AARP

“Social Security is at the heartof who we are as a people.”


LETTER FROM BILL NOVELLI,AARP CHIEF EXECUTIVE OFFICER

“It’s Our Time…”

I can almost hear AARP’s founder, Dr. Ethel Percy Andrus, saying thesewords. She believed when she founded AARP in 1958 that “It’s Our Time.”But when I step back and think about it, I realize that it really wasn’t somuch that it was her time, but that she made it her time.

In Dr. Andrus’ time, it was uncommon for women to pursue highereducation, women principals in schools (which she was) were rare, and

retirement was considered a time to sit back and relax. It certainly doesn’t sound like an idealtime for her. But Ethel Percy Andrus founded the National Retired Teachers Association (NRTA)and AARP after she retired. She made it her time by recognizing needs and finding ways tomeet them and by providing leadership.

Harry Truman once said, “[People] make history and not the other way around. In periodswhere there is no leadership, society stands still. Progress occurs when courageous, skillfulleaders seize the opportunity to change things for the better.” That’s what Dr. Andrus did,and that’s what AARP is still doing today.

We entered 2005 knowing that we would be engaged in a tough battle over the futureof Social Security. While our ultimate goal was (and still is) to make Social Security solvent forthe long term while maintaining a guaranteed, adequate benefit, we knew that we wouldfirst have to defeat the idea of creating private accounts out of Social Security. As 2005 cameto a close, the public had pretty much concluded that creating private accounts out of SocialSecurity was a bad idea, and what had been at the start of the year a forceful call for suchaccounts had not succeeded. We didn’t achieve a solvency solution to Social Security in 2005,but we did lay to rest (at least for now) the notion of creating private accounts out of SocialSecurity and establish some key principles on which a solvency solution can be reached.

2005 was also our time to lead the effort to get Medicare beneficiaries enrolled in thenew Medicare Part D prescription drug benefit. Since we had led the effort to get theMedicare Modernization Act enacted into law in 2003, we also wanted to help beneficiariesmake the important choices about whether or not to enroll in the program and aboutselecting the plan that would benefit them the most. To do that, we launched a majorcampaign to inform and educate our members and the public about the new Medicare Part D benefit.

Medicare Part D is now helping millions of older Americans better afford their prescriptiondrugs. But everyone needs more affordable prescription drugs. So in addition to our MedicarePart D education and outreach campaign, we continued our campaign for more affordableprescription drugs. Our AARP Rx Watchdog Reports and research forums were instrumental inkeeping the spotlight on rising drug prices. We also continued lobbying for state and federallaws that would allow safe and legal prescription drugs to be imported from Canada and

B. Health and Supportive Services

n Americans have affordable coverage for, and access to, quality health care and supportive services.

• Medicare is strengthened as the most important source of quality health care for older Americans.

• Prescription drugs are more affordable to older Americans.

• Individuals have access to home- and community-based care.

• Individuals have access to a range of financing sources for needed long-term services and supports.

• Appropriate quality services are delivered efficiently and effectively across all settings.

• Stable and affordable health coverage for all is available.

n Americans 50+ have improved health status (through healthy behaviors).

• An increasing number of 50+ individuals become more physically active.

• An increased proportion of people 50+ use medication wisely.

C. Livable Communities

n Americans 50+ are able to sustain mobility as they age.

• There are adequate mobility options when driving is not feasible.

• Individuals retain their driving competencies and competent drivers retain their driving privileges to the maximum extent possible.

n Americans 50+ have appropriate and affordable housing options.

• Individuals have adequate housing options that enable them to age in place.

D. Global Aging

n Nations exchange experiences and best practices on global aging issues to strengthen policies in the United States and other countries as a means of economic security and quality of life for all, regardless of age.

• AARP is a leading force in international understanding and dialogues around the global aging agenda.

E. Navigation — Access to Information

n Americans 50+ have access to and use needed information and resources.

• AARP provides one-stop access to needed information and resources.

AARP will work in partnerships and coalitions, and utilize information and education, advocacy, community service/volunteers, products and services, and other means to achieve these goals.


SUMMARY OF 2005 AARPCONSOLIDATED FINANCIAL STATEMENT

SUMMARY OF 2005 AARPCONSOLIDATED FINANCIAL STATEMENTS

The following summary financial information is from the consolidated statements of activities and financialposition of AARP and its affiliates for the year endingDecember 31, 2005.

Revenue

Our total operating revenue in 2005 was $936 million, an increase of 6.6 percent over 2004. Membership dues ($229 million) and royalties and service provider relationshipmanagement fees ($379 million) continued to be the two largest sources of revenue supporting AARP programs and services. All federal funds are administered by the AARPFoundation, AARP’s affiliated charity.

Expenses

Our operating expenses totaled $925 million in 2005, an increase of 15.6 percent over2004. We made investments in member services, communication, and advocacy activities tocarry out our member and social impact agendas. AARP publications — primarily AARP TheMagazine and AARP Bulletin — cost $165 million to produce and distribute to our membersin 2005. Advertising revenue offset about 64.5 percent of these costs.

We continued to invest heavily in programs and services that directly benefit membersand their communities — a total of $254 million during 2005, up 6.2 percent from 2004.These include: the AARP Driver Safety Program; member education; community presence;volunteer coordination; and AARP Foundation’s Legal Counsel for the Elderly, which providesfree legal assistance and education to older adults, primarily in the District of Columbia. Alsoincluded are two other AARP Foundation programs, AARP Tax-Aide and the AARP SeniorCommunity Service Employment Program (SCSEP), which transitions low-income people into paid employment.


Bill NovelliChief Executive Officer, AARP

other nations. And our state offices led the way in developing, and advocating for, someinnovative state-level solutions to make prescription drugs and health care generally moreaffordable.

As more and more people get older, our research tells us that more of them want to continue working, out of either need or choice. This year we reached a new milestone in ourcontinued advocacy on behalf of older workers when we joined with Towers Perrin to releaseThe Business Case for Workers Age 50+: Planning for Tomorrow’s Talent Needs in Today’sCompetitive Environment. This study not only challenges the myths about the costs and valueof older workers, but also demonstrates that companies should view 50+ workers as asolution to meeting their workforce needs. It also shows, through documented best practicesand case studies, how to develop and implement an effective strategy for retaining andrecruiting workers 50+.

