The Bank of New York Mellon Trust Co. N.A. 300 N. Meridian Street, Suite 910 Indianapolis, IN Attn: Perette Russell

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1 The Bank of New York Mellon Trust Co. N.A. 300 N. Meridian Street, Suite 910 Indianapolis, IN Attn: Perette Russell Re: Indiana Housing and Community Development Authority Multifamily Housing Revenue Bonds (Stone Lake Apartments) Series 2011 $16,000,000 No Default Letter Dear Ms. Russell: In accordance with Section 6.10(a)(ii) of the Loan Agreement relating to the above referenced bonds, and to the best of our knowledge and belief, as of December 31, 2013, the Company was not in default with respect to any covenants, agreements or conditions contained in the Loan Agreement, which has been reviewed by us during our audit of the financial statements of GMF - Stone Lake, LLC. Global Ministries Fellowship (GMF) has provided you with a copy of the Company s December 31, 2013 financial statements. Very truly yours, If you have any questions regarding the above, please feel free to contact us. Memphis, Tennessee March 15, 2014

2 Debt Service Coverage Ratio Calc GMF - Stone Lake, LLC December 31, 2013 Per Audited Financial Statements Cash Basis Adjustment Cash Basis Balances Adjustment per Indenture Indenture Basis Balances REVENUE Potential Gross Rental Revenue $ 4,471,824 $ - $ 4,471,824 $ - $ 4,471,824 Vacancy (871,844) - (871,844) - (871,844) Bad debt expense - (37,403) (37,403) - (37,403) Net Rental Revenue 3,599,980 (37,403) 3,562,577-3,562,577 Other Revenue 242, , ,678 Operating Revenue $ 3,842,658 $ (37,403) $ 3,805,255 $ - $ 3,805,255 EXPENDITURES General Administrative $ 150,108 $ (37,403) $ 112,705 $ - $ 112,705 Advertising 18,806-18,806-18,806 Payroll 598, , ,782 Utilities 402, , ,048 Management Fee 148, ,901 (64,225) 84,676 Repairs and Maintenance 600,570 (60,717) 539,853 (408,553) 131,300 Contract Services 27,307-27,307-27,307 Insurance 122,266 11, , ,070 Interest expense 964,035 (15,035) 949,000 (949,000) - Debt service fees 11,775 Depreciation and amortization 529,817 (529,817) Replacement Reserves , ,400 Total Expenditures $ 3,574,415 $ (631,168) $ 2,931,472 $ (1,227,378) $ 1,704,094 Net Operating Revenue 2,101,161 Net Available for Debt Service 2,101,161 Bond Debt Service 1,114,000 Excess Cash Flow 987,161 Debt Service Coverage 1.89 Asset Management Fee (36,000) Subordinated management fee (28,225) Extraordinary maintenance (353,701) 501(c)3 Program Expenses (54,852) Adjusted Excess Cash Flow 514,383

3 Financial Statements December 31, 2013

4 Table of Contents December 31, 2013 Page Independent Auditor s Report... 2 Balance Sheet... 3 Statement of Operations... 4 Statement of Changes in Member s Equity... 5 Statement of Cash Flows... 6 Notes to the Financial Statements

5 Independent Auditor s Report To the Member GMF - Stone Lake, LLC Memphis, Tennessee We have audited the accompanying financial statements of GMF - Stone Lake, LLC, which comprise the balance sheet as of December 31, 2013, and the related statements of operations, changes in member s equity, and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedure to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GMF - Stone Lake, LLC as of December 31, 2013, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Memphis, Tennessee March 15, 2014

6 Balance Sheet December 31, 2013 ASSETS Current assets Cash and cash equivalents $ 29,444 Tenant receivables 24,875 Prepaid expenses 36,875 Restricted deposits: Tax and insurance escrow 12,500 Trustee bond fund cash 807,101 Total current assets 910,795 Property and equipment, net 13,269,774 Other assets Tenant security deposits 146,574 Reserve for replacements 16,200 Reserve for debt service 1,114,844 Deferred financing costs, net of accumulated amortization of $36, ,682 Total other assets 1,848,300 Total assets $ 16,028,869 LIABILITIES AND MEMBER'S EQUITY Current liabilities Current maturities of bonds payable $ 175,000 Accounts payable 94,507 Accrued interest payable 78,625 Prepaid rent 20,069 Total current liabilities 368,201 Tenant security deposits liability 142,422 Long-term liabilities Bonds payable 15,106,398 Total liabilities 15,617,021 Member's equity 411,848 Total liabilities and member's equity $ 16,028,869 See notes to the financial statements. 3

7 Statement of Operations For the year ended December 31, 2013 Revenue Net rental income $ 3,599,980 Other revenue 242,678 Interest 14 Total revenue 3,842,672 Operating expenses Interest expense 964,035 Repairs and maintenance 600,570 Payroll 598,782 Depreciation and amortization 529,817 Utilities 402,048 General and administrative 150,108 Management fee 148,901 Insurance 122,266 Contract services 27,307 Advertising 18,806 Debt service fees 11,775 Total operating expenses 3,574,415 Net income $ 268,257 See notes to the financial statements. 4

8 Statement of Changes in Member s Equity For the year ended December 31, 2013 Member's equity, beginning of year $ 643,591 Distributions (500,000) Net income 268,257 Member's equity, end of year $ 411,848 See notes to the financial statements. 5

