WHEATON IL SENIOR HOLDINGS, LLC CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2017 AND 2016

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1 CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED CliftonLarsonAllen LLP WEALTH ADVISORY OUTSOURCING AUDIT, TAX, AND CONSULTING

2 TABLE OF CONTENTS YEARS ENDED INDEPENDENT AUDITOR S REPORT 1 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS 3 CONSOLIDATED STATEMENTS OF OPERATIONS 4 CONSOLIDATED STATEMENTS OF MEMBERS EQUITY 5 CONSOLIDATED STATEMENTS OF CASH FLOWS 6 7

3 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITOR S REPORT Board of Managers Wheaton IL Senior Holdings, LLC Report on the Financial Statements We have audited the accompanying consolidated financial statements of Wheaton IL Senior Holdings, LLC which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the related consolidated statements of operations, members equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the basis of accounting described in Note 1; this includes determining the basis of accounting is an acceptable basis for the preparation of the consolidated financial statements in the circumstances. Management is also responsible for the design, implementation, and maintenance of the internal control relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the 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 consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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. (1)

4 Board of Managers Wheaton IL Senior Holdings, LLC Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wheaton IL Senior Holdings, LLC as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended in accordance with the basis of accounting described in Note 1. Basis of Accounting We draw attention to Note 1 of the consolidated financial statements, which describes the basis of accounting. The consolidated financial statements are prepared on the basis of accounting as described in Note 1, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. a CliftonLarsonAllen LLP West Des Moines, Iowa February 28, 2018 (2)

5 CONSOLIDATED BALANCE SHEETS ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 9,506,505 $ 9,455,270 Accounts Receivable 1,999,536 2,027,052 Prepaid Expenses and Other 698, ,584 Total Current Assets 12,204,043 12,163,906 Assets Limited as to Use or Restricted 1,786,500 1,795,500 Investment in Community 138,245, ,415,243 Total Assets $ 152,235,855 $ 144,374,649 LIABILITIES AND MEMBERS' EQUITY CURRENT LIABILITIES Long-Term Debt, Current Portion $ 1,815,000 $ 1,886,500 Accounts Payable, Trade 517, ,918 Accounts Payable, Affiliates 852, ,368 Accrued Expenses 1,608,082 1,613,131 Accrued Interest - 99,670 Refundable Resident Deposits 313, ,599 Contract Liabilities From Residents, Current Portion 41, ,480 Total Current Liabilities 5,147,764 5,583,666 Long-Term Debt, Less Current Portion 42,200,800 44,015,800 Loans from Residents 30,166,535 25,878,452 Resident Contract Liability 17,991,036 19,508,346 Total Liabilities 95,506,135 94,986,264 MEMBERS' EQUITY 56,729,720 49,388,385 Total Liabilities and Members' Equity $ 152,235,855 $ 144,374,649 See accompanying Notes to Consolidated Financial Statements. (3)

6 CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2017 AND REVENUES Nonrefundable Entrance Payments $ 2,564,994 $ 2,526,368 Apartment Revenues 12,755,917 12,305,714 Health Center Revenues 17,538,955 17,703,859 Other Revenues 12,873 14,111 Total Revenues 32,872,739 32,550,052 OPERATING EXPENSES General and Administrative 5,789,440 5,366,958 Plant 3,008,391 2,936,839 Housekeeping 1,429,175 1,512,178 Dietary 4,369,470 4,547,761 Medical and Resident Care 13,475,974 13,920,691 Total Operating Expenses 28,072,450 28,284,427 INCOME FROM OPERATIONS 4,800,289 4,265,625 OTHER INCOME (EXPENSES) Interest Income 1, Interest Expense (1,395,984) (1,173,238) Professional Non-Operating Expense (339,162) - Total Other Expense (1,733,870) (1,172,675) NET INCOME 3,066,419 3,092,950 Change in Unrealized Appreciation of Investment in Community 4,889,250 4,181,751 Change in Unrealized Appreciation of Resident Loans and Resident Contract Liability 659, ,030 NET INCREASE IN MEMBERS' EQUITY RESULTING FROM OPERATIONS $ 8,615,427 $ 7,595,731 See accompanying Notes to Consolidated Financial Statements. (4)