There’s no question that the world is changing. And boomers especially are looking for leadership to show them how they can become involved in social change to build a betterAmerica. At AARP, we’re looking to the future and providing that leadership. In 2005, weintroduced Reimagining America: AARP’s Blueprint for the Future. This document recognizesthat the aging of the boomers and the increased longevity of Americans present real financialand social challenges to all sectors of society, and argues that, as a nation, we can balanceour longer lives with these challenges and build a stronger nation in the process. It lays out an ambitious but realistic agenda that will protect vital public programs, protect theindependence and choice of people as they get older, and remain fair to all generations.

Social impact is what fundamentally distinguishes us from other organizations. Ourmembers value our long history of social activism, and we are well-positioned to inspire anew generation to work for positive social change. In 2005, we added more than 800,000new members and better integrated our social impact and member value work.

It’s our time to lead. I’ve always believed that true leadership must lead to change thattranslates into social betterment. That’s our mission at AARP: to enhance the quality of life forall as we age. Whether fighting for the future of Social Security, educating people about theMedicare prescription drug benefit, helping to make communities more livable, transformingthe health care system, demonstrating the value of older workers, or protecting the pensionsof workers, we are making life better for people as they age.

in 2005, we added more than 800,000 new members and betterintegrateD our social impact and member value work.


IT’S OUR TIMETO SPEAK OUT

Member Voices: Pat Moles, Edith Williams, and Richard DeCarlo

AARP volunteers are making an enormous impact on their lives — and the livesof other older adults. Take Pat Moles and Edith Williams, for example. The twowomen separately signed up to receive presentation training from AARP.“When we discovered we were both from Montgomery County, we decided to be co-presenters,” says Pat. “We divvy up responsibilities, and it makes thepresentation more interesting.”

The two have spoken at retirement communities, colleges, and community fairs ontopics such as discussing tough issues with your children and prolonging independentliving. “Seniors have valuable life experiences — and AARP taps into them,” Pat says. Adds Edith,“I’ve learned so much from being a volunteer. In helping others, I grow as anindividual.”

Like Pat and Edith, Richard DeCarlo shares a thirst for knowledge and sharing. “If youcare, you share,” says Richard. An active AARP volunteer for more than 13 years, Richard isnow president of the largest AARP chapter in Washington, DC. He also serves as a “goodwill” ambassador at national AARP events held across the country.

Richard encourages chapter members to participate in all that AARP has to offer. “We have lots of volunteer opportunities here in DC,” says Richard. For instance, Richardgalvanized more than 50 AARP members from his chapter to participate in a Social Securityrally on Capitol Hill. Pat and Edith were also at the rally, getting out the message aboutAARP’s position on the proposed privatization of Social Security.

“Volunteering with AARP has been the crowningachievement of my life,” says Richard. “It’s given me anopportunity to share with others and others to share withme. I’m really proud to be a member.”

2005 AARP ANNUAL REPORT | 92005 AARP ANNUAL REPORT | 8

2005 THE YEAR IN REVIEW

2005 marked another historic year of growth for AARP, as well as continued progress toward our social change andmember value goals. All this resulted from the remarkable passionand commitment of our staff, volunteers, and members. We weresteadfast in our commitment to building and sustaining a WORLD-CLASS organization, while achieving successes in the ongoingdebate over the future of Social Security and prescription drugaffordability. We launched a major campaign to inform andeducate the public about the new Medicare Part D benefit andadvanced our commitment to keeping older workers in theworkforce through our National Workforce Initiative. We published Reimagining America: AARP’s Blueprint for the Future,which puts forth a common-sense framework to deal with anaging society and positions AARP as a leading voice with the message that the challenges of an aging America are manageableand indeed beneficial.


Social Security

Strengthening Social Security was a top priority in 2005, and our work in that area isthe essence of meaningful social impact.

Late in 2004, the Bush Administration proposed diverting payroll contributions to fund private accounts carved out of Social Security. This would have done little to assure the continued values we have come to expect from the program. In fact, private accounts would damage Social Security by cutting guaranteed benefits, creating a mountain of debt, and passing the bill to future generations. AARP and millions of Americans viewed this as a serious threat to a system that has providedsecurity since 1935. So we embarked on a national campaign to ensure that SocialSecurity remains secure for future generations of Americans. It was the right thing to do at the right time, and we took on the challenge.

AARP members, volunteers, and the public at large demonstrated their supportfor blocking private accounts that take money out of Social Security. Some 1.3 millionpetitions were signed and sent to lawmakers, 412,000 calls and 150,000 emails were received by Members of Congress, and our 250 forums and local meetings drew thousands of participants. AARP members felt empowered and supported by our commitment and leadership in the debate to protect this important bedrock forfinancial security.

As the debate over securing Social Security moves forward, any legislation must, at a minimum, be measured against a basic checklist:

n Risk-free benefits that can’t be outlived for all who contribute.

n Annual adjustments that keep up with inflation.

n Protection for working families with retirement, disability, and survivor benefits.

n Broad participation by workers to ensure fairness.

n Balanced contributions from both employees and employers, and benefits based on those contributions.

n An early retirement benefit that meets the needs of American workers.

These values and checklist items leave more than enough room for sensible ideas and needed changes that can go a long way towardeliminating the solvency shortfall. We know that finding consensus will not be easy, but it is something lawmakers must do. Getting to solvency will bring all Americans closer to a secure retirement.

IT’S OUR TIMETO STRENGTHEN

Here are some highlights from 2005:

n AARP’s Social Security campaign will certainly go down in our history as one of the most integrated

campaigns the Association has ever mounted. We played aleading role in this all-important national debate. By the beginning of

2006, the idea of creating private accounts out of Social Security was a backseat issue. That’s social impact.

n We launched a major campaign to inform and educate our members and othersabout the new Medicare Part D benefit. Our AARP Rx Watchdog Reports andresearch forums were instrumental in keeping the spotlight on rising drug prices.We also continued lobbying for state and federal laws that would allow safe andlegal prescription drugs to be imported from Canada and other nations.

n We published Reimagining America: AARP’s Blueprint for the Future, which lays out our view that America can afford to grow older, but only if policy makers move to put forward-thinking policies in place.

n We handed over our Voices of Civil Rights archive to the Library of Congress. These firsthand accounts form the foundation of a great national treasure, and we are proud to have been a part of collecting them.

n 2005 was a very successful year for the AARP Global Aging Program. While wecontinued to share our expertise and experience abroad and learn from theexperiences of other nations, the Global Aging Program also focused on bringinginternational experiences to the United States as Social Security, pensions, andimplementation of Medicare Part D dominated the domestic policy agenda.

n Through the AARP Foundation, we led a large-scale fundraising effort to providedisaster relief services to older victims of the 2005 Gulf Coast hurricanes. By the end of the year, 41 grants totaling almost $1.6 million were issued to localorganizations in the affected areas, which provided food, shelter, health services,housing, and legal assistance.

