Independent Auditor s Report

Combined Financial Statements Christian Care Retirement Apartments, Inc. Christian Care Assisted Living (Phoenix), Inc. Christian Care Mesa, Inc. www.eidebailly.com

Table of Contents Independent Auditor s Report... 1 Combined Financial Statements... 3 Combined Statements of Financial Position... 3 Combined Statements of Activities... 4 Combined Statements of Cash Flows... 5... 7

Independent Auditor s Report Board of Directors Christian Care Retirement Apartments, Inc.; Phoenix, Arizona Report on the Financial Statements We have audited the accompanying combined financial statements of Christian Care Retirement Apartments, Inc.;, which comprise the combined statements of financial position as of, and the related combined statements of activities and cash flows for the years then ended, and the related notes to the combined financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these combined 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 combined 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 combined 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 combined financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the combined 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 combined 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 combined financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. www.eidebailly.com 1850 N. Central Ave., Ste. 400 Phoenix, AZ 85004-4624 T 602.264.5844 F 602.277.4845 EOE 1

Opinion In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Christian Care Retirement Apartments, Inc.; Christian Care Assisted Living (Phoenix), Inc.;, as of, and the changes in their combined net assets and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Phoenix, Arizona March 23, 2015 2

Combined Statements of Financial Position Assets 2014 2013 Current Assets Cash and cash equivalents $ 947,381 $ 353,487 Investments 739,121 - Tenant accounts receivable, net 232,607 365,442 Prepaid expenses 159,092 56,016 Inventory 94,217 88,860 Restricted deposits under bond indenture 383,382 721,723 Due from related parties 2,466,736 1,907,358 Total current assets 5,022,536 3,492,886 Interest rate cap, net of accumulated amortization of $44,480 in 2014 and $133,441 in 2013 42,626 87,107 Restricted deposits under bond indenture 1,359,434 3,104,741 Property and equipment, net 19,114,149 19,854,846 Due from related parties 6,439,352 5,038,352 Bond issuance costs, net of accumulated amortization of $729,155 in 2014 and $798,846 in 2013 1,925,613 2,042,303 Total assets $ 33,903,710 $ 33,620,235 Liabilities and Net Assets (Deficit) Current Liabilities Accounts payable $ 337,876 $ 356,750 Accrued expenses 549,000 643,417 Tenant security and reservation deposits 403,910 360,330 Deferred revenue - prepaid rent 166,246 145,404 Due to related parties 548,913 229,252 Current portion of notes payable 26,175 26,825 Current portion of bonds payable 890,000 725,000 Total current liabilities 2,922,120 2,486,978 Long-Term Liabilities, Less Current Portion Notes payable 52,591 73,780 Bonds payable 28,775,000 30,535,000 Bond premium 187,940 - Total long-term liabilities 29,015,531 30,608,780 Net Assets (Deficit) Unrestricted net assets 4,959,001 3,157,993 Unrestricted net deficit - related to refinancing (2,992,942) (2,633,516) Total net assets (deficit) 1,966,059 524,477 Total liabilities and net assets (deficit) $ 33,903,710 $ 33,620,235 See 3

2014 Temporarily Unrestricted Restricted Total Revenues, Gains, and Other Support Tenant rental and service income $ 17,668,792 $ - $ 17,668,792 Financial income 54,729-54,729 Contributions 40,244-40,244 Insurance proceeds - - - Other income 56,933-56,933 Total revenues, gains, and other support 17,820,698-17,820,698 Expenses Operating 10,514,692-10,514,692 Administrative 3,532,181-3,532,181 Financial expenses 704,091-704,091 Loss on disposal 14,458-14,458 Depreciation and amortization 1,254,268-1,254,268 Total expenses 16,019,690-16,019,690 Operating Income 1,801,008-1,801,008 Loss on Refinancing 359,426-359,426 Revenues in Excess of Expenses and Change in Net Assets (Deficit) 1,441,582-1,441,582 Net Assets (Deficit), Beginning of Year 524,477-524,477 Net Assets, End of Year $ 1,966,059 $ - $ 1,966,059 See

Combined Statements of Activities Years Ended 2013 Temporarily Unrestricted Restricted Total $ 16,687,197 $ - $ 16,687,197 810-810 16,342-16,342 82,391-82,391 109,598-109,598 16,896,338-16,896,338 10,018,173-10,018,173 2,922,631-2,922,631 741,481-741,481 28,476-28,476 1,188,319-1,188,319 14,899,080-14,899,080 1,997,258-1,997,258 - - - 1,997,258-1,997,258 (1,472,781) - (1,472,781) $ 524,477 $ - $ 524,477 4

