$24,520,000 Iowa Finance Authority Senior Living Facilities Revenue Refunding Bonds (Sunrise Retirement Community Project), Series 2012

Transcription

1 REFUNDING ISSUE BOOK ENTRY ONLY NOT RATED In the opinion of Bond Counsel, under existing law and assuming continuous compliance with the applicable provisions of the Internal Revenue Code of 1986, as amended (the Code ), interest on the Bonds is excluded from gross income for federal income tax purposes, and will not be treated as a specific item of tax preference for purposes of the federal alternative minimum tax applicable to individuals and corporations, although, in the case of corporations (as defined for federal income tax purposes), interest on the Bonds will be taken into account in determining adjusted current earnings for purposes of computing such alternative minimum tax. Interest on the Bonds is NOT excluded from income for State of Iowa income tax purposes. The Bonds will not be designated as qualified tax-exempt obligations within the meaning of Section 265(b)(3) of the Code. See TAX EXEMPTION herein. $24,520,000 Iowa Finance Authority Senior Living Facilities Revenue Refunding Bonds (Sunrise Retirement Community Project), Series 2012 Dated Date: Date of Issuance Due: As shown on the inside front cover The Bonds are special, limited obligations of the Issuer payable solely from the proceeds of the Bonds, the revenues pledged to the payment thereof pursuant to the Loan Agreement, and the funds and accounts held in the Bond Indenture. Neither the Issuer, the State of Iowa, nor any political subdivision thereof shall be obligated to pay the principal of, purchase price for or interest on the Bonds except from said revenues, and neither the faith and credit nor any taxing powers of the Issuer, the State of Iowa or any political subdivision thereof is pledged to the payment of the principal of, purchase price for or interest on the Bonds. The Issuer has no taxing power. Pursuant to the Loan Agreement, the proceeds of the Bonds will be loaned to Sunrise Manor, d/b/a Sunrise Retirement Community, an Iowa nonprofit corporation ( Sunrise Manor or the Borrower and, together with the other Initial Members (defined herein), the Obligated Group ) and used for the purposes of: (1) paying a portion of the costs of demolishing its former Health Center located on the Obligated Group s campus (the Campus ) at 5501 Gordon Drive East, Sioux City, Iowa (collectively, the Project ); (2) refunding the outstanding principal amount of the $3,000,000 Senior Living Facility Revenue Note (The Pointe at Sunrise Project) Series 2008A (the Woodbury County Series 2008A Note ) of Woodbury County, Iowa ( Woodbury County ); refunding the outstanding principal amount of the $9,000,000 Senior Living Facility Revenue Note (The Pointe at Sunrise Project) Series 2008 of the City of Lawton, Iowa (the Lawton Series 2008 Note ); refunding $50,000 of the $1,510,000 Healthcare Facility Revenue Notes (Sunrise Retirement Community Project), Series 2011 of the City of Lawton, Iowa (the Lawton Series 2011 Notes ); refunding the outstanding principal amount of the $10,000,000 Senior Living Facility Revenue Note (Sunrise Retirement Community Project), Series 2011 (the Bronson Note ) of the City of Bronson, Iowa; and refunding the outstanding principal amount of the $380,000 Senior Living Facility Revenue Note (Sunrise Retirement Community Project), Series 2011 (the Woodbury County Series 2011 Note ) of Woodbury County (together, the Prior Bonds ); (3) funding a debt service reserve fund; and (4) paying for costs of issuance of the Bonds. The Bonds will be payable solely from the moneys held for the payment thereof by Bankers Trust Company, in Des Moines, Iowa, as Bond Trustee, or its successors, under the Bond Indenture, including amounts held in the Reserve Fund and Loan Repayments required to be made under the Loan Agreement by the Borrower. The Bonds will be paid solely from and secured by a pledge of certain rights of the Issuer under and pursuant to the Loan Agreement and Obligation No. 1, described herein and issued by the Obligated Group under a Master Trust Indenture, dated as of September 1, 2012 (as supplemented and amended, the Master Indenture ) between the Obligated Group and Bankers Trust Company, as master trustee (the Master Trustee ). Under the Master Indenture, Members of the Obligated Group have granted the Master Trustee first mortgage liens and assignments of rents on certain of the health, housing and residential care facilities owned by such Members. See SECURITY FOR THE BONDS. An investment in the Bonds is subject to certain risks. See BONDHOLDERS RISKS herein. The Bonds will be issued as fully registered bonds in the denomination of $5,000 or any integral multiple thereof. Principal of the Bonds is payable at the principal corporate trust office of the Bond Trustee and interest on the Bonds, payable on March 1 and September 1 of each year, commencing March 1, 2013, will be payable on such dates by check or draft mailed to the persons shown as the registered owners of the Bonds on the fifteenth day of the month preceding each interest payment date. The Bonds are hereby offered for purchase by investors solely in Book-Entry form. Therefore, all Bonds will be issued as fully registered bonds without coupons, registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), to whom all payments and notices with respect to the Bonds will be made. As long as the Bonds are in Book-Entry form, purchasers of Bonds will not receive actual Bond certificates. Instead, purchasers of Bonds will become the beneficial owners of such Bonds, with such ownership evidenced solely in the Book-Entry System records maintained by DTC and certain Participants (and Indirect Participants) who participate with DTC in maintaining the Book-Entry System. See THE BONDS -- Book-Entry System. The Bonds are subject to redemption and prepayment as described herein under THE BONDS --Redemption Prior to Maturity. The Bonds are offered, subject to prior sale, when, as and if accepted by the Underwriter named below and subject to an opinion as to validity and tax exemption by Dorsey & Whitney LLP, Des Moines, Iowa, Bond Counsel, the approval of certain matters by Dorsey & Whitney LLP, Des Moines, Iowa, as counsel to and for the benefit of the Issuer, the approval of certain matters by Corbett, Anderson, Corbett, Vellinga & Irvin, L.L.P., Sioux City, Iowa, as counsel to and for the benefit of the Obligated Group, the approval of certain matters by Kutak Rock LLP, Minneapolis, Minnesota, as counsel to and for the benefit of the Underwriter, and certain other conditions. It is expected that delivery of the Bonds will be made on or about October 11, 2012, against payment therefor, through the facilities of DTC in New York, New York. Subject to applicable securities laws and prevailing market conditions, the Underwriter intends, but is not obligated, to effect secondary market trading in the Bonds. For information with respect to the Underwriter, see UNDERWRITING herein. PIPER JAFFRAY & CO. The date of this Official Statement is October 2, 2012

2 $24,520,000 IOWA FINANCE AUTHORITY SENIOR LIVING FACILITIES REVENUE REFUNDING BONDS (SUNRISE RETIREMENT COMMUNITY PROJECT), SERIES 2012 Dated: Date of Issuance Due: September 1, 2043 Maturity Date Principal Amount Interest Rate Yield Price CUSIP Number March 1, 2014 $180, % 2.750% C AJ8 September 1, , % 2.750% C AK5 March 1, , % 3.000% C AL3 September 1, , % 3.000% C AM1 March 1, , % 3.250% C AN9 September 1, , % 3.250% C AP4 March 1, , % 3.500% C AQ2 September 1, , % 3.500% C AR0 March 1, , % 3.750% C AS8 September 1, , % 3.750% C AT6 March 1, , % 4.000% C AU3 September 1, , % 4.000% C AV1 March 1, , % 4.250% C AW9 September 1, , % 4.250% C AX7 March 1, , % 4.500% C AY5 September 1, , % 4.500% C AZ2 March 1, , % 4.750% C BA6 September 1, , % 4.750% C BB4 $2,820, % Term Bond Due September 1, 2027; Yield: 5.125%; Price: ; CUSIP No C BC2 $3,660, % Term Bond Due September 1, 2032; Yield: 5.500%; Price: ; CUSIP No C BD0 $4,795, % Term Bond Due September 1, 2037; Yield: 5.750%; Price: ; CUSIP No C BE8 $9,480, % Term Bond Due September 1, 2043; Yield: 5.875%; Price: ; CUSIP No C BF5

3 Campus Map Stone Avenue Sunrise Walking Bridge Water Tower Maple Heights Independent Living Apartments Sunrise Hills Independent Living Homes Sunrise Hills Independent Living Condos Gerwulf Community Center Skilled Nursing Assisted Living Memory Care North North Assisted Living Chapel Memory Care Skilled Health Center 5501 Gordon Dr. Skilled Nursing Color Keys The Pointe 36 Eastview Dr. Independent Living Assisted Living Key Nursing Memory Care Living South Maple Street East View Drive Maple Heights Apartments Gerwulf Community Center Sunrise Hills Independent Living Condos Bus Stop Gordon Drive US Hwy Gordon Drive East Sioux City, IA Phone:

4 REGARDING THIS OFFICIAL STATEMENT All information contained in this Official Statement other than the information contained under the heading "The Issuer" has been furnished by the Obligated Group. The Issuer has not participated in the preparation of this Official Statement and has not verified the accuracy of the information contained herein, other than the information respecting the Issuer under the heading "The Issuer". The Issuer's approval of this Official Statement does not constitute approval of the information contained herein, other than such aforesaid information contained herein. No dealer, broker, salesman or other person has been authorized by the Issuer, the Obligated Group or the Underwriter to give information or to make any representations with respect to the Bonds, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder implies that there has been no change in the matters described herein since the date hereof. Certain information contained herein has been obtained from the Obligated Group and other sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness and is not to be construed to be the representation of the Issuer or the Underwriter. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer or the Obligated Group since the date hereof. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale on the Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION BY REASON OF THE PROVISIONS OF SECTION 3(a)(2) OF THE SECURITIES ACT OF 1933, AS AMENDED. THE REGISTRATION OR QUALIFICATION OF THESE SECURITIES IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF THE JURISDICTIONS IN WHICH THEY HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER JURISDICTIONS SHALL NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE JURISDICTIONS NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE SECURITIES OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE OBLIGATED GROUP AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The purchase of the Bonds involves a high degree of risk as they are a speculative investment. For such reason, each purchaser of the Bonds, by its purchase of the Bonds or any interest therein, will be deemed to have acknowledged, represented, warranted and agreed with and to the Issuer, the Underwriter and the Bond Trustee; that the Bonds, when, as and if issued, will be special, limited obligations of the Issuer, payable solely from proceeds of the Bonds, the revenues pledged to the payment thereof pursuant to the Loan Agreement, and the funds and accounts held under and pursuant to the Bond Indenture and - i -

5 pledged therefor; that the Bonds, the interest thereon and any other payments or costs incident thereto do not constitute an indebtedness or a loan of the credit of the Issuer, the State of Iowa (the State ) or any political subdivision thereof within the meaning of any constitutional or statutory provisions; that the Issuer does not pledge its faith or credit nor the faith or credit of the State nor any political subdivision of the State to the payment of the principal of, the interest on or any other payments or costs incident to the Bonds; that the issuance of the Bonds and the execution of any documents in relation thereto do not directly, indirectly or contingently obligate the State or any political subdivision of the State to apply money from or levy or pledge any form of taxation whatever to the payment of the principal of or interest on the Bonds or any other payments or costs incident thereto; that the Issuer has no taxing power; that neither the Issuer nor any of its officers or employees take any responsibility for, and the purchaser is not relying upon any of such parties with respect to, information appearing anywhere in the Official Statement, and that none of such parties have participated in the preparation of the Official Statement; that it has received both this Official Statement and the information from the Borrower and the other Members of the Obligated Group relating to: (i) the sources of repayment of the Bonds, (ii) the Borrower s facilities (including financial and operating data) and (iii) such other material matters relating to the Bonds as the purchaser deemed relevant; that it had the opportunity to ask questions of, and request additional information from, the Borrower and the other Members of the Obligated Group regarding the information provided to it and any other matters considered to be relevant to the purchaser s decision to purchase the Bonds; that it understands and agrees that neither the Issuer nor any of its officers or employees have any responsibility for the accuracy or completeness of the information supplied to it or any other information that the purchaser has received or relied upon in making its decision to invest in the Bonds; that it has reviewed and has made its decision to invest in the Bonds based solely on its review of the information provided by the Borrower and the other Members of the Obligated Group; that it understands that the Bonds are a speculative investment and that there is a high degree of risk in investing in the Bonds; that the purchaser is capable of suffering a loss of the entirety of its investment which is represented by the Bonds; that it can bear the economic risk associated with a purchase of high risk securities such as the Bonds; and that it has such knowledge and experience in business and financial matters, including the analysis of a participation in the purchase of similar investments, so as to be capable of evaluating the merits and risks of an investment in the Bonds on the basis of the information and review described herein. - ii -

6 FORWARD-LOOKING STATEMENTS This Official Statement, including Appendix A, contains statements which should be considered forward-looking statements, meaning they refer to possible future events or conditions. Such statements are generally identifiable by the words such as plan, expect, estimate, budget, forecast, forecasted, or similar words. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE OBLIGATED GROUP DOES NOT EXPECT OR INTEND TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR OR FAIL TO OCCUR. TABLE OF CONTENTS SUMMARY INFORMATION...iv INTRODUCTORY STATEMENT...1 BONDHOLDERS RISKS...3 THE BONDS...13 SECURITY FOR THE BONDS...19 PLAN OF FINANCE...22 SOURCES AND USES OF FUNDS...23 THE ISSUER...23 DEBT SERVICE SCHEDULE...24 ENFORCEABILITY OF OBLIGATIONS...25 APPROVAL OF LEGAL PROCEEDINGS...25 TAX EXEMPTION...25 UNDERWRITING...27 PLAN OF OFFERING...28 CONTINUING DISCLOSURE...28 RELATIONSHIPS AMONG THE PARTIES...28 LITIGATION...29 FINANCIAL STATEMENTS...29 MISCELLANEOUS...29 APPENDIX A THE OBLIGATED GROUP AND THE PROJECT...A-1 APPENDIX B AUDITED, UNAUDITED AND COMPILED FINANCIAL STATEMENTS...B-1 APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS...C-1 APPENDIX D FORM OF BOND COUNSEL OPINION...D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE UNDERTAKING... E-1 APPENDIX F COMPILED FINANCIAL FORECAST... F-1 Page - iii -

7 SUMMARY INFORMATION The following is a summary of certain information contained in this Official Statement. The summary is not comprehensive or complete and is qualified in its entirety by reference to the complete Official Statement. Undefined capitalized terms used below are defined in Appendix C hereto or elsewhere in this Official Statement. The Bonds... Payment... Redemption or Prepayment... The Issuer s $24,520,000 Senior Living Facilities Revenue Refunding Bonds (Sunrise Retirement Community Project), Series 2012 (the Bonds ) to be issued in denominations of $5,000 or whole multiples thereof. See THE BONDS -- Interest; Maturity; Payment and THE ISSUER. Interest accrues on the Bonds at the rates set forth on the inside of the cover page hereof and is payable semiannually on March 1 and September 1 of each year (commencing March 1, 2013) by check or draft of the Bond Trustee mailed on such dates to the persons who were the registered owners of Bonds as of the 15th day of the month preceding each interest payment date. The Bonds are being issued solely in Book-Entry form. See THE BONDS -- Interest; Maturity; Payment and THE BONDS -- Book-Entry System. As more fully described herein, the Bonds are subject to redemption and prepayment prior to maturity, as follows: (a) optional redemption upon request of the Borrower in whole or in part on or after the dates described herein, at a redemption price equal to the principal amount so redeemed plus accrued interest to the redemption date, without premium; (b) mandatory redemption of the Bonds at par plus accrued interest upon a Determination of Taxability; (c) for Term Bonds, mandatory redemption at par plus accrued interest due to sinking fund redemption; (d) extraordinary optional redemption upon satisfaction of certain conditions under the Master Indenture; and (e) acceleration due to an Event of Default occurring under the Master Indenture, the Bond Indenture, the Loan Agreement or the Mortgage. See THE BONDS -- Redemption Prior to Maturity. - iv -

8 Use of Proceeds... The Obligated Group... Pursuant to the Loan Agreement, proceeds of the Bonds will be loaned by the Issuer to Sunrise Manor, d/b/a Sunrise Retirement Community, an Iowa nonprofit corporation ( Sunrise Manor or the Borrower and, together with the other initial Members (defined herein), the Obligated Group ), and used for the purposes of: (1) paying a portion of the costs of demolishing its former Health Center located on the Obligated Group s campus (the Campus ) at 5501 Gordon Drive East, Sioux City, Iowa (collectively, the Project ); (2) refunding the outstanding principal amount of the $3,000,000 Senior Living Facility Revenue Note (The Pointe at Sunrise Project) Series 2008A (the Woodbury County Series 2008A Note ) of Woodbury County, Iowa ( Woodbury County ); refunding the outstanding principal amount of the $9,000,000 Senior Living Facility Revenue Note (The Pointe at Sunrise Project) Series 2008 of the City of Lawton, Iowa (the Lawton Series 2008 Note ); refunding $50,000 of the $1,510,000 Healthcare Facility Revenue Notes (Sunrise Retirement Community Project), Series 2011 of the City of Lawton, Iowa (the Lawton Series 2011 Notes ); refunding the outstanding principal amount of the $10,000,000 Senior Living Facility Revenue Note (Sunrise Retirement Community Project), Series 2011 (the Bronson Note ) of the City of Bronson, Iowa; and refunding the outstanding principal amount of the $380,000 Senior Living Facility Revenue Note (Sunrise Retirement Community Project), Series 2011 (the Woodbury County Series 2011 Note ) of Woodbury County (together, the Prior Bonds ); (3) funding a debt service reserve fund; and (4) paying for costs of issuance of the Bonds. See SOURCES AND USES OF FUNDS. The Obligated Group will initially consist of Sunrise Manor, Fountain View Assisted Living ( Fountain View ), Sunrise Eastview ( Sunrise Eastview ) and Sunrise Health Center ( Sunrise Health Center ) (collectively, the Members of the Obligated Group ), each an Iowa nonprofit corporation. Sunrise Manor and Fountain View are 501(c)(3) exempt organizations, and Sunrise Eastview and Sunrise Health Center have applied for such designation. The Obligated Group s facilities currently provide 72 nursing beds, 46 assisted living units and 93 independent living units on the Obligated Group s campus in Sioux City, Iowa. See Appendix A: THE OBLIGATED GROUP AND THE PROJECT. - v -

