Memo. Hot Springs Village Property Owners Association Board of Directors Report

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1 Hot Springs Village Property Owners Association Board of Directors Report Memo To: David Twiggs, COO, and HSV Board of Directors From: Lesley Nalley, CFO LAN Date: April 20, 2016 Re: March 2016 Financial Report Attached please find the following financial package documents: Executive Summary Financial Dashboard Golf Rounds and Revenue Details Statement of Financial Position Statement of Revenue and Expenses Statement of Capital Additions

2 Hot Springs Village POA Executive Summary % Operating Budget Spent YTD 20% % Capital Budget Spent YTD 18% % Net Revenue Earned vs. Budgeted YTD 19% Properties/Units in Good Standing 23,848-69% FINANCIAL DASHBOARD Year to date, $200k more assessments have been received than billed, demonstrating strong advanced payments and collection efforts. By comparison, for the same three month periods in 2015 and 2014, $314k and $531k less, respectively, was received on non POA owned property vs. that which was billed. Assuming projected operating results materialize and the Supreme Court appeal is ruled in the POA s favor, we are beginning to see possible indicators of reserve availability. In the event the appeal is not ruled in the POA s favor, a cash shortfall is projected. For this reason, certain budgeted capital spending, such as rolling stock and building maintenance, is being delayed. PROPERTY & POPULATION STATISTICS 1,450 more properties/units were in good standing at the end of March as compared to the end of February. An additional $25k corporate investor payment was received in April. GOLF ROUNDS 11,024 more rounds of golf have been played so far in 2016, as compared to Magellan, Balboa, and DeSoto posted the top three largest round increases. Although the average golf rate is $4.60/round less than 2015 s ADR, the overall improved golf activity from weather, flex pricing, and outside or group play resulted in $132k more revenue over 2015 YTD results. STATEMENT OF FINANCIAL POSITION CASH: HSVPOA ended the month with $6.6mil of cash/cash equivalents, with $1mil of this amount representing remaining Arvest/DeSoto loan proceeds, $1.6 mil held by Multi Bank Securities in brokered CDs, and $877k held in escrow. ASSESSMENTS RECEIVABLE: $17.7mil of assessments is currently outstanding, a reduction from February s outstanding balance, further reflecting improved collection activities. There are currently 10,598 properties considered unproductive or not in good standing. LONG TERM DEBT: $2.98mil of long term debt is currently outstanding, with an additional $2mil in bond debt slated to close in May. The current debt ratios, cash balance, and projected operating results demonstrate HSV s ability to meet the related debt service obligations for 2016.

3 No new long term debt should be considered, unless operating results exceed budgeted expectations. POA LOTS: The POA currently owns 2,514 unimproved residential lots. The number of POA owned lots at December 2013, 2014, and 2015 was 2,189; 2,363, and 2,488, respectively. NET WORTH: HSV s current net worth is $69mil, compared to $71mil in The year over year difference relates mainly to the aging asset base and reduction in reserves. In order to reverse the declining equity trend, a balanced approach of building reserves, collecting outstanding receivables, and replacing or expanding assets is necessary. In other words, net results must offset the roughly $4mil/year in depreciation, at a minimum. STATEMENT OF REVENUE AND EXPENSE NET REVENUE: The $1mil(2) year over year revenue increase resulted from the additional assessments on improved properties (approx. $240k more per month), receipt of final DeSoto insurance payout, marina sales, and golf results. These increases were offset by decreases related to lost town house sanitation business and member decal program. Administration s $64k decrease relates to a refund received in 2015 for a federal unemployment tax overpayment, as well as fewer gate card and photo ID purchases thus far in Total Public Works revenue is currently tracking behind budget and behind last year. A deeper analysis for potential mid-year budget adjustments is being conducted. Considering much of the revenue listed under Food & Beverage were based on a POAoperated DeSoto Club (along with related expense), this division s budget should be revised according to the tenant-operated establishment. EXPENSE: Total operational expense(3) is 20% of budget and currently $370k higher than Golf s $195k (4) increase relates to additional staffing from more playable days in 2016, the related earlier course treatment, as well as equipment and course maintenance. Public Work s $185k (5) increase relates to additional sewer system and streets maintenance, rentals and maintenance related to sanitation equipment, and additional lake maintenance. This increase was partially offset by decreased sanitation personnel. Recreation s $32k (6) decrease reflects a decrease in maintenance personnel and activity (some responsibilities were moved to other departments), partially offset by an increase for marina operations. Public Safety s $17k increase relates to increased personnel costs, as budgeted. NET OPERATING RESULTS: Net excess before depreciation and capital was $641k (1), as compared to a $5k deficit for the same period last year. The year over year increase reflects the new assessment rate on improved properties. STATEMENT OF CAPITAL ADDITIONS CAPITAL: Capital spending totals $347k of the $4.6mil budgeted for 2016 and $680k in carried over DeSoto Club spending, for total ytd spending of $1.028mil.

