disclosure statement 2018 – 2019 fordisclosure statement provides a detailed view of who we are...

DISCLOSURE STATEMENT

2019 – 2020

FOR

September 2019

A Pinnacle Living Community

January 13, 2020

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MISSION STATEMENT

The mission of

WindsorMeade Williamsburg

&

Pinnacle Living

is

Enriching Life’s Journey

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TABLE OF CONTENTS

Page

Introduction .................................................................................................................................................. 1

Continuing Care Provider ............................................................................................................................. 1

Officers, Directors, Trustees, Managing and General Partners .................................................................... 1

Business Experience ..................................................................................................................................... 4 Acquisition of Goods and Services ............................................................................................................... 6 Criminal, Civil and Regulatory Proceedings ................................................................................................ 6 Affiliations with Religious, Charitable or Other Not-For-Profit Organizations; Not-For-Profit Tax Status of Provider .................................................................................................................................. 7 Ownership of Real Property ......................................................................................................................... 8 Location and Description of Real Property .................................................................................................. 8 Services Provided Under Continuing Care Contracts (Residency Agreement) ............................................ 8 Fees Required of Residents........................................................................................................................... 9 Frequency and Amounts of Increases in Periodic Rates ............................................................................. 15 Reserve Funding ......................................................................................................................................... 15 Certified Financial Statements .................................................................................................................... 15 Financial Restructuring ............................................................................................................................... 15 Pro Forma Statements ................................................................................................................................. 17

Explanation of Material Differences ........................................................................................................... 17

Admission of New Residents ...................................................................................................................... 17

Access to Community and Services ............................................................................................................ 19

Procedure By Which a Resident May File a Complaint or Disclose Concern............................................ 19

Residency Agreement ................................................................................................................................. 20

Schedule A ..................................................................................................................................... 43

Schedule B ..................................................................................................................................... 57

Bedford Terrace Residency Agreement ...................................................................................................... 60

Schedule A ..................................................................................................................................... 75

Schedule B ..................................................................................................................................... 84

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Certificate of Entrance ................................................................................................................................ 87

Surety Agreement ....................................................................................................................................... 91

Reservation Agreement............................................................................................................................... 95

Exhibits Exhibit A – Financial Report – May 31, 2019 Exhibit B – WindsorMeade Williamsburg

Pro Forma Statement of Activities, Balance Sheet and Statement of Cash Flows Years Ending May 31, 2020 – 2024

Exhibit C - Pinnacle Living ProForma Statement of Activities, Balance Sheet and Statement of Cash Flows Years Ending May 31, 2020 - 2024

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INTRODUCTION Nearly four years ago, our respective Boards of Directors and other Leaders began to question whether the names Virginia United Methodist Homes, Inc. and Virginia United Methodist Homes of Williamsburg, Inc. continue to be the best names for our organizations as we move into the future. We asked: Do our names position our organizations to continue to excel? We sought insight and direction from our respective residents, our prospective residents and our team members. We learned there was general agreement - that a number of words in our current names are unappealing and even exclusive. Armed with our research findings and the blessing of our key stakeholders, we began to search for a new name. For more than two years our team explored over 400 potential options as we searched for a name that gave us all something to live up to. Our new shared Mission, Enriching Life’s Journey, reflects the way we want the people we serve to live, to add value and to explore meaning every day at any age. When we tested a few select names, one clear choice rose above the rest – “Pinnacle Living”. The following Disclosure provides a detailed view of who we are and how we continue to serve our residents. CONTINUING CARE PROVIDER The continuing care providers are WindsorMeade Williamsburg (WindsorMeade) and Pinnacle Living. WindsorMeade, a dba for Virginia United Methodist Homes of Williamsburg, Inc., is a Virginia not-for-profit, non-stock corporation with its business address at 5101 Cox Road, Suite 225, Glen Allen, Virginia 23060. Pinnacle Living is the sole member of WindsorMeade. Pinnacle Living, a dba for Virginia United Methodist Homes, Inc., is a Virginia not-for-profit, non-stock corporation with its business address at 5101 Cox Road, Suite 225, Glen Allen, Virginia 23060. Pinnacle Living provides administrative services to WindsorMeade pursuant to an Administrative Services Agreement but does not provide continuing care or other services directly to any resident of WindsorMeade. Pinnacle Living is not responsible for the obligations of WindsorMeade. OFFICERS, DIRECTORS, TRUSTEES, MANAGING AND GENERAL PARTNERS, AND CERTAIN PERSONS WHO HOLD EQUITY OR BENFICIAL INTERESTS A. WINDSORMEADE The names and business addresses of the officers of WindsorMeade are: Christopher P. Henderson, President/CEO 5101 Cox Road, Suite 225 Glen Allen, Virginia 23060 Clark D. Cundiff, Chairman 1053 Collection Creek Way Virginia Beach, Virginia 23454

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The names and addresses of the directors of WindsorMeade are: Harvey L. Bryant 5101 Cox Road, Suite 225 Glen Allen, Virginia 23060

Clark D. Cundiff 1053 Collection Creek Way Virginia Beach, Virginia 23454 Christopher P. Henderson 5101 Cox Road, Suite 225 Glen Allen, Virginia 23060

Elizabeth P. McCormick

P.O Box 726 Gloucester Point, Virginia 23062

Bishop Sharma D. Lewis – Ex Officio P.O. Box 5606 Glen Allen, Virginia 23058 The Directors of WindsorMeade are elected as follows:

• Nominated by a nominating committee of the Board of Directors of Pinnacle Living • Elected by the Board of Directors of Pinnacle Living

WindsorMeade has one member, namely Pinnacle Living. Subject to the foregoing, no person has a ten percent (10%) or greater equity or beneficial interest in WindsorMeade. Pursuant to the terms and conditions of the WindsorMeade By-Laws, the President of WindsorMeade must be the same person as the President of Pinnacle Living, and members of the WindsorMeade Board of Directors may, but are not required to, be current or immediate-past-members of the Pinnacle Living Board of Directors. Additionally, WindsorMeade’s budget and other significant financial activities are subject to the approval of the Pinnacle Living Board however, Pinnacle Living is not responsible for the obligations of WindsorMeade.

B. PINNACLE LIVING

Pinnacle Living is the sole member of WindsorMeade. The names and business addresses of the officers of Pinnacle Living are:

Christopher P. Henderson, President 5101 Cox Road, Suite 225 Glen Allen, Virginia 23060

Lisa F. Han, Chairperson 142 W. York Street, Suite 605 Norfolk, Virginia 23510

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Jane G. Hornbeck, Vice Chairperson 5101 Cox Road, Suite 225 Glen Allen, Virginia 23060

William H. Peterson, Secretary 5101 Cox Road, Suite 225 Glen Allen, Virginia 23060 The names and addresses of the directors of Pinnacle Living are: Brenda S. Brooks 5101 Cox Road, Suite 225 Glen Allen, Virginia 23060 Kevin W. Bruny 512 Greene Ridge Road Henrico, Virginia 23229

Shirley M. Cauffman 5101 Cox Road, Suite 225 Richmond, Virginia 23060 Lisa F. Han 142 W. York Street, Suite 605 Norfolk, Virginia 23510 Christopher P. Henderson 5101 Cox Road, Suite 225 Glen Allen, Virginia 23060 Jane G. Hornbeck 5101 Cox Road, Suite 225 Glen Allen, Virginia 23060 Steven R. Jones 5101 Cox Road, Suite 225 Glen Allen, Virginia 23060 F. Ellen Netting 9534 Oldhouse Drive Richmond, Virginia 23238

William H. Peterson 5101 Cox Road, Suite 225 Glen Allen, Virginia 23060 Bishop Sharma D. Lewis – Ex Officio P.O. Box 5606 Glen Allen, Virginia 23058

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Pinnacle Living has no trustees and no managing or general partners. No person has a ten percent (10%) or greater equity or beneficial interest in Pinnacle Living.

Pinnacle Living has no members. The Directors of Pinnacle Living are elected as follows:

• Nominated by a nominating committee of the Board of Directors • Elected by the Board of Directors

BUSINESS EXPERIENCE OF; ACQUISITION OF GOODS AND SERVICES FROM; AND CRIMINAL, CIVIL AND REGULATORY PROCEEDINGS AGAINST THE PROVIDER; ITS OFFICERS, DIRECTORS, TRUSTEES, MANAGING AND GENERAL PARTNERS; CERTAIN PERSONS WHO HOLD EQUITY OR BENEFICIAL INTERESTS; AND THE MANAGEMENT A. BUSINESS EXPERIENCE

WindsorMeade has operated the community in Williamsburg since its construction was completed in 2008. WindsorMeade’s sole member, Pinnacle Living, has substantial experience in the operation of such communities. With its incorporation in 1945, Pinnacle Living embarked on a journey of providing residences and services to seniors throughout the Commonwealth, from Richmond to Alexandria in Northern Virginia, to Onancock on the Eastern Shore, to Roanoke in the Shenandoah Valley, to Tidewater in Norfolk, from there back to Richmond’s suburbs and, most recently, into the Williamsburg area as the sole member of WindsorMeade, with its beautiful community in James City County.

Throughout these 73 years, the communities have changed, the industry has changed, the well-being and expectations of the residents have changed, but Pinnacle Living’s commitment to its residents and the enhancement of their lives has remained constant.

Pinnacle Living provides continuing care at its four communities throughout Virginia as follows: Hermitage Roanoke 1009 Old Country Club Road Roanoke, Virginia 24017-0339 Hermitage Northern Virginia 5000 Fairbanks Avenue Alexandria, Virginia 22311-1241

Hermitage Richmond 1600 Westwood Avenue Richmond, Virginia 23227-4682 Cedarfield 2300 Cedarfield Parkway Richmond, Virginia 23233-1938

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Pinnacle Living has engaged in the management of the community at 1600 Westwood Avenue, Richmond, Virginia since 1948; the community at 5000 Fairbanks Avenue, Alexandria, Virginia since 1962; the community at 1009 Old Country Club Road, Roanoke, Virginia since 1964 and the community at 2300 Cedarfield Parkway, Richmond, Virginia since 1996.

Pursuant to the WindsorMeade By-Laws, the President of WindsorMeade must be the same person as the President of Pinnacle Living, and members of the WindsorMeade Board of Directors may, but are not required to be, current or immediate-past-members of the Pinnacle Living Board of Directors. Additionally, WindsorMeade’s budget and other significant financial activities are subject to the approval of the Pinnacle Living Board.

In consideration of the significant interrelationship between Pinnacle Living and WindsorMeade, the following schedule is provided to describe the business experience WindsorMeade’s Directors and Officers and Pinnacle Living’s Directors and Officers have had in the operation and/or management of WindsorMeade and Pinnacle Living, respectively:

DIRECTOR MEMBER OF WINDSORMEADE BOARD SINCE

MEMBER OF PINNACLE LIVING

BOARD SINCE Brenda S. Brooks 2014 Harvey L. Bryant 2015 Kevin W. Bruny 2017 Shirley M. Cauthorn 2016 Clark D. Cundiff 2014 Lisa F. Han 2015 Christopher P. Henderson 2005 2005 Jane G. Hornbeck 2016 Steven R Jones 2017 Elizabeth P. McCormick 2014 F. Ellen Netting 2017 William H. Peterson 2011

OFFICER

EXPERIENCE WITH WINDSORMEADE

EXPERIENCE WITH PINNACLE LIVING

Clark D. Cundiff Chairman since 2017 Member of Board since 2014

Christopher P. Henderson President since 2005 Member of Board since 2005

President since 2005 Member of Board since 2005

Lisa F. Han Chairperson since 2018 Member of Board since 2015

Jane G. Hornbeck Vice Chairperson since 2018 Member of Board since 2016

William H. Peterson Secretary since 2014 Member of Board since 2011

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B. ACQUISTION OF GOODS AND SERVICES

Neither WindsorMeade nor any of its officers or directors has any interest, indirectly or directly, in any professional service, firm, association, foundation, trust, partnership, or other legal entity, in which such person has, or which has in such person, a 10% or greater interest and which it is presently intended will or may provide goods, leases or services to WindsorMeade of a value of $500.00 or more within any year.

WindsorMeade’s sole member, Pinnacle Living, currently provides administrative services to WindsorMeade. The initial Administrative Services Agreement was awarded to Pinnacle Living in 2007 in consideration of the special relationship that exists between WindsorMeade and Pinnacle Living, its sole member, and Pinnacle Living’s many years of experience in the operation and management of several continuing care facilities. Accordingly, no other offers were solicited or received. Pinnacle Living and WindsorMeade entered into a new Administrative Services Agreement in May 2013.

The Administrative Services Agreement provides for the Basic Services (payroll, accounts payable and receivable, general accounting, retirement plan, state and local tax payments and exemptions, fund development and investment, insurance and workers’ compensation, human resources, bond and financing), Leadership Services (communications, excellent practices, and strategic planning and implementation) and expansion and construction services. WindsorMeade pays to Pinnacle Living a Basic Services Fee and an Affiliation Fee for such services, subject to certain limitations described below. The Basic Services Fee consists of the costs expended by Pinnacle Living for salaries, expenses and other direct costs incurred by Pinnacle Living and directly related to providing the development, administration and other quantifiable services to WindsorMeade. The Affiliation Services Fee is thirty-percent (30%) of the Basic Services Fee for each previous quarter.

The Basic Services Fee and Affiliation Services Fee (the “Combined Fees”) are due and payable on a monthly and quarterly basis, respectively. The Combined Fees are subject to the following limitations under the Series 2013 Residential Care Facility Revenue Bonds (WindsorMeade) (the “Series 2013 Bonds”). In Fiscal Year 2017, the Combined Fees will not exceed two-percent (2%) of WindsorMeade’s annual gross revenue. In Fiscal Year 2018 and the years that follow, so long as the Administrative Services Agreement is in force, the Combined Fees will not exceed three-percent (3%) of WindsorMeade’s annual gross revenue. While the Series 2013 Bonds remain outstanding, Pinnacle Living is entitled to annual Manager Incentive Payments equal to ten-percent (10%) of the aggregate annual payments made by WindsorMeade under Obligation No. 5 (defined in the Master Trust Indenture between WindsorMeade and UMB Bank, N.A., Master Trustee) with respect to any payment of principal or interest on the Series 2013A Subordinate Bonds.

C. CRIMINAL, CIVIL AND REGULATORY PROCEEDINGS

Neither WindsorMeade, Pinnacle Living, nor any of their respective officers or directors:

(1) has been convicted of a felony or pleaded nolo contendere to a criminal charge, or been held liable or enjoined in a civil action by final judgement, if the crime or civil action involved fraud, embezzlement, fraudulent conversion, or misappropriation of property or moral turpitude; or

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(2) is subject to an injunctive or restrictive order of a court of record, or within the past five years had any state or federal license or permit suspended or revoked as a result of an action brought by a governmental agency or department, arising out of or relating to business activity or health care, including, without limitation, actions affecting a license to operate a foster care community, nursing home, retirement home, home for the aged or community registered under this chapter or similar laws in another state; or

(3) is currently the subject of any state or federal prosecution, or administrative investigation

involving allegations of fraud, embezzlement, fraudulent conversion, or misappropriation of property.

AFFILIATIONS WITH RELIGIOUS, CHARITABLE OR OTHER NOT-FOR-PROFIT ORGANIZATIONS; TAX STATUS OF PROVIDER

A. AFFILIATIONS

WindsorMeade and Pinnacle Living are each independent, non-stock, not-for-profit corporations. Neither WindsorMeade nor Pinnacle Living is subject to the control of the Virginia Annual Conference of the United Methodist Church. Neither the Virginia Annual Conference of the United Methodist Church, the United Methodist Association of Health and Welfare Ministries, the Department of Health and Welfare Ministries of the Board of Global Ministries of the United Methodist Church, nor the United Methodist Church is, nor will be, responsible for the financial or contractual obligations of WindsorMeade or Pinnacle Living. Likewise, neither WindsorMeade nor Pinnacle Living is, nor will either be, responsible for the financial or contractual obligations of the Virginia Annual Conference of the United Methodist Church, the United Methodist association of Health and Welfare Ministries, the Department of Health and Welfare Ministries of the Board of Global Ministries of the United Methodist Church or the United Methodist Church. The foregoing organizations are related to WindsorMeade and Pinnacle Living by faith, heritage, history, morals and guiding principles.

Pinnacle Living is the sole member of the Hermitage Capital & Reserve Corp. (HCRC), a Virginia, not-for-profit, non-stock corporation exempt from taxation under §501(c)(3) of the Internal Revenue Code and a “supporting organization” within the meaning §509(a) of the Internal Revenue Code. HCRC was formed exclusively to support WindsorMeade’s sole member, Pinnacle Living, WindsorMeade and any future affiliates of Pinnacle Living or WindsorMeade.

WindsorMeade is a member of Leading Age Virginia, an affiliate of Leading Age, a national organization which provides support and education primarily to not-for-profit entities serving seniors.

B. TAX EXEMPT STATUS OF PROVIDER

WindsorMeade and Pinnacle Living are both exempt from taxation under Internal Revenue Code §501(c)(3) and are permitted to receive charitable donations which, under ordinary gifting circumstances, are tax deductible to the donor. Under Internal Revenue Code regulations for tax exempt entities, no earnings may be used for the benefit of, nor distributed to, corporate directors or officers or private individuals. All excess funds remain available to be used by WindsorMeade or Pinnacle Living to further the mission of Enriching Life’s Journey.

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OWNERSHIP OF REAL PROPERTY

The real property on which the WindsorMeade community is constructed was conveyed to WindsorMeade from Pinnacle Living on May 31, 2013. WindsorMeade also owns all equipment, buildings and other improvements on the real property. All such property is pledged to secure the WindsorMeade debt obligations described in the attached Consolidated Financial Statements.

LOCATION AND DESCRIPTION OF REAL PROPERTY

The main buildings of the real property are located at 3900 Windsor Hall Drive, Williamsburg, Virginia. The community is built on approximately 105 acres located in James City County, Virginia and consists of 96 villas, 85 apartments and an Assisted Living Neighborhood consisting of 14 Assisted Living residences, known as Abingdon Neighborhood, as well as ancillary spaces which include a ballroom and resident wellness center. The community also includes Manchester House (a newly constructed 18 residence Memory Support Household) and Hadley House (a newly renovated and expanded 22 residence Health Care Household). Abingdon Neighborhood, Manchester House and Hadley House are all located in Bedford Terrace in the WindsorMeade Community.

SERVICES PROVIDED UNDER CONTINUING CARE CONTRACT

A. WINDSORMEADE RESIDENCY AGREEMENT

A specimen of the current WindsorMeade Residency Agreement is attached to this Disclosure. Services provided under the Residency Agreement are described generally in the following specific sections of the Agreement and in greater detail in the Schedule A attached to the Agreement. The WindsorMeade Residency Agreement is entered into by Residents who initially establish residency in Independent Living.

Services Included in Monthly Service Fee – Section C.1

Additional Services Available at Additional Cost – Section C.2

Health Services in Apartments or Villas at an Additional Cost – Section C.3.a

Assisted Living Services in Abingdon Neighborhood – Section C.3.b

Memory Support Services in Manchester House – Section C.3.c

Health Care Services in Hadley House – Section C.3.d

Health Care Services in Apartments or Villas – Section C.3.f Health Care Medicare Stay – Section C.3.e

B. BEDFORD TERRACE RESIDENCY AGREEMENT

A specimen of the current WindsorMeade Bedford Terrace Residency Agreement is attached to this Disclosure. Services provided under the Bedford Terrace Residency Agreement are described generally in the following specific sections of the Agreement and in greater detail in the Schedule A attached to the Agreement. The WindsorMeade Bedford Terrace Residency Agreement is entered into by Residents who initially establish residency in Abingdon Neighborhood or Manchester House.

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Services Included in Monthly Service Fee – Section C.1

Additional Services Available at Additional Cost – Section C.2

Assisted Living Services in Abingdon Neighborhood – Section C.3.a

Memory Support Services in Manchester House – Section C.3.b

Health Care Services in Hadley House – Section C.3.c

Health Care Medicare Stay – Section C.3.d FEES REQUIRED OF RESIDENTS

Residents will pay a one-time Entrance Fee at the time of admission which cannot be increased after admission except as specifically stated in the Residency Agreement. See Sections B.2, D, E, F and G of the attached Residency Agreement for more information concerning Entrance Fees, including refunds. (See the paragraph below for Entrance Fee provisions related to the Bedford Terrace Residency Agreement). The Residency Agreement reflects an option for either a 90% Entrance Fee Refund Plan or a 50% Entrance Fee Refund Plan. Monthly Service Fees will be charged, the amount of which will be dependent upon the residence selected. See Sections D.2 and F of the Residency Agreement for other information concerning Monthly Service Fees, including refunds and finance charges for late payments. If a resident’s financial position substantially deteriorates, he or she may be required to deposit monies as security for payments of future Fees.

The Bedford Terrace Residency Agreement does not require a deposit; the Entrance Fee is due in full when a resident establishes residency. The Bedford Terrace Residency Agreement refund is at least ninety percent (90%) and may be elected to be applied to the Monthly Service Fee after the end of one year of residency or upon transfer to nursing services in Hadley House. See Section D.1 of the Bedford Terrace Residency Agreement.

The Monthly Service Fees are intended to provide for the regularly offered services and conveniences as well as all other financial obligations and objectives of WindsorMeade including, for example, taxes, debt service, costs of operations, maintaining the viability and marketability of the community, maintaining and improving the quality of services provided, enhancing and expanding the community when expansion is warranted, maintaining reserves to assist residents, where appropriate, who may become unable to meet their financial obligations and payments or distributions to Pinnacle Living. The Monthly Service Fees may be adjusted by WindsorMeade, in its sole discretion, from time to time after thirty days advance written notice. There are no limitations on the amount, or frequency, of increases in the Monthly Service Fees.

WindsorMeade is presently accepting applications for residency. Prior to acceptance for residency, prospective residents may sign a Reservation Agreement and pay a one-time Application Fee (the Application Fee is refundable if the Reservation Agreement is terminated at any time by either party). If the prospective resident is accepted for residency, the prospective resident will sign a Residency Agreement and, except for Bedford Terrace Residency Agreement applicants, pay a Deposit equal to ten percent 10% of the Entrance Fee for the residence selected (the full amount of the Application Fee shall be applied as a credit against the deposit). The Deposit will be placed in an escrow account to be held, maintained and disbursed by the escrow agent, which shall be a bank, trust company or other escrow agent approved by the State Corporation Commission of Virginia (see the specimen Residency

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Agreement and the Reservation Agreement included attached to this Disclosure for additional information). Subject to the provisions of the Residency Agreement:

A. The Deposit shall remain the funds of the prospective resident, shall be maintained separate and apart from WindsorMeade’s funds, and shall not be subject to any liens, judgements, garnishments or creditor’s claims against WindsorMeade;

B. Charges of the escrow agent for its services as such shall not be deducted from the Deposit;

C. The Deposit shall only be invested in accordance with investments permitted by the Code of Virginia; and

D. The Deposit shall remain in escrow until (i) released to WindsorMeade upon written notice to escrow agent that the prospective resident occupies a residence or that a residence of the type the prospective resident selected is ready for immediate occupancy by the prospective resident, or (ii) refunded to the prospective resident (less appropriate charges, as explained in the specimen Residency Agreement).

The current Entrance Fees and Monthly Service Fees for WindsorMeade are shown below:

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WindsorMeade Residency Agreement Fee Schedule

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WindsorMeade Residency Agreement Fee Schedule

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WindsorMeade Bedford Terrace Residency Agreement Fee Schedule

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FREQUENCY AND AMOUNTS OF INCREASE IN PERIODIC RATES

WindsorMeade began receiving Monthly Fees from residents in May 2007. The average dollar amount of increase in single monthly fees for continuing care contracts is as follows:

Average Dollar Amount of Increase

Frequency Apartment Villa Assisted Living Health Care Memory Support 16-17 124 131 (205) 304 17-18 124 131 178 335 6,083 18-19 149 156 183 230 0 19-20 132 138 608 335 760

RESERVE FUNDING

WindsorMeade does not provide secured or “earmarked” reserve funding or security (including escrow accounts, trust or reserve funds) to guaranty that it will fully perform its obligations under its continuing care contracts. However, WindsorMeade (1) operates under a business and financial model that it believes to be very conservative and rigorously tested, (2) maintains operational investment reserves, and (3) has a revolving credit facility under which it can borrow to provide liquidity for operations. WindsorMeade follows generally accepted accounting principles for not-for-profit entities utilized by Pinnacle Living. Please refer to Note 1 of the Consolidated Financial Statements for the years ended May 31, 2019, and May 31, 2018, for information concerning the accounting treatment by Pinnacle Living of Entrance Fees and unearned income from residents who pay an Entrance Fee. Annually, Pinnacle Living revalues the liability to annuitants by utilizing commonly used actuarial tables. For funds on hand, Pinnacle Living’s Board of Directors establishes an Investment Policy and selects a financial institution to make investment decisions based upon the guidelines in the approved investment policy. Sandy Wiggins, of the Actuarial Consulting Group, serves as the investment consultant. Mr. Wiggins assists the Board as it develops appropriate investment policies. Mr. Wiggins has over 28 years of experience. CERTIFIED FINANCIAL STATEMENTS Independent auditors annually audit consolidated financial statements for WindsorMeade and its sole member, Pinnacle Living. Attached are certified consolidated financial statements of WindsorMeade and Pinnacle Living including balance sheets, statements of activities and statements of cash flows for the two most recent fiscal years. These consolidated financial statements conform to generally accepted accounting principles and have been certified by an independent certified public accountant, whose opinion is also included. The section immediately following titled “Financial Restructuring” contains further, material information regarding the restructuring of the financial affairs of WindsorMeade. FINANCIAL RESTRUCTURING In May 2013, WindsorMeade emerged from a voluntary Chapter 11 reorganization, resulting in significant debt reduction and improving WindsorMeade’s financial and business models (the “Restructuring”). The Restructuring was completed in only 92 days – a testament to collaboration among

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all stakeholders, who shared a desire to protect residents’ interests and quickly restore WindsorMeade to financial stability.

In fall 2012, WindsorMeade began the process of restructuring its debt obligations due to resident occupancy challenges caused by the 2008 economic and housing market collapse. In February 2013, WindsorMeade reached an agreement with a majority of its secured creditors to restructure and refinance its existing debt obligations. To implement the Restructuring, WindsorMeade pursued a voluntary Chapter 11 reorganization proceeding with the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division (the Court) and filed with the Court a Chapter 11 plan of reorganization (the Plan). The Plan was approved by an overwhelming majority of affected creditors and confirmed by the Court, and financial transactions provided for in the Plan were closed on May 31, 2013. On September 20, 2013, the Court entered its Final Decree, closing the bankruptcy case.

As a part of the Restructuring, WindsorMeade’s prior senior debt, which exceeded $61 million, was reduced to below $39 million, with payments spread over 30 years. Subordinated debt of $9.7 million was also issued. During the Restructuring, WindsorMeade and its advisors engaged in extensive financial analysis leading to the development of business plans and financial models suited to the post-recession economy from which the Plan was developed.

Following the Restructuring, WindsorMeade began planning the construction of Manchester House (an 18 residence Memory Support Household) and renovation and expansion of Hadley House (a 22 residence Health Care Household). Such construction and the renovation began in August 2016 in conjunction with issuance of new financing. The new financing consisted of a loan up to $7,000,000 in the form of a tax-exempt term note issued to STI Institutional & Government, Inc. by WindsorMeade with a guarantee agreement entered into by Pinnacle Living its sole member. The note was secured on parity with WindsorMeade’s Economic Development Authority of James City County, Virginia, Residential Care Facilities Revenue Bonds (Virginia United Methodist Homes of Williamsburg, Inc.) Series 2013A, B and C Senior Bonds and a Pinnacle Living Revolving Loan. The purpose of the loan was to construct Manchester house, renovate Hadley House to a household model, and increase the number of its health care residences by 10. Construction was completed September 2017.

With the Restructuring. WindsorMeade removed almost $38 million of debt from its balance sheet, allowing it to move forward under a rigorously tested business/financial model geared to the new economy. WindsorMeade enjoys the liquidity support of a revolving credit facility.

To date, WindsorMeade’s operations have outperformed the projections developed as part of the plan of reorganization. Overall occupancy for the community has improved significantly since the restructuring. As of May 31, 2019, 177 of 181 (97%) Independent Living Residences were occupied.

Further information about the Restructuring is available upon request. Information related to the continuing disclosure provided by WindsorMeade and the Trade Activity for the WindsorMeade bonds is posted regularly to a website controlled by the Municipal Securities Rulemaking Board. The MSRB can found at: http://emma.msrb.org. The CUSIP number for the Senior Secured Bonds is 47029WCC9, and the CUSIP number for the Subordinate Bonds is 47029WCD7.

http://emma.msrb.org/

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PRO FORMA STATEMENTS

Exhibit B of this Disclosure contains the projected Statement of Activities, Balance Sheet and Statement of Cash Flows for WindsorMeade for Fiscal Years 2020 – 2024. The financial statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP). Further information about the assumptions upon which the pro forma projections are based is available from WindsorMeade upon request.

Exhibit C of this Disclosure contains the projected Statement of Activities, Balance Sheet and Statement of Cash Flows for Pinnacle Living for Fiscal Years 2020 – 2024. The financial statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP). Further information about the assumptions upon which the pro forma projections are based is available from WindsorMeade upon request.

EXPLANATION OF MATERIAL DIFFERENCES BETWEEN PRIOR FISCAL YEAR’S PRO FORMA INCOME STATEMENT AND THE ACTUAL RESULTS OF OPERATIONS DURING THE PRIOR FISCAL YEAR

Fiscal year ended May 31, 2019 (“FY 2019”) with an average occupancy as follows:

• Independent Living residences (IL) 98% • Assistant Living residences (AL) 87% • Memory Support residences (AL) 41%, and • Health Care (HC), (which includes skilled nursing) 55%

For FY 2019, WindsorMeade produced total operating revenue of $16,477,000 (1.7% increase from the FY2019 Proforma) and total operating expenses of $16,707,000 (2.2% increase over the FY2019 Proforma). This has resulted in a deficit change in net assets from operations of $230,000 (58.6% increase from the 2019 Proforma). Non-operating changes had a deficit of $3,139,000 (2.7% decrease from the FY2019 Proforma) which is primarily from interest expense charges. The largest expense variance was Neighborhood/Household staffing increases due to agency costs for nursing and dedicated team member transfers from other departments. Buildings and grounds was higher than budget due to salary adjustments and non-capitalizable repair costs. Dining services was higher than budget due to raw food costs and some agency use. Williamsburg, Virginia, where WindsorMeade is located, is primarily a hospitality market and staffing dining services can be more difficult because of this. WindsorMeade continues to reduce it’s 90% refundable residency agreements to 50% refundable residency agreements. This year saw a greater number of 90% refunds causing net entrance fees to be negative. In FY2013, the reorganization recommended the reduction in the refundable contract and anticipated there would be some years in which net entrance fees would be negative.

ADMISSION OF NEW RESIDENTS

A minimum age of 62 is required at the time of residency; provided, however, that, in the case of married Joint Residents, WindsorMeade’s Executive Director may require that only one Joint Resident meet the minimum age requirement.

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A. INDEPENDENT LIVING

(1) An Independent Living resident must meet WindsorMeade’s standards for living independently as a resident:

(a) exhibiting the ability to exit the building

(b) securing the approval of the future resident’s physician and WindsorMeade’s physician

(2) The future resident must demonstrate the ability to meet the cost of services contemplated to be provided.

(3) Residency may be refused on the basis that approval may interfere with WindsorMeade’s ability to provide proper services to present residents. B. ASSISTED LIVING – ABINGDON NEIGHBORHOOD

(1) Residency in Abingdon Neighborhood is limited to the availability of space, and the future resident must provide sufficient information to permit WindsorMeade to determine the services that will be necessary.

(2) The future resident must secure the approval of both the future resident’s physician and WindsorMeade’s physician.

(3) The future resident must demonstrate the ability to meet the cost of services contemplated

to be provided. (4) Residency may be refused on the basis that approval may interfere with WindsorMeade’s

ability to provide proper services to present residents.

C. MEMORY SUPPORT – MANCHESTER HOUSE

(1) Residency in Manchester House is limited to the availability of space, and is further limited by applicable law. The future resident must provide sufficient information to permit WindsorMeade to determine the services that will be necessary.



(4) Residency may be refused on the basis that approval may interfere with WindsorMeade’s ability to provide proper services to present residents.

D. HEALTH CARE – HADLEY HOUSE

(1) Residency in Hadley House is limited to the availability of space, and is further limited by applicable law. The future resident must provide sufficient information to permit WindsorMeade to determine the services that will be necessary.


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(4) Residency may be refused on the basis that approval of the application may interfere with WindsorMeade’s ability to provide proper services to present residents.

ACCESS TO COMMUNITY AND SERVICES

WindsorMeade does not offer its services to persons who do not have an agreement with WindsorMeade. Arrangements may be made to accommodate overnight guests.

PROCEDURE BY WHICH A RESIDENT MAY FILE A COMPLAINT OR DISCLOSE CONCERN

A Resident may file a complaint or disclose any concern, in writing, as follows:

(1) The complaint or concern should first be submitted in writing to the appropriate department director who will provide a written response within fifteen (15) days.

(2) In the event the resident’s complaint or concern is not resolved to the resident’s satisfaction by the department director within such fifteen (15) day period, the resident may submit the complaint or concern in writing to the Executive Director, who will provide a written response within fifteen (15) days.

(3) In the event the resident’s complaint or concern is not resolved by the Executive Director within such fifteen (15) day period, the resident may submit the complaint or concern to the appropriate ombudsman.

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RESIDENCY AGREEMENT September 2019

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TABLE OF CONTENTS

PAGE

Premise ........................................................................................................................................... 23

A. Acceptance for Residency ................................................................................................. 23

B. Residence Accommodations ............................................................................................. 23

C. Services to Residents ......................................................................................................... 24

D. Fees .................................................................................................................................... 27

E. Rescission Before Residency is Established ..................................................................... 29

F. Termination After Residency is Established ..................................................................... 30

G. Transfer From Your Residence ......................................................................................... 32

H. Reassignment of a Residence ............................................................................................ 37

I. Disposition of Personal Property ....................................................................................... 37

J. Financial Obligations and Subsidies ................................................................................. 38

K. Nature of Payments ........................................................................................................... 38

L. Personal Representative for Incapacity ............................................................................. 39

M. Right of Entry .................................................................................................................... 39

N. Loss or Damage to Property or Person .............................................................................. 39

O. Entire Agreement and Modification .................................................................................. 39

P. Severability ........................................................................................................................ 40

Q. Governing Law and Cost of Enforcement ......................................................................... 40

R. Insurance ........................................................................................................................... 39

S. Non-Waiver of Breach ...................................................................................................... 40

T. No Ownership Interest ....................................................................................................... 40

U. Assignability ...................................................................................................................... 10

V. Joint and Several Liability of Joint Residents ................................................................... 41

Schedule A ............................................................................................................................... 43

Schedule B ............................................................................................................................... 57

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WINDSORMEADE WILLIAMSBURG

RESIDENCY AGREEMENT

This is an Agreement between Insert Resident(s) Name(s) (either “Resident”, “Joint Resident(s)”, “You” or “Your”) and WindsorMeade Williamsburg Pinnacle Living (either “WindsorMeade”, “Our”, “We” or “Us”). We are a Virginia, not-for-profit, non-stock corporation operating a continuing care community (sometimes referred to as “the Community”) located at 3900 Windsor Hall Drive, Williamsburg, Virginia. (If two people sign this Agreement as Residents, this is a Joint Residency Agreement, and the term “You” shall refer to each person individually, and to both people together, as the context may dictate). You acknowledge receipt of a copy of the Reservation Agreement, this Agreement and the Disclosure Statement. The Reservation Agreement (including the financial, health and related documents submitted by You in relation thereto) is by this reference, made part of this Agreement. A. ACCEPTANCE FOR RESIDENCY

We agree to provide You with the following residency and services in an available independent Residence of Your choice, subject to the terms and conditions of this Agreement.

You agree to comply with the terms of this Agreement and Our policies and procedures, as they may be modified from time to time, provided they are consistent with the provisions of this Agreement. You agree to provide Us, no sooner than thirty (30) days and no less than seven (7) days before establishing occupancy, a report from Your personal physician regarding a physical examination to permit Us to assess Your ability to live independently. You also agree to provide updated health and financial information and documentation to Us from time to time upon Our reasonable request, and to inform Us immediately of any material change in Your health or financial condition. If Your financial position substantially deteriorates, You may be required to deposit monies as security for the payment of future Monthly Service Fees.

B. RESIDENCE ACCOMMODATIONS

1. Your Residence

You will have a personal, non-assignable right to reside in the residence which You have reserved (“Your Residence”). Your Residence is type Insert Residence Type number Insert Residence Number.

You may decorate and furnish Your Residence as You deem appropriate. Appliances and special equipment will be subject to the prior approval of Our Executive Director. You may arrange to make physical changes to Your Residence with the prior written approval of Our Executive Director. You will be responsible for the cost of materials and labor required to make such changes. When You vacate Your Residence, You will be responsible for any costs incurred in restoring Your Residence to its original condition, reasonable wear and tear excepted. Title to all fixtures added as part of the foregoing will immediately vest in Us and will remain Our property after termination or rescission of this Agreement. Notwithstanding any other provision of this Agreement, any such decorations, furnishings or changes must be

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in compliance with all applicable safety and governmental codes and regulations as well as Our written policies, which may change from time to time.

2. Establishing Residency

We will notify You when Your Residence is ready and available for occupancy by You. Unless otherwise agreed to in writing by Us, You agree to establish Residency (“Residency”) within ninety (90) days from the date You sign this Agreement by paying the balance of the total Entrance Fee and the Monthly Service Fee for the first month of Residency, prorated in the event Residency is established after the first day of the month (You may not occupy Your Residence until such Fees have been paid, although You will not be required to occupy Your Residence physically in order to “establish Residency”). If You fail to establish Residency within the ninety (90) day period, We shall have the right to market the residence You have reserved to other prospective residents, during which time You will have the first right of refusal of the residence, as follows:

a. We shall have the right to show the residence to other prospective residents; b. We will advise You in writing if a prospective resident indicates an intention to establish

Residency in the Residence; c. You shall have seven (7) days from the date of such written notice to establish Residency

by paying the balance of the total Entrance Fee and Monthly Service Fee for the first month or Residency, prorated in the event Residency is established after the first day of the month; and

d. If You do not establish Residency within such seven (7) day period, We will have the

right to permit another prospective resident to establish Residency in the residence, in which case We shall refund the entire amount of Your Deposit to You.

C. SERVICES TO RESIDENTS

1. Services Included in Monthly Service Fee

The Monthly Service Fee covers Your access to amenities, certain services and meals, as described in Schedule A attached hereto. Except as otherwise specifically provided in this Agreement, there will be no change in the scope of services without at least thirty days prior written notice to You.

2. Additional Services Available at Additional Cost

Additional Services are available, at an additional cost, as described in Schedule A attached hereto.

3. Health Services

The following health services are presently available to Our residents. The Interdisciplinary Care Team (which typically includes a registered nurse, dietician, social worker and activities coordinator, and may include other WindsorMeade team members)

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will determine, in consultation with the Medical Director, whether such services are appropriate for You and, if so, the proper location and provision for such services. Subject to the qualification set forth in Section G.4., such services may be provided to You in Your apartment or villa, or in Bedford Terrace (which is comprised of Abingdon Neighborhood, Manchester House and Hadley House).

a. Health Services in Apartments or Villas The Monthly Service Fee covers Your access to the following Health Services:

i. Health and well-being assessments at Our Resident Wellness Center; and ii. Preventative health services at Our Resident Wellness Center, including minor

first aid, regular blood pressure checks, temperature and pulse checks and maintenance of Your health records. Additional services may be available at Our Resident Wellness Center for an additional charge.

b. Assisted Living Services – Abingdon Neighborhood

We presently operate an assisted living neighborhood (Abingdon Neighborhood) in Bedford Terrace at WindsorMeade, staffed with personnel trained to provide Assisted Living services. Abingdon Neighborhood is designed for residents who are unable to function independently in an independent living Residence, but who do not need continuous medical supervision. Abingdon Neighborhood residents receive those services covered under Section C.1, commensurate with their condition, such as help in dressing, self-care and other activities of daily living, assistance in attending meals, increased assistance in housekeeping, increased monitoring of personal status, and monitoring of medications. There are tiers of Assisted Living services as detailed in Schedule A attached hereto.