9 Security for the Bonds... The Bonds will be paid solely from and secured by a pledge of certain rights of the Issuer under and pursuant to the Loan Agreement and Obligation No. 1, described herein and issued by the Obligated Group under a Master Trust Indenture, dated as of September 1, 2012 (as supplemented and amended, the Master Indenture ) between the Obligated Group and Bankers Trust Company, as master trustee (the Master Trustee ). The Bonds are special, limited obligations of the Issuer payable solely from the proceeds of the Bonds, the revenues pledged to the payment thereof pursuant to the Loan Agreement, and the funds and accounts held in the Bond Indenture. Neither the Issuer, the State of Iowa, nor any political subdivision thereof shall be obligated to pay the principal of, purchase price for or interest on the Bonds except from said revenues, and neither the faith and credit nor any taxing powers of the Issuer, the State of Iowa or any political subdivision thereof is pledged to the payment of the principal of, purchase price for or interest on the Bonds. The Issuer has no taxing power. As further security for the Bonds, the Borrower shall have granted the Master Trustee a first mortgage lien and assignment of rents on the health, housing and residential care facilities owned by the Borrower (the Mortgaged Properties ). See SECURITY FOR THE BONDS. Forecast... Ryun, Givens & Company, P.L.C., certified public accountants, has compiled the forecasted financial statements of the Obligated Group for the five-year period for fiscal years 2012 through 2016, included as APPENDIX F (the Forecast ). The Forecast assumes the Bonds have an average interest rate of 6.10% per annum. Based upon assumptions set forth in the Forecast, set forth below are selected data for the stated fiscal years: Schedule of Long-Term Debt Service Coverage Ratio Revenues $ 11,278,013 $11,609,297 $11,953,649 Gross Expenses 10,475,217 10,678,858 10,840,600 Less: Interest on Indebtedness (1,541,001) (1,495,928) (1,414,879) Less: Depreciation and Amortization (1,089,908) (1,089,908) (1,089,908) Add: Repair and Replacement Fund Deposit 52,750 52,750 52,750 Expenses 7,897,058 8,145,772 8,388,563 Income Available for Debt Service 3,380,955 3,463,525 3,565,086 Maximum Annual Long-Term Debt Service Requirement Series 2012 Bonds 1.657, , ,919 Long-Term Debt Service Coverage Ratio Friend Notes (Subordinate) 106,400 74,500 8,000 Long-Term Debt Service Coverage Ratio w/friend Notes Bond Trustee and Paying Agent... Investment Risks... Bankers Trust Company in Des Moines, Iowa. An investment in the Bonds involves risks, including, but not limited to, those discussed under BONDHOLDERS RISKS. - vi -

10 OFFICIAL STATEMENT $24,520,000 Iowa Finance Authority Senior Living Facilities Revenue Refunding Bonds (Sunrise Retirement Community Project), Series 2012 INTRODUCTORY STATEMENT The following is a brief introduction as to certain matters discussed elsewhere in this Official Statement and is qualified in its entirety as to such matters by such discussion and the text of the actual documents described or referenced. Any capitalized term not required to be capitalized or otherwise defined herein is used with the meaning assigned in Appendix C or in the Master Indenture (defined below), the Bond Indenture (defined below), the Loan Agreement (defined below) or other document with respect to which the term is used. Any definition of a term contained in the text hereof is for ease of reference only and is qualified in its entirety by any corresponding definition in Appendix C or the documents with respect to which such term relates. The Appendices hereto are an integral part of this Official Statement and each potential investor should review the Appendices in their entirety. General This Official Statement provides information regarding the $24,520,000 Senior Living Facilities Revenue Refunding Bonds (Sunrise Retirement Community Project), Series 2012 (the Bonds ) to be issued by the Iowa Finance Authority (the Issuer ) in the above-stated aggregate principal amount, pursuant to a Bond Trust Indenture (the Bond Indenture ), dated as of September 1, 2012, between the Issuer and Bankers Trust Company, Des Moines, Iowa (the Trustee ). See Appendix C: DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS SUMMARY OF THE BOND INDENTURE. Pursuant to a Loan Agreement (the Loan Agreement ), dated as of September 1, 2012, between the Issuer and Sunrise Manor, d/b/a Sunrise Retirement Community, an Iowa nonprofit corporation ( Sunrise Manor or the Borrower and, together with the other Initial Members (defined herein), the Obligated Group ), proceeds of the sale of the Bonds will be loaned to the Borrower and will be used for the purposes of: (1) paying a portion of the costs of demolishing its former Health Center located on the Obligated Group s campus (the Campus ) at 5501 Gordon Drive East, Sioux City, Iowa (collectively, the Project ); (2) refunding the outstanding principal amount of the $3,000,000 Senior Living Facility Revenue Note (The Pointe at Sunrise Project) Series 2008A (the Woodbury County Series 2008A Note ) of Woodbury County, Iowa ( Woodbury County ); refunding the outstanding principal amount of the $9,000,000 Senior Living Facility Revenue Note (The Pointe at Sunrise Project) Series 2008 of the City of Lawton, Iowa (the Lawton Series 2008 Note ); refunding $50,000 of the $1,510,000 Healthcare Facility Revenue Notes (Sunrise Retirement Community Project), Series 2011 of the City of Lawton, Iowa (the Lawton Series 2011 Notes ); refunding the outstanding principal amount of the $10,000,000 Senior Living Facility Revenue Note (Sunrise Retirement Community Project), Series 2011 (the Bronson Note ) of the City of Bronson, Iowa; and refunding the outstanding principal amount of the $380,000 Senior Living Facility Revenue Note (Sunrise Retirement Community Project), Series 2011 (the Woodbury County Series 2011 Note ) of Woodbury County (together, the Prior Bonds ); (3) funding a debt service reserve fund; and (4) paying for costs of issuance of the Bonds. Proceeds of the Lawton Series 2008 Note and the Woodbury County Series 2008A Note were used to finance the construction and equipping of a 62-unit independent living facility known as The Pointe at Sunrise. Proceeds of the Lawton Series 2011 Notes, the Bronson Note and the Woodbury County Series 2011 Note were used to finance the construction and equipping of a 38-unit skilled nursing facility and a 46-unit assisted living facility (which includes 12 units dedicated to memory care).

11 For more information about the Obligated Group and its facilities, see PLAN OF FINANCE, SOURCES AND USES OF FUNDS and Appendix A: THE OBLIGATED GROUP AND THE PROJECT. The Obligated Group Initially, the Obligated Group will consist of Sunrise Manor, Fountain View Assisted Living ( Fountain View ), Sunrise Eastview ( Sunrise Eastview ) and Sunrise Health Center ( Sunrise Health Center ) (collectively, the Members of the Obligated Group ), each an Iowa nonprofit corporation. Sunrise Manor and Fountain View are 501(c)(3) exempt organizations, and Sunrise Eastview and Sunrise Health Center have applied for such designation. See Appendix A: THE OBLIGATED GROUP AND THE PROJECT. Security for the Bonds The Bonds will be issued under, and secured by, the Bond Indenture. The Bonds are limited obligations of the Issuer payable by the Issuer under the Bond Indenture solely from (i) payments received by the Issuer under the Loan Agreement, (ii) payments made by the Members of the Obligated Group under the Sunrise Retirement Communities Obligated Group Obligation No. 1 ( Obligation No. 1 ) relating to the Bonds, issued under a Supplement to the Master Indenture (the Supplement ), dated as of September 1, 2012, between Sunrise Manor, as Obligated Group Agent (the Obligated Group Agent ), on behalf of itself and the other Members of the Obligated Group, and Bankers Trust Company, as master trustee (the Master Trustee ), supplementing the Master Indenture, and (iii) moneys in the funds and accounts (other than the Rebate Fund) established under the Bond Indenture. See generally, SECURITY FOR THE BONDS herein. Pursuant to the Loan Agreement, the Issuer will lend the proceeds of the Bonds to the Borrower, and the Borrower will agree to make loan payments sufficient, in the aggregate, to pay the principal and redemption price of, and interest on, the Bonds. Pursuant to the Bond Indenture, the Issuer will assign and pledge to the Bond Trustee all of its rights and interests under the Loan Agreement (except for certain rights to receive payment of fees and expenses, to receive notices, to grant certain consents and indemnification rights) and Obligation No. 1. Obligation No. 1 will entitle the Bond Trustee, as the holder thereof, to the protection of the covenants, restrictions and other obligations imposed upon the Members of the Obligated Group by the Master Indenture. Obligation No. 1 and any additional obligations issued in the future on parity therewith pursuant to the Master Indenture are herein collectively referred to as the Obligations. See SECURITY FOR THE BONDS-The Master Indenture and the Obligated Group herein. As further security for the obligations of the Obligated Group under the Master Indenture, the Borrower will deliver to the Master Trustee, for the benefit and security of the holders of all obligations issued under the Master Indenture (including the Bond Trustee as the holder of Obligation No. 1), a Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement, dated as of September 1, 2012 (the Mortgage ), granting a mortgage lien and assignment of rents on its existing facilities (the Mortgaged Properties ). See APPENDIX A THE OBLIGATED GROUP AND THE PROJECT hereto for a description of the Mortgaged Properties. In addition, each Member of the Obligated Group has agreed in the Master Indenture that it will not create, assume or suffer to exist liens upon any of the Mortgaged Properties other than Permitted Liens pursuant to the Master Indenture. See SECURITY FOR THE BONDS The Mortgage and APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS SUMMARY OF THE MASTER INDENTURE and SUMMARY OF THE MORTGAGE. Debt Service Reserve Fund On the date of issuance of the Bonds, proceeds of the Bonds, in an amount equal to the Reserve Fund Requirement (as defined in the Bond Indenture), will be deposited in the Debt Service Reserve Fund to secure the Bonds. Amounts in the Debt Service Reserve Fund may be used by the Bond Trustee to pay principal of and premium and interest on the Bonds in the event available sums in the Bond Fund created by the Indenture are insufficient for such purpose. See SECURITY FOR THE BONDS Debt Service Reserve Fund and APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS SUMMARY OF THE BOND INDENTURE Establishment of Funds and Accounts Debt Service Reserve Fund

12 Special Covenants of the Obligated Group The Master Indenture provides that Members of the Obligated Group may incur additional Indebtedness (in addition to Obligation No. 1) provided that there is compliance with certain tests. Additional Indebtedness may be in the form of additional obligations issued under and secured by the Master Indenture on a parity with Obligation No. 1 or in the form of indebtedness not issued under or secured by the Master Indenture. See SECURITY FOR THE BONDS. Bondholders Risks Miscellaneous Certain risks associated with an investment in the Bonds are discussed under BONDHOLDERS RISKS. This Official Statement (including the Appendices hereto) contains descriptions of, among other matters, the Bond Indenture, the Master Indenture, the Loan Agreement, Obligation No. 1, the Supplement, the Mortgage, the Obligated Group, the Issuer, the Mortgaged Properties and the Bonds. Such descriptions and information do not purport to be comprehensive or definitive. All references to documents described herein are qualified in their entirety by reference to such documents, copies of which are available for inspection at the principal corporate trust office of the Bond Trustee. BONDHOLDERS RISKS No person should purchase any Bonds without carefully reviewing the following information, which summarizes some, but not all, factors that should be carefully considered before such purchase. General Except as noted herein, the principal of and interest on the Bonds will be payable under the Bond Indenture from payments by the Borrower under the Loan Agreement, from funds held under the Bond Indenture (except the Rebate Fund) and from payments made by the Members of the Obligated Group on Obligation No. 1. The obligations of the Borrower under the Loan Agreement are a general obligation of the Borrower, and the obligations of the Obligated Group under Obligation No. 1 are general obligations of the Obligated Group. No representation or assurance is given or can be made that revenues will be realized by the Borrower in amounts sufficient to pay all payments due under the Loan Agreement in amounts sufficient to meet debt service requirements on the Bonds and other payments necessary to meet the obligations of the Borrower. In analyzing this offering, prospective investors should read this entire Official Statement, including the Appendices hereto, and carefully consider the following risk factors, among other factors set forth in this Official Statement, prior to making a decision to purchase the Bonds. The following list of risks factors is not intended to provide an exhaustive list of the general or specific risks relating to the purchase of the Bonds. Adequacy of Revenues Under the terms of the Bond Indenture, the Bonds are limited obligations of the Issuer payable by the Issuer under the Bond Indenture solely from (i) payments received by the Issuer under the Loan Agreement, (ii) payment made by Members of the Obligated Group under Obligation No. 1 and (iii) moneys and the funds in accounts (other than the Rebate Fund) established under the Bond Indenture. See generally, SECURITY FOR THE BONDS herein. The ability to make payments under the Loan Agreement and Obligation No. 1 is dependent upon the operation of the Mortgaged Properties in a manner that will generate revenues in amounts necessary to pay the principal, premium, if any, and interest on the Bonds and other Obligations as well as other operating and capital expenses. The revenues of the Obligated Group could be affected by future legislation, regulatory actions, economic - 3 -

13 conditions, changes in demand for services provided in the Mortgaged Properties, the ability to recruit and retain qualified staff members, changes in the population or economic condition of the Obligated Group s service area, the level of and restrictions on federal funding of Medicare, federal and state funding of Medicaid, imposition of government wage and price controls, competition, rates, government regulations and licensing requirements, inflation, and future economic and other conditions which are unpredictable and may not be quantifiable or determinable at this time. Neither the Underwriter, the Issuer or the Obligated Group nor any of their attorneys, financial advisors or other representatives have made any independent investigation of the extent to which any such factors will have an adverse impact on the revenues generated by the Mortgaged Properties. Nature of Forecast Included as APPENDIX F are forecasted financial statements of the Obligated Group, compiled by Ryun Givens & Company, P.L.C., independent certified public accountants in Urbandale, Iowa (the Study ). The Study is based upon assumptions made by the management of the Obligated Group. Inevitably, there will be differences between the forecasted and the actual results because events and circumstances frequently do not occur as expected, and those differences may be material. In addition, the Study is only for the period for the five (5) years ending December 31, 2012, through December 31, 2016, and consequently the Study does not cover the whole period during which the Bonds may be outstanding. The Study should be read in its entirety. BECAUSE THERE IS NO ASSURANCE THAT ACTUAL EVENTS WILL CORRESPOND WITH THE ASSUMPTIONS MADE, NO GUARANTEE CAN BE MADE THAT THE FORECASTED RESULTS WILL CORRESPOND WITH THE RESULTS ACTUALLY ACHIEVED IN THE FUTURE. ACTUAL OPERATING RESULTS MAY BE AFFECTED BY MANY FACTORS, INCLUDING BUT NOT LIMITED TO, INCREASED COSTS, LOWER THAN ANTICIPATED REVENUES, EMPLOYEE RELATIONS, TAXES, GOVERNMENTAL CONTROLS, CHANGES IN APPLICABLE GOVERNMENTAL REGULATION, CHANGES IN DEMOGRAPHIC TRENDS, CHANGES IN THE RETIREMENT LIVING AND HEALTH CARE INDUSTRIES AND GENERAL ECONOMIC CONDITIONS. No Credit Enhancement The Bonds are not secured by any letter of credit, insurance policy, liquidity facility or other credit enhancement and no person is obligated to obtain any such credit facility or enhancement in the future. Failure to Maintain Occupancy The payment of principal of, premium, if any, and interest on the Bonds is intended to be made from payments of the Borrower under the Loan Agreement. The ability of the Borrower to pay debt service on the Bonds is largely dependent upon the ability of the Borrower to maintain occupancy in the Mortgaged Properties, and to charge and collect rents and charges sufficient to pay operating expenses and debt service. Future revenues and expenses of the Mortgaged Properties are subject to conditions which may change in the future to an extent that cannot be determined at this time. Such conditions may include the inability to generate adequate occupancy levels due to inadequate demand, competitive rates or services, disadvantageous general or local economic conditions, inability to control expenses, delays in receiving payments from third party payors (with respect to nursing home facilities) and other factors. Prior revenues and expenditures of the Mortgaged Properties are no guarantee as to future revenue and expenditures of the Mortgaged Properties. Government Regulation and Reimbursement of the Mortgaged Properties General. Nursing facilities are subject to extensive governmental regulation through state licensing requirements and, in the case of nursing facilities, complex laws and regulations imposed at the federal and state level for facilities to remain licensed and certified to receive payments under the so-called Medicaid and Medicare programs. The Iowa Department of Inspections and Appeals renews nursing home licenses annually and makes periodic inspections to determine compliance with licensure and certification requirements. Continuing licensure to provide nursing care is essential to the operation of the Borrower s nursing facilities. Further, revenues of the Mortgaged Properties are significantly dependent on payments under the Medicaid program, such that a loss of certification for participation in the Medicaid program, or an elimination of or a material reduction in the availability - 4 -

14 of Medicaid payments, would materially adversely affect the operations and financial condition of the Mortgaged Properties. Changes in law. Licensing and certification requirements are subject to change and there can be no assurance that the Mortgaged Properties will be able to maintain all necessary licenses or certifications or that it will not incur substantial costs in doing so. Both federal and state regulation relating to nursing, assisted living and residential care and the payment thereof have been subject to change in the past and future change can be expected. The effect of such changes may materially adversely affect the operations and financial condition of the Mortgaged Properties. In attempts to limit federal and state expenditures, there have been, and the Borrower expects that there will continue to be, a number of proposals to limit Medicare and Medicaid payments, including those for care provided by nursing and assisted living facilities. Previous federal changes included limitations on payments to nursing facilities under the Medicare and Medicaid programs and an increased emphasis on cost control. Further, various health care reforms have been made recently which resulted in changes in general health care funding in the near future (see Federal Health Care Reform below). It is presently unclear what effect, if any, such reforms might have on the Mortgaged Properties. The methods of determining the amount and availability of payments under the Medicaid program in the State of Iowa (the State ) have been subject to a variety of significant changes in the past, and future changes can be expected to occur. Further, various studies and proposals for changes in the State reflect a general emphasis on directing residents requiring lower levels of care to non-licensed facilities and otherwise encouraging non-institutional care for the aged to save Medicaid costs. Federal Health Care Reform. The Patient Protection and Affordable Care Act of 2010 and The Health Care and Education Reconciliation Act of 2010 (collectively referred to as the Health Reform Act ) were signed into law by President Obama in March of The Health Reform Act reflects the federal government s attempt to reform the systems through which health care services are delivered and financed in the United States. The Health Reform Act is expected to have a significant impact on the entire health care industry. Numerous provisions of the Health Reform Act have become effective since enactment of the law, including provisions related to health insurance underwriting and requirements related to denials of insurance coverage and claims, which took effect September 23, A significant portion of the reforms required by the Health Reform Act will be phased in during a period of time ranging from one to ten years. Because many of the reforms set out in the Health Reform Act are addressed only in conceptual or policy terms, new guidelines and regulations related to the Health Reform Act will likely need to be enacted. Among other things, the Health Reform Act makes changes to the ways that individuals pay for their own and their families health care and how employers procure health insurance for their employees. In addition, the Health Reform Act requires health insurers to change certain underwriting practices and benefit structures to extend coverage to individuals who previously could have been ineligible for private health insurance. As a result, there is expected to be a significant increase in the number of individuals eligible for, and covered by, health insurance. Broadly stated, the goals of the Health Reform Act are to reduce the number of uninsured individuals, to increase the availability and affordability of insurance coverage, to enhance the focus on quality of care and to contain health spending growth. The legislation intends to accomplish these objectives through various provisions, including (i) creating active markets (referred to as exchanges ) in which individuals and small employers can purchase health insurance for themselves and their families or their employees and dependents, (ii) providing subsidies for premium costs to individuals and families based upon their income relative to federal poverty levels, (iii) mandating that individuals obtain and certain employers provide a minimum level of health insurance and providing for penalties and imposing taxes on those individuals and employers that do not obtain coverage, (iv) establishing insurance reforms that expand coverage generally through such provisions as prohibitions on denials of coverage for pre-existing conditions and elimination of lifetime or annual cost caps, (v) expanding eligibility for existing public programs, including Medicaid, for individuals and families, (vi) increasing cost containment provisions in Medicare and Medicaid, and (vii) creating and funding research programs related to quality and cost of care. It is expected that there will be an increased demand for health care services as a result of the increase in individuals eligible for health insurance coverage. The following are examples of provisions of the Health Reform Act may affect the operations and financial condition of Sunrise Health Center and the Fountain View Facility: - 5 -