2005 AARP ANNUAL REPORT | 12 2005 AARP ANNUAL REPORT | 13

2. Encourage Medicare-eligible individuals to enroll in the Part D program by the May 15, 2006, enrollment deadline.

1. Our integrated outreach efforts included advertising, media outreach, and broaddissemination of informational booklets (in English and Spanish), as well as numerousoutreach efforts coordinated by our 53 state offices. To reach more people who couldqualify for limited-income assistance, which would cover almost all of their prescriptioncosts, we stepped up national outreach, including distributing public service announcements and sponsoring audio news releases with information on how to apply for the Extra Help benefit. We also provided additional funding to organizations withexisting programs that provide one-on-one enrollment help to low-income individuals, and reached out to low-income beneficiaries in rural and urban areas through local partners that conduct on-the-ground enrollment assistance.

3. Lift barriers to enrolling in Medicare Part D.

1. We worked to persuade government officials to takeaction on several key barriers to enrolling, including extending the enrollment deadline for low-income beneficiaries through 2006; extending enrollment for all beneficiaries in hurricane-affected states through 2006; keeping Niaspan, a cholesterol-lowering drug, on the list of Medicare-approved drugs through 2007; creating a standardized form for the exceptions and appeals process; and protecting beneficiaries from Part D plans’ formulary changes.

IT’S OUR TIMETO ENCOURAGE

Medicare Part D Educational Outreach

We made 2005 our year to play a leading role in making prescription drug coverage available to Medicare beneficiaries. Today, more than 37 million Americans have Medicare prescriptiondrug coverage (also known as Part D). Our volunteer and staffactivities in the states and at the national level have made a real difference in people’s lives.

When launching the Medicare Rx Outreach campaign in September 2005, we understood that the true test would be the number of individuals we helped make an informed decision about how to enroll in the Part D plan that is right for them. Our local and national outreach efforts achieved three goals, to:

1. Position AARP as a trusted and credible source ofinformation on the new Medicare Part D program.

In an effort to assist Medicare beneficiaries with the enrollment process, AARP published and distributed well over one million copies of consumer education materials, including a general informational publication,The New Medicare Prescription Drug Coverage: WhatYou Need to Know, and a companion publication, TheNew Medicare Prescription Drug Coverage: Extra Helpfor People with Limited Incomes, which detailed theExtra Help benefit for Medicare beneficiaries withlimited incomes. We also produced The NewMedicare Prescription Drug Coverage: Using theMedicare Prescription Drug Plan Finder.

2005 AARP ANNUAL REPORT | 152005 AARP ANNUAL REPORT | 14

Can a Business Case Be Made for 50+ Workers?

AARP took a bold position through a report that examined the costof 50+ workers relative to cash compensation (including salary, pension, and health benefits), paid time off, and the “value” side(including engagement and turnover). This landmark report, TheBusiness Case for Workers Age 50+: Planning for Tomorrow’s TalentNeeds in Today’s Competitive Environment, which was produced bythe management consulting firm Towers Perrin, addressed the ongoing concerns employers often express regarding the costs associated with older workers, particularly as they relate to health insurance coverage. The report shows that the additional cost associated with older workers is negligible and is largely offset bysuch factors as higher productivity, lower turnover rates, and greaterloyalty. AARP believes including 50+ workers in employer strategiesmakes good business sense.

AARP formed the Alliance for an Experienced Workforce, made up of 22 associations that represent over five million companiesnationwide. The Alliance seeks to be an information clearinghouse and “think tank”on ways to support the challenges that industries will face with the aging of theirworkforce. The Alliance will lead the way in providing employers with the information,tools, and resources they will need to meet the needs of their 50+ workforce.

In addition to addressing the challenges American businesses face with the agingof the workforce, AARP is committed to providing employment opportunities for ourmembers and 50+ jobseekers. The AARP National Employer Team (NET; formerly theFeatured Employers Program) represents national employers who are seeking the skillsand experiences of 50+ workers. Companies representing the NET include The HomeDepot, Kelly Services, Johns Hopkins, and CVS/pharmacy.

AARP is taking the lead on issues concerning 50+ workers as more employers (specifically in certain industries such as health care, manufacturing, andretail) are seeking our assistance in helping them solve

issues related to their 50+ workforce.

IT’S OUR TIMETO ADDRESS

OLDER WORKERS — AARP Workforce Issues

It’s our time to address the needs of the aging American workforce, which is becoming more top-of-mind for today’s employers. More employers are seeking to adopt best practices from industry leaders to keep their competitive edge. Consider that:

n In 2000, 13 percent of the workforce was 55 and older.

n By 2015, 20 percent of the workforce will be 55 and older.

n The highest growth rate in the workforce will be among people aged 55–64.

Early on, AARP recognized the potential of this trend to affect the lives of our members. The AARP Employer Resource Center was established as a clearinghouse of information targeted to employers regarding issues affecting the 50+ workforce. Its website, www.aarp.org/employerresourcecenter, includes information about employer best practices, research to practice, web-based seminars, and a service that provides the user with weekly news clippings and articles related to the 50+ workforce.

2005 marked the best year ever for the AARP Best Employers for Workers Over 50 awards program. Fifty companies were honored from a wide variety ofindustries including education, manufacturing, healthcare,and finance.

Suzane W. Bradley (center), General Manager, Inclusion Strategies, Cinergy Corp., receives her AARP Best Employers for Workers Over 50

award from AARP Board President Marie F. Smithand AARP Chief Executive Officer Bill Novelli.

Europe NorthAmerica

Oceania Asia Latin America/Caribbean

Near East/North Africa

Sub-SaharanAfrica

30

2000

20

10

0

Perc

enta

ge65

year

san

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der

2050

Source: U.S. Bureau of the Census (2000).


Looking Ahead: Social Impact & Member Value in 2006

2005 was a year marked by even greater passion for our mission and steady progresstoward our social change and member value goals. We won a number of major battlesfor the future of Social Security and the implementation of the prescription drug benefit in Medicare.

In 2006, we will focus on four main themes:

1. Making available to our members relevant new and restaged products. We willmake significant investments in developing products and services that speakdirectly to the way the Baby Boom Generation lives.