If the Interdisciplinary Care Team, (in consultation with the Medical Director) determines that Assisted Living services are appropriate for You, You will be granted priority access to Abingdon Neighborhood over those who do not reside at WindsorMeade pursuant to a Residency Agreement (“Nonresidents”), on a space-availability basis. If You transfer to Abingdon Neighborhood (as further explained in Section G.4 hereof), You agree to pay a fee for Assisted Living services (the “Assisted Living Fee”), commensurate with the Assisted Living tier of services You receive (See Schedule A attached hereto for a description of Assisted Living tiers currently offered and related Assisted Living Fees, which services and Fees may change from time to time).

c. Memory Support Services – Manchester House

We presently operate a Memory Support household (Manchester House) in Bedford Terrace at WindsorMeade, staffed with personnel trained to provide Memory Support services. Manchester House is designed for residents who need help in dressing, self-care and other activities of daily living, assistance in attending meals, increased assistance with housekeeping, increased monitoring of personal status, and monitoring of medications.

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If the Interdisciplinary Care Team (in consultation with the Medical Director and/or such other persons as may be required under the then current Virginia Law and regulations) determines that Memory Support services are appropriate for You, You will be granted priority access to Manchester House over Nonresidents, on a space-availability basis. If You transfer to Manchester House (as further explained in Section G.4 hereof), You agree to pay a fee for Memory Support services (the “Memory Support Fee) (See Schedule A attached hereto for a description of Memory Support services currently offered and related Memory Support Fees, which services and Fees may change from time to time).

d. Health Care Services – Hadley House

We presently operate a Health Care household (Hadley House) in Bedford Terrace at WindsorMeade, staffed with personnel trained to provide Health Care services. Residents of Hadley House not on a Medicare Stay (defined below) receive those services covered under Section C.1, commensurate with their condition, and other Health Care varying with their needs, the highest level of which is total nursing care in accordance with the Rules and Regulations for Licensed Nursing Facilities promulgated by the Virginia Department of Health. If the Interdisciplinary Care Team (in consultation with the Medical Director) determines that Hadley House is appropriate for You, You will be granted priority access to Hadley House over Nonresidents. While occupying Your apartment or villa, You will receive a total of twelve free days (“Free Days”) of care in Hadley House for a non-Medicare Stay during Your lifetime, per resident, at no extra charge beyond the Monthly Service Fee (unused Free Days will have no residual value at termination of Your Residency). After these Free Days have been used, if You transfer to Hadley House (as further described in Section G.4 hereof) on a non-Medicare stay, You agree to pay a fee for Health Care services (the “Health Care Fee) (See Schedule A attached hereto for a description of Health Care services currently offered and the related Health Care Fee, which services and Fee may change from time to time).

e. Health Care Medicare Stay Hadley House is certified under the Medicare program (Title XVIII of the Social

Security Act) to provide skilled nursing care. If you are in need of skilled nursing care and you meet and maintain the requirements determined by the Medicare program, your stay in Hadley House will be pursuant to the Medicare program (a “Medicare Stay”). You will be responsible for paying all deductibles and other permitted non-covered charges during your Medicare Stay. Since Medicare covers part of this stay, you do not pay the Health Care Fee; however, you will continue to pay your Monthly Service Fee. When your admission to our Health Care Center is a Medicare Stay, you will execute a separate Medicare specific Hadley House Residency Agreement with us which will govern your Medicare Stay only. We reserve the right to withdraw from the Medicare program at any time.

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f. Services in Your Apartment or Villa It may be determined that any of the foregoing Health services may be provided to

You in Your apartment or villa rather than in Abingdon Neighborhood or Hadley House. This determination may be made in consideration of reasons deemed appropriate by Us for Your care and benefit. In such event, in addition to Your Monthly Service Fee, You will pay an hourly home-care fee based upon the level and extent of the services to be provided (See Schedule A attached hereto for the current fees for such services).

g. Services Not Covered The services provided in Abingdon Neighborhood, Manchester House and Hadley

House shall not cover the cost of medical care, such as hospitalization, professional medical services by an attending physician, drugs, medical supplies, medical equipment, transportation incident to medical care, and expenses of private duty nurses or companions employed by You. You are encouraged to carry adequate health insurance to cover these health related expenses. Further, You are responsible for paying charges of any physician, physical therapist, speech therapist, occupational therapist, dentist, podiatrist, psychologist, psychiatrist or other health professional regardless of whether You arrange for such services or We make the arrangements for You; and You are also responsible for all charges for Your medicine, drugs, lab services, x-rays, food supplements, durable medical equipment, personal care supplies and other health related items.

h. Insurance All Residents are required to carry Medicare Insurance Parts A and B and a Medicare

Supplement, or the equivalent of such coverage. We reserve the right to require evidence of such insurance coverage.

D. FEES

You agree to pay the following fees to Us as a condition of Your Residency:

1. Entrance Fee

You agree to pay to Us, before establishing Residency, an Entrance Fee, as shown below in either Section (a) or (b). Select one option by indicating in the appropriate space. The Entrance Fee shall be payable according to Section (c), below. There shall be no restrictions on Our use of the Entrance Fee, and the Entrance Fee shall not be changed except as specifically stated in this Agreement.

a. A 50% Refund Entrance Fee in the amount of $ . No less than fifty percent (50%) of

the Entrance Fee paid will be refunded to You upon termination of this Agreement. The refund (“Your Refund”) will be an amount equal to the Entrance Fee paid less (i) four percent (4%) of the amount of Your Entrance Fee as an Administrative Fee assessed at the beginning of the term of this Agreement and (ii) two percent (2%) of the Entrance Fee for each full or partial month of Residency through the twenty-third (23rd) month, at which time the refund will reach fifty percent (50%) of the Entrance Fee. Your Refund

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will thereafter remain a constant fifty percent (50%), regardless of Your length of Residency at WindsorMeade, subject to the provisions of Section G. Any unpaid charges will be deducted from the refund.

b. A 90% Refund Entrance Fee in the amount of $ . No less than ninety percent

(90%) of the Entrance Fee paid will be refunded to You upon termination of this Agreement. The refund (“Your Refund”) will be an amount equal to the Entrance Fee paid less (i) four percent (4%) of the amount of Your Entrance Fee as an Administrative Fee assessed at the beginning of the term of this Agreement and (ii) two percent (2%) of the Entrance Fee for each full or partial month of Residency through the third (3rd) month, at which time Your Refund will reach ninety percent (90%) of the Entrance Fee. Your Refund will thereafter remain a constant ninety percent (90%), regardless of Your length of Residency at WindsorMeade, subject to the provisions of Section G. Any unpaid charges will be deducted from the refund.

c. The Entrance Fee Shall be payable as follows:

i. A deposit of $ (from time to time the “Deposit”) equal to 10% of the total

Entrance Fee is due when You sign this Agreement and return it to Us. ii. The remaining balance of $ is due within ninety (90) days from the date You

sign this Agreement.

d. There are no restrictions on Our use of the Entrance Fee, and the Entrance Fee shall not be changed except as specifically stated in this Agreement.

e. To the extent required by Virginia law, the Deposit (i) shall be placed in an escrow account

to be held, maintained and disbursed by the escrow agent (which shall be a bank, trust company or other escrow agent approved by the State Corporation Commission of Virginia); (ii) shall remain Your fund, shall be maintained separate and apart from Our funds, and shall not be subject to claims against Us; and (iii) shall only be invested in accordance with investments permitted by the Code of Virginia, such as obligations of the United States Government and its agencies, obligations of the Commonwealth of Virginia, bankers’ acceptances, and certain high grade corporate bonds. The Deposit shall not be subject to the forgoing requirements once You establish Residency.

2. Monthly Service Fee

You agree to pay Us each month, starting with the month You establish Residency, a Monthly Service Fee applicable to Your Residence, prorated in the event Residency is established after the first day of the month.

a. The initial Monthly Service Fee for Your Residence is $ ; provided, however, that if

You execute this Agreement more than thirty days prior to establishing Residency, the initial Monthly Service Fee may be adjusted as provided below in subsection D.2.d (We will give You at least thirty days advance written notice of such adjustment). You agree to pay the Monthly Service Fee (as adjusted) on or before the first day of each month of Your Residency.

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b. The Monthly Service Fee stated above is based on Residency by person(s). If this is

a Joint Residency Agreement, the Monthly Service Fee includes a Second Person Monthly Service Fee of $ . In such case, each of You will be jointly and severally liable for the full amount of the Monthly Service Fee (including the Second Person Monthly Service Fee). In the event of termination of this Agreement with respect to one of the Joint Residents or the permanent transfer of one of the Joint Residents to Bedford Terrace (as described in Section G.4 hereof), the Monthly Service Fee relative to the remaining Joint Resident will thereafter be reduced by the amount of the Second Person Monthly Service Fee; provided that both Joint Residents shall remain jointly and severally liable for full payment of the reduced Monthly Service Fee as provided in Section V hereof.

c. The Monthly Service Fee is due and payable on the first day of each month of Residency.

If it is not paid on or before the fifth day of each month, in addition to any other obligations hereunder, You agree to pay a FINANCE CHARGE at the rate of NINE PERCENT per annum (9% APR) until the Monthly Service Fee is paid in full.

d. The Monthly Service Fees are intended to provide for the regularly offered services and

conveniences as well as all other financial obligations and objectives of WindsorMeade including, for example, taxes, debt service, costs of operations, maintaining the viability and marketability of the Community, maintaining and improving the quality of services provided, enhancing and expanding the Community when expansion is warranted, maintaining reserves to assist residents, where appropriate, who may become unable to meet their financial obligations, and payments and distributions to Pinnacle Living (WindsorMeade’s sole member). The Monthly Service Fees may be adjusted by Us, in Our sole discretion, from time to time, after thirty days advance written notice. There are no limitations on the amount, or frequency, of increases in the Monthly Service Fees.

e. You will not receive any refund of any portion of the Monthly Service Fee, unless this

Agreement is terminated or in the event of Your permanent transfer to Bedford Terrace (as described in Section G.4 hereof). Such refund, if any, will be calculated in consideration of the effective date of such termination or permanent transfer.

f. You will be billed for additional services that are not covered by the Monthly Service Fee,

either at the time they are rendered or with Your next Monthly Service Fee statement. The current fees for such additional services are listed in Schedule A attached hereto, and such fees may change from time to time. Subject to the foregoing, payment procedures for fees for such additional services, including imposition of finance charges, will be the same as for Your Monthly Service Fee.

E. RESCISSION BEFORE RESIDENCY IS ESTABLISHED

1. Rescission Without Cause Within Seven Days

You have the right to rescind this Agreement, without penalty or forfeiture, by delivering written notice of such rescission to Us within seven days after (i) You gave us an initial deposit or (ii) You receive a fully executed copy of this Agreement (signed by You and Us), whichever occurs first. You will not be required to establish Residency or to move into Your Residence prior to the expiration of such seven-day period.

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In the event of rescission of this Agreement in accordance with this Section E.1, You will receive a full refund of the Entrance Fee within sixty days of such rescission, without penalty or forfeiture.

2. Rescission by Death or Incapacity

If, prior to establishing Residency, You die or become incapacitated by illness or injury and no longer qualify for Independent Living, this Agreement will be deemed automatically rescinded by You. The effective date of such rescission will be the date We receive written notice of Your death or incapacity.

In the event of rescission of this Agreement in accordance with this Section E.2, You will receive a full refund of the Entrance Fee within sixty days of such rescission, provided that the amount of such refund will be reduced by the amount of any costs specifically incurred by Us at Your request according to a written document signed by You and Us.

3. Special Provision for Joint Residency Agreement

If this is a Joint Residency Agreement, any rescission by one Joint Resident before Residency is established will be deemed a rescission by both Joint Residents; provided that the other Joint Resident may enter into a new Residency Agreement so long as such other Resident then satisfies Our then current admissions criteria independently.

F. TERMINATION OF RESIDENCY AFTER RESIDENCY IS ESTABLISHED

1. Termination by Resident

You may terminate Residency at any time by giving Us written notice. If You die after having established Residency, Your death will be deemed a termination of this Agreement in accordance with this Section F.1. If this is a Joint Residency Agreement and only one of the Joint Residents terminates Residency, the remaining Resident will retain the rights and obligations of this Agreement; provided, however, that the Joint Resident terminating this Agreement shall also remain obligated to Us as provided in Section V hereof.

In the event of termination in accordance with this Section F.1, You will receive Your Refund, if any, within sixty days after the later of (i) the date You have physically vacated (including removal of all of Your personal property from) Your Residence, and (ii) the date a new resident enters into a Residency Agreement with Us and pays Us the then current Entrance Fee for the residence You have vacated; provided, however, that if the residence You have vacated is occupied by a current resident of the Community who is relocating to Your former Residence (and, in certain cases, who may be one of a series of several current residents relocating among independent living residences), no refund shall be paid to You until the later of (i) the date You have physically vacated (including removal of all of Your personal property from) Your Residence, and (ii) We receive from a new resident of the Community full payment of the then applicable entrance fee with respect to the residence previously occupied by a relocating current resident. You may stop paying the Monthly Service Fee after such termination, as follows:

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a. If Your death is the cause of termination of this Agreement, You (Your estate) may stop paying the Monthly Service Fee thereafter as of the date all of Your personal property has been removed from Your Residence; provided that, if this is a Joint Residency Agreement, the Second Person Fee shall cease as of the date of Your death (the remaining Joint Resident shall thereafter pay the single person Monthly Service Fee applicable to Your Residence).

b. If You terminate this Agreement for any reason other than Your death, You may stop paying

the Monthly Service Fee upon the later of (i) the date You have physically vacated (including removal of all of Your personal property from) Your Residence, and (ii) the date a new resident enters into a Residency Agreement with Us and pays Us the then current Entrance Fee for the residence You have vacated or an existing resident transfers to Your Residence); provided that, in no case shall You be obligated to pay the Monthly Service Fee for more than ninety days after the date You have physically vacated (including removal of all of Your personal property from) Your Residence (if this is a Joint Residency Agreement, after the terminating Joint Resident physically vacates Your Residence, the remaining Joint Resident shall pay the single person Monthly Service Fee applicable to Your Residence).

2. Termination by Us

Once You establish Residency, We will not terminate Your Residency except for Good Cause. “Good Cause” means (a) proof that You are a danger to Yourself or others; (b) Your non-payment of any monthly or periodic fees; (c) Your repeated conduct that interferes with other Residents’ quiet enjoyment of the Community; (d) Your persistent refusal to comply with Our reasonable written rules and regulations, policies and procedures or the Resident’s Handbook; (e) a material misrepresentation made intentionally by or recklessly by You in Your Application for Residency, or any other document provided by You to Us regarding information which, if accurately provided, would have resulted in either Your failure to qualify for Residency or a material increase in the cost of providing to You the care and services provided under this Agreement; or (f) a material breach by You of the terms and conditions of this Agreement. We will not terminate Your Residency until We have given You written notice stating the grounds of termination and a reasonable period of time for cure. The effective date of such termination will be stated in the written notice but will not be prior to the end of such cure period. If this is a Joint Residency Agreement, this termination may, depending on the nature of the cause, apply to either One Joint Resident or to both and, if termination applies to only one Joint Resident, provided the other Joint Resident then satisfies Our then current admissions criteria independently, such other Joint Resident will have the option of retaining the obligation and rights of this Agreement or terminating this Agreement. In the event of termination in accordance with this Section F.2, You will receive Your Refund, if any, within sixty days after the later of (i) the date You have physically vacated (including removal of all of Your personal property from) the Residence, and (ii) the date a new resident enters into a Residency Agreement with Us and pays Us the then current Entrance Fee for the Residence You have vacated; provided, however, that if the residence You have vacated is occupied by a current resident of the Community who is relocating to Your former residence (and, in certain cases, who may be one of a series of several current residents relocating among residences), no refund shall be paid to You until the later of (i) the date You have physically vacated (including removal of all of Your personal property from) Your Residence, and (ii) We receive from a new resident of the Community full payment of the then applicable entrance fee with respect to the residence previously occupied by a relocating current resident.

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3. Refund for Joint Residents

If this a Joint Residency Agreement, You shall not receive Your Refund in accordance with this Section F until sixty days after (i) both of You have physically vacated (including removal of all of Your personal property from) Your Residence, and (ii) the date a new resident enters into a Residency Agreement with Us and pays Us the then current Entrance Fee for the residence You have vacated; provided, however, that if the residence You have vacated is occupied by a current resident of the Community who is relocating to Your former residence (and, in certain cases, who may be one of a series of several current residents relocating among residences), no refund shall be paid to You until the later of (i) the date You have physically vacated (including removal of all of Your personal property from) Your Residence, and (ii) We receive from a new resident of the Community full payment of the then applicable entrance fee with respect to the residence previously occupied by a relocating current resident. Unless otherwise agreed by both of You and Us in writing, Your Refund, if any, is due shall be paid (i) in equal shares to both of You if the Residency of both of You is terminated simultaneously, or (ii) to the one of You whose Residency is terminated last if Residency is not terminated simultaneously.

4. Refund Payable to Trustee

Your Refund, if any, may be paid to the Trustee of an existing Trust if You have executed and delivered to Us an assignment document in such form and content as the Assignment of Refund document attached hereto as Schedule B, or such other document We deem appropriate, in Our discretion, provided such document is effective at the time Your Refund is due.

G. TRANSFER FROM YOUR RESIDENCE

1. You May Change Your Residence

If You desire to move from Your current Residence to another residence in the Community, subject to availability and Our then current policies and procedures, We shall use Our best efforts to accommodate such a transfer. Prior to any such transfer, You (both of You if this is a Joint Residency Agreement) must satisfy Our then current admissions criteria relative to the residence to which You desire to transfer (Your “new Residence”). You agree to abide by Our transfer policies and procedures.

In the event of such transfer, if the Entrance Fee applicable to Your new Residence is greater than the amount of the then current Entrance Fee applicable to the residence from which You desire to move, You will pay the difference (the “Additional Entrance Fee”) to Us prior to such transfer. You will not receive any payment at such time if the new Entrance Fee is less than the current Entrance Fee applicable to the Residence from which You desire to move. After such transfer, You will pay the Monthly Service Fee applicable to Your new Residence, pro-rated for the first month if such transfer occurs on any day other than the first day of the month. Additionally, certain relocation, refurbishment upgrade and additional square footage fees may be charged to You.

In the event You pay any Additional Entrance Fee, unless otherwise agreed by You and Us in writing, any refund thereof shall be amortized at the same rate as the Entrance Fee Plan You selected in Section D.1 hereof, starting at the date of payment of such Additional Entrance Fee

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as though such date was the date You established Residency for the purpose of such calculation.

2. Establishing Joint Residency With an Existing Resident

If You marry another resident of the Community and desire to establish Joint Residency, subject to availability and Our then current policies and procedures, We shall use Our best efforts to accommodate such arrangements. In such event, You will each be required to terminate Your respective, existing Residency Agreement to and execute a new (then current) Joint Residency Agreement, provided that the provisions of subsection G.1 above shall apply to Your Additional Entrance Fee, if any.

After any such transfer, You will be treated in all respects as Joint Residents and thereafter will pay the Monthly Service Fee for Joint Residency, with the Second Person Monthly Service Fee prorated for the first month, if appropriate.

3. Establishing Joint Residency With a Nonresident

If You marry a person not a resident of the Community and desire to establish Joint Residency with Your spouse, Your spouse must submit an Application for Residency and such other documentation as We may reasonably require in accordance with Our then current policies and procedures, and both You and Your spouse must submit a then current financial report. If Your spouse does not qualify for independent living Residency in accordance with Our acceptance policies then in effect, Your spouse will not be permitted to establish Residency at WindsorMeade.

If accepted for Joint Residency, You will be required to terminate your existing Residency Agreement, and You and Your spouse must then execute a new, Joint Residency Agreement, provided that the provisions of subsection G.1 above shall apply to Your Additional Entrance Fee, if any. After any such transfer, You and Your spouse will be treated in all respects as Joint Residents and thereafter will pay the Monthly Service Fee for Joint Residency, with the Second Person Monthly Service Fee prorated for the first month, if appropriate.

4. Transfer for Level of Service Reasons

If You have a condition which requires a level of service that cannot be given in the Community, such as a dangerously contagious disease, an uncontrolled or untreated mental condition, specialized psychiatric condition or any other condition requiring services which are prohibited under the applicable licenses of Abingdon Neighborhood, Manchester House or Hadley House or which We are otherwise unable to provide to You in the Community (including by reason of lack of space), We will assist You in transferring to an appropriate hospital, institution or other community (herein an “Outside Facility”).

It is Our policy to see that You reside in an area of the Community where Your specific needs and the appropriate level of services are available to You. The Community is organized as a “continuing care retirement community” (“CCRC”) where We have made certain assumptions in our planning that You will move seamlessly through a continuum of care and receive the appropriate level of services in the most cost-effective and efficient setting. Our Interdisciplinary Care Team (described in this Agreement) is the team that ultimately makes

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the determinations of the appropriate level of service for You. In making these determinations, the Interdisciplinary Care Team will consult with You and will review potential reasonable accommodations to allow you to stay on a desired level of service so long as that level of service is appropriate for You. You will not be permitted to remain on a lower level of service if We determine that it may alter the nature of Our Community as a CCRC or if We determine that it may not allow Us to provide You the appropriate level of services needed in your particular circumstances in consideration of Your safety and security and those of other residents of the Community.

You agree that, after You have established Residency, We may transfer You to Bedford Terrace (as described in Section C hereof) or to an Outside Facility, at such time as We, in consultation with the Interdisciplinary Care Team (and in consultation with the Medical Director), determine that such a transfer is necessary for Your well-being. The Interdisciplinary Care Team, in consultation with the Medical Director and You, Your family and/or Your physician, will determine based on its criteria for evaluation and placement whether Your transfer is temporary or permanent.

a. Temporary Transfer

If You are transferred temporarily to Bedford Terrace or an Outside Facility, You may retain Your Residence during Your absence. In that case, You will pay Your regular Monthly Service Fee, less adjustments made in accordance with Section D.2.g hereof, and the Assisted Living Fee, Memory Support Fee or Health Care Fee (after use of Your Free Days) or the charges of an Outside Facility, as applicable.

If You are transferred temporarily to an Outside Facility for Health Care Services which We are unable to provide in Hadley House solely because of a lack of space, You will receive Free Days in accordance with the foregoing guidelines, limited to the then current per diem Health Care Fee for non-residents, direct-admits, as adjusted from time to time.

b. Permanent Transfer

If You are transferred permanently to Bedford Terrace or an Outside Facility, the following provisions will apply;

i. Single Occupancy. If You occupy Your Residence by Yourself and it has been determined that such transfer is permanent, You must vacate Your Residence (including removal of Your personal property) within sixty days after the date We give You notice that Your transfer is permanent. When Your Residence has been vacated (including removal of Your personal property), subject to the provisions of subparagraph G.6 hereof, You will no longer be required to pay the Monthly Service Fee; instead, You will pay the Assisted Living Fee, Memory Support Fee, Health Care Fee (after use of Your Free Days) or Outside Facility charges, as applicable, and You will also be responsible for fees and charges for any additional services or items that You may receive.

If You do not vacate Your Residence (including removal of Your personal property) within sixty days of the date We give You notice that Your transfer is

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permanent, You will be liable to continue to pay (i) the Monthly Service Fee for Your Residence, (ii) the Assisted Living Fee, Memory Support Fee, Health Care Fee (after use of Your Free Days) or Outside Facility charges, as applicable, (iii) any fees and charges for any additional services or items that You may receive, and (iv) Our costs of repossession of the Residence and storage of Your personal property.

ii. Joint Occupancy. If this is a Joint Residency Agreement, and it has been determined that such transfer is permanent for only one of You, the other Joint Resident will continue to occupy Your Residence. In that case, the remaining Resident will pay the regular single occupancy Monthly Service Fee, and the transferred Resident will pay the Assisted Living Fee, Memory Support Fee, Health Care Fee (after use of Your Free Days) or Outside Facility charges, as applicable, and any fees and charges for any additional services or items that such transferred Resident may receive.

If it has been determined that such transfer is permanent for both of You, You must both vacate Your Residence (including removal of Your personal property from) within fourteen days of the date We give You notice that Your transfer is permanent. If Your Residence has not been vacated by both You (including removal of Your personal property from) within fourteen days of the date We give You notice that Your transfer is permanent, You will both be jointly and severally liable to continue to pay (A) the Monthly Service Fee for Your Residence, (B) the Assisted Living Fee, Memory Support Fee, Health Care Fee (after use of Your Free Days) or Outside Facility charges, as applicable, (C) any fees and charges for any additional services or items that You may receive, and (D) Our costs of repossession of Your Residence and storage of Your personal property.

iii. Your New “Residence”. In the event of any such permanent transfer to Bedford Terrace, such new living accommodations will thereafter be deemed “Your Residence” for all purposes, under this Agreement unless and until You have transferred to another living accommodation in accordance with this Agreement.

5. Disposition of Refund a. Permanent Transfer to Outside Facility

If You are transferred permanently from Your Residence to an Outside Facility, this Agreement will automatically terminate, and You will receive payment of Your Refund, if any, within sixty days after the later of (i) the date You have physically vacated (including removal of Your personal property from) Your Residence, and (ii) the date a new resident enters into a Residency Agreement with Us and pays Us the then current Entrance Fee for the Residence You have vacated provided, however, that if the residence You have vacated is occupied by a current resident of the Community who is relocating to Your former residence (and, in certain cases, who may be one of a series of several current residents relocating among residences), no refund shall be paid to You until the later of (i) the date You have physically vacated (including removal of all of Your personal property from) Your Residence, and (ii) We receive from a new resident of the Community full payment of the then applicable entrance fee with respect to the residence

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previously occupied by a relocating current resident. In the event of such termination, if You later recover and wish to occupy a new Residence, You will be required to apply for Residency and, if You are accepted for Residency based upon Our then current criteria for admissions, You will be required to execute a new Residency Agreement. You will not have priority status for such Residency, nor will You have priority status for admission to the Bedford Terrace.

b. Permanent Transfer to Health Services

If You are permanently transferred from Your Residence to Bedford Terrace, You shall receive advance payment of a portion of Your Refund, as follows:

i. The amount of the payment shall be equal to (A) the amount of Your Refund (as determined in accordance with Section D.1 hereof as though the date of such transfer was the date of termination of Your Residency), less (B) Seven Hundred Thirty (730) days times the per diem Health Care Fee at the rate current on the date of Your permanent transfer to Bedford Terrace.

ii. If this is a Joint Residency Agreement, there shall be no calculation or payment made until Your Residence is vacated by both of You.

iii. Upon termination of Your Residency, the amount of Your Refund shall be reduced,

dollar for dollar, by the amount of any payment You receive in accordance with this Section (such reduced amount may be referred to from time to time as “Your Remaining Refund” and, unless otherwise indicated, any reference to “Your Refund” shall be deemed to mean such a reduced amount).

If You are permanently transferred from Your Residence to Bedford Terrace, and thereafter Your health improves so that You are able to return to Independent Living, We will provide You with the next available apartment or villa appropriate to Your condition. In such event, You shall pay the difference between (i) the amount of the then current Entrance Fee applicable to Your new Residence, and (ii) the amount of Your Remaining Refund. Thereafter, You will be required to pay the Monthly Service Fee applicable to the residence to which You transfer, as such Fee may be adjusted from time to time in accordance with this Agreement. You will also have priority access over Nonresidents, on a space-availability basis, for re-admission to any other Household or Neighborhood in Bedford Terrace, as may be appropriate for Your benefit.

6. Continuing Responsibility for Residence Vacated

Notwithstanding any other provisions of this Agreement, if You transfer from Your Residence in accordance with the provisions of this Section G, the following provisions shall apply:

a. You will be responsible for all moving and cleaning costs and the cost of restoring Your vacated residence to its original condition, excluding ordinary wear and tear (Joint Residents shall be jointly and severally liable for such costs);

b. No payment of any Refund or portion thereof will be made to You until we receive payment of the applicable Entrance Fee from a new resident for the residence You have vacated; provided, however, that if the residence You have vacated is occupied by a current resident of the Community who is relocating to Your former residence (and, in

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certain cases, who may be one of a series of several current residents relocating among residences), no refund shall be paid to You until the later of (i) the date You have physically vacated (including removal of all of Your personal property from) Your Residence, and (ii) We receive from a new resident of the Community full payment of the then applicable entrance fee with respect to the residence previously occupied by a relocating current resident, and

c. You will continue to pay the Monthly Service Fee (and the Second Person Monthly Service Fee if applicable) relative to Your vacated residence (in addition to all other Fees described above) until We receive payment of an Entrance Fee from a new resident for Your vacated residence (or an existing resident transfers to Your Residence); provided that, unless this Agreement is terminated in accordance with Section F hereof, You will not be responsible to pay such Fee for more than sixty days (pro-rated) after You have physically vacated (including removal of all of Your personal property from) Your Residence.

H. REASSIGNMENT OF A RESIDENCE

1. We may reassign Your Residence to a different resident upon the occurrence of any of the following:

a. Your failure to establish Residency within the time frame prescribed in Section B.2 of this Agreement.

b. The permanent vacancy of Your Residence by every Resident having a present right to reside there. A permanent vacancy is considered to exist if:

i. This Agreement is rescinded, or Your Residency is otherwise terminated, and Your Residence is vacated (including removal of all personal property) by every Resident having a present right to reside there, or

ii. You (or the last remaining Joint Resident in the case of Joint Residency) are admitted permanently to Bedford Terrace or an Outside Facility.

2. Except as otherwise provided in this Agreement, if You use Bedford Terrace or an Outside Facility on a temporary basis, You will retain possession, rights and privileges for use of Your Residence during that period.

I. DISPOSITION OF PROPERTY

In the event of termination or rescission of this Agreement or Your permanent transfer from Your Residence, all of Your personal property must be removed from Your Residence within sixty days thereof. If after that sixty day period such property is not removed, We will have the right to remove the property from Your Residence and to charge You for the actual cost of storing, insuring, transporting and preserving the property, such costs not to be less than fifty dollars ($50.00) per month. We will have a lien in such property to the extent of such costs and the costs of recovering same.

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J. FINANCIAL OBLIGATIONS AND SUBSIDIES

Your timely payment of all fees and other charges under this Agreement is a condition of Your Residency at the Community, and failure to pay any such fees and charges will constitute “Good Cause” for termination of Your Residency. However, We may grant You a subsidy to assist You in the payment of a portion of such fees or charges in the event We determine, in Our sole and absolute discretion, that such subsidy is appropriate. Any such subsidy will be made in accordance with Our policies and procedures then in effect, which may be changed from time to time. In no event will any such subsidy be given to any resident who impairs his or her ability to meet financial obligations, whether by gratuitous transfer (to Your spouse or to any other individualor entity) or incurrence of unusual, unnecessary or extraordinary expenditures or obligations, as determined by Us in Our sole and absolute discretion. No subsidy will be granted to a remaining Joint Resident if the first Joint Resident to die, or withdraw, fails to provide for the remaining Joint Resident as more fully set forth in Section V below. You agree to provide Us with such financial and other information and documentation as We may request, from time to time, in Our sole and absolute discretion, to determine Your eligibility for such subsidy in accordance with the foregoing. In the event any such subsidy is granted to You, You agree as follows:

1. You will remain obligated to reimburse Us for the full amount of such subsidy, which will remain Your obligation upon termination of this Agreement and may be satisfied from or offset against any refund or other sums We may owe to You. To the extent such obligation is not satisfied as of the time of Your death, You hereby agree that it will be an obligation of Your estate.

2. You agree to accept such level of accommodations as We deem necessary, in Our sole and absolute discretion, so as not to impair Our ability to meet Our financial obligations and otherwise operate the Community on a sound financial basis, in Our sole and absolute discretion. You agree that such accommodations may be smaller or otherwise different from Your Residence if We deem it necessary or appropriate.

3. You acknowledge that We are under no obligation to make or to continue any such subsidy, and that We may discontinue any such subsidy at any time in Our sole and absolute discretion.

In consideration of Our acceptance of You for Residency under this Agreement, You hereby agree not to take any action, or to omit to take any actions, so as to impair Your ability to meet Your financial obligations under this Agreement, whether by gratuitous transfer to any person or entity or to incur any unusual, unnecessary or extraordinary expenditures or obligations. Expenditures for private duty personnel can be, in certain circumstances, deemed unnecessary or extraordinary. Any such act or omission by You (or in Your behalf by Your personal representative, agent or other authorized person) shall be deemed a “material breach” of this Agreement by You constituting “Good Cause” for Us to terminate this Agreement as contemplated under Section F.2(f) hereof.

K. NATURE OF PAYMENTS

You and We acknowledge that the payments made by You to Us under this Agreement are intended solely as compensation to Us for providing You with residency and services, and that such payments are not intended to be a loan. However, We have not provided, nor shall We provide, any advice to You in this regard, and We urge You to seek advice and counsel from Your own legal and

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tax advisors regarding these matters and any income or other tax implications relating to such payments or otherwise relating to this Agreement.

L. PERSONAL REPRESENTATIVE FOR INCAPACITY

We strongly encourage You to make arrangements before You move into Your Residence whereby Your affairs will be managed by attorneys-in-fact or other agents with legal authority to handle your personal, health, legal and business matters (collectively Your “personal representatives”) if You become incapacitated. You agree to have a financial power of attorney in place at all times while a resident of the Community. You agree to provide Us with the name, address and telephone number of each of Your personal representatives before You move into Your Residence, and to inform Us of any change in the identity of Your personal representatives. You also agree that either You or Your personal representatives will inform Us when Your personal representatives assume responsibility for managing Your personal, health, legal or business affairs. You agree to reimburse Us for all expenses which We may incur as the result of Your having failed to make or to keep such arrangements in place.

M. RIGHT OF ENTRY

You agree to give Us and Our authorized team members and agents the right of entry into Your Residence at all reasonable times (after making arrangements with You if reasonably practicable) for inspection, maintenance and housekeeping or storage purposes, and at any time for emergencies.

N. LOSS OR DAMAGE TO PROPERTY OR PERSON

1. We will not be responsible for the loss or damage of any of Your personal property due to routine maintenance, housekeeping activities, theft, fire, other casualty or any other cause. Our insurance policy(ies) shall not protect You against loss or damage to Your personal property. You may desire to obtain such policy(ies) of insurance as may be appropriate to provide against theft, fire or other casualty to Your personal property.

2. You agree that neither We nor Our agents or team members will be liable for death or injury not caused by Our active negligence.

3. You agree to indemnify and hold Us and Our agents and team members harmless from and against any and all claims, demands, actions and causes of action (including any costs and attorney’s fees), whether from injury to person, loss of life or damage to property, occurring in or about Your Residence or involving You anywhere else at the Community, but only to the extent actually caused by Your negligence.

O. ENTIRE AGREEMENT AND MODIFICATION

This Agreement, including the Application for Residency (including, without limitation, the health, financial and other related documentation You provide Us), comprise the entire Agreement between You and Us. You agree that You are not relying upon any oral statements or representations made by Us which are not also set forth in this written Agreement. No amendment or special provision of this Agreement will be valid or enforceable unless set forth in a written document executed by all

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Residents who are parties hereto and on behalf of WindsorMeade by its President. We reserve the right to modify the Agreement unilaterally in order to conform to changes in the law or applicable regulations and to modify unilaterally Our rules, regulations, policies and procedures.

P. SEVERABILITY

Except as otherwise specifically provided in this Agreement, the invalidity or amendment of any restriction, condition or other provision of this Agreement, or any part thereof, shall not impair or affect in any way the validity, enforceability or effect of the rest of this Agreement.

Q. GOVERNING LAW AND COST OF ENFORCEMENT

This Agreement is made in Virginia, and it shall be governed and construed, in all respects, in accordance with the laws of the Commonwealth of Virginia. In the event of a dispute concerning the performance of this Agreement, the substantially prevailing party shall be allowed to collect from the other party their court costs and reasonable attorney fees in such dispute.

R. INSURANCE

1. You agree to maintain health insurance coverage under Parts A and B of the Medicare Program; provided that, if You are not eligible for such coverage, You agree to obtain equivalent coverage in such amounts and from such carrier(s) as may be reasonably acceptable to Us.

2. We are not permitted to serve persons who are recipients of Medicaid, nor are recipients of Medicaid eligible for placement in Health Care.

S. NON-WAIVER OF BREACH

If in one or more instances We fail to insist that You perform any of Your obligations under this Agreement, such failure shall not be construed as a waiver of any past, present or future rights We have under this Agreement; Your obligations shall nevertheless continue in full force and effect.

T. NO OWNERSHP INTEREST

The rights and privileges granted to You by this Agreement do not include any leasehold rights or interests nor include any right, title or interest in any part of the personal property, land, buildings or improvements owned or administered by Us. Your rights are primarily for services, with a contractual right of residency. Any rights, privileges or benefits under this Agreement or any interest or contractual rights of any nature in the Community, including the right to any refund of the Entrance Fee, Your Refund or other benefit or payment hereunder, are and shall be subordinate in priority, right, claim and interest to any lien, charge, mortgage or other security interest or agreement now or hereafter placed on or affecting WindsorMeade or any of WindsorMeade’s real or personal property, and to any amendment, modification, replacement or refunding thereof.

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U. ASSIGNABILITY

You may not assign Your rights or obligations hereunder, in whole or in part, nor may You subcontract Your right to reside in Your Residence, under any circumstances. We shall have the right to assign Our rights and obligations hereunder in whole or in part to any successor owner or lender, either outright or as security for any indebtedness of WindsorMeade, without Your consent. The transfer of ownership of WindsorMeade, or any part thereof, shall not be deemed a termination of this Agreement.

V. JOINT AND SEVERAL LIABILITY

If this is a Joint Residency Agreement, each Joint Resident hereby agrees (i) to be bound jointly and severally by the terms and conditions hereof, (ii) to make provision in his or her respective estate planning documents (whether by will, trust, survivorship, pay-on-death, beneficiary designation or other designation) to satisfy the continuing obligations of the remaining Joint Resident under this Agreement after the death of the first Joint Resident to die, and (iii) that such obligations shall become an obligation of his or her estate. You hereby agree to provide us from time to time, upon Our request, with written evidence satisfactory to Us of Your compliance with Your obligations under this Paragraph. In the event that one Joint Resident no longer resides at the Community, each of You, as Joint Residents, shall remain jointly liable for the full performance of this Agreement (including but not limited to payment for expenses of the other Joint Resident) even in the event of death, divorce, legal or actual separation. Any contrary provision of this Agreement notwithstanding, should one of You, as Joint Resident, die or withdraw without making provisions for the remaining Joint Resident sufficient to permit the remaining Joint Resident to qualify financially as a Resident independently after the Joint Resident’s death or withdrawal, then, in addition to being in breach of this Agreement affecting both Joint Residents, You agree that the remaining Joint Resident shall have a claim against Your estate and against any person to whom You made a transfer in violation of the duty to support Your Joint Resident under this Agreement. You acknowledge that We would not enter into this Agreement but for the assurances of both Joint Residents that each would provide for the remaining Joint Resident, and You acknowledge that one Joint Resident’s failure to do so for the other is a material breach of this Agreement constituting good cause for termination of this Agreement by Us and otherwise excusing Our further performance of this Agreement. This Section V shall survive the termination of this Agreement.

WITNESS THE SIGNATURES of the parties. RESIDENT(S): Date: ___________________________________________ Resident Signature Date: ___________________________________________ Joint Resident Signature (if applicable)

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WINDSORMEADE WILLIAMSBURG By:___________________________________________ Title:_________________________________________

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SCHEDULE A TO RESIDENCY AGREEMENT

WINDSORMEADE WILLIAMSBURG AMENITIES AND SERVICES*

Summary of Amenities • club room and private dining venue; • communication channel/monthly newsletter; • library/business center; • pharmacy/gift shop/convenience store; • access to meeting space/activity rooms; • salon services; • fitness center with pool, spa, juice bar, exercise studio; • bistro, formal dining room and take out; • tennis courts, bocce court; • building access system; • resident garden area; • health and wellness center with on-site physician services; • rehabilitation therapy; • gated community with 24 hour security; • housekeeping and maintenance services; • lawn care; • priority access to Bedford Terrace; • free days (lifetime) in Hadley House, per contract; • transportation; • planned activities and outings; • catering services; • club house; • woodworking shop; • massage therapy; • car detailing; • personal laundry services; • hospitality and concierge services; • guest suites; • dietician services; • dry cleaning pick up; • art gallery; • wifi in select common spaces. * NOTE: The amenities, services and fees described in this Schedule A may be modified from time to

time or eliminated, as may be deemed appropriate; provided, however, that residents will be given at least 30 days advance notice of any such changes.