15 The Health Care Act requires an expansion of Medicaid programs to a broader population, with incomes up to 133% of federal poverty levels. Commencing in federal fiscal year 2011 (which began October 1, 2010), federal payments to states for Medicaid services related to certain health care acquired conditions will be prohibited. With varying effective dates, the Health Reform Act mandates a reduction of waste, fraud and abuse in public programs by allowing provider enrollment screening, enhanced oversight periods for new providers and suppliers, and enrollment moratoria in areas identified as being at elevated risk of fraud in all public programs and by requiring Medicare and Medicaid program providers and suppliers to establish compliance programs. The legislation provides for increased penalties for fraud and abuse violations and for increased funding for antifraud activities. The Health Reform Act also provides for the implementation of various demonstration programs and pilot projects to test, evaluate, encourage and expand new payment structures and methodologies to reduce health care expenditures while maintaining or improving quality of care, including bundled payments under Medicare and Medicaid, and comparative effectiveness research programs that compare the clinical effectiveness of medical treatments and develop recommendations concerning practice guidelines and coverage determinations. At this time, given the number of variables involved in implementation of the Health Reform Act, including the likely adoption of significant additional policies, rules and regulations, the Borrower s management is unable to predict the effect that the Health Reform Act will have on the operations or financial performance of Sunrise Health Center and the Fountain View Facility. Dependence on Medicaid. As of June 30, 2012, approximately 43.3% of the gross patient service revenues of Sunrise Health Center and approximately 32.3% of the gross patient service revenues of the Fountain View Facility were derived from Medicaid payment rates established by the State. States currently fund a substantial portion of Medicaid payments and exercise considerable discretion in determining payments allowed to care providers. Regulations promulgated by the federal Centers for Medicare and Medicaid Services ( CMS ) provide that states are not required to pay for long term care services on a cost-related basis. As a result, the reimbursement payments allowed by many states are based less on the actual costs of the nursing services and more on formula rates which the governmental agencies deem reasonable, creating a more competitive environment for nursing facilities. The political emphasis on budget cutting, further changes in the Medicaid and Medicare funding and changes in reimbursement patterns of the federal government and the State may have an adverse effect upon the revenues of Sunrise Health Center and the Fountain View Facility. To be eligible for reimbursement by Medicaid, a nursing facility must be certified by Medicare and comply with the requirements of that program. Medicaid-participating nursing facilities must accept the Medicaid reimbursement as payment in full for Medicaid-covered services. Nursing facility Medicaid reimbursement is in the form of prospective per diem rates, established for each Medicaid eligible resident based on a facility s historic costs and the level of care needed by the resident. Allowable Medicaid per diem rates are set quarterly on each January 1, April 1, July 1 and October 1 for the following 3-month period and are limited to the lower of the nursing facility s average nongovernmental program per diem charge or the facility s established Medicaid per diem rate. The Medicaid eligible residents per diem rates are determined generally on the basis of defined allowable historical costs of providing services at resident s facility, subject to certain limits. In determining the Medicaid per diem rate for each Medicaid eligible resident in a facility, the Department of Human Services first calculates two facility per diem rates: the facility s case-mix adjusted rate for direct care (which is based on the level of care provided) and the facility s non-direct care rate. The Medicaid per diem rate for each eligible resident is then determined by multiplying the case-mix adjusted rate for direct care by the resident s resource utilization group ( RUG ) classification, then adding the facility s non-direct care rate

16 Medicare Prospective Payment System. Medicare provides coverage for nursing home care for up to 100 days following the discharge of a patient after a qualifying hospital stay (referred to as extended care services ). To be covered by Medicare, extended care services must follow an inpatient hospital stay of at least three consecutive days and must be related to the condition treated during the patient s hospital stay. Effective July 1, 1998, the Balanced Budget Act of 1997 ( BBA ) mandated a phased-in implementation of a Prospective Payment System ( PPS ) for nursing facilities covering all costs (routine, ancillary and capital) related to nursing home services furnished to Medicare beneficiaries. The nursing facility PPS effectively shifts the financial risk for service costs to the nursing facilities, giving them a significant incentive to reduce costs. Under PPS, Medicare now pays nursing facilities an adjusted federal per diem rate. The adjusted federal per diem rate is determined on the basis of historical per diem rates for all facilities that received payments for fiscal year The historical per diem rate is updated by multiplying the latter by a Skilled Nursing Facility Market Basket Percentage (calculated by CMS) minus one-half percentage point. The rate is then standardized by adjusting for variations among nursing facilities by geographic area and resident case mix. Finally, the standardized rate is adjusted to account for each facility s geographic labor costs and resident resource utilization. A facility s resident resource utilization is determined by assigning each resident of the nursing facility one of 44 RUGs. RUGs are assigned based on the categories of services used by the resident as well as the expected amount of staff time and service frequency, variety and duration required to provide those services. An integral part of PPS is a consolidated billing requirement for nursing facilities providing services to Medicare beneficiaries. Under the consolidated billing requirement, nursing facilities must submit all Medicare claims for all of the extended care services that its residents receive, with the exception of services not included in a resident s plan of care and certain other excluded services. Payments are to be made directly to the nursing facility, which is responsible for paying any contracted service providers. As a result of the consolidated billing requirement, nursing facilities are no longer able to unbundle services to an outside supplier that can then bill Medicare directly. This requirement, like the PPS, effectively places greater financial risk for the cost of services (including contracted services) on the Mortgaged Properties. There can be no assurances of the long-term effect PPS and its consolidated billing requirement will have on the operation of Sunrise Health Center or the net revenues of the Obligated Group. Fraud and Abuse Laws and Regulations. Anti-Kickback Laws. The Federal Medicare/Medicaid Anti-Fraud and Abuse Amendments to the Social Security Act (the Anti-Kickback Law ) make it a criminal felony offense (subject to certain exceptions) to knowingly or willfully offer, pay, solicit or receive remuneration in order to induce business for which reimbursement may be provided under the Medicare or Medicaid programs. The arrangements prohibited under the Anti-Kickback Law can involve hospitals, physicians and other health care providers such as nursing homes and home health agencies. Prohibited arrangements may include joint ventures between providers, space and equipment rentals, purchases of physician practices, physician recruiting programs and management and personal services contracts. In addition to criminal penalties, violations of the Anti-Kickback Law can lead to civil monetary penalties and exclusion from the Medicare and Medicaid programs for not less than five years. Exclusion from either of these programs would have a material adverse impact on the operations and financial condition of Sunrise Health Center and the Fountain View Facility. Billing and Reimbursement Practices. Health care providers, including nursing homes, also are subject to criminal, civil and exclusionary penalties for violating billing and reimbursement standards under state and federal law. In recent years, state and federal enforcement authorities have investigated and prosecuted providers for submitting false claims to Medicare or Medicaid for services not rendered or for misrepresenting the level or necessity of services actually rendered in order to obtain a higher level of reimbursement. The Department of Health and Human Services Office of Inspector General ( OIG ) and the Department of Justice ( DOJ ) have conducted several joint investigation and prosecution projects in the last two years involving a significant number of hospitals and certain other health care providers nationwide in an effort to recover alleged - 7 -

17 overpayments. In some instances, the OIG and DOJ have recovered double or treble damages, plus penalties and interest, and have imposed strict compliance measures to ensure correct billing practices in the future. Managed Care Nursing facilities throughout the United States are facing a health care environment that is becoming increasingly dominated by the development of risk-based managed care plans. The necessity for nursing facilities to contract with managed care plans is increasing not only for privately insured residents but also for certain Medicare beneficiaries. States are experimenting with innovative delivery and payment systems to provide care to Medicare beneficiaries, and in the State there are certain plans that provide for contractual risk-sharing in the delivery of services to individuals who are eligible for both Medicaid and Medicare. The current trend in health care reimbursement is for the federal government to enable the states to use managed care as a way to reduce costs without the need for federal interference and approval. There can be no assurances that Sunrise Health Center will choose to, or will be able to, enter into satisfactory contracts with such managed care plans or that the revenues generated for Sunrise Health Center by any such managed care plans with which Sunrise Health Center may choose to contract will be sufficient to meet such facility s actual operating costs. Other Project Regulatory Matters Various health and safety regulations and statutes apply to the Mortgaged Properties and are administered and enforced by various state agencies. Violations of certain health and safety standards could result in closure of all or a portion of a licensed facility or imposition of the requirement of complying with such standards. Such standards are, however, subject to change and there can be no guarantee that in the future the Mortgaged Properties will meet these changed standards or that the Mortgaged Properties will not be required to expend significant sums in order to comply with such changed standards. Environmental Matters There are numerous environmental risks that can arise in connection with real estate investments, including, without limitation: (1) areas of on-site and off-site environmental contamination; (2) past, present or future violations of environmental laws; (3) adequacy of waste handling procedures; and (4) potential environmental restrictions on future uses of property. A Phase I environmental site assessment was previously performed on the site of the Mortgaged Properties on July 28, The assessment revealed no evidence of recognized environmental conditions. The Mortgaged Properties, similar to commercial real estate, may be subject to such environmental risks which can result in substantial costs to the Obligated Group from any mandatory clean-up, damages, fines or penalties that might be ordered with respect thereto. Any environmental problems discovered with respect to the Mortgaged Properties could have an adverse effect on the collateral value thereof. Failure to Meet Financial Covenants The Obligated Group may fail to meet the financial covenants set forth in the Master Indenture and Loan Agreement. See SECURITY FOR THE BONDS Certain Covenants of the Obligated Group. As long as the Long-Term Debt Service Coverage Ratio is not (i) less than 1.00:1.00 for two consecutive Fiscal Years or (ii) less than 1.00:1.00 for a Fiscal Year and the Days Cash on Hand is less than 60 days for such Fiscal Year, such failure to meet such requirement is not an Event of Default, in which event the Master Indenture and Loan Agreement only require the Obligated Group to engage a Consultant to formulate a plan of action; however, the Obligated Group may, upon submission of an alternative plan of action, choose not to follow the recommendations of the Consultant. While these covenants are intended to require the Obligated Group to take corrective action in order to avert a payment default, no assurance can be given that such corrective action, if required, will be successful

18 Tax-Exempt Status of Bonds The tax-exempt status of the Bonds is based on the continuous compliance by the Issuer and the Borrower with certain covenants contained in the Bond Indenture and the Loan Agreement. These covenants relate generally to ownership, use and operation of the Mortgaged Properties, arbitrage limitations, rebate of certain excess investment earnings to the federal government, and restrictions on the amount of issuance costs financed with the proceeds of the Bonds. Currently the Borrower owns each of the facilities comprising the Mortgaged Properties; however, the Borrower intends to transfer certain of the Mortgaged Properties to other Members of the Obligated Group. The Borrower will enter into a Use Agreement with each Member of the Obligated Group relating to the Bond Financed Property (as defined in the Loan Agreement) being financed or refinanced with the proceeds of the Bonds. Failure to comply with any of these covenants may result in the treatment of interest on the Bonds as taxable retroactive to the date of issuance. See TAX EXEMPTION herein. Internal Revenue Code Compliance The possible modification or repeal of certain existing federal income or state tax laws or other loss by the Borrower of the present advantages of certain provisions of the federal income or state tax laws could materially and adversely affect the status of the Borrower and thereby the revenues of the Borrower. As an exempt organization, the Borrower is subject to a number of requirements affecting its operations. The failure to remain qualified as an exempt organization would affect the funds available for payments to be made under the Loan Agreement. The maintenance by the Borrower of its tax-exempt status depends, in part, upon maintenance of its status as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the Tax Code ). The maintenance of such status is contingent upon compliance with general rules promulgated under the Tax Code and related regulations regarding the operation of tax-exempt entities, including operation for charitable purposes and avoidance of transactions which may cause their assets to inure to the benefit of private individuals. Although specific activities of health care providers have been the subject of interpretations by the Internal Revenue Service in the form of private letter rulings, many activities have not been addressed in any official opinion, interpretation or policy of the Internal Revenue Service. There can be no assurance that transactions conducted by the Borrower will not be challenged by the Internal Revenue Service. Value of Mortgaged Property Security for the Bonds includes the Mortgage with respect to the Mortgaged Properties. Attempts to foreclose under the Mortgage may be met with protracted litigation or bankruptcy proceedings, which proceedings cause delays. Thus, there can be no assurance that, upon the occurrence of an Event of Default, the Bond Trustee will be able to obtain possession of the Mortgaged Properties and generate revenue therefrom in a timely fashion. Furthermore, there can be no assurance that proceeds derived from the sale of the Mortgaged Properties, upon default and foreclosure of the Mortgage, would be sufficient to pay all Bonds and accrued interest. The Mortgaged Properties are special purpose facilities, which fact may reduce the value of the Mortgaged Properties at foreclosure or sale. Liens on Mortgaged Properties The Borrower may file or record certain liens on the Mortgaged Properties pursuant to the Master Indenture. See the definition of Permitted Liens in APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS hereto. In addition, state or federal authorities may file liens and the Members of the Obligated Group may file liens that would constitute an Event of Default under the Master Indenture. Such liens, in addition to Permitted Liens, may have priority over the liens of the Mortgage. Concurrently with, and as a condition of, the delivery of the Bonds, the Borrower will deliver to the Master Trustee evidence acceptable to the Master Trustee insuring that the Mortgage on the Mortgaged Properties constitute a first lien on such Mortgaged Properties, subject only to Permitted Liens

19 Normal Risks Attending Any Investment in Real Estate There are many diverse risks attending any investment in real estate not within the Borrower s control, which may have a substantial bearing on the profitability and financial feasibility of the Mortgaged Properties. Such risks include, but are not limited to, possible adverse use of adjoining land, fire or other casualty, condemnation, imposition of increased taxes, changes in demand for the Mortgaged Properties, decline in the neighborhood and local or general economic conditions and changing governmental regulations. Labor Matters In recent years, many nursing homes have suffered from an increasing scarcity of skilled nursing personnel and nursing assistants to staff their facilities. This trend in the scarcity of qualified personnel could eventually affect Sunrise Manor s nursing home facility and force Sunrise Manor to pay increased salaries to such personnel as competition for such employees intensifies and, in an extreme situation, could lead to difficulty in keeping the Sunrise Manor s nursing home facility licensed. Insurance Although the Borrower will be required to obtain certain insurance as set forth in the Loan Agreement, there can be no assurance that the Mortgaged Properties will not suffer losses for which insurance cannot be or has not been obtained or that the amount of any such loss, or the period during which the Mortgaged Properties cannot generate revenues, will not exceed the coverage of such insurance policies. The Borrower, to the extent insurance is available and affordable, will be insured against patient abuse and neglect claims. In recent years, the number of lawsuits and the dollar amount of patient abuse and neglect recoveries have been increasing dramatically nationwide, resulting in increased insurance premiums and, in some states, an inability to obtain any insurance coverage. Competition The Mortgaged Properties will face competition from other existing nursing, assisted living, enhanced care and residential care or rental facilities in the Borrower s primary service area and may face additional competition in the future if and when there occurs the construction of new, or the renovation of existing, facilities. There are currently no restrictive regulatory barriers to entry into the field of housing for the elderly. Therefore, as new facilities offering housing with services for the elderly are built and existing assisted living facilities and other facilities providing personal care services are updated and renovated, such newer and more modern facilities become strong competitors of older facilities. Many seniors see an advantage in living on a campus in which there is a continuum of housing and care opportunities so that they can age in place. The Borrower may face especially strong competition if new housing facilities are constructed on the campus of another nursing home or senior apartment project in the Borrower s primary service area. In addition, the growth of home health care services in the community permits elder adults to stay in their own homes longer without the need to move to a residential setting in which they can receive assistance with their personal and health care. Certain states have experienced the construction of new personal care and assisted living facilities at a pace that results in the availability of more units than individuals choosing to live in such facilities. In such states, some facilities find it necessary to offer free rent and other concessions in order to achieve sufficient occupancy. There is no assurance that such a situation would not develop in the State, or that there will be no other entrants into the senior housing market in the Borrower s primary service area in the future. See Appendix A: THE OBLIGATED GROUP AND THE PROJECT Service Area and Competition and Appendix F: FINANCIAL FORECAST. Effect of Federal Bankruptcy Laws on Security for the Bonds If any Member of the Obligated Group were to file a petition for relief (or if a petition were filed against a Member of the Obligated Group) under the Bankruptcy Code, the filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against such Member of the Obligated Group and its property. If the bankruptcy court so ordered, the respective Member s property, including its accounts receivable

20 and proceeds thereof, could be used for the benefit of such Member of the Obligated Group despite the claims of its creditors. In a bankruptcy proceeding, a Member of the Obligated Group could file a plan for the adjustment of its debts which modifies the rights of creditors generally, or the rights of any class of creditors, secured or unsecured. The plan, when confirmed by the court, binds all creditors who had notice or knowledge of the plan and discharges all claims against the debtor provided for in the plan. No plan may be confirmed unless, among other conditions, the plan is in the best interests of creditors, is feasible and has been accepted by each class of claims impaired thereunder. Each class of claims has accepted the plan if at least two-thirds in dollar amount and more than one-half in number of the allowed claims of the class that are voted with respect to the plan are cast in its favor. Even if the plan is not so accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly. Certain judicial decisions, rules and regulations have caused doubt upon the right of the Bond Trustee, in the event of health care systems bankruptcy, to collect and retain for the benefit of the Bondholders portions of revenues consisting of Medicare, Medicaid and other governmental receivables. Risk of Early Call There are a number of circumstances under which all or a portion of the Bonds may be redeemed prior to their stated maturity. See THE BONDS Redemption Prior to Maturity. Absence of Rating No rating as to the creditworthiness of the Bonds has been requested from any organization engaged in the business of granting and publishing such ratings. Typically, unrated bonds lack liquidity in the secondary market in comparison with rated bonds. As a result of the foregoing, the Bonds are believed to bear interest at higher rates than would prevail for bonds with comparable maturities and redemption provisions that have investment grade credit ratings. Bonds should not be purchased by any investor who, because of financial condition, investment policies or otherwise, does not desire to assume, or have the ability to bear, the risks inherent in an investment in the Bonds. Secondary Market The Underwriter expects to effect secondary market trading in the Bonds. However, the Underwriter is not obligated to repurchase any Bonds at the request of the holders thereof and cannot assure that there will be a continuing secondary market in the Bonds. In addition, adverse developments, including insufficient cash flow from the Mortgaged Properties, may have an unfavorable effect upon the bid and asked prices for the Bonds in the secondary market. Additional Debt or Guaranties The Master Indenture, under certain conditions, will permit Members of the Obligated Group to incur additional indebtedness or undertake guaranties of indebtedness of non-member affiliates which may be, but need not be, equally and ratably secured with the Obligations. Any such additional parity indebtedness or guaranteed indebtedness will be entitled to share ratably with the owners of the Bonds in any moneys realized from the exercise of remedies upon an event of a default by the Obligated Group. In addition such additional parity indebtedness or guaranteed indebtedness could reduce the Long-Term Debt Service Coverage Ratio or could otherwise impair the ability of the Obligated Group to maintain its compliance with certain covenants. There is no assurance that, despite compliance with the conditions upon which additional indebtedness or guaranties may be incurred or undertaken, as applicable, at the time such Indebtedness is created, the ability of the Obligated Group to make the necessary payments to repay the Bonds will not be materially and adversely affected. Amendments to the Bond Indenture and the Master Indenture Certain amendments to the Bond Indenture may be made with the consent of owners of not less than a majority of the principal amount of the Outstanding Bonds. Certain amendments to the Master Indenture may be