2. Communicating better with our members. Our members are becoming more technologically savvy. We will improve our website while developing and testingprototypes of new information products targeted for members’ specific interests.

3. Strengthening an already strong brand and integrating it throughout AARP’s work. This initiative will let the public see AARP not as an organization focused on the issue of retirement but on broad issues of living life to the fullest at every age in every American community.

4. Making effective investments in infrastructure to improve interactions withmembers. We plan to become much better at enhancing the contacts individualmembers have with us by developing a business strategy, Member RelationshipManagement, specifically to improve interactions with our members. We will also invest more in our integrated database infrastructure.

In addition, we will continue in our efforts to be more efficient by being faster and better in our quest to change the world. Our founder, Dr. Ethel Percy Andrus, carved out a niche when she founded AARP, and the Association has spent the last 47 years building on that niche. Now, others are experiencing an awakening in virtually every sector in which we operate, so we need to stay ahead of the game.

In 2006, we will be more visible in more places with more partners. We will have strategiestailored to boomers and other audiences, including web-based communication.

At the international level, the Board of Directors approved the creation of the AARP GlobalNetwork to be launched in 2006. For decades, AARP has been approached by organizations that want to learn how and what we do, in order to build a similar organization in their owncountry. The AARP Global Network will allow us to share best practices and deliver technicalassistance to strengthen existing organizations and build new ones across the globe. The Network will bring together organizations from around the world that share the mission that the needs and interests of people as they age will be better met through social entrepreneurship.IT’S OUR TIME

TO LOOK AHEADTrends in Global Aging


3. Engagement on Social Issuesn Members value AARP’s active leadership on social issues.

• Members are aware of and highly satisfied with AARP’s actions on issues

of importance to them at national, state, and local levels.

• Members increasingly engage in opportunities provided by AARP to contribute to improving their communities and society.

4. Relationship with AARP

n Members feel they have a relationship with AARP and appreciate their ability to be heard.

• Members have a passionate/strong relationship with AARP.

• Members believe that AARP listens, acknowledges, and responds to their issues and viewpoints.

5. Personal Growth, Fulfillment, and Purpose

n Members successfully explore, develop, and realize their personal potential.

• Members view AARP as a partner in their quest for a creative empowered life beyond 50.

• AARP helps individuals and society accept and value wisdom, vitality, and experience of people 50+.

AARP’S MEMBER VALUE AGENDA

People 50+ choose to join and stay with AARP becausewe deliver meaningful value and play a unique role intheir lives.

1. Information

n Members trust AARP as a primary source of credible, accurate, and actionableinformation that helps them make informed decisions and enhances the quality of their lives.

• Members increasingly report that they trust AARP as an objective provider of credible information.

• Members increasingly cite AARP’s information resources as a primary value of membership.

• Members increasingly access timely, relevant, and high-quality information through the AARP information channel of their choice.

2. Benefits, Products, and Services

n Members trust and choose AARP’s market-changing (or market-leading) benefits, products,and services because they meet their needs and enhance their lives.

• Members (and prospective members) increasingly choose AARP as their provider of choice to acquire the benefits, products, andservices they need and want.

• Members realize/recognize value every day by using their AARP membership.

Europe NorthAmerica

Oceania Asia Latin America/Caribbean

Near East/North Africa

Sub-SaharanAfrica

30

2000

20

10

0

Perc

enta

ge65

year

san

dol

der

2050

Source: U.S. Bureau of the Census (2000).


Looking Ahead: Social Impact & Member Value in 2006

2005 was a year marked by even greater passion for our mission and steady progresstoward our social change and member value goals. We won a number of major battlesfor the future of Social Security and the implementation of the prescription drug benefit in Medicare.

In 2006, we will focus on four main themes:

1. Making available to our members relevant new and restaged products. We willmake significant investments in developing products and services that speakdirectly to the way the Baby Boom Generation lives.

2. Communicating better with our members. Our members are becoming more technologically savvy. We will improve our website while developing and testingprototypes of new information products targeted for members’ specific interests.

3. Strengthening an already strong brand and integrating it throughout AARP’s work. This initiative will let the public see AARP not as an organization focused on the issue of retirement but on broad issues of living life to the fullest at every age in every American community.

4. Making effective investments in infrastructure to improve interactions withmembers. We plan to become much better at enhancing the contacts individualmembers have with us by developing a business strategy, Member RelationshipManagement, specifically to improve interactions with our members. We will also invest more in our integrated database infrastructure.

In addition, we will continue in our efforts to be more efficient by being faster and better in our quest to change the world. Our founder, Dr. Ethel Percy Andrus, carved out a niche when she founded AARP, and the Association has spent the last 47 years building on that niche. Now, others are experiencing an awakening in virtually every sector in which we operate, so we need to stay ahead of the game.

In 2006, we will be more visible in more places with more partners. We will have strategiestailored to boomers and other audiences, including web-based communication.

At the international level, the Board of Directors approved the creation of the AARP GlobalNetwork to be launched in 2006. For decades, AARP has been approached by organizations that want to learn how and what we do, in order to build a similar organization in their owncountry. The AARP Global Network will allow us to share best practices and deliver technicalassistance to strengthen existing organizations and build new ones across the globe. The Network will bring together organizations from around the world that share the mission that the needs and interests of people as they age will be better met through social entrepreneurship.IT’S OUR TIME

TO LOOK AHEADTrends in Global Aging


AARP’S TEN-YEAR SOCIAL IMPACT AGENDA

People 50+ will have independence, choice, and controlin ways that are beneficial and affordable for them andfor society as a whole.

A. Economic Security

n Americans can rely on Social Security that is solvent for the long term and maintains a guaranteed benefit and income protection features.

• There is stronger public support for Social Security improvements that comport with AARP policies.

• Legislation comporting with AARP’s policies is enacted to make Social Securitystronger and solvent.

n Americans 50+ remain in the workforce, as desired.

• Unfair and/or discriminatory treatment of 50+ workers is reduced.

• Employers adopt policies and practices that afford 50+ workers more and betterworkplace options.

• Underserved populations obtain employment.

n Americans accumulate and effectively manage adequate retirement assets.

• Pensions and retirement savings vehicles are protected and, where possible,expanded.

• Individuals manage financial decisions better.

• Consumers are protected from financial fraud and abuse that can erode retirementsavings and financial assets (including home equity and investments).

• There is access to affordable, quality utility services.

n Americans with low incomes and special populations have increased resources available to meet their needs.

• Low-income and special populations use benefits forwhich they are eligible.