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Schedule A (Continued)

INDEPENDENT LIVING SERVICES

Services Included in Monthly Service Fee (Subject to change with 30 days’ notice)

Summary of Services

• meal allowance, per resident, per month at the prevailing community rate schedule; • weekly light housekeeping, to include mopping of kitchens and bathrooms, light dusting,

vacuuming, wiping of exposed kitchen surfaces and general cleaning of bathroom areas including sinks, tubs, showers, toilets and mirrors;

• nursing on call 24 hours per day for emergencies; • water and sewer; • gas and electric services, apartments included, villas pay prevailing vendor rate; • trash disposal and recycling services; • pest control services; • maintenance of common spaces, grounds and lawn care; • maintenance of Residences including repair of appliances provided by WindsorMeade; • two hours of personal maintenance service within the first two weeks following move-in for

picture hanging and furniture arrangement. Supplies not included. Hours not used are not carried over for future use;

• 24-hour security; • emergency call system monitoring, 24 hrs a day; • daily check-in system; • regularly scheduled social, cultural, educational, wellness and recreational programs; • access to Fitness Center, pool and tennis; • medical transportation within a 10-mile radius for routine, non-emergency medical care; • transportation to regularly scheduled shopping trips and planned events and activities; • concierge services; • access to woodworking shop and garden area; • access to library, resident business center and spiritual programs; • use of common area facilities (some require scheduling); • limited medical meal delivery service (up to five days); • preventative health services at the Wellness Center, to include minor first aid, regular blood

pressure checks, temperature and pulse checks, maintenance of health records; • access to Bedford Terrace, including Respite Care, per contract; • assistance with the coordination of home health, companion, and other support services; • wifi in select common areas.

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INDEPENDENT LIVING SERVICES

Additional Services Available at an Additional Cost

• additional housekeeping (beyond weekly light housekeeping service) at an hourly rate to be established;

• on site physician services (physician must have a service agreement with WindsorMeade; fee for services made directly between resident and physician);

• alternative therapies, such as massage (prevailing vendor rates); • salon services (prevailing vendor rates); • basic cable TV (billed monthly at community rate); • premium cable TV service (prevailing vendor rates); • catered meal functions (varies with menu choices and location); • guest suites (based on availability); • personal laundry services (wash, dry, and fold); • rehabilitation services based on prevailing rates; • repair of personal appliances, lamps, etc. (fee based per hour plus parts); • special programs, concert tickets, catered trips; • telephone (prevailing vendor rates); • internet (prevailing vendor rates); • on-site pharmacy; • long term care insurance review and filing, at prevailing community rate; • meals in excess of the monthly meal allowance; • hospitality services (mail pick up, water plants, automobile jump start); • dietary consultation; • room set up fee (varies by location); • gas and electric services, villas pay prevailing vendor rate, apartments included; • medical supplies and additional services received in the Wellness Center, per contract; • dry cleaning pick up (prevailing vendor rate); • medical transportation outside a 10-mile radius; • private transportation; • on site flu and pneumonia vaccinations (billed to Medicare).

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ASSISTED LIVING TIERS – ABINGDON NEIGHBORHOOD

Services Included in Monthly Service Fee (Subject to change with 30 days notice)

Assisted Living Tier 1: This tier indicates a need for minimal assistance from our team members in order to function in daily routines. Residents require the presence of additional support services with little or no assistance and supervision with the physical aspects of daily living. Assisted Living Tier 2: This tier indicates a need for moderate assistance from our team members in order to function in daily routines. Residents require greater supervision of the physical aspects of daily living, behavior patterns or orientation, such as the need for cueing to maintain this level of independence. Assisted Living Tier 3: This tier indicates a need for moderate to maximum assistance from our team members in order to function in daily routines. Residents require significant supervision with the physical aspects of daily living and continual cueing for orientation and behavior to maintain this level of independence.

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ASSISTED LIVING SERVICES – ABINGDON NEIGHBORHOOD


• three meals per day in the dining room, plus snacks and beverages; • weekly housekeeping to include linen change; • nursing assistance and monitoring 24 hours per day; • water, sewer, electric, heating and cooling; • trash disposal; • pest control services; • maintenance of apartment and grounds; • one hour of personal maintenance service within the first week following move-in for


• special diets, if ordered by physician; • 24-hour security; • scheduled life enhancement opportunities; • medical transportation within specified radius; • transportation to regularly scheduled shopping trips and planned events and activities; • use of bistro, wellness center, outdoor terrace, wood and garden shop and library; • use of common areas space (some require scheduling); • use of laundry facilities; • wireless internet; • local telephone calls.

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• housekeeping beyond weekly service at prevailing community rates; • on site physician services (physician must have a service agreement with WindsorMeade; fee

for services made directly between resident and physician); • alternative therapies, such as massage (prevailing vendor rates); • salon services (prevailing vendor rates); • medical supplies and dressings; • basic cable TV (billed monthly at community rate); • premium cable TV service (prevailing vendor rates); • catered meal functions (varies with menu choices and location); • guest suites (based on availability); • personal laundry services (wash, dry, and fold); • rehabilitation services based on prevailing rates; • special programs, concert tickets, catered trips; • telephone (rental fee and long distance billed monthly at community rate); • mobility alert/wander management equipment; • incontinence services (supplies are applicable to the Partial Fee); • pharmaceutical services; • long term care review and filing, at prevailing community rate; • private transportation (prevailing community rates, based on availability); • dry cleaning services (prevailing vendor rates); • guest meals; • wound care; • medical equipment rental; • formal dining room; • medication administration; • bed; • bedside table; • bedside light; • comfortable chair; and • dresser with drawers.

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MEMORY SUPPORT SERVICES – MANCHESTER HOUSE


• three meals per day in the dining room, plus snacks and beverages; • daily housekeeping to include linen change; • nursing assistance and monitoring 24 hours per day; • water, sewer, electric, heating and cooling; • trash disposal; • pest control services; • maintenance of apartment and grounds; • one hour of personal maintenance service within the first week following move-in for


• special diets, if ordered by physician; • 24-hour security; • scheduled life enhancement opportunities; • medical transportation within specified radius; • transportation to regularly scheduled shopping trips and planned events and activities; • use of bistro, wellness center, outdoor terrace, wood and garden shop and library; • use of common areas space (some require scheduling); • use of laundry facilities; • wireless internet; • medication management; • local telephone calls.

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• housekeeping beyond daily service at prevailing community rates; • on site physician services (physician must have a service agreement with WindsorMeade; fee

for services made directly between resident and physician); • alternative therapies, such as massage (prevailing vendor rates); • salon services (prevailing vendor rates); • medical supplies and dressings; • basic cable TV (billed monthly at community rate); • premium cable TV service (prevailing vendor rates); • catered meal functions (varies with menu choices and location); • guest suites (based on availability); • personal laundry services (wash, dry, and fold); • rehabilitation services based on prevailing rates; • special programs, concert tickets, catered trips; • telephone (rental fee and long distance billed monthly at community rate); • mobility alert/wander management equipment; • incontinence services (supplies are applicable to the Partial Fee); • pharmaceutical services; • long term care review and filing, at prevailing community rate; • private transportation (prevailing community rates, based on availability); • dry cleaning services (prevailing vendor rates); • guest meals; • wound care; • medical equipment rental; • formal dining room; • bed; • bedside table; • bedside light; • comfortable chair; and • dresser with drawers.

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HEALTH CARE SERVICES – HADLEY HOUSE


• three meals per day, plus snacks and beverages; • dietary consultation; • daily light housekeeping; • linen changes weekly and as needed; • nursing assistance and monitoring 24 hours per day; • medication administration; • water, sewer, electric, heating and cooling; • trash disposal; • pest control services; • basic cable TV; • maintenance of apartment and grounds; • special diets, if ordered by physician; • 24-hour security; • Regularly scheduled social, cultural, spiritual, education, wellness and recreational

programs; • access to Fitness Center, pool and tennis; • medical transportation within a 10-mile radius for routine, non-emergency medical care; • transportation to regularly scheduled shopping trips and planned special events; • use of bistro, formal dining room, outdoor terrace, woodworking shop, garden center and

library; • use of common areas facilities (some require scheduling); • use of laundry facilities; • access to Wellness Center; • computer access; • wifi in select common spaces.

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• on site physician services (physician must have a service agreement with

WindsorMeade; fee for services made directly between resident and physician); • alternative therapies, such as massage (prevailing vendor rates); • salon services (prevailing vendor rates); • wound care; • medical supplies and dressings; • premium cable TV service (prevailing vendor rates); • catered meal functions (varies with menu choices and location); • guest suites (based on availability); • personal laundry service (wash, dry, and fold); • rehabilitation services based on prevailing rates; • special programs, concert tickets, catered trips; • telephone (rental fee and long distance billed monthly at community rate); • mobility alert equipment; • incontinence care (supplies are applicable to the Partial Fee); • private transportation (prevailing community rates, based on availability); • pharmaceutical services; • long term care insurance review and filing, at prevailing community rate; • guest meals; • dry cleaning services (prevailing vendor rates); • medical equipment rental (such as oxygen concentrator and tanks).

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SCHEDULE A (Continued)


BEDFORD TERRACE 2019-2020 FEE SCHEDULE

Abingdon Neighborhood-Assisted Living Services

Monthly Fee $5,170.00

Tier 1 Services $760.00

Tier 2 Services $1,672.00


Assisted Living-Medication Management

Monthly Fee $304.00

Manchester House-Memory Support Services


Hadley House-Health Care Services

Daily Fees Original Wing Rooms $383.00

New Wing Rooms $394.00

These fees are applicable to Residency Agreement Residents only and are subject to change in thirty (30) days advance written notice.

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SCHEDULE A (Continued) WINDSORMEADE WILLIAMSBURG

DESCRIPTION OF

SERVICES TO RESIDENTS The following is a description of the Services which are presently offered to Independent Living Residents at WindsorMeade. Except as otherwise stated, the Monthly Service Fee covers the cost of these Services. A Resident Handbook is provided with additional details concerning all WindsorMeade Programs and Services.

A. Meals:

Meals will be available in WindsorMeade’s dining venues seven days a week. The hours of operation of these venues will be published in the Resident Handbook. Residents may use their monthly meal allowance, at their own discretion, to cover the cost of such meals. Meal purchases beyond the monthly meal allowance will be charged to the resident’s monthly statement at the published menu prices. Guest meals, carryout and home delivery service may also be charged against the resident’s monthly meal allowance.

Catering and Special Event Services will be available through the Dining Services Department. Service charges and fees will apply. Residents may not charge these services against their monthly meal allowance. WindsorMeade will make reasonable efforts to accommodate special diets as prescribed by a resident’s physician as a medical necessity. Limited Medical Meal Delivery Service will be available to the residence of an ill resident with the approval of the Executive Director and Health and a Wellness Center nurse. A delivery fee will be charged only after such service has been provided to such resident for more than five (5) consecutive days. Guests are welcome to dine in WindsorMeade’s dining venues. A reservation policy has been established in the Resident Handbook.

B. Housekeeping:

WindsorMeade residents are expected to maintain their own residences in a clean, sanitary, safe and orderly condition, and WindsorMeade will provide weekly light housekeeping to assist residents in this regard. The weekly service will include (i) mopping of hard surface floors, (ii) vacuuming carpeting, (iii) cleaning and sanitizing showers, tubs, lavatories, kitchen sink and all countertops, (iv) cleaning the exterior of vanities and kitchen cabinets and (v) cleaning exterior surfaces of kitchen appliances, (vi) light dusting. In addition, windows will be cleaned as scheduled. Additional or more frequent housekeeping is available upon request, at an additional charge.

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C. Laundry

Each residence is equipped with a washer and dryer. Personal laundry assistance will be provided at an additional fee. Dry cleaning pick-up and drop-off services will be provided on a scheduled basis with local cleaners, subject to availability.

D. Utilities

Apartments in the Windsor Hall will have water, sewer, electricity, heating, cooling and trash service, the cost of which is covered by the Monthly Service Fee. Villas have water, sewer and trash service, the cost of which is covered by the Monthly Service Fee. Electricity and gas are separately metered for each villa and will be charged directly by the provider.

Each residence will be wired for cable T.V. Such service will be available at an additional charge. Each residence will be wired for up to two (2) telephone lines. Additional telephone lines may be available at an additional fee. Telephone service will be available at an additional charge directly by the provider.

Each residence will be wired for in-home computer use. High-speed Internet access is available at an additional charge by an outside provider.

E. Maintenance

WindsorMeade will maintain each residence and all provided appliances.

WindsorMeade will maintain all community common areas.

WindsorMeade will maintain all landscaping and grounds. Residents are welcome to plant personal gardens within designated planting areas.

F. Transportation

WindsorMeade will provide scheduled transportation for local shopping trips and local medical/dental appointments. Additional transportation service outside of regularly scheduled routes may be available at an additional charge.

G. Security

WindsorMeade will provide reasonable security measures, including a 24-hour resident emergency call system, a resident check-in system and monitoring of the WindsorMeade grounds and facilities by security personnel.

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H. Storage Space

Residents who occupy an Apartment will be assigned one (1) storage locker, the cost of which is included in the Monthly Service Fee. State and local fire regulations restrict what may be stored, and the manner in which it may be stored, in such storage lockers. Guidelines for use of storage space will be provided in a Resident Handbook.

I. Social-Recreational Activities

WindsorMeade will have a program of activities designed to meet the spiritual, physical, social, recreational and intellectual needs of WindsorMeade residents. Residents are welcome to participate in these activities, as they may desire. Some events may involve an additional charge.

J. Guests

Guest rooms shall be provided for visitors on a reserved basis, at an additional fee, subject to availability.

K. Health and Wellness Program

Your Monthly Service Fee covers access to the Health and Wellness programs at WindsorMeade. The programs include:

• Scheduled Health Education programs; • Health and well-being assessments in our Wellness Center; • Access to Fitness Center and pool during open hours; • Scheduled fitness, exercise and water activities classes; • Preventative Health Services such as regular blood pressure check, temperature and

pulse checks and minor first aid.

In addition, a variety of fitness programs, wellness services and consultation services may be available at an additional fee.

WindsorMeade may provide additional services in the future, or may modify or eliminate existing services from time to time, as may be deemed appropriate (i.e., if there is an insufficient level of resident interest or participation); provided, however, that residents will be given at least 30 days advance notice of any such change.

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SCHEDULE B TO RESIDENCY AGREEMENT

WINDSORMEADE WILLIAMSBURG – ASSIGNMENT OF REFUND The undersigned Resident (“resident”) hereby, assigns, grants and conveys unto the Trustee(s) (the “Assignee”) of the Trust described below all right, title and interest in and to any and all refunds Resident is entitled to receive under that certain Residency Agreement (the “Residency Agreement”) between Resident and WindsorMeade Williamsburg (“WindsorMeade”) dated , 20 . Resident hereby acknowledges that, with regard to this Assignment:

(1) It shall be Resident’s duty to notify WindsorMeade in writing regarding any change in the identity of the Trustee(s);

(2) Upon request by WindsorMeade, Resident (or the Trustee(s)) shall provide written

assurance satisfactory to WindsorMeade regarding continuing validity of the Trust and the identity and authority of the Assignee Trustee(s); and

(3) In the event of any confusion regarding the correct identity of the Assignee Trustee(s) or

Trust at the time any refund payment is due, WindsorMeade shall be entitled, in its sole and absolute discretion, to distribute such refund(s) to Resident’s estate without liability to any person or entity.

Resident hereby acknowledges that WindsorMeade is accepting this Assignment as a convenience to Resident and, on behalf of Resident and Resident’s heirs, distributees, beneficiaries, personal representatives, successors and assignees, Resident hereby releases WindsorMeade and agrees to indemnify and save WindsorMeade harmless of and from any and all claims and other liability as may arise in connection with WindsorMeade’s compliance with the instructions contained herein. Resident acknowledges that all of WindsorMeade’s rights and remedies hereunder shall devolve to WindsorMeade’s successors and assigns. If this is a Joint Residency Agreement, any rescission by one Joint Resident will be deemed a rescission by both Joint Residents; provided that the other Joint Resident may enter into a new Residency Agreement so long as such other Resident then satisfies Our then current admissions criteria independently. If two persons signed the Residency Agreement as Residents, the Residency Agreement is a Joint Residency Agreement, in which case (i) the term “Resident”, as used herein and in the Residency Agreement shall refer to each Joint Resident individually and to both Joint Residents together, as the context may dictate, and (ii) both Residents agree to be bound jointly and severally by the terms and conditions hereof.

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Name of Assignee/Trustee(s): Insert Name(s) of Assignee/Trustee(s) Name of Trust: Insert Name of Trust Effective Date of Trust: Insert Effective Date of Trust WITNESS the signatures of the parties. RESIDENT(S): Date: ___________________________________________ Resident Signature Date: ___________________________________________ Joint Resident Signature (if applicable) ASSIGNEE/TRUSTEE(S): Date: ____________________________________________ Trustee’s Signature Date: ____________________________________________ Co-Trustee’s Signature (if applicable) WINDSORMEADE WILLIAMSBURG PINNACLE LIVING Date: By:___________________________________________ Title:_________________________________________

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BEDFORD TERRACE

RESIDENCY AGREEMENT September 2019

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TABLE OF CONTENTS

PAGE

ACCEPTANCE FOR RESIDENCY.................................................................................................. 61 RESIDENCE ACCOMMODATIONS .............................................................................................. 61 SERVICES TO RESIDENT .............................................................................................................. 62 FEES .................................................................................................................................................. 64 RESCISSION BEFORE RESIDENCY IS ESTABLISHED ............................................................. 66 TERMINATION AFTER RESIDENCY IS ESTABLISHED ........................................................... 67 TRANSFER FROM YOUR RESIDENCE ........................................................................................ 68 REASSIGNMENT OF A RESIDENCE ............................................................................................ 70

DISPOSITION OF PROPERTY ........................................................................................................ 70 FINANCIAL OBLIGATIONS AND SUBSIDIES ............................................................................ 70 NATURE OF PAYMENTS ............................................................................................................... 71 PERSONAL REPRESENTATIVE FOR INCAPACITY .................................................................. 71 RIGHT OF ENTRY ........................................................................................................................... 72 LOSS OR DAMAGE TO PROPERTY OR PERSON ...................................................................... 72 ENTIRE AGREEMENT AND MODIFICATION ............................................................................ 72 SEVERABILITY ............................................................................................................................... 72 GOVERNING LAW AND COST OF ENFORCEMENT ................................................................. 72 INSURANCE ..................................................................................................................................... 73 NON-WAIVER OF BREACH ........................................................................................................... 73 NO OWNERSHP INTEREST ........................................................................................................... 73 ASSIGNABILITY ............................................................................................................................. 73

V. MARRIAGE ...................................................................................................................................... 74

SCHEDULE A ............................................................................................................................................ 75 SCHEDULE B ............................................................................................................................................ 84

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WINDSORMEADE WILLIAMSBURG BEDFORD TERRACE

RESIDENCY AGREEMENT

This is an Agreement between Enter Resident Name (either “Resident”, “You” or “Your”) and WindsorMeade Williamsburg Pinnacle Living (either “WindsorMeade”, “Our”, “We” or “Us”). We are a Virginia not-for-profit, non-stock corporation operating a continuing care community (sometimes referred to as “the Community”) located at 3900 Windsor Hall Drive, Williamsburg, Virginia. You acknowledge receipt of a copy of the Reservation Agreement, this Agreement and the Disclosure Statement. The Reservation Agreement (including the financial, health and related documents submitted by You in relation thereto) is by this reference, made part of this Agreement.

ACCEPTANCE FOR RESIDENCY

We agree to provide You with the following residency and services in an available Abingdon Neighborhood or Manchester House Residence of Your choice, subject to the terms and conditions of this Agreement. Abingdon Neighborhood and Manchester House are both licensed by the Virginia Department of Social Services for assisted living services with Manchester House also providing memory support services.

You agree to comply with the terms of this Agreement and Our policies and procedures, as they may be modified from time to time, provided they are consistent with the provisions of this Agreement. You agree to provide Us, no sooner than thirty (30) days and no less than seven (7) days before establishing occupancy, a report from Your personal physician regarding a physical examination to permit Us to assess Your service needs throughout the potential term of this Agreement. You also agree to provide updated health and financial information and documentation to Us from time to time upon Our reasonable request, and to inform Us immediately of any material change in Your health or financial condition. If Your financial position substantially deteriorates, You may be required to deposit monies as security for the payment of future Monthly Service Fees.

RESIDENCE ACCOMMODATIONS

1. Your Residence

You will have a personal, non-assignable right to reside in the Abingdon Neighborhood or Manchester House residence which You have reserved (“Your Residence”). Your Residence is type Enter Residence Type Enter Residence Type number Enter Residence Number Enter Residence Number.

You may decorate and furnish Your Residence as You deem appropriate provided the furnishings do not interfere with Our ability to deliver services and otherwise perform required functions. Appliances and special equipment will be subject to the prior approval of Our Executive Director. Notwithstanding any other provision of this Agreement, any such decorations, furnishings or changes must be in compliance with all applicable safety and

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governmental codes and regulations as well as Our written policies, which may change from time to time.

2. Establishing Residency

We will notify You when Your Residence is ready and available for occupancy by You. Unless otherwise agreed to in writing by Us, You agree to establish Residency (“Residency”) within thirty (30) days from the date You sign this Agreement by paying the balance of the total Entrance Fee and the Monthly Service Fee for the first month of Residency, with the Monthly Service Fee prorated in the event Residency is established after the first day of the month (You may not occupy Your Residence until such Fees have been paid, although You will not be required to occupy Your Residence physically in order to “establish Residency”). If You fail to establish Residency within the thirty (30) day period, We shall have the right to market the residence and Your Agreement shall be terminated in accordance with Section F.

SERVICES TO RESIDENT

1. Services Included in Monthly Service Fee

The Monthly Service Fee covers Your access to amenities, certain services depending upon where You reside in Bedford Terrace, and meals, as described in Schedule A attached hereto (see p. 16 for Amenities, p.18 for Abingdon, p. 20 for Manchester and p. 22 for Hadley). Except as otherwise specifically provided in this Agreement, there will be no change in the scope of services without at least thirty days prior written notice to You.

2. Additional Services Available at Additional Cost

Additional Services are available, at an additional cost, as described in Schedule A attached hereto (see p. 19 for Abingdon, p. 21 for Manchester and p. 23 for Hadley).

3. Health Services

The following health services are presently available to Our residents. The Interdisciplinary Care Team (which typically includes a registered nurse, dietician, social worker and activities coordinator, and may include other WindsorMeade team members) will determine, in consultation with the Medical Director, whether such services are appropriate for You and, if so, the proper location and provision for such services. Subject to the qualification set forth in Section G.1., such services may be provided to You in another section of Bedford Terrace (which is comprised of Abingdon Neighborhood, Manchester House and Hadley House).

Assisted Living Services – Abingdon Neighborhood

We presently operate an assisted living neighborhood (Abingdon Neighborhood) in Bedford Terrace at WindsorMeade, staffed with team members trained to provide Assisted Living services. Abingdon Neighborhood is designed for residents who are unable to function independently in an independent living Residence, but who do not need continuous medical supervision. Abingdon Neighborhood residents receive those

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services covered under Section C.1, and commensurate with their condition, such help as needed in dressing, self-care and other activities of daily living, assistance in attending meals, increased assistance in housekeeping, increased monitoring of personal status, and monitoring of medications. There are tiers of Assisted Living services as detailed on p. 17 of Schedule A attached hereto. If Your Residence is in Abingdon Neighborhood, You agree to pay a fee for Assisted Living services (the “Assisted Living Fee”), commensurate with the Assisted Living tier of services You receive (See Schedule A attached hereto, p. 17, for a description of Assisted Living tiers currently offered and related Assisted Living Fees, which services and Fees may change from time to time).

Memory Support Services – Manchester House

We presently operate a Memory Support household (Manchester House) in Bedford Terrace at WindsorMeade, staffed with team members trained to provide Memory Support services. Manchester House is designed for residents who need help in dressing, self-care and other activities of daily living, assistance in attending meals, increased assistance with housekeeping, increased monitoring of personal status, and monitoring of medications. If the Interdisciplinary Care Team (in consultation with the Medical Director and/or such other persons as may be required under the then current Virginia Law and regulations) determines that Memory Support services are appropriate for You, You will be granted priority access to Manchester House over Nonresidents, on a space-availability basis. If Your Residence is in Manchester House, You agree to pay a fee for Memory Support services (the “Memory Support Monthly Service Fee”) (See Schedule A attached hereto for a description of Memory Support services currently offered and related Memory Support Monthly Service Fees, which services and Fees may change from time to time).

Health Care Services – Hadley House

We presently operate a Health Care household (Hadley House) in Bedford Terrace at WindsorMeade, staffed with team members trained to provide Health Care services. Residents of Hadley House not on a Medicare Stay (defined below) receive those services covered under Section C.1, commensurate with their condition, and other Health Care varying with their needs, the highest level of which is total nursing care in accordance with the Rules and Regulations for Licensed Nursing Facilities promulgated by the Virginia Department of Health. If the Interdisciplinary Care Team (in consultation with the Medical Director) determines that Hadley House is appropriate for You, You will be granted priority access to Hadley House over Nonresidents. If You transfer to Hadley House (as further described in Section G.1 hereof) on a non-Medicare stay, You agree to pay a fee for Health Care services (the “Health Care Monthly Service Fee”) (See Schedule A attached hereto for a description of Health Care services currently offered and the related Health Care Monthly Service Fee, which services and Fee may change from time to time).

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Health Care Medicare Stay

Hadley House is certified under the Medicare program (Title XVIII of the Social Security Act) to provide skilled nursing care. If you need skilled nursing care and you meet and maintain the requirements determined by the Medicare program, your stay in Hadley House will be pursuant to the Medicare program (a “Medicare Stay”). You will be responsible for paying all deductibles and other permitted non-covered charges during your Medicare Stay. Since Medicare covers part of this stay, you do not pay the Health Care Monthly Service Fee; however, you will continue to pay your Monthly Service Fee for Your permanent residence is in Abingdon Neighborhood or Manchester House. When your admission to our Health Care Center is a Medicare Stay, you will execute a separate Medicare specific Hadley House Residency Agreement with us which will govern your Medicare Stay only. We reserve the right to withdraw from the Medicare program at any time.

Services Not Covered

The services provided in Abingdon Neighborhood, Manchester House and Hadley House shall not cover the cost of medical care, such as hospitalization, professional medical services by an attending physician, drugs, medical supplies, medical equipment, transportation incident to medical care, and expenses of private duty nurses or companions employed by You. You are encouraged to carry adequate health insurance to cover these health-related expenses. Further, You are responsible for paying charges of any physician, physical therapist, speech therapist, occupational therapist, dentist, podiatrist, psychologist, psychiatrist or other health professional regardless of whether You arrange for such services or We make the arrangements for You; and You are also responsible for all charges for Your medicine, drugs, lab services, x-rays, food supplements, durable medical equipment, personal care supplies and other health related items.

Insurance

All Residents are required to carry Medicare Insurance Parts A and B and a Medicare Supplement, or the equivalent of such coverage. We reserve the right to require evidence of such insurance coverage.

FEES

You agree to pay the following fees to Us as a condition of Your Residency:

1. Entrance Fee

a. You agree to pay to Us, before establishing Residency, a 90% Refund Entrance Fee in the amount of $ . No less than ninety percent (90%) of the Entrance Fee paid will be refunded to You upon termination of this Agreement. The refund (“Your Refund”) will be an amount equal to the Entrance Fee paid less (i) four percent (4%) of the amount of Your Entrance Fee as an

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Administrative Fee assessed at the beginning of the term of this Agreement and (ii) two percent (2%) of the Entrance Fee for each full or partial month of Residency through the third (3rd) month, at which time Your Refund will reach ninety percent (90%) of the Entrance Fee. Your Refund will thereafter remain a constant ninety percent (90%) of the Entrance Fee, unless you elect to apply Your Refund (i) after the first year of residency to Your Monthly Service Fee pursuant to Section D 2(f) or (ii) after Your transfer to Hadley House to Your Hadley House Monthly Fee pursuant to Section G 2(b) in which case Your Refund will be reduced by the amount of such applied fees. Any unpaid charges will be deducted from Your Refund.

b. The Entrance Fee shall be paid at the time you move into Your Residence.

c. There are no restrictions on Our use of the Entrance Fee, and the Entrance Fee shall not be changed except as specifically stated in this Agreement.

2. Monthly Service Fee

You agree to pay Us each month, starting with the month You establish Residency, a Monthly Service Fee applicable to Your Residence (depending upon the area in Bedford Terrace and the tier of services) (the “Monthly Service Fee”), prorated in the event Residency is established after the first day of the month. The Monthly Service Fee is calculated by multiplying the applicable Daily Rate (current rate listed in Schedule A, p. 24) by the number of days in the month. The “Monthly Service Fee” for Manchester House is also referred to as the Memory Support Month Service Fee and for Hadley House as the Health Care Monthly Service Fee.

a. The initial Monthly Service Fee for Your Residence is $ ; provided, however, that if You execute this Agreement more than thirty days prior to establishing Residency, the initial Monthly Service Fee may be adjusted as provided below in subsection D.2.c (We will give You at least thirty days advance written notice of such adjustment). You agree to pay the Monthly Service Fee (as adjusted) on or before the first day of each month of Your Residency. The Monthly Service Fee You pay will be that which is applicable to the area in Bedford Terrace where Your Residence is located. Such Monthly Service Fee will take into account the tier of services You receive, and You agree to pay any additional fees not covered by the Monthly Service Fee.

b. The Monthly Service Fee is due and payable on the first day of each month of Residency. If it is not paid on or before the fifth day of each month, in addition to any other obligations hereunder, You agree to pay a FINANCE CHARGE at the rate of NINE PERCENT per annum (9% APR) until the Monthly Service Fee is paid in full.

c. The Monthly Service Fees are intended to provide for the regularly offered services and conveniences as well as all other financial obligations and objectives of WindsorMeade including, for example, taxes, debt service, costs of operations, maintaining the viability and marketability of the Community, maintaining and improving the quality of services provided, enhancing and expanding the Community when expansion is warranted, maintaining reserves to assist residents, where

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appropriate, who may become unable to meet their financial obligations, and payments and distributions to Pinnacle Living (WindsorMeade’s sole member). The Monthly Service Fees may be adjusted by Us, in Our sole discretion, from time to time, after thirty days advance written notice. There are no limitations on the amount, or frequency, of increases in the Monthly Service Fees.

d. You will not receive any refund of any portion of the Monthly Service Fee, unless this Agreement is terminated or in the event of Your permanent transfer from Bedford Terrace (as described in Section G.1 hereof). Such refund, if any, will be calculated in consideration of the effective date of such termination or permanent transfer.

e. You will be billed for additional services that are not covered by the Monthly Service Fee, either at the time they are rendered or with Your next Monthly Service Fee statement. The current fees for such additional services are listed in Schedule A attached hereto, and such fees may change from time to time. Subject to the foregoing, payment procedures for fees for such additional services, including imposition of finance charges, will be the same as for Your Monthly Service Fee.

f. You may elect (i) after you have remained in Your Residence for a period of one (1) year or (ii) after You move to Hadley House, to draw upon Your Refund that would be due You upon termination of this Agreement, as provided in Section D 1, to pay Your Monthly Service Fee. In such case, We will reduce the amount of the refund which would otherwise be due to You under this Agreement by the amount applied in lieu of Your direct payment of the Monthly Service Fee. Once Your Refund is fully applied, You will pay the Monthly Service Fee directly for so long as You remain a resident in the Community.

RESCISSION BEFORE RESIDENCY IS ESTABLISHED

1. Rescission Without Cause Within Seven Days

You have the right to rescind this Agreement, without penalty or forfeiture, by delivering written notice of such rescission to Us within seven days after (i) You gave us an initial deposit or (ii) You receive a fully executed copy of this Agreement (signed by You and Us), whichever occurs first. You will not be required to establish Residency or to move into Your Residence prior to the expiration of such seven-day period.

In the event of rescission of this Agreement in accordance with this Section E.1, You will receive a full refund of the Entrance Fee within sixty days of such rescission, without penalty or forfeiture.

2. Rescission by Death or Incapacity

If, prior to establishing Residency, You die or become incapacitated by illness or injury and no longer qualify for Assisted Living, this Agreement will be deemed automatically rescinded by You. The effective date of such rescission will be the date We receive written notice of Your death or incapacity.

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In the event of rescission of this Agreement in accordance with this Section E.2, You will receive a full refund of the Entrance Fee within sixty days of such rescission, provided that the amount of such refund will be reduced by the amount of any costs specifically incurred by Us at Your request according to a written document signed by You and Us.

TERMINATION AFTER RESIDENCY IS ESTABLISHED

1. Termination by Resident

You may terminate Residency at any time by giving Us written notice. If You die after having established Residency, Your death will be deemed a termination of this Agreement in accordance with this Section F.1.

In the event of termination in accordance with this Section F.1, You will receive Your Refund, if any, within sixty days after the later of (i) the date You have physically vacated (including removal of all of Your personal property from) Your Residence. You may stop paying the Monthly Service Fee after such termination, as follows:

a. If Your death is the cause of termination of this Agreement, You (Your estate) may stop paying the Monthly Service Fee thereafter as of the date all of Your personal property has been removed from Your Residence.

b. If You terminate this Agreement for any reason other than Your death, You may stop paying the Monthly Service Fee upon the date You have physically vacated (including removal of all of Your personal property from) Your Residence.

2. Termination by Us

Once You establish Residency, We will not terminate Your Residency except for Good Cause. “Good Cause” means (a) proof that You are a danger to Yourself or others; (b) Your non-payment of any monthly or periodic fees; (c) Your repeated conduct that interferes with other Residents’ quiet enjoyment of the Community; (d) Your persistent refusal to comply with Our reasonable written rules and regulations, policies and procedures or the Resident’s Handbook; (e) a material misrepresentation made intentionally by or recklessly by You in Your Application for Residency, or any other document provided by You to Us regarding information which, if accurately provided, would have resulted in either Your failure to qualify for Residency or a material increase in the cost of providing to You the care and services provided under this Agreement; or (f) a material breach by You of the terms and conditions of this Agreement. We will not terminate Your Residency until We have given You written notice stating the grounds of termination and a reasonable period of time for cure. The effective date of such termination will be stated in the written notice but will not be prior to the end of such cure period.

In the event of termination in accordance with this Section F.2, You will receive Your Refund, if any, within sixty days after the date You have physically vacated (including removal of all of Your personal property from) the Residence.

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3. Refund Payable to Trustee

Your Refund, if any, may be paid to the Trustee of an existing Trust if You have executed and delivered to Us an assignment document in such form and content as the Assignment of Refund document attached hereto as Schedule B, or such other document We deem appropriate, in Our discretion, provided such document is effective at the time Your Refund is due.

TRANSFER FROM YOUR RESIDENCE

1. Transfer for Level of Service Reasons

If You have a condition which requires a level of service that cannot be given in the Community, such as a dangerously contagious disease, an uncontrolled or untreated mental condition, specialized psychiatric condition or any other condition requiring services which are prohibited under the applicable licenses of Abingdon Neighborhood, Manchester House or Hadley House or which We are otherwise unable to provide to You in the Community (including by reason of lack of space), We will assist You in transferring to an appropriate hospital, institution or other community (herein an “Outside Facility”).

It is Our policy to see that You reside in an area of the Community where Your specific needs and the appropriate level of services are available to You. The Community is organized as a “continuing care retirement community” (“CCRC”) where We have made certain assumptions in our planning that You will move seamlessly through a continuum of care and receive the appropriate level of services in the most cost-effective and efficient setting. Our Interdisciplinary Care Team (described in this Agreement) is the team that ultimately makes the determinations of the appropriate level of service for You. In making these determinations, the Interdisciplinary Care Team will consult with You and will review potential reasonable accommodations to allow you to stay on a desired level of service so long as that level of service is appropriate for You. You will not be permitted to remain on a lower level of service if We determine that it may alter the nature of Our Community as a CCRC or if We determine that it may not allow Us to provide You the appropriate level of services needed in your particular circumstances in consideration of Your safety and security and those of other residents of the Community.

You agree that, after You have established Residency, We may transfer You to Manchester House or Hadley House or to an Outside Facility, at such time as We, in consultation with the Interdisciplinary Care Team (and in consultation with the Medical Director), determine that such a transfer is necessary for Your well-being. The Interdisciplinary Care Team, in consultation with the Medical Director and You, Your family and/or Your physician, will determine based on its criteria for evaluation and placement whether Your transfer is temporary or permanent.

a. Temporary Transfer

If You are transferred temporarily to Manchester House or Hadley House or an Outside Facility, You may retain Your Residence during Your absence. In that case, You will pay Your regular Monthly Service Fee (for Assisted Living or Memory Support, as applicable) and the charges of an Outside Facility.

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b. Permanent Transfer

If You are transferred permanently to Manchester House or Hadley House or an Outside Facility, the following provisions will apply;

i. Single Occupancy. If it has been determined that such transfer is permanent, You must vacate Your Residence (including removal of Your personal property) within fourteen (14) days after the date We give You notice that Your transfer is permanent. When Your Residence has been vacated (including removal of Your personal property), You will pay the, Memory Support Fee, Health Care Monthly Service Fee or Outside Facility charges, as applicable, and You will also be responsible for fees and charges for any additional services or items that You may receive. If You do not vacate Your Residence (including removal of Your personal property) within fourteen (14) days of the date We give You notice that Your transfer is permanent, You will be liable to continue to pay (i) the Monthly Service Fee for Your Residence (for Assisted Living, Memory Support, or Health Care Fee or Outside Facility charges, as applicable, (ii) any fees and charges for any additional services or items that You may receive, and (iii) Our costs of repossession of the Residence and storage of Your personal property.

ii. Your New “Residence”. In the event of any such permanent transfer to Manchester House or Hadley House, such new living accommodations will thereafter be deemed “Your Residence” for all purposes, under this Agreement unless and until You have transferred to another living accommodation in accordance with this Agreement.

2. Disposition of Refund

a. Permanent Transfer to Outside Facility

If You are transferred permanently from Your Residence to an Outside Facility, this Agreement will automatically terminate, and You will receive payment of Your Refund, if any, within thirty days after the date You have physically vacated (including removal of Your personal property from) Your Residence Your Monthly Service Fee will continue until Your Residence is fully vacated (including the removal of Your personal property). No refund shall be paid to You until You have removed Your personal property.

b. Permanent Transfer to Hadley House for Nursing Services

Upon Your transfer from either Abingdon Neighborhood or Manchester House to Hadley House for non-Medicare nursing services (i.e., a non-Medicare Stay), You will be permitted to draw upon the refund due You under Section D 1, to pay your Monthly Service Fee for Hadley House. Once the refund is exhausted, You shall continue to pay the Monthly Service Fee and all other charges from Your own funds. Should this Agreement be terminated prior to your exhausting of the refund, the remaining refund will be paid in accordance with the other provisions of this Section F.

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REASSIGNMENT OF A RESIDENCE

1. We may reassign Your Residence to a different resident upon the occurrence of any of the following:

a. Your failure to establish Residency within the time frame prescribed in Section B.2 of this Agreement.

b. The permanent vacancy of Your Residence. A permanent vacancy is considered to exist if:

i. This Agreement is rescinded, or Your Residency is otherwise terminated, and Your Residence is vacated (including removal of all personal property), or

ii. You are admitted permanently to Manchester House, Hadley House or an Outside Facility.

2. Except as otherwise provided in this Agreement, if You use Hadley House or an Outside Facility on a temporary basis, You will retain possession, rights and privileges for use of Your Residence during that period.