21 made with the consent of holders of not less than a majority of the principal amount of outstanding Obligations. Such amendments may adversely affect the security of the owners of the Bonds and, with respect to the Master Indenture, such percentage may be composed wholly or partially of holders of Obligations other than Obligation No. 1. See APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS. Matters Relating to Security for the Bonds The remedies available to the Bond Trustee, the Master Trustee, the Issuer or the owners of the Bonds upon an event of default under the Master Indenture, the Bond Indenture, the Loan Agreement or Obligation No. 1 are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including, specifically, the Bankruptcy Code, the remedies provided in the Master Indenture, the Bond Indenture, the Loan Agreement and Obligation No. 1 may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by general principles of equity and by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and laws relating to fraudulent conveyances. Certain Matters Relating to the Enforceability of the Master Indenture In determining whether various covenants and tests contained in the Master Indenture (including tests relating to the issuance of additional indebtedness) are met, the accounts of the Obligated Group and any future Members of the Obligated Group will be combined for financial reporting purposes, notwithstanding uncertainties hereinafter described as to the enforceability of certain obligations of the Obligated Group contained in the Master Indenture which bear on the availability of the revenues of the Members of the Obligated Group for payment of debt service on obligations issued under the Master Indenture, including Obligation No. 1 pledged as security for the Bonds. The joint and several obligations described herein of the Members of the Obligated Group to make payments of debt service on obligations issued under the Master Indenture (including transfers in connection with voluntary dissolution or liquidation) may not be enforceable to the extent such payments (a) are requested to be made with respect to payments on any obligation issued by or for a Member of the Obligated Group other than the Member from which such payment is requested which is issued for a purpose that is not consistent with the charitable purposes of the Member from which such payment is requested or which is issued for the benefit of an entity other than a tax-exempt organization; (b) are requested to be made from any property which is donor restricted or which is subject to a direct or express trust which does not permit the use of such property for such payment; (c) would result in the cessation or discontinuation of any material portion of the health or related services previously provided by the Member of the Obligated Group from which such payment is requested (other than the Member by or for which such obligation was issued); or (d) are requested to be made pursuant to any loan violating applicable usury laws. Due to the absence of any clear legal precedent in this area, the extent to which the property of any present or future Member of the Obligated Group falls within category (a) referred to above cannot be determined and could be substantial. A Member of the Obligated Group may not be required to make payments on the Obligations issued by or for the benefit of another Member to the extent any such payment would render such Member insolvent or would conflict with, would not be permitted by or would be subject to recovery for the benefit of other creditors of such member under applicable fraudulent conveyance, bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors rights. There is no clear precedent in the law as to whether payments by a Member of the Obligated Group in order to pay debt service on obligations issued by or for the benefit of another Member may be voided by a trustee in bankruptcy in the event of a bankruptcy of the member or by third party creditors in an action brought pursuant to state fraudulent conveyances statutes. Under the Bankruptcy Code, a trustee in bankruptcy and, under state fraudulent conveyances statutes, a creditor of a related guarantor, may avoid any obligation incurred by a related guarantor, if, among other bases therefor, (1) the guarantor has not received fair consideration or reasonably equivalent value in exchange for the guaranty and (2) the guaranty renders the guarantor insolvent, as defined in the Bankruptcy Code or state fraudulent conveyances statutes, or the guarantor is undercapitalized

22 Application by courts of the tests of insolvency, reasonably equivalent value and fair consideration has resulted in a conflicting body of case law. It is possible that, in an action to force a Member of the Obligated Group to pay debt service on obligations issued under the Master Indenture issued by or for the benefit of another Member, a court might not enforce such a payment in the event it is determined that such Member is analogous to a guarantor and that fair consideration or reasonably equivalent value for such guaranty was not received and that the incurrence of such obligation has rendered and will render the Member of the Obligated Group insolvent or the Member is or will thereby become undercapitalized. There exists common law authority and authority under state statutes for the ability of courts in such states to terminate the existence of a not-for-profit or nonprofit corporation or undertake supervision of its affairs on various grounds, including a finding that such corporation has insufficient assets to carry out its stated charitable purposes. Such court action may arise on the court s own motion or pursuant to a petition of the attorney general of such states or such other persons who have interests different from those of the general public, pursuant to the common law and statutory power to enforce charitable trusts and to see to the application of their funds to their intended charitable uses. Other Possible Risk Factors The occurrence of any of the following events, or other unanticipated events, could adversely affect the operations of the Members of the Obligated Group: (i) inability to control increases in operating costs, including salaries, wages and fringe benefits, supplies and other expenses, without being able to obtain corresponding increases in revenues from residents, some of whose incomes may be fixed; (ii) unionization, employee strikes and other adverse labor actions which could result in a substantial increase in expenditures without a corresponding increase in revenues; (iii) adoption of federal, state or local legislation or regulations having an adverse effect on future operating or financial performance of the Obligated Group; (iv) a decline in the population, a change in the age composition of the population or a decline in the economic conditions of the Obligated Group s market areas; (v) the ability of, and cost to, the Obligated Group to continue to insure or otherwise protect itself against malpractice claims; (vi) the inability to control increased health care costs, some of which must be provided to residents without any additional charge, which increased costs may be a result of increased acuity levels, or health care requirements of the resident population; and (vii) developments or events affecting the federal or state exemption of each of the Members of the Obligated Group s income from taxation or such Member s status as an exclusively charitable organization under federal tax or securities laws. Interest; Maturity; Payment THE BONDS The Bonds will be issued in the aggregate principal amounts and will bear interest as set forth on the cover hereof payable semiannually on March 1 and September 1 (each an Interest Payment Date ) of each year commencing on March 1, Interest will be calculated on the basis of a 360-day year with twelve months of thirty days. The ownership of any Bonds offered hereby will be beneficial ownership and not record ownership so long as the Bonds are held in book-entry form. While in such form, the Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company. See this section, Book-Entry System. The Bonds are issuable in fully registered form, in the denomination of $5,000 and integral multiples thereof not exceeding the principal amount maturing in any year. In the event any Bond is mutilated, lost, stolen or destroyed, the Issuer may execute, and the Bond Trustee may authenticate, a new Bond in accordance with the provisions therefor in the Indenture, and the Issuer and the Bond Trustee may charge the owner of such Bond with reasonable fees and expenses in connection therewith and require indemnity satisfactory to them

23 Book-Entry System The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchases of the Bonds under the DTC system must be made by or through Direct Participants which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them

24 Redemption notices are required to be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts, upon DTC s receipt of funds and corresponding detail information from the Issuer or the Bond Trustee on the payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Bond Trustee, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Bond Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Beneficial Owner will give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Bond Trustee, and will effect delivery of such Bonds by causing the Direct Participant to transfer the Participant s interest in the Bonds, on DTC s records, to the Bond Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC s records and followed by a book-entry credit of tendered Bonds to the Bond Trustee s DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Bond Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. THE INFORMATION ABOVE DISCUSSING THE BOOK-ENTRY SYSTEM HAS BEEN FURNISHED BY DTC. NO REPRESENTATION IS MADE BY THE ISSUER, THE BOND TRUSTEE, MEMBERS OF THE OBLIGATED GROUP OR THE UNDERWRITER AS TO THE COMPLETENESS OR ACCURACY OF SUCH INFORMATION OR AS TO THE ABSENCE OF MATERIAL ADVERSE CHANGES IN SUCH INFORMATION SUBSEQUENT TO THE DATE HEREOF. NO ATTEMPT HAS BEEN MADE BY THE ISSUER, THE BOND TRUSTEE, MEMBERS OF THE OBLIGATED GROUP OR THE UNDERWRITER TO DETERMINE WHETHER DTC IS OR WILL BE FINANCIALLY OR OTHERWISE CAPABLE OF FULFILLING ITS OBLIGATIONS. THE ISSUER HAS NO RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS, OR THE PERSONS FOR WHICH

25 THEY ACT AS NOMINEES WITH RESPECT TO THE BONDS, OR FOR ANY PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST PAYMENT THEREON. Redemption Prior to Maturity Mandatory Sinking Fund Redemption of Bonds. The Bonds maturing September 1, 2027, September 1, 2032, September 1, 2037 and September 1, 2043 (the Term Bonds ) will be subject to mandatory redemption prior to maturity by lot in such manner as the Bond Trustee may determine through the operation of mandatory sinking fund payments as provided in the Bond Indenture, at the principal amount so to be redeemed plus accrued interest to the redemption date, in accordance with the following schedules: $2,820,000 Term Bond Due September 1, 2027 Sinking Fund Payment Date Principal Amount 3/1/2023 $250,000 9/1/2023 $260,000 3/1/2024 $265,000 9/1/2024 $270,000 3/1/2025 $280,000 9/1/2025 $285,000 3/1/2026 $290,000 9/1/2026 $300,000 3/1/2027 $305,000 9/1/2027** $315,000 ** Maturity $3,660,000 Term Bond Due September 1, 2032 Sinking Fund Payment Date Principal Amount 3/1/2028 $325,000 9/1/2028 $330,000 3/1/2029 $340,000 9/1/2029 $350,000 3/1/2030 $360,000 9/1/2030 $370,000 3/1/2031 $380,000 9/1/2031 $390,000 3/1/2032 $405,000 9/1/2032** $410,000 ** Maturity

26 $4,795,000 Term Bond Due September 1, 2037 Sinking Fund Payment Date Principal Amount 3/1/2033 $425,000 9/1/2033 $435,000 3/1/2034 $445,000 9/1/2034 $460,000 3/1/2035 $470,000 9/1/2035 $485,000 3/1/2036 $500,000 9/1/2036 $510,000 3/1/2037 $525,000 9/1/2037** $540,000 ** Maturity $9,480,000 Term Bond Due September 1, 2043 Sinking Fund Payment Date Principal Amount 3/1/2038 $555,000 9/1/2038 $570,000 3/1/2039 $585,000 9/1/2039 $605,000 3/1/2040 $620,000 9/1/2040 $640,000 3/1/2041 $655,000 9/1/2041 $680,000 3/1/2042 $700,000 9/1/2042 $715,000 3/1/2043 $740,000 9/1/2043** $2,415,000 ** Maturity On or before the 30th day prior to each such mandatory sinking fund redemption date, the Bond Trustee shall proceed to call the Term Bonds for redemption, pursuant to the provisions of the Bond Indenture, in the aggregate principal amount set forth above less any reduction pursuant to the provisions of the Bond Indenture governing the Sinking Fund Account in the Bond Fund or the provisions of the Bond Indenture described in the next succeeding sentence. At its option, to be exercised on or before the 60th day next preceding any such redemption date, the Issuer, at the request of the Borrower, may (a) deliver to the Bond Trustee for cancellation Term Bonds subject to redemption from Redemption Requirements on such mandatory sinking fund redemption date, as provided in the Bond Indenture, in any aggregate principal amount desired or (b) receive a credit in respect to Redemption Requirements for any Term Bonds which prior to said date have been redeemed otherwise than through the operation of Redemption Requirements and canceled by the Bond Trustee and subject to the Redemption Requirements on such mandatory sinking fund redemption date and not theretofore applied as a credit against any Redemption Requirements. Each Term Bond so delivered or previously redeemed shall be credited by the Bond Trustee at the principal amount thereof on such redemption date and the principal amount of Term Bonds to be redeemed from Redemption Requirements on such date shall be accordingly reduced. Optional Redemption. The Bonds are subject to redemption prior to their stated maturity, at the option of the Borrower (from prepayments made by the Borrower, at its option, under the Loan Agreement), on and after

27 September 1, 2020, as a whole or in part at any time, at a redemption price of par together with the interest accrued thereon to the date fixed for redemption, with redemption premium as follows: Redemption Date September 1, 2020 through August 31, 2021 September 1, 2021 through August 31, 2022 September 1, 2022 and thereafter Redemption Premium 1.0% of principal amount being redeemed 0.5% of principal amount being redeemed No premium Mandatory Tax Redemption Upon Determination of Taxability. If a Determination of Taxability occurs and the Bond Trustee receives notice thereof, all Bonds shall be redeemed on the date designated by the Bond Trustee pursuant to the provisions of the Loan Agreement, at a redemption price equal to the amount to be redeemed plus accrued interest to the redemption date, without premium. Extraordinary Optional Redemption. The Bonds are redeemable out of certain moneys received by the Bond Trustee pursuant to the Loan Agreement, at the option of the Borrower, at a redemption price equal to the principal amount of the Bonds to be redeemed without premium plus accrued interest thereon to the date fixed for redemption, as a whole or in part at any time, upon the occurrence of certain events and the satisfaction of certain conditions relating to damage, destruction, condemnation or sale of the Mortgaged Properties, all as set forth in Sections 3.04 and 3.14 of the Master Indenture. Notice of Redemption; Payment At least 30 days before the redemption date of any Bonds, whether such redemption be in whole or in part, the Bond Trustee shall cause a notice of any such redemption signed by the Bond Trustee to be sent by electronic means or mailed by first class mail, postage prepaid, to all Bondholders owning Bonds to be redeemed in whole or in part. Failure to mail any such notice to any Bondholder or any defect in any notice so mailed shall not affect the validity of the proceedings for the redemption of the Bonds of any other Bondholders. Each such notice shall set forth the date fixed for redemption, the redemption price to be paid, the maturities of the Bonds to be redeemed and, if less than all of the Bonds then Outstanding shall be called for redemption, the distinctive numbers and letters, if any, of such Bonds to be redeemed and, in the case of Bonds to be redeemed in part only, the portion of the principal amount thereof to be redeemed. If any Bond is to be redeemed in part only, the notice of redemption shall state also that on or after the redemption date, upon surrender of such Bond, a new Bond in principal amount equal to the unredeemed portion of such Bond will be issued. If at the time of mailing of optional redemption there shall not have been deposited with the Bond Trustee moneys sufficient to redeem all of the Bonds called for redemption, such notice may state that it is conditional upon sufficient funds required to effect such redemption being on deposit with the Bond Trustee on or prior to the redemption date, and such notice shall be of no effect unless such moneys are so deposited. Ownership The person in whose name a Bond is registered may be treated for all purposes as the owner thereof

28 General SECURITY FOR THE BONDS The Bonds will be issued and will be secured under the Bond Indenture, which will assign and pledge to the Bond Trustee for the benefit of bondholders, (1) Obligation No. 1; (2) the rights of the Issuer under the Loan Agreement (except for certain unassigned rights including rights to notice, consent, reporting, payment of fees and expenses and indemnification); and (3) the funds and accounts (except the Rebate Fund), including the money and investments therein, which the Bond Trustee holds under the terms of the Bond Indenture. Obligation No. 1 will constitute an unconditional promise by the Obligated Group to pay amounts sufficient to pay principal of (whether at maturity, by acceleration or call for redemption), premium, if any, and interest on the Bonds and will be secured, on a parity with all prior and additional obligations issued under the Master Indenture, by the Mortgage. Limited Obligations The Bonds are issued under and pursuant to Chapter 16 of the Code of Iowa, 2011, as amended (the Act ), and pursuant to a resolution adopted by the Issuer. The Bonds constitute special, limited obligations of the Issuer, payable solely from proceeds of the Bonds, the revenues pledged to the payment thereof pursuant to the Loan Agreement, and the funds and accounts held under and pursuant to the Bond Indenture and pledged therefor. The Bonds, the interest thereon and any other payments or costs incident thereto do not constitute an indebtedness or a loan of the credit of the Issuer, the State or any political subdivision thereof within the meaning of any constitutional or statutory provisions. The Issuer does not pledge its faith or credit nor the faith or credit of the State nor any political subdivision of the State to the payment of the principal of, the interest on or any other payments or costs incident to the Bonds. The issuance of the Bonds and the execution of any documents in relation thereto do not directly, indirectly or contingently obligate the State or any political subdivision of the State to apply money from or levy or pledge any form of taxation whatever to the payment of the principal of or interest on the Bonds or any other payments or costs incident thereto. The Issuer has no taxing power. The Master Indenture and the Obligated Group General. At the time of issuance of the Bonds, Sunrise Manor, Fountain View, Sunrise Eastview and Sunrise Health Center will be the only Members of the Obligated Group. See APPENDIX A THE OBLIGATED GROUP AND THE PROJECT. The Master Indenture provides, however, that one or more entities may be admitted to the Obligated Group as members from time to time upon the satisfaction of certain conditions. See APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS THE MASTER INDENTURE. Each member will jointly and severally covenant to pay the principal of and premium, if any, and interest on all obligations secured by the Master Indenture and to perform any and all other covenants, agreements and obligations under the Master Indenture subject to the right of such member to withdraw from the Obligated Group under certain circumstances specified in the Master Indenture. See APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS THE MASTER INDENTURE. Obligation No. 1 will be issued by the Obligated Group under the Master Indenture. Obligation No. 1 and any other Obligation issued by the Obligated Group or any individual Member of the Obligated Group in the future will be the general, joint and several obligations of each Member of the Obligated Group. All such Obligations, including Obligation No. 1, will rank on a parity basis with each other and will be equally and ratably secured by the Master Indenture. The Master Indenture requires all Members of the Obligated Group to make payments sufficient to pay all Obligations when due. The enforceability of the Obligations of Members of the Obligated Group may be limited in certain circumstances. See the subsection Bankruptcy below and BONDHOLDERS RISKS herein. The Members of the Obligated Group are subject to restrictions and limitations with respect to the incurrence of indebtedness, consolidation and merger, transfer of assets (including cash and investments) and addition and withdrawal of Members of the Obligated Group. The Master Indenture also includes covenants with respect to the maintenance of Property of the Obligated Group, as well as covenants relating to rates and fees to be