• Key components of the social safety net (e.g., SSI, state Rx, energy assistance) are preserved or expanded to protect the most vulnerable.


LETTER FROM BILL NOVELLI,AARP CHIEF EXECUTIVE OFFICER

“It’s Our Time…”

I can almost hear AARP’s founder, Dr. Ethel Percy Andrus, saying thesewords. She believed when she founded AARP in 1958 that “It’s Our Time.”But when I step back and think about it, I realize that it really wasn’t somuch that it was her time, but that she made it her time.

In Dr. Andrus’ time, it was uncommon for women to pursue highereducation, women principals in schools (which she was) were rare, and

retirement was considered a time to sit back and relax. It certainly doesn’t sound like an idealtime for her. But Ethel Percy Andrus founded the National Retired Teachers Association (NRTA)and AARP after she retired. She made it her time by recognizing needs and finding ways tomeet them and by providing leadership.

Harry Truman once said, “[People] make history and not the other way around. In periodswhere there is no leadership, society stands still. Progress occurs when courageous, skillfulleaders seize the opportunity to change things for the better.” That’s what Dr. Andrus did,and that’s what AARP is still doing today.

We entered 2005 knowing that we would be engaged in a tough battle over the futureof Social Security. While our ultimate goal was (and still is) to make Social Security solvent forthe long term while maintaining a guaranteed, adequate benefit, we knew that we wouldfirst have to defeat the idea of creating private accounts out of Social Security. As 2005 cameto a close, the public had pretty much concluded that creating private accounts out of SocialSecurity was a bad idea, and what had been at the start of the year a forceful call for suchaccounts had not succeeded. We didn’t achieve a solvency solution to Social Security in 2005,but we did lay to rest (at least for now) the notion of creating private accounts out of SocialSecurity and establish some key principles on which a solvency solution can be reached.

2005 was also our time to lead the effort to get Medicare beneficiaries enrolled in thenew Medicare Part D prescription drug benefit. Since we had led the effort to get theMedicare Modernization Act enacted into law in 2003, we also wanted to help beneficiariesmake the important choices about whether or not to enroll in the program and aboutselecting the plan that would benefit them the most. To do that, we launched a majorcampaign to inform and educate our members and the public about the new Medicare Part D benefit.

Medicare Part D is now helping millions of older Americans better afford their prescriptiondrugs. But everyone needs more affordable prescription drugs. So in addition to our MedicarePart D education and outreach campaign, we continued our campaign for more affordableprescription drugs. Our AARP Rx Watchdog Reports and research forums were instrumental inkeeping the spotlight on rising drug prices. We also continued lobbying for state and federallaws that would allow safe and legal prescription drugs to be imported from Canada and

B. Health and Supportive Services

n Americans have affordable coverage for, and access to, quality health care and supportive services.

• Medicare is strengthened as the most important source of quality health care for older Americans.

• Prescription drugs are more affordable to older Americans.

• Individuals have access to home- and community-based care.

• Individuals have access to a range of financing sources for needed long-term services and supports.

• Appropriate quality services are delivered efficiently and effectively across all settings.

• Stable and affordable health coverage for all is available.

n Americans 50+ have improved health status (through healthy behaviors).

• An increasing number of 50+ individuals become more physically active.

• An increased proportion of people 50+ use medication wisely.

C. Livable Communities

n Americans 50+ are able to sustain mobility as they age.

• There are adequate mobility options when driving is not feasible.

• Individuals retain their driving competencies and competent drivers retain their driving privileges to the maximum extent possible.

n Americans 50+ have appropriate and affordable housing options.

• Individuals have adequate housing options that enable them to age in place.

D. Global Aging

n Nations exchange experiences and best practices on global aging issues to strengthen policies in the United States and other countries as a means of economic security and quality of life for all, regardless of age.

• AARP is a leading force in international understanding and dialogues around the global aging agenda.

E. Navigation — Access to Information

n Americans 50+ have access to and use needed information and resources.

• AARP provides one-stop access to needed information and resources.

AARP will work in partnerships and coalitions, and utilize information and education, advocacy, community service/volunteers, products and services, and other means to achieve these goals.


SUMMARY OF 2005 AARPCONSOLIDATED FINANCIAL STATEMENT

SUMMARY OF 2005 AARPCONSOLIDATED FINANCIAL STATEMENTS

The following summary financial information is from the consolidated statements of activities and financialposition of AARP and its affiliates for the year endingDecember 31, 2005.

Revenue

Our total operating revenue in 2005 was $936 million, an increase of 6.6 percent over 2004. Membership dues ($229 million) and royalties and service provider relationshipmanagement fees ($379 million) continued to be the two largest sources of revenue supporting AARP programs and services. All federal funds are administered by the AARPFoundation, AARP’s affiliated charity.

Expenses

Our operating expenses totaled $925 million in 2005, an increase of 15.6 percent over2004. We made investments in member services, communication, and advocacy activities tocarry out our member and social impact agendas. AARP publications — primarily AARP TheMagazine and AARP Bulletin — cost $165 million to produce and distribute to our membersin 2005. Advertising revenue offset about 64.5 percent of these costs.

We continued to invest heavily in programs and services that directly benefit membersand their communities — a total of $254 million during 2005, up 6.2 percent from 2004.These include: the AARP Driver Safety Program; member education; community presence;volunteer coordination; and AARP Foundation’s Legal Counsel for the Elderly, which providesfree legal assistance and education to older adults, primarily in the District of Columbia. Alsoincluded are two other AARP Foundation programs, AARP Tax-Aide and the AARP SeniorCommunity Service Employment Program (SCSEP), which transitions low-income people into paid employment.



2005 was our time to protect Social Security by defeating the idea of private accounts…to lead the way in encouraging Medicare beneficiaries to participate in the Part D prescription drug benefit…and to foster fresh ideas about the aging of society — in order to enhance the quality of life for all as we age.


























THE AARP BOARD OF DIRECTORS

Marie F. SmithMarie F. Smith of Maui, HI, is AARP’s 21st President. She brings

a wealth of leadership experience in Social Security and a

commitment to women’s, multiethnic, and aging issues. During

her presidency, she is emphasizing retirement security issues.

Ms. Smith held several senior managerial positions with the Social

Security Administration, including director of Manpower

Management and Organization Planning. She is a member of

Zonta International in Washington, DC. Among her numerous

citations and awards are the Woman of Excellence Award from

the Commission on the Status of Women. Ebony magazine

recently cited her as one of America’s 100 most influential leaders,

and she is listed in Who’s Who in American Women, 2004.