DISPOSITION OF PROPERTY

In the event of termination or rescission of this Agreement or Your permanent transfer from Your Residence, all of Your personal property must be removed from Your Residence within fourteen (14) days thereof. If after that fourteen (14) day period such property is not removed, We will have the right to remove the property from Your Residence and to charge You for the actual cost of storing, insuring, transporting and preserving the property, such costs not to be less than fifty dollars ($50.00) per month. We will have a lien on such property to the extent of such costs and the costs of recovering same.

FINANCIAL OBLIGATIONS AND SUBSIDIES

Your timely payment of all fees and other charges under this Agreement is a condition of Your Residency at the Community, and failure to pay any such fees and charges will constitute Good Cause for termination of Your Residency. However, We may grant You a subsidy to assist You in the payment of a portion of such fees or charges in the event We determine, in Our sole and absolute discretion, that such subsidy is appropriate. Any such subsidy will be made in accordance with Our policies and procedures then in effect, which may be changed from time to time. In no event will any such subsidy be given to any resident who impairs his or her ability to meet financial obligations, whether by gratuitous transfer (to Your spouse or to any other individual or entity) or incurrence of unusual, unnecessary or extraordinary expenditures or obligations, as determined by Us in Our sole and absolute discretion. You agree to provide Us with such financial and other information and documentation as We may request, from time to time, in Our sole and absolute discretion, to determine Your eligibility for such subsidy in accordance with the foregoing. In the event any such subsidy is granted to You, You agree as follows:

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1. You will remain obligated to reimburse Us for the full amount of such subsidy, which will remain Your obligation upon termination of this Agreement and may be satisfied from or offset against any refund or other sums We may owe to You. To the extent such obligation is not satisfied as of the time of Your death, You hereby agree that it will be an obligation of Your estate.

2. You agree to accept such level of accommodations as We deem necessary, in Our sole and absolute discretion, so as not to impair Our ability to meet Our financial obligations and otherwise operate the Community on a sound financial basis, in Our sole and absolute discretion. You agree that such accommodations may be smaller or otherwise different from Your Residence if We deem it necessary or appropriate.

3. You acknowledge that We are under no obligation to make or to continue any such subsidy, and that We may discontinue any such subsidy at any time in Our sole and absolute discretion.

In consideration of Our acceptance of You for Residency under this Agreement, You hereby agree not to take any action, or to omit to take any actions, so as to impair Your ability to meet Your financial obligations under this Agreement, whether by gratuitous transfer to any person or entity or to incur any unusual, unnecessary or extraordinary expenditures or obligations. Expenditures for private duty team members can be, in certain circumstances, deemed unnecessary or extraordinary. Any such act or omission by You (or in Your behalf by Your personal representative, agent or other authorized person) shall be deemed a “material breach” of this Agreement as contemplated under Section F(2)(f) hereof.

NATURE OF PAYMENTS

You and We acknowledge that the payments made by You to Us under this Agreement are intended solely as compensation to Us for providing You with residency and services, and that such payments are not intended to be a loan. However, We have not provided, nor shall We provide, any advice to You in this regard, and We urge You to seek advice and counsel from Your own legal and tax advisors regarding these matters and any income or other tax implications relating to such payments or otherwise relating to this Agreement.

PERSONAL REPRESENTATIVE FOR INCAPACITY

We strongly encourage You to make arrangements before You move into Your Residence whereby Your affairs will be managed by attorneys-in-fact or other agents with legal authority to handle your personal, health, legal and business matters (collectively Your “personal representatives”) if You become incapacitated. You agree to have a financial power of attorney in place at all times while a resident of the Community. You agree to provide Us with the name, address and telephone number of each of Your personal representatives before You move into Your Residence, and to inform Us of any change in the identity of Your personal representatives. You also agree that either You or Your personal representatives will inform Us when Your personal representatives assume responsibility for managing Your personal, health, legal or business affairs. You agree to reimburse Us for all expenses which We may incur as the result of Your having failed to make or to keep such arrangements in place.

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RIGHT OF ENTRY

You agree to give Us and Our authorized team members and agents the right of entry into Your Residence at all reasonable times (after making arrangements with You if reasonably practicable) for inspection, maintenance and housekeeping or storage purposes, and at any time for emergencies.

LOSS OR DAMAGE TO PROPERTY OR PERSON

1. We will not be responsible for the loss or damage of any of Your personal property due to routine maintenance, housekeeping activities, theft, fire, other casualty or any other cause. Our insurance policy(ies) shall not protect You against loss or damage to Your personal property. You may desire to obtain such policy(ies) of insurance as may be appropriate to provide against theft, fire or other casualty to Your personal property.

2. You agree that neither We nor Our agents or team members will be liable for death or injury not caused by Our active negligence.

3. You agree to indemnify and hold Us and Our agents and team members harmless from and against any and all claims, demands, actions and causes of action (including any costs and attorney’s fees), whether from injury to person, loss of life or damage to property, occurring in or about Your Residence or involving You anywhere else at the Community, but only to the extent actually caused by Your negligence.

ENTIRE AGREEMENT AND MODIFICATION

This Agreement, including the Application for Residency (including, without limitation, the health, financial and other related documentation You provide Us), comprise the entire Agreement between You and Us. You agree that You are not relying upon any oral statements or representations made by Us which are not also set forth in this written Agreement. No amendment or special provision of this Agreement will be valid or enforceable unless set forth in a written document executed by all Residents who are parties hereto and on behalf of WindsorMeade by its President. We reserve the right to modify the Agreement unilaterally in order to conform to changes in the law or applicable regulations and to modify unilaterally Our rules, regulations, policies and procedures.

SEVERABILITY

Except as otherwise specifically provided in this Agreement, the invalidity or amendment of any restriction, condition or other provision of this Agreement, or any part thereof, shall not impair or affect in any way the validity, enforceability or effect of the rest of this Agreement.

GOVERNING LAW AND COST OF ENFORCEMENT

This Agreement is made in Virginia, and it shall be governed and construed, in all respects, in accordance with the laws of the Commonwealth of Virginia. In the event of a dispute

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concerning the performance of this Agreement, the substantially prevailing party shall be allowed to collect from the other party their court costs and reasonable attorney fees in such dispute.

INSURANCE

1. You agree to maintain health insurance coverage under Parts A and B of the Medicare Program; provided that, if You are not eligible for such coverage, You agree to obtain equivalent coverage in such amounts and from such carrier(s) as may be reasonably acceptable to Us.

2. We are not permitted to serve persons who are recipients of Medicaid, nor are recipients of Medicaid eligible for placement in Health Care.

NON-WAIVER OF BREACH

If in one or more instances We fail to insist that You perform any of Your obligations under this Agreement, such failure shall not be construed as a waiver of any past, present or future rights We have under this Agreement; Your obligations shall nevertheless continue in full force and effect.

NO OWNERSHP INTEREST

The rights and privileges granted to You by this Agreement do not include any leasehold rights or interests nor include any right, title or interest in any part of the personal property, land, buildings or improvements owned or administered by Us. Your rights are primarily for services, with a contractual right of residency. Any rights, privileges or benefits under this Agreement or any interest or contractual rights of any nature in the Community, including the right to any refund of the Entrance Fee, Your Refund or other benefit or payment hereunder, are and shall be subordinate in priority, right, claim and interest to any lien, charge, mortgage or other security interest or agreement now or hereafter placed on or affecting WindsorMeade or any of WindsorMeade’s real or personal property, and to any amendment, modification, replacement or refunding thereof.

ASSIGNABILITY

You may not assign Your rights or obligations hereunder, in whole or in part, nor may You subcontract Your right to reside in Your Residence, under any circumstances. We shall have the right to assign Our rights and obligations hereunder in whole or in part to any successor owner or lender, either outright or as security for any indebtedness of WindsorMeade, without Your consent. The transfer of ownership of WindsorMeade, or any part thereof, shall not be deemed a termination of this Agreement.

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MARRIAGE

Bedford Terrace only has available under this Agreement single occupancy residences. Consequently, whether You are married at the time this Agreement is made or You become married during your residency with Us, should Your spouse wish entry to WindsorMeade, Your spouse will be required to qualify separately at the then current fees. If your spouse does not qualify, he or she will not be able to reside at WindsorMeade.

WITNESS THE SIGNATURES of the parties. RESIDENT: _________________________ ___________________________________ Date Resident’s Signature WINDSORMEADE WILLIAMSBURG _________________________ ___________________________________ Date By ___________________________________ Title

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SCHEDULE A

TO RESIDENCY AGREEMENT WINDSORMEADE WILLIAMSBURG

AMENITIES AND SERVICES* Summary of Amenities • club room and private dining venue; • communication channel/monthly newsletter; • library/business center; • pharmacy/gift shop/convenience store; • access to meeting space/activity rooms; • salon services; • fitness center with pool, spa, juice bar, exercise studio; • bistro, formal dining room and take out; • tennis courts, bocce court; • building access system; • resident garden area; • health and wellness center with on-site physician services; • rehabilitation therapy; • gated community with 24-hour security; • housekeeping and maintenance services; • lawn care; • priority access to other levels of Bedford Terrace; • transportation; • planned activities and outings; • catering services; • club house; • woodworking shop; • massage therapy; • car detailing; • personal laundry services; • hospitality and concierge services; • guest suites; • dietician services; • dry cleaning pick up; • art gallery; • wifi in select common spaces. * NOTE: The amenities, services and fees described in this Schedule A may be modified from time to time or

eliminated, as may be deemed appropriate; provided, however, that residents will be given at least 30 days advance notice of any such changes.

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ASSISTED LIVING TIERS – ABINGDON NEIGHBORHOOD

Assisted Living Tier 1: This tier indicates a need for minimal assistance from our team members in order to function in daily routines. Residents require the presence of additional support services with little or no assistance and supervision with the physical aspects of daily living. Assisted Living Tier 2: This tier indicates a need for moderate assistance from our team members in order to function in daily routines. Residents require greater supervision of the physical aspects of daily living, behavior patterns or orientation, such as the need for cueing to maintain this level of independence. Assisted Living Tier 3: This tier indicates a need for moderate to maximum assistance from our team members in order to function in daily routines. Residents require significant supervision with the physical aspects of daily living and continual cueing for orientation and behavior to maintain this level of independence.

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• three meals per day in the dining room, plus snacks and beverages; • weekly housekeeping to include linen change; • nursing assistance and monitoring 24 hours per day; • water, sewer, electric, heating and cooling; • trash disposal; • pest control services; • maintenance of apartment, common spaces and grounds; • one hour of personal maintenance service within the first week following move-in for picture

hanging and furniture arrangement. Supplies not included. Hours not used are not carried over for future use;

• special diets, if ordered by physician; • 24-hour security; • life enhancement opportunities; • medical transportation within a 10-mile radius for routine, non-emergency medical care; • transportation to regularly scheduled shopping trips and planned events and activities; • use of bistro, formal dining, wellness center, outdoor terrace, wood and garden shop and library; • use of common areas space (some require scheduling); • use of laundry facilities; • wifi in select common spaces; • local telephone calls.

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• housekeeping beyond weekly service at prevailing community rates; • on site physician services (physician must have a service agreement with WindsorMeade; fee for

services made directly between resident and physician); • alternative therapies, such as massage (prevailing vendor rates); • salon services (prevailing vendor rates); • medical supplies and dressings; • basic cable TV (billed monthly at community rate); • premium cable TV service (prevailing vendor rates); • catered meal functions (varies with menu choices and location); • guest suites (based on availability); • personal laundry services (wash, dry, and fold); • rehabilitation services based on prevailing rates; • special programs, concert tickets, catered trips; • telephone (rental fee and long distance billed monthly at community rate); • mobility alert/wander management equipment; • incontinence services (supplies are applicable to the partial fee); • pharmaceutical services; • long term care insurance review and filing, at prevailing community rate; • private transportation (prevailing community rates, based on availability); • dry cleaning services (prevailing vendor rates); • guest meals; • wound care; • medical equipment rental; • medication administration; • bed; • bedside table; • bedside light; • comfortable chair; and • dresser with drawers.

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• three meals per day in the dining room, plus snacks and beverages; • daily housekeeping to include linen change; • nursing assistance and monitoring 24 hours per day; • water, sewer, electric, heating and cooling; • trash disposal; • pest control services; • maintenance of apartment, common spaces and grounds; • one hour of personal maintenance service within the first week following move-in for picture

hanging and furniture arrangement. Supplies not included. Hours not used are not carried over for future use;

• special diets, if ordered by physician; • 24-hour security; • life enhancement opportunities; • medical transportation within a 10-mile radius for routine, non-emergency medical care; • transportation to regularly scheduled shopping trips and planned events and activities; • use of bistro, formal dining, wellness center, outdoor terrace, wood and garden shop and library; • use of common areas space (some require scheduling); • use of laundry facilities; • wifi in select common spaces; • medication administration; • local telephone calls.

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• housekeeping beyond daily service at prevailing community rates; • on site physician services (physician must have a service agreement with WindsorMeade; fee for

services made directly between resident and physician); • alternative therapies, such as massage (prevailing vendor rates); • salon services (prevailing vendor rates); • medical supplies and dressings; • basic cable TV (billed monthly at community rate); • premium cable TV service (prevailing vendor rates); • catered meal functions (varies with menu choices and location); • guest suites (based on availability); • personal laundry services (wash, dry, and fold); • rehabilitation services based on prevailing rates; • special programs, concert tickets, catered trips; • telephone (rental fee and long distance billed monthly at community rate); • mobility alert/wander management equipment; • incontinence services (supplies are applicable to the partial fee); • pharmaceutical services; • long term care insurance review and filing, at prevailing community rate; • private transportation (prevailing community rates, based on availability); • dry cleaning services (prevailing vendor rates); • guest meals; • wound care; • medical equipment rental; • bed; • bedside table; • bedside light; • comfortable chair; and • dresser with drawers.

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• three meals per day, plus snacks and beverages; • dietary consultation; • daily light housekeeping; • linen changes weekly and as needed; • nursing assistance and monitoring 24 hours per day; • medication administration; • water, sewer, electric, heating and cooling; • trash disposal; • pest control services; • basic cable TV; • maintenance of apartment, common spaces and grounds; • special diets, if ordered by physician; • 24-hour security; • regularly scheduled social, cultural, spiritual, educational, wellness and recreational programs; • access to Fitness Center, pool and tennis; • life enhancement opportunities; • medical transportation within a 10-mile radius for routine, non-emergency medical care; • transportation to regularly scheduled shopping trips and planned special events; • use of bistro, formal dining room, outdoor terrace, woodworking shop, garden center and library; • use of common areas facilities (some require scheduling); • use of laundry facilities; • access to Wellness Center; • computer access; • wifi in select common spaces.

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• on site physician services (physician must have a service agreement with WindsorMeade; fee for

services made directly between resident and physician); • alternative therapies, such as massage (prevailing vendor rates); • salon services (prevailing vendor rates); • wound care; • medical supplies and dressings; • premium cable TV service (prevailing vendor rates); • catered meal functions (varies with menu choices and location); • guest suites (based on availability); • personal laundry service (wash, dry, and fold); • rehabilitation services based on prevailing rates; • special programs, concert tickets, catered trips; • telephone (rental fee and long distance billed monthly at community rate); • mobility alert equipment; • incontinence care (supplies are applicable to the partial fee); • private transportation (prevailing community rates, based on availability); • pharmaceutical services; • long term care insurance review and filing, at prevailing community rate; • guest meals; • dry cleaning services (prevailing vendor rates); • medical equipment rental (such as oxygen concentrator and tanks).

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SCHEDULE A (Continued) WINDSORMEADE WILLIAMSBURG

BEDFORD TERRACE

2019-2020 FEE SCHEDULE

Abingdon Neighborhood-Assisted Living Services


Tier 1 Services $760.00



Assisted Living-Medication Management

Monthly Fee $304.00

Manchester House-Memory Support Services


Hadley House-Health Care Services

Daily Fees

Original Wing Rooms $383.00 New Wing Rooms $394.00

These fees are applicable to Residency Agreement Residents only and are subject to change in thirty (30) days advance written notice.

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SCHEDULE B

TO RESIDENCY AGREEMENT WINDSORMEADE WILLIAMSBURG – ASSIGNMENT OF REFUND

The undersigned Resident (“resident”) hereby, assigns, grants and conveys unto the Trustee(s) (the “Assignee”) of the Trust described below all right, title and interest in and to any and all refunds Resident is entitled to receive under that certain Residency Agreement (the “Residency Agreement”) between Resident and WindsorMeade Williamsburg (“WindsorMeade”) dated , 20 . Resident hereby acknowledges that, with regard to this Assignment:

(1) It shall be Resident’s duty to notify WindsorMeade in writing regarding any change in the identity of the Trustee(s);

(2) Upon request by WindsorMeade, Resident (or the Trustee(s)) shall provide written assurance

satisfactory to WindsorMeade regarding continuing validity of the Trust and the identity and authority of the Assignee Trustee(s); and

(3) In the event of any confusion regarding the correct identity of the Assignee Trustee(s) or Trust at the

time any refund payment is due, WindsorMeade shall be entitled, in its sole and absolute discretion, to distribute such refund(s) to Resident’s estate without liability to any person or entity.

Resident hereby acknowledges that WindsorMeade is accepting this Assignment as a convenience to Resident and, on behalf of Resident and Resident’s heirs, distributees, beneficiaries, personal representatives, successors and assignees, Resident hereby releases WindsorMeade and agrees to indemnify and save WindsorMeade harmless of and from any and all claims and other liability as may arise in connection with WindsorMeade’s compliance with the instructions contained herein. Resident acknowledges that all of WindsorMeade’s rights and remedies hereunder shall devolve to WindsorMeade’s successors and assigns. Name of Assignee/Trustee(s): Enter Name(s) of Assignee/Trustee(s) Name of Trust: Enter Name of Trust Effective Date of Trust: Enter Effective Date of Trust

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WITNESS the signatures of the parties. RESIDENT: _______________________ ______________________________ Date Resident Signature ASSIGNEE/TRUSTEE(S): _________________________ _______________________________ Date Trustee’s Signature _________________________ _______________________________ Date Co-Trustee’s Signature (if applicable) WINDSORMEADE WILLIAMSBURG PINNACLE LIVING _________________________ ________________________________ Date By ________________________________ Title

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CERTIFICATE OF ENTRANCE

September 2019

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CERTIFICATE OF ENTRANCE

This Certificate of Entrance, executed by Insert Name of Resident (the “Resident”) and WindsorMeade

Williamsburg (“WindsorMeade”) this day of , , evidences that the Resident entered

WindsorMeade on the date hereof pursuant to that certain Residency Agreement made and entered into between

the Resident and WindsorMeade (the “parties”).

The parties acknowledge and agree that this date shall be considered the date of Resident’s entrance to the

community for all purposes contemplated in the Residency Agreement.

WITNESS the following signatures:

______________________________ _____________________________ Resident’s Signature Joint Resident’s Signature ______________________________ _____________________________ Print Resident’s Name Print Joint Resident’s Name


Date: By_______________________________________ Name _____________________________________________ Title

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SURETY AGREEMENT

September 2019

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SURETY AGREEMENT

________________________________________ Name of Resident

In consideration of WindsorMeade Williamsburg (“WindsorMeade”) agreeing to accept the Resident named above (the “Resident”) as a resident of WindsorMeade in accordance with the terms and conditions set forth in the attached Residency Agreement (the “Residency Agreement”), I, the undersigned, do hereby enter myself as surety of the Resident’s obligations under the Residency Agreement, and unconditionally promise and agree to pay to WindsorMeade all fees, costs and expenses required to be paid to WindsorMeade in accordance with the Residency Agreement. I hereby acknowledge that I have received a copy of the Residency Agreement, that I have read it and understand all of its terms and conditions, that I have been advised to review it with my own legal advisor and have been given sufficient opportunity to do so, and that I hereby expressly consent and agree to all the terms, conditions and provisions thereof.

I hereby warrant and represent that I have personal assets to support the Resident’s financial obligations under the Residency Agreement. I hereby agree to provide WindsorMeade with updated personal financial statements from time to time upon WindsorMeade’s request, in such form and content as WindsorMeade may request, and I hereby agree to inform WindsorMeade in the event of any material change in my financial situation without waiting for WindsorMeade to request such information. I hereby acknowledge that my promises made herein, and the information contained in the statements I have provided and will provide to WindsorMeade, have substantially induced WindsorMeade to accept the Resident for residency at the Community, and that any material misstatements made therein, or in any other statement or other information I provide to WindsorMeade, shall constitute good cause for WindsorMeade to terminate the Residency Agreement, in addition to any other remedies available to WindsorMeade hereunder or otherwise at law or in equity.

I hereby acknowledge and agree that my obligations as surety of the Residency Agreement shall extend to any and all extensions, modifications and amendments to the Residency Agreement, whether or not I am given actual notice thereof.

This is a surety of payment and not of collection, and WindsorMeade shall be permitted to bring any suit, action or proceeding against me for the enforcement of any provisions under this surety without exhausting other remedies WindsorMeade may have against the Resident, without bringing any action against the Resident or any other party, and without resort to any security. In the event other persons execute surety agreement(s) for the benefit of the Resident, WindsorMeade may exercise its rights against multiple sureties separately, or against any one or more sureties, at its sole option, and I agree that my liability is both joint and several.

No lawful act of commission or omission by WindsorMeade or any delay by WindsorMeade in exercising its rights hereunder or under the Residency Agreement (or any amended or revised version thereof) shall in any way or at any time affect, impair or waive the rights of WindsorMeade to enforce any right, power or benefit arising under this surety.

I hereby expressly agree that notice to the Resident shall be deemed sufficient notice to me for all purposes, and I hereby bind my executors, administrators, heirs and assigns to all matters agreed to herein.

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If any provision of this surety or the application thereof in any circumstance is held to be unenforceable, the remainder of this surety shall not be affected thereby and shall remain in full force and effect.

This surety shall be governed in all respects under the laws if the Commonwealth of Virginia.

I hereby agree to pay all costs and expenses, including reasonable attorney fees, incurred by WindsorMeade in connection with the enforcement of its rights under this surety including, without limitation, such costs and expenses incurred in the collection of fees payable by the Resident.

WITNESS my signature as of this __________day of __________________, 20______.

___________________________________________________Surety

COMMONWEALTH OF VIRGINIA COUNTY/CITY OF ______________________, to-wit:

The foregoing instrument was acknowledged before me this date, _________________________, 20_____,

by ____________________________________.

______________________________________ Notary Public

My commission expires:

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RESERVATION AGREEMENT

September 2019

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RESERVATION AGREEMENT

This Reservation Agreement is made this day , between Insert Prospective Residents(s) Name(s), (“You” or “Your”) and WindsorMeade Williamsburg Pinnacle Living, a Virginia not-for-profit, non-stock corporation operating a continuing care community (sometimes referred to as “WindsorMeade” or “the Community”) located at 3900 Windsor Hall Drive, Williamsburg, Virginia. (If two people sign this Agreement as Residents, this is a Joint Residency Agreement, and the term “You” shall refer to each person individually, and to both people together, as the context may dictate).

RECITALS:

A. We own and operate a continuing care retirement community located in Williamsburg (James City County), Virginia, known as “WindsorMeade” (referred to from time to time as the “Community”).

B. You wish to reserve a particular residence in the Community, and You are prepared to submit an

Application for Residency and to pay the appropriate Application Fee (described below).

IT IS THEREFORE AGREED:

1. Application Fee. An Application Fee of One Thousand Dollars ($1,000.00) (the “Application Fee”) is due when You sign this Agreement and return it to Us. The Application Fee shall not be held in an escrow account, and You shall not earn any interest or other income on the Application Fee.

2. Reservation of Residence. The Residence You have selected is (“Your Residence”).

3. Entrance Fee. The Entrance Fee for the Residence you have chosen is $ .

4. Application for Residency. In order to assist us in making the determination that You are able to live independently and otherwise qualify for residency in the Community, You agree to provide Us within seven (7) days of signing this Reservation Agreement, such financial, health and other information as We may reasonably request, from time to time, on forms We shall provide to You. In signing this Reservation Agreement, you acknowledge receipt of a copy of the WindsorMeade Disclosure Statement, which includes a specimen copy of the current WindsorMeade Residency Agreement (You also acknowledge that the Residency Agreement may be modified or updated prior to the time You execute it).

(a) If we determine that You qualify for residency, We shall notify You of such determination and You shall then have ten (10) days to: (i) execute the then current Residency Agreement and related documents, and (ii) pay the appropriate Reservation Deposit (described below) for Your Residence; provided that the full amount of the Application Fee shall be applied as a credit towards such reservation Deposit. In the event that You do not satisfy both requirements within the prescribed ten (10) day period, We shall have the right, but not the obligation, to terminate this Agreement at any time after the expiration of such period, upon written notice to You. Such termination shall be effective immediately upon such notice. After the expiration of such ten (10) days period, We shall have the right to market Your Residence to other perspective residents, without notice thereof to You, regardless of whether We terminate this Agreement. In the event

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We terminate this Agreement, You shall receive a full refund of the Application Fee within thirty (30) days after such termination.

(b) If We determine that You do not qualify for residency, We shall notify You of such determination, this Agreement shall thereby be terminated, effective immediately, and You shall receive a full refund of the Application Fee within thirty (30) days after such termination.

(c) You may terminate this Agreement at any time prior to signing the Residency Agreement by giving Us written notice of such termination, and You shall receive a full refund of the Application Fee within thirty (30) days after such termination.

5. Reservation Deposit. Except for the Bedford Terrace Residency Agreement, a Reservation Deposit equal to ten percent (10%) of the Entrance Fee for your selected residence, less the $1,000 Application Fee previously paid (a total payment of $ ), shall be due and payable at the time You sign the then current Residency Agreement.

6. Rescission of this Agreement. This Agreement shall automatically be rescinded if You die prior to signing the Residency Agreement or are precluded through illness, injury or incapacity from becoming a resident of WindsorMeade, and You shall receive a full refund of the Application Fee within thirty (30) days after such rescission.

7. Entire Agreement. This Agreement contains the entire Agreement between You and Us as of the date hereof, and no amendment or special provision hereof shall be valid unless contained in a written document executed by You and on behalf of WindsorMeade by its President.

8. Governing Law. This Agreement shall be governed, in all respects, in accordance with the laws of the Commonwealth of Virginia.

9. Seven-Day Rescission Right. Notwithstanding any other provision hereof, You may rescind this Agreement within seven (7) days after You give us the Application Fee, without any penalty or forfeiture.

10. Assignment and Transfer. You may not assign Your rights or obligations hereunder, in whole or in part, under any circumstances. We shall have the right to assign Our rights and obligations hereunder in whole or in part to any successor owner or lender, either outright or as security for any indebtedness of WindsorMeade, without Your consent. The transfer of ownership of WindsorMeade shall not be deemed a termination of this Agreement.

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WITNESS the signatures of the parties.

WINDSORMEADE WILLIAMSBURG PINNACLE LIVING By:___________________________________________ Title:_________________________________________

PROSPECTIVE RESIDENT(S): ___________________________________________ Resident Signature ___________________________________________ Joint Resident Signature (if applicable) ____________________________________________ Date

Combined Financial Report May 31, 2019

Exhibit A

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Table of Contents INDEPENDENT AUDITORS’ REPORT .................................................................................................................................................. 1

COMBINED BALANCE SHEETS MAY 31, 2019 AND 2018 ................................................................................................................... 2

COMBINED STATEMENT OF ACTIVITIES YEAR ENDED MAY 31, 2019 ............................................................................................... 3

COMBINED STATEMENT OF ACTIVITIES YEAR ENDED MAY 31, 2018 ............................................................................................... 4

COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED MAY 31, 2019 AND 2018 ....................................................................... 6

NOTES TO COMBINED FINANCIAL STATEMENTS .............................................................................................................................. 7

1. Nature of Operations and Summary of Significant Accounting Policies........................................................................ 7

2. Net Assets With and Without Donor Restrictions ....................................................................................................... 14

3. Investments ................................................................................................................................................................ 15

4. Fair Value .................................................................................................................................................................... 17

5. Assets Whose Use is Limited ....................................................................................................................................... 23

6. Property and Equipment ............................................................................................................................................. 25

7. Bonds Payable ............................................................................................................................................................. 26

8. Employee Retirement Plan ......................................................................................................................................... 37

9. Concentrations of Credit Risk ...................................................................................................................................... 37

10. Commitments and Contingencies ............................................................................................................................... 37

11. Related Party Transactions ......................................................................................................................................... 38

12. Fair Value of Financial Instruments ............................................................................................................................. 38

13. Donor Restricted Funds............................................................................................................................................... 40

14. Endowment (Samaritan) Program .............................................................................................................................. 44

15. New Accounting Pronouncements .............................................................................................................................. 49

16. Liquidity....................................................................................................................................................................... 50

17. Functional Expenses .................................................................................................................................................... 52

18. Reclassifications .......................................................................................................................................................... 54

19. Subsequent Events ...................................................................................................................................................... 54

INDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY INFORMATION ............................................................................. 55

COMBINING BALANCE SHEET MAY 31, 2019 ............................................................................................................................. 56

COMBINING BALANCE SHEET MAY 31, 2018 ............................................................................................................................. 57

COMBINING STATEMENT OF ACTIVITIES YEAR ENDED May 31, 2019 ....................................................................................... 58

COMBINING STATEMENT OF ACTIVITIES YEAR ENDED May 31, 2018 ....................................................................................... 59

COMBINING STATEMENT OF CASH FLOWS YEAR ENDED MAY 31, 2019 ................................................................................... 60

COMBINING STATEMENT OF CASH FLOWS YEAR ENDED MAY 31, 2018 ................................................................................... 62

SUPPLEMENTAL INFORMATION AND OTHER REQUIRED DISCLOSURES ......................................................................................... 65

COMBINING BALANCE SHEET BY COMMUNITY MAY 31, 2019 .................................................................................................. 66

COMBINING BALANCE SHEET BY COMMUNITY MAY 31, 2018 .................................................................................................. 68

COMBINING STATEMENT OF ACTIVITIES BY COMMUNITY YEAR ENDED MAY 31, 2019 ........................................................... 70

COMBINING STATEMENT OF ACTIVITIES BY COMMUNITY YEAR ENDED MAY 31, 2018 ........................................................... 72

SUMMARY OF FINANCIAL INFORMATION ................................................................................................................................. 74

1

INDEPENDENT AUDITORS’ REPORT INDEPENDENT AUDITOR’S REPORT

Board of Directors Pinnacle Living Richmond, Virginia

Report on the Financial Statements We have audited the accompanying combined financial statements of Pinnacle Living, WindsorMeade, and Hermitage Capital and Reserve Corporation, which comprise the combined balance sheets as of May 31, 2019 and 2018, the related combined statements of activities and cash flows for the years then ended, and the related notes to the combined financial statements (collectively, the financial statements).

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit 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 financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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 financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pinnacle Living, WindsorMeade, and Hermitage Capital and Reserve Corporation as of May 31, 2019 and 2018, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Mitchell Wiggins

Richmond, Virginia September 13, 2019

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PINNACLE LIVING COMBINED BALANCE SHEETS MAY 31, 2019 AND 2018

2019 2018

ASSETS

Current Assets

Cash and cash equivalents $ 17,643,505 $ 15,760,602 Cash and cash equivalents with donor restrictions 187,045 311,697

Total cash and cash equivalents 17,830,550 16,072,299 Accounts receivable, residents, less allowance for uncollectible accounts 2019 $3,817,638; 2018 $3,886,778 552,484 498,272

Accounts receivable, other 833,629 523,376 Prepaid expenses 275,205 268,460

Accrued income receivable 138,897 163,582 Assets whose use is limited 4,950,509 4,628,199

Other assets 2,659 - Total current assets 24,583,933 22,154,188

Beneficial interest in trusts, with donor restrictions 17,408,821 18,257,029 Investments 54,432,761 54,368,914 Investments, with donor restrictions 3,231,998 3,044,561

Assets whose use is limited 62,433,512 45,921,451 Other assets 146,855 165,913

Property and equipment, net 198,250,956 186,893,726

Total assets $ 360,488,836 $ 330,805,782

LIABILITIES AND NET ASSETS

Liabilities

Current liabilities

Accounts payable $ 3,576,776 $ 5,840,734

Resident refunds payable 3,376 16,038 Accrued expenses 8,155,278 7,723,615

Deposits, prospective residents 453,090 512,011 Bonds payable 2,110,000 2,055,000 Other liabilities 62,613 379,593

Total current liabilities 14,361,133 16,526,991

Resident refunds payable 4,160,082 4,239,072

Deposits, prospective residents 1,680,597 1,880,431 Bonds payable, net of 2019 OID $5,662,741 and bond issuance costs $2,685,478; 2018 OID $7,253,003 and bond issuance costs $1,694,199 149,256,878 105,813,488 Deferred revenue, entrance fees 86,947,020 87,437,396 Refundable fees 55,783,398 58,027,097

Other liabilities 68,804 52,852 Total liabilities 312,257,912 273,977,327

Net Assets

Without donor restrictions

Undesignated 22,117,437 35,215,168

With board designations 5,285,623 - With donor restrictions

Purpose restricted for Samaritan Program 303,619 80,785 Purpose restricted for all other programs 141,486 301,535

Perpetual in nature - investments 2,973,938 2,973,938 Perpetual in nature - beneficial interest in trusts 17,408,821 18,257,029

Total net assets 48,230,924 56,828,455

Total liabilities and net assets $ 360,488,836 $ 330,805,782

See Notes to Combined Financial Statements

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PINNACLE LIVING COMBINED STATEMENT OF ACTIVITIES YEAR ENDED MAY 31, 2019

Without Donor Restrictions

With Donor Restrictions

Total

Operating revenues and support Residents' fees $ 63,687,960 $ - $ 63,687,960 Membership fees 6,968 - 6,968 Benevolent care (474,105) - (474,105)

Amortization of deferred revenue from entrance fees 12,661,028 - 12,661,028 Ancillary service revenue, net 285,659 - 285,659

Other operating revenue 1,463,694 - 1,463,694 Net assets released from restrictions 427,701 (427,701) -

Total operating revenues and support 78,058,905 (427,701) 77,631,204

Operating expenses Administration 10,345,327 - 10,345,327 Marketing 3,021,702 - 3,021,702

General overhead 2,053,784 - 2,053,784 Depreciation 10,190,565 - 10,190,565

Dining 13,175,394 - 13,175,394 Resident services 3,584,978 - 3,584,978

Designated funds 333,059 - 333,059 Building and grounds 12,260,416 - 12,260,416

Housekeeping 3,788,822 - 3,788,822 Households / Neighborhoods 20,348,420 - 20,348,420

Total operating expenses 79,102,467 - 79,102,467

Change in net assets from operations (1,043,562) (427,701) (1,471,263)

Other non-operating changes Bequests 251,270 - 251,270 Trusts and legacies 817,006 - 817,006

Present value change in trusts - (848,208) (848,208) Loss on disposal of property and equipment (4,062,257) - (4,062,257)

Contributions, other 33,600 - 33,600 Contributions, Samaritan funds - 216,020 216,020 Contributions, restricted funds 141,205 31,804 173,009

Investment income 1,332,243 108,288 1,440,531 Net realized gain (loss) on investments 1,735,671 (53,829) 1,681,842

Net unrealized gain (loss) on investments (1,902,324) 188,203 (1,714,121) Interest expense (4,964,215) - (4,964,215)

Other non-operating charges and fees (150,745) - (150,745)

Total other non-operating changes (6,768,546) (357,722) (7,126,268)

Change in net assets (7,812,108) (785,423) (8,597,531) Net assets at the beginning of the year 35,215,168 21,613,287 56,828,455

Net assets at the end of the year $ 27,403,060 $ 20,827,864 $ 48,230,924


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PINNACLE LIVING COMBINED STATEMENT OF ACTIVITIES YEAR ENDED MAY 31, 2018



Total

Operating revenues and support Residents' fees $ 62,559,928 $ - $ 62,559,928 Benevolent care (779,262) - (779,262) Amortization of deferred revenue from entrance fees 11,078,257 - 11,078,257

Ancillary service revenue, net 295,892 - 295,892 Other operating revenue 1,518,645 - 1,518,645

Net assets released from restrictions 235,442 (235,442) -

Total operating revenues and support 74,908,902 (235,442) 74,673,460

Operating expenses Administration 10,571,367 - 10,571,367

Marketing 3,241,268 - 3,241,268 General overhead 1,920,447 - 1,920,447

Depreciation 9,828,357 - 9,828,357 Dining 13,526,439 - 13,526,439

Resident services 3,741,446 - 3,741,446 Designated funds 245,456 - 245,456

Building and grounds 12,429,493 - 12,429,493 Housekeeping 4,053,977 - 4,053,977

Households / Neighborhoods 19,254,349 - 19,254,349

Total operating expenses 78,812,599 - 78,812,599

Change in net assets from operations (3,903,697) (235,442) (4,139,139)

Other non-operating changes Bequests 1,761,261 - 1,761,261

Trusts and legacies 801,735 - 801,735 Present value change in trusts - (4,379,394) (4,379,394)

Loss on disposal of property and equipment (96,720) - (96,720) Contributions, other 10,500 - 10,500

Contributions, Samaritan funds - 237,853 237,853 Contributions, restricted funds 235,696 2,377 238,073 Investment income 1,196,355 4,431 1,200,786

Net realized gain (loss) on investments 1,210,209 (2,070) 1,208,139 Net unrealized gain (loss) on investments 302,862 (3,234) 299,628

Interest expense (4,155,459) - (4,155,459) Other non-operating charges and fees (143,472) - (143,472)

Total other non-operating changes 1,122,967 (4,140,037) (3,017,070)

Change in net assets (2,780,730) (4,375,479) (7,156,209)

Net assets at the beginning of the year 37,995,898 25,988,766 63,984,664

Net assets at the end of the year $ 35,215,168 $ 21,613,287 $ 56,828,455


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PINNACLE LIVING COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED MAY 31, 2019 AND 2018

2019 2018

Operating Activities Change in net assets $ (8,597,531) $ (7,156,209)

Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation 10,190,565 9,828,357

Amortization of deferred revenue from entrance fees (12,661,028) (11,078,257) Amortization of bond issuance costs 92,335 433,966 Amortization of original issue discount (premium) on bonds payable 206,691 388,798

Realized gains on investments (1,681,842) (1,208,139) Unrealized (gains) losses on investments 1,714,121 (299,628) Loss on disposal of property and equipment 4,062,257 96,720

Proceeds of Pinnacle Advantage membership entrance fees 150,000 - Proceeds after first generation entrance fees 14,513,300 22,531,490

Refunds of entrance fees (4,932,556) (5,474,258) Beneficial interest in trusts, with donor restrictions 848,208 4,379,394 Changes in operating assets

Accounts receivable, residents (54,212) 155,505 Accounts receivable, other 142,432 69 Accrued income receivable 24,685 (836)

Prepaid expenses (6,745) 86,326 Other assets 16,399 29,872

Changes in operating liabilities Accounts payable (2,263,958) 2,867,414 Resident refunds payable (348,130) (234,152)

Accrued expenses 431,663 2,417,462 Deposits, prospective residents (258,755) 721,992 Other liabilities (301,028) 148,062

Net cash provided by operating activities 1,286,871 18,633,948

Investment Activities Proceeds from sales of investment securities 11,514,251 18,191,569 Purchase of investments (27,007,184) (61,158,880)

Withdrawal from investments (1,500,000) 2,235,415 Proceeds from the sale of property and equipment 751,200 468,668

Purchase of property and equipment, Cedarfield and WindsorMeade expansion (18,145,020) (15,651,996) Purchase of property and equipment, capitalized interest (1,509,146) (934,896) Purchase of property and equipment, routine (6,707,085) (6,900,236)

Net cash used in investment activities (42,602,984) (63,750,356)

Financing Activities Bond issuance costs (1,083,614) (1,029,031) Original issue premium 1,383,571 3,075,180

Issuance Series 2016 bonds 6,767,043 177,357 Issuance Series 2017A & 2017B bonds - 4,111,789

Issuance Series 2017C bonds - 54,710,000 Issuance Series 2019A bonds 34,000,000 - Issuance Series 2019B bonds 4,287,338 -

Principal payment of Series 2012 bonds (1,865,000) (1,815,000) Principal payment of Series 2013A bonds (190,000) (95,160) Principal payment of Series 2013C bonds (125,000) (120,000)

Principal payment of Series 2016 bonds (99,974) - Principal payment of Series 2017A & 2017B bonds - (15,111,491)

Net cash provided by financing activities 43,074,364 43,903,644

Net change in cash and cash equivalents 1,758,251 (1,212,764) Cash and cash equivalents, beginning 16,072,299 17,285,063

Cash and cash equivalents, ending $ 17,830,550 $ 16,072,299

Supplemental disclosure of cash flow information, cash payments for interest, net of amounts capitalized

$

5,219,334

$

3,581,164


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NOTES TO COMBINED FINANCIAL STATEMENTS

1. Nature of Operations and Summary of Significant Accounting Policies

Nature of operations Virginia United Methodist Homes, Inc. d/b/a Pinnacle Living is a non-stock, §501(c)(3) (tax-exempt) entity organized under the laws of the Commonwealth of Virginia for the purpose of providing quality care for the elderly in the Commonwealth of Virginia. Pinnacle Living currently operates five active life plan communities, a community based continuing care program, and one §509(a)(3) entity throughout the Commonwealth of Virginia. During Fiscal 2019, one community was sold (Hermitage Eastern Shore) and one closed (Lydia Roper Homes). Of Pinnacle Living’s five active life plan communities, three accept term lease contracts, and two accept entrance fee contracts. Specifically, the communities that make up Pinnacle Living are as follows: Hermitage Northern Virginia; located in Alexandria, Virginia

• A Pinnacle Living term contract life plan community.