Combined Statements of Cash Flows Years Ended 2014 2013 Cash Flows from Operating Activities Change in net assets $ 1,441,582 $ 1,997,258 Adjustments to reconcile change in net assets to net cash from operating activities Depreciation 1,155,288 1,094,000 Amortization of bond issuance costs 98,980 94,319 Amortization of interest rate cap 44,481 44,479 Loss on disposal of property and equipment 14,458 28,476 Loss on bond refinance 359,426 - Decrease (increase) in Tenant accounts receivable, net 132,835 (137,511) Miscellaneous receivables - 31,574 Prepaid expenses (103,076) (4,333) Inventory (5,357) (9,497) Due from affiliates (65,017) 543,547 Increase (decrease) in Accounts payable (18,874) 30,975 Accrued expenses (94,417) 71,545 Tenant deposits 43,580 29,850 Deferred revenue - prepaid rent 20,842 109,056 Total adjustments 1,583,149 1,926,480 Net Cash from Operating Activities 3,024,731 3,923,738 Cash Flows used for Investing Activities Investing activities with affiliates (1,401,000) (1,860,000) Increase in restricted deposits under bond indenture 2,083,648 (264,093) Purchase of certificate of deposit (739,121) - Purchase of property and equipment (429,049) (584,867) Net Cash used for Investing Activities (485,522) (2,708,960) Cash Flows used for Financing Activities Financing activities with affiliates (174,700) (174,700) Payments on notes payable (21,839) (24,603) Bond premium 187,940 - Bond issuance costs (341,716) (3,710) Retirement of bond principal (1,595,000) (820,000) Net Cash used for Financing Activities (1,945,315) (1,023,013) Net Increase in Cash and Cash Equivalents 593,894 191,765 Cash and Cash Equivalents, Beginning of Year 353,487 161,722 Cash and Cash Equivalents, End of Year $ 947,381 $ 353,487 See 5

Combined Statements of Cash Flows Years Ended 2014 2013 Supplemental Disclosures of Cash Flows Information Cash paid during the year for interest $ 428,970 $ 319,973 Supplemental Disclosures of Noncash Financing Activities Refinance of bonds payable $ 2,965,000 $ - Supplemental Disclosures of Noncash Financing Activities Amount financed to purchase server under note payable $ - $ 81,578 See 6

Note 1 - Nature of Operations and Significant Accounting Policies These combined financial statements include the amounts of Christian Care Retirement Apartments, Inc.; (the Organizations). All significant intercompany transactions have been eliminated in the preparation of the combined financial statements. Christian Care Retirement Apartments, Inc. operates a 265-unit apartment complex with services in Phoenix, Arizona for low to middle-income seniors. Significant rental operations began in April 1989. Christian Care Assisted Living (Phoenix), Inc. operates a 40-unit assisted living complex in Phoenix, Arizona for the low to middle-income seniors. Significant rental operations began in March 1998. Christian Care Mesa, Inc. operates a 194-unit apartment complex with services and a 42-unit assisted living complex for low to middle-income seniors. Both complexes are located in Mesa, Arizona. Significant rental operations began in May 1998. See Note 2 for description of related party organizations and disclosures. Basis of Accounting and Presentation The combined financial statement presentation of the Organizations is prepared on the accrual basis and accordingly reflects all significant receivables, payables, and other liabilities. The Organizations report information regarding their financial position and activities according to three classes of net assets: unrestricted net assets, temporary restricted net assets, and permanently restricted net assets. Cash and Cash Equivalents The Organizations consider all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents excluding deposits restricted under bond indentures. The Organizations maintain cash in banks which, at times, may exceed federally insured limits. Tenant Accounts Receivable Accounts receivable are primarily non-interest bearing amounts due from third party insurance providers for certain services provided for residents. Certain receivables are uncollateralized resident obligations, due for services rendered. Payments of accounts receivable are allocated to the specific invoices identified on a resident or third party remittance advice or applied to the earliest unpaid claim. The carrying amount of accounts receivable may be reduced by a valuation allowance that reflects management s best estimate of uncollectible amounts. Management reviews all accounts receivable balances that exceed thirty days from the invoice date, and based on an assessment of creditworthiness, estimates the portion, if any, of the balance that will not be collected. As of, the allowance for uncollectible accounts was $0 for both years. Inventory Inventory is stated at the lower of cost or market using the FIFO (first in, first out) method. As of December 31, 2014 and 2013, inventory consisted of food and gift shop items. 7

