Meeting Agenda

• Introduction 6:35pm• Establish a quorum (25%) 6:45pm• Approve 2017 Annual Minutes 6:50pm• Opening Statements (Communication / ARB) 6:55pm• Financial Review 7:10pm• Board Election 8:00pm

• Adjournment 8:15pm

1

Opening Statements

2

2017

3

Funds were spent in the following manner…

-($684M) / 70% on repairs and maintenance. Items that, in many cases were long overdue.

-($287M) / 30% spent on improvements to the community.

Deferred Repair & Maintenance

70%$684

Community Enhancements

30%$287

RESERVE EXPENDITURES

• Deferred Maintenance projects on Club House, Fitness Center (termite damage), swimming pool and pool house, and Mansion (various small repairs) took priority as well as recovering from the tornado damages we encountered.

• Accomplished improvements at the Club House, new/replaced fencing and painting, added fountains to all our lakes, and lit up the entrance way on Governors Way. As well as resurfacing our tennis courts and adding new screens and a backboard.

Communication Update2017-2018

-Weekly e-blast-Monthly updates in Magazine-Update communication board at the Concord exit-Emergency e-blasts-Focus group meetings

2019-Develop alternative communication tools (text program, etc.)-Update owner emails for the e-blast system.-Review website deficiencies 4

ARB Improvements

5

6

Financial Review

7

Dave Lindsay• 30 years with CLARCOR Inc., a $1.5B manufacturer of filters and filtration systems. Publicly owned

company traded on the NYSE.

• Chief Administration Officer…Responsible for human resources, risk management, property & casualty insurance, compensation & benefit programs, management development program and a variety of other administrative functions. Retired March 2017.

• Director of Wahl Clipper Corporation, a manufacturer of clippers and shear, from 1999 to present; Chairman of the Compensation Committee.

• Professional certifications – CPA (Certified Public Accountant) and CFP (Certified Financial Planner).

• B.S. in Accounting from the University of Illinois.

• Variety of community experiences…Police & Fire Commissioner, Chair of Health Care Coalition, Numerous non-profit boards.

• Originally from Rockford, IL. Moved to Brentwood, TN in June 2004 with relocation of corporate headquarters.

8

Treasurer Since November 2017…Initial Actions

• Assure that appropriate controls in place…segregation of accounts…signing authority.

• Review process flows…data entry / invoices / dues.

• Monthly financial statement process…Kemper corporate review and sign off…Board Review.

9

Treasurer since November 2017…Financial Objectives

• Practice financial conservatism

• Prepare and implement an annual budget that recognizes both short and long term needs of the community

• Adhere to accepted business / financial practices

…tight expense control

…cash flow policy / discipline

…multiple quotes for vendor services

…negotiate, negotiate, negotiate

• Continuous improvement / improve service and reduce costs

• Prepare for long term plan that utilizes 2017 engineering study as the basis

• Transparency and meet with anyone who has questions / concerns and provide whatever documents requested. 10

Overview

• Financial operations are running smoothly

• Cash position is strong

• On-site accounting function (KemperSports) is far more efficient than previous arrangement

• Dedicated efforts of Jodie Anderson (Controller), Matt Reilly (Regional Controller in Chicago), Shawn Richter (Director of Accounting in Chicago) and Jim Fitzsimmons (GM) provide better control, better analysis, and more timely reporting.

