THE BOULDERS AT LA RESERVE CONDOMINIUM ASSOCIATION

THE BOULDERS AT LA RESERVE CONDOMINIUM ASSOCIATION REVIEWED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEARS ENDED DECEMBER 31, 2014 AND 2013

REVIEWED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION DECEMBER 31, 2014 AND 2013 TABLE OF CONTENTS Page Independent accountants review report.. 1 REVIEWED FINANCIAL STATEMENTS Balance sheets 2 Statements of revenues, expenses and changes in members equity.. 3 Statements of cash flows 4 Notes to financial statements.. 5 SUPPLEMENTARY INFORMATION Supplementary information on future major repairs and replacements (unaudited) 9

BALANCE SHEETS DECEMBER 31, 2014 AND 2013 ASSETS 2014 2013 Cash and cash equivalents - undesignated $ 41,555 $ 37,363 Cash and cash equivalents - designated for future repairs and replacements 691,294 478,937 Investments 290,110 353,890 Assessments receivable, net 7,660 8,346 Other receivables 1,452 1,467 Prepaid insurance - 1,824 Prepaid taxes 13 52 Total assets $ 1,032,084 $ 881,879 LIABILITIES AND MEMBERS' EQUITY Liabilities Accounts payable and accrued expenses $ 27,845 $ 11,083 Taxes payable 4 - Assessments received in advance 13,176 16,296 Deferred revenue 43,000 47,000 Total liabilities 84,025 74,379 Members' equity Undesignated 205,608 168,742 Designated for future repairs and replacements 742,451 638,758 Total members' equity 948,059 807,500 Total liabilities and members' equity $ 1,032,084 $ 881,879 See independent accountants' review report and notes to financial statements. 2

STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN MEMBERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 Revenues 2014 2013 HOA assessments $ 460,838 $ 408,077 Master HOA assessments 58,920 56,420 Interest income 7,373 6,877 Water assessment reimbursement 76,465 54,429 Other income 12,199 13,699 Total revenues 615,795 539,502 Expenses Administrative 16,067 11,599 Bad debt 5,652 5,641 Employee benefits and payroll taxes 10,686 12,868 Maintenance and repairs 122,402 87,919 Management fees 28,800 28,800 Property insurance 17,108 19,433 Protective services 3,239 2,949 Master HOA assessments 59,149 56,333 Salaries and wages 44,025 42,203 Utilities 133,391 133,040 Income taxes 591 597 Major repairs and replacements 34,126 53,849 Total expenses 475,236 455,231 Excess of revenues over expenses 140,559 84,271 Members' equity, beginning 807,500 723,229 Members' equity, end of year $ 948,059 $ 807,500 See independent accountants' review report and notes to financial statements. 3

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 Cash flows from operating activities: 2014 2013 Excess of revenues over expenses $ 140,559 $ 84,271 Adjustments to reconcile excess of revenues over expenses to net cash provided by operating activities: (Increase) decrease in operating assets: Assessments receivable 686 (282) Other receivables 15 (1,467) Prepaid insurance 1,824 356 Prepaid taxes 39 597 Increase (decrease) in operating liabilities: Accounts payable and accrued expenses 16,762 (2,543) Taxes payable 4 - Assessments received in advance (3,120) 5,267 Deferred revenue (4,000) (4,000) Total adjustments 12,210 (2,072) Net cash provided by operating activities 152,769 82,199 Cash flows from investing activities: Proceeds from investments 153,797 - Purchases of investments (90,017) (3,513) Net cash provided by (used in) investing activities 63,780 (3,513) Net increase in cash and cash equivalents 216,549 78,686 Cash and cash equivalents, beginning of year 516,300 437,614 Cash and cash equivalents, end of year $ 732,849 $ 516,300 Supplemental disclosures: Cash paid for income taxes $ 548 $ - Cash paid for interest $ - $ - See independent accountants' review report and notes to financial statements. 4

NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2014 AND 2013 NOTE 1 Organization The Boulders at La Reserve Condominium Association (the Association) is incorporated as a nonprofit corporation in the State of Arizona for the purposes of operating and maintaining the common property of the Association. The Association consists of 240 residential units on approximately 14.404 acres located outside Tucson, Arizona. The Association began operations in 2006 under the control of the Developer and transferred control to the members in 2011. The Association is part of a master area association, La Reserve. La Reserve began operations in 1984 as a nonprofit corporation in the State of Arizona for the purposes of developing the 1198 acres of land into various lots and parcels and to sell and convey such lots and parcels. La Reserve owns the land improvements which serve the complex and, as a result, the members pay an assessment to La Reserve to maintain streets and landscaping outside of the complex. The Association collects the master HOA assessment from each member on behalf of La Reserve and remits payment to La Reserve. NOTE 2 Summary of Significant Accounting Policies Financial Statement Presentation: The financial statements have been prepared on the accrual basis of accounting. Revenue Recognition: Revenues are recognized and reported when earned and when the amount and timing of the receipt of payment can be reasonably estimated. Revenues consist primarily of monthly member assessments. Cash and Cash Equivalents: The Association considers all highly liquid investments with a maturity of three months or less to be cash equivalents. Investments: Investments consist of various certificates of deposit ranging from one to two years. Certificates of deposit are carried at fair market value. Assessments Receivable: Association members are subject to monthly assessments to provide funds for the Association s operating expenses, future capital acquisitions, and major repairs and replacements. Assessments receivable at the balance sheet date represent fees due from unit owners. The Association s policy is to charge late fees and interest when assessments are 30 days or more delinquent. Receivables 70 days or more delinquent are turned over to an outside collection agency. The Association had delinquent assessments of $25,700 and $20,021 at December 31, 2014 and 2013, respectively. The Board provides an allowance for doubtful collections based on a review of outstanding receivables, historical collection information, and existing economic conditions. Any excess assessments at year end are retained by the Association for use in the succeeding year. See independent accountants' review report. 5

NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2014 AND 2013 NOTE 2 Summary of Significant Accounting Policies - continued Property and Equipment: Although title to the common area within the subdivision has been conveyed to the Association, real property and common areas acquired from the Developer and related improvements to such property are not recorded in the Association s financial statements because those properties are owned by the unit owners in common. The Association capitalizes at cost any personal property to which it has title. Income Taxes: The Association is classified as a nonexempt membership organization for both federal and state income tax purposes. It does not qualify as a tax exempt organization. The Association is subject to specific rulings and regulations applicable to nonexempt membership organizations. In general, the Association is required to separate its taxable income and deductions into membership transactions, non-membership transactions, and capital transactions. The Association is taxed on all net income from non-membership activities reduced only by losses from nonmembership activities for which a profit motive exists. Non-membership income may not be offset by membership losses, and any excess membership deductions may only be carried forward to offset membership income of future tax periods. Any net membership income not applied to a subsequent tax year is subject to taxation. U.S. generally accepted accounting principles prescribe rules for the recognition, measurement, classification, and disclosure in the financial statements of uncertain tax positions taken or expected to be taken in the Association s tax returns. The Board has determined that the Association does not have any uncertain tax positions and associated unrecognized benefits that materially impact the financial statements or related disclosures. Since tax matters are subject to some degree of uncertainty, there can be no assurance that the Association s tax returns will not be challenged by the taxing authorities and that the Association will not be subject to additional tax, penalties, and interest as a result of such challenge. The Association s tax returns remain open for federal income tax examination for three years from the date of filing and four years for the State of Arizona. Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. NOTE 3 Cash and Cash Equivalents At December 31, 2014 and 2013, cash and cash equivalents consisted of: 2014 2013 Checking account - undesignated $ 41,555 $ 37,363 Checking account- designated 185,000 - Money market - designated 506,294 478,937 $ 732,849 $ 516,300 The Association places its cash and cash equivalents with various financial institutions. Money market accounts are brokered by the institution among numerous banks to mitigate the risk of balances above the FDIC limit. At times the balances in the Association s accounts may exceed the FDIC insurance limit. The Board does not believe it is exposed to any significant credit risk on cash and cash equivalents. See independent accountants' review report. 6

NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2014 AND 2013 NOTE 4 Investments Fair value measurements are determined based on the assumptions referred to as inputs that market participants would use in pricing the asset. GAAP establishes a fair value hierarchy that distinguishes between market participant assumptions and the Company s own assumptions about market participant assumptions. Observable inputs are assumptions based on market data obtained from independent sources; while unobservable inputs are the Company s own assumptions about what market participants would assume based on the best information available in the circumstances. Level 1 inputs. A quoted price in an active market for an identical asset or liability is considered to be the most reliable evidence of fair value. The Company s certificates of deposit are measured utilizing Level 1 inputs. Amounts held in certificates of deposits at banks were $290,110 and $353,890 at December 31, 2014 and 2013, respectively. Level 2 inputs. These are observable inputs, either directly or indirectly, other than quoted prices included within Level 1. The Company does not utilize Level 2 inputs. Level 3 inputs. These inputs are unobservable and are used to measure fair value only when observable inputs are not available. The Company does not utilize Level 3 inputs. NOTE 5 Assessments Receivable At December 31, 2014 and 2013, assessments receivable consists of the following: 2014 2013 Assessments receivable $ 26,660 $ 22,346 Less allowance for doubtful accounts (19,000) (14,000) Assessements receivable, net $ 7,660 $ 8,346 Three members comprised 80% of assessments receivable at December 31, 2014, and two members comprised 70% of assessments receivable at December 31, 2013. NOTE 6 Future Major Repairs and Replacements The Association engaged an independent engineering firm that conducted a study in November 2014 to estimate the remaining useful lives and the replacement costs of the common property components. The Association is funding for such major repairs and replacements over the estimated useful lives of the components based on the study s estimates of current replacement costs and considering amounts previously accumulated and held in designated money market and CD accounts (the replacement fund). Actual expenditure, however, may vary from the estimated amounts, and the variation may be material. Therefore, amounts accumulated in the replacement fund may not be adequate to meet future needs. If additional funds are required, the Association has the right to increase regular assessments or levy special assessments, subject to member approval, or it may delay major repairs and replacements until funds are available. See independent accountants' review report. 7

NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2014 AND 2013 NOTE 7 Commitments and Contingencies The Association entered into a service agreement (the Agreement) in October 2010 with Comcast of Arizona, Inc. (Comcast) to install, operate, maintain and repair all facilities necessary to transmit broadband services to the Association. The Agreement provides for services for a term of 15 years with an automatic renewal for successive periods of 90 days unless either party shall provide the other with a minimum 60 day notice to terminate. As consideration for entering into the Agreement, Comcast paid the Association a per unit fee of $250, for a total of $60,000. In the event that the Agreement is terminated early, the Association shall refund a portion of the compensation based on the number of years remaining in the term of the Agreement. The Association had deferred revenue of $43,000 and $47,000 related to the Agreement at December 31, 2014 and 2013, respectively. The Association contracts with a professional property management company to maintain and operate the property and to provide administrative support. Paul Ash Management Company, LLC acts as agent for the Association, performing such services and duties as may be reasonably required in connection with management of the property. The contract is renewable on an annual basis each March and, absent cancellation, will renew automatically. Cancellation requires a 30 day written notice; however, there is an early termination fee if the contract is terminated prior to the normal renewal date. The contract was last renewed in March 2014, for an additional one year term. The contract requires a monthly fee of $2,400, and the Association paid management fees of $28,800 for each of the years ended December 31, 2014 and 2013. The Association is subject to potential claims and litigation arising from the normal course of its operations. Legal action may be brought by unit holders and others seeking damages or seeking to void actions of the Association, including relief from covenant and restriction enforcement, assessments and fines. Management believes the ultimate outcome of any such action will not have a material adverse effect on the Association s financial position. NOTE 8 Related Party The Developer continued to own 41 and 43 units for the years ended December 31, 2014 and 2013, respectively, which are rented to various tenants. NOTE 9 Concentration The Developer comprised 17% and 18% of total assessment revenues for the years ending December 31, 2014 and 2013, respectively. NOTE 10 Subsequent Events The Association evaluates events or transactions that occur subsequent to year end for potential recognition or disclosure in the financial statements through the date on which the financial statements are available to be issued. The financial statements were approved by the Board and available to be issued on April 10, 2015. See independent accountants' review report. 8