Erik D. Olsen

Erik D. Olsen, D.D.S., of Glenbrook, NV, is AARP’s President-electand will become AARP’s 22nd National President in May 2006. He currently serves on the AARP Audit and Finance Committee, is co-chair of the AARP Insurance Trust, and is an ex-officio member of the Board Nominating Committee. Dr. Olsen was an executive committee member of the Secretary’s AdvisoryCommittee on Regulatory Reform for the Department of Healthand Human Services (HHS). In 1992, he retired as president andCEO of Delta Dental Plan of California. Dr. Olsen’s recognitionsinclude induction into the Delta Dental Association Hall of Fameand receipt of the first Hillenbrand Fellowship in DentalAdministration.

Nelda Barnett

Nelda Barnett of Owensboro, KY, is vice chair of the AARPFoundation Board of Trustees and is a member of the BoardGovernance Committee. She has 36 years of experience in humanservices, with the majority of that time devoted to helping olderAmericans. She was director of the Area Agency on Aging (AAA)and, in 1999, retired as director of Maplebrook Village, ChristianChurch Homes of Kentucky. She currently is a volunteer with both organizations. Mrs. Barnett received the Mayor’s Award forExcellence, the highest honor bestowed upon an individual ororganization by the City of Owensboro, the Elizabeth MundayAward in recognition of her work for seniors, and theThoroughbred Award for Outstanding Advocacy on Behalf of the Elderly from the Kentucky Association for Gerontology.

The AARP Board of Directors

1. Marie F. Smith

2. Erik D. Olsen

3. Nelda Barnett

4. Lavada E. DeSalles

5. Joanne Disch

6. W. Lee Hammond

7. Jennie Chin Hansen

8. Douglas C. Holbrook

9. Clarence Pearson

10. Mary C. Scott

11. Culberto “José” Maldonado

12. Mary Jane O’Gara

13. Cora L. Christian

14. Richard Johnson

15. Angel Rodolfo “A.R.” Sales

16. Thomas “Byron” Thames

17. Charles Leven

18. N. Joyce Payne

19. Bonnie M. Cramer

20. Yash Aggarwal

1 2 3 4 5


Jennie Chin HansenJennie Chin Hansen of San Francisco, CA, chairs the AARPFoundation Board of Trustees and is on the Board Committee onMembership. She recently retired as executive director of On Lok,Inc., a family of nonprofit organizations providing primary, acute,and community-based long-term care services to older people inSan Francisco. The On Lok model is a national prototype nowbeing emulated in all 50 states. Ms. Hansen is a nursing facultymember at San Francisco State University and a senior fellow atthe Center for the Health Professions at the University ofCalifornia. She has received numerous awards, including the2002 Gerontological Society of America’s Maxwell Pollack Award for Productive Aging and the Silver SPUR Award from the San Francisco Urban Planning and Research Organization.

Douglas C. Holbrook

Douglas C. Holbrook of Fredericksburg, VA, serves as VicePresident–Secretary/ Treasurer and, in that capacity, chairs theBoard Audit and Finance Committee. He also is chair of theNational Leadership Forum Planning Committee and a memberof the CEO Evaluation Committee. Mr. Holbrook was appointedsecretary–treasurer of the American Postal Workers Union(APWU) in 1981, where he was re-elected in every nationalAPWU election since 1983. He retired as chief financial officerafter serving his fifth term. Extremely active in the AmericanDiabetes Association (ADA), Mr. Holbrook has been responsiblefor a strong, supportive alliance between the American PostalWorkers Union and the ADA. He received numerous awardsfrom the Juvenile Diabetes Association and the ADA.

Clarence Pearson

Clarence Pearson of New York, NY, serves on the BoardGovernance Committee and the AARP Foundation Board ofTrustees. Mr. Pearson is senior advisor to the World HealthOrganization Office at the United Nations, where his focus isglobal aging. He is on the advisory panel of the InternationalExecutive Service Corps and the board of overseers forDartmouth Medical School, among others. He has received theInternational Health Lifetime Achievement Award from theAmerican Public Health Association and the DistinguishedAlumni Award from the School of Public Health at the Universityof North Carolina at Chapel Hill. Mr. Pearson is an adjunctprofessor of community health at the Robert Wood JohnsonMedical School and adjunct professor of education at theTeachers College, Columbia University.

Lavada E. DeSalles

Lavada E. DeSalles of Sacramento, CA, is chair of the AARPInsurance Trust and vice chair of the Board GovernanceCommittee. After 32 years of service with the State of CaliforniaEmployment Services, Mrs. DeSalles retired in 1994 as executivedirector of the Governor’s Task Force for Employment of OlderWorkers. She was a member of the International Association ofPersonnel in Employment Security, the National Forum for BlackPublic Administrators, and the African American LeadershipAssociation. Mrs. DeSalles has received the Los Angeles Mayor’sCertificate of Appreciation presented by the late Tom Bradley, aCertificate of Special Recognition from Congresswoman MaxineWaters, and an Outstanding Achievement Award from theAfrican American Leadership Association.

Joanne Disch

Joanne Disch, Ph.D., R.N., FAAN, of Minneapolis, MN, is chair of the National Nominating Committe, and vice chair of the Board Audit and Finance Committee, and serves on theCEO Evaluation Committee. She is professor and director of theKatharine J. Densford International Center for Nursing Leadershipand the Katherine R. and C. Walton Lillehei Chair in NursingLeadership at the University of Minnesota School of Nursing. Dr. Disch serves on the boards of directors for the AmericanAcademy of Nursing and Allina Health System, and wasappointed to the Governor’s Commission on Health Care Costs.She also was honored with the establishment of the JoanneDisch Excellence in Medical Nursing Practice Award from theHospital of the University of Pennsylvania.

W. Lee Hammond

W. Lee Hammond of Salisbury, M.D., is Vice President–Membership. In that capacity, he chairs the Board Committee on Membership, and serves on the National NominatingCommittee. He is a member of the Maryland Commission on Aging and the Maryland Innovations in Aging Services Grant Program Advisory Council. Mr. Hammond retired from a 30-year career with the Wicomico County Maryland Board ofEducation as a school administrator. For that work, he receivedthe Governor’s Citation for Work in Education and an HonoraryLife Membership in the Maryland Congress of Parents andTeachers. In recognition of his volunteer service, Mr. Hammondreceived the Governor’s Salute to Excellence and was elected tothe Maryland Senior Citizens Hall of Fame.