• Target retirement age is 80+ for all levels of care.

• Principal markets in Virginia are the counties of Fairfax and Arlington, and the cities of Alexandria, Falls Church, Annandale, Springfield, Burke, Kingstowne, Vienna, Mclean, and Lorton. The District of Columbia is also a principal market.

• Revenue is primarily derived from resident fees. Hermitage Richmond; located in Richmond, Virginia


• Target retirement age is 84+ for all levels of care.

• Principal market is Richmond City, Near West End of Henrico County, and parts of Mechanicsville in Hanover County, Virginia.

• Revenue is primarily derived from resident fees.

Hermitage Roanoke; located in Roanoke, Virginia


• Target retirement age is 75+ for independent living, 85+ for assisted living, and 90+ for the health center.

• Principal markets are the counties of Bedford, Botetourt, and Franklin, the city of Salem, and the town of Vinton, Virginia.

• Revenue is primarily derived from resident fees. Cedarfield; located in Henrico, Virginia

• A Pinnacle Living Entrance Fee life plan community.

• Target retirement age for Cedarfield is 65 - 84 for independent living. Cedarfield is a life-care community and as such fills its assisted living and health center primary through internal transfers.

• Principal markets are the counties of Henrico and Goochland and parts of Richmond City, Virginia.

• Revenue is primarily derived from resident fees.

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NOTES TO COMBINED FINANCIAL STATEMENTS 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)

Hermitage Eastern Shore; located in Onancock, Virginia

• Effective December 14, 2018, Pinnacle Living sold Hermitage Eastern Shore to Commonwealth Senior Living. Located in Onancock, Virginia, Hermitage Eastern Shore had sixty assisted living apartments and thirty-five health center beds. It opened in 1966 and represented approximately 5% of Pinnacle Living’s total revenue for the fiscal year ended May 2018. Hermitage Eastern Shore does not secure the bonds.

Lydia Roper Home; located in Norfolk, Virginia

• Pinnacle Living closed the Lydia Roper Home on January 31, 2019. The Lydia Roper Home is a twenty-six apartment assisted living facility in Norfolk, Virginia that became part of Pinnacle Living in 1966 and represented approximately 1% of Pinnacle Living’s total revenue for the fiscal year ended May 2018. Lydia Roper Home does not secure the bonds.

Pinnacle Advantage; located in Henrico, Virginia

• A Pinnacle Living Early Acceptance program.

• Target retirement age for Pinnacle Advantage is 65 – 85.

• Pinnacle Advantage provides certain amenities at Cedarfield while a member remains in their home and provides a path for transitioning to Cedarfield’s health services when needed.

In 2003, Pinnacle Living formed a non-stock, §501(c)(3) (tax-exempt) entity, Virginia United Methodist Homes of Williamsburg, Inc., dba WindsorMeade Williamsburg (“WindsorMeade”). Pinnacle Living is the sole member of WindsorMeade and has the right to appoint its directors. WindsorMeade operates a life plan community in the Williamsburg, Virginia area and is a Pinnacle Living Entrance Fee life plan community. The target retirement age for WindsorMeade is 70+ for independent living. WindsorMeade predominately fills its assisted living and health center from internal transfers. WindsorMeade’s principal market is James City County and Williamsburg, Virginia. The majority of revenue is derived from resident fees. In 2013, Pinnacle Living formed a supporting organization as contemplated under §509(a)(3) of the Internal Revenue Code entitled Hermitage Capital and Reserve Corporation (“HCRC”). HCRC is a Virginia non-stock corporation exempt from taxation pursuant to IRC §501(c)(3). Pinnacle Living is the sole member of HCRC with the right to appoint all but one of the directors. WindsorMeade is entitled to appoint the other director. HCRC maintains funds that may only be used to support Pinnacle Living and/or WindsorMeade. Pinnacle Living, WindsorMeade, and HCRC are collectively referred to as the “Organization.”

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Accounts receivable The Organization routinely extends credit in connection with the Organization’s activities to residents in its communities. Accounts are carried at their estimated collectible amounts and are generally extended on a short-term basis and therefore do not bear interest.

Advertising

The Organization expenses advertising costs as incurred. Total advertising expenses incurred were $1,319,759 and $1,468,284 for the years ended May 31, 2019 and 2018, respectively.

Allowance for uncollectible accounts

The allowance for uncollectible accounts is established through a provision for uncollectible accounts charged to expense. The allowance represents an amount which, in management’s judgment, will be adequate to absorb probable losses on existing accounts that may become uncollectible. Management’s judgment in determining the adequacy of the allowance is based on evaluations of the collectability of individual accounts receivable. Accounts receivable are charged against the allowance when deemed to be uncollectible. Subsequent recoveries are added to the allowance.

Assets whose use is limited Assets whose use is limited consist of the following:

• Assets restricted by bond indenture agreements, which may be expended only in connection with Pinnacle Living (for debt taken out on Cedarfield) and WindsorMeade.

• Assets held for contingences with Pinnacle Living’s annuity bonds.

• Assets restricted by escrow agreements to secure deposits made by prospective residents of Pinnacle Living and WindsorMeade.

• Assets held on behalf of the residents. Beneficial interest in trusts

Beneficial interest in trusts are recognized when the decedent’s will is declared valid by the probate court. The amount recognized (fair value) is determined by discounting the expected future cash flows using an appropriate discount rate, which may be based on a 30 year U.S. Treasury security or the actual yield of the trust if known. Subsequent to the original recognition of the beneficial interest in a trust, the Organization will annually review the fair value of its beneficial interest and adjust as necessary. During the current and prior years, the Organization changed the inputs utilized in the fair value calculations for some beneficial interests because it believes the revised inputs produce a more representative fair value for those trusts. The change in inputs resulted in negative adjustments which are reflected in the combined statements of activities for the years ended May 31, 2019 and 2018. At times, the Organization may have beneficial interests in trusts where sufficient financial information is not readily available to record these interests. However, these interests may be significant.

10


Bond issuance costs Bond issuance costs are amortized over the lives of the related bonds and the amortization is included as part of interest expense. For Pinnacle Living, the 2012 bonds will amortize its bond issuance costs until 2028. The 2017A&B bonds have been refinanced and their corresponding bond issuance costs were expensed and the 2017C and 2019 bonds will have their bond issuance costs amortized until 2053. For WindsorMeade, bond issuance costs for the 2013 bonds are part of reorganization items, net, and therefore expensed. The 2016 issue will amortize over five years. Amortization was $92,335 and $433,966 for the years ended May 31, 2019 and 2018, respectively.

Cash and cash equivalents

For purposes of reporting the combined statements of cash flows, the Organization includes all general fund cash accounts without and with donor restrictions, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments with a maturity of three months or less as cash and cash equivalents.

Combination and basis of financial statement presentation

The accompanying combined financial statements include the accounts of Pinnacle Living, WindsorMeade and Hermitage Capital and Reserve Corporation. All significant intercompany transactions and balances have been eliminated in the combined financial statements. The combined financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and general industry practices.

Contributed services

During the years ended May 31, 2019 and 2018, the value of contributed services meeting the requirements for recognition in the combined financial statements was not material and has not been recorded. However, a substantial number of volunteers have donated significant amounts of their time in the Organization’s various activities.

Contributions Contributions received are recorded without or with donor restrictions depending on the existence or nature of any donor restrictions.

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Entrance fees Fees paid by a resident upon entering into a continuing care contract, net of the portion thereof that is refundable to the resident, are recorded as deferred revenue and are amortized to income using the straight-line method over the estimated remaining life expectancy of the resident. Entrance fees are listed on the combined statements of cash flows as Proceeds after first generation entrance fees. This line item is listed as an operating activity. It represents entrance fees received after first generation entrance fees (or after a particular residence is originally occupied). These entrance fees are not restricted or designated for a particular purpose. Cedarfield and WindsorMeade require residents in the independent living residences to pay a one-time upfront entrance fee, typically between $174,705 to $1,018,000, which is partially refundable in certain circumstances. The amount of the entrance fee varies depending upon the type and size of the residence, the type of contract plan selected, whether the contract contains a life-care benefit for the resident, the amount and timing of the refund, and other variables. These agreements are subject to regulation by the Virginia State Corporation Commission. In addition to a resident’s entrance fee, residents under all of the Organization’s entrance fee agreements also pay a monthly service fee, which entitles them to the use of certain amenities and services.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Financial statement presentation The primary purpose of financial statements is to provide relevant information to meet the common interest of donors, members, creditors and others who provide resources to the Organization. More specifically, the purpose of financial statements, including the accompanying notes, is to provide information about the following: a) the amount and nature of the Organization’s assets, liabilities and net assets; b) the effects of transactions and other events and circumstances that change the amount and nature of net assets, c) the amount and kinds of inflows and outflows of economic resources during a period and the relation between the inflows and outflows; d) how the Organization obtains and spends cash, its borrowing and repayment of borrowing, and other factors that may affect its liquidity; e) the service efforts of the Organization.

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Financial statement presentation, continued General-purpose external financial statements include a statement of financial position (or balance sheet), a statement of activities and a cash flow statement. In addition, certain entities provide either a statement or footnote disclosure of functional expenses. Further, general-purpose financial statements classify and report net assets in two groups; net assets with donor restrictions and net assets without donor restrictions based on the existence or absence of donor-imposed restrictions and the nature of those restrictions.

Net assets without donor restrictions include resources that can be used currently for the general operations of the Organization and amounts designated by the Board for contingencies. Net assets with donor restrictions may be temporary or permanent. Some donor-imposed restrictions impose limits that are permanent, for example, stipulated that resources be invested in perpetuity. Others are temporary, for example, stipulated that resources may be used only after a specified date, for particular programs or services, or to acquire buildings and equipment.

Functional expenses The costs of providing the various programs and activities have been summarized on a functional basis in the accompanying combined statements of activities. Accordingly, certain costs have been allocated among programs and supporting services.

Income taxes Pinnacle Living, WindsorMeade, and HCRC are non-stock corporations exempt from taxation pursuant to IRC § 501(c)(3). Contributions to Pinnacle Living, WindsorMeade, and HCRC are tax deductible. Before soliciting contributions to HCRC, Pinnacle Living would amend its filing with the IRS to state the fact that it intended to make solicitations from the general public. None of the entities that comprise the Organization are classified as private foundations under IRC § 509(a)(1) and 170(b)(1)(A)(vi). HCRC is a supporting organization for Pinnacle Living and WindsorMeade pursuant to IRC § 509(a)(3). The Financial Accounting Standards Board issued guidance on accounting for uncertainty in income taxes. Management evaluated the Organization’s tax positions and concluded that the Organization had taken no uncertain tax positions that require adjustment to the combined financial statements to comply with the provisions of this guidance. With few exceptions, the Organization is no longer subject to income tax examinations by the taxing authorities for years ending before May 31, 2016. The Organization includes penalties and interest assessed by income taxing authorities in other non-operating charges and fees. The Organization did not have penalties and interest relating to income taxes for the years ended May 31, 2019 and 2018.

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Investments and investment income

Investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the combined balance sheets. Unrealized gains and losses are included in the change in net assets as required by accounting standards. The Organization has also adopted authoritative guidance regarding the Endowment of Not-for Profit Organizations: Net Asset Classification of Fund Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds.

Obligation to provide future services

The Organization annually calculates the present value of the net cost of future services and use of facilities to be provided to current residents and compares that amount with the balance of deferred revenue from entrance fees. If the present value of the net cost of future services and use of facilities exceeds the deferred revenue from entrance fees, a liability is recorded (obligation to provide future services and use of facilities) with the corresponding charge to income. Any obligation is discounted based on the expected long-term rate of return of invested funds. Pinnacle Living and WindsorMeade did not have an obligation to provide future services for fiscal 2019 or fiscal 2018.

Original issue discount and original issue premium The original issue premium (Pinnacle Living) and original issue discount (WindsorMeade) on bonds payable are amortized into interest expense using the effective interest method.

Property and equipment Property and equipment acquisitions are recorded at cost or, if donated, at fair market value at the date of the gift. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The following table summarizes the estimated useful lives of the assets:

Landscaping………………………………………………………………… 5 to 25 years Buildings……………………………………………………………………… 35 to 50 years Building additions or upgrades…………………………..………. 5 to 40 years Large equipment………………………………………………………… 5 to 15 years Small equipment………………………………………………………… 2 to 7 years

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2. Net Assets With and Without Donor Restrictions Net assets with and without donor restrictions include the following:

Pinnacle Living

May 31, 2019 May 31, 2018


Undesignated $ 36,023,317 $ 45,553,872 Board Designated

Samaritan Program 5,162,876 -

Hermitage Richmond capital expenses for health care center 122,747 -


Purpose restricted programs

Samaritan Program 282,004 70,623 All other programs

Angel Fund 62,404 113,924

Community Enrichment Fund 12,425 93,921

Flower Fund 3,926 4,761 Library Funds 2,126 3,236

Technology Fund 7,138 8,145

Spiritual Life Fund - 9,612

Resident Program Fund 945 42,868 Scholarship Fund 550 4,900

Perpetual in nature

Investments 2,973,938 2,973,938 Beneficial interest in trusts 17,408,821 18,257,029

Total net assets $ 62,063,217 $ 67,136,829

WindsorMeade

May 31, 2019 May 31, 2018

Without Donor Restrictions Undesignated $ (13,664,121) $ (10,226,432)


Purpose restricted programs Samaritan Program 21,615 10,162

All other programs

Angel Fund 17,934 20,168 Scholarship Fund 34,038 -

Total net assets $ (13,590,534) $ (10,196,102)

Hermitage Capital & Reserve Corporation

May 31, 2019 May 31, 2018

Without Donor Restrictions Undesignated $ 7,791,023 $ 7,524,159

Combined

May 31, 2019 May 31, 2018

Total net assets before eliminations $ 56,263,706 $ 64,464,886 Less: Eliminations between Pinnacle Living and WindsorMeade (8,032,782) (7,636,431

Total net assets, combined $ 48,230,924 $ 56,828,455

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3. Investments Investments are managed for the Organization by outside parties.

May 31, 2019

Pinnacle Living

Total Cost

Total FMV

Unrealized Appreciation (Depreciation)

Cash/Money market funds $ 61,492,190 $ 61,492,190 $ -

Mutual funds 21,468,603 20,915,903 (552,700)

Corporate stocks 5,557,238 7,323,122 1,765,884

Bonds 20,102,553 20,120,585 18,032

Total Pinnacle Living $ 108,620,584 $ 109,851,800 $ 1,231,216

May 31, 2019

WindsorMeade

Total Cost

Total FMV



Total WindsorMeade $ 6,074,540 $ 6,074,540 $ -

May 31, 2019


Total Cost

Total FMV


Cash/Money market funds $ 14,921 $ 14,921 $ -

Mutual Funds 7,191,296 6,958,873 (232,423)

Total HCRC $ 7,206,217 $ 6,973,794 $ (232,423)

May 31, 2019

Combined Total

Total Cost

Total FMV



Mutual funds 28,659,899 27,874,776 (785,123)

Corporate stocks 5,557,238 7,323,122 1,765,884 Bonds 20,102,553 20,120,585 18,032

Total combined $ 121,901,341 $ 122,900,134 $ 998,793

The assets held by Pinnacle Living in WindsorMeade, valued at $8,372,284, would be considered Level 2 municipal bonds. This amount is eliminated on the combined balance sheets.

16

NOTES TO COMBINED FINANCIAL STATEMENTS 3. Investments (Continued)

May 31, 2018

Pinnacle Living

Total Cost

Total FMV



Mutual funds 17,624,576 18,998,738 1,374,162 Corporate stocks 5,292,640 7,714,421 2,421,781

Bonds 22,695,932 21,916,250 (779,682)

Total Pinnacle Living $ 90,550,988 $ 93,567,249 $ 3,016,261

May 31, 2018

WindsorMeade

Total Cost

Total FMV



Total WindsorMeade $ 5,264,349 $ 5,264,349 $ -

May 31, 2018


Total Cost

Total FMV


Cash/Money market funds $ 21,657 $ 21,657 $ -

Mutual Funds 6,987,908 6,684,561 (303,347)

Total HCRC $ 7,009,565 $ 6,706,218 $ (303,347)

May 31, 2018

Combined Total

Total Cost

Total FMV



Mutual funds 24,612,484 25,683,299 1,070,815 Corporate stocks 5,292,640 7,714,421 2,421,781

Bonds 22,695,932 21,916,250 (779,682)

Total combined $ 102,824,902 $ 105,537,816 $ 2,712,914

The assets held by Pinnacle Living in WindsorMeade, valued at $8,037,897, would be considered Level 2 municipal bonds. This amount is eliminated on the combined balance sheets. These investments are shown on the combined balance sheets as follows:

2019 2018

Investments without donor restrictions $ 54,432,761 $ 54,368,914 Investment with donor restrictions 3,231,998 3,044,561

Assets whose use is limited 65,235,375 48,124,341

Total combined $ 122,900,134 $ 105,537,816

17


4. Fair Value Generally Accepted Accounting Principles (GAAP) requires disclosure of the fair value of certain assets, the valuation techniques employed to determine fair value, and provides the framework for measuring fair value. The fair value framework includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety. Level 1 Input

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. A Level 1 input will be available for many financial assets and liabilities, some of which might be exchanged in multiple active markets.

Level 2 Input

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly through corroboration with observable market data (market-corroborated inputs). If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 Input

Level 3 inputs are unobservable inputs for the asset or liability, that is, inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability (including assumptions about risk) developed based on the best information available in the circumstances.

A description of the valuation methodologies used for assets measured by fair value is below. There have been no changes in the methodologies used at May 31, 2019 and 2018. Money market funds

Money market funds are valued at the net asset value of shares held at year end. Mutual funds

Mutual funds are valued at the net asset value of shares held at year end.

18

NOTES TO COMBINED FINANCIAL STATEMENTS 4. Fair Value (Continued)

Corporate stocks

Corporate stocks are valued based on quoted market prices, when available, or market prices provided by recognized broker dealers.

Bonds Corporate bonds are valued using recently executed transactions, market price quotations (where observable), bond spreads or credit default swap spreads. The spread data used are for the same maturity as the bond. If the spread data does not reference the issuer, then data that references a comparable issuer is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bonds, or single-name credit default swap spreads and recovery rates based on collateral values as key inputs. Corporate bonds are generally categorized in Level 2 of the fair value hierarchy. The fair value of government bonds is generally based on quoted prices in active markets. When quoted prices are not available, fair value is determined based on a valuation model that uses inputs that include interest-rate yield curves, cross-currency basis index spreads, and country credit spreads similar to the bond in terms of issuer, maturity and seniority. Government bonds are generally categorized in Levels 1 and 2.

Beneficial interest in trusts Fair value for the beneficial interest in charitable trusts is determined by calculating the present value of the future distributions expected to be received from the trust using a discount rate.

The methods described above may produce a fair value calculation that may not be indicative of net realized value or reflective of future fair values. Furthermore, while Pinnacle Living believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

19


Fiscal 2019 information is provided below:

May 31, 2019

Pinnacle Living Total FMV Level 1 Level 2 Level 3

Cash/Money market funds

Cash and money market funds $ 61,492,190 $ 61,492,190 $ - $ -

Mutual funds

International 3,284,465 3,284,465 - -

Large cap value 7,742,295 7,742,295 - - Small cap value 3,176,274 3,176,274 - -

Short-term bond 6,712,869 6,712,869 - -

Corporate stocks Large cap core 925,680 925,680 - -

Large cap growth 2,606,289 2,606,289 - -

Large cap value 802,129 802,129 - - Mid cap core 535,844 535,844 - -

Mid cap growth 602,636 602,636 - -

Mid cap value 1,419,144 1,419,144 - -

Real estate 229,604 229,604 - - Small cap growth 30,530 30,530 - -

Small cap value 171,266 171,266 - -

Bonds Agency 6,682,803 6,682,803 - -

Corporate 11,047,771 - 11,047,771 -

Government 2,390,011 2,390,011 - -

Beneficial interest in trusts 17,408,821 - - 17,408,821

Total Pinnacle Living $ 127,260,621 $ 98,804,029 $ 11,047,771 $ 17,408,821

May 31, 2019

WindsorMeade Total FMV Level 1 Level 2 Level 3

Cash/Money market funds Domestic Fixed Income $ 6,074,540 $ 6,074,540 $ - $ -

Total WindsorMeade $ 6,074,540 $ 6,074,540 $ - $ -

20


May 31, 2019

Hermitage Capital & Reserve Corporation Total FMV Level 1 Level 2 Level 3

Cash/Money market funds Cash and money market funds $ 14,921 $ 14,921 $ - $ -

Mutual Funds Short-term bond 6,958,873 6,958,873 - -

Total HCRC $ 6,973,794 $ 6,973,794 $ - $ -

May 31, 2019

Combined Total Total FMV Level 1 Level 2 Level 3

Cash/Money market funds Cash and money market funds $ 61,507,111 $ 61,507,111 $ - $ -

Domestic Fixed Income 6,074,540 6,074,540 - -

Mutual funds

International 3,284,465 3,284,465 - -

Large cap value 7,742,295 7,742,295 - -

Small cap value 3,176,274 3,176,274 - -

Short-term bond 13,671,742 13,671,742 - - Corporate stocks

Large cap core 925,680 925,680 - -

Large cap growth 2,606,289 2,606,289 - - Large cap value 802,129 802,129 - -

Mid cap core 535,844 535,844 - -

Mid cap growth 602,636 602,636 - -

Mid cap value 1,419,144 1,419,144 - - Real estate 229,604 229,604 - -

Small cap growth 30,530 30,530 - -

Small cap value 171,266 171,266 - - Bonds

Agency 6,682,803 6,682,803 - -

Corporate 11,047,771 - 11,047,771 - Government 2,390,011 2,390,011 - -


Total combined $ 140,308,955 $ 111,852,363 $ 11,047,771 $ 17,408,821

21


Fiscal 2018 information is provided below.

May 31, 2018

Pinnacle Living Total FMV Level 1 Level 2 Level 3


Mutual funds International 3,247,107 3,247,107 - -

Large cap value 8,111,685 8,111,685 - - Small cap value 3,287,068 3,287,068 - -

Short-term bond 4,352,878 4,352,878 - -

Corporate stocks International 86,329 86,329 - -

Large cap core 931,932 931,932 - -

Large cap growth 3,140,461 3,140,461 - -

Large cap value 580,791 580,791 - - Mid cap core 741,857 741,857 - -

Mid cap growth 789,657 789,657 - -

Mid cap value 1,035,437 1,035,437 - -

Real estate 186,256 186,256 - - Small cap core 18,756 18,756 - -

Small cap growth 70,415 70,415 - -

Small cap value 132,530 132,530 - -

Bonds Agency 7,021,345 7,021,345 - -

Corporate 12,433,415 - 12,433,415 - Government 2,461,490 2,461,490 - -


Total Pinnacle Living $ 111,824,278 $ 81,133,834 $ 12,433,415 $ 18,257,029

May 31, 2018

WindsorMeade Total FMV Level 1 Level 2 Level 3

Cash/Money market funds Domestic Fixed Income $ 5,264,349 $ 5,264,349 $ - $ -

Total WindsorMeade $ 5,264,349 $ 5,264,349 $ - $ -

22


May 31, 2018

Hermitage Capital & Reserve Corporation Total FMV Level 1 Level 2 Level 3

Cash/Money market funds Cash and money market funds $ 21,657 $ 21,657 $ - $ -

Mutual Funds

Short-term bond 6,684,561 6,684,561 - -

Total HCRC $ 6,706,218 $ 6,706,218 $ - $ -

May 31, 2018

Combined Total Total FMV Level 1 Level 2 Level 3


Domestic Fixed Income 5,264,349 5,264,349 - -

Mutual funds

International 3,247,107 3,247,107 - -

Large cap value 8,111,685 8,111,685 - -

Small cap value 3,287,068 3,287,068 - - Short-term bond 11,037,439 11,037,439 - -

Corporate stocks International 86,329 86,329 - -

Large cap core 931,932 931,932 - - Large cap growth 3,140,461 3,140,461 - -

Large cap value 580,791 580,791 - -

Mid cap core 741,857 741,857 - - Mid cap growth 789,657 789,657 - -

Mid cap value 1,035,437 1,035,437 - -

Real estate 186,256 186,256 - -

18,756 18,756 - - Small cap growth 70,415 70,415 - -

Small cap value 132,530 132,530 - -

Bonds

Agency 7,021,345 7,021,345 - -

Corporate 12,433,415 - 12,433,415 -

Government 2,461,490 2,461,490 - -


Total combined $ 123,794,845 $ 93,104,401 $ 12,433,415 $ 18,257,029

23


Assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 inputs):

Beneficial interest in trusts

June 1, 2017 $ 22,636,423

Change in value (4,379,394)

May 31, 2018 18,257,029

Change in value (848,208)

May 31, 2019 $ 17,408,821

5. Assets Whose Use is Limited Assets whose use is limited consists of the following:

May 31, 2019

Pinnacle Living

WindsorMeade

Total

Investments held under indenture agreement by Trustee

Bond principal fund $ 2,380,980 $ 327,206 $ 2,708,186

Bond interest fund 610,748 1,163,526 1,774,274

Debt service reserve fund 7,308,530 2,295,300 9,603,830 Funded interest account 2,665,234 - 2,665,234

Construction fund 46,149,720 - 46,149,720

Capital reserve and replacement fund - 2,288,507 2,288,507

Investments held in reserve for contingencies Annuity bonds 45,624 - 45,624

Total investments as assets whose use is limited 59,160,836 6,074,539 65,235,375

Resident accounts 14,959 - 14,959

Assets held from prospective members

To secure deposits 363,072 90,018 453,090 To secure deposits on Cedarfield's new IL apartments 983,597 - 983,597

Future deposits 505,000 192,000 697,000

Total assets whose use is limited $ 61,027,464 $ 6,356,557 $ 67,384,021

There were no assets whose use was limited for HCRC in fiscal year 2019.

24

NOTES TO COMBINED FINANCIAL STATEMENTS 5. Assets Whose Use is Limited (Continued)

May 31, 2018

Pinnacle Living

WindsorMeade

Total

Investments held under indenture agreement by Trustee Bond principal fund $ 2,045,763 $ 316,011 $ 2,361,774

Bond interest fund 575,902 1,145,645 1,721,547

Debt service reserve fund 5,364,356 2,295,300 7,659,656

Funded interest account 3,609,055 - 3,609,055 Construction fund 31,219,292 - 31,219,292

Capital reserve and replacement fund - 1,507,393 1,507,393

Investments held in reserve for contingencies Annuity bonds 45,624 - 45,624

Total investments as assets whose use is limited 42,859,992 5,264,349 48,124,341

Resident accounts 32,867 - 32,867

Assets held from prospective members To secure deposits 390,989 121,022 512,011 To secure deposits on Cedarfield's new IL apartments 1,209,431 - 1,209,431

Future deposits 506,000 165,000 671,000

Total assets whose use is limited $ 44,999,279 $ 5,550,371 $ 50,549,650

There were no assets whose use was limited for HCRC in fiscal year 2018.

25


6. Property and Equipment A summary of property and equipment is as follows:

May 31, 2019

Pinnacle Living WindsorMeade Total

Land and landscaping $ 6,165,209 $ 4,982,035 $ 11,147,244

Building 138,515,923 121,042,878 259,558,801

Furniture and equipment 19,912,575 3,471,272 23,383,847 Leasehold improvements 94,000 - 94,000

Capital projects in process 39,764,875 276,174 40,041,049

Property and equipment, gross 204,452,582 129,772,359 334,224,941

Less: Accumulated depreciation (99,535,599) (36,438,386) (135,973,985)

Property and equipment, net $ 104,916,983 $ 93,333,973 $ 198,250,956

HCRC did not have any property and equipment for fiscal 2019.

May 31, 2018

Pinnacle Living WindsorMeade Total

Land and landscaping $ 7,238,034 $ 4,870,578 $ 12,108,612

Building 145,727,484 111,829,731 257,557,215

Furniture and equipment 20,108,707 3,285,954 23,394,661

Leasehold improvements 62,112 - 62,112 Capital projects in process 21,333,754 8,284,717 29,618,471

Property and equipment, gross 194,470,091 128,270,980 322,741,071

Less: Accumulated depreciation (102,852,662) (32,994,683) (135,847,345)

Property and equipment, net $ 91,617,429 $ 95,276,297 $ 186,893,726

HCRC did not have any property and equipment for fiscal 2018.

26


7. Bonds Payable PINNACLE LIVING On August 9, 2012, Pinnacle Living entered into a loan agreement with the Economic Development Authority of Henrico County, Virginia to borrow the proceeds of the Authority’s $30,425,000 Residential Care Facility Revenue Refunding Bonds, Series 2012. The Series 2012 Bonds are secured by a pledge of Pinnacle Living’s revenues, a first lien deed of trust on the real estate portion of the Cedarfield facility, and a security interest in the equipment of the Cedarfield facility. The primary purpose of this loan was (a) refunding of the outstanding principal balance of the Authority’s $45,505,000 Residential Care Facility Revenue Refunding Bonds, Series 2002A and Series 2002B, (b) funding a Debt Service Reserve Fund for the Series 2012 Bonds, and (c) paying costs of issuance, and other amounts relating to the Series 2012 Bonds. The interest rates for the Series 2012 Bonds are fixed and range from 3.00% to 5.00%. The Series 2012 Bonds principal and interest payments are as follows:

May 31, 2019

Fiscal Year Principal Interest Total

2020 $ 1,920,000 $ 887,225 $ 2,807,225

2021 1,985,000 818,278 2,803,278

2022 2,060,000 729,706 2,789,706 2023 2,160,000 624,206 2,784,206

2024 2,270,000 513,456 2,783,456

2025 2,385,000 397,081 2,782,081 2026 2,500,000 274,956 2,774,956

2027 2,410,000 161,244 2,571,244

2028 2,515,000 55,016 2,570,016

Subtotal 20,205,000 4,461,168 24,666,168 Original issue premium 355,123 -- 355,123

Total $ 20,560,123 $ 4,461,168 $ 25,021,291

On December 27, 2017, Pinnacle Living entered into a loan agreement with the Virginia Small Business Financing Authority to borrow the proceeds of the Authority’s Residential Care Facility Revenue Bonds, Series 2017C in the amount of $54,710,000. The primary purpose of the Series 2017C Bond was to refund the Authority’s $25,060,000 and $25,595,000 Residential Care Facility Revenue Bonds, Series 2017A and Series 2017B, (b) funding a Debt Service Reserve Fund for the Series 2017C Bonds, and (c) paying costs of issuance, and other amounts relating to the Series 2017 Bonds. The interest rates for the Series 2017C Bonds are fixed and range from 3.50% to 5.00%.

27

NOTES TO COMBINED FINANCIAL STATEMENTS 7. Bonds Payable (Continued)

The Series 2017C Bonds principal and interest payments are as follows:

May 31, 2019


2020 $ - $ 2,717,850 $ 2,717,850 2021 - 2,717,850 2,717,850

2022 - 2,717,850 2,717,850

2023 - 2,717,850 2,717,850

2024 - 2,717,850 2,717,850 2025 - 2,717,850 2,717,850

2026 - 2,717,850 2,717,850

2027 - 2,717,850 2,717,850

2028 - 2,717,850 2,717,850 2029 870,000 2,702,625 3,572,625

2030 910,000 2,664,650 3,574,650

2031 955,000 2,618,025 3,573,025 2032 1,005,000 2,569,025 3,574,025

2033 1,055,000 2,517,525 3,572,525

2034 1,110,000 2,463,400 3,573,400

2035 1,175,000 2,406,275 3,581,275 2036 1,230,000 2,346,150 3,576,150

2037 1,300,000 2,282,900 3,582,900

2038 1,365,000 2,216,275 3,581,275 2039 1,430,000 2,148,700 3,578,700

2040 1,505,000 2,077,625 3,582,625

2041 1,585,000 2,000,375 3,585,375

2042 1,840,000 1,914,750 3,754,750 2043 2,060,000 1,817,250 3,877,250

2044 2,165,000 1,711,625 3,876,625

2045 2,280,000 1,600,500 3,880,500

2046 2,395,000 1,483,625 3,878,625 2047 2,520,000 1,360,750 3,880,750

2048 2,650,000 1,231,500 3,881,500

2049 2,790,000 1,095,500 3,885,500 2050 4,750,000 907,000 5,657,000

2051 4,995,000 663,375 5,658,375

2052 5,250,000 407,250 5,657,250

2053 5,520,000 138,000 5,658,000

Subtotal 54,710,000 69,805,325 124,515,325

Original issue premium 2,913,113 - 2,913,113

Total $ 57,623,113 $ 69,805,325 $ 127,428,438

28


On March 13, 2019, the Economic Development Authority of Henrico County, Virginia issued $34,000,000 in Residential Care Facilities Revenue Bonds Series 2019A to provide funds to be used (1) to finance costs associated with renovation and expansion of Pinnacle Living’s continuing care retirement community known as Cedarfield including (without limitation) (A) acquiring, constructing, designing, equipping and renovating additional independent living and assisted living units, (B) renovating existing independent living units, (C) renovating memory support facility, (D) acquiring, constructing, designing, equipping and renovating rehabilitation facility, (E) acquiring, constructing, designing, equipping and renovating health care (including assisted living and nursing care) and wellness center facility, (F) renovating common areas, (G) acquiring, constructing, designing, equipping and renovating dining, physical therapy, parking and wellness facility and (H) performing site work and other community-related improvement; and (2) to finance costs related to a debt service reserve fund, costs of issuance, capitalized interest through approximately July 1, 2020, working capital, routing capital expenditures at Cedarfield and other expenses in connection with the issuance of the Bonds. The interest rates for the Series 2019A Bonds are fixed and range from 4.00% to 5.00%.

29


The Series 2019A Bonds principal and interest payments are as follows:

May 31, 2019


2020 $ - $ 1,215,117 $ 1,215,117 2021 - 1,695,513 1,695,513

2022 - 1,695,513 1,695,513

2023 - 1,695,513 1,695,513

2024 - 1,695,513 1,695,513 2025 - 1,695,513 1,695,513

2026 - 1,695,513 1,695,513

2027 - 1,695,513 1,695,513

2028 - 1,695,513 1,695,513 2029 895,000 1,673,388 2,568,388

2030 935,000 1,628,163 2,563,163

2031 985,000 1,580,438 2,565,438 2032 1,035,000 1,529,938 2,564,938

2033 1,090,000 1,476,813 2,566,813

2034 1,145,000 1,420,938 2,565,938

2035 1,195,000 1,362,438 2,557,438 2036 1,260,000 1,301,063 2,561,063

2037 1,320,000 1,236,563 2,556,563

2038 1,390,000 1,168,813 2,558,813 2039 1,465,000 1,097,438 2,562,438

2040 1,535,000 1,022,438 2,557,438

2041 1,610,000 945,531 2,555,531

2042 1,650,000 865,750 2,515,750 2043 1,705,000 781,875 2,486,875

2044 1,795,000 694,375 2,489,375

2045 1,885,000 602,375 2,487,375

2046 1,980,000 505,750 2,485,750 2047 2,080,000 404,250 2,484,250

2048 2,185,000 297,625 2,482,625

2049 2,295,000 185,625 2,480,625 2050 595,000 113,375 708,375

2051 625,000 82,875 707,875

2052 655,000 50,875 705,875

2053 690,000 17,250 707,250

Subtotal 34,000,000 36,825,183 70,825,183

Original issue premium 1,369,505 - 1,369,505

Total $ 35,369,505 $ 36,825,183 $ 72,194,688

Simultaneously with the issuance of the Series 2019A Bonds, the Authority issued its $11,000,000 Residential Care Facilities Revenue Bond Series 2019B as a separate resolution. The Series 2019B bonds have a separate Loan Agreement with STI Institution and Government, Inc., an affiliate of SunTrust Bank. These bonds are being issued on a draw-down basis. The interest rate for the Series 2019B bonds is 81% of LIBOR plus a spread of 1.40%. The average interest rate for fiscal 2019 was 3.15%. The principal and interest on this bond is due and payable in full on March 13, 2023.

30


WINDSORMEADE On May 31, 2013, WindsorMeade entered into a loan agreement with the Economic Development Authority of James City County, Virginia with respect to the restructuring of the Authority’s $114,270,000 Residential Care Facility Revenue Bonds, Series 2007A, 2007B, and 2007C through the issuance of the Authority's Residential Care Facility Revenue Bonds Series 2013A (Senior) (the "Series 2013A Senior Bonds"), the Residential Care Facility Revenue Bonds Series 2013A (Subordinate) (the "Series 2013A Subordinate Bonds"), the Residential Care Facility Revenue Bonds Series 2013B (Senior) (the "Series 2013B Senior Bonds") and the Residential Care Facility Revenue Bonds Series 2013C (Senior) (the "Series 2013C Senior Bonds" and together with the Series 2013A Senior Bonds, the Series 2013A Subordinate Bonds and the Series 2013B Senior Bonds, (the "Series 2013 Bonds"). The Series 2013 Bonds are secured by a pledge of WindsorMeade’s revenues, a lien on the real estate portion of the WindsorMeade facility and improvements thereon, and a security agreement in the equipment of the WindsorMeade facility. The Series 2013 Bonds are as follows:

• Series 2013A Senior Bonds: o Principal amount: $30,000,160 o Final maturity: June 1, 2043 o Fixed rate bonds o Stated interest 6% per annum

• Series 2013A Subordinate Bonds: o Initial principal amount: $9,703,660 o Final maturity: June 1, 2048 o Fixed rate bonds o Stated interest rate 2% per annum

• Series 2013B Senior Bonds: o Aggregate principal amount: $6,500,000 o Final maturity: June 1, 2042 o Fixed rate bonds o Interest is 6% per annum

• Series 2013C Senior Bonds: o Aggregate principal amount: $2,000,000 o Final maturity: June 1, 2028 o Fixed rate bonds o Interest is 4% per annum

Additionally, on May 31, 2013 Pinnacle Living and WindsorMeade entered into a revolving loan agreement (“revolver”) to provide WindsorMeade with a revolving loan in a principal amount up to $5,600,000. The term of the revolver will end on May 31, 2023. Any monies advanced under the revolver will bear interest at 4% per annum. As of May 31, 2019, no monies have been drawn on the revolver. WindsorMeade is required to make quarterly interest installments on advances under the revolver on each March 1, June 1, September 1, and December 1, commencing with the first day of the first quarter following the first advance of proceeds thereunder. Beginning with the first day of the first quarter following the first advance of proceeds thereunder, WindsorMeade is required to make quarterly principal payments with respect to amounts advanced under the revolver, but only to the extent that the amount of such payments will not cause WindsorMeade's Days' Cash on Hand to go lower than 120 Days' Cash on Hand.