11

12

2018

Forecast

REVENUES

Association Fees 1377

Golf Club Shared Expenses Income 78

Easement Revenue 54

Insurance Clain Funds 0

Other 48

TOTAL REVENUES 1,557

OPERATING EXPENSES

GENERAL OPERATIONS/COMMON AREAS

Landscape Expense 413

Repair & Maintenance 61

Snow Removal 27

Other 78

TOTAL GENERAL OPERATIONS/COMMON AREAS 579

Y/E 2018 Income Statement Forecast2018

Forecast

SECURITY OPERATIONS

Security 419

Repair & Maintenance 43

Utilities 11

Other 3

TOTAL SECURITY OPERATIONS 476

MANSION / FITNESS / POOL OPERATIONS

Repair & Maintenance 17

Utilities 33

Other 31

TOTAL MANSION / FITNESS / POOL OPERATIONS 81

ADMINISTRATIVE EXPENSES

Management Fee & Payroll 165

Taxes & Insurance 42

Homeowner Relations 29

Other 38

TOTAL ADMINSTRATIVE EXPENSES 274

TOTAL EXPENSES 1,410

NET OPERATING INCOME 147

13

GOVERNORS CLUB - POA

RESERVE ACCOUNT

2018 Forecast

2018 Forecast

End of Year Reserve Balance 561,724

Reserve Expenses Incurred in 2017 and Paid in 2018 -262,000

2018 Additions to Reserve 149,491

2018 Transfers from Reserve 0

2018 FORECAST RESERVE YEAR END TOTAL $449,215

14

2018 Major Unexpected Expenses

Expense AnalysisItem Budget Actual Variance

Gate Repairs $8 $46 $38

Tree Removal $0 $16 $16

Snow Removal $18 $28 $10

R&M Roads $12 $20 $8

Insurance / Deductibles $19 $44 $25

Legal $2 $9 $7

Total $59 $163 $104

15

16

Y/E 2018 Balance Sheet Forecast

Shift to 2019

17

DuesThere are divergent opinions on dues

…The members of the ad hoc Finance Committee strongly believe dues should move to $350 / monthly

…The residents who attached the November Focus Group Meeting generally agreed that $350 / monthly was appropriate.

…In the last two weeks I’ve met with several residents who range from “concerned” to “upset” that the Board is proposing an increase to $330 / month.

18

19

GAP – Dues & CostsR

epai

r &

Rep

lace

men

t C

ost

20

Reserve StudyRecommended every 3-5 years

POA authorized in 2009, 2014 and 2017

Cost of 2017 study….. $12,000

Evaluates assets and estimates future costs to repair and / or replace assets

Does not include the cost of new assets

The basis for determining annual funding rate21

22

FINANCIAL PROJECTION

Totals for 2019 -2027

(000's) $330

Dues

TOTAL REVENUE $16,497

OPERATING EXPENSES -$14,583

NET OPERATING INCOME $1,914

2017 Reserve Study Expenditures -$3,726

Est. Reserve Balance 12/31/18 $450

A/R Country Club due 1/15/19 $100

GAP -$1,262

Annual Reserve Funding to Eliminate GAP $140($1,262 / 9)

THIS ANALYSIS ONLY INCLUDES REPAIRS AND REPLACEMENT

OF EXISTING ASSETS…NO NEW OR ADDITIONAL ASSETS

ARE INCLUDED

Revenue includes $150K/year Misc. Income

Operating Expenses are increased 2% per year

2019 Reserve expenditures are increased $111K

(Board's proposal to include minor road repairs, mansion

repairs and completion of Gov Way lighting project).

23

$330/Dues Per Month

Budget Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast

2019 2020 2021 2022 2023 2024 2025 2026 2027

TOTAL REVENUE $1,833 $1,833 $1,833 $1,833 $1,833 $1,833 $1,833 $1,833 $1,833

OPERATING EXPENSES -$1,495 -$1,525 -$1,555 -$1,587 -$1,618 -$1,651 -$1,684 -$1,717 -$1,752

NET OPERATING INCOME $338 $308 $278 $246 $215 $182 $149 $116 $81

2017 Reserve Study Expenditures -$211 -$367 -$205 -$566 -$380 -$282 -$683 -$720 -$312

NET INCOME AFTER RESERVE EXP. $127 -$59 $73 -$320 -$165 -$100 -$534 -$604 -$231

Est. Reserve Balance 12/31/18 $450

A/R Country Club due 1/15/19 $100

Yearend Reserve Balance $677 $618 $691 $371 $206 $106 -$427 -$1,032 -$1,262

24

2019 BudgetIncome Statement 2018 2019 Percentage

Forecast Budget Variance

REVENUES

Association Fees ('19 Budget $330) 1377 1,683 22%

Golf Club Shared Expenses Income 78 96 23%

Easement Revenue 54 0 -100%

Insurance Claim Funds 0 0

Other 48 51 6%TOTAL REVENUES 1,557 1,830 18%

OPERATING EXPENSES

TOTAL GENERAL OPERATIONS/COMMON AREAS 579 608 5%

TOTAL SECURITY OPERATIONS 476 497 4%

TOTAL MANSION / FITNESS / POOL OPERATIONS 81 103 27%

TOTAL ADMINSTRATIVE EXPENSES 274 286 4%

TOTAL EXPENSES 1,410 1,494 6%

NET OPERATING INCOME 147 336 129%

* Accrual Accounting

25

GOVERNORS CLUB - POA

RESERVE ACCOUNT2019 Budget

Golf Club Loan Payment January 2019 100,000

2019 Additions to Reserve 336,000

2019 Transfers from Reserve -211,000

2019 FORECAST RESERVE YEAR END TOTAL $674,215

26

Operating Expense Analysis (000's)