7 CONSOLIDATED STATEMENTS OF MEMBERS EQUITY YEARS ENDED BALANCE - BEGINNING $ 49,388,385 $ 41,081,397 Contributions from Members 525,000 3,500,000 Distributions to Members (1,799,092) (2,788,743) Net Increase in Members' Equity Resulting from Operations 8,615,427 7,595,731 BALANCE - END OF YEAR $ 56,729,720 $ 49,388,385 See accompanying Notes to Consolidated Financial Statements. (5)

8 CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED CASH FLOWS FROM OPERATING ACTIVITIES Net Increase in Members' Equity Resulting from Operations $ 8,615,427 $ 7,595,731 Adjustments to Reconcile to Members' Equity Resulting from Operations to Net Cash Provided by Operating Activities: Change in Unrealized Appreciation of Investment in Community (4,889,250) (4,181,751) Change in Unrealized Appreciation of Resident Loans and Resident Contract Liability (659,758) (321,030) Changes in Operating Assets and Liabilities: Accounts Receivable (313,842) 531,664 Prepaid Expenses and Other (16,418) 783 Accounts Payable, Trade and Affiliates (124,951) 384,632 Accrued Expenses (5,049) (103,031) Accrued Interest (99,670) 99,670 Refundable Resident Deposits, Net 284, ,662 Net Cash Provided by Operating Activities 2,791,116 4,583,330 CASH FLOWS FROM INVESTING ACTIVITIES Additions to Investment in Community (2,940,819) (3,425,851) Increase in Assets Whose Use is Limited or Restricted 9,000 4,500 Net Cash Used by Investing Activities (2,931,819) (3,421,351) CASH FLOWS FROM FINANCING ACTIVITIES Contributions from Members 525,000 3,500,000 Distributions to Members (1,799,092) (2,788,743) Proceeds from Resident Loans 8,353,503 6,647,738 Repayment of Resident Loans (2,805,259) (1,884,284) Repayment of Resident Contracts (2,195,714) (2,881,904) Repayment of Long-Term Debt (1,886,500) (1,533,800) Net Cash Provided by Financing Activities 191,938 1,059,007 NET INCREASE IN CASH AND CASH EQUIVALENTS 51,235 2,220,986 Cash and Cash Equivalents - Beginning of Year 9,455,270 7,234,284 CASH AND CASH EQUIVALENTS- END OF YEAR $ 9,506,505 $ 9,455,270 SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES Cash Paid During the Year for Interest $ 1,395,984 $ 1,173,238 Redemption of Resident Loans and Resident Contract Liability in Satisfaction of Outstanding Accounts Receivable Balance $ 341,358 $ 255,984 See accompanying Notes to Consolidated Financial Statements. (6)

9 NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization Wheaton IL Senior Holdings, LLC, a Delaware limited liability company (WSH), was formed on February 6, WSH owns a 100% interest in Wheaton IL Senior Property, LLC (PropCo), a Delaware limited liability company, and Wyndemere Senior Care, LLC (OpCo), a Delaware limited liability company. PropCo owns a 100% interest in Wheaton IL SNF Property, LLC (SNF PropCo), a Delaware limited liability company. LCS Wyndemere II LLC (LCSWII), an Iowa limited liability company, owns a 10% interest and ROC Seniors Housing Holdings, LLC (ROC), a Delaware limited liability company (the Managing Member), owns a 90% interest in WSH. LCSWII and ROC, collectively the Capital Balance Members, formed the Company to acquire, further develop, manage, own, and operate a continuing care retirement community in Wheaton, Illinois (the Community). The Community was acquired on March 2, 2015 from LCS Wyndemere LLC and Westminster-LCS LLC (the Former Owners), who had acquired the Community from Central Dupage Health in March Basis of Accounting The Company prepares its consolidated financial statements under the basis of accounting described in Accounting Standards Codification Topic 946 Financial Services Investment Companies (ASC 946). The Company does not qualify as an investment company in accordance with this standard; therefore the presentation is considered an other comprehensive basis of accounting. However, consistent with industry practice for real estate entities that are majority owned by entities that do qualify as Investment Companies, the Company has elected to present the accompanying consolidated financial statements using the basis of accounting discussed above. ASC 946 uses fair value accounting which requires the use of certain estimates and assessments by management that is not in management s control. Because of the inherent uncertainty of valuation, amounts ultimately realized may vary from their fair values presented and the difference could be material. Certain titles of statements and disclosures are not in line with the Investment Companies Audit Guide, but are deemed immaterial to the consolidated financial statements. Principals of Consolidation The accompanying consolidated financial statements include the accounts of WSH, SNF PropCo, PropCo, and OpCo, collectively, the Company. Intercompany transactions and balances have been eliminated in the preparation of the accompanying consolidated financial statements. Use of Estimates In preparing the consolidated financial statements in accordance with fair value basis of accounting, management makes estimates and assumptions which affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions. Certain estimates require an assessment of factors not within management s control. Amounts ultimately realized from the investment may vary significantly from fair values presented and the difference could be material to the consolidated financial statements. (7)