31


The WindsorMeade Series 2013 bonds will be accounted for using the effective interest rate method. In using the effective interest rate method, the carrying values of the bonds are calculated as the present value of the coupon payments (based on the stated interest rate), principal payment, and the market interest rate at the time of issuance. Depending on the amount calculated as the carrying value of the bonds, the bonds can be purchased at par or with a premium or discount. If the bond issue is determined to be issued at a premium or discount this difference between the par value and purchase price is amortized over the life of the bond as interest expense. Please see below for a summary of details used to calculate the carrying value of the 2013 bonds on the balance sheet at emergence.

Bond Issue

Stated Interest Rate

Effective Interest Rate

Maturity Date

Par Value

Original Issue Discount

2013A–Senior Bonds 6% 7% 6/1/2043 $30,000,160 $3,741,730 2013A–Subordinate Bonds 2% 12% 6/1/2048 9,703,660 9,387,677 2013B–Senior Bonds 6% 5.50%-7.00% 6/1/2042 6,500,000 480,777 2013C–Senior Bonds 4% 5.98%-7.87% 6/1/2028 2,000,000 500,165

32


The Series 2013A Senior Bonds (fixed rate) principal and interest payments are as follows:

May 31, 2019


2020 $ 190,000 $ 1,777,200 $ 1,967,200 2021 485,000 1,756,950 2,241,950

2022 570,000 1,725,300 2,295,300

2023 605,000 1,690,050 2,295,050

2024 640,000 1,652,700 2,292,700 2025 680,000 1,613,100 2,293,100

2026 720,000 1,571,100 2,291,100

2027 760,000 1,526,700 2,286,700

2028 805,000 1,479,750 2,284,750 2029 855,000 1,429,950 2,284,950

2030 905,000 1,377,150 2,282,150

2031 960,000 1,321,200 2,281,200 2032 1,020,000 1,261,800 2,281,800

2033 1,080,000 1,198,800 2,278,800

2034 1,145,000 1,132,050 2,277,050

2035 1,215,000 1,061,250 2,276,250 2036 1,285,000 986,250 2,271,250

2037 1,365,000 906,750 2,271,750

2038 1,445,000 822,450 2,267,450 2039 1,530,000 733,200 2,263,200

2040 1,625,000 638,550 2,263,550

2041 1,720,000 538,200 2,258,200

2042 1,825,000 431,850 2,256,850 2043 1,935,000 319,050 2,254,050

2044 4,350,000 130,500 4,480,500

Subtotal 29,715,000 29,081,850 58,796,850

Original issue discount (2,552,130) -- (2,552,130)

Total $ 27,162,870 $ 29,081,850 $ 56,244,720

33


The Series 2013A Subordinate Bonds:

The Series 2013A Subordinate Bonds have a final maturity date of June 1, 2048, bear interest at a rate of 2.0% per annum and were issued in the initial principal amount of $9,703,660. Principal payments on the Series 2013A Subordinate Bonds will not be in fixed amounts but will be entirely dependent upon the amount of WindsorMeade’s "Excess Funds" as defined in the loan agreement for the Series 2013 Bonds. Beginning with the fiscal year ending May 31, 2016 and through the fiscal year ending May 31, 2025, interest on the Series 2013A Subordinate Bonds is due and payable in full. Payment of interest on the Series 2013A Subordinate Bonds has been guaranteed by Pinnacle Living through October 1, 2025. Interest on the Series 2013A Subordinate Bonds is due and payable each October 1, commencing October 1, 2014, in an amount equal to Excess Funds as set forth in the loan agreement and the bond indenture for the Series 2013 Bonds. Through October 1, 2027, to the extent WindsorMeade does not have sufficient Excess Funds to pay accrued interest on the Series 2013A Subordinate Bonds for the applicable interest accrual period, accrued and unpaid interest accretes into the principal amount of the Series 2013A Subordinate Bonds. Commencing October 1, 2021 and each October 1 thereafter until maturity, interest and principal on the Series 2013A Subordinate Bonds is due and payable in an amount equal to Excess Funds as set forth in the loan agreement and bond indenture for the Series 2013 Bonds. After the accretion period ends on June 1, 2027, to the extent WindsorMeade does not have an obligation to make loan payments, interest on the Series 2013A Subordinate Bonds shall be deferred to the following October 1 and such interest shall bear interest until paid at the same rate set forth in the Series 2013A Subordinate Bond. If the Series 2013A Subordinate Bonds have not already been paid or redeemed in full, the final payment made on the Series 2013A Subordinate Bonds will be in the amount of the final payment on the Subordinate Bonds pursuant to Section 4.1(a)(4) of the Loan Agreement, which states on October 1, 2048, the entire outstanding and unpaid principal and accrued interest thereon, unless sooner prepaid, shall be due and payable. As set forth in Section 4.1(a)(4)(c), simultaneously with the interest and principal payments made on the Series 2013A Subordinate Bonds, as described above, and commencing with the Fiscal Year ending May 31, 2021, and ending with the Fiscal Year ending May 31, 2048, WindsorMeade shall pay to Pinnacle Living the Manager Incentive Payment to the extent that interest or principal payments are made. The Manager Incentive Payment is the amount due under the Administrative Services Agreement equal to 10% of the aggregate annual payments with respect to the principal and interest on the Series 2013A Subordinate Bonds. The calculation of the Manager Incentive Payments is subject to the amount of WindsorMeade’s “Excess Funds” as defined in the loan agreement for the Series 2013 Bonds. The principal balance of the Series 2013A Subordinate Bonds was $9,897,933 at May 31, 2019 and 2018 and consists of the following: Initial principal amount $9,706,660 Interest accreted into principal for years ended prior to May 31, 2018 194,073 Senior 2013A Subordinate Bonds as of May 31, 2019 $9,897,733 Interest for the years ended May 31, 2019 and 2018 was paid and not accreted into principal.

34


The Series 2013B Senior Bonds (fixed rate) principal and interest payments are as follows:

May 31, 2019


2020 $ -- $ 390,000 $ 390,000 2021 -- 390,000 390,000

2022 155,000 385,350 540,350

2023 155,000 376,050 531,050

2024 170,000 366,300 536,300 2025 175,000 355,950 530,950

2026 190,000 345,000 535,000

2027 200,000 333,300 533,300

2028 215,000 320,850 535,850 2029 225,000 307,650 532,650

2030 240,000 293,700 533,700

2031 255,000 278,850 533,850 2032 265,000 263,250 528,250

2033 285,000 246,750 531,750

2034 300,000 229,200 529,200

2035 320,000 210,600 530,600 2036 340,000 190,800 530,800

2037 355,000 169,950 524,950

2038 380,000 147,900 527,900 2039 405,000 124,350 529,350

2040 425,000 99,450 524,450

2041 455,000 73,050 528,050

2042 480,000 45,000 525,000 2043 510,000 15,300 525,300

Subtotal 6,500,000 5,958,600 12,458,600

Original issue discount (360,887) -- (360,887)

Total $ 6,139,113 $ 5,958,600 $ 12,097,713

35


The Series 2013C Senior Bonds (fixed rate) principal and interest payments are as follows:

May 31, 2019


2020 $ 135,000 $ 67,500 $ 202,500 2021 140,000 62,000 202,000 2022 150,000 56,200 206,200 2023 160,000 50,000 210,000 2024 170,000 43,400 213,400 2025 175,000 36,500 211,500 2026 190,000 29,200 219,200 2027 200,000 21,400 221,400 2028 210,000 13,200 223,200 2029 225,000 4,500 229,500 Subtotal 1,755,000 383,900 2,138,900 Original issue discount (203,775) - (203,775) Total $ 1,551,225 $ 383,900 $ 1,935,125

On September 29, 2016, WindsorMeade entered into a loan agreement with the Economic Development Authority of James City County to borrow the proceeds of the Authority’s $7,000,000 Residential Care Facility Revenue Bond, Series 2016. The Series 2016 Bond is secured by a pledge of WindsorMeade’s revenues, a first lien deed of trust on the real estate portion of WindsorMeade, and a security interest in the equipment of the WindsorMeade facility. The primary purpose of the Series 2016 Bond was to (a) finance the renovation and expansion of the health center at WindsorMeade, and (b) pay costs of issuance. The interest rate on the Series 2016 Bond is a variable rate equal to 75% of one-month LIBOR plus a spread of 2.25%. For fiscal 2019, the average interest rate was 4.19%. Repayment of interest is monthly. Beginning October 1, 2018, WindsorMeade shall make monthly principal payments equal to 1/336th of the Bond. The Series 2016 Bond is subject to mandatory purchase by WindsorMeade on September 29, 2026. Payments of principal and interest on the Series 2016 Bond are guaranteed by Pinnacle Living, subject to reduction or termination upon the occurrence of certain events. HERMITAGE CAPITAL AND RESERVE CORPORATION Hermitage Capital and Reserve Corporation had no bonds or loans outstanding effective May 31, 2019 or 2018.

36


THE COMBINED ORGANIZATION The bonds payable for fiscal years 2019 and 2018 shown on the combined balance sheets consist of the following:

May 31, 2019 May 31, 2018

Pinnacle Living

2012 senior bonds $ 20,205,000 $ 22,070,000

Premium on 2012 senior bonds 355,123 437,863

2017C senior bonds 54,710,000 54,710,000

Premium on 2017C senior bonds 2,913,113 3,075,180 2019A senior bonds 34,000,000 -

Premium on 2019A senior bonds 1,369,505 -

2019B senior bonds 4,287,338 -

Bond issuance costs, net (2,626,572) (1,620,061)

Total bonds payable $ 115,213,507 $ 78,672,982

WindsorMeade

2013A senior bonds 29,715,000 29,905,000

Discount on 2013A senior bonds (2,522,130) (2,719,470)

2013A subordinate bonds 9,897,733 9,897,733

Discount on 2013A subordinate bonds (7,778,352) (8,046,576) 2013B senior bonds 6,500,000 6,500,000

Discount on 2013B senior bonds (360,887) (380,867)

2013C senior bonds 1,755,000 1,880,000

Discount on 2013C senior bonds (203,775) (246,831)

2016 senior bonds 6,900,026 232,957 Bond issuance costs, net (58,906) (74,138)

Total bonds payable 43,843,709 36,947,808

Total bonds payable $ 159,057,216 $ 115,620,790

Less: Eliminations between Pinnacle Living and WindsorMeade

2013B senior bonds $ (6,500,000) $ (6,500,000) 2013C senior bonds (1,755,000) (1,880,000)

Discount on 2013B senior bonds 360,887 380,867

Discount on 2013C senior bonds 203,775 246,831

Total bonds payable, combined $ 151,366,878 $ 107,868,488

37


8. Employee Retirement Plan

The Organization has a defined contribution retirement plan. All employees may participate in the plan, however, full-time employees and those part-time employees who work over twenty hours a week are eligible for employer contributions as of the first payroll period which includes the anniversary date following twelve months of service. Employer contributions to the plan are approved by the Board of Directors. The total retirement expense for the years ended May 31, 2019 and 2018 was $1,380,103 and $1,752,322, respectively.

9. Concentrations of Credit Risk

The Organization has checking accounts and money market mutual funds, at financial institutions, which are not fully insured by the FDIC. The checking accounts are insured to the FDIC limit of $250,000 per financial institution. At May 31, 2019, the Organization had cash balances in a financial institution in excess of the amounts insured by the FDIC. The Organization does not require collateral for any of its receivables. In certain circumstances and on a case-by-case basis, WindsorMeade may grant a prospective resident the option of deferring the payment of their entrance fee for up to four months in order to allow that resident to obtain the funds necessary to pay the entrance fee. This optional deferral is typically offered in circumstances where a resident has been unable to sell an existing home and requires funds from the sale in order to pay the entrance fee. This optional deferral program is an integral part of WindsorMeade’s ability to attract interested and eligible residents. In the event the entrance fee is not paid on the entrance fee due date, the resident agrees to pay a finance charge of nine percent per annum until either (i) the balance of the entrance fee is paid in full or (ii) the Residency Agreement is terminated.

10. Commitments and Contingencies

Pinnacle Living entered into a long-term operating lease agreement for office facilities. The lease runs until November 30, 2022. The following is a schedule of the rental payments under the lease agreement:

Year Ending

May 31, 2020 168,395 May 31, 2021 172,604 May 31, 2022 176,920 May 31, 2023 90,301

Total future lease payments $ 608,220

Total rental expense for the years ended May 31, 2019 and 2018 amounted to $203,528 and $213,531, respectively.

38

NOTES TO COMBINED FINANCIAL STATEMENTS 10. Commitments and Contingencies (Continued)

Self-Funded Health Insurance

• The Organization participates in a self-funded health insurance plan. The plan is managed by Scott Benefit Services with administrative services provided by Anthem Blue Cross and Blue Shield and stop loss reinsurance provided by QBE.

• The Plan year runs from October 1 – September 30.

• Financial projections are based on a blended analysis of historical claims experience and evaluation of manual claims. Due to the Organization’s size and credibility of claims data, financial projections are 90% to 100% weighted toward projections based on actual paid claims experience.

• The Organization’s self-funded health plan maintains an individual stop loss policy of $75,000 and an aggregate stop loss policy of 125% of expected claims.

• There are no tax implications as all members of the captive are non-profit corporations.

• As of May 31, 2019 and 2018 the incurred liability was $304,365 and $323,811, respectively. The Organization

The Organization, from time to time, is a party to various legal actions normally associated with life plan communities, the aggregate effect of which, in management’s and legal counsel’s opinion, would not be material to the financial condition of the Organization.

11. Related Party Transactions

The nature of the relationship between Pinnacle Living, WindsorMeade, and HCRC is described in footnote 1, Nature of Operations and Summary of Significant Accounting Policies. According to the Accounting Standards Codification (ASC) 850-10-50-1 “disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required.” All intercompany transactions between Pinnacle Living, WindsorMeade, and HCRC have been eliminated in the combined financial statements.

12. Fair Value of Financial Instruments

Professional standards require disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Professional standards exclude certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Organization. The following methods and assumptions were used by the Organization in estimating the fair value of its financial instruments:

39

NOTES TO COMBINED FINANCIAL STATEMENTS 12. Fair Value of Financial Instruments (Continued)

Cash and cash equivalents, accounts receivable, other receivables, accrued income receivable, beneficial interest in trusts, and notes payable

The carrying amount approximates fair value. Investments

Fair values are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Bonds payable

The fair values are estimated using a discounted cash flow calculation that applies interest rates currently being offered on similar bond financing and does not reflect market risk.

Organization’s financial assets and liabilities at May 31, 2019 and 2018:

May 31, 2019 May 31, 2018

Carrying Amount

Estimated Fair Value

Carrying Amount

Estimated Fair Value

Financial Assets Cash and cash equivalents $ 17,831,000 $ 17,831,000 $ 16,072,000 $ 16,072,000

Accounts receivable 552,000 552,000 498,000 498,000 Other receivables 834,000 834,000 523,000 523,000

Accrued income receivable 139,000 139,000 164,000 164,000

Beneficial interest in trusts 17,409,000 17,409,000 18,257,000 18,257,000 Investments, without donor restrictions 54,433,000 54,433,000 54,369,000 54,369,000

Investment, with donor restrictions 3,232,000 3,232,000 3,045,000 3,045,000

Assets whose use is limited 67,384,000 67,384,000 50,550,000 50,550,000

Financial liabilities

Bonds payable 151,367,000 166,336,000 107,868,000 119,257,000

40


13. Donor Restricted Funds A donor may make a gift to Pinnacle Living without restrictions (i.e. unrestricted). However, Pinnacle Living also has nine donor restricted fund categories to which a donor may contribute. They are:

1. Angel Fund

Angel Fund gifts are a response to the desires of a community to give assistance to members of the community in crisis. Any resident, team member, contract team member, or volunteer of the community may make a request to nominate persons who are undergoing a crisis who might be a qualified recipient of assistance.

2. Community Enrichment Fund

Gifts restricted to community enrichment are to enhance the experience of living in the community for all residents. Use of such funds include community beautification such as landscape or garden plants, statuary and seating. The community may consider community enrichment recommendations from any donor, but in no event is the community bound in any way to honor the recommendation.

3. Flower Fund

Flower fund gifts are restricted to use in support of creation of chapel/vesper and common area flower arrangements which benefit the entire community. A donor may specify the gift as a tribute to honor or remember a loved one, expression of appreciation or recognition of a special occasion.

4. Library Fund

Gifts restricted to support community libraries enhance literary services through the provision of additional materials and services including magazine and newspaper subscriptions, acquisition of print and audio books, and organizational needs for the library setting.

5. Technology Fund

Gifts restricted to the technology fund provide resources to benefit communication, access to information and accessibility for all residents. Examples of projects and needs which can be funded by such gifts include audio/visual equipment, computer access, and speech, vision and memory enhancements.

6. Spiritual Life Fund

Gifts restricted to Spiritual Life in the community may include individual restricted contributions to enrich the spiritual life of residents. These funds may be used to enhance chapel/vesper services and facilities, provide resources for spiritual life programming, and to engage residents through special projects and service needs.

7. Resident Program Fund

Gifts restricted to resident activities support lifelong learning and engagement opportunities for residents, recognizing that activities and expectations vary by community. Use of the funds may include sponsorship of classes and workshops, provision of materials and supplies, purchase of fitness or entertainment equipment, and support of excursions.

41

NOTES TO COMBINED FINANCIAL STATEMENTS 13. Donor Restricted Funds (Continued)

8. Scholarship Fund The Scholarship Fund is an educational enrichment program funded by contributions from generous donors committed to financially assisting selected team members who are pursuing a certification, degree, or taking continuing education courses to support and advance their career goals and who meet the eligibility requirements determined by community scholarship committees without regard to race, creed, or national origin using established application, rating and review processes. Awards are available to no more than ten percent (10%) of the eligible pool of applicants in any one year and are dependent upon availability of funds.

9. Samaritan Program The purpose of the Samaritan Program is to provide monies to defray the cost of providing services to persons in Pinnacle Living communities who are unable to provide such monies on their own behalf. Donors may temporarily restrict their gifts to a community. Such monies will be assigned to that community. Monies not temporarily restricted to a community shall be used to subsidize benevolent care in a community where the Samaritan Fund balance cannot meet the benevolent need. Contributions cannot be received for the benefit of a specific individual.

Pinnacle Living Ending Balance Summaries as of May 31, 2019

Hermitage Northern Virginia

Hermitage Richmond

Hermitage Roanoke

Angel Fund $ 1,250 $ 7,051 $ - Community Enrichment Fund 365 - 11,210 Flower Fund - - - Library Funds - - - Technology Fund - - - Spiritual Life Fund - - - Resident Program Fund - - -

Scholarship Fund - 550 -

Total All Other Restricted Funds $ 1,615 $ 7,601 $ 11,210

Cedarfield Total

Angel Fund $ 54,103 $ 62,404 Community Enrichment Fund 850 12,425 Flower Fund 3,926 3,926 Library Funds 2,126 2,126 Technology Fund 7,138 7,138 Spiritual Life Fund - - Resident Program Fund 945 945

Scholarship Fund - 550

Total All Other Restricted Funds $ 69,088 $ 89,514

42


WindsorMeade Ending Balance Summaries as of May 31, 2019

WindsorMeade

Angel Fund $ 17,934

Community Enrichment Fund -

Flower Fund -

Library Funds -

Technology Fund - Spiritual Life Fund -

Resident Program Fund -

Scholarship Fund 34,038

Total All Other Restricted Funds $ 51,972

Pinnacle Living Ending Balance Summaries as of May 31, 2018

Hermitage

Northern Virginia

Hermitage Richmond

Hermitage

Eastern Shore Angel Fund $ 1,438 $ 35,145 $ 25 Community Enrichment Fund 18,982 32,854 4,087 Flower Fund - - - Library Funds 50 - 1,672 Technology Fund - 800 - Spiritual Life Fund 1,428 3,851 422 Resident Program Fund 33,293 3,784 75

Scholarship Fund - - 4,900


Hermitage Roanoke

Lydia Roper

Home

Cedarfield Angel Fund $ 196 $ 6,053 $ 71,067 Community Enrichment Fund 22,411 12,348 3,239 Flower Fund - - 4,761 Library Funds - - 1,514 Technology Fund - 10 7,335 Spiritual Life Fund 421 - 3,490 Resident Program Fund 110 5,107 500

Scholarship Fund - - -


43


Pinnacle Living Ending Balance Summaries as of May 31, 2018 (Continued)

Total

Angel Fund $ 113,924 Community Enrichment Fund 93,921 Flower Fund 4,761 Library Funds 3,236 Technology Fund 8,145 Spiritual Life Fund 9,612 Resident Program Fund 42,868

Scholarship Fund 4,900


WindsorMeade Ending Balance Summaries as of May 31, 2018

WindsorMeade

Angel Fund $ 20,168

Community Enrichment Fund -

Flower Fund -

Library Funds -

Technology Fund - Spiritual Life Fund -

Resident Program Fund -

Scholarship Fund -


44


14. Endowment (Samaritan) Program

In August 2008, the Financial Accounting Standards Board issued authoritative guidance regarding “Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds”. The authoritative guidance provides guidance on the net asset classification of donor-restricted endowment funds for a nonprofit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA). The authoritative guidance also required additional disclosures about an organization’s endowment funds (both donor-restricted endowment funds and board-designated endowment funds) whether or not the organization is subject to UPMIFA. The Commonwealth of Virginia enacted UPMIFA effective July 1, 2008, the provisions of which apply to endowment funds existing on or established after that date. Management has determined that a portion of the Organization’s net assets with donor restrictions meet the definition of endowment funds under UPMIFA. Donor-designated endowments (UPMIFA state)

The Organization’s endowment consists of one fund established to partially defray the cost of administering care to those persons who are otherwise unable to provide such monies on their own behalf (also called the Samaritan Program). The Board of Trustees of the Organization has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as net assets with donor restrictions (perpetual in nature) (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in net assets with donor restrictions (perpetual in nature) is classified as net assets with donor restrictions (purpose restricted), including investment income and realized and unrealized gains/losses, until those amounts are appropriated for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by UPMIFA.

In accordance with UPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation of the various funds, (2) the purposes of the donor-restricted endowment funds, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected total return from income and the appreciation of investments, (6) other resources of the Organization, and (7) the Organization’s investment policies.

45

NOTES TO COMBINED FINANCIAL STATEMENTS 14. Endowment (Samaritan) Program (Continued)

Investment return objectives, risk parameters, and strategies

The Organization’s investment philosophy is to obtain, over a period of years, a satisfactory level of current investment income and a reasonable increase in the value of the principal through market appreciation consistent with the preservation of the principal. In measuring the performance of the funds to the capital markets, the goal is to generate an annualized return of 30 basis points over a composite benchmark weighted twenty-five percent (25%) to the S&P 500 Common Stock Index and seventy-five percent (75%) to the Barclays Capital Aggregate Bond Index, at a risk level within one hundred twenty percent (120%) of the composite benchmark, over each three-to-five-year period. Performance is measured relative to peers by ensuring the invested funds are within the top-half of a blended universe weighted twenty-five percent (25%) equity funds and seventy-five percent (75%) fixed income funds over each three-to-five year period.

The assets of the Endowment (Samaritan) Program are included in the accompanying combined balance sheets as follows:

May 31, 2019



Total Net Endowment Assets

Cash and cash equivalents $ - $ 45,559 $ 45,559

Investments - 3,231,998 3,231,998

Beneficial interest in trusts - 208,018 208,018

Total $ - $ 3,485,575 $ 3,485,575

May 31, 2018



Total Net Endowment Assets

Cash and cash equivalents $ - $ 10,162 $ 10,162

Investments - 3,044,561 3,044,561

Beneficial interest in trusts - 243,395 243,395

Total $ - $ 3,298,118 $ 3,298,118

Hermitage Capital and Reserve Corporation had no endowment funds for fiscal 2019 or fiscal 2018.

46


Endowment (Samaritan) net asset composition by type of fund as of May 31, 2019 and 2018 are as follows:

May 31, 2019

Pinnacle Living Without Donor

Restrictions With Donor

Restrictions Total Net

Endowment Assets

Donor-restricted endowment fund $ - $ 3,463,960 $ 3,463,960

May 31, 2018

Pinnacle Living Without Donor



Endowment Assets

Donor-restricted endowment fund $ - $ 3,287,956 $ 3,287,956

May 31, 2019

WindsorMeade Without Donor



Endowment Assets

Donor-restricted endowment fund $ - $ 21,615 $ 31,615

May 31, 2018

WindsorMeade Without Donor



Endowment Assets

Donor-restricted endowment fund $ - $ 10,162 $ 10,162

47


Changes in endowment (Samaritan) net assets as of May 31, 2019 and 2018 are as follows:

May 31, 2019

Pinnacle Living

Without Donor

Restrictions


Undesignated

Purpose Restricted

Perpetual in Nature

Total

Balance as of June 1, 2018 $ - $ 70,623 $ 3,217,333 $ 3,287,956 Contributions - 204,567 - 204,567

Present value change in beneficial interest in trusts - - (35,377) (35,377)

Investment income - 108,289 - 108,289 Net realized losses on investments - (53,829) - (53,829)

Net unrealized losses on investments - 188,203 - 188,203

Benevolent care - (235,849) - (235,849)

Balance as of May 31, 2019 $ - $ 282,004 $ 3,181,956 3,463,960

May 31, 2019

WindsorMeade

Without Donor

Restrictions


Undesignated

Purpose Restricted

Perpetual in Nature

Total

Balance as of June 1, 2018 $ - $ 10,162 $ - $ 10,162

Contributions - 11,453 - 11,453

Balance as of May 31, 2019 $ - $ 21,615 $ - 21,615

48


May 31, 2018

Pinnacle Living

Without Donor

Restrictions


Undesignated

Purpose Restricted

Perpetual in Nature

Total

Balance as of June 1, 2018 $ - $ 69,486 $ 3,183,689 $ 3,253,175

Contributions - 227,691 - 227,691 Present value change in beneficial interest in trusts - - 33,644 33,644

Investment income - 4,431 - 4,431

Net realized losses on investments - (2,070) - (2,070) Net unrealized losses on investments - (3,234) - (3,234)

Benevolent care - (225,681) - (225,681)

Balance as of May 31, 2019 $ - $ 70,623 $ 3,217,333 3,287,956

May 31, 2018

WindsorMeade

Without Donor

Restrictions


Undesignated

Purpose Restricted

Perpetual in Nature

Total

Balance as of June 1, 2018 $ - $ - $ - $ - Contributions - 10,162 - 10,162

Balance as of May 31, 2019 $ - $ 10,162 $ - 10,162

49


15. New Accounting Pronouncements For the fiscal year ended May 31, 2019, the Organization adopted FASB Accounting Standards Update 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, (“ASU 2016-14”). The provisions of ASU 2016-14 are intended to simplify and improve the presentation of net assets, as well as information regarding liquidity, financial performance and cash flows. ASU 2016-14 revises the net asset classification structure to two classes (net assets with donor restrictions and net assets without donor restrictions) instead of the previous three. ASU 2016-14 also enhances disclosures for self-imposed limits on the use of resources both with and without donor-imposed restrictions and requires qualitative disclosures on liquidity and the availability of resources to fund operations. The Organization has adjusted the presentation of these statements accordingly. ASU 2016-14 has been applied retrospectively to all periods presented. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The amendments in this ASU are effective for the Organization for the fiscal year ending May 31, 2020, with early adoption permitted, and should be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements. Management has not yet determined what the effects of adopting this ASU will have on its combined financial statements. For the fiscal year ended May 31, 2019, the Organization adopted FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) using the modified retrospective approach. ASU No. 2014-09 supersedes the revenue recognition requirement in Topic 605, Revenue Recognition, and most industry specific guidance. The core principle under ASU No. 2014-09 is that revenues are recognized to depict the transfer of promised goods or services to customers (residents) in an amount that reflects the consideration at which the entity expects to be entitled in exchange for those goods or services. Additionally, ASU No. 2014-09 required enhanced disclosures of revenue arrangements. Under the modified retrospective approach, adoption change is shown as an adjustment to beginning net assets with donor restrictions. There were no adjustments needed for the Organization. The Organization does not have material contract assets. Contract liabilities relate to cash received from residents in connection with contracts for which revenue is recognized over time. Changes in the Organization’s contract liabilities, which are included in refundable fees and deferred revenue, entrance fees on the combined balance sheets are as follows:

Refundable Fees

Deferred Revenue, Entrance Fees

Total

Balance at May 31, 2017 $ 58,921,832 $ 80,615,979 $ 139,537,811

Increases due to cash received 3,608,450 18,923,040 22,531,490 Decreases due to recognition of revenue - (11,078,257) (11,078,257)

Refunds paid (5,045,741) (428,517) (5,474,258) Previous year's deferrals of entrance fees 418,425 (418,425) -

Other changes 124,131 (176,424) (52,293)

Balance at May 31, 2018 58,027,097 87,437,396 145,464,493 Increases due to cash received 2,225,554 12,437,746 14,663,300

Decreases due to recognition of revenue - (12,661,028) (12,661,028)

Refunds paid (4,537,143) (395,413) (4,932,556) Current Year deferrals of entrance fees (226,344) 226,344 -

Other changes 294,234 (98,025) 196,209

Balance at May 31, 2019 $ 55,783,398 $ 86,947,020 $ 142,730,418

50


16. Liquidity

Financial Assets Available to Meet Cash Needs for General Expenditures Within One Year

May 31, 2019 Pinnacle

Living

WindsorMeade

HCRC

Eliminations

Total Total current assets $ 12,567,939 $ 11,243,542 $ 817,229 (44,777) $ 24,583,933 Less those unavailable for general expenditures within one year for:

Donor imposed restrictions (113,458) (73,587) - - (187,045) Assets whose use is limited (3,369,759) (1,580,750) - - (4,950,509)

Board Designations Hermitage Richmond capital expenses for healthcare center

(122,747)

-

-

(122,747)

Non-financial assets (227,063) (50,801) - - (277,864)

Financial assets available to meet cash needs for general expenditures within one year

$

8,734,912

$

9,538,404

$

817,229

$

(44,777)

$

19,045,768

Financial Assets Available to Meet Cash Needs for General Expenditures Within One Year

May 31, 2018 Pinnacle

Living

WindsorMeade

HCRC

Eliminations

Total Total current assets $ 12,347,406 $ 9,753,450 $ 817,941 $ (764,609) $ 22,154,188

Less those unavailable for general expenditures within one year for:

Donor imposed restrictions (281,367) (30,330) - - (311,697)

Assets whose use is limited (3,045,521) (1,582,678) - (4,628,199) Non-financial assets (212,728) (55,732) - - (268,460)

Financial assets available to meet cash needs for general expenditures within one year

$

8,807,790

$

8,084,710

$

817,941

$

(764,609)

$

16,945,832

51

NOTES TO COMBINED FINANCIAL STATEMENTS 16. Liquidity (Continued)

Pinnacle Living has $8,734,912 and $8,807,790 of financial assets available within one year as of May 31, 2019 and 2018, respectively for general expenditures consisting of the following:

Pinnacle Living

May 31, 2019

May 31, 2018

Cash and cash equivalents $ 7,927,931 $ 7,054,280 Accounts receivable due from residents 261,400 301,943

Accounts receivable, other 361,907 523,376

Accrued income receivable 138,897 163,582 Due from affiliate 44,777 764,609

Total $ 8,734,912 $ 8,807,790

Pinnacle Living structures its financial assets to be available as its general expenditures, liabilities and other obligations come due. As part of Pinnacle Living’s investment policy, it invests excess cash and investments as outlined in Footnotes three and four. WindsorMeade has $9,538,404 and $8,084,710 of financial assets available within one year as of May 31, 2019 and 2018, respectively for general expenditures consisting of the following:

WindsorMeade

May 31, 2019

May 31, 2018

Cash and cash equivalents $ 8,775,598 $ 7,888,381 Accounts receivable due from residents 291,084 196,329

Accounts receivable, other 471,722 -

Total $ 9,538,404 $ 8,084,710

WindsorMeade structures its financial assets to be available as its general expenditures, liabilities and other obligations come due. Hermitage capital and reserve corporation has $817,229 and $817,941 of financial assets available within one year as of May 31, 2019 and 2018, respectively for general expenditures consisting of cash and cash equivalents.

52


17. Functional Expenses

Operating expenses for Pinnacle Living and WindsorMeade are classified by function. HCRC had no operating expenses for fiscal 2019 and 2018.

May 31, 2019

Pinnacle Living WindsorMeade Program

Services Management

& General

Fundraising

Total Program

Services Management

& General

Fundraising

Total

Eliminations Combined

Total

Salaries $ 25,946,333 $ 4,002,455 $ 105,245 $ 30,054,033 $ 5,265,465 $ 503,839 $ - $ 5,769,304 $ - $ 35,823,337

Defined contribution plan contributions 1,288,072 481 2,501 1,291,054 56,529 32,520 - 89,049 - 1,380,103

Employee benefits 2,645,279 253,346 - 2,898,625 429,135 40,589 - 469,724 - 3,368,349

Payroll taxes 1,975,138 230,529 8,089 2,213,756 370,662 29,295 - 399,957 - 2,613,713

Total salaries and related expenses 31,854,822 4,486,811 115,835 36,457,468 6,121,791 606,243 - 6,728,034 - 43,185,502

Advertising 1,060,950 3,385 1,503 1,065,838 251,257 2,664 - 253,921 - 1,319,759

Conferences and education 63,184 93,525 1,754 158,463 22,100 9,590 - 31,690 - 190,153

Consultant services 704,343 1,060,728 121,029 1,886,100 90,833 136,089 - 226,922 - 2,113,022

Contract services 2,220,933 199,117 - 2,420,050 1,190,375 526,212 - 1,716,587 (494,296) 3,642,341

Depreciation 6,746,789 - - 6,746,789 3,443,704 - - 3,443,704 - 10,190,493

Designated funds 322,822 56 - 322,878 10,235 - - 10,235 - 333,113

Dietary - food costs 3,408,210 9,136 - 3,417,346 971,328 4,287 - 975,615 - 4,392,961

Dietary - non-edible 406,201 116 - 406,317 74,792 - - 74,792 - 481,109

Dues and subscriptions 40,316 75,386 125 115,827 8,933 23,707 - 32,640 - 148,467

Information technology 1,234,947 28,520 - 1,263,467 162,683 - - 162,683 - 1,426,150

Insurance 1,053,603 51,618 - 1,105,221 240,634 14,110 - 254,744 - 1,359,965

Licenses and fees 19,456 6,001 - 25,457 24,206 1,658 - 25,864 - 51,321

Maintenance and repair 1,967,931 28,016 492 1,996,439 491,117 15,209 - 506,326 - 2,502,765

Medical services 154,749 - - 154,749 338,087 - - 338,087 - 492,836

Medical supplies 108,948 - - 108,948 10,691 - - 10,691 - 119,639

Minor equipment 164,254 4,005 - 168,259 54,808 870 - 55,678 - 223,937

Miscellaneous 20,827 21,314 - 42,141 - 374 - 374 - 42,515

Person centered initiative 12,212 17,068 - 29,280 10,015 8,000 - 18,015 - 47,295

Postage and shipping 9,803 37,294 - 47,097 7,726 6,497 - 14,223 - 61,320

Recruitment and retention 54,751 255,888 - 310,639 67,523 3,320 - 70,843 - 381,482

Rent 30,392 167,306 - 197,698 5,830 - - 5,830 - 203,528

Residence renovations 348,839 - - 348,839 63,027 - - 63,027 - 411,866

Resident services 168,874 271 - 169,145 53,180 497 - 53,677 - 222,822

Supplies 499,180 76,265 - 575,445 191,284 14,466 - 205,750 - 781,195

Taxes 8,621 2,359 - 10,980 682,849 - - 682,849 - 693,829

Travel, meals and lodging 35,466 93,152 6,161 134,779 8,769 6,666 - 15,435 - 150,214

Utility costs 3,130,883 48,241 - 3,179,124 753,744 - - 753,744 - 3,932,868

Total operating expenses $ 55,852,306 $ 6,765,578 $ 246,899 $ 62,864,783 $ 15,351,521 $ 1,380,459 $ - $ 16,731,980 $ (494,296) $ 79,102,467

53

NOTES TO COMBINED FINANCIAL STATEMENTS 17. Functional Expenses (Continued)

May 31, 2018

Pinnacle Living WindsorMeade Program

Services Management

& General

Fundraising

Total Program

Services Management

& General

Fundraising

Total

Eliminations Combined

Total

Salaries $ 26,616,753 $ 3,689,545 $ 84,069 $ 30,390,367 $ 4,513,156 $ 482,034 $ - $ 4,995,190 $ - $ 35,385,557

Defined contribution plan contributions 1,289,498 269,326 - 1,558,824 162,255 31,243 - 193,498 - 1,752,322

Employee benefits 2,622,312 362,172 - 2,984,484 409,088 40,652 - 449,740 - 3,434,224

Payroll taxes 1,955,762 218,334 5,619 2,179,715 324,976 28,912 - 353,888 - 2,533,603

Total salaries and related expenses 32,484,325 4,539,377 89,688 37,113,390 5,409,475 582,841 - 5,992,316 - 43,105,706

Advertising 1,163,284 4,274 8,329 1,175,887 290,274 2,123 - 292,397 - 1,468,284

Conferences and education 61,308 80,075 1,498 142,881 25,440 9,897 - 35,337 - 178,218

Consultant services 722,357 1,144,607 108,312 1,975,276 45,117 275,439 - 320,556 - 2,295,832

Contract services 1,868,595 388,598 - 2,257,193 1,134,756 474,046 - 1,608,802 (442,395) 3,423,600

Depreciation 6,433,452 - - 6,433,452 3,394,904 - - 3,394,904 - 9,828,356

Designated funds 245,457 - - 245,457 - - - - - 245,457

Dietary - food costs 3,587,116 2,794 - 3,589,910 815,932 19,543 - 835,475 - 4,425,385

Dietary - non-edible 366,452 - - 366,452 74,492 - - 74,492 - 440,944

Dues and subscriptions 34,209 93,860 - 128,069 9,092 21,830 - 30,922 - 158,991

Information technology 1,198,347 34,189 - 1,232,536 149,506 2,301 - 151,807 - 1,384,343

Insurance 976,693 51,245 - 1,027,938 216,407 17,095 - 233,502 - 1,261,440

Licenses and fees 21,009 14,194 - 35,203 5,415 1,057 - 6,472 - 41,675

Maintenance and repair 1,905,954 24,264 177 1,930,395 584,709 13,475 - 598,184 - 2,528,579

Medical services 155,148 - - 155,148 213,902 - - 213,902 - 369,050

Medical supplies 132,765 - - 132,765 11,049 - - 11,049 - 143,814

Minor equipment 195,153 8,925 - 204,078 110,616 1,066 - 111,682 - 315,760

Miscellaneous 41,658 16,013 890 58,561 - 6,744 - 6,744 - 65,305

Person centered initiative 7,659 14,103 - 21,762 - 3,379 - 3,379 - 25,141

Postage and shipping 3,777 34,231 2,033 40,041 6,556 2,709 - 9,265 - 49,306

Recruitment and retention 67,779 169,677 - 237,456 68,258 1,529 - 69,787 - 307,243

Rent 42,203 165,469 - 207,672 5,859 - - 5,859 - 213,531

Residence renovations 439,872 290 - 440,162 30,941 - - 30,941 - 471,103

Resident services 222,517 41 - 222,558 56,369 329 - 56,698 - 279,256

Supplies 616,244 68,598 45 684,887 224,053 11,848 - 235,901 - 920,788

Taxes 9,707 - - 9,707 650,155 - - 650,155 - 659,862

Travel, meals and lodging 39,556 91,158 7,588 138,302 16,803 9,119 - 25,922 - 164,224

Utility costs 3,242,960 34,327 200 3,277,487 763,919 - - 763,919 - 4,041,406

Total operating expenses $ 56,285,556 $ 6,980,309 $ 218,760 $ 63,484,625 $ 14,313,999 $ 1,456,370 $ - $ 15,770,369 $ (442,395) $ 78,812,599

54


18. Reclassifications

Certain accounts relating to the prior year have been reclassified to conform to the current year’s presentation.

19. Subsequent Events

Management has evaluated subsequent events through September 13, 2019, the date which the financial statements were available for issue.