Investments The Organizations have adopted generally accepted accounting principles in which investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the combined statements of financial position. Material unrealized gains and losses are included in the change in net assets. Investment income and gains restricted by a donor are reported as increases in unrestricted net assets if the restrictions are met (either by passage of time or by use) in the reporting period in which the income and gains are recognized. Fair Value Measurements The Organizations have determined the fair value of certain assets and liabilities in accordance with the provisions of generally accepted accounting principles, which provides a framework for measuring fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy has been established, which prioritizes the valuation inputs into three broad levels. Level 1 inputs consist of quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the related asset or liability. Level 3 inputs are unobservable inputs related to the asset or liability. The Organizations determine the fair value measurement valuation policies and procedures, including those for Level 3 recurring measurements. The Organizations determine if the current valuation techniques used in fair value measurements are still appropriate and evaluate and adjust the unobservable inputs used in the fair value measurements based on current market conditions and third party information. Fair Value of Financial Instruments Generally accepted accounting principles require disclosure of an estimate of fair value of certain financial instruments. The Organization s significant financial instruments include bonds payable. For these financial instruments, carrying values approximate fair value. Bond Issuance Costs Bond issuance costs are comprised of the cost to issue the original bonds and costs associated with remarketing the bonds in 2010 and costs of the bonds refinanced in 2014. These costs are being amortized on a straight-line basis over the bond term. Interest Rate Cap The costs associated with obtaining the interest rate cap, effective December 31, 2010 (see Note 8) are being amortized over a period of five years (the duration of the cap agreement). 8

Property and Equipment Property and equipment acquisitions are recorded at cost, if purchased, or at estimated fair market value if received as a donation. Additions, renewals, and betterments greater than $1,000 are generally capitalized, whereas expenditures for maintenance and repairs are charged to expense. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. The Organizations review their property and equipment whenever events indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recorded when the sum of the future cash flows is less than the carrying amount of the asset. An impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. No impairment loss was recorded for property and equipment for the years ended. Resident Revenues Resident revenues are recorded at amounts billed to and paid by residents at rates established by management after market studies are performed. The rates are approved by the board during the budgeting process. The tenant rental leases or residency agreements in assisted living expire on various dates depending on the lease term, which can vary from 30 days to one year. After expiration of the initial lease term, the lease is normally renewed annually for the residential living apartment units and month to month for the assisted living units. Revenues in Excess of Expenses Revenues in excess of expenses excludes unrealized gains and losses on investments, transfers of assets to and from related parties for other than goods and services, and contributions of long-lived assets, including assets acquired using contributions which were restricted by donors. Contributions The Organizations account for contributions using generally accepted accounting principles in which contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and/or nature of any donor restrictions. Recognition of Donor Restricted Contributions Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets depending on the nature of the restriction. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of 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 and those differences could be material. 9

Advertising Advertising costs are expensed as incurred. Advertising expense was approximately $442,170 and $171,312 for the years ended, respectively. Income Taxes The Organizations are organized as Arizona nonprofit corporations and have been recognized by the Internal Revenue Service (IRS) as exempt from federal income taxes under Section 501(a) of the Internal Revenue Code as organizations described in Section 501(c)(3) and have been determined not to be private foundations under Section 509(a)(2). Accordingly, contributions to them qualify for the charitable contribution deduction under Section 170(b)(1)(A). Each organization is annually required to file a Return of Organization Exempt from Income Tax (Form 990) with the IRS. In addition, the Organizations are generally subject to income tax on net income that is derived from business activities that are unrelated to their exempt purposes. Management has determined the Organizations have no taxable unrelated business income and they have not filed Exempt Organization Business Income Tax Returns (IRS Forms 990-T). Management believes that it has appropriate support for any income tax positions taken, and, as such, does not have any uncertain tax positions that are material to the financial statements. The entities would recognize future accrued interest and penalties related to unrecognized tax benefits and liabilities in income tax expense if such interest and penalties are incurred. Functional Expenses The costs of providing various programs and other activities are summarized on a functional basis as follows for December 31: 2014 2013 Program $ 12,487,509 $ 11,976,449 Administration 3,532,181 2,922,631 Total expenses $ 16,019,690 $ 14,899,080 Subsequent Events The Organizations have evaluated subsequent events through March 23, 2015, the date which the combined financial statements were available to be issued. 10