29 charged in order to maintain certain coverage ratios. Detailed summaries of the covenants of the Obligated Group under the Master Indenture are contained in APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS THE MASTER INDENTURE. See also Certain Covenants of the Obligated Group below. Enforceability of the Master Indenture. The state of the insolvency, fraudulent conveyance and bankruptcy laws relating to the enforceability of guaranties or obligations issued by one corporation in favor of the creditors of another or the obligations of a Member of the Obligated Group to make debt service payments on behalf of another Member of the Obligated Group is unsettled and the ability to enforce the Master Indenture and the Obligations against any Member of the Obligated Group which would be rendered insolvent thereby could be subject to challenge. In particular, such obligations may be voidable under the Bankruptcy Code or applicable state fraudulent conveyance laws if the obligation is incurred without fair and/or fairly equivalent consideration to the obligor and if the incurrence of the obligation thereby renders the Obligated Group member insolvent. The standards for determining the fairness of consideration and the manner of determining insolvency are not clear and may vary under the Bankruptcy Code, state fraudulent conveyance statutes and applicable cases. In addition, common law authority and authority under state statutes exists in certain states for the ability of courts in such states to terminate the existence of a not-for-profit or nonprofit corporation or undertake supervision of its affairs on various grounds, including a finding that such corporation has insufficient assets to carry out its stated charitable purposes. Such court action may arise on the court s own motion or pursuant to a petition of the attorney general of such state or such other persons who have interests different from those of the general public, pursuant to the common law and statutory power to enforce charitable trusts and to see to the application of their funds to their intended charitable uses. The Mortgage As further security for the obligations of the Obligated Group under the Master Indenture, pursuant to the Mortgage, the Borrower has granted to the Master Trustee a mortgage lien on the Mortgaged Properties, subject to Permitted Liens. In addition, each Member of the Obligated Group covenants in the Master Indenture that it will not create, assume or suffer to exist liens upon any of the Mortgaged Properties other than Permitted Liens pursuant to the Master Indenture. The Borrower will deliver evidence acceptable to the Master Trustee insuring that the Mortgage on the Mortgaged Properties constitutes a first lien on such Mortgaged Properties, subject only to Permitted Liens. Although the Obligated Group has covenanted not to create or permit any mortgage or security interest on the Mortgaged Properties except as described in the Master Indenture, if it were to violate such covenant, any such mortgage, security interest or other lien created may nevertheless be enforceable even if it adversely affects the ability of the Obligated Group to provide for payment of the Bonds. The existence of any such liens could have an adverse effect on the treatment of owners of the Bonds in any bankruptcy proceeding. See the subsection Bankruptcy below and BONDHOLDERS RISKS herein. In addition, certain liens, such as liens for enforcement of tax and environmental laws, may attach even in the absence of bankruptcy. Pursuant to the Master Indenture, property subject to the Mortgage may be transferred between Members of the Obligated Group or released in certain conditions. See APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS THE MASTER INDENTURE Sale, Lease or Other Disposition of Property and THE MORTGAGE. Debt Service Reserve Fund A Debt Service Reserve Fund will be funded with a portion of the proceeds of the Bonds in an amount equal to the Reserve Fund Requirement. The Loan Agreement will require the Borrower to replenish the amount in the Debt Service Reserve Fund to the Reserve Fund Requirement, if the Bond Trustee is required to use monies in said fund to pay debt service on the Bonds, in twelve equal monthly installments commencing as of the 20th day of the month following any month in which a transfer is made from the Debt Service Reserve Fund to the Bond Fund. If a deficiency exists in the Debt Service Reserve Fund resulting from a decrease in the market value of the Qualified Investments held therein, the Borrower will be required to restore the Debt Service Reserve Fund immediately. See the subsection THE

30 INDENTURE Revenues and Funds Debt Service Reserve Fund in APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS. Certain Covenants of the Obligated Group Covenant to Maintain Long-Term Debt Service Coverage Ratio. Each Member of the Obligated Group covenants to set rates and charges for its Facilities and services such that the Long-Term Debt Service Coverage Ratio, calculated at the end of each Fiscal Year, beginning with the Fiscal Year ending on December 31, 2014, will not be less than 1.20:1.00; provided, however, that in any case where Long Term Indebtedness has been incurred to acquire, renovate, or construct capital improvements, the Annual Long Term Debt Service Requirement with respect thereto shall not be taken into account in making the foregoing calculation until the second Fiscal Year commencing after the initial occupation or utilization of such capital improvements, unless the Long-Term Debt Service Requirement and other costs of carry with respect thereto is required to be paid from sources other than the proceeds of such Long Term Indebtedness prior to such Fiscal Year, in which case the Long Term Debt Service Requirement shall be taken into account in the Fiscal Year in which it is required to be paid. If at any time the Long-Term Debt Service Coverage Ratio required by the Master Indenture is not met, the Obligated Group covenants that if the Long-Term Debt Service Coverage Ratio is less than 1.20:1.00, then the Obligated Group shall retain a Consultant within 30 days after a determination of non compliance to make recommendations to the Obligated Group to meet such covenants or, if in the opinion of the Consultant meeting such covenants is impracticable, to meet such covenants to the greatest extent attainable, but at least 1.00:1.00. Such recommendations shall be due within 90 days after the determination of non compliance. Each Member of the Obligated Group agrees that it will, to the extent permitted by law, follow the recommendations of the Consultant. So long as a Consultant shall be retained in such circumstances and each Member of the Obligated Group shall follow such Consultant s recommendations to the extent permitted by law, this Section shall be deemed to have been complied with; if however, (i) the Long-Term Debt Service Coverage Ratio is less than 1.00:1.00 for two consecutive Fiscal Years, or (ii) the Long-Term Debt Service Coverage Ratio for a Fiscal Year is less than 1:00:1:00 and the Days Cash on Hand is less than 60 days for such Fiscal Year, then such failure shall constitute an Event of Default under this Master Indenture regardless of whether a Consultant is engaged. See APPENDIX C CERTAIN DEFINITIONS AND SUMMARIES OF DOCUMENTS. Days Cash on Hand. The Members of the Obligated Group agree that they, as a group, will maintain Unrestricted Cash and Investments such that as of December 31 for each Fiscal Year, beginning with the Fiscal Year ending December 31, 2012, based on the audited Financial Statements for that Fiscal Year, the Days Cash on Hand for the Obligated Group will be at least 45 days. If the amount of Days Cash on Hand for the Obligated Group in any Fiscal Year falls below 45 days, the Obligated Group Agent shall retain a Consultant within 30 days after a determination of noncompliance to make written recommendations to the Obligated Group Agent to meet the required Days Cash on Hand. Each Member of the Obligated Group agrees that it will, to the extent permitted by law, follow the recommendations of the Consultant. So long as a Consultant shall be retained in such circumstances and each Member of the Obligated Group shall follow such Consultant s recommendations to the extent permitted by law, this Section shall be deemed to have been complied with. See APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS. Other Covenants. For information about the Obligated Group s covenants with respect to the incurrence of additional indebtedness, maintenance of facilities, Permitted Liens, sale or transfer or disposition of property and other covenants, see generally APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS MASTER INDENTURE. Additional Bonds; Parity Indebtedness Although the Bond Indenture makes no provision for the issuance of any additional bonds or other indebtedness secured by the Bond Indenture, the Master Indenture permits the incurrence by the Obligated Group of additional Indebtedness on a parity basis with Obligation No. 1 and other Obligations issued under the Master Indenture. Such additional Indebtedness would therefore be secured on a parity with the Bonds. See THE MASTER INDENTURE in APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS. As the holder of Obligation No. 1, the Bond Trustee also may require that the Master Trustee

31 accelerate payment of Obligation No. 1 under certain conditions, subject, however, to the rights of the holders of the other Obligations, if any, under the Master Indenture. See the subsection Acceleration: Annulment of Acceleration under THE MASTER INDENTURE in APPENDIX C DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF DOCUMENTS. Defeasance If interest on, and the principal and redemption premium (as the case may be) of all Bonds have been paid, or the required amount of money and noncallable Defeasance Obligations have been deposited with the Bond Trustee to provide sufficient amounts to pay the principal of, premium, if any, and interest due and to become due on the Bonds on or prior to the redemption date or maturity date thereof, such Bonds shall be no longer deemed outstanding under the Bond Indenture and the Bond Trustee shall cancel the obligations of the Obligated Group to the owners of the Bonds. Bankruptcy Bankruptcy, insolvency, reorganization, moratorium or other similar laws, and equitable principles may limit the specific enforcement of certain rights to security given or to be given for Obligation No. 1 or the Bonds. Bankruptcy proceedings by any Member of the Obligated Group could have adverse effects on the owners of the Bonds, including (1) delay in the enforcement of their remedies, (2) subordination of their claims to claims of those supplying goods and services to the Members of the Obligated Group after the initiation of bankruptcy proceedings and (3) imposition without their consent of a plan of reorganization reducing or delaying payment of the Bonds. The Bankruptcy Code contains provisions intended to ensure that, in any plan of reorganization not accepted by at least a majority of any class of creditors such as holders of the Bonds, such class of creditors will retain the liens securing such creditors claims and receive on account of such claims deferred cash payments totaling at least the value of the property securing such claims or receive the indubitable equivalent of such claims. The effect of these and other provisions of the Bankruptcy Code cannot be predicted and may be significantly affected by judicial interpretation. See BONDHOLDERS RISKS herein. PLAN OF FINANCE Certain proceeds of the Bonds will be used to prepay the Prior Bonds by depositing such proceeds of the Bonds into the Refunding Fund established under the Bond Indenture. Certain moneys in the Refunding Fund will be deposited with MidWestOne Bank, as Servicer for the Prior Bonds, and will be applied on the prepayment date set pursuant to the Servicing Agreement (as defined in Appendix C attached hereto) to optionally prepay all of the Prior Bonds outstanding on such date at a redemption price of the principal amount thereof, plus interest accrued to the date set for prepayment of the Prior Bonds, which will happen on or shortly after the date of issuance of the Bonds. Following the date of the prepayment of the Prior Bonds, approximately $1,410,000 of the Lawton Series 2011 Notes will remain outstanding. The Lawton Series 2008 Note, the Woodbury County Series 2008 Note, the Bronson Note, and the Woodbury County Series 2011 Note will have been prepaid in their entirety. The remaining proceeds of the Bonds will be used to (1) pay a portion of the costs of demolishing the Borrower s former Health Center located on the Obligated Group s campus (the Campus ) at 5501 Gordon Drive East, Sioux City, Iowa (collectively, the Project ); (2) fund a debt service reserve fund; and (3) pay certain other costs associated with the issuance of the Bonds. [The remainder of this page has intentionally been left blank.]

32 SOURCES AND USES OF FUNDS Following are the estimated sources and uses of funds as presently estimated for the costs associated with the prepayment of the Prior Bonds and the construction and equipping of the Project: Sources Par Amount of Bonds $24,520,000 Original Issue Discount (363,315) Additional Equity Contribution 79,036 TOTAL SOURCES $24,235,722 Uses Deposit to Project Fund $539,696 Prepayment of Prior Bonds 21,475,937 Deposit to Reserve Fund 1,657,919 Costs of Issuance 562,170 TOTAL USES $24,235,722 THE ISSUER The Issuer is a public instrumentality and agency of the State of Iowa. The Issuer is authorized by Chapter 16 of the Code of Iowa, as amended, to issue the Bonds and lend the proceeds thereof to the Borrower, and to secure the Bonds by a pledge of amounts payable by the Borrower under the Loan Agreement and the Indenture. The Bonds are issued under and pursuant to Chapter 16 of the Code of Iowa, 2011, as amended (the Act ), and pursuant to a resolution adopted by the Issuer. The Bonds constitute special, limited obligations of the Issuer, payable solely from proceeds of the Bonds, the revenues pledged to the payment thereof pursuant to the Loan Agreement, and the funds and accounts held under and pursuant to the Bond Indenture and pledged therefor. The Bonds, the interest thereon and any other payments or costs incident thereto do not constitute an indebtedness or a loan of the credit of the Issuer, the State or any political subdivision thereof within the meaning of any constitutional or statutory provisions. The Issuer does not pledge its faith or credit nor the faith or credit of the State nor any political subdivision of the State to the payment of the principal of, the interest on or any other payments or costs incident to the Bonds. The issuance of the Bonds and the execution of any documents in relation thereto do not directly, indirectly or contingently obligate the State or any political subdivision of the State to apply money from or levy or pledge any form of taxation whatever to the payment of the principal of or interest on the Bonds or any other payments or costs incident thereto. The Issuer has no taxing power

33 DEBT SERVICE SCHEDULE The following table sets forth, for each year ending September 1, the amounts required each year to be paid with respect to the Bonds, assuming no prepayment other than for mandatory sinking fund redemptions. Principal of and interest on the Bonds will be paid on each March 1 and September 1. Year Ending September 1 Principal Interest Total $1,150,722 $1,150, $365,000 1,292,088 1,657, ,000 1,281,750 1,656, ,000 1,270,188 1,655, ,000 1,257,263 1,657, ,000 1,242,919 1,657, ,000 1,226,900 1,656, ,000 1,209,325 1,654, ,000 1,189,913 1,654, ,000 1,168,463 1,653, ,000 1,144,875 1,654, ,000 1,119,000 1,654, ,000 1,091,875 1,656, ,000 1,063,375 1,653, ,000 1,033,500 1,653, ,000 1,001,188 1,656, , ,750 1,654, , ,250 1,656, , ,550 1,655, , ,513 1,657, , ,138 1,657, , ,288 1,654, , ,825 1,653, ,010, ,475 1,655, ,065, ,238 1,654, ,125, ,144 1,654, ,190, ,594 1,653, ,260, ,163 1,654, ,335, ,706 1,655, ,415, ,650 1,657, ,155, ,138 3,315,138 TOTAL $24,520,000 $27,952,760 $52,472,

34 ENFORCEABILITY OF OBLIGATIONS On the date of issuance of the Bonds, Dorsey & Whitney LLP, Des Moines, Iowa, Bond Counsel, shall deliver its opinion, dated the delivery date, that the Bonds, the Loan Agreement and the Bond Indenture are valid and legally binding on the Issuer, enforceable in accordance with their respective terms. Corbett, Anderson, Corbett, Vellinga & Irvin, L.L.P., Sioux City, Iowa, as counsel to the Borrower and the other Members of the Obligated Group, will deliver its opinion that the Loan Agreement, the Master Indenture, Obligation No. 1, the Supplement, the Disclosure Agreement and the Mortgage are valid and legally binding agreements of the Borrower and the other Members of the Obligated Group, as applicable, each enforceable in accordance with its respective terms, and that the Borrower and Fountain View are each a validly existing 501(c)(3) exempt organization. Dorsey & Whitney LLP, Des Moines, Iowa, as counsel to and for the benefit of the Issuer, will deliver its opinion on certain legal matters on behalf of the Issuer. The foregoing opinions will be generally qualified to the extent that the enforceability of the respective instruments may be limited by laws, decision and equitable principles affecting remedies and by bankruptcy or insolvency or other laws, decisions and equitable principles affecting creditors rights generally. While the Bonds are secured or payable pursuant to the Bond Indenture, the Master Indenture, the Loan Agreement and the Mortgage, the practical realization of payment from any security will depend upon the exercise of various remedies specified in the respective instruments. These and other remedies are dependent in many respects upon judicial action, which is subject to discretion and delay. Accordingly, the remedies specified in the above documents may not be readily available or may be limited. APPROVAL OF LEGAL PROCEEDINGS Legal matters incident to the issuance and sale of the Bonds and with regard to the tax-exempt status of interest on the Bonds under existing laws are subject to the approving legal opinion of Dorsey & Whitney LLP, Des Moines, Iowa, as Bond Counsel. Certain legal matters will be passed on for the Borrower and the other Members of the Obligated Group by their counsel, Corbett, Anderson, Corbett, Vellinga & Irvin, L.L.P., Sioux City, Iowa. Certain legal matters will be passed on for the Issuer by its counsel, Dorsey & Whitney LLP, Des Moines, Iowa. The Underwriter has been represented in this transaction by Kutak Rock LLP, Minneapolis, Minnesota. General TAX EXEMPTION In the opinion of Bond Counsel, based upon federal laws, regulations, rulings and decisions in effect on the date of delivery of the Bonds, the interest on the Bonds is, including any original issue discount, excluded from gross income of the owners thereof for federal income tax purposes, and is not treated a specific item of tax preference for purposes of determining the federal alternative minimum tax for individuals and corporations, but, in the case of corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings for purposes of computing the federal alternative minimum tax. Interest on the Bonds is not exempt from present State income taxes imposed on corporations. The Code establishes certain requirements (the Federal Tax Requirements ) that must be met subsequent to the issuance of the Bonds in order that, for federal income tax purposes, interest on the Bonds not be included in gross income pursuant to Section 103 of the Code. The Federal Tax Requirements include, but are not limited to, requirements relating to the expenditure of proceeds of the Bonds, requirements relating to the operation of the facilities financed by the Bonds, restrictions on the investment of proceeds of the Bonds prior to expenditure and the requirement that certain earnings on the gross proceeds of the Bonds be paid to the federal government. Noncompliance with the Federal Tax Requirements may cause interest on the Bonds to become subject to federal income taxation retroactive to their date of issue irrespective of the date on which such noncompliance occurs or is

35 ascertained. In expressing its opinion, Bond Counsel will assume compliance by the Issuer, the Members of Obligated Group and the Bond Trustee with the tax covenants contained in each of the Loan Agreement, the Tax Exemption Agreement and the Bond Indenture. No provision has been made for an increase in the interest rate on the Bonds in the event that interest on the Bonds becomes subject to federal income taxation; however, upon the occurrence of a Determination of Taxability with respect to the Bonds, the Bonds are subject to mandatory redemption. See THE BONDS -- Redemption Prior to Maturity -- Mandatory Redemption of Bonds Upon Determination of Taxability herein. Prospective purchasers of the Bonds should be aware that the ownership of the Bonds may result in collateral federal income tax consequences to individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations. Certain corporations may have a tax imposed on passive income, including tax-exempt interest, such as interest on the Bonds. Bond Counsel expresses no opinion with respect to such other potential collateral tax consequences and prospective purchasers of the Bonds should consult their tax advisors as to the applicability and impact of these and other potential collateral tax consequences of owning and disposing of the Bonds. Original Issue Discount The Bonds maturing in the years 2027, 2037 and 2043 (collectively, the Discount Bonds ) are being sold at a discount from the principal amount payable on such Bonds at maturity. The difference between the price at which a substantial amount of the Discount Bonds of a given maturity is first sold to the public (the Issue Price ) and the principal amount payable at maturity constitutes original issue discount under the Code. The amount of original issue discount that accrues to a holder of a Discount Bond under section 1288 of the Code is excluded from federal gross income to the same extent that stated interest on such Discount Bond would be so excluded. The amount of the original issue discount that accrues with respect to a Discount Bond under section 1288 is added to the owner s federal tax basis in determining gain or loss upon disposition of such Discount Bond (whether by sale, exchange, redemption or payment at maturity). Interest in the form of original issue discount accrues under section 1288 pursuant to a constant yield method that reflects semiannual compounding on dates that are determined by reference to the maturity date of the Discount Bond. The amount of original issue discount that accrues for any particular semiannual accrual period generally is equal to the excess of (1) the product of (a) one-half of the yield on such Discount Bonds (adjusted as necessary for an initial short period) and (b) the adjusted issue price of such Discount Bonds, over (2) the amount of stated interest actually payable. For purposes of the preceding sentence, the adjusted issue price is determined by adding to the Issue Price for such Discount Bonds the original issue discount that is treated as having accrued during all prior semiannual accrual periods. If a Discount Bond is sold or otherwise disposed of between semiannual compounding dates, then the original issue discount that would have accrued for that semiannual accrual period for federal income tax purposes is allocated ratably to the days in such accrual period. An owner of an Discount Bond who disposes of such Discount Bond prior to maturity should consult owner s tax advisor as to the amount of original issue discount accrued over the period held and the amount of taxable gain or loss upon the sale or other disposition of such Discount Bond prior to maturity. Owners who purchase Discount Bonds in the initial public offering but at a price different than the Issue Price should consult their own tax advisors with respect to the tax consequences of the ownership Discount Bonds. The Code contains provisions relating to the accrual of original issue discount in the case of subsequent purchasers of bonds such as the Discount Bonds. Owners who do not purchase Discount Bonds in the initial offering should consult their own tax advisors with respect to the tax consequences of the ownership of the Discount Bonds. Original issue discount that accrues in each year to an owner of a Discount Bond may result in collateral federal income tax consequences to certain taxpayers. No opinion is expressed as to state and local income tax treatment of original issue discount. All owners of Discount Bonds should consult their own tax advisors with