10 NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Use of Estimates (Continued) Although the estimated fair values represent subjective estimates, management believes these estimated fair values are reasonable approximations of market prices and the aggregate estimated values of the Investment in Community, Loans from Residents, and Resident Contract Liability are fairly stated as of December 31, 2017 and Cash and Cash Equivalents The Company considers investments with maturities of three months or less when purchased to be cash equivalents. Accounts Receivable Accounts receivable are stated at net realizable value. Management determines the value by reviewing each account for its potential for collection. Assets Limited as to Use or Restricted The Company maintains an operating reserve escrow account required by the state of Illinois, equal to six months debt service (excluding balloon payments). Releases from the operating reserve require the approval of the Illinois Department of Public Health. The balance at December 31, 2017 and 2016 was $1,786,500 and $1,795,500, respectively. Fair Value of Financial Instruments The fair value of financial instruments is determined by reference to market data and other valuation techniques, as appropriate. Investment in Community, Loans from Residents and Resident Contract Liability The Investment in Community, Loans from Residents and Resident Contract Liability are carried at fair value as described in Note 5. The change in the difference between cost and the fair value of the Investment in Community is reflected as Unrealized Appreciation on Investment in Community on the consolidated statement of operations. The change in the difference between cost and the fair value of Loans from Residents and the Resident Contract Liability is reflected as Unrealized Appreciation of Resident Loans and Resident Contract Liability on the consolidated statement of operations. The Company s investments are exposed to various market risks. It is reasonably possible that changes in the values of investments will occur in the near term and that such changes could materially affect the amounts reported. Income Taxes The Company is not subject to income taxes. Each Capital Balance Member is taxed on its share of the Company s taxable income, whether or not distributed, and reports on its tax return, its share of any net income or loss of the Company. As a consequence, no provision is made in these consolidated financial statements for income taxes, or penalties and interest thereon. (8)

11 NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes (Continued) Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the Company and recognize a tax liability (or asset) for an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. Management has evaluated their material tax positions and determined there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the consolidated statements. Revenue and Expenses The residents pay an Entrance Payment, net of funds previously deposited, consisting of a First Person Fee (and Second Person Fee, if applicable) and a Loan. The First Person Fee (and Second Person Fee, if applicable) is recorded as Nonrefundable Entrance Payments revenue when received. Residents also pay a monthly fee, determined annually. The monthly fee may only be used for purposes specified in the Residency Agreements. Health Center Revenues The Community has agreements with third-party payors that provide for payments to the Company at amounts different from the Company s established rates. Payment arrangements include prospectively determined per diem payments and are not subject to retrospective adjustment. Health center revenues are reported at the estimated net realizable amounts from patients, third-party payors and others for services rendered at the time the service is provided. See Note 7 for additional information on health center revenues. Recent Accounting Pronouncements In May 2014, the FASB issued ASU No , Revenue from Contracts with Customers ( ASU ). ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. The five-step model defined by ASU requires the Company to (i) identify the contracts with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when each performance obligation is satisfied. Revenue will be recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services. ASU may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). (9)