9 Statement of Cash Flows For the year ended December 31, 2013 Operating activities: Net income $ 268,257 Depreciation expense 511,408 Amortization expense 18,409 Amortization of original issue discount 15,640 Adjustment to reconcile net income to net cash provided by operating activities: Accounts receivable (13,733) Prepaid expenses (11,804) Accounts payable 60,717 Accrued interest (605) Prepaid rent 3,898 Tenant security deposits 1,317 Net cash provided by operating activities 853,504 Investing activities: Purchase of property and equipment (182,843) Net cash used in investing activities (182,843) Financing activities: Member distributions (500,000) Principle payments on long-term debt (155,000) Net cash used in financing activities (655,000) Net increase in cash and cash equivalents 15,661 Cash and cash equivalents, beginning of year 1,964,428 Cash and cash equivalents, end of year 1,980,089 Less: restricted cash and cash equivalents (1,950,645) Cash and cash equivalents, unrestricted, end of year $ 29,444 Supplemental disclosure of cash flow information: Cash paid for interest $ 949,000 See notes to the financial statements. 6

10 Notes to the Financial Statements December 31, 2013 Note 1 Organization and business activity GMF - Stone Lake, LLC, (the "Company") was organized on June 27, 2011, as a Tennessee limited liability company formed to acquire, own and operate Stone Lake Apartments (the Property ), a 648 unit apartment complex in Indianapolis, Indiana. Note 2 Summary of significant accounting policies Basis of accounting The accrual method of accounting is used for financial statement purposes. Cash equivalents All highly liquid investments purchased with an initial maturity of less than three months are considered cash equivalents. Accounts receivable Accounts receivable consists of amounts due from tenants. The Company performs continual credit evaluation of its tenants and does not consider an allowance for doubtful accounts necessary. Property, equipment and depreciation Property, equipment, major renewals and betterments are recorded at cost. Expenditures for normal repair and maintenance are expensed to operations as they occur. Depreciation is provided through the straight-line method over the assets estimated useful lives which range from five to forty years. Accelerated depreciation methods are used for tax purposes. Rental income Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Company and the tenants of the property are operating leases. Amortization The costs incurred in conjunction with long-term debt financing arrangements are recorded as deferred financing costs and are amortized over the life of the debt commitment. Total amortization expense for the year ended December 31, 2013 was $18,409. Income taxes Neither the Company nor its non-profit corporate member are subject to income taxes. The Company recognizes the tax benefits of uncertain positions only where the position is more likely than not to be sustained assuming examination by tax authorities. Management has analyzed the Company s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for the open tax years, or expected to be taken in the Company s 2013 tax return. The Company identifies its major tax jurisdictions as U.S. Federal, Tennessee and Indiana State jurisdictions; however, the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. 7

11 Notes to the Financial Statements (continued) December 31, 2013 Note 2 Summary of significant accounting policies (continued) Use of estimates in the preparation of financial statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Subsequent events Management has evaluated subsequent events through March 15, 2014, the date the financial statements were available to be issued. Note 3 Property and equipment Property and equipment consisted of the following at December 31, 2013: Land $ 1,085,000 Buildings 12,014,871 Building equipment, portable 112,717 Furnishings 1,039,978 Total property and equipment 14,252,566 Less: accumulated depreciation 982,792 Property and equipment, net $ 13,269,774 Depreciation expense for the year $ 511,408 8

12 Notes to the Financial Statements (continued) December 31, 2013 Note 4 Bonds payable On December 14, 2011, the Company issued $16,000,000 in Indiana Housing and Community Development Authority Multifamily Housing Revenue Bonds. The bonds have staggered maturity dates from December 1, 2014 to December 1, 2046, carry interest rates from 4.40% to 6.25%, and are secured by substantially all assets of the Company. Scheduled principal maturities of bonds payable during each of the next five years are as follows: Year ending December 31, Amount 2014 $ 175, , , , ,000 Thereafter 14,730,000 Total long-term liabilities 15,685,000 Less: current maturities 175,000 15,510,000 Less: unamortized original issue discount 403,602 Long-term liabilities, non-current $ 15,106,398 The bond indentures require the Company to make deposits to restricted accounts including a debt service reserve account, a repair and maintenance escrow, and a property tax and insurance escrow. Note 5 Management fee The Company is managed by Multi Family Management, Inc. (the Agent ), an unaffiliated entity for a fee equal to three percent (3%) of gross collections. Management fees were $112,901 for the period ended December 31, In addition, the Agent receives a monthly fee in reimbursement of costs it incurred for data processing and accounting on behalf of the Company. These fees amounted to $20,004 for the period ended December 31, Note 6 Related party transactions The Company pays a fee to GMF Preservation of Affordability Corp. ( GMF-PAC ) computed as an asset management fee of $3,000 per month. Asset management fees earned were $36,000 for the year ended December 31, Note 7 Concentrations The Company deposits its cash in financial institutions. At times, deposits may exceed federally insured limits. The Company has not experienced any losses in such accounts. 9

13 Notes to the Financial Statements (continued) December 31, 2013 Note 8 Restricted assets At December 31, 2013, the Company had $1,114,844 in trust, irrevocably dedicated to the repayment of the Indiana Housing and Community Development Authority Multifamily Housing Revenue Bonds. The Company has not been relieved of its obligation and remains the primary obligor of this debt. Therefore, the liability is recognized on the accompanying balance sheet. 10