The Pines at Davidson Inc.

“Ex officio members do not have voting rights”

“The board of directors of the pines at davidson maintains an audit committee as one of its standing committees. All members of the audit committee are volunteer directors who are independent of management. All members of the audit committee are experienced business people or cpas and the chairperson is a cpa. The chairperson also serves as a member of the executive committee of the organization's board of directors and reports as needed directly to the board of directors. The audit committee meets at least annually in executive session with the auditors without management present. Clifton larson allen audits the organization and also prepares its form 990 based on information provided by the pines' management. Prior to filing the 990 tax return the form 990 is reviewed by the audit committee. A copy of the form 990 is also provided to all directors prior to filing.”

“The organization monitors the conflict of interest policy by sending a questionnaire prepared by the organization's attorney at least annually to all directors who return signed questionnaires. Management of the pines works closely with its legal and tax advisors in the event any directors indicate potential conflicts and provide assistance in determining proper treatment and disclosure. The executive committee of the board of directors and/or the board of directors is also apprised of any potential conflicts of interest.”

“The executive committee of the pines' board of directors ("board") serves as the compensation committee that evaluates the performance and reviews and sets compensation for the president/executive director and vice president/cfo of the pines. The executive committee is comprised of directors of the corporation, consisting of the chairman, vice chairman, treasurer, and secretary of the corporation and the chairpersons of the committees of the board of directors. The compensation committee meets at least annually to evaluate the president and vice president. A number of factors are considered as part of this process, including but not limited to, an assessment of job performance as measured by the attainment of key financial and non-financial objectives established by the board as part of the corporation's strategic plan. The strategic plan adopted by the board and in effect for the 2013 tax year includes eight key strategic goals: (1) exceptional facilities, (2) high quality health care and other services, (3) caring, talented and loyal team, (4) delighted residents, (5) strong community relations, (6) financial strength, (7) innovative culture driving high occupancy, and (8) effective board governance. The board also adopted quantifiable,measurable objectives for each of these eight key goals as a way of measuring the performance of the pines' management team. Examples of such objectives include but are not limited to the following (numbers in parentheses refer to the related strategic goal): maintaining a passing health department rating on the pools (1), achieving a county health department restaurant sanitation score of 95 or better (2), having no incidents of resident abuse or neglect (2), meeting employee turnover and satisfaction objectives (3), meeting resident satisfaction objectives (4), answering nursing call bells within 3 minutes 95% of the time (4), striving to respond to all life safety related and high priority work orders in a timely manner (4), complying with nc general statutes pertaining to the level of charity care and community benefit provided by retirement communities to obtain exclusion from property taxation (5), scoring at the median or better on 17 key financial ratios calculated annually on 139 single site nonprofit accredited continuing care retirement communities (6), striving to maintain an 'a-' fitch rating or better (6), operating the facility at an operating margin of 3% to 5% or better (6), maintaining positive cash flow each year as measured by cash used or provided from operations (6), and maintaining 95% occupancy or better in independent living (7). In evaluating the reasonableness and appropriateness of compensation for the president and vice president, the compensation committee considers compensation for similar positions at other nonprofit organizations in the same industry with comparable total revenues. Such information on approximately 50 other nonprofit continuing care retirement communities (mainly in nc) is gathered from form 990 tax returns by an independent compensation consultant who is a cpa. The independent compensation consultant provides his report directly to the compensation committee. The compensation committee also considers a national compensation survey done for leading age (formerly the american association of homes and services for the aging) that provides regional and national compensation data for similar positions at approximately 380 nonprofit continuing care retirement communities. The president and vice president rank below the 75th percentile when their compensation is compared to the compensation survey information referred to above.”

“Form 990 as well as the conflict of interest policy and the corporate bylaws are available on request at the business office of the pines. The audited financial statements are also available on request and a copy is kept in the library of the pines at davidson. The organization files a disclosure statement annually with the north carolina department of insurance and is available on the ncdoi website. Such disclosure statement contains significant information about the status and operations of the pines. Such disclosure statement is also available in the library of the pines and is distributed to all applicants for residence.”

“Change in discount 182,069. Net asset released from restriction for operations -381,206.”

“No change in method since the prior year.”

“The revenue less expenses for the fiscal year 2013 as reported on part i, line 19 of the form 990 reconciles to the organization's audited financial statements in the following manner: total operating revenue and support 17,031,614 total operating expenses 16,411,761 increase in unrestricted net assets 619,853 form 990, part i, line 19 -- revenue less expenses 1,154,299 restricted contributions (173,258) unrestricted contributions (8,151) restricted interest income (311,877) realized gain from sale of investments (41,160) increase in unrestricted net assets per audited financial statements 619,853 the increase in unrestricted net assets of $619,853 for fiscal year 2013 represents 3.6% of total operating revenue of $17,031,614 for such year. This ratio is referred to as the operating margin ratio. An operating ratio of 3.6% means that $3.60 out of every $100 in operating revenues remained after accounting for operating expenses. By way of comparison, the 75th percentile operating ratio for a group of approximately 139 single site accredited continuing care retirement communities was 5.21% for 2013 (source: financial ratios trend analysis of carf-ccac accredited organizations).”