4 Hot Springs Village POA Financial Dashboard At a Glance Comparison of Select Financial Data 2015 YTD 2016 YTD Inc/(Decr) %Change $ 3,294,513 $ 4,528,173 Assessments Received $ 1,233, % $ 3,608,711 $ 4,327,233 Assessments Billed $ 718, % $ 2,345,535 $ 2,557,508 Operational Revenue $ 211, % $ 5,353,289 $ 5,723,338 Operating Expenses $ 370, % $ 408,440 $ 347,235 Capital Spending $ (61,206) % $ 6,856,333 $ 6,647,712 Cash and Cash Equivalents $ (208,622) -3.04% 2,364 2,514 POA Owned Lots % 27,721 38,745 Golf Rounds 11, % $ $ Avg Golf Rate (all Sources) $ (4.60) % Home Sales (8) -7.69% 10 8 New Dwelling Permits (2) % Residential Additions (2) -2.90% Viability Ratio Est 2016 w/new debt Debt Service Coverage Ratio* Est 2016 w/new debt 2.90 *The Bond issue is not expected to increase annual debt service, only extend the repayment term Reconciliation of Projected Cash Usage Cash & Cash Equivalent Balance $ 6,647,712 Petty Cash, Employee Insurance, & Act 833 Funds (114,914) Outstanding Accounts Payable (826,173) Accrued 2016 Cash Spending (1,586,970) Workers Compensation Reserve (200,000) Remaining DeSoto Project Budget (1,251,764) Remaining Budgeted 2016 Capital (4,332,005) Bond Funds Expected 1,800,000 Building Failure Reserve Remaining (355,496) Estimated Remaining Cash Yield from Operations 1,055,503 Bond Reserve (153,502) Annual Debt Service - Principle Only Bond & Arvest (587,360) Estimated Excess for Reserves Before Escrow $ 95,031 Current Funds in Escrow (877,401) Estimated Deficit for Reserves After Escrow $ (782,370)

5 Hot Springs Village POA Financial Dashboard Property & Population Statistics Total Residential & Commercial Subject to Assessment 34,446 Cooper's Reserved Property-no voting rights, pays a square footage fee 8 Percentage Productive Delinquent/ Unproductive Total Good Standing Unimproved Lots Not Owned by the POA 22,908 65% 14,999 7,909 Improved Lots 8,730 98% 8, Unimproved Lots Owned by the POA 2,514 2,514 Platted Lots 34,152 69% 23,554 10,598 Time share units Good Samaritan Units Mt Carmel Units Multi-unit facilities TOTAL 23,848 10,598

6 Hot Springs Village POA Golf Rounds and Revenue Details 2016 GOLF RESULTS 2016 Rounds 2016 Revenue 2016 Revenue/Round Balboa 4, , Coronado 3, , Cortez 5,058 76, DeSoto 4,880 88, Granada 5, , Isabella 6,085 95, Magellan 4, , Ponce de Leon 4, , , ,910 Admin & Miscellaneous 40, , GOLF RESULTS 2015 Rounds 2015 Revenue 2015 Revenue/Round Balboa 2,723 88, Coronado 2, , Cortez 4,291 66, DeSoto 3,144 77, Granada 3,893 96, Isabella 5,035 83, Magellan 2, , Ponce de Leon 3, , , ,690 Admin & Miscellaneous 38, , ,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2, Golf Rounds Comparison Balboa Coronado Cortez DeSoto Granada Isabella Magellan Ponce de Leon 2016 Rounds 2015 Rounds Comparison of Revenue Per Round Balboa Coronado Cortez DeSoto Granada Isabella Magellan Ponce de Leon 2016 Revenue/Round 2015 Revenue/Round