12 NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recent Accounting Pronouncements (Continued) The AICPA s Health Care Entities Revenue Recognition Task Force (Task Force) identified Type A or life care contracts as an implementation issue and submitted their interpretation of performance obligations, transaction price, and timing of satisfaction to the Financial Reporting Executive Committee (FinREC) in November The Company believes the Task Force submission will be finalized into the AICPA Revenue Recognition guide. The Task Force submission, paired with anticipated management elections, will result in no significant change to the timing of revenues recognized by the Company under its Residency Agreements or ancillary services. The Company is still evaluating the impact ASU will have on disclosures and treatment of costs incurred to acquire or fulfill Residency Agreements. At this time, management intends to adopt ASU using the modified retrospective approach for the fiscal year beginning January 1, In November 2016, the FASB issued ASU , Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force), which provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. ASU will be effective for the Company beginning on January 1, ASU must be applied using a retrospective transition method with early adoption permitted. The Company has reviewed the ASU and expects it to change how the Assets Limited as to Use or Restricted is presented on the statement of cash flows. In February 2016, the FASB issued ASU , Leases (Topic 842) ( ASU ) which supersedes the leasing guidance in Topic 840. ASU requires that lessees recognize assets and liabilities arising from operating leases among other changes. The lease agreement between PropCo and OpCo and SNF PropCo and SNF OpCo are and will continue to be eliminated for the purpose of these consolidated financial statements and ASU will not have any impact on the accounting or reporting of these lease agreements. NOTE 2 RELATED PARTY TRANSACTIONS The Company has a client services agreement with Life Care Services LLC (affiliated through common ownership with LCSWII), to provide management services relating to the operations of the Community. For the years ended December 31, 2017 and 2016, $901,212 and $900,000, of services has been expensed and earned under this agreement, respectively. At December 31, 2017 and 2016, the Company had a payable due to Life Care Services LLC of $11,118 and $11,629, respectively. The Company has a client services agreement with LCS Reliance LLC (affiliated through common ownership with LCSWII), to provide Health Center billing services relating to the operations of the Community. For the years ended December 31, 2017 and 2016, $114,000 and $98,400 of services has been expensed and earned under this agreement, respectively. At December 31, 2017 and 2016, the Company had a payable to LCS Reliance LLC of $9,500 and $0, respectively. (10)

13 NOTE 2 RELATED PARTY TRANSACTIONS (CONTINUED) The Company has an agreement with LCS Community Employment LLC (LCE) to provide employment services for the Community. At December 31, 2017 and 2016, the Company had a balance payable to LCE of $701,877 and $848,173, relating to salaries and benefits. During 2016, the Company engaged LCS Development LLC (affiliated through common ownership with LCSWII), to provide consulting regarding future development. For the years ended December 31, 2017 and 2016, $324,861 and $131,277 has been earned and placed into the Investment in Community, respectively. At December 31, 2017 and 2016, the Company had a balance payable to LCS Development LLC of $129,810 and $100,566, respectively. In the normal course of operations, the Company purchases from affiliates of LCSWII services for group purchasing, insurance, computing technology and related ancillary matters. NOTE 3 RESIDENCY AGREEMENTS As part of the 2010 purchase of the Community, the Former Owners acquired existing resident contracts that were initiated prior to March Included in the resident contracts are multiple contract types with repayment of the Entrance Payment made at the time a new resident purchases their apartment. This Resident Contract Liability has been recorded at fair value as discussed in Note 5. As part of the 2015 purchase of the Community and subsequent to the 2015 purchase of the Community, the Company acquired and has entered into Residency Agreements that were initiated after March These Residency Agreements with occupants and prospective occupants of the Community provide for the lifetime use of a living unit, under certain conditions. The residents pay an Entrance Payment, net of funds previously deposited, consisting of a First Person Fee (and Second Person Fee, if applicable) and a Loan which bears no interest and shall be repaid per the terms of the Residency Agreements. The Loan is recorded at its fair value as discussed in Note 5 while the First Person Fee is recognized as revenue in the year received. The Agreements also provide for the occupants to pay a monthly fee. NOTE 4 INVESTMENT IN COMMUNITY On March 2, 2015, the Company purchased the Community for $69,500,000 exclusive of closing costs, prorations, and liabilities assumed. The Community contains a total of 211 apartments and 26 dwelling units (Wyndemere), a licensed 209 bed health center (Wynscape at Wyndemere), and a 65 bed assisted living facility (Westbridge at Wyndemere). Costs incurred related to the design, development and financing of improvements to the Community are added to the Investment in Community. The Investment in Community has been recorded at fair value as discussed in Note 5. (11)