Note 2 - Related Party Transactions The Organizations are components of the Christian Care Companies. The Christian Care Companies are comprised of non-profit corporations sponsored by the non-denominational Christian Churches of Arizona. The corporations are governed by a common Board of Directors and share administrative facilities and employees. Related entities include the following: Christian Care Foundation, Inc.; Christian Care Tucson, Inc.; Christian Care Mesa II, Inc.; Christian Care Mesa III, Inc.; Christian Care Nursing Center, Inc.; Christian Care Manor I, Inc.; Christian Care Manor II, Inc.; Christian Care Manor III, Inc.; Christian Housing Mesa, Inc.; Christian Housing Cottonwood, Inc.; Christian Care Cottonwood, Inc.; Christian Care Cottonwood III, Inc.; Christian Care Cottonwood IV, Inc.; Christian Care Cottonwood V, Inc.; Christian Care Cottonwood VI, Inc.; Christian Care Cottonwood VII, Inc.; Christian Care Cottonwood VIII, Inc.; Christian Care California, Inc.; Christian Care Management, Inc. (MGT); Christian Care Management II, Inc.; Christian Care Holding Company, Inc. (HC); and Christian Care Surprise, Inc. The Organizations and Christian Care Management, Inc. entered into a management agreement under which the Organizations are to pay management fees to Christian Care Management, Inc. of 5% of each organization s gross receipts, subject to restrictions imposed by bond covenants. During 2014 and 2013, $879,576 and $835,657, respectively, was paid in management fees. In the normal course of business, the Organizations pay shared expenses for a variety of related affiliates and have shared expenses paid for them by a variety of related affiliates. These shared expenses are repaid once a month. The Organizations may also advance funds to MGT or HC expecting to be repaid as funds are available. The payroll and benefits for the employees working on the Organizations campuses is paid through MGT and reimbursed every two weeks. In 2014 and 2013, expenses including payroll paid by affiliates on the Organizations behalf, totaled $8,852,695 and $8,367,622, respectively. Expenses paid by the Organizations on behalf of affiliates totaled $652,307 and $558,762, respectively. Net cash was advanced from the Organizations to affiliates in 2014 and 2013 totaling $1,929,846 and $1,625,300, respectively. Net cash advanced to the Organizations from affiliates in 2014 and 2013 totaled $0 for both years. Note 3 - Investments During the year, the Organizations acquired three brokered bank certificates of deposit in the amount of $245,000 each. The investment is recorded at market value plus any accrued interest with a value of $739,121 at December 31, 2014. Interest rates on the investments are 2.67% - 2.75% with maturity dates of September 23, 2020 and 2025. Note 4 - Fair Value Measurements The Organizations determine the fair value of financial instruments consistent with FASB ASC 820, Fair Value Measurements and Disclosures. This standard clarifies the definitions of fair value for financial reporting, establishes a hierarchical disclosure framework for measuring fair value, and requires additional disclosures about the use of fair value measurements. 11

The standard provides a consistent definition of fair value which focuses on an exit price which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date. The three-level hierarchy for fair value measurements is defined as follows: Level 1 Valuation is based on observable inputs using quoted prices in active markets for identical assets that are accessible at the measurement date. Level 2 Valuation is based on inputs from sources other than quoted prices in active markets that are either directly or indirectly observable as of the reporting date. This may include quoted prices for similar assets in an active market, quoted prices for similar assets in a market that is not as active, or valuation methods using models, interest rates and yield curves as observable inputs. Level 3 Valuation is based on unobservable inputs for the asset, reflecting assumptions that a market participant would use in pricing the asset, to the extent that observable inputs (Level 1 and 2) are not available. Level 3 assets include situations where there is little or no market activity for the investment and significant management judgment or estimates are required. Following is a description of the valuation methodologies used for assets measured at fair value. Fixed income securities Valued at fair value of the shares held at year end. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Organizations believe 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. The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. These classifications (Level 1, 2, and 3) are intended to reflect the observability of inputs used in the valuation of the future contracts and are not necessarily an indication of risk or liquidity. The fair values of the Organizations financial assets that are measured on a recurring basis as of December 31, 2014, are as follows: 2014 Level 1 Level 2 Level 3 Total Fixed income securities $ - $ 735,000 $ - $ 735,000 Total investments $ - $ 735,000 $ - $ 735,000 12