7 HOT SPRINGS VILLAGE POA Comparative Statement of Financial Position ASSETS CASH AND CASH EQUIVALENTS $ 6,647,712 $ 6,856,333 MEMBERSHIP ASSESSMENT RECEIVABLE GROSS ASSESSMENTS BILLED 17,717,053 14,715,040 LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS (17,203,910) (14,317,332) NET MEMBERSHIP ASSESSMENT RECEIVABLE 513, ,708 OTHER MEMBERSHIP RECEIVABLES 147, ,915 OTHER RECEIVABLES 39,363 2,230 INVENTORIES 695, ,399 PREPAID EXPENSES 226, ,113 REAL ESTATE HELD FOR SALE, NET REALIZABLE VALUE 1,885,500 1,763,341 RECOVERABLE ELECTRIC COSTS GROSS 7,989,920 8,000,000 LESS ALLOWANCE FOR UNCOLLECTIBILITY (3,994,960) (4,000,000) PROPERTY AND EQUIPMENT, Net of Accumulated Depr. 65,199,504 65,802,969 TOTAL ASSETS $ 79,350,589 $ 79,847,007 LIABILITIES AND MEMBERSHIP EQUITY LIABILITIES ACCOUNTS PAYABLE $ 826,173 $ 584,410 ACCRUED EXPENSES 2,485,277 2,563,540 PREPAID ASSESSMENTS AND FEES 3,373,465 3,097,521 SECURITY DEPOSITS & OTHER DEPOSITS 602, ,279 ARVEST LOAN - DESOTO 1,453,835 - LINE OF CREDIT - - BONDS PAYABLE 1,535,000 1,815,000 TOTAL LIABILITIES 10,276,297 8,762,751 MEMBERSHIP EQUITY UNDESIGNATED 68,718,796 69,737,576 DESIGNATED FOR FUTURE REPAIRS & REPLACEMENT 355,496 1,346,681 TOTAL MEMBERSHIP EQUITY 69,074,292 71,084,257 TOTAL LIABILITIES AND MEMBERSHIP EQUITY $ 79,350,589 $ 79,847,007

8 HOT SPRINGS VILLAGE POA Comparative Statements of Revenue and Expenses Months ended March 31, 2016 and March 31, 2015 Actual YTD 2016 Over/(Under) Budget Budget Mar-16 Mar-15 Prior Year Remaining Membership Assessment Revenue 17,375,000 4,412,563 3,608,711 Assessment Penalties & Other 443, , ,002 Provision for future Bad Debt (2,482,104) (786,398) (800,044) Net Assessment Revenue 15,335,896 3,807,287 3,002, ,618 11,528,609 Administration REVENUE 281,260 53, ,309 (64,053) 228,004 EXPENSE (4,875,116) (989,391) (986,934) 2,456 3,885,725 Net Administration (4,593,856) (936,135) (869,625) Public Safety REVENUE 755, , ,267 6, ,937 EXPENSE (4,239,572) (1,040,310) (1,022,534) 17,776 3,199,262 Net Public Safety (3,483,952) (889,627) (878,267) Public Works REVENUE 7,695, , ,578 (24,512) 6,737,450 EXPENSE (5) (6,775,822) (1,515,462) (1,329,531) 185,930 5,260,360 Net Public Works 919,694 (557,396) (346,954) Planning & Inspection REVENUE 195,000 30,302 31,841 (1,539) 164,698 EXPENSE (314,810) (71,236) (74,014) (2,777) 243,574 Net Planning & Inspection (119,810) (40,935) (42,173) Food & Beverage REVENUE 950, ,201 35, , ,469 EXPENSE (1,269,748) (70,462) (67,399) 3,064 1,199,286 Net Food & Beverage (319,078) 91,739 (31,482) Golf REVENUE 6,544, , , ,034 5,631,898 EXPENSE (4) (7,711,221) (1,506,567) (1,310,831) 195,736 6,204,654 Net Golf (1,166,974) (594,218) (530,517) Recreation REVENUE 1,199, , ,309 37, ,048 EXPENSE (6) (2,734,587) (529,910) (562,046) (32,137) 2,204,677 Net Recreation (1,534,887) (239,257) (308,737) Over/(Under) Prior Year Budget Remaining 16 Budget 16 Actual 15 Actual Gross Revenue $ 35,440,013 $ 7,151,193 $ 6,148,248 Bad Debt Expense (2,482,104) (786,398) (800,044) Net Revenue (2) 32,957,909 6,364,795 5,348,204 1,016,591 26,593,114 Operational Expense (3) (27,920,876) (5,723,338) (5,353,289) 370,048 22,197,538 Excess (Deficit) Before Depr.(1) $ 5,037,033 $ 641,457 $ (5,085) Depreciation $ (948,807) $ (900,076)

9 HOT SPRINGS VILLAGE POA Statement of Capital Additions 2016 Annual Budget Spending Budget Remaining Administration $ 107,085 $ 1,400,000 $ 1,292,915 Public Safety 41, , ,170 Public Works 120,969 1,980,545 1,859,576 Club Services and Facilities 27,231 84,000 56,769 Golf 5, , ,186 Parks and Recreation 44, , ,550 Construction - 253, ,839 Current Yr Capital Additions $ 347,235 $ 4,679,240 $ 4,332,005 DeSoto Project Carryforward from 2015 $ 680,909 $ 1,932,673 $ 1,251,764 Total Year to Date Capital Additions $ 1,028,143 $ 6,611,913 $ 5,583,770

Memo. Hot Springs Village Property Owners Association Board of Directors Report

Memo. Hot Springs Village Property Owners Association Board of Directors Report Hot Springs Village Property Owners Association Board of Directors Report Memo To: David Twiggs, COO, and HSV Board of Directors From: Lesley Nalley, CFO LAN Date: June 15, 2016 Re: May 2016 Financial