14 NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS The Company measures the fair value of financial instruments as required by the Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification, using a fair value hierarchy consisting of three input levels, generally ranging from the most objective to the most subjective. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset or liability s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgement, and considers factors specific to the investment. The Company assesses the levels of the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Company s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. For the years ended December 31, 2017 and 2016, there were no such transfers. If the fair value of a financial instrument held cannot be valued by reference to observable valuation measures for comparable companies, then the primary analytical method used to estimate the fair value of such financial instrument is the discounted cash flow method. A sensitivity analysis is applied to the estimated future cash flows using various factors depending on financial instrument, including assumed growth rate (in cash flows), capitalization rates (for determining terminal values), and appropriate discount rates to determine a range of reasonable values. The valuation based on the inputs determined to be the most probably is used as the fair value of the instrument. The determination of fair value using these methodologies takes into account consideration of a range of factors, including but not limited to the price at which the financial instrument was acquired, the nature of the financial instrument, local market conditions, current and projected operating performance, current debt service, discount rates of replacement instruments and financing transactions subsequent to the acquisitions of the financial instrument. These valuation methodologies involve a significant degree of judgment by the Company. A description of the valuation techniques applied to the Company s major categories of assets and liabilities measured at fair value on a recurring basis is as follows: Investment in Community The fair value is evaluated by the Company s Managing Member using the discounted cash flow method. In determining the projected cash flows, assumptions are determined using historical Community performance, projected Community performance and industry averages as provided by the National Investment Center for Seniors Housing & Care (NIC) and American Seniors Housing Association (ASHA). (12)

15 NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) Loans from Residents and Resident Contract Liability The fair value is calculated by discounting the contract amounts to present value using a discount rate consistent with subordinate debt in a portfolio of Continuing Care Retirement Communities with a risk level similar to that of the Community. The following table represents the Company s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31: Level Assets: Investment in Community $ 138,245,312 $ 130,415,243 Liabilities: Loans from Residents 30,166,535 25,878,452 Resident Contract Liability 18,032,545 19,811,826 Total $ 48,199,080 $ 45,690,278 Financial instruments classified as Level 3 in the fair value hierarchy represent the Company s investments in financial instruments in which the Company has used at least one significant unobservable input in the valuation model. The following table presents a reconciliation of activity for the Level 3 financial instruments for December 31, 2017: Investment in Community Balance - December 31, 2016 $ 130,415,243 Fixed Asset Additions 2,940,819 Change in Unrealized Appreciation of Investment in Community 4,889,250 Balance - December 31, 2017 $ 138,245,312 Resident Loans Balance - December 31, 2016 $ 25,878,452 Proceeds from Resident Loans 8,353,503 Repayment of Resident Loans (2,805,259) Redemption of Resident Loans in Satisfaction of Outstanding Accounts Receivable Balance (53,421) Transfer from Refundable Resident Deposits 157,388 Change in Unrealized Appreciation of Resident Loans (1,364,128) Balance - December 31, 2017 $ 30,166,535 Resident Contract Liability Balance - December 31, 2016 $ 19,811,826 Repayment of Resident Contracts (2,195,714) Redemption of Resident Contract Liability in Satisfaction of Outstanding Accounts Receivable Balance (287,937) Change in Unrealized Appreciation of Resident Contract Liability 704,370 Balance - December 31, 2017 $ 18,032,545 (13)

16 NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) The following table presents a reconciliation of activity for the Level 3 financial instruments for December 31, 2016: Investment in Community Balance - December 31, 2015 $ 122,807,641 Fixed Asset Additions 3,425,851 Change in Unrealized Appreciation of Investment in Community 4,181,751 Balance - December 31, 2016 $ 130,415,243 Resident Loans Balance - December 31, 2015 $ 21,745,980 Proceeds from Resident Loans 6,647,738 Repayment of Resident Loans (1,884,284) Redemption of Resident Loans in Satisfaction of Outstanding Accounts Receivable Balance (53,127) Transfer from Refundable Resident Deposits 642,060 Change in Unrealized Appreciation of Resident Loans (1,219,915) Balance - December 31, 2016 $ 25,878,452 Resident Contract Liability Balance - December 31, 2015 $ 21,997,702 Repayment of Resident Contracts (2,881,904) Redemption of Resident Contract Liability in Satisfaction of Outstanding Accounts Receivable Balance (202,857) Change in Unrealized Appreciation of Resident Contract Liability 898,885 Balance - December 31, 2016 $ 19,811,826 In accordance with ASU , the following table summarizes information about the Company s Level 3 fair value measurements as of December 31, 2017 and 2016: Fair Value as of Fair Value as of Valuation Unobservable December 31, 2017 December 31, 2016 Technique Inputs Range Investment in Community $ 138,245,312 $ 130,415,243 Discounted Cash Flow Discount Rate 11.25% Rate Growth 3% Occupancy 91-93% Interest Rate 2-5% Loans from Residents 30,166,535 25,878,452 Discounted Cash Flow Discount Rate 5% Average Life in Community 11 Years Resident Contract Liability 18,032,545 19,811,826 Discounted Cash Flow Discount Rate 5% Average Life in Community 11 Years (14)