6 7 8 9 10


i am proud to have served an organization whose time

has truly come. AARP has taken a leadership role, working to

empower people to bring about a society in which we ALL age

with dignity and purpose. That means you. That means me.

As my presidency comes to an end and I reflect on the past two years, I am humbled bythe impact this organization has had on my life and the lives of millions of Americans. Ouraccomplishments over the past two years have been staggering. Let me highlight just a few:

n We responded decisively after hurricanes Katrina and Rita with prompt on-the-groundsupport and AARP Foundation funding for 41 local groups in Alabama, Louisiana,Mississippi, and Texas less than three weeks after the hurricanes.

n We strengthened our voice on international aging issues and conducted ground-breaking research to compare retirement trends across different countries. We also convened important international conferences on issues such as long-term care, private and public pension systems, and livable communities.

I am proud to have served an organization whose time has truly come. AARP has taken aleadership role, working to empower people to bring about a society in which we ALL agewith dignity and purpose. That means you. That means me. And that means our children andgrandchildren, as well. Dignity and purpose are why AARP fights for Social Security, as well asfor older workers, private pensions, health care reform, drug affordability, and age-friendlycommunities where people can continue to live independently. We pledge to use “the powerto make it better” to ensure that people 50+ have independence, choice, and control in waysthat are beneficial and affordable for them and all of society.

Marie F. SmithPresident, AARP

“Social Security is at the heartof who we are as a people.”


When I assumed the presidency of AARP two years ago, I said, “AARPhas a demonstrated history of fighting for justice and fairness for ALL those50 and older. We have the vision, we have the experience, and, most important, we have the will.”

That statement is even truer today, thanks in large part to the collaborative efforts of our volunteers and staff, whose work speaks volumes.Our efforts in 2005 further solidified our leadership in matters affecting people over 50 and, indeed, society as a whole. It is clearly our time as an

organization to lead and empower those 50+ to live their lives to the fullest.

In 2005, we made it our time to go to the front lines of the battle over the future ofSocial Security. That my presidential term coincided with AARP’s battle to strengthen SocialSecurity is one of those coincidences that leaves me feeling that nothing is coincidence. Thetiming couldn’t have been better for me personally, having spent 25 years of my professionallife working at the Social Security Administration. I believe so passionately in the program.

Social Security is at the heart of who we are as a people. It’s not just about freedom fromwant. It’s about fairness among generations. And it’s about strengthening families.

We fought for fairness not just in Social Security, but also in Medicare, another program I am passionate about. Today, millions of beneficiaries are reaping the reward of prescriptiondrugs being covered under Medicare for the first time. AARP can take credit for educatingmillions of people about the importance of enrolling in Medicare Part D. What a wonderfullegacy to be a part of!

LETTER FROM MARIE SMITH,AARP PRESIDENT 2004 –2006

Social Security is at the heart of who we are as a people.

It’s not just about freedom from want. It’s about fairness

among generations. And it’s about strengthening families.

Cora L. Christian

Cora L. Christian, M.D., MPH, of Frederiksted, Virgin Islands (VI), is on the Board Audit and Finance Committee and the AARPInsurance Trust. She is the health care quality improvementmedical director of the Virgin Islands Medical Institute, which she founded and of which she was its first executive director. Dr. Christian also is assistant commissioner of the VI Departmentof Health, medical director of Hess Oil Virgin Islands Corporation,on the board of the American Health Quality Association, and a practicing family physician. As the first native woman from the Virgin Islands to become a medical doctor, she has wonnumerous awards, including the 2003 Physician of the YearAward from the VI Medical Society and the Best Doctors inAmerica Award in 1999.

Richard Johnson

Richard Johnson of Wilmington, DE, is on the Board Committeeon Membership, the AARP Insurance Trust, and the BoardNominating Committee. He served on several task forces to helpensure the protection of older people in Delaware, including theDelaware Attorney General’s Senior Victims Task Force, the AdultProtective Services Advisory Council, and the Medicare FraudPatrol Steering Committee, and currently is a member of theboard of Helpline. Prior to retirement, Mr. Johnson was districtsales manager and director of national accounts for theMonsanto Company. He has received numerous awards,including the Governor’s Outstanding Volunteer Award, theVolunteer Leader of the Year Award and the OutstandingLeadership Award, and a Special Award of Appreciation fromAARP Delaware.

Angel Rodolfo “A.R.” Sales

Angel Rodolfo “A.R.” Sales, of Ft. Myers, FL, is on the BoardAudit and Finance Committee, the National NominatingCommittee, the AARP Services, Inc. Board, and the CEOEvaluation Committee. He retired as chief operating officer fromBest Access Systems and currently is a part-time consultant. Mr. Sales also serves on the board of directors of ADESA, Inc., aNYSE-listed vehicle marketing corporation. He previously servedon the board and executive committee of Financial ExecutivesInternational as well as numerous other boards in Indiana, wherehe maintains a part-time residence. Mr. Sales is listed in Who’sWho in America, and received a Beta Gamma Sigma HonoraryMembership from the Kelley School of Business and a NavyAchievement Medal from the U.S. Navy.

Mary C. Scott

Mary C. Scott of Bedford, TX, is on the AARP Board Committeeon Membership and the National Leadership Forum PlanningCommittee. She previously chaired the National LegislativeCouncil, a legislative advisory body to the AARP Board. She was active in the Retired Teachers Association (RTA) and chairedthe Senior Political Action Committee of Tarrant County. She also is co-founder of the Tarrant Coalition for EnvironmentalAwareness, the Nursing Home Ombudsman Advisory Council,and the Area Agency Public Policy and Legislation Committees.As a speech pathologist, Ms. Scott practiced in the Texas public schools for 24 years and was an instructor of English as a Second Language at a local college. She is also certified to teach language- and learning-disabled children.

Culberto “José” Maldonado

Culberto “José” Maldonado of Colorado Springs, CO, is on the Board Committee on Membership and the AARP InsuranceTrust. He retired as human resources director of two businessesand a school district in Colorado Springs. Mr. Maldonado retiredfrom the U.S. Air Force after 22 years of service, where his last assignment was assistant professor at the U.S. Air ForceAcademy in Colorado Springs. He was a member of the board of directors of Pikes Peak Hospice, and a member of theColorado Springs Medical Ethics Committee and the AreaAgency on Aging. Among his awards are volunteer recognitionawards from the League of United Latin American Citizens(LULAC) and numerous commendations from the Air Force.