55

INDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY INFORMATION

Board of Directors Pinnacle Living Richmond, Virginia We have audited the combined financial statements of Pinnacle Living, WindsorMeade, and Hermitage Capital and Reserve Corporation as of and for the years ended May 31, 2019 and 2018, and have issued our report thereon, which contains an unmodified opinion on those financial statements. See page 1. Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information on pages 56 through 63 has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The information on pages 65 through 80 has not been subjected to the auditing procedures applied in the audits of the financial statements and, accordingly, we express no opinion on it.

Mitchell Wiggins Richmond, Virginia September 13, 2019

56

PINNACLE LIVING SCHEDULE OF COMBINING INFORMATION COMBINING BALANCE SHEET MAY 31, 2019

Pinnacle Living

WindsorMeade


Without Donor

Restrictions


Without Donor

Restrictions


Without Donor

Restrictions


Sub-Total

Eliminations

Total

ASSETS

Current Assets

Cash and cash equivalents $ 8,050,678 $ - $ 8,775,598 $ - $ 817,229 $ - $ 17,643,505 $ - $ 17,643,505

Cash and cash equivalents, with donor restrictions - 113,458 - 73,587 - - 187,045 - 187,045

Total cash and cash equivalents 8,050,678 113,458 8,775,598 73,587 817,229 - 17,830,550 - 17,830,550

Accounts receivable, residents, less allowance for uncollectible accounts $3,817,638 261,400 - 291,084 - - - 552,484 - 552,484

Accounts receivable, other 361,907 - 471,722 - - - 833,629 - 833,629

Prepaid expenses 224,404 - 50,801 - - - 275,205 - 275,205

Accrued income receivable 138,897 - - - - - 138,897 - 138,897

Due from affiliate 44,777 - - - - - 44,777 (44,777) -

Assets whose use is limited 3,369,759 - 1,580,750 - - - 4,950,509 - 4,950,509

Other assets 2,659 - - - - - 2,659 - 2,659

Total current assets 12,454,481 113,458 11,169,955 73,587 817,229 - 24,628,710 (44,777) 24,583,933

Beneficial interest in trusts, with donor restrictions - 17,408,821 - - - - 17,408,821 - 17,408,821

Due from affiliate - WindsorMeade 8,372,284 - - - - - 8,372,284 (8,372,284) -

Due from affiliate - HCRC 7,350,836 - - - - - 7,350,836 (7,350,836) -

Investments 47,458,967 - - - 6,973,794 - 54,432,761 - 54,432,761

Investments, with donor restrictions - 3,231,998 - - - - 3,231,998 - 3,231,998


Other assets 146,855 - - - - - 146,855 - 146,855

Property and equipment, net 104,916,983 - 93,333,973 - - - 198,250,956 - 198,250,956

Total assets $ 238,358,111 $ 20,754,277 $ 109,279,735 $ 73,587 $ 7,791,023 $ - $ 376,256,733 $ (15,767,897) $ 360,488,836


Liabilities

Current liabilities

Accounts payable $ 3,374,937 $ - $ 201,839 $ - $ - $ - $ 3,576,776 $ - $ 3,576,776

Resident refunds payable - - 3,376 - - - 3,376 - 3,376

Accrued expenses 6,034,316 - 2,120,962 - - - 8,155,278 - 8,155,278

Deposits, prospective residents 363,072 - 90,018 - - - 453,090 - 453,090

Due to affiliate - - 44,777 - - - 44,777 (44,777) -

Bonds payable 1,920,000 - 325,000 - - - 2,245,000 (135,000) 2,110,000

Other liabilities 62,613 - - - - - 62,613 - 62,613

Total current liabilities 11,754,938 - 2,785,972 - - - 14,540,910 (179,777) 14,361,133

Resident refunds payable - - 4,160,082 - - - 4,160,082 - 4,160,082

Deposits, prospective residents 1,488,597 - 192,000 - - - 1,680,597 - 1,680,597

Bonds payable, net of OID $5,662,741 and bond issuance costs $2,685,478 113,293,507 - 43,518,709 - - - 156,812,216 (7,555,338) 149,256,878

Deferred revenue, entrance fees 67,669,657 - 19,277,363 - - - 86,947,020 - 86,947,020

Refundable fees 2,773,668 - 53,009,730 - - - 55,783,398 - 55,783,398


Total liabilities 197,049,171 - 122,943,856 - - - 319,993,027 (7,735,115) 312,257,912

Net Assets


Undesignated 36,023,317 - (13,664,121) - 7,791,023 - 30,150,219 (8,032,782) 22,117,437

With board designations 5,285,623 - - - - - 5,285,623 - 5,285,623

With donor restrictions

Purpose restricted for Samaritan Program - 282,004 - 21,615 - - 303,619 - 303,619

Purpose restricted for all other programs - 89,514 - 51,972 - - 141,486 - 141,486

Perpetual in nature - investments - 2,973,938 - - - - 2,973,938 - 2,973,938

Perpetual in nature - beneficial interest in trusts - 17,408,821 - - - - 17,408,821 - 17,408,821

Total net assets 41,308,940 20,754,277 (13,664,121) 73,587 7,791,023 - 56,263,706 (8,032,782) 48,230,924

Total liabilities and net assets $ 238,358,111 $ 20,754,277 $ 109,279,735 $ 73,587 $ 7,791,023 $ - $ 376,256,733 $ (15,767,897) $ 360,488,836

57

PINNACLE LIVING SCHEDULE OF COMBINING INFORMATION COMBINING BALANCE SHEET MAY 31, 2018

Pinnacle Living

WindsorMeade


Without Donor

Restrictions




Without Donor

Restrictions


Sub-Total

Eliminations

Total

ASSETS

Current Assets

Cash and cash equivalents $ 7,054,280 $ - $ 7,888,381 $ - $ 817,941 $ - $ 15,760,602 $ - $ 15,760,602

Cash and cash equivalents, with donor restrictions - 281,367 - 30,330 - - 311,697 - 311,697

Total cash and cash equivalents 7,054,280 281,367 7,888,381 30,330 817,941 - 16,072,299 - 16,072,299

Accounts receivable, residents, less allowance for uncollectible accounts $3,886,778 301,943 - 196,329 - - - 498,272 - 498,272

Accounts receivable, other 523,376 - - - - - 523,376 - 523,376

Prepaid expenses 212,728 - 55,732 - - - 268,460 - 268,460

Accrued income receivable 163,582 - - - - - 163,582 - 163,582

Due from affiliate 764,609 - - - - - 764,609 (764,609) -


Total current assets 12,066,039 281,367 9,723,120 30,330 817,941 - 22,918,797 (764,609) 22,154,188

Beneficial interest in trusts, with donor restrictions - 18,257,029 - - - - 18,257,029 - 18,257,029

Due from affiliate - WindsorMeade 8,037,897 - - - - - 8,037,897 (8,037,897) -

Due from affiliate - HCRC 7,350,836 - - - - - 7,350,836 (7,350,836) -

Investments 47,662,696 - - - 6,706,218 - 54,368,914 - 54,368,914

Investments, with donor restrictions - 3,044,561 - - - - 3,044,561 - 3,044,561


Other assets 165,913 - - - - - 165,913 - 165,913

Property and equipment, net 91,617,429 - 95,276,297 - - - 186,893,726 - 186,893,726

Total assets $ 208,854,568 $ 21,582,957 $ 108,967,110 $ 30,330 $ 7,524,159 $ - $ 346,959,124 $ (16,153,342) $ 330,805,782


Liabilities

Current liabilities

Accounts payable $ 5,405,457 $ - $ 435,277 $ - $ - $ - $ 5,840,734 $ - $ 5,840,734

Resident refunds payable 16,038 - - - - - 16,038 - 16,038

Accrued expenses 5,808,932 - 1,914,683 - - - 7,723,615 - 7,723,615

Deposits, prospective residents 390,989 - 121,022 - - - 512,011 - 512,011

Due to affiliate - - 764,609 - - - 764,609 (764,609) -

Bonds payable 1,865,000 - 315,000 - - - 2,180,000 (125,000) 2,055,000

Other liabilities 379,295 - 298 - - - 379,593 - 379,593

Total current liabilities 13,865,711 - 3,550,889 - - - 17,416,600 (889,609) 16,526,991

Resident refunds payable - - 4,239,072 - - - 4,239,072 - 4,239,072

Deposits, prospective residents 1,715,431 - 165,000 - - - 1,880,431 - 1,880,431

Bonds payable, net of OID $7,253,003 and bond issuance costs $1,694,199 76,807,982 - 36,632,808 - - - 113,440,790 (7,627,302) 105,813,488

Deferred revenue, entrance fees 68,085,052 - 19,352,344 - - - 87,437,396 - 87,437,396

Refundable fees 2,773,668 - 55,253,429 - - - 58,027,097 - 58,027,097


Total liabilities 163,300,696 - 119,193,542 - - - 282,494,238 (8,516,911) 273,977,327

Net Assets


Undesignated 45,553,872 - (10,226,432) - 7,524,159 - 42,851,599 (7,636,431) 35,215,168


Purpose restricted for Samaritan Program - 70,623 - 10,162 - - 80,785 - 80,785

Purpose restricted for all other programs - 281,367 - 20,168 - - 301,535 - 301,535

Perpetual in nature - investments - 2,973,938 - - - - 2,973,938 - 2,973,938

Perpetual in nature - beneficial interest in trusts - 18,257,029 - - - - 18,257,029 - 18,257,029

Total net assets 45,553,872 21,582,957 (10,226,432) 30,330 7,524,159 - 64,464,886 (7,636,431) 56,828,455

Total liabilities and net assets $ 208,854,568 $ 21,582,957 $ 108,967,110 $ 30,330 $ 7,524,159 $ - $ 346,959,124 $ (16,153,342) $ 330,805,782

58

PINNACLE LIVING SCHEDULE OF COMBINING INFORMATION COMBINING STATEMENT OF ACTIVITIES YEAR ENDED May 31, 2019

Pinnacle Living

WindsorMeade Hermitage Capital & Reserve

Corporation

Without Donor

Restrictions


Without Donor

Restrictions


Without Donor

Restrictions


Sub-Total

Eliminations

Total

Operating revenues and support

Residents' fees $ 49,954,122 $ - $ 13,733,838 $ - $ - $ - $ 63,687,960 $ - $ 63,687,960

Membership fees 6,968 - - - - - 6,968 - 6,968

Benevolent care (474,105) - - - - - (474,105) - (474,105)

Amortization of deferred revenue from entrance fees 10,443,149 - 2,217,879 - - - 12,661,028 - 12,661,028

Ancillary service revenue, net 34,488 - 251,171 - - - 285,659 - 285,659

Other operating revenue 1,684,346 - 273,644 - - - 1,957,990 (494,296) 1,463,694

Net assets released from restrictions 427,701 (427,701) - - - - - - -

Total operating revenues and support 62,076,669 (427,701) 16,476,532 - - - 78,125,500 (494,296) 77,631,204

Operating expenses

Administration 8,944,149 - 1,895,474 - - - 10,839,623 (494,296) 10,345,327

Marketing 2,451,092 - 570,610 - - - 3,021,702 - 3,021,702

General overhead 1,116,142 - 937,642 - - - 2,053,784 - 2,053,784

Depreciation 6,746,862 - 3,443,703 - - - 10,190,565 - 10,190,565

Dining 10,978,491 - 2,196,903 - - - 13,175,394 - 13,175,394

Resident services 2,986,486 - 598,492 - - - 3,584,978 - 3,584,978

Designated funds 322,824 - 10,235 - - - 333,059 - 333,059

Building and grounds 9,671,987 - 2,588,429 - - - 12,260,416 - 12,260,416

Housekeeping 3,216,883 - 571,939 - - - 3,788,822 - 3,788,822

Households / Neighborhoods 16,429,867 - 3,918,553 - - - 20,348,420 - 20,348,420

Total operating expenses 62,864,783 - 16,731,980 - - - 79,596,763 (494,296) 79,102,467

Change in net assets from operations (788,114) (427,701) (255,448) - - - (1,471,263) - (1,471,263)

Other non-operating changes

Bequests 251,270 - - - - - 251,270 - 251,270

Trusts and legacies 817,006 - - - - - 817,006 - 817,006

Present value change in trusts - (848,208) - - - - (848,208) - (848,208)

Loss on disposal of property and equipment (4,062,257) - - - - - (4,062,257) - (4,062,257)

Contributions, other 33,600 - - - - - 33,600 - 33,600

Contributions, Samaritan funds - 204,567 - 11,453 - - 216,020 - 216,020

Contributions, restricted funds 130,970 - 10,235 31,804 - - 173,009 - 173,009

Investment income 1,524,153 108,288 79,087 - 196,651 - 1,908,179 (467,648) 1,440,531

Net realized gain (loss) on investments 1,735,671 (53,829) - - - - 1,681,842 - 1,681,842

Net unrealized gain (loss) on investments (1,513,860) 188,203 - - 70,923 - (1,254,734) (459,387) (1,714,121)

Interest expense (2,246,990) - (3,247,909) - - - (5,494,899) 530,684 (4,964,215)

Other non-operating charges and fees (126,381) - (23,654) - (710) - (150,745) - (150,745)

Total other non-operating changes (3,456,818) (400,979) (3,182,241) 43,257 266,864 - (6,729,917) (396,351) (7,126,268)

Change in net assets (4,244,932) (828,680) (3,437,689) 43,257 266,864 - (8,201,180) (396,351) (8,597,531)

Net assets at the beginning of the year 45,553,872 21,582,957 (10,226,432) 30,330 7,524,159 - 64,464,886 (7,636,431) 56,828,455

Net assets at the end of the year $ 41,308,940 $ 20,754,277 $ (13,664,121) $ 73,587 $ 7,791,023 $ - $ 56,263,706 $ (8,032,782) $ 48,230,924

59

PINNACLE LIVING SCHEDULE OF COMBINING INFORMATION COMBINING STATEMENT OF ACTIVITIES YEAR ENDED May 31, 2018

Pinnacle Living

WindsorMeade Hermitage Capital & Reserve

Corporation

Without Donor

Restrictions


Without Donor

Restrictions


Without Donor

Restrictions


Sub-Total

Eliminations

Total

Operating revenues and support

Residents' fees $ 50,254,750 $ - $ 12,305,178 $ - $ - $ - $ 62,559,928 $ - $ 62,559,928

Benevolent care (779,262) - - - - - (779,262) - (779,262)

Amortization of deferred revenue from entrance fees 8,907,414 - 2,170,843 - - - 11,078,257 - 11,078,257

Ancillary service revenue, net 163,682 - 132,210 - - - 295,892 - 295,892

Other operating revenue 1,690,224 - 270,816 - - - 1,961,040 (442,395) 1,518,645

Net assets released from restrictions 235,442 (235,442) - - - - - - -

Total operating revenues and support 60,472,250 (235,442) 14,879,047 - - - 75,115,855 (442,395) 74,673,460

Operating expenses

Administration 9,124,299 - 1,889,463 - - - 11,013,762 (442,395) 10,571,367

Marketing 2,631,988 - 609,280 - - - 3,241,268 - 3,241,268

General overhead 1,037,645 - 882,802 - - - 1,920,447 - 1,920,447

Depreciation 6,433,453 - 3,394,904 - - - 9,828,357 - 9,828,357

Dining 11,227,238 - 2,299,201 - - - 13,526,439 - 13,526,439

Resident services 3,132,581 - 608,865 - - - 3,741,446 - 3,741,446

Designated funds 245,456 - - - - - 245,456 - 245,456

Building and grounds 9,807,314 - 2,622,179 - - - 12,429,493 - 12,429,493

Housekeeping 3,511,711 - 542,266 - - - 4,053,977 - 4,053,977

Households / Neighborhoods 16,332,940 - 2,921,409 - - - 19,254,349 - 19,254,349

Total operating expenses 63,484,625 - 15,770,369 - - - 79,254,994 (442,395) 78,812,599

Change in net assets from operations (3,012,375) (235,442) (891,322) - - - (4,139,139) - (4,139,139)


Bequests 1,761,261 - - - - - 1,761,261 - 1,761,261

Trusts and legacies 801,735 - - - - - 801,735 - 801,735

Present value change in trusts - (4,379,394) - - - - (4,379,394) - (4,379,394)

Loss on disposal of property and equipment (96,720) - - - - - (96,720) - (96,720)

Contributions, other 10,500 - - - - - 10,500 - 10,500

Contributions, Samaritan funds - 227,691 - 10,162 - - 237,853 - 237,853

Contributions, restricted funds 235,696 - - 2,377 - - 238,073 - 238,073

Investment income 1,462,632 4,431 24,269 - 177,102 - 1,668,434 (467,648) 1,200,786

Net realized gain (loss) on investments 1,210,209 (2,070) - - - - 1,208,139 - 1,208,139

Net unrealized gain (loss) on investments 403,818 (3,234) - - (140,438) - 260,146 39,482 299,628

Interest expense (2,060,126) - (2,630,086) - - - (4,690,212) 534,753 (4,155,459)

Other non-operating charges and fees (125,495) - (17,876) - (101) - (143,472) - (143,472)

Total other non-operating changes 3,603,510 (4,152,576) (2,623,693) 12,539 36,563 - (3,123,657) 106,587 (3,017,070)

Change in net assets 591,135 (4,388,018) (3,515,015) 12,539 36,563 - (7,262,796) 106,587 (7,156,209)

Net assets at the beginning of the year 44,962,737 25,970,975 (6,711,417) 17,791 7,487,596 - 71,727,682 (7,743,018) 63,984,664

Net assets at the end of the year $ 45,553,872 $ 21,582,957 $ (10,226,432) $ 30,330 $ 7,524,159 $ - $ 64,464,886 $ (7,636,431) $ 56,828,455

60

PINNACLE LIVING SCHEDULE OF COMBINING INFORMATION COMBINING STATEMENT OF CASH FLOWS YEAR ENDED MAY 31, 2019

Pinnacle Living WindsorMeade HCRC Sub-Total Eliminations Total

Operating Activities

Change in net assets $ (5,073,612) $ (3,394,432) $ 266,864 $ (8,201,180) $ (396,351) $ (8,597,531)

Adjustments to reconcile change in net assets to net cash provided (used in) by operating activities

Depreciation 6,746,862 3,443,703 - 10,190,565 - 10,190,565

Amortization of deferred revenue from entrance fees (10,443,149) (2,217,879) - (12,661,028) - (12,661,028)

Amortization of bond issuance costs 77,103 15,232 - 92,335 - 92,335

Amortization of original issue discount (premium) on bonds payable (258,873) 528,600 - 269,727 (63,036) 206,691

Realized gains on investments (1,681,842) - - (1,681,842) - (1,681,842)

Unrealized (gains) losses on investments 1,325,657 - (70,923) 1,254,734 459,387 1,714,121

Loss on disposal of property and equipment 4,062,257 - - 4,062,257 - 4,062,257

Proceeds of Pinnacle Advantage membership entrance fees 150,000 - - 150,000 - 150,000

Proceeds after first generation entrance fees 10,273,165 4,240,135 - 14,513,300 - 14,513,300

Refunds of entrance fees (395,413) (4,537,143) - (4,932,556) - (4,932,556)

Beneficial interest in trusts, with donor restrictions 848,208 - - 848,208 - 848,208

Changes in operating assets

Accounts receivable, residents 40,543 (94,755) - (54,212) - (54,212)

Accounts receivable, other 161,469 (19,037) - 142,432 - 142,432

Accrued income receivable 24,685 - - 24,685 - 24,685

Prepaid expenses (11,676) 4,931 - (6,745) - (6,745)

Due from affiliate(s) 719,832 - - 719,832 (719,832) -

Other assets 16,399 - - 16,399 - 16,399

Changes in operating liabilities - -

Accounts payable (2,030,520) (233,438) - (2,263,958) - (2,263,958)

Resident refunds payable (16,038) (332,092) - (348,130) - (348,130)

Accrued expenses 225,384 206,279 - 431,663 - 431,663

Deposits, prospective residents (254,751) (4,004) - (258,755) - (258,755)

Due to affiliate - (719,832) - (719,832) 719,832 -

Other liabilities (300,730) (298) - (301,028) - (301,028)

Net cash provided by (used in) operating activities 4,204,960 (3,114,030) 195,941 1,286,871 - 1,286,871

Investment Activities

Proceeds from sales of investment securities 11,514,251 - - 11,514,251 - 11,514,251

Purchase of investments (26,004,345) (806,186) (196,653) (27,007,184) - (27,007,184)

Withdrawal from investments (1,500,000) - - (1,500,000) - (1,500,000)

Proceeds from the sale of property and equipment 751,200 - - 751,200 - 751,200

Purchase of property and equipment, Cedarfield expansion (18,145,020) - - (18,145,020) - (18,145,020)

Purchase of property and equipment, capitalized interest (1,509,146) - - (1,509,146) - (1,509,146)

Purchase of property and equipment, routine (5,205,706) (1,501,379) - (6,707,085) - (6,707,085)

Net cash used in investment activities (40,098,766) (2,307,565) (196,653) (42,602,984) - (42,602,984)

61

PINNACLE LIVING SCHEDULE OF COMBINING INFORMATION COMBINING STATEMENT OF CASH FLOWS YEAR ENDED MAY 31, 2019 (CONTINUED)


Financing Activities

Bond issuance costs (1,083,614) - - (1,083,614) - (1,083,614)

Original issue premium 1,383,571 - - 1,383,571 - 1,383,571

Issuance Series 2016 bonds - 6,767,043 - 6,767,043 - 6,767,043

Issuance Series 2019A bonds 34,000,000 - - 34,000,000 - 34,000,000

Issuance Series 2019B bonds 4,287,338 - - 4,287,338 - 4,287,338

Principal payment of Series 2012 bonds (1,865,000) - - (1,865,000) - (1,865,000)

Principal payment of Series 2013A bonds - (190,000) - (190,000) - (190,000)

Principal payment of Series 2013C bonds - (125,000) - (125,000) - (125,000)

Principal payment of Series 2016 bonds - (99,974) - (99,974) - (99,974)

Net cash provided by financing activities 36,722,295 6,352,069 - 43,074,364 - 43,074,364

Net change in cash and cash equivalents 828,489 930,474 (712) 1,758,251 - 1,758,251

Cash and cash equivalents, beginning 7,335,647 7,918,711 817,941 16,072,299 - 16,072,299

Cash and cash equivalents, ending $ 8,164,136 $ 8,849,185 $ 817,229 $ 17,830,550 $ - $ 17,830,550

Supplemental disclosure of cash flow information, cash payments for interest, net of amounts capitalized

$

2,525,761

$

2,693,583

$

-

$

5,219,344

$

-

$

5,219,344

62

PINNACLE LIVING SCHEDULE OF COMBINING INFORMATION COMBINING STATEMENT OF CASH FLOWS YEAR ENDED MAY 31, 2018


Operating Activities

Change in net assets $ (3,796,883) $ (3,502,476) $ 36,563 $ (7,262,796) $ 106,587 $ (7,156,209)

Adjustments to reconcile change in net assets to net cash provided by operating activities

Depreciation 6,433,453 3,394,904 - 9,828,357 - 9,828,357

Amortization of deferred revenue from entrance fees (8,907,414) (2,170,843) - (11,078,257) - (11,078,257)

Amortization of bond issuance costs 425,439 8,527 - 433,966 - 433,966

Amortization of original issue discount (premium) on bonds payable (81,505) 537,408 - 455,903 (67,105) 388,798

Realized gains on investments (1,208,139) - - (1,208,139) - (1,208,139)

Unrealized (gains) losses on investments (400,584) - 140,438 (260,146) (39,482) (299,628)

Loss on disposal of property and equipment 96,720 - - 96,720 - 96,720

Proceeds after first generation entrance fees 14,362,790 8,168,700 - 22,531,490 - 22,531,490

Refunds of entrance fees (1,140,606) (4,333,652) - (5,474,258) - (5,474,258)

Beneficial interest in trusts, with donor restrictions 4,379,394 - - 4,379,394 - 4,379,394

Changes in operating assets - -

Accounts receivable, residents 203,000 (47,495) - 155,505 - 155,505

Accounts receivable, other 69 - - 69 - 69

Accrued income receivable (836) - - (836) - (836)

Prepaid expenses 99,644 (13,318) - 86,326 - 86,326

Due from affiliate(s) (739,970) - - (739,970) 739,970 -

Other assets 29,872 - - 29,872 - 29,872

Changes in operating liabilities

Accounts payable 3,085,248 (217,834) - 2,867,414 - 2,867,414

Resident refunds payable (7,377) (226,775) - (234,152) - (234,152)

Accrued expenses 2,043,879 373,583 - 2,417,462 - 2,417,462

Deposits, prospective residents 871,563 (149,571) - 721,992 - 721,992

Due to affiliate - 739,970 - 739,970 (739,970) -

Other liabilities 346,117 (198,055) - 148,062 - 148,062

Net cash provided by operating activities $ 16,093,874 $ 2,363,073 $ 177,001 $ 18,633,948 $ - $ 18,633,948

Investment Activities

Proceeds from sales of investment securities 18,191,569 - - 18,191,569 - 18,191,569

Purchase of investments (60,262,831) (718,948) (177,101) (61,158,880) - (61,158,880)

Withdrawal from investments 2,235,415 - - 2,235,415 - 2,235,415

Proceeds from the sale of property and equipment 468,668 - - 468,668 - 468,668

Purchase of property and equipment, Cedarfield and WindsorMeade expansion (13,437,719) (2,214,277) - (15,651,996) - (15,651,996)

Purchase of property and equipment, capitalized interest (549,565) (385,331) - (934,896) - (934,896)

Purchase of property and equipment, routine (6,099,639) (800,597) - (6,900,236) - (6,900,236)

Net cash used in investment activities (59,454,102) (4,119,153) (177,101) (63,750,356) - (63,750,356)

63

PINNACLE LIVING SCHEDULE OF COMBINING INFORMATION COMBINING STATEMENT OF CASH FLOWS YEAR ENDED MAY 31, 2018 (CONTINUED)


Financing Activities

Bond issuance costs (1,029,031) - - (1,029,031) - (1,029,031)

Original issue premium 3,075,180 - - 3,075,180 - 3,075,180

Issuance Series 2016 bonds - 177,357 - 177,357 - 177,357

Issuance Series 2017A & 2017B bonds 4,111,789 - - 4,111,789 - 4,111,789

Issuance Series 2017C bonds 54,710,000 - - 54,710,000 - 54,710,000

Principal payment of Series 2012 bonds (1,815,000) - - (1,815,000) - (1,815,000)

Principal payment of Series 2013A bonds - (95,160) - (95,160) - (95,160)

Principal payment of Series 2013C bonds - (120,000) - (120,000) - (120,000)

Principal payment of Series 2017A & 2017B bonds (15,111,491) - - (15,111,491) - (15,111,491)

Net cash provided by (used in) financing activities 43,941,447 (37,803) - 43,903,644 - 43,903,644

Net change in cash and cash equivalents 581,219 (1,793,883) (100) (1,212,764) - (1,212,764)

Cash and cash equivalents, beginning 6,754,428 9,712,594 818,041 17,285,063 - 17,285,063

Cash and cash equivalents, ending $ 7,335,647 $ 7,918,711 $ 817,941 $ 16,072,299 $ - $ 16,072,299

Supplemental disclosure of cash flow information, cash payments for interest, net of amounts capitalized $ 1,117,108 $ 2,464,056 $ - $ 3,581,164 $ - $ 3,581,164

64


65

SUPPLEMENTAL INFORMATION AND OTHER REQUIRED DISCLOSURES

Pinnacle Living is a “provider” of continuing care, as such term is contemplated under Virginia law. Pinnacle Living facilities are not legal entities unto themselves. Rather, Pinnacle Living facilities are locations where Pinnacle Living provides continuing care for its residents. Accordingly, as is reflected in the foregoing financial statements, Pinnacle Living owns all assets of the corporation, and all liabilities of the corporation are incurred by Pinnacle Living in its corporate name. In consultation with its auditor, Pinnacle Living has determined that the following Combining Balance Sheets by Community accurately reflect the foregoing realities: No Pinnacle Living facility owns assets, and no Pinnacle Living facility incurs obligations in the name of the facility. However, Pinnacle Living has prepared the following Combining Statements of Activities by Community in an effort to provide information about revenues received and expenses incurred by Pinnacle Living with regard to its various facilities. The reader is cautioned to be mindful of the fact, as stated above, that all such activities are engaged in by the corporation (Pinnacle Living) in these locations, not by the facilities themselves (which are not legal entities), and that this information is more accurately reflected in the Pinnacle Living audited financial statements. Indeed, Pinnacle Living’s auditor has not subjected this information to the auditing procedures applied in the audit of the basic financial statements precisely because it does not accurately describe the entity contractually responsible for providing services to the residents. Nevertheless, the following unaudited information is presented in response to Administrative Letter 2013-01 of the Commissioner of Insurance, State Corporation Commission of Virginia, to be reviewed in connection with the foregoing audited financial statements of Pinnacle Living, which do accurately reflect such contractual relationship.

66

PINNACLE LIVING SUPPLEMENTAL INFORMATION AND OTHER REQUIRED DISCLOSURES COMBINING BALANCE SHEET BY COMMUNITY MAY 31, 2019

Pinnacle Living

Pooled Funds Hermitage

Northern Virginia Hermitage

Richmond Hermitage Eastern

Shore Hermitage

Roanoke Lydia Roper Home

ASSETS

Current Assets

Cash and cash equivalents $ 8,050,678 $ - $ - $ - $ - $ -

Cash and cash equivalents, with donor restrictions 113,458 - - - - -

Total cash and cash equivalents 8,164,136 - - - - -

Accounts receivable, residents, less allowance for uncollectible accounts $3,817,638 261,400 - - - - -

Accounts receivable, other 361,907 - - - - -

Prepaid expenses 224,404 - - - - -

Accrued income receivable 138,897 - - - - -

Due from affiliate 44,777 - - - - -

Assets whose use is limited 3,369,759 - - - - -

Other assets 2,659 - - - - -

Total current assets 12,567,939 - - - - -

Beneficial interest in trusts, with donor restrictions 17,408,821 - - - - -

Due from affiliate - WindsorMeade 8,372,284 - - - - -

Due from affiliate - HCRC 7,350,836 - - - - -

Investments 47,458,967 - - - - -

Investments, with donor restrictions 3,231,998 - - - - -


Other assets 146,855 - - - - -

Property and equipment, net 104,916,983 - - - - -

Total assets $ 259,112,388 $ - $ - $ - $ - $ -


Liabilities

Current liabilities

Accounts payable $ 3,374,937 $ - $ - $ - $ - $ -

Resident refunds payable - - - - - -

Accrued expenses 6,034,316 - - - - -

Deposits, prospective residents 363,072 - - - - -

Due to affiliate - - - - - -

Bonds payable 1,920,000 - - - - -

Other liabilities 62,613 - - - - -

Total current liabilities 11,754,938 - - - - -


Deposits, prospective residents 1,488,597 - - - - -

Bonds payable, net of OID $5,662,741 and bond issuance costs $2,685,478 113,293,507 - - - - -

Deferred revenue, entrance fees 67,669,657 - - - - -

Refundable fees 2,773,668 - - - - -


Total liabilities 197,049,171 - - - - -

Net Assets


Undesignated 36,023,317 - - - - -

With board designations 5,285,623 - - - - -


Purpose restricted for Samaritan Program 282,004 - - - - -

Purpose restricted for all other programs 89,514 - - - - -

Perpetual in nature - investments 2,973,938 - - - - -

Perpetual in nature - beneficial interest in trusts 17,408,821 - - - - -

Total net assets 62,063,217 - - - - -

Total liabilities and net assets $ 259,112,388 $ - $ - $ - $ - $ -

67

PINNACLE LIVING SUPPLEMENTAL INFORMATION AND OTHER REQUIRED DISCLOSURES COMBINING BALANCE SHEET BY COMMUNITY MAY 31, 2019 (CONTINUED)

Cedarfield Pinnacle

Advantage Pinnacle Living

Obligated Group WindsorMeade HCRC Eliminations

Total

ASSETS

Current Assets

Cash and cash equivalents $ - $ - $ 8,050,678 $ 8,775,598 $ 817,229 $ - $ 17,643,505

Cash and cash equivalents, with donor restrictions - - 113,458 73,587 - - 187,045

Total cash and cash equivalents - - 8,164,136 8,849,185 817,229 - 17,830,550

Accounts receivable, residents, less allowance for uncollectible accounts $3,817,638 - - 261,400 291,084 - - 552,484

Accounts receivable, other - - 361,907 471,722 - - 833,629

Prepaid expenses - - 224,404 50,801 - - 275,205

Accrued income receivable - - 138,897 - - - 138,897

Due from affiliate - - 44,777 - - (44,777) -

Assets whose use is limited - - 3,369,759 1,580,750 - - 4,950,509

Other assets - - 2,659 - - - 2,659

Total current assets - - 12,567,939 11,243,542 817,229 (44,777) 24,583,933

Beneficial interest in trusts, with donor restrictions - - 17,408,821 - - - 17,408,821

Due from affiliate - WindsorMeade - - 8,372,284 - - (8,372,284) -

Due from affiliate - HCRC - - 7,350,836 - - (7,350,836) -

Investments - - 47,458,967 - 6,973,794 - 54,432,761

Investments, with donor restrictions - - 3,231,998 - - - 3,231,998


Other assets - - 146,855 - - - 146,855

Property and equipment, net - - 104,916,983 93,333,973 - - 198,250,956

Total assets $ - $ - $ 259,112,388 $ 109,353,322 $ 7,791,023 $ (15,767,897) $ 360,488,836


Liabilities

Current liabilities

Accounts payable $ - $ - $ 3,374,937 $ 201,839 $ - $ - $ 3,576,776

Resident refunds payable - - - 3,376 - - 3,376

Accrued expenses - - 6,034,316 2,120,962 - - 8,155,278

Deposits, prospective residents - - 363,072 90,018 - - 453,090

Due to affiliate - - - 44,777 - (44,777) -

Bonds payable - - 1,920,000 325,000 - (135,000) 2,110,000

Other liabilities - - 62,613 - - - 62,613

Total current liabilities - - 11,754,938 2,785,972 - (179,777) 14,361,133

Resident refunds payable - - - 4,160,082 - - 4,160,082

Deposits, prospective residents - - 1,488,597 192,000 - - 1,680,597

Bonds payable, net of OID $5,662,741 and bond issuance costs $2,685,478 - - 113,293,507 43,518,709 - (7,555,338) 149,256,878

Deferred revenue, entrance fees - - 67,669,657 19,277,363 - - 86,947,020

Refundable fees - - 2,773,668 53,009,730 - - 55,783,398


Total liabilities - - 197,049,171 122,943,856 - (7,735,115) 312,257,912

Net Assets


Undesignated - - 36,023,317 (13,664,121) 7,791,023 (8,032,782) 22,117,437

With board designations - - 5,285,623 - - - 5,285,623


Purpose restricted for Samaritan Program - - 282,004 21,615 - - 303,619

Purpose restricted for all other programs - - 89,514 51,972 - - 141,486

Perpetual in nature - investments - - 2,973,938 - - - 2,973,938

Perpetual in nature - beneficial interest in trusts - - 17,408,821 - - - 17,408,821

Total net assets - - 62,063,217 (13,590,534) 7,791,023 (8,032,782) 48,230,924

Total liabilities and net assets $ - $ - $ 259,112,388 $ 109,353,322 $ 7,791,023 $ (15,767,897) $ 360,488,836

68

PINNACLE LIVING SUPPLEMENTAL INFORMATION AND OTHER REQUIRED DISCLOSURES COMBINING BALANCE SHEET BY COMMUNITY MAY 31, 2018

Pinnacle Living

Pooled Funds Hermitage

Northern Virginia Hermitage

Richmond Hermitage Eastern

Shore Hermitage Roanoke Lydia Roper Home

ASSETS

Current Assets

Cash and cash equivalents $ 7,054,280 $ - $ - $ - $ - $ -

Cash and cash equivalents, with donor restrictions 281,367 - - - - -

Total cash and cash equivalents 7,335,647 - - - - -

Accounts receivable, residents, less allowance for uncollectible accounts $3,886,778 301,943 - - - - -

Accounts receivable, other 523,376 - - - - -

Prepaid expenses 212,728 - - - - -

Accrued income receivable 163,582 - - - - -

Due from affiliate 764,609 - - - - -


Total current assets 12,347,406 - - - - -

Beneficial interest in trusts, with donor restrictions 18,257,029 - - - - -

Due from affiliate - WindsorMeade 8,037,897 - - - - -

Due from affiliate - HCRC 7,350,836 - - - - -

Investments 47,662,696 - - - - -

Investments, with donor restrictions 3,044,561 - - - - -


Other assets 165,913 - - - - -

Property and equipment, net 91,617,429 - - - - -

Total assets $ 230,437,525 $ - $ - $ - $ - $ -


Liabilities

Current liabilities

Accounts payable $ 5,405,457 $ - $ - $ - $ - $ -

Resident refunds payable 16,038 - - - - -

Accrued expenses 5,808,932 - - - - -

Deposits, prospective residents 390,989 - - - - -

Due to affiliate - - - - - -

Bonds payable 1,865,000 - - - - -


Total current liabilities 13,865,711 - - - - -


Deposits, prospective residents 1,715,431 - - - - -

Bonds payable, net of OID $7,253,003 and bond issuance costs $1,694,199 76,807,982 - - - - -

Deferred revenue, entrance fees 68,085,052 - - - - -

Refundable fees 2,773,668 - - - - -


Total liabilities 163,300,696 - - - - -

Net Assets


Undesignated 45,553,872 - - - - -


Purpose restricted for Samaritan Program 70,623 - - - - -

Purpose restricted for all other programs 281,367 - - - - -

Perpetual in nature - investments 2,973,938 - - - - -

Perpetual in nature - beneficial interest in trusts 18,257,029 - - - - -

Total net assets 67,136,829 - - - - -

Total liabilities and net assets $ 230,437,525 $ - $ - $ - $ - $ -

69

PINNACLE LIVING SUPPLEMENTAL INFORMATION AND OTHER REQUIRED DISCLOSURES COMBINING BALANCE SHEET BY COMMUNITY MAY 31, 2018 (CONTINUED)

Cedarfield Pinnacle


Obligated Group WindsorMeade HCRC Eliminations Total

ASSETS

Current Assets

Cash and cash equivalents $ - $ - $ 7,054,280 $ 7,888,381 $ 817,941 $ - $ 15,760,602

Cash and cash equivalents, with donor restrictions - - 281,367 30,330 - - 311,697

Total cash and cash equivalents - - 7,335,647 7,918,711 817,941 - 16,072,299

Accounts receivable, residents, less allowance for uncollectible accounts $3,886,778 - - 301,943 196,329 - - 498,272

Accounts receivable, other - - 523,376 - - - 523,376

Prepaid expenses - - 212,728 55,732 - - 268,460

Accrued income receivable - - 163,582 - - - 163,582

Due from affiliate - - 764,609 - - (764,609) -


Total current assets - - 12,347,406 9,753,450 817,941 (764,609) 22,154,188

Beneficial interest in trusts, with donor restrictions - - 18,257,029 - - - 18,257,029

Due from affiliate - WindsorMeade - - 8,037,897 - - (8,037,897) -

Due from affiliate - HCRC - - 7,350,836 - - (7,350,836) -

Investments - - 47,662,696 - 6,706,218 - 54,368,914

Investments, with donor restrictions - - 3,044,561 - - - 3,044,561


Other assets - - 165,913 - - - 165,913

Property and equipment, net - - 91,617,429 95,276,297 - - 186,893,726

Total assets $ - $ - $ 230,437,525 $ 108,997,440 $ 7,524,159 $ (16,153,342) $ 330,805,782


Liabilities

Current liabilities

Accounts payable $ - $ - $ 5,405,457 $ 435,277 $ - $ - $ 5,840,734

Resident refunds payable - - 16,038 - - - 16,038

Accrued expenses - - 5,808,932 1,914,683 - - 7,723,615

Deposits, prospective residents - - 390,989 121,022 - - 512,011

Due to affiliate - - - 764,609 - (764,609) -

Bonds payable - - 1,865,000 315,000 - (125,000) 2,055,000

Other liabilities - - 379,295 298 - - 379,593

Total current liabilities - - 13,865,711 3,550,889 - (889,609) 16,526,991

Resident refunds payable - - - 4,239,072 - - 4,239,072

Deposits, prospective residents - - 1,715,431 165,000 - - 1,880,431

Bonds payable, net of OID $7,253,003 and bond issuance costs $1,694,199 - - 76,807,982 36,632,808 - (7,627,302) 105,813,488

Deferred revenue, entrance fees - - 68,085,052 19,352,344 - - 87,437,396

Refundable fees - - 2,773,668 55,253,429 - - 58,027,097


Total liabilities - - 163,300,696 119,193,542 - (8,516,911) 273,977,327

Net Assets


Undesignated - - 45,553,872 (10,226,432) 7,524,159 (7,636,431) 35,215,168


Purpose restricted for Samaritan Program - - 70,623 10,162 - - 80,785

Purpose restricted for all other programs - - 281,367 20,168 - - 301,535

Perpetual in nature - investments - - 2,973,938 - - - 2,973,938

Perpetual in nature - beneficial interest in trusts - - 18,257,029 - - - 18,257,029

Total net assets - - 67,136,829 (10,196,102) 7,524,159 (7,636,431) 56,828,455

Total liabilities and net assets $ - $ - $ 230,437,525 $ 108,997,440 $ 7,524,159 $ (16,153,342) $ 330,805,782

70

PINNACLE LIVING SUPPLEMENTAL INFORMATION AND OTHER REQUIRED DISCLOSURES COMBINING STATEMENT OF ACTIVITIES BY COMMUNITY YEAR ENDED MAY 31, 2019

Pinnacle Living Pooled Funds


Hermitage Richmond

Hermitage Eastern Shore

Hermitage Roanoke

Lydia Roper Home

Residents' fees $ - $ 9,295,511 $ 12,932,395 $ 2,158,385 $ 2,922,816 $ 193,005

Membership fees - - - - - -

Benevolent care - - (238,806) (84,972) (94,238) -

Amortization of deferred revenue from entrance fees - 6,523 - 23,423 21,745 -

Ancillary service revenue, net - (2,589) (2,995) (9,793) 15,633 -

Other operating revenue 579,073 189,404 112,106 26,473 88,549 2,567

Total operating revenues and support 579,073 9,488,849 12,802,700 2,113,516 2,954,505 195,572

Operating expenses

Administration 5,198,687 771,927 717,200 227,957 382,295 19,331

Marketing 287,463 732,971 495,333 94,144 323,791 8,108

General overhead 3,929 198,235 266,446 37,456 91,346 24,115

Depreciation 255,233 1,386,860 745,696 334,491 306,434 136,771

Dining - 1,916,335 1,929,580 479,926 785,769 161,153

Resident services - 617,139 651,271 100,730 222,626 21,970

Designated funds - 53,852 115,911 14,327 15,926 25,519

Building and grounds - 1,614,320 1,565,747 498,780 950,707 112,140

Housekeeping - 760,020 642,724 111,682 176,352 10,956

Households / Neighborhoods - 3,227,352 5,311,392 870,303 1,568,798 266,058

Total operating expenses 5,745,312 11,279,011 12,441,300 2,769,796 4,824,044 786,121

Excess (deficiency) from operations1 (5,166,239) (1,790,162) 361,400 (656,280) (1,869,539) (590,549)


Bequests - - 251,270 - - -

Trusts and legacies - 16,842 61,054 4,877 683,580 1,540

Present value change in trusts, with donor restrictions - (18,873) (61,792) - (711,031) -

Loss on disposal of property and equipment - - (1,160) (4,061,097) - -

Contributions, other - 24,091 2,214 1,000 990 489

Contributions, Samaritan funds, with donor restrictions - 14,291 52,225 3,775 22,890 1,294

Contributions, restricted funds used for intended purpose - 277 47,077 3,145 3,997 2,000

Contributions, with donor restrictions - - - - - -

Investment income - 242,453 299,670 72,652 150,306 29,710

Investment income, with donor restrictions - 25,857 22,318 - 10,360 -

Net realized gain on investments - 291,916 349,313 57,539 171,853 32,727

Net realized loss on investments, with donor restrictions - (12,853) (11,094) - (5,150) -

Net unrealized gain (loss) on investments - (218,405) (401,126) (170,615) (102,818) (104,480)

Net unrealized gain on investments, with donor restrictions - 44,938 38,788 - 18,008 -

Interest expense - (358,312) (446,779) (149,366) (212,512) (48,921)

Other non-operating charges and fees - (8,438) (10,137) (8,200) (5,051) (940)

Shared resources 5,166,239 (847,439) (999,009) (260,530) (509,659) (83,928)

Total other non-operating changes 5,166,239 (803,655) (807,168) (4,506,820) (484,237) (170,509)

Excess (deficiency)2 $ - $ (2,593,817) $ (445,768) $ (5,163,100) $ (2,353,776) $ (761,058)

1This line item corresponds to the Change in net assets from operations line item on the Combining Statement of Activities. 2This line item corresponds to the Change in net assets line item on the Combining Statement of Activities.