Forecast Budget % Change

Department 2018 2019 2019

Security $476 $498 4.62%

Landscaping $413 $426 3.15%

Administrative $294 $287 -2.38%

General Operations / Common Area $166 $181 9.04%

Mansion/Fitness/Pool/Tennis $81 $102 25.93%

Total $1,430 $1,494 4.48%

27

Security 28%

Landscape30%

Repairs & Maitenance16%

Admenistration16%

Mansion, Fitness, Pool10%

OPERATING EXPENSES

Observation• We have “Reserve Funds”, not “Restricted Funds”…

By-Laws are clear on this issue. Provides great flexibility to Board(s).

• Institutions evolve over time…to remain “healthy” they need to periodically review their governing documents.

• Balance between Board flexibility and resident certainty regarding ability to meet future community obligations is critical.

• 2019 Board should make this the #1 priority and bring a recommendation to residents no later than the 1st quarter community update meeting (March 2019).

28

2018 Annual Meeting Minutes

29

2018 Annual Homeowners Meeting MinutesMonday, December 17, 2018

The Governors Club held its Annual Homeowners Meeting was scheduled to begin at 6:30 PM on Monday, December 17, 2018 at the Governors Club Palmer Room, 19 Governors Way, Brentwood, TN 37027. The meeting was called to order at 6:33 PM by President, Tim Stinson.

Board members in attendance were the following: Tim Stinson-President, Greg Cantrell-Vice President, Bill Freels-Secretary, Dave Lindsay-Treasurer and Mel Moore-Member at Large. Representing KemperSports were Mark Freemont-Vice President of Operations and Jim Fitzsimmons-General Manager of the Governors Club. Also, present were Kristan Ward-Community Manager and Lindsey Farmer-Community Assistant.

As defined by the By-Laws, it was determined a quorum was present.

MINUTES: The 2017 Annual Homeowners Meeting Minutes were reviewed. A motion and second was accepted from the floor. The minutes were approved.

PRESIDENT’S REPORT: Tim Stinson provided an overview of several of the Association’s deferred maintenance projects completed in 2017. He also reviewed and clarified the importance of the improvements made in 2017. Tim stressed the importance that the condition of the club and golf course have on property values. He reviewed the KemperSports agreement and the associated contributions required by the agreement. He also pointed out that KemperSports had contributed $540,627 more than their contract requires. This covers the period of years 2013-2018.

COMMUNICATION REPORT: Mel Moore provided an overview of the 2017-2018 communication improvements and 2019 communication goals.

• Goal 1 - Develop alternative communication tools (text program, etc.) • Goal 2 - Update owner email addresses in the system. • Goal 3 - Review website deficiencies

ARB CHAIRMAN’S REPORT: Greg Cantrell provided an overview of the 2018 architectural improvements completed by the homeowners. Greg noted since the ARB reduced the application fees that homeowners have invested an estimated $4m plus into their homes. Only two out of all requests in 2018 were denied.

TREASURER’S REPORT: Dave Lindsay provided an overview of, 1.) Projected 2018 results, 2.) The 2018 Year End Reserve Balance and 3.) 2019 Budget. He also reviewed the dues history, 2017 Engineering Study and Reserve / Restricted fund differences.

2019 BUDGET: The Board and Homeowners discussed the 2019 budget which included a monthly dues increase to $330. Jay Steinberg, representing the ad hoc finance committee, made a short presentation advocating a dues increase to $350 per month. A motion and second was accepted from the floor to reject the 2019 budget.

Ballots were distributed to residents to vote with, or against, the motion to reject the 2019 proposed budget. The motion did not carry by the required margins. Thus, the 2019 budget as recommended by the Board became effective.

2019 BOARD OF DIRECTORS RESULTS: Tim Stinson announced the results of the 2019 Board of Directors election. The new members elected to two year terms were Michael Music, Rick Carter and Rick Lundgren.

ADJOURNMENT: There being no further business a motion and second were made to adjourn the meeting. The meeting was adjourned at 9:42pm.

30