36 respect to the federal, state, local and foreign tax consequences associated with the purchase, ownership, redemption, sale or other disposition of Discount Bonds. Bank Qualification The Borrower will not designate the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Code relating to the ability of financial institutions to deduct from income for federal income tax purposes a portion of the interest expense that is allocable to carrying and acquiring tax-exempt obligations. UNDERWRITING Under a Bond Purchase Agreement (the Bond Purchase Agreement ) entered into among the Issuer, the Borrower and Piper Jaffray & Co. (the Underwriter ), the Bonds are being purchased by the Underwriter at a purchase price of $23,758, (representing the principal amount of the Bonds, less original issue discount of $363, and less Underwriter s discount of $398,450.00). The Bond Purchase Agreement provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation of the Underwriter to accept delivery of the Bonds is subject to various conditions contained in the Bond Purchase Agreement. The Underwriter intends to offer the Bonds to the public initially at the offering prices set forth on the inside front cover of this Official Statement, which may subsequently change without any requirement of prior notice. The Underwriter and Pershing LLC, a subsidiary of The Bank of New York Mellon Corporation, have entered into an agreement (the Agreement ) which enables Pershing LLC to distribute certain new issue municipal securities underwritten by or allocated to the Underwriter, including the Bonds, at the original offering prices. Under the Agreement, if applicable to the Bonds, the Underwriter will share with Pershing LLC a portion of the fee or commission paid to the Underwriter. The Underwriter also reserves the right to join with dealers and other underwriters in offering the Bonds to the public. The Underwriter may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices lower than the public offering prices. In connection with this offering, the Underwriter may over allot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Borrower has agreed in the Bond Purchase Agreement to indemnify the Underwriter and the Issuer against certain civil liabilities, including certain potential liabilities under federal securities laws. PLAN OF OFFERING The offering of the Bonds is to be undertaken only in those jurisdictions in which such offering may be lawfully made in accordance with the relevant provisions of all applicable state and federal securities laws. The Bonds are being offered and sold initially only to banks, savings institutions, trust companies, insurance companies, investment companies or other financial institutions or institutional buyers, or other broker dealers, whether the purchaser is acting for itself or in some fiduciary capacity. The term institutional buyer includes a person who is an accredited investor within the meaning of Regulation D promulgated under the Securities Act of 1933, as amended. The purchase of the Bonds involves a high degree of risk as they are a speculative investment. For such reason, each purchaser of the Bonds, by its purchase of the Bonds or any interest therein, will be deemed to have acknowledged, represented, warranted and agreed with and to the Issuer, the Underwriter and the Bond Trustee; that the Bonds, when, as and if issued, will be special, limited obligations of the Issuer, payable solely from proceeds of the Bonds, the revenues pledged to the payment thereof pursuant to the Loan Agreement, and the funds and accounts held under and pursuant to the Bond Indenture and pledged therefor; that the Bonds, the interest thereon and any other payments or costs incident thereto do not constitute an indebtedness or a loan of the credit of the Issuer, the State of Iowa (the State ) or any political subdivision thereof within the meaning of any constitutional or statutory

37 provisions; that the Issuer does not pledge its faith or credit nor the faith or credit of the State nor any political subdivision of the State to the payment of the principal of, the interest on or any other payments or costs incident to the Bonds; that the issuance of the Bonds and the execution of any documents in relation thereto do not directly, indirectly or contingently obligate the State or any political subdivision of the State to apply money from or levy or pledge any form of taxation whatever to the payment of the principal of or interest on the Bonds or any other payments or costs incident thereto; that the Issuer has no taxing power; that neither the Issuer nor any of its officers or employees take any responsibility for, and the purchaser is not relying upon any of such parties with respect to, information appearing anywhere in the Official Statement, and that none of such parties have participated in the preparation of the Official Statement; that it has received both this Official Statement and the information from the Borrower and the other Members of the Obligated Group relating to: (i) the sources of repayment of the Bonds, (ii) the Borrower s facilities (including financial and operating data) and (iii) such other material matters relating to the Bonds as the purchaser deemed relevant; that it had the opportunity to ask questions of, and request additional information from, the Borrower and the other Members of the Obligated Group regarding the information provided to it and any other matters considered to be relevant to the purchaser s decision to purchase the Bonds; that it understands and agrees that neither the Issuer nor any of its officers or employees have any responsibility for the accuracy or completeness of the information supplied to it or any other information that the purchaser has received or relied upon in making its decision to invest in the Bonds; that it has reviewed and has made its decision to invest in the Bonds based solely on its review of the information provided by the Borrower and the other Members of the Obligated Group; that it understands that the Bonds are a speculative investment and that there is a high degree of risk in investing in the Bonds; that the purchaser is capable of suffering a loss of the entirety of its investment which is represented by the Bonds; that it can bear the economic risk associated with a purchase of high risk securities such as the Bonds; and that it has such knowledge and experience in business and financial matters, including the analysis of a participation in the purchase of similar investments, so as to be capable of evaluating the merits and risks of an investment in the Bonds on the basis of the information and review described herein CONTINUING DISCLOSURE Prior to the issuance of the Bonds, the Borrower will execute and deliver a Continuing Disclosure Undertaking pursuant to which the Borrower will agree to provide ongoing disclosure pursuant to the requirements of Rule 15c2-12 of the Securities and Exchange Commission (the Rule ). Financial statements and other operating data will be provided at least annually to the Municipal Securities Rulemaking Board (the MSRB ) and notices of certain events will be issued pursuant to the Rule. Information will be filed with the MSRB through its Electronic Municipal Market Access ( EMMA ) system, unless otherwise directed by the MSRB. A form of the Continuing Disclosure Undertaking is attached hereto as Appendix E. The Borrower is not aware of any occasions of noncompliance with continuing disclosure undertakings under the Rule. A failure by the Borrower to comply with the Continuing Disclosure Undertaking will not constitute an Event of Default under the Bond Indenture. Nevertheless, such a failure must be reported in accordance with the Rule and must be considered by a broker or dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price and the ability of the Issuer to issue and sell bonds in the future. RELATIONSHIPS AMONG THE PARTIES In connection with the issuance of the Bonds, the Issuer, the Members of the Obligated Group and the Underwriter are being represented by the attorneys or law firms identified above under the heading APPROVAL OF LEGAL PROCEEDINGS. In other transactions not related to the Bonds, each of these attorneys or law firms may have acted as Bond Counsel or represented the Issuer, the Members of the Obligated Group or the Underwriter or their affiliates, in capacities different from those described, and there will be no limitations imposed as a result of the issuance of the Bonds on the ability of any of these firms or attorneys to act as bond counsel or represent any of these parties in any future transactions. Potential purchasers of the Bonds should not assume that the Issuer, the Members of the Obligated Group and the Underwriter or their respective counsel or Bond Counsel have not previously engaged in, or will not after the issuance of the Bonds engage in, other transactions with each other or

38 with any affiliates of any of them, and no assurance can be given that there are or will be no past or future relationships or transactions between or among any of these parties or these attorneys or law firms. In addition, the Bond Indenture permits the Bond Trustee and its officers and directors to acquire and own or become the pledgee of Bonds and otherwise deal with the Issuer and the Obligated Group in the same manner, to the same extent and with like effect as though it were not Bond Trustee under the Bond Indenture. The Issuer LITIGATION There is not now pending or, to the knowledge of the Issuer, threatened any litigation against the Issuer seeking to restrain or enjoin the issuance or delivery of the Bonds, or questioning or affecting the validity of the Bonds or the proceedings or authority under which they are to be issued, or which in any manner questions the right of the Issuer to enter into the Bond Indenture or the Loan Agreement or to secure the Bonds in the manner provided in the Bond Indenture or the Act. The Obligated Group There is no litigation nor any proceedings or investigations pending or, to the knowledge of the management of the Members of the Obligated Group, threatened against any Member of the Obligated Group that would in any manner challenge or adversely affect the corporate existence or 501(c)(3) exempt organization status (as applicable) of the Members of the Obligated Group or the power of the Obligated Group to enter into and carry out the transactions described in or contemplated by, or the execution, delivery, validity or performance by the Obligated Group of, the Bond Indenture, the Master Indenture, the Loan Agreement, Obligation No. 1 or the Mortgage or the status of the Borrower. FINANCIAL STATEMENTS The financial statements of the Borrower as of and for the years ended December 31, 2010 and 2011 included in Appendix B to this Official Statement, have been audited by Ryun, Givens & Co., P.L.C., independent auditors. The financial statements of the Borrower for the six-month periods ended June 30, 2011 and 2012 included in Appendix B to this Official Statement have been compiled by Ryun, Givens & Co., P.L.C. MISCELLANEOUS The foregoing does not purport to be comprehensive or definitive and all references to any document herein are qualified in their entirety by reference to each such document. All references to the Bonds are qualified in their entirety by reference to the forms thereof and the information with respect thereto included in the aforesaid documents. Copies of these documents are available for inspection during the period of the offering at the offices of the Underwriter in Minneapolis, Minnesota, and thereafter at the principal corporate trust office of the Bond Trustee. All information contained in Appendices A and B has been derived from information provided by the Members of the Obligated Group. The Underwriter makes no representations or warranties as to the accuracy or completeness of the information in any of the Appendices. The Members of the Obligated Group and the Issuer have authorized the use and distribution of this Official Statement; provided, however, that the Issuer has not participated in the preparation of this Official Statement, has not made an independent investigation with respect to the information contained herein, and assumes no responsibility for the accuracy or completeness of the information contained herein. The Members of the Obligated Group has approved the information contained herein

39 APPENDIX A THE OBLIGATED GROUP AND THE PROJECT General Sunrise Manor d/b/a Sunrise Retirement Community ( Sunrise Manor or the Borrower ) is an Iowa nonprofit corporation originally organized in 1956 whose mission is to provide housing and services to the elderly of Sioux City, Iowa and surrounding communities, without regard to gender, handicap or religious affiliation. Fountain View Assisted Living ( Fountain View ) is an Iowa nonprofit corporation organized in 2001 to provide assisted living to the elderly and handicapped. Sunrise Eastview ( Sunrise Eastview ) is an Iowa nonprofit corporation organized in 2012 for the purpose of owning and operating multiple level residential care facilities as described herein. Sunrise Health Center is an Iowa nonprofit corporation organized in 2012 for the purpose of owning and operating Sunrise Health Center (as defined herein). Sunrise Manor will hold the Continuing Care Retirement Community ( CCRC ) registration for the campus through the Office of the Iowa Insurance Commissioner. Sunrise Manor, Fountain View, Sunrise Eastview and Sunrise Health Center are the initial Members of the Obligated Group, and their facilities are a part of a multiple level CCRC located on a 33-acre campus (the Campus ) at 5501 Gordon Drive East, Sioux City, Iowa The Campus sits on an elevated location facing Gordon Drive, a major east-west route connecting U.S. Highway 20 and downtown Sioux City. It is in a principally residential section of Sioux City, approximately two miles east of the downtown area. A CCRC offers flexibility to residents who wish to age in place and further to couples who may best be served at different service levels, but want to live close to one another on the same campus. A CCRC such as the facilities on the Campus gives priority admission to independent residents living on the Campus, should the resident need assisted living or skilled nursing care. This means there is less worry about where a person will be served if they need more care. The added social component of a CCRC encourages engagement, which plays an important role in positive holistic aging. The Campus facilities have and will continue to offer its residents and their families peace of mind and continuity of care, while preserving much of their resources to purchase the additional services they may need as they age. Proceeds of the Bond issue will be used to (1) pay a portion of the costs of demolishing its former nursing home and assisted living facilities located on the Campus (collectively, the Project ); (2) refund the outstanding principal amount of the $3,000,000 Senior Living Facility Revenue Note (The Pointe at Sunrise Project) Series 2008A (the Woodbury County Series 2008A Note ) of Woodbury County, Iowa ( Woodbury County ); refund the outstanding principal amount of the $9,000,000 Senior Living Facility Revenue Note (The Pointe at Sunrise Project) Series 2008 of the City of Lawton, Iowa (the Lawton Series 2008 Note ); refund $50,000 of the $1,510,000 Healthcare Facility Revenue Notes (Sunrise Retirement Community Project), Series 2011 of the City of Lawton, Iowa (the Lawton Series 2011 Notes ); refund the outstanding principal amount of the $10,000,000 Senior Living Facility Revenue Note (Sunrise Retirement Community Project), Series 2011 (the Bronson Note ) of the City of Bronson, Iowa; and refund the outstanding principal amount of the $380,000 Senior Living Facility Revenue Note (Sunrise Retirement Community Project), Series 2011 (the Woodbury County Series 2011 Note ) of Woodbury County (together, the Prior Bonds ); (3) fund a debt service reserve fund; and (4) pay for costs of issuance of the Bonds. The Bonds are payable solely from (i) payments received by the Issuer under the Loan Agreement, (ii) payments made by the Members of the Obligated Group under the Series 2012 Obligation relating to the Bonds, issued under the Master Indenture and (iii) moneys in the funds and accounts (other than the Rebate Fund) established under the Bond Indenture. As further security for the obligations of the Obligated Group under the Master Indenture, Sunrise Manor will deliver to the Master Trustee, for the benefit and security of the holders of all obligations issued under the Master Indenture (including the Bond Trustee as the holder of the Series 2012 Obligation) a Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement, (the Mortgage ) granting a mortgage lien on the real property comprising its existing facilities (the Mortgaged Properties ), as well as a lien on the revenues generated by such Mortgaged Properties. See generally, SECURITY FOR THE BONDS in the Official Statement A-1

40 Sunrise Manor currently owns and operates all of the Mortgaged Properties, which include the Sunrise Health Center Facility (including the Sunlight and Bernstein Centers), the Fountain View Facility, Eastview, The Pointe at Sunrise, and the Gerwulf Community Center (all as described herein). Subsequent to the issuance of the Bonds, and upon receipt by Sunrise Eastview and Sunrise Health Center of their respective 501(c)(3) designation by the Internal Revenue Service, Sunrise Manor will transfer ownership of the Sunrise Health Center Facility to Sunrise Health Center, will transfer ownership of the Fountain View Facility to Fountain View, and will transfer ownership of Eastview, The Pointe at Sunrise and the Gerwulf Community Center to Sunrise Eastview. This organizational restructuring occurs at a most opportune time, as it will allow all Members of the Obligated Group to demonstrate the transparency of their single operations as a part of the whole. This will be beneficial to the Board of Directors and Administration of each of the Members of the Obligated Group, in the start up and ongoing assessment of each cost center s productivity. This reorganization also allows transparency of operational costs to government pay sources, such as the Iowa Medicaid Enterprise (IME) and Center for Medicare Services (CMS), decreasing the opportunities for these agencies to deny payment due to organizational cost grouping. None of the transfers will adversely affect the security on the Bonds provided by the Mortgage, and each of the Mortgaged Properties is, and will continue to be, owned and operated by a Member of the Obligated Group. On the following page is a chart describing the organizational structure of the Obligated Group following the transfers described above: A-2

41 Obligated Group (Mortgaged Property) 501(c)(3) s: Included Properties: Existing 501(c)(3) To-Be-Formed A-3

42 Mortgaged Properties A significant part of the Campus programming focuses on person centered care. Residents are provided with the activities and the way of life they choose. This philosophy challenges the staff team to deinstitutionalize medical care and service delivery by focusing on the individual and their wants and needs. Each of the Mortgaged Properties is, and will continue to be, owned and operated by a Member of the Obligated Group. The Mortgaged Properties include the Sunrise Health Center Facility (including the Sunlight and Bernstein Centers), the Fountain View Facility, The Pointe at Sunrise, Eastview, and Gerwulf Community Center (all as defined herein). Sunrise Health Center Facility (including Sunlight and Bernstein Centers) and the Fountain View Facility Sunrise Manor presently operates a 72-bed skilled nursing facility divided into a number of smaller, specialized care units to ensure personalized attention and quality care ( Sunrise Health Center Facility ), comprised of a one-story facility licensed for 38 general population nursing beds located within 36 private bedrooms (two rooms are available as semi-private, if desired) within a neighborhood design serving up to 19 residents in each neighborhood, with a living room, dining room and activity areas. The Sunlight and Bernstein Centers house an additional 34 licensed beds, 16 and 18 beds respectively, offering specialized care for residents with dementia related disorders (the Sunlight and Bernstein Centers ). All beds in the Sunlight and Bernstein Centers are located in private rooms. Sunrise Manor also owns and operates a 46-unit, three-story assisted living facility known as Fountain View Assisted Living ( Fountain View Facility ), which is attached to the Sunrise Health Center Facility. Both the Sunrise Health Center Facility and the Fountain View Facility are replacement facilities completed in June, The Sunlight and Bernstein Center additions were opened in July, 1991 and July 1996, respectively, and are separate and distinct buildings attached to the Sunrise Health Center Facility. Following the issuance of the Bonds, Sunrise Manor will transfer ownership of the Fountain View Facility to Fountain View, and, following such transfer, Fountain View will own and operate the Fountain View Facility. The Sunrise Health Center Facility (including the Sunlight and Bernstein Centers) include 24-hour professional nursing staff, medication administration by licensed personnel, supervised diet, including three meals a day in the centralized dining room, physical therapy, daily housekeeping/linen service, and planned programs and activities (including one free van ride per month). Sunrise Manor s active rehabilitation department allows residents to progress through levels of care to maximize their independence. Certain additional services, such as beauty and barber services, personal laundry service, and respiratory care, are available to residents for an additional fee. The Sunlight and Bernstein Centers offer a non-restrictive, homelike environment apart from the general Sunrise Health Center Facility population. The Fountain View Facility operates 46 units, but is certified by the State for 92 beds to allow for double occupancy of each unit 2. The current configuration of units is comprised of 26 one-bedroom units, 8 studio units and 12 studio units specializing in memory care services. These units offer a kitchenette with refrigerator and microwave and an emergency call system. The level of basic services available to residents include access to 24-hour professional nursing staff, medication administration by licensed personnel, supervised diet (including three meals a day in the centralized dining room), physical therapy facilities, weekly housekeeping/linen service, and planned programs and activities. There is a higher level of services for an increased daily fee, as well as additional services available on an a la carte basis. Social services support is available to all Sunrise Health Center Facility and Fountain View Facility residents. All departments are served by a full-time Iowa licensed social worker and a half-time designee. Together, the social work team provides to the residents: psychosocial support, assistance with funding questions, and referral services. Sunrise Manor provides in-house chaplaincy services to all residents; the chaplain is present in the facilities and arranges and coordinates pastoral services. 1 Proceeds of the Bonds will finance the demolition of the building that previously housed residents of the Sunrise Health Center Facility and Fountain View Facility. 2 The Borrower intends to doubly occupy 6 of the Fountain View Facility units, totaling 52 beds. The Borrower s goal is to achieve such operational configuration by June, A-4