17 NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) The significant unobservable inputs used in the fair value measurements of Investment in Community are discount rate, rate growth, occupancy, and interest. Changes in these rates can result in higher (lower) fair value measurement. The significant unobservable inputs used in the fair value measurement of Loans from Residents and Resident Contract Liability are date of maturity. Changes in this input can result in higher (lower) fair value measurement. The fair value of certain financial instruments approximates the carrying value because of the short-term maturity of these instruments, including cash and cash equivalents, accounts receivable, assets limited as to use or restricted, accounts payable, trade, accounts payable affiliate, and refundable resident deposits. The carrying value approximates the estimated fair value of long-term debt as interest rates are determined periodically based on prevailing market conditions. NOTE 6 LONG-TERM DEBT On March 2, 2015, the Company entered into a term loan of $48,650,000 which had a maturity date of February 27, On February 27, 2018, the Company entered into a loan amendment agreement to extend the maturity date to February 27, Borrowings under the loan will bear interest at LIBOR plus 2.00% per annum. The interest rate on December 31, 2017 and 2016 was 3.25% and 2.61%, respectively. The term loan has a limited guarantee by ROC and Life Care Companies LLC (owner of LCSWII) and is secured by substantially all assets of the Company including Entrance Payments without limitation. Principal and interest payments are paid monthly. As of December 31, 2017, approximate aggregate maturities of long-term debt are as follows: Year Ending December 31, Amount 2018 $ 1,815, ,200,800 Total $ 44,015,800 The debt agreement includes various restrictive covenants requiring adherence to be in compliance with the terms of the debt agreement. (15)

18 NOTE 7 HEALTH CENTER REVENUES The Company has agreements with third-party payors that provide for payments to the Company at amounts different from its established rates. A summary of the payment arrangements with the major third-party payor follows: Medicare Skilled-nursing services rendered to Medicare program beneficiaries are paid at prospectively determined per diem rates. The prospective rate is based upon a classification system called Resource Utilization Groups (RUGS), with reimbursement based upon resident acuity. Health center revenues from the Medicare program accounted for approximately 42% and 44% of total health center revenues in 2017 and 2016, respectively. Revenues from the Medicare program accounted for approximately 25% and 26% of total revenues in 2017 and 2016, respectively. NOTE 8 EMPLOYEE RETIREMENT BENEFIT PLAN Available to all eligible employees of LCE is a defined contribution employee retirement benefit plan (the Plan). The Company accrued matching contributions of approximately $249,000 and $223,000 in 2017 and 2016, respectively, to be remitted to the Plan in 2018 and 2017, respectively, which were to equal 100% of the first 3% of the participant s eligible contributions plus 50% of the next 2% of eligible contributions. NOTE 9 COMMITMENTS AND CONTINGENCIES The Company in the normal course of operations is exposed to risk and involvement in legal actions and proceedings. To the extent available at the costs believed reasonable by the Company, it maintains insurance coverage s for various types of risk. Based on the Company s past experience, management believes that any legal actions or proceedings will not have a material effect on the financial position of the Company. Because of the various regulations surrounding government reimbursed medical costs, there can be no assurance that the reimbursements will be equal to or exceed costs to provide such services. NOTE 10 SUBSEQUENT EVENTS The Company has evaluated subsequent events through February 28, 2018, the date which the consolidated financial statements were available to be issued. Other than the loan amendment agreement discussed in Note 6, there were no additional material subsequent events requiring disclosure. (16)

19 Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.