Note 5 - Restricted Deposits Under Bond Indenture As a requirement of the 2005 Senior Living Facilities Revenue Bonds (see Note 8) certain trustee-held funds were established. Their use is restricted to retiring bond principal and interest, operating reserve, bond reserve, and funding for various items. The reserve funds held by the trustee may exceed federally insured limits at times. The balances of the funds were as follows as of December 31: 2014 2013 Debt service interest funds $ 35,062 $ 103,719 Debt service principal fund 93,430 300,118 Capital and maintenance fund 125,341 110,640 Tax and insurance escrow fund 129,549 207,246 Debt service reserve funds 1,219,416 2,964,602 Other funds 140,018 140,139 1,742,816 3,826,464 Less amount shown as current (383,382) (721,723) $ 1,359,434 $ 3,104,741 The above funds were held as follows at December 31: 2014 2013 Certificates of deposit $ 900,000 $ 2,078,000 Treasury money market funds 842,816 1,748,464 $ 1,742,816 $ 3,826,464 Note 6 - Property and Equipment The balances of major classes of property and equipment were as follows at December 31: 2014 2013 Land and improvements $ 2,780,467 $ 2,733,659 Construction in progress 30,475 12,669 Buildings 31,510,805 31,358,306 Building equipment 1,944,303 1,845,963 Furniture and fixtures 506,784 488,398 Vehicles 378,664 378,664 Computers and equipment 525,173 486,378 37,676,671 37,304,037 Accumulated depreciation (18,562,522) (17,449,191) $ 19,114,149 $ 19,854,846 13

Depreciation expense charged to operations was $1,155,288 and $1,094,000 for the years ended December 31, 2014 and 2013, respectively. Substantially all of the property and equipment has been pledged as collateral with regard to the bonds payable (see Note 8). Note 7 - Notes Payable Notes payable consisted of the following at December 31: 2014 2013 Vehicle loan, payable in monthly installments of $939, including interest at 5.75%, due October 2016, collateralized $ 19,486 $ 29,303 by the vehicle. Server lease, payable in monthly installments of $1,662 including interest at 8.21%, due May 2018, with a bargain purchase option of $1. 59,280 70,608 Other - 694 Total notes payable $ 78,766 $ 100,605 Future minimum payments on the notes are as follows at December 31, 2014: 2015 $ 26,175 2016 25,945 2017 16,317 2018 10,329 $ 78,766 Note 8 - Bonds Payable During 2005, the Industrial Development Authority of the County of Maricopa, Arizona (Maricopa IDA) issued Adjustable Rate Senior Living Facilities Revenue Refunding Bonds (Christian Care Retirement Apartments, Inc.), Series 2005A in the amount of $30,750,000. The Maricopa IDA also issued Subordinate Senior Living Facilities Revenue Refunding Bonds (Christian Care Retirement Apartments, Inc.), Series 2005B in the amount of $7,600,000. The Series 2005A Bonds were issued for the purpose of refinancing three multifamily rental housing projects, one in Mesa, Arizona, and two in Phoenix, Arizona. The bonds are subject to optional and mandatory redemption and to mandatory tender prior to maturity as described in the bond documents. The bonds are secured by the real and personal property of the Organizations. From September 28, 2005 to December 15, 2010, the bonds bore interest at the Initial Reset Rate and were to be converted to a weekly variable rate, subject to terms and conditions of the Indenture. During the Initial Reset Period, the bonds bore interest at a rate of 4.855%, interest was payable semiannually on December 15 and June 15 each year, and the first payment commenced on December 15, 2005. 14