71

PINNACLE LIVING SUPPLEMENTAL INFORMATION AND OTHER REQUIRED DISCLOSURES COMBINING STATEMENT OF ACTIVITIES BY COMMUNITY YEAR ENDED MAY 31, 2019 (CONTINUED)

Cedarfield Pinnacle



Total

Residents' fees $ 22,452,010 $ - $ 49,954,122 $ 13,733,838 $ - $ - $ 63,687,960

Membership fees - 6,968 6,968 - - - 6,968

Benevolent care (56,089) - (474,105) - - - (474,105)

Amortization of deferred revenue from entrance fees 10,389,073 2,385 10,443,149 2,217,879 - - 12,661,028

Ancillary service revenue, net 34,232 - 34,488 251,171 - - 285,659

Other operating revenue 686,174 - 1,684,346 273,644 - (494,296) 1,463,694

Total operating revenues and support 33,505,400 9,353 61,648,968 16,476,532 - (494,296) 77,631,204

Operating expenses

Administration 1,613,503 13,249 8,944,149 1,895,474 - (494,296) 10,345,327

Marketing 498,509 10,773 2,451,092 570,610 - - 3,021,702

General overhead 494,615 - 1,116,142 937,642 - - 2,053,784

Depreciation 3,581,377 - 6,746,862 3,443,703 - - 10,190,565

Dining 5,705,728 - 10,978,491 2,196,903 - - 13,175,394

Resident services 1,372,750 - 2,986,486 598,492 - - 3,584,978

Designated funds 97,289 - 322,824 10,235 - - 333,059

Building and grounds 4,930,293 - 9,671,987 2,588,429 - - 12,260,416

Housekeeping 1,515,149 - 3,216,883 571,939 - - 3,788,822

Households / Neighborhoods 5,185,964 - 16,429,867 3,918,553 - - 20,348,420

Total operating expenses 24,995,177 24,022 62,864,783 16,731,980 - (494,296) 79,102,467

Excess (deficiency) from operations1 8,510,223 (14,669) (1,215,815) (255,448) - - (1,471,263)


Bequests - - 251,270 - - - 251,270

Trusts and legacies 49,113 - 817,006 - - - 817,006

Present value change in trusts, with donor restrictions (56,512) - (848,208) - - - (848,208)

Loss on disposal of property and equipment - - (4,062,257) - - - (4,062,257)

Contributions, other 4,816 - 33,600 - - - 33,600

Contributions, Samaritan funds, with donor restrictions 110,092 - 204,567 11,453 - - 216,020

Contributions, restricted funds used for intended purpose 74,474 - 130,970 10,235 - - 141,205

Contributions, with donor restrictions - - - 31,804 - - 31,804

Investment income 729,362 - 1,524,153 79,087 196,651 (467,648) 1,332,243

Investment income, with donor restrictions 49,753 - 108,288 - - - 108,288

Net realized gain on investments 832,323 - 1,735,671 - - - 1,735,671

Net realized loss on investments, with donor restrictions (24,732) - (53,829) - - - (53,829)

Net unrealized gain (loss) on investments (516,416) - (1,513,860) - 70,923 (459,387) (1,902,324)

Net unrealized gain on investments, with donor restrictions 86,469 - 188,203 - - - 188,203

Interest expense (1,031,100) - (2,246,990) (3,247,909) - 530,684 (4,964,215)

Other non-operating charges and fees (93,560) (55) (126,381) (23,654) (710) - (150,745)

Shared resources (2,465,674) - - - - - -

Total other non-operating changes (2,251,592) (55) (3,857,797) (3,138,984) 266,864 (396,351) (7,126,268)

Excess (deficiency)2 $ 6,258,631 (14,724) $ (5,073,612) $ (3,394,432) $ 266,864 $ (396,351) $ (8,597,531)


72

PINNACLE LIVING SUPPLEMENTAL INFORMATION AND OTHER REQUIRED DISCLOSURES COMBINING STATEMENT OF ACTIVITIES BY COMMUNITY YEAR ENDED MAY 31, 2018

Pinnacle Living Pooled Funds


Hermitage Richmond

Hermitage Eastern Shore

Hermitage Roanoke

Lydia Roper Home

Residents' fees $ - $ 9,611,461 $ 12,820,025 $ 3,043,249 $ 3,279,045 $ 400,054

Benevolent care - (157,337) (330,945) (99,107) (140,522) 10,612

Amortization of deferred revenue from entrance fees - 20,066 2,316 9,642 23,165 -

Ancillary service revenue, net - 41,503 12,079 (8,552) 82,840 -

Other operating revenue 503,060 168,015 93,122 33,678 83,644 1,934

Total operating revenues and support 503,060 9,683,708 12,596,597 2,978,910 3,328,172 412,600

Operating expenses

Administration 5,481,107 773,015 652,203 508,788 370,567 37,034

Marketing 297,656 708,167 616,583 156,861 318,589 45,554

General overhead 85,159 171,904 211,746 83,027 79,655 29,199

Depreciation 246,751 1,368,099 741,249 723,417 305,180 131,728

Dining - 1,920,421 1,925,007 730,361 800,970 189,725

Resident services - 667,293 616,303 187,803 227,678 54,320

Designated funds - 31,475 82,967 17,573 2,084 4,827

Building and grounds - 1,633,371 1,517,995 773,438 928,712 138,164

Housekeeping - 660,593 648,005 197,000 208,950 18,300

Households / Neighborhoods - 3,389,055 5,009,776 1,367,727 1,345,160 340,052

Total operating expenses 6,110,673 11,323,393 12,021,834 4,745,995 4,587,545 988,903

Excess (deficiency) from operations1 (5,607,613) (1,639,685) 574,763 (1,767,085) (1,259,373) (576,303)


Bequests 1,758,831 - 250 - - 2,180

Trusts and legacies 123,188 - 27,639 - 650,908 -

Present value change in trusts, with donor restrictions - (101,304) (281,319) (64,106) (3,617,650) (17,893)

Loss on disposal of property and equipment - - - (96,720) - -

Contributions, other 2,500 2,000 - - - -

Contributions, Samaritan funds, with donor restrictions 68,364 21,410 20,466 1,540 7,878 1,792

Contributions, restricted funds used for intended purpose - 31,475 64,724 7,975 2,084 4,827

Contributions, with donor restrictions - 2,168 - - 1,387 98

Investment income 1,305,206 88 112 55 55 155,965

Investment income, with donor restrictions 4,431 - - - - -

Net realized gain (loss) on investments 1,287,609 - - - - (77,400)

Net realized gain (loss) on investments, with donor restrictions (2,070) - - - - -

Net unrealized gain (loss) on investments 530,747 - - - - (126,929)

Net unrealized gain (loss) on investments, with donor restrictions (3,234) - - - - -

Interest expense 205,630 (341,223) (438,650) (215,927) (208,903) (60,269)

Other non-operating charges and fees (115,285) - (9,841) - - -

Shared resources 441,696 (63,609) (81,771) (40,252) (38,943) (11,235)

Total other non-operating changes 5,607,613 (448,995) (698,390) (407,435) (3,203,184) (128,864)

Excess (deficiency)2 $ - $ (2,088,680) $ (123,627) $ (2,174,520) $ (4,462,557) $ (705,167)


73

PINNACLE LIVING SUPPLEMENTAL INFORMATION AND OTHER REQUIRED DISCLOSURES COMBINING STATEMENT OF ACTIVITIES BY COMMUNITY YEAR ENDED MAY 31, 2018 (CONTINUED)

Cedarfield Pinnacle



Total

Residents' fees $ 21,100,916 $ - $ 50,254,750 $ 12,305,178 $ - $ - $ 62,559,928

Benevolent care (61,963) - (779,262) - - - (779,262)

Amortization of deferred revenue from entrance fees 8,852,225 - 8,907,414 2,170,843 - - 11,078,257

Ancillary service revenue, net 35,812 - 163,682 132,210 - - 295,892

Other operating revenue 806,771 - 1,690,224 270,816 - (442,395) 1,518,645

Total operating revenues and support 30,733,761 - 60,236,808 14,879,047 - (442,395) 74,673,460

Operating expenses

Administration 1,301,585 - 9,124,299 1,889,463 - (442,395) 10,571,367

Marketing 488,578 - 2,631,988 609,280 - - 3,241,268

General overhead 376,955 - 1,037,645 882,802 - - 1,920,447

Depreciation 2,917,029 - 6,433,453 3,394,904 - - 9,828,357

Dining 5,660,754 - 11,227,238 2,299,201 - - 13,526,439

Resident services 1,379,184 - 3,132,581 608,865 - - 3,741,446

Designated funds 106,530 - 245,456 - - - 245,456

Building and grounds 4,815,634 - 9,807,314 2,622,179 - - 12,429,493

Housekeeping 1,778,863 - 3,511,711 542,266 - - 4,053,977

Households / Neighborhoods 4,881,170 - 16,332,940 2,921,409 - - 19,254,349

Total operating expenses 23,706,282 - 63,484,625 15,770,369 - (442,395) 78,812,599

Excess (deficiency) from operations1 7,027,479 - (3,247,817) (891,322) - - (4,139,139)


Bequests - - 1,761,261 - - - 1,761,261

Trusts and legacies - - 801,735 - - - 801,735

Present value change in trusts, with donor restrictions (297,122) - (4,379,394) - - - (4,379,394)

Loss on disposal of property and equipment - - (96,720) - - - (96,720)

Contributions, other 6,000 - 10,500 - - - 10,500

Contributions, Samaritan funds, with donor restrictions 106,241 - 227,691 10,162 - - 237,853

Contributions, restricted funds used for intended purpose 106,530 - 217,615 - - - 217,615

Contributions, with donor restrictions 14,428 - 18,081 2,377 - - 20,458

Investment income 1,151 - 1,462,632 24,269 177,102 (467,648) 1,196,355

Investment income, with donor restrictions - - 4,431 - 4,431

Net realized gain (loss) on investments - - 1,210,209 - 1,210,209

Net realized gain (loss) on investments, with donor restrictions - - (2,070) - (2,070)

Net unrealized gain (loss) on investments - - 403,818 - (140,438) 39,482 302,862

Net unrealized gain (loss) on investments, with donor restrictions - - (3,234) - (3,234)

Interest expense (1,000,784) - (2,060,126) (2,630,086) - 534,753 (4,155,459)

Other non-operating charges and fees (369) - (125,495) (17,876) (101) - (143,472)

Shared resources (205,886) - - - - - -

Total other non-operating changes (1,269,811) - (549,066) (2,611,154) 36,563 106,587 (3,017,070)

Excess (deficiency)2 $ 5,757,668 $ - $ (3,796,883) $ (3,502,476) $ 36,563 $ 106,587 $ (7,156,209)


74

SUMMARY OF FINANCIAL INFORMATION HERMITAGE NORTHERN VIRGINIA AS OF MAY 31, 2019 AND 2018

Current Year Prior Year

Balance Sheet Summary: Total assets $ -- $ -- Total liabilities $ -- $ -- Total net assets $ -- $ -- Statement of Activities Summary: Total operating revenues $ 9,488,849 $ 9,683,708 Total operating expenses $ 11,279,011 $ 11,323,393

Deficiency from operations $ (1,790,162) $ (1,639,685) Total non-operating charges and fees $ (803,655) $ (448,995)

Deficiency $ (2,593,817) $ (2,088,680)

Narrative on Financial Condition FY 2019: Hermitage Northern Virginia’s overall loss was related to lower occupancy. In November 2018, a new Executive Director was hired whose initial focus was assisted living occupancy and expense curtailment. Since November, assisted living occupancy has increased, however, health center occupancy has decreased. Hermitage Northern Virginia management has turned their attention back on the health center and will have a plan in place by the end of the first fiscal quarter.

Summary of Occupancy Information:

Capacity of Residences2

Average Occupancy

Percentage Occupancy

Independent Living / Assisted Living1 119 96 80.6% Health Care 48 33 68.7%

1Hermitage Northern Virginia’s residence configuration allows a resident to remain in their residence in either independent

living or assisted living. Therefore, independent living and assisted living are combined. 2Capacity of residences does not include any residences that are offline due to either renovation or other purposes. The

health care capacity equals the number of beds that are active and would not include any bed offline for residence renovations or due to a resident paying for a private vs. semi-private room.

75

SUMMARY OF FINANCIAL INFORMATION HERMITAGE RICHMOND AS OF MAY 31, 2019 AND 2018



Excess from operations $ 361,400 $ 574,763 Total non-operating charges and fees $ (807,168) $ (698,390)

Excess (deficiency) $ (445,768) $ (123,627)

Narrative on Financial Condition FY 2019: Hermitage Richmond experienced a positive change in net assets from operations, however, was under budget by 71.4% or $702,000. Resident fees were lower due to a new health center renovation. The project will occur in 16 phases, taking four rooms offline at a time for renovations. Currently six phases have been completed. Higher expenses were attributable to agency usage in the first half of the fiscal year and have since been reduced with new nursing leadership. Also causing higher expenses were information technology (“IT”) costs dealing with the financial reporting system and higher dining staffing expenses.



Average Occupancy


Independent Living / Assisted Living1 118 112 94.9% Health Care 70 60 85.7%

1Hermitage Richmond’s residence configuration allows a resident to remain in their residence in either independent living

or assisted living. Therefore, independent living and assisted living are combined. 2Capacity of residences does not include any residences that are offline due to either renovation or other purposes. The

health care capacity equals the number of beds that are active and would not include any bed offline for residence renovations or due to a resident paying for a private vs. semi-private room.

76

SUMMARY OF FINANCIAL INFORMATION HERMITAGE EASTERN SHORE AS OF MAY 31, 2019 AND 2018



Deficiency from operations $ (656,280) $ (1,767,085) Total non-operating charges and fees $ (4,506,820) $ (407,435)

Deficiency $ (5,163,100) $ (2,174,520)

Narrative on Financial Condition FY 2019: Effective December 14, 2018, Hermitage Eastern Shore was sold.


Capacity of Residences

Average Occupancy


Independent Living / Assisted Living N/A N/A N/A Health Care N/A N/A N/A

77

SUMMARY OF FINANCIAL INFORMATION HERMITAGE ROANOKE AS OF MAY 31, 2019 AND 2018



Deficiency from operations $ (1,869,539) $ (1,259,373) Total non-operating charges and fees $ (484,237) $ (3,203,184)

Excess (deficiency) $ (2,353,776) $ (4,462,557)

Narrative on Financial Condition FY 2019: Hermitage Roanoke reduced its assisted living apartment rates effective the second quarter of the fiscal year to better align with market expectations. Beginning the third quarter of the fiscal year, occupancy has begun to increase moving from 34 occupied residences to 41. Building and grounds was higher due to non-capitalizable repairs. Nursing services has had staffing changes to leadership including a new Director of Nursing and the elimination of the Assisted Living Coordinator. Effective the last quarter of the fiscal year, a new Executive Director was hired as well.



Average Occupancy


Independent Living 22 19 86.3% Assisted Living 52 36 69.2% Health Care 14 11 78.5%

1Capacity of residences does not include any residences that are offline due to either renovation or other purposes. The

health care capacity equals the number of beds that are active and would not include any bed offline for residence renovations or due to a resident paying for a private room vs. semi-private room.

78

SUMMARY OF FINANCIAL INFORMATION LYDIA ROPER HOME AS OF MAY 31, 2019 AND 2018


Balance Sheet Summary: Total assets $ -- $ -- Total liabilities $ -- $ -- Total net assets $ -- $ -- Statement of Activities Summary: Total operating revenues $ 195,572 $ 412,600 Total operating expenses $ 786,121 $ 988,903

Deficiency from operations $ (590,549) $ (576,303) Total non-operating charges and fees $ (170,509) $ (128,864)

Deficiency $ (761,058) $ (705,167)

Narrative on Financial Condition FY 2019: Lydia Roper Home closed effective January 31, 2019.


Capacity of Residences

Average Occupancy


Independent Living / Assisted Living N/A N/A N/A

79

SUMMARY OF FINANCIAL INFORMATION CEDARFIELD AS OF MAY 31, 2019 AND 2018



Excess from operations $ 8,510,223 $ 7,027,479 Total non-operating charges and fees $ (2,251,592) $ (1,269,811)

Excess $ 6,258,631 $ 5,757,668

Narrative on Financial Condition FY 2019: Cedarfield has been at or above overall budgeted occupancy. Amortization of deferred revenue from entrance fees was higher due to a higher number of expected deaths in FY2019. Ancillary service charges are lower as a new nursing team is in place and learning the billing process. Other operating revenue was under budget due to lower than expected modification income on residences. Operating expenses were higher due primarily to administration, buildings and grounds, general overhead and Neighborhoods/Households (this includes nursing) expenses. Administration was higher because of IT costs for the new financial reporting system and network changes. Buildings and grounds was higher because of outsourced positions for labor from vacant positions. Water and sewer charges also increased in FY2019. General overhead was greater because of higher property and excess liability insurance and neighborhoods/households was higher because of staffing turnover and agency costs. Cedarfield is currently going through a $100,000,000 renovation and expansion project.



Average Occupancy





80

SUMMARY OF FINANCIAL INFORMATION WINDSORMEADE AS OF MAY 31, 2019 AND 2018


Balance Sheet Summary: Total assets $ 109,353,322 $ 108,997,440 Total liabilities $ 122,943,856 $ 119,193,542 Total net assets $ (13,590,534) $ (10,196,102) Statement of Activities Summary: Total operating revenues $ 16,476,532 $ 14,879,047 Total operating expenses $ 16,731,980 $ 15,770,369

Excess (deficiency) from operations $ (255,448) $ (891,322) Total non-operating charges and fees $ (3,138,984) $ (2,611,154)

Deficiency $ (3,394,432) $ (3,502,476)

Narrative on Financial Condition FY 2019: Fiscal year ended May 31, 2019 (“FY 2019”) - average occupancy is as follows: independent living residences (IL) – 98%, assisted living residences (AL) – 87%, Memory Support (AL) – 41% and health care (HC) (which includes skilled nursing) – 55%. For FY2019, WindsorMeade produced total operating revenue of $16,477,000 (10.7% increase from FY2018) and total operating expenses of $16,732,000 (6.1% increase over FY2018). This has resulted in a change in net assets from operations of -$255,000 (71.3% increase from FY2018). Non-operating changes had a deficit of $3,139,000 (20.2% decrease from FY2018) which is primarily from interest expense charges. The largest expense variance was Neighborhoods/Households as staffing increased due to agency costs for nursing and dedicated staff being transferred from other departments. Buildings and grounds was higher than budget due to salary adjustments and non-capitalizable repair costs. Dining services was over budget due to raw food costs and some agency usage. Williamsburg, Virginia, where WindsorMeade is located, is primarily a hospitality market and dining staff can be more difficult to find because of this. WindsorMeade continues to reduce it’s 90% refundable contracts to 50% refundable contracts. This year saw a greater number of 90% refunds causing net entrance fees to be negative. In FY2013, the Reorganization recommended the reduction in the refundable contract and anticipated there would be some years where the net entrance fees would be negative. Of the $4,160,000 resident refund payable amount, $3,492,000 represents those residents who have transferred to health services.



Average Occupancy





81


Exhibit B

WindsorMeade Williamsburg Pro Forma Statement of Activities Years Ended May 31, 2020 – May 31, 2024 In Thousands

2020 2021 2022 2023 2024 Operating revenues and support Residents' Fees $ 15,241 $ 16,097 $ 16,483 $ 16,877 $ 17,279 Benevolent care (50) (51) (52) (53) (54) Deferred revenue from entrance fees 2,351 2,410 2,470 2,532 2,595 Ancillary revenue, net 285 219 224 230 236 Other operating revenue 307 315 323 331 339 Total operating revenues and support 18,134 18,990 19,448 19,917 20,395 Operating expenses Administration 1,997 2,028 2,084 2,141 2,200 Marketing 730 750 771 792 814 General overhead 930 956 982 1,009 1,037 Depreciation 3,560 3,658 3,758 3,861 3,967 Dining 2,122 2,180 2,240 2,301 2,364 Resident services 671 689 708 727 747 Building and grounds 2,567 2,637 2,709 2,783 2,859 Housekeeping 548 563 578 594 610 Nursing, Households / Neighborhoods 3,621 3,720 3,822 3,927 4,035 Total operating expenses 16,746 17,181 17,652 18,135 18,633 Change in net assets from operations 1,388 1,809 1,796 1,782 1,762 Other non-operating changes Contributions 17 40 46 19 20 Investment income 1 2 3 4 5 Interest expense (2,710) (2,677) (2,626) (2,569) (2,508) Amortization of original issue discount (520) (508) (496) (483) (471) Amortization of bond issuance costs (8) (8) (8) (8) (8) Other non-operating charges and fees (12) (12) (12) (12) (12) Total other non-operating changes (3,232) (3,163) (3,093) (3,049) (2,974) Change in net assets $ (1,844) $ (1,354) $ (1,297) $ (1,267) $ (1,212)

See accompanying notes

WindsorMeade Williamsburg Pro Forma Balance Sheet May 31, 2020 – May 31, 2024 In Thousands

2020 2021 2022 2023 2024 ASSETS Current Assets Cash and cash equivalents $ 7,649 $ 9,249 $ 10,150 $ 11,355 $ 12,471 Accounts receivable, residents 190 200 205 210 215 Prepaid expenses 46 46 46 46 46 Assets whose use is limited 1,826 2,058 2,079 2,115 2,140 Total current assets 9,711 11,553 12,480 13,726 14,872 Assets whose use is limited 2,504 2,504 2,504 2,504 2,504 Property and equipment, gross, net 92,951 90,293 87,535 84,674 81,707 TOTAL ASSETS $ 105,166 $ 104,350 $ 102,519 $ 100,904 $ 99,083 LIABILITIES AND NET ASSETS Liabilities Current Liabilities Accounts payable $ 787 $ 808 $ 830 $ 852 $ 876 Accrued expenses 1,858 1,906 1,958 2,012 2,067 Deposits, prospective members 97 99 101 104 107 Bonds and notes payable 803 1,058 1,108 1,749 2,956 Total current liabilities 3,545 3,871 3,997 4,717 6,006 Resident refund payable 1,600 2,772 2,844 2,916 2,988 Deposits, future list 184 184 184 184 184 Bonds and notes payable 53,509 52,451 51,343 49,594 46,638 Original issue discount, net (10,346) (9,838) (9,342) (8,859) (8,388) Bond issuance costs, net (58) (50) (42) (34) (26) Deferred revenue and refundable fees, net 71,757 71,339 71,211 71,329 71,836 Total liabilities 120,191 120,729 120,195 119,847 119,238 Net Assets Total net assets (15,025) (16,379) (17,676) (18,943) (20,155) TOTAL LIABILITIES AND NET ASSETS $ 105,166 $ 104,350 $ 102,519 $ 100,904 $ 99,083


WindsorMeade Williamsburg Pro Forma Statement of Cash Flows Years Ended May 31, 2020 – May 31, 2024 In Thousands

2020 2021 2022 2023 2024 Operating Activities Change in net assets $ (1,844) $ (1,354) $ (1,297) $ (1,267) $ (1,212) Adjustments to operating activities Depreciation 3,560 3,658 3,758 3,861 3,967 Amortization of deferred revenue from entrance fees (2,351) (2,410) (2,470) (2,532) (2,595) Amortization of bond issuance costs 8 8 8 8 8 Amortization of original issue discount 520 508 496 483 471 Proceeds from entrance fees 6,382 6,706 6,991 7,326 7,735 Refunds of entrance fees (4,828) (4,714) (4,649) (4,676) (4,633) (Increase) decrease in assets (22) (10) (5) (5) (5) Increase (decrease) in liabilities (2,293) 1,243 148 151 154 Net cash provided by (used in) operating activities (868) 3,635 2,980 3,349 3,890 Investing Activities Change in assets whose use is limited 2,049 (232) (21) (36) (25) Purchase of property and equipment - Capital Reserve and Replacement Fund

(2,279)

-

-

-

-

Purchase of property and equipment - routine (971) (1,000) (1,000) (1,000) (1,000) Net cash used in investing activities (1,201) (1,232) (1,021) (1,036) (1,025) Financing Activities Principal payments on debt (499) (803) (1,058) (1,108) (1,749) Net cash provided by (used in) investing activities (499) (803) (1,058) (1,108) (1,749) Net increase (decrease) in cash and cash equivalents (2,568) 1,600 901 1,205 1,116 Cash and cash equivalents, beginning 10,217 7,649 9,249 10,150 11,355 Cash and cash equivalents, ending $ 7,649 $ 9,249 $ 10,150 $ 11,355 $ 12,471


WindsorMeade Williamsburg Pro Forma Footnotes Years Ended May 31, 2020 – May 31, 2024 Footnote 1: DISCLOSURE PRINCIPLE DEPARTURES AS REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS ISSUED BY THE U.S. FINANCIAL ACCOUNTING STANDARDS BOARD These quarterly statements may omit related disclosure principle departures. This may influence conclusions about the financial position, results of operations, and cash flows. To gain a better understanding of the Organization, see the most recent audited financial statements. These financial statements may be found on the Electronic Municipal Market Access (“EMMA”) site located at http://emma.msrb.org/Home. Search for Virginia United Methodist Homes, Inc. dba Pinnacle Living or Virginia United Methodist Homes of Williamsburg, Inc. dba WindsorMeade Williamsburg.

Footnote 2: MEASUREMENT PRINCIPLE DEPARTURES FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS ISSUED BY THE U.S. FINANCIAL ACCOUNTING STANDARDS BOARD

A. New Accounting Standards

New accounting standards effective for fiscal 2020 and thereafter have not been adopted in these pro-forma statements.

B. Cash and cash equivalents, temporarily restricted Cash and cash equivalents, with donor restrictions is not a part of these financial statements and instead is combined with Cash and cash equivalents.

C. Amortization of deferred revenue from entrance fees Deferred revenue and refundable fees The pro-forma statements include assumptions for move-ins, move-outs and transfers between levels of care. These statements use a five year historical moving average, with reasonable adjustments made by the accounting team in lieu of actuarially determined estimates. These assumptions may affect the estimated deferred revenue and refundable fee amount.

D. Depreciation Depreciation amounts for assets placed in service, as well as future capital projects, are based on an average estimated life. Actual approved capital projects for the years 2020-2024 may be different than budgeted capital projects.

E. Capitalized Interest Capitalized interest, if any, are not reflected in these pro-forma statements.

F. Deferred revenue and refundable fees These pro forma statements combine deferred revenue and refundable fees together.

G. Net Assets Net Assets are not broken out to show Without Donor Restrictions and With Donor Restrictions. To gain a better understanding of WindsorMeade’s Net Assets, refer to the audited financial statements.

H. Statement of Cash Flows i. These pro-forma statements summarize the Changes in operating assets and liabilities.

ii. These pro forma statements summarize the proceeds from sale of investment securities, purchase of investments and withdrawal from investments into one line item called Change in Assets whose use is limited.

iii. These pro forma statements summarize all principal payments on the senior bonds.

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Exhibit C Pinnacle Living Pro Forma Statement of Activities Years Ended May 31, 2020 – May 31, 2024 In Thousands

2020 2021 2022 2023 2024 Operating revenues and support Residents' Fees $ 49,468 $ 52,453 $ 54,274 $ 57,393 $ 59,702 Benevolent care (694) (715) (737) (760) (783) Deferred revenue from entrance fees 9,410 9,594 9,761 9,954 10,153 Ancillary revenue, net 156 161 166 171 176 Other operating revenue 1,707 1,773 1,819 1,867 1,916 Total operating revenues and support 60,047 63,266 65,283 68,625 71,164 Operating expenses Administration 8,690 8,951 9,219 9,494 9,779 Marketing 2,598 2,677 2,757 2,840 2,926 General overhead (insurance and taxes) 1,044 1,106 1,139 1,173 1,208 Depreciation 6,505 6,595 6,793 6,997 7,207 Dining 9,953 10,309 10,646 11,241 11,693 Resident services 4,084 4,199 4,318 4,440 4,566 Building and grounds 7,628 7,932 8,167 8,414 8,665 Housekeeping 3,160 3,287 3,386 3,488 3,592 Nursing / Neighborhoods 15,768 16,241 17,441 17,965 18,504 Total operating expenses 59,430 61,297 63,866 66,052 68,140 Change in net assets from operations 617 1,969 1,417 2,573 3,024 Other non-operating changes Trusts and legacies 782 784 786 788 790 Contributions 188 236 312 379 449 Gain (loss) on disposal of property and equipment

(1,039) - - - -

Investment income 1,459 1,453 1,442 1,427 1,410 Interest expense (4,181) (5,088) (4,933) (4,989) (4,898) Other non-operating charges (167) (171) (175) (179) (183) Total non-operating changes (2,958) (2,786) (2,568) (2,574) (2,432) Change in net assets $ (2,341) $ (817) $ (1,151) $ (1) $ 592


Pinnacle Living Pro Forma Balance Sheet May 31, 2020 – May 31, 2024 In Thousands

2020 2021 2022 2023 2024 ASSETS Current Assets Cash and cash equivalents $ 9,458 $ 12,662 $ 14,848 $ 18,487 $ 22,972 Cash and cash equivalents, temporarily restricted 278 281 284 287 290 Total cash and cash equivalents 9,736 12,943 15,132 18,774 23,262 Accounts receivable, residents 389 402 416 437 454 Prepaid expenses 135 140 147 152 156 Accrued income receivable 163 163 163 163 163 Due from affiliate 49 52 53 54 55 Assets whose use is limited 5,005 4,950 5,005 4,958 4,968 Total current assets 15,477 18,650 20,916 24,538 29,058 Beneficial interest in trusts, permanently restricted 18,257 18,257 18,257 18,257 18,257 Due from affiliate - WindsorMeade 7,765 7,625 7,320 7,005 6,665 Due from affiliate - HCRC 7,351 7,351 7,351 7,351 7,351 Investments, unrestricted 46,228 46,228 46,228 46,228 46,228 Investments, donor restricted 2,974 2,974 2,974 2,974 2,974 Assets whose use is limited 33,478 12,030 7,833 7,834 7,835 Property and equipment, gross 237,241 255,709 263,632 267,382 271,382 Accumulated depreciation (105,015) (111,610) (118,403) (125,400) (132,607) TOTAL ASSETS $ 263,756 $ 257,214 $ 256,108 $ 256,169 $ 257,143 LIABILITIES AND NET ASSETS Liabilities Current Liabilities Accounts payable 1,859 1,914 1,972 2,030 2,091 Accrued expenses 4,079 4,215 4,380 4,527 4,669 Deposits, prospective members 310 318 326 334 342 Bond and notes payable 12,911 2,060 2,160 2,160 2,270 Total current liabilities 19,159 8,507 8,838 9,051 9,372 Deposits, future list 506 507 508 509 510 Deposits, prospective members, new apartments 629 - - - - Bond and notes payable 105,010 102,950 100,790 98,630 96,360 Original issue premium 4,441 4,229 4,021 3,834 3,667 Bond issuance costs, net (2,365) (2,143) (1,921) (1,783) (1,645) Deferred revenue and refundable fees, net 78,633 86,238 88,097 90,154 92,513 Other 49 49 49 49 49 Total liabilities 206,062 200,337 200,382 200,444 200,826 Net Assets Total net assets 57,694 56,877 55,726 55,725 56,317 TOTAL LIABILITIES AND NET ASSETS $ 263,756 $ 257,214 $ 256,108 $ 256,169 $ 257,143


Pinnacle Living Pro Forma Statement of Cash Flows Years Ended May 31, 2020 – May 31, 2024 In Thousands

2020 2021 2022 2023 2024 Operating Activities Change in net assets $ (2,341) $ (817) $ (1,151) $ (1) $ 592 Adjustments to operating activities Depreciation 6,505 6,595 6,793 6,997 7,207 Amortization of deferred revenue from entrance fees (9,410) (9,594) (9,761) (9,954) (10,153) Amortization of bond issuance costs 222 222 222 138 138 Amortization of original issue premium (213) (212) (208) (187) (167) Loss on disposal of property and equipment 1,039 - - - - Proceeds after first generation entrance fees 11,088 11,774 12,298 12,658 13,045 Refunds of entrance fees (652) (691) (678) (647) (533) (Increase) decrease in assets 174 (21) (22) (27) (22) Increase (decrease) in liabilities (974) (429) 232 214 212 Net cash provided by operating activities 5,438 6,827 7,725 9,191 10,319 Investing Activities Change in AWUL and investments 14,298 21,643 4,447 361 329 Purchase of FF&E - Phase 1 of Cedarfield expansion (10,300) (1,216) (507) - - Purchase of FF&E - Phase 2 of Cedarfield expansion (13,630) (13,661) (3,691) - - Purchase of FF&E - routine (3,000) (3,250) (3,500) (3,750) (4,000) Purchase of FF&E - capitalized interest (960) (341) (225) - - Net cash provided by (used in) investing activities (13,592) 3,175 (3,476) (3,389) (3,671) Financing Activities Proceeds from first generation entrance fees 5,903 6,116 - - - Issuance of debt 6,980 74 - - - Principal payment on debt (1,920) (12,985) (2,060) (2,160) (2,160) Net cash provided by (used in) investing activities 10,963 (6,795) (2,060) (2,160) (2,160) Net increase (decrease) in cash and cash equivalents 2,809 3,207 2,189 3,642 4,488 Cash and cash equivalents, beginning 6,927 9,736 12,943 15,132 18,774 Cash and cash equivalents, ending $ 9,736 $ 12,943 $ 15,132 $ 18,774 $ 23,262


Pinnacle Living Pro Forma Footnotes Years Ended May 31, 2020 – May 31, 2024 Footnote 1: DISCLOSURE PRINCIPLE DEPARTURES AS REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS ISSUED BY THE U.S. FINANCIAL ACCOUNTING STANDARDS BOARD These quarterly statements may omit related disclosure principle departures. This may influence conclusions about the financial position, results of operations, and cash flows. To gain a better understanding of the Organization, see the most recent audited financial statements. These financial statements may be found on the Electronic Municipal Market Access (“EMMA”) site located at http://emma.msrb.org/Home. Search for Virginia United Methodist Homes, Inc. dba Pinnacle Living or Virginia United Methodist Homes, Inc. dba Pinnacle Living.

Footnote 2: MEASUREMENT PRINCIPLE DEPARTURES FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS ISSUED BY THE U.S. FINANCIAL ACCOUNTING STANDARDS BOARD

A. New Accounting Standards

New accounting standards effective for fiscal 2020 and thereafter have not been adopted in these pro-forma statements.

B. Amortization of deferred revenue from entrance fees Deferred revenue and refundable fees The pro-forma statements include assumptions for move-ins, move-outs and transfers between levels of care. These statements use a five year historical moving average, with reasonable adjustments made by the accounting team in lieu of actuarially determined estimates. These assumptions may affect the estimated deferred revenue and refundable fee amount.

C. Depreciation Depreciation amounts for assets placed in service, as well as future capital projects, are based on an average estimated life. Actual approved capital projects for the years 2020-2024 may be different than budgeted capital projects.

D. Capitalized Interest Capitalized interest, if any, are not reflected in these pro-forma statements.

E. Deferred revenue and refundable fees These pro forma statements combine deferred revenue and refundable fees together.

F. Net Assets Net Assets are not broken out to show Without Donor Restrictions and With Donor Restrictions. To gain a better understanding of Pinnacle Living’s Net Assets, refer to the audited financial statements.

G. Statement of Cash Flows i. These pro-forma statements summarize the Changes in operating assets and liabilities.

ii. These pro forma statements summarize the proceeds from sale of investment securities, purchase of investments and withdrawal from investments into one line item called Change in AWUL (Assets whose use is limited) and investments.

iii. These pro forma statements summarize all principal payments on the senior bonds.

http://emma.msrb.org/Home

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