SUPPLEMENTARY INFORMATION ON FUTURE MAJORS REPAIRS AND REPLACEMENTS (UNAUDITED) DECEMBER 31, 2014 Components useful life (years) remaining useful life (years) current replacement cost Fully Funded Balance RECREATION AREA HVAC Units - Replace (A) 15 0 $ 10,000 $ 10,000 HVAC Units - Replace (B) 15 7 5,000 2,667 HVAC Units - Replace (C) 15 11 5,000 1,333 Carpet Floor - Replace 8 1 4,440 3,885 Tile Floor - Replace 30 10 34,120 22,747 Wood Floor - Replace 20 11 4,335 1,951 Window Curtains - Replace 15 6 1,555 933 Interior Chandeliers - Replace 20 2 1,415 1,274 Wall Pictures - Replace 20 11 2,500 1,125 Furniture - Replace 10 1 17,085 15,377 Kitchen - Remodel 20 11 16,830 7,574 Appliances - Replace 12 3 6,120 4,590 Restrooms - Remodel 20 12 8,260 3,304 Fitness Equipment - Replace (A) 10 8 6,000 1,200 Fitness Equipment - Replace (B) 10 1 3,720 3,348 Fitness Equipment - Replace (C) 10 6 8,670 3,468 Free Weights - Replace 15 10 2,475 825 Strength Equipment - Replace 15 14 4,000 267 Fitness Mirrors - Replace 20 3 5,660 4,811 Key Card System - Replace 12 10 10,710 1,785 Fire Alarm Panel - Replace 15 6 1,910 1,146 Interior Surfaces - Repaint 10 0 8,250 8,250 Pool Deck - Resurface 16 3 10,505 8,535 Pool Deck - Seal/Repair 4 3 2,755 689 Pool - Resurface 10 8 11,000 2,200 Spa - Resurface 10 7 5,100 1,530 Pool Furniture - Replace 10 1 38,780 34,902 Furniture Cushions - Replace 5 1 3,430 2,744 Pool Fence - Replace 30 10 6,070 4,047 Pool/Spa Filters - Replace 15 6 4,130 2,478 Pool Heater - Replace 8 6 3,000 750 Spa Heater - Replace 8 3 2,500 1,563 Pool/Spa Pumps - Replace 10 9 3,520 352 258,845 161,650 See independent accountants' review report. 9

SUPPLEMENTARY INFORMATION ON FUTURE MAJORS REPAIRS AND REPLACEMENTS (UNAUDITED) DECEMBER 31, 2014 Components useful life (years) remaining useful life (years) current replacement cost Fully Funded Balance COMMON AREA Decorative Concrete - Replace 30 10 48,960 32,640 Asphalt - Resurface 24 4 227,920 189,933 Asphalt - Seal/Repair 4 1 15,810 11,858 Bollard Lights - Replace 25 5 50,745 40,596 Mailboxes - Replace 20 1 7,905 7,510 Block Walls - Repair 25 5 8,875 7,100 Metal Fence - Replace 30 10 23,765 15,843 Wood Fence - Replace 15 6 2,180 1,308 Trash Gates - Replace 18 9 5,865 2,933 Monument - Refurbish 20 5 6,375 4,781 Block Walls - Repaint 6 5 5,700 950 Metal Fence - Repaint 4 0 2,800 2,800 Carports - Repaint 8 0 8,570 8,570 Carport Roofs - Repair 10 2 6,270 5,016 421,740 331,838 UNIT BUILDINGS Metal Surfaces - Repaint 5 1 35,980 28,784 Stucco Surfaces - Repaint 10 1 280,700 252,630 Wood Surfaces - Repaint 5 1 26,160 20,928 Flat Roof - Replace 15 6 413,150 247,890 Tile Roof - Refurbish 30 10 196,550 131,033 Roofing - Repairs 1 0 37,895 37,895 Roofing - Repairs 1 1 5,000-995,435 719,160 TOTALS $ 1,676,020 $ 1,212,648 Recommended minimum funding percentage 70% Recommended minimum funding requirement $ 848,854 Amount currently funded $ 981,404 Percent currently funded 81% See independent accountants' review report. 10