On December 15, 2010, the outstanding senior bonds in the amount of $28,700,000 were converted from a fixed rate to a weekly variable rate based on the auction of Fannie Mae 7-day paper. Weekly rates varied between.02% and.13% during the year ending December 31, 2014 and between.05% and.24% during the year ending December 31, 2013. Weekly rates are capped at a maximum of 6% through December 15, 2015. Additional interest related costs of about 1.6% are incurred monthly for guarantee, servicing, liquidity, remarketing, interest rate cap amortization, and related fees. As of, the bonds are being redeemed in increments of $100,000 as principal redemption funds are available. The Series 2005B Bonds were issued to Christian Care Retirement Apartments, Inc.; Christian Care Assisted Living (Phoenix), Inc.; for the purpose of providing funds for a portion of the cost of (i) refunding certain prior bonds issued to finance the costs of equipping: (a) a 265-unit senior living facility located at 2002 West Sunnyside Drive, Phoenix, Arizona; (b) a 40-unit assisted living facility at 11818 N. 19th Avenue in Phoenix, Arizona; and (c) a 42-unit assisted living facility and a 194-unit senior living facility located at 6945 East Main Street, Mesa, Arizona; (ii) to fund a debt service reserve related to the Subordinate Bonds; (iii) to fund an operating reserve; and (iv) to pay certain costs of issuing the Subordinate Bonds. The bonds are subject to mandatory sinking fund requirements, extraordinary and optional redemption prior to their stated maturity date and are secured by the real and personal property of the Organizations. Interest is payable semiannually on January 1 and July 1 each year, and the first payment commenced on January 1, 2006. The Series 2005B Bonds were refinanced during 2014 and are currently Series 2014 Bonds. The terms of the contract which include usage of the funds and bond covenants remain unchanged but the interest rate fluctuates from 2-4% with a maturity date of January 1, 2024. The Organizations paid a premium as part of the refinance in the amount of $187,940 which is being amortized over the life of the bond (10 years). Bond issuance costs were $341,403 and are also being amortized over the life of the bond. The Organization experienced a loss on refinance in the amount of $359,426. The bonds principal amounts, interest rates, and maturities are as follows at December 31: 2014 2013 Series 2005A bonds, at variable rates capped at 6%, maturity date of September 15, 2035. Interest rate at $ 26,700,000 $ 27,300,000 December 31, 2013 was 0.13%. Series 2005B bonds, at 6.5%, maturity date of January 1, 2036-3,960,000 Series 2014B bonds, at 2-4%, maturity date of January 1, 2024 2,965,000 - $ 29,665,000 $ 31,260,000 The loan agreements obligate the Organizations to pay to a trustee, for the account of the issuer, ratable monthly payments equal to the amounts required to pay the interest coming due on each interest payment date with respect to the bonds, plus the principal amounts on the bonds maturing or required to be redeemed, as defined. Interest expense was $691,441 and $736,181 for the year ended, respectively. 15

Future minimum payments on the bonds are as follows at December 31, 2014: 2015 $ 890,000 2016 995,000 2017 1,005,000 2018 1,015,000 2019 1,125,000 Thereafter 24,635,000 $ 29,665,000 Under the terms of the bond agreements, the Organizations are required to (i) maintain a debt service coverage ratio of at least 1.20, (ii) make monthly payments to specified reserve accounts, and (iii) attain minimum occupancy percentages of 85%. The loan agreement also requires the furnishing of periodic financial statements and reports, maintenance of continuous insurance coverage, restrictions as to disposition of assets, and other conditions. As of December 31, 2014, the Organizations were in compliance with these covenants. Under the terms of the Series 2005 regulatory agreement, at least 20% of the rental units of the Organizations are required to be rented to individuals whose income is 60% or less of area median income (adjusted for family size), as determined by the United States Department of Housing and Urban Development under Section 8 of the Housing Act of 1937, as amended. Note 9 - Revolving Line of Credit During 2012, Christian Care Retirement Apartments, Inc. obtained a $500,000 unsecured revolving line of credit with a financial institution. This agreement matured June 18, 2014 and was renewed for one year with a new maturity date of June 18, 2015. At December 31, 2014, the maximum amount available to borrow under the agreement was $500,000, with no amounts owed. The line of credit bears interest at the prime rate plus 1.0% (4.25% at December 31, 2014) or 5.0%, whichever is greater. The line of credit is guaranteed by Christian Care Holding Company, Inc., a related party. Note 10 - Employees Tax Deferred Annuity Program The Organizations have a tax-deferred annuity program under Section 403(b) of the Internal Revenue Code. An employee is eligible to voluntarily participate in the plan if they are scheduled to work at least 20 hours per week. In addition, once an employee reaches age 18 and has one year of service, the Organizations will begin making matching contributions. The Organizations will match 100% of qualified employees contributions up to 3% of the employees gross pay. The total annual maximum amount that can be contributed, including both employees and employer s contribution, is 25% of the employees pay. The contribution charged to expense for the years ended was $93,106 and $74,057, respectively. Note 11 - Property Taxes The Organizations have an agreement with Maricopa County for an exemption from property taxes. The Organizations apply annually for the exemption. 16