43 The community life department provides life enrichment activities to all residents of the Sunrise Health Center Facility and the Fountain View Facility. Three full-time staff and many volunteers provide a wide variety of events for the residents to choose from each day. Large and small group activities occur on and off-site, with many one-onone activities as well. Eastview and The Pointe at Sunrise - Sunrise Manor also owns, among its independent living units, a 31 unit development known as Eastview comprised of 16 condominiums, 14 cottage homes and one single family home ( Eastview ) and a 62 unit development known as The Pointe at Sunrise comprised of 11 one-bedroom units and 51 two-bedroom units (the Pointe at Sunrise ). The Eastview units consist of 2-bedroom, ground level, ranch-style units located in a quiet setting in close proximity to the Sunrise Health Center Facility. In addition to two bedrooms, all units feature a living room, dining room, kitchen with stove and refrigerator, laundry room, an attached garage, patio and professionally landscaped surroundings. A majority of the units are part of a duplex or triplex building. The Eastview units are designated either for monthly rental with an up front deposit or for purchase of occupancy rights with a partially refundable entrance fee that also requires the payment of monthly maintenance fees. Property tax assessments are also passed through to the tenant. Table 1 Eastview Unit Mix # of Purchase or Type of Square # of # of Garage Development Units Rental Option Unit Feet Beds Baths Stalls Eastview 7 Purchase Condo 1, Eastview 9 Purchase Condo 1, Eastview 14 Rental Cottage 925-1, Eastview 1 Rental S.F. 1, Total 31 # of The Pointe at Sunrise facility, which opened in 2009, is a three-story wood frame structure with a gabled roof, brick and siding exterior and 62 underground parking spaces, and consists of 11 one-bedroom units, 40 two-bedroom units and 11 two-bedroom plus units, ranging from 695 square feet to 1,050 square feet. Each unit contains a full kitchen, washer/dryer units, individually controlled heating and cooling, patios and a personal emergency call system. The Pointe at Sunrise has central common areas and a central dining room. Services provided to residents of these units include emergency nursing services, monthly housekeeping services, annual deep cleaning services, continental breakfast, a monthly meal plan, basic cable and utilities, exterior and interior maintenance, garbage collection, lawn care/snow removal, secured storage and an annual health assessment. Unit Type Table 2 The Pointe at Sunrise Unit Mix # of Units Description Sq. Ft. A 11 2 bedroom/2 bathroom 1,050 B 40 2 bedroom/2 bathroom 900 C 11 1 bedroom/1 bathroom 695 Total 62 Gerwulf Community Center Sunrise Manor also owns the John Gerwulf Community Center (the Gerwulf Community Center ), located just a few minutes from most units on the Campus, and open to residents of all the Obligated Group s facilities. The Gerwulf Community Center offers residents a place to gather with friends, A

44 exercise, play games, and participate in arts and crafts. The Gerwulf Community Center features a large common area, full kitchen, TV area, game room, and exercise space, along with a comfortable suite and private bath for overnight guests. Following the issuance of the Bonds, Sunrise Manor will transfer ownership of Eastview, The Pointe at Sunrise and Gerwulf Community Center to Sunrise Eastview, and, following such transfer, Sunrise Eastview will own and operate Eastview, The Pointe at Sunrise and Gerwulf Community Center. Non-Mortgaged Properties Stone Avenue, South Maple and Maple Heights There are 21 privately paid independent living units in two other developments located on the Campus known as South Maple and Stone Avenue, owned and operated by Sunrise Hills, an Iowa nonprofit corporation ( Sunrise Hills ). Additionally, there are two HUD apartment complexes located on the Campus containing 70 units of federally subsidized housing designed specifically for the elderly and the handicapped - a 50-unit facility known as Maple Heights Apartments, owned and operated by Maple Heights Apartments, Inc., an Iowa nonprofit corporation ( Maple Heights Apartments ), and a 20-unit facility known as Maple Heights Annex, owned and operated by Maple Heights Annex, Inc., an Iowa nonprofit corporation ( Maple Heights Annex ). Sunrise Hills, Maple Heights Apartments and Maple Heights Annex are all affiliates of Sunrise Manor. However, Sunrise Hills, Maple Heights Apartments and Maple Heights Annex are not Members of the Obligated Group, and none of their facilities are included in the Mortgaged Properties. Fees, Charges and Payment Mix Sunrise Health Center Facility The Sunrise Health Center Facility charges nursing and dementia care residents a daily fee. The charges reflect the resources used, based on the needs of individual residents. Services provided for the daily rate include access to 24-hour professional nursing staff, medication administration by licensed personnel, supervised diet (including three meals a day in the centralized dining room), physical therapy, daily housekeeping/linen service, and planned programs and activities. Certain additional services, such as beauty and barber services, personal laundry service, and respiratory care, are available to residents for an additional per-service fee. Average and estimated daily rates at the Sunrise Health Center Facility are presented below: Table 3 Historic and Forecasted Average Daily Nursing and Dementia Care Rates at the Sunrise Health Center Facility Historical Forecasted (1) Medicaid $ $ $ $ $ $ $ Private Pay $ $ $ $ $ $ $ Medicare Part A $ $ $ $ $ $ $ Medicare Part B $ $ $ $ $ $ $ (1) The Sunrise Health Center Facility replacement facility opened July 1, The 2012 forecasted rates are a weighted average of rates charged at the prior facility from January, 2012 through June, 2012 and rates to be charged in the new facility from July, 2012 through December, A-6

45 The Sunrise Health Center Facility participates in the Medicare and Medicaid programs. The historic and projected payor mix of the persons received by the Sunrise Health Center Facility is as follows: Table 4 Historic and Projected Payor Mix at the Sunrise Health Center Facility (by percentage of Total Resident Days) Historical Forecasted (1) Medicaid 42.46% 44.22% 43.08% 38.55% 38.55% 38.55% 38.55% Private Pay 43.98% 42.98% 46.25% 44.06% 44.06% 44.06% 44.06% Medicare Part A 13.56% 12.80% 10.67% 17.39% 17.39% 17.39% 17.39% Total % 100.0% % % % % % (1) The Sunrise Health Center Facility replacement facility opened July 1, The 2012 forecasted payor mix is a weighted average of the payor mix in the prior facility from January, 2012 through June, 2012 and the expected payor mix in the new facility from July, 2012 through December, Fountain View Facility - Residents of the Fountain View Facility pay base room rates of $117 per day for a private one bedroom unit and $122 per day for a large one bedroom unit. In addition, residents also pay a daily service fee. Table 5 Fountain View Facility Unit Mix Square # of Units Type of Unit Footage Available Assisted Living: Studio (Elderly Waiver) One Bedroom One Bedroom Average / Subtotal Memory Care Assisted Living: Studio Studio Average / Subtotal Average / Total Average and projected monthly rates at the Fountain View Facility are presented below: Table 6 Historic and Forecasted Average Monthly Assisted Living Care Rates at Fountain View Facility Historic Forecasted (1) Assisted Living $2,563 $2,623 $2,903 $2,973 $3,098 $3,191 $3,287 Memory Care N/A N/A $5,912 $6,012 $6,191 $6,376 $6,568 (1) The Fountain View Facility replacement facility opened July 1, The 2012 forecasted rates are a weighted average of rates charged at the prior facility from January, 2012 through June, 2012 and rates to be charged in the new facility from July, 2012 through December, A-7

46 The care packages listed in Table 7 represent a commitment to allow the resident to select the services serving them best, while fitting into their particular financial arrangement. Level 1 Care provides for some medication administration, some special treatments to accommodate the management of chronic disease processes, some assistance in grooming, stand by shower assist in the resident s room and pet assistance up to one time a day. Level 2 Care provides all of the basic services, enhanced medication assistance and help through the night, one person assist with transfers, enhanced monitoring and assistance with physical and psychological disease management and one spa bath per week. Level 3 Care provides for day and night consistent assistance, as needed, could allow for Hospice staff involvement, 2 spa baths per week and is viewed as a temporary accommodation if arrangements for chronic long-term care should be needed. Table 7 Forecasted Average Monthly Revenue from Additional Services at Fountain View Facility Bathing $ 3,840 $ 3,955 $ 4,074 $ 4,196 $ 4,322 Level 1 Care $16,566 $17,050 $17,565 $18,092 $18,635 Level 2 Care $ 6,744 $ 6,947 $ 7,155 $ 7,370 $ 7,591 Level 3 Care $ 4,598 $ 4,736 $ 4,878 $ 5,024 $ 5,175 The Fountain View Facility participates in the Medicaid program. persons received by the Fountain View Facility is as follows: The historic and projected payor mix of the Table 8 Historic and Projected Payor Mix at Fountain View Facility (by percentage of Total Resident Days) Historical Forecasted (1) Medicaid 20.84% 26.86% 26.55% 16.24% 15.38% 15.38% 15.38% Private Pay 79.16% 73.14% 73.45% 83.76% 84.62% 84.62% 84.62% Total % 100.0% % % % % % (1) The Fountain View Facility replacement facility opened July 1, The 2012 forecasted payor mix is a weighted average of the payor mix in the prior facility from January, 2012 through June, 2012 and the expected payor mix in the new facility from July, 2012 through December, The Sunrise Health Center Facility and the Fountain View Facility also offer Respite Care Programs, with the goal of providing a temporary time of support, rehabilitation and relief for the resident and, often times, to the primary caregiver. Respite care residents at the Sunrise Health Center Facility stay for a period of 5-7 days at the daily rate described in Table 3 above, with certain additional services available for an additional fee on a per-service basis. Respite care residents at the Fountain View Facility stay for a period of 7-21 days at the daily rate described earlier, depending on the size of the unit, with certain additional services available for an additional fee on an a la carte basis A-8

47 Eastview - 15 Eastview units are available as rental units with the tenant paying a monthly rental fee plus a real estate tax assessment. 16 Eastview units are available as entrance fee units. The tenant pays an up front entrance fee with a monthly maintenance fee and a real estate tax assessment. The pricing for each unit type is below: Table 9 Eastview Unit Pricing Monthly Rental/Maintenance Fees Historic Forecasted Condo (Entrance Fee) (1) $ 340 $ 354 $ 365 $ 376 $ 387 $ 399 $ 411 Cottage (Rental) $ 805 $ 819 $ 833 $ 848 $ 863 $ 878 $ 893 Single Family (Rental) $1,002 $1,016 $1,030 $1,045 $1,060 $1,075 $1,090 (1) Entrance fees for this unit type are $83,500 for 1,100 square foot units and $89,900 for 1,340 square foot units. Monthly Tax Assessment Historic Forecasted Condo (Entrance Fee) $106 $106 $106 $109 $112 $115 $118 Cottage (Rental) $106 $106 $106 $109 $112 $115 $118 Single Family (Rental) $390 $390 $390 $402 $414 $426 $439 The Pointe at Sunrise - Residents of The Pointe at Sunrise will have the choice of paying a monthly lease fee or paying an up-front entrance fee with a correspondingly lower monthly maintenance fee. However, there are limited units offering the entrance fee (currently, only 8). Unit breakdown, entrance fees and monthly lease and maintenance fees are as follows: Table 10 The Pointe at Sunrise Unit Mix and Pricing Historic Forecasted Lease 1-Bedroom (698 Sq. Ft.) $1,800 $1,854 $1,910 $1,967 $2,026 $2,087 $2,150 2-Bedroom (900 Sq. Ft.) $2,100 $2,163 $2,228 $2,295 $2,364 $2,435 $2,508 2-Bedroom (1,050 Sq. Ft.) $2,400 $2,472 $2,546 $2,622 $2,701 $2,782 $2,865 Entrance Fee (1) 1-Bedroom (698 Sq. Ft.) $1,300 $1,339 $1,379 $1,420 $1,463 $1,507 $1,552 2-Bedroom (900 Sq. Ft.) $1,500 $1,545 $1,591 $1,639 $1,688 $1,739 $1,791 2-Bedroom (1,050 Sq. Ft.) $1,800 $1,854 $1,910 $1,967 $2,026 $2,087 $2,150 Second Occupant $ 210 $ 216 $ 222 $ 229 $ 236 $ 243 $ 250 (1) Entrance fees are $80,000 for 698 square foot units, $105,000 for 900 square foot units, and $125,000 for 1,050 square foot units. These Entrance fees are reviewed annually for market rate adjustment A-9

48 Occupancy The following table shows the historical occupancy of all of the Sunrise Health Center Facility, the Fountain View Facility, The Pointe at Sunrise and Eastview for the years ending December 31, 2008 through 2011 and as of July 31, Table 11 Historical Occupancy Total Historical Occupancy Number Facility of Units Sunrise Health Center % 94.4% 92.8% 91.3% 97.2% Fountain View Facility % 93.5% 94.0% 89.8% 60.9% Eastview % 99.5% 98.1% 94.7% 100.0% The Pointe at Sunrise 62 N/A 30.5% 42.1% 67.3% 93.5% 3 In April, 2010, Sunrise Health Center went from a license of 100 beds to a license of 92 beds, in order to better position private rooms to create a dedicated Medicare unit. In July, 2012, following completion of construction of the replacement Sunrise Health Center Facility, the number of nursing beds decreased from 92 to In July, 2012, following completion of construction of the replacement Fountain View Facility, the number of assisted living beds increased from 34 to 46, 34 for general assisted living and 12 for memory care assisted living. A

49 Service Area and Competition The Mortgaged Properties are located in Sioux City, Iowa. As of 2010, Sioux City had a population of 82, Sioux City is the county seat of Woodbury County and the Sioux City metropolitan area is served by U.S. Highways 20 and 75 and Interstate 29. The Obligated Group s primary service area is defined on the map attached hereto as Exhibit A. The Obligated Group s primary service area has a number of competing facilities. The following tables identify the other skilled nursing, assisted living and independent living facilities in the market area including distance from the Campus, licensed and operating capacity per facility, if applicable, and occupancy statistics. Table 12 Skilled Nursing Facility Competitors Facility Name Distance from Campus Beds Occupancy Rate 6 Sunrise Health Center Facility % Countryside Retirement Home 1.8 miles 135 See below** Casa De Paz Health Care Center 6.7 miles 71 94% Holy Spirit Retirement Home 6.7 miles % Westwood Nursing and Rehabilitation Center 6.9 miles 85 92% Hallmark Care Center 7.8 miles 48 79% Touchtone Living Center 8.0 miles % Embassy Rehabilitation and Care Center 8.9 miles 60 83% Table 13 Assisted Living Facility Competitors Distance from Licensed Operating Occupancy Facility Name Campus Capacity Capacity Rate Fountain View Facility Assisted Living Units % Assisted Living Memory Care Units* % Countryside Retirement Home 1.8 miles See below** Whispering Creek Assisted Living 2.5 miles N/A 43 74% Prime Living Assisted Living 4.6 miles % NorthPark Senior Living Community 5.7 miles % Holy Spirit Retirement Community 6.7 miles % Northern Hills Retirement Community 7.0 miles % Bickford Cottage 8.7 miles % Floyd House 8.8 miles % * Assisted Living Memory Care units is a new product offered in the Fountain View Facility **The combined occupancy of the Countryside Retirement Home nursing units and assisted living units is 96% 5 Population data from U.S. Census Bureau. 6 Occupancy Rates in Tables are as of July 31, A-11

50 Table 14 Independent Living Facility Competitors Facility Name Distance from Campus # of Units Occupancy Rate Eastview % The Pointe at Sunrise % Four Seasons Townhomes Countryside 1.8 miles 62 98% Whispering Creek Independent Living 2.5 miles 39 79% Northpark Terrace 5.9 miles 48 94% Holy Spirit Retirement Community 6.7 miles % Northern Hills Retirement Community 7.0 miles 71 87% Personnel and Staffing Consistent staffing to each of the Campus service areas is the vehicle to make person centered care possible. The Obligated Group s staff is empowered by management to make decisions immediately, within the guidance of organizational policies and procedures. This system keeps each and every staff team member focused on the residents. As of June 30, 2012, the Obligated Group reported the distribution of full-time and part-time employees by type of job category below. None of the Obligated Group s employees have any union affiliation. Management Table 15 Personnel and Staffing Job Category Full-Time Employees Part-Time Employees Administration 7 3 Leisure/Volunteer Services 3 0 Social Services 1 1 Dining Services Nursing/Assisted Living Environmental Services 11 5 Maintenance 5 1 Development 1 1 Marketing 1 1 Beautician 0 5 Transportation 0 4 Total Employees Management direction for each Member of the Obligated Group is provided by the same Board comprised of between 15 and 25 members 7. Board members are elected to a one-year term; there is no limit on the number of terms a Member may serve. As provided in the bylaws for each Member of the Obligated Group, Board members hold office until a successor has been elected by the affirmative vote of a majority of the Board members present at the annual Board meeting. 7 There are currently 14 members of the Board and 1 vacancy. The Executive Committee of the Board is currently identifying candidates to join the Board and will act as soon as practicable to have at least 15 members of the Board, as provided in the Bylaws of each Member of the Obligated Group. A