Mary Jane O’Gara

Mary Jane O’Gara of Omaha, NE, is on the Board Committee on Membership and the National Leadership Forum PlanningCommittee. She was appointed by the Governor of Nebraska to represent consumers on a Women’s Health and HumanServices Council. She previously was a member of the AmericanDiabetes Association Board and the Omaha Press Club. In 1990,Mrs. O’Gara retired from the Omaha Public Schools as assistant director of public relations. Prior to that, she was a journalist and freelance writer who published numerous magazine andjournal articles. Mrs. O’Gara also collaborated in authoring abook on specific learning disabilities that is still used in the training of teachers. She received a national award for her work with the Omaha Public Schools.


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Thomas “Byron” Thames

Thomas “Byron” Thames, M.D., of Orlando, FL, is on the Board Governance Committee, the AARP Insurance Trust, and the AARP Services, Inc. Board. He is medical director of the Employee Clinic at Florida Hospital in Orlando, the DardenEmployee Clinic, and COMPNET, and is medical consultant totwo health care systems. Dr. Thames consults on medical issuesto the Area Agency on Aging (AAA) for Central Florida, theRetired Senior Volunteer Program (RSVP), and the SeniorResource Alliance, and is the medical provider for the AAAMedical Mobile Clinic for the Elderly. Among his awards are theArt of Medicine Award from the Florida Academy of FamilyPhysicians, the Florida Family Physician of the Year Award, andthe Distinguished Medical Alumni Award from Duke University.

Charles Leven

Charles Leven of Millbrook, NY, serves as Vice President–BoardGovernance and, in that capacity, chairs the AARP Board ofDirectors and the Board Governance Committee. He also chairsthe CEO Evaluation Committee. Mr. Leven’s other volunteeractivities include membership on the Attorney General’s CrimeVictim’s Board and the Dutchess 2000 Health Care PlanningBoard. He also is a member of the New York State Departmentof Aging Advisory Board. Prior to his retirement in 1994, Mr. Leven held a variety of positions in retail management,including senior vice president of operations for Saks FifthAvenue and Abraham & Straus. Among his numerous awards are recognitions by the Suffolk County Boy Scouts and the National Retail Merchants Association.

N. Joyce Payne

N. Joyce Payne, Ed.D., of Washington, DC, is on the BoardCommittee on Membership and the AARP Foundation Board of Trustees. Dr. Payne is director of the human resources and minority programs for the National Association of StateUniversities and Land-Grant Colleges. She founded the ThurgoodMarshall Scholarship Fund, which has awarded over $42 millionin scholarship assistance and capacity-building support. Dr. Paynealso founded and chairs the board of directors for the G. JamesGholson Endowment Fund and chaired the board of trustees of the University of the District of Columbia Board. Among hernumerous honors are an honorary doctorate degree from LincolnUniversity, a Presidential Leadership Award from Delaware StateUniversity, and a fellowship from the Ford Foundation.


Bonnie M. CramerBonnie M. Cramer, of Raleigh, NC, is on the Board GovernanceCommittee and the AARP Insurance Trust. She retired from a 30-year career with the North Carolina state government’sDepartment of Health and Human Services and the Governor’sOffice of State Budget and Management. Ms. Cramer was amember of the board of directors for the National Association of State Units on Aging and on the advisory committee for theNational Center on Elder Abuse. She has received many awards,including the Ewald B. Busse Award for Health Care Leadershipfor Older Adults from the Division of Aging, a Public ServiceAward from the North Carolina Association for Home Care, anda Leadership in Aging Award from the Duke University Centerfor Aging.

Yash Aggarwal

Yash Aggarwal, Ph.D., JD, of New City, NY, serves on the BoardAudit and Finance Committee and the AARP Insurance Trust. In 2002, Dr. Aggarwal founded IndiaPAC — India-U.S. PoliticalAction Committee — to foster better relations between theUnited States and India. Previously, he chaired the Asian-American Coalition, a nonprofit public interest organization that facilitated the integration of Asian Americans into themainstream. He is also on the board of Worldfest, NY, Inc. Dr. Aggarwal retired from MetLife, where he was a financialplanner and risk manager. Prior to that, he was president and board chair of Sensearth, Inc., a corporation providingconsulting services on seismic risk. Among his many awards andcitations is an award for exemplary service from Respect AgeInternational in 2001.

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2005 was our time to protect Social Security by defeating the idea of private accounts…to lead the way in encouraging Medicare beneficiaries to participate in the Part D prescription drug benefit… and to foster fresh ideas about the aging of society — in order to enhance the quality of life for all as we age.

























AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have independence,choice and control in ways that are beneficial and affordable to them and society as a whole. Weproduce AARP The Magazine, published bimonthly; AARP Bulletin, our monthly newspaper; AARPSegunda Juventud, our bimonthly magazine in Spanish and English; NRTA Live & Learn, our quarterlynewsletter for 50+ educators; and our website, AARP.org. AARP Foundation is an affiliated charity thatprovides security, protection, and empowerment to older persons in need with support from thousandsof volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia,Puerto Rico, and the U.S. Virgin Islands.

Photo Credits

Cover: Peter HowsonPage 6: Peter HowsonPage 7: Peter HowsonPage 14: Neil Seiffer Page 14: fotobricenoPage 15: Jay BrousseauPage 15: Joseph P. Sebo, Jr.Page 19: Paul FettersPage 28: Jim Burger

Design

Blattner Brunner, Inc.

2 Letter from the President

4 Letter from the Chief Executive Officer

6 Member Voices

9 2005: The Year in Review

11 It’s Our Time to Strengthen

12 It’s Our Time to Encourage

14 It’s Our Time to Address

16 It’s Our Time to Look Ahead

18 AARP’s Member Value Agenda

20 AARP’s Ten-Year Social Impact Agenda

22 Summary of 2005 AARP Consolidated

Financial Statements

24 AARP Board of Directors

28 AARP Executive Team

C O N T E N T S

2005 AARP ANNUAL REPORT

IT’S OUR TIMETO EMPOWER

Edith Williams, Richard DeCarlo, and Pat Moles:AARP Social Security volunteers on location at the U.S. Capitol.

MISSION STATEMENTAARP is dedicated to enhancing quality of life for all as we age. We lead

positive social change and deliver value to members through information,

advocacy and service.

601 E Street, NW, Washington, DC 20049

www.aarp.org

D12594 (706)

IT’S OUR TIME TO EMPOWER · medical director of the Virgin Islands Medical Institute, which she...

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