51 The current members of the Board for each Member of the Obligated Group and their occupations are as follows: Table 16 Board Members Board Member Larry L. Book, President Tom Grimsley, Vice-President Dr. Bud Ziebell MD, Secretary Donald D. Kelsey, Treasurer Howard M. Logan, Past President Richard L. Keith John Anderson Dr. Barbara Condon Michael Gunsch Dr. Mary Korvana Dr. Carolyn Leman Dr. Thomas Padgett Peter Thoreen Corey Wrenn Occupation Construction and Property Management CFO CW Suter & Son, Inc. Dermatologist (Retired) Insurance Agent - Prudential Financial Services (Retired) First Trust & Savings Bank (Moville, Iowa) Vice President - RBC Dain Rauscher Attorney - Corbett, Anderson, Corbett, Vellinga & Irvin, L.L.P. Professor of Nursing, Briar Cliff University Younglove Construction, President Chair and Professor of Nursing, Morningside College Briar Cliff University, Professor of Nursing (Retired) Briarcliff University, Professor (Retired), City Councilman, Sioux City, Iowa President & CEO, St. Luke s Health System, Inc. Vice President, Peacut & Co., Registered Investment Advisor Administration The Executive Director/Administrator is selected by the Board of Directors and hires the administrative staff. Listed below is biographical information regarding the President of the Board, the Executive Director/Administrator, and certain of the administrative staff: Larry L. Book, President of the Board - Mr. Book has been a member of the Board since He is the founder of a local construction company, L&L Builders, and is well known as a local developer, owning and managing many commercial properties in Sioux City and the surrounding area. Mr. Book has been publically recognized numerous times for his accomplishments as a business leader including the 2012 Rotary Club s Key Way award and the 2000 Sertoman of the Year. Mr. Book is also known as a community-minded individual, having served on the Board of Directors for several local nonprofits and professional organizations and is active in fundraising for the benefit of these organizations. Bev Zenor, Executive Director - Ms. Zenor graduated from the St. Joseph s School of Nursing in 1984, received her Bachelors of Science degree in Nursing from Briar Cliff University, Sioux City, Iowa, in 1988, and received her Master s degree in Health Care Administration in 1997 from the University of South Dakota. She was employed by Sunrise Manor in March, 1990 as Administrator and became Executive Director/Administrator in August Ms. Zenor s prior work experience includes: Director of Nursing-Holy Spirit Retirement Home , Charge Nurse-Holy Spirit Retirement Home , Joint Owner/Operator-grain and livestock operation Ms. Zenor is responsible for the professional and efficient operation of the Obligated Group s facilities and all departments for the betterment of the residents, the overall organization, responsible for licensed administration of Sunrise Health Center, responsible for all properties owned and acquired by the Obligated Group. Alan Bruinsma, Sunrise Health Center Administrator - Mr. Bruinsma graduated from Dakota State University in Madison, South Dakota in Mr. Bruinsma taught high school and coached for 12 years in Parkston and Wessington Springs, South Dakota. Mr. Bruinsma became acting administrator of Storla Sunset Nursing Home, Letcher, South Dakota, in June, 1998 and received his nursing home administrator license from South Dakota in January, From August of 1999 through August 2003, Mr. Bruinsma was the Community Administrator of Belle Fourche Health Care Center, Belle Fourche, South Dakota. That campus included 82 nursing beds, 8 assisted living units, 16 independent living units and an outpatient therapy department, lab and x-ray services. Mr. Bruinsma was responsible for overseeing daily operations. From September 2007 through September 2008, Mr. Bruinsma was A-13

52 the administrator of Indian Hills Nursing and Rehab, Sioux City, Iowa, a 196 bed SNF/ICF facility. In September 2008, Mr. Bruinsma assumed his current position at Sunrise Manor, overseeing daily operations, regulatory compliance and fiscal responsibility for the licensed nursing and assisted living operations. Hallie Salmen, Chief Financial Officer - Ms. Salmen received her Bachelor s Degree in Accounting from the University of South Dakota. She was employed by Sunrise Manor in Her job duties include directing all financial and business operations relative to the successful functioning of the Obligated Group. Prior to joining Sunrise Manor in 2001, Ms. Salmen was employed by King Reinsch Prosser and Company, CPA firm, beginning in Judy Skoglund, Nursing Services Manager - Ms. Skoglund received her Diploma as a Registered Nurse from St. Luke s Methodist School of Nursing in She joined Sunrise Manor as the Health Services Manager in Ms. Skoglund s prior work experience includes employment at Mercy Medical Center from , in various work capacities. Prior to 1977, Ms. Skoglund worked for a physician s office. Ms. Skoglund s responsibilities include coordination of health care services for Sunrise Health Center. Selected Financial Data The following tables set forth the Consolidated Statement of Operations of Sunrise Manor and its affiliates for the two Fiscal Years ended December 31, 2010 and 2011 and the Statement of Operations solely for Sunrise Manor for the six-month periods ended June 30, 2011 and The consolidated statements for the two Fiscal Years ended December 31, 2010 and 2011 are derived from financial reports audited by Ryun, Givens & Co., P.L.C., independent auditors. The statements for the six-month periods ended June 30, 2011 and 2012 are unaudited and are derived from financial reports compiled by Ryun, Givens & Co, P.L.C. Additional data related to the Obligated Group and the Non-Mortgaged Properties are derived from unaudited consolidating information as presented in such financial reports and information provided by the Borrower. Operating results for the six-month period ending June 30, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, The selected financial data should be read in conjunction with the financial reports, related notes and other financial information included as Appendix B to this Official Statement A-14

53 Statement of Operations for the Fiscal Year Ended December 31, 2010 Total Sunrise Maple Non- Manor and Heights Obligated Mortgaged Fountain View Apartments Consolidating Consolidated Group Property Assisted Living and Annex Total Entries Total (1) Revenues, Gains, & Other Support Net Resident Service Revenue (2) $8,505,030 $267,334 $8,772,364 $379,525 $9,151,889 $ -- $9,151,889 Other Operating Revenue 125,935 33, ,908 8, ,955 (29,029) 138,926 Investment Income 3,761 4,191 7,952 1,156 9, ,108 Donations & Gifts 64, , , ,648 Net Assets Released from Restrictions 15, , , ,194 Total Revenue, Gains & Other Support $8,714,568 $305,498 $9,020,066 $388,728 $9,408,794 $(29,029) $9,379,765 Expenses Salaries & Benefits $5,067,153 $(196,812) $4,870,341 $48,731 $4,919,072 $ -- $4,919,072 Medical Supplies, Drugs & Therapies 838, , , ,989 Food 312,704 1, , , ,773 Utilities 234,425 40, ,670 50, , ,573 Insurance & Other 835, ,089 1,304, ,339 1,426,701 $(29,029) 1,397,672 Depreciation & Amortization 722,340 96, , , , ,101 Interest 500, , , , ,288 Total Expenses $8,511,552 $409,863 $8,921,415 $445,082 $9,366,497 $(29,029) $9,337,468 Operating Income (Loss) $203,016 $(104,365) $98,651 $(56,354) $42,297 $ -- $42,297 Net Assets Released from Restrictions 139, , , , ,653 Used for Purchase of PP&E Increase (Decrease) in $342,458 $374,846 $717,304 $(56,354) $660,950 $ -- $660,950 Unrestricted Net Assets Increase (Decrease) in Temporarily Restricted Net Assets (151,039) -- (151,039) -- (151,039) -- (151,039) Increase (Decrease) in Net Assets $191,419 $374,846 $566,265 $(56,354) $509,911 $ -- $509,911 (1) Audited. (2) Includes amortization of advance fee revenue for Sunrise Manor and Fountain View of $321,317, comprised of $296,932 for the Obligated Group and $24,385 for the Non-Mortgaged Property A-15

54 Statement of Operations for the Fiscal Year Ended December 31, 2011 Total Sunrise Maple Non- Manor and Heights Obligated Mortgaged Fountain View Apartments Consolidating Consolidated Group Property Assisted Living and Annex Total Entries Total (1) Revenues, Gains, & Other Support Net Resident Service Revenue (2) $8,848,318 $135,349 $8,983,667 $410,146 $9,393,813 $ -- $9,393,813 Other Operating Revenue 181,971 32, ,057 9, ,319 (34,180) 189,139 Investment Income 8, ,465 1,198 9, ,663 Donations & Gifts 27, , , ,597 Net Assets Released from Restrictions 12, , , ,553 Total Revenue, Gains & Other Support $9,078,904 $167,435 $9,246,339 $420,606 $9,666,945 $(34,180) $9,632,765 Expenses Salaries & Benefits $5,136,913 $28,964 $5,165,877 $52,164 $5,218,041 $ -- $5,218,041 Medical Supplies, Drugs & Therapies 783, , , ,613 Food 378, , , ,805 Utilities 315,230 3, ,125 48, , ,752 Insurance & Other 1,365, ,559 1,480, ,848 1,602,935 $(34,180) 1,568,755 Depreciation & Amortization 741,327 70, , , , ,097 Interest 545, , , , ,024 Total Expenses $9,267,318 $218,251 $9,485,569 $450,698 $9,936,267 $(34,180) $9,902,087 Operating Income (Loss) $(188,414) $(50,816) $(239,230) $(30,092) $(269,322) $ -- $(269,322) Change in Net Unrealized Gains (Losses) (8,386) -- (8,386) -- (8,386) -- (8,386) Net Assets Released from Restrictions 373, , , ,021 Used for Purchase of PP&E Increase (Decrease) in $ 176,221 (50,816) $ 125,405 $(30,092) $95,313 $ -- $95,313 Unrestricted Net Assets Increase (Decrease) in Temporarily Restricted Net Assets (49,066) -- (49,066) -- (49,066) -- (49,066) Increase (Decrease) in Net Assets $ 127,155 $(50,816) $ 76,339 $(30,092) $46,247 $ -- $46,247 (1) Audited. (2) Includes amortization of advance fee revenue for Sunrise Manor and Fountain View of $152,261, comprised of $129,595 for the Obligated Group and $22,666 for the Non-Mortgaged Property A-16

55 Statement of Operations for the Six Months Ended June 30, 2012 and June 30, 2011 (1) June 30, 2012 June 30, 2011 Total Sunrise Total Sunrise Non- Manor and Non- Manor and Obligated Mortgaged Fountain View Obligated Mortgaged Fountain View Group Property Assisted Living Group Property Assisted Living Revenues, Gains, & Other Support Net Resident Service Revenue $4,495,095 $69,223 $4,564,318 $4,352,310 $ 56,444 $4,408,754 Other Operating Revenue 102,370 18, ,610 85,008 13,505 98,513 Investment Income 4, ,653 2, ,557 Total Revenue, Gains & Other Support $4,602,118 $87,463 $4,689,581 $4,439,875 $ 69,949 $4,509,824 Expenses Salaries & Benefits $2,515,578 $18,269 $2,533,847 $2,469,757 $ 19,781 $2,489,538 Medical Supplies, Drugs & Therapies 401, , , ,497 Food 201, , , ,226 Utilities 150,606 4, , ,880 1, ,873 Insurance & Other 621,294 37, , ,246 35, ,449 Depreciation & Amortization 358,195 33, , ,042 33, ,717 Interest 299, , , ,204 Total Expenses $4,547,292 $94,212 $4,641,504 $4,426,852 $ 90,652 $4,517,504 Operating Income (Loss) $ 54,826 $ (6,749) $ 48,077 $ 13,023 $(20,703) $ (7,680) Increase (Decrease) in Unrestricted Net Assets $ 54,826 $ (6,749) $ 48,077 $ 13,023 $(20,703) $ (7,680) Increase (Decrease) in Temporarily Restricted Net Assets 202, ,532 76, ,376 Increase (Decrease) in Net Assets $ 257,358 $ (6,749) $ 250,609 $ 89,399 $(20,703) $ 68,696 (1) Excludes Maple Heights Apartments, Inc. and Maple Heights Annex, Inc A-17

56 The following table sets forth the Statement of Financial Position solely for Sunrise Manor and Fountain View on December 31, 2010 and 2011 and on June 30, 2011 and The Statement of Financial Position for such dates is derived from compiled information provided in financial reports prepared by Ryun, Givens & Company, P.L.C. as included in Appendix B. (1) Statement of Financial Position (1) As of December 31, As of June 30, ASSETS Current Assets Cash and Cash Equivalents $ 951,850 $ 1,785,977 $ 1,433,150 $ 1,476,970 Other Current Assets 1,038,511 1,057,063 1,018,836 1,027,499 Assets Limited as to Use 612, , , ,201 Net Property and Equipment 17,499,123 20,589,658 17,169,680 26,311,837 Other Assets (2) 874,440 1,280, ,943 2,125,918 TOTAL ASSETS $20,976,627 $25,208,036 $20,909,281 $31,288,425 LIABILITIES AND NET ASSETS Current Liabilities $ 1,932,993 $ 1,197,290 $ 978,476 $ 989,142 Long-Term Liabilities 13,672,769 18,563,542 14,491,244 24,601,470 Net Assets Unrestricted 5,007,942 5,133,347 5,125,704 5,181,424 Temporarily Restricted 362, , , ,389 TOTAL LIABILITIES AND NET ASSETS $20,976,627 $25,208,036 $20,909,281 $31,288,425 Includes Stone Avenue and South Maple facilities, but excludes Maple Heights Apartments, Inc. and Maple Heights Annex, Inc. (2) Includes unrestricted Board-Designated cash and cash equivalents of $168,237 as of June 30, 2011 and $332,085 as of June 30, A-18

57 The number of days cash on hand for Sunrise Manor and Fountain View on December 31, 2010 and 2011, and June 30, 2011 and 2012, is presented below: Days Cash on Hand (1) (1) As of December 31, As of June 30, Cash/Cash Equivalents $ 951,850 $1,785,977 $1,433,150 $1,476,970 Board Designated Funds Assets Limited as to Use 612, , , ,201 Other Assets (Board-Designated) , ,085 Less: Restricted Funds -- (294,610) Total Cash/Cash Equivalents $1,564,553 $1,986,300 $1,928,059 $2,155,256 Operating Expenses $8,921,415 $9,485,569 $4,517,504 $4,641,504 Less: Depreciation/Amortization (818,612) (812,160) (391,717) (391,870) Adjusted Operating Expenses $8,102,803 $8,673,409 $4,125,787 $4,249,634 Daily Adjusted Operating Expenses (2) $ 22,199 $ 23,763 $ 22,794 $ 23,350 Number of Days Cash on Hand (3) Includes Stone Avenue and South Maple facilities, but excludes Maple Heights Apartments, Inc. and Maple Heights Annex, Inc. (2) Adjusted operating expenses divided by 365 for December 31, 2010 and 2011; divided by 181 for June 30, 2011 and divided by 182 for June 30, (3) Total cash and cash equivalents divided by daily adjusted operating expenses. Management s Discussion of Financial Performance Results of Operations of Obligated Group for Fiscal Years Ending December 31, 2010 and 2011: From the fiscal year ending December 31, 2010 to December 31, 2011, net income from operations decreased. Operation of the Mortgaged Properties produced operating margins of 2.3% and (2.1)% for fiscal years 2010 and 2011, respectively. Revenues totaled $8,714,568 and $9,078,904 for the fiscal years ended December 31, 2010 and 2011, respectively. This increase of 4.2% was primarily due to annual rate increases. Other factors contributing to the increase in revenues include an increasing census at the Pointe at Sunrise, combined with a slightly lower census in the nursing and assisted living areas of the campus. Expenses totaled $8,511,552 and $9,267,318 for the fiscal years ended December 31, 2010 and 2011, respectively. This increase of 8.9% was primarily due to activities related to the construction of the new Sunrise Health Center Facility/Fountain View Facility such as professional fees and interest expense as well as increased salary expenses. Other factors contributing to the increase of expenses included interest expense related to new construction, increased occupancy at the Pointe at Sunrise, increased cost of food and increased property taxes on the Pointe at Sunrise relative to the scheduled tax abatement changes A-19

58 Results of Operations of Obligated Group for Six-Month Periods Ending June 30, 2011 and 2012: For the six-month periods ending June 30, 2011 and 2012, net income from operations increased. Operation of the Mortgaged Properties produced operating margins of 0.3% and 1.2% for the six-month periods ending June 30, 2011 and 2012, respectively. Revenues totaled $4,439,875 and $4,602,118 for the six-month periods ending June 30, 2011 and 2012, respectively. This increase of 3.7% was primarily due to steadily increasing occupancy at the Pointe at Sunrise. Other factors contributing to the increase in revenues include the scheduled annual increase in monthly fees. Expenses totaled $4,426,852 and $4,547,292 for the six-month periods ending June 30, 2011 and 2012, respectively. This increase of 2.7% was primarily due to increased salary costs and food expenses. Summary of Insurance Coverage The Obligated Group presently maintains property insurance of over $36.3 million, with a $2,500 deductible and 100% coinsurance. The Obligated Group also maintains business income and expense insurance of approximately $8,600,000, with an 80% coinsurance. The Obligated Group maintains general liability insurance of $1,000,000 per occurrence and $3,000,000 in aggregate. The Obligated Group also maintains Director s and Officer s liability insurance of $1,000,000 per occurrence. The Obligated Group has employee benefit liability coverage of $1,000,000 per occurrence. In addition, the Obligated Group has insurance coverage for employee crime, computer equipment, boiler and business auto insurance. The Obligated Group also has an additional $1,000,000 commercial umbrella policy with a $10,000 self insured retention rate. Future Capital Expenditures Other than the demolition of the former health care center and assisted living facility and the regular upkeep and maintenance of the Campus, there are no planned capital expenditures of the Members of the Obligated Group. Existing Indebtedness As of June 30, 2012, the following list describes different types and amounts of the Obligated Group s current outstanding indebtedness: 1) The $1,000,000 Promissory Note of Sunrise Manor issued in favor of St. Luke s Health System, Inc. 2) The $3,000,000 Woodbury County, Iowa Senior Living Facility Revenue Note (The Pointe at Sunrise Project) Series 2008A (the Woodbury County Series 2008A Note ); the $9,000,000 City of Lawton, Iowa Senior Living Facility Revenue Note (The Pointe at Sunrise Project) Series 2008 (the Lawton Series 2008 Note ); the $1,510,000 City of Lawton, Iowa Healthcare Facility Revenue Notes (Sunrise Retirement Community Project), Series 2011 (the Lawton Series 2011 Notes ); the $10,000,000 City of Bronson, Iowa Senior Living Facility Revenue Note (Sunrise Retirement Community Project), Series 2011 (the Bronson Note ); and the $380,000 Woodbury County, Iowa Senior Living Facility Revenue Note (Sunrise Retirement Community Project), Series 2011 (the Woodbury County Series 2011 Note ). The proceeds of the Bonds will be used to prepay $50,000 of the Lawton Series 2011 Notes (leaving $1,410,000 outstanding) and to prepay, in their entirety, the Woodbury County Series 2008A Note, the Lawton Series 2008 Note, the Bronson Note and the Woodbury County Series 2011 Note. 3) The $100,000 line of credit with First Trust & Savings Bank of Molville, Iowa. There is currently $36,000 owing on the line of credit A-20

59 Pushpins My Pushpins Custom Territories Sioux City Market Ar... Map of the Sioux City Market Area, Sunrise Retirement Community, Sioux City, Iowa 0 mi Copyright and (P) Microsoft Corporation and/or its suppliers. All rights reserved. Portions InstallShield Software Corporation. All rights reserved. Certain mapping and direction data 2005 NAVTEQ. All rights reserved. The Data for areas of Canada includes information taken with permission from Canadian authorities, including: Her Majesty the Queen in Right of Canada, Queen's Printer for Ontario. NAVTEQ and NAVTEQ ON BOARD are trademarks of NAVTEQ Tele Atlas North America, Inc. All rights reserved. Tele Atlas and Tele Atlas North America are trademarks of Tele Atlas, Inc.