The Havenwood-Heritage Heights Trust Fund HAVENWOOD-HERITAGE HEIGHTS TRUST FUND AUDITED FINANCIAL...

BAKER NEWMAN

NOYES

The Havenwood-Heritage Heights Trust Fund

Audited Financial Statements

Years Ended December 31, 2016 and 2015 With Independent Auditors' Report

Baker Nicp.,01,,, LLc

MAINE I MASSACHUSETTS I NEW HAMPSHIRE

800.244.7444 I www.bnncpa.com

THE HAVENWOOD-HERITAGE HEIGHTS TRUST FUND

AUDITED FINANCIAL STATEMENTS

Years Ended December 31, 2016 and 2015

TABLE OF CONTENTS

Independent Auditors' Report 1

Audited Financial Statements: Statements of Financial Position 2 Statement of Activities — Year Ended December 31, 2016 3 Statement of Activities — Year Ended December 31, 2015 4 Statements of Cash Flows 5 Notes to Financial Statements 6

BAKER NEWMAN

NOYES

Baker Newman 8, Noyes PIC

MAINE I MASSACHUSETTS I NEW HAMPSHIRE

800.244.74441 www.bnncpa.com

INDEPENDENT AUDITORS' REPORT

Board of Trustees The Havenwood-Heritage Heights Trust Fund

We have audited the accompanying financial statements of The Havenwood-Heritage Heights Trust Fund, which comprise the statements of financial position as of December 31, 2016 and 2015, and the related statements of activities and cash flows for the years 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.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' 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 on 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 The Havenwood-Heritage Heights Trust Fund as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

,LL

Manchester, New Hampshire April 10, 2017

1

ASSETS

2016

$ 82,510 66,645

18,800,226 679,793 332,346

2015

$ 131,830 55,819

17,280,187 693,394 333,572

$19,961,520 $18,494,802

2,567,435

4,950,868

10,703,199 361,498

87,946

11,152,643

1,208,178 82,396

1,290,574

17,394,085

$19,961,520

2,715,718

4,518,927

9,575,641 319,478

73,238

9,968,357

1,209,404 82,396

1,291,800

15,779,084

$18,494,802


STATEMENTS OF FINANCIAL POSITION

December 31, 2016 and 2015

Cash and cash equivalents Interest receivable Investments, pooled Investments, charitable gift annuities Beneficial interest in trust

Total assets

LIABILITIES AND NET ASSETS

Line of credit Charitable gift annuities liability Accounts payable Due to affiliate

$ 2,183,078 $ 2,283,078 318,296 373,916

19,728 20,616 46,333 38,108

Total liabilities

Net assets: Unrestricted net assets

Temporarily restricted net assets: Restricted for resident support Restricted for charitable gift annuity program Restricted for specific purposes

Total temporarily restricted net assets

Permanently restricted net assets: Restricted for resident support Restricted for specific purposes

Total permanently restricted net assets

Total net assets

Total liabilities and net assets

See accompanying notes.

2

$ $ 42,617 $ 4,091 $ - $ $ $ 46,708 143,312 351,896 12,834 4,955 512,997 413,812 964,022 36,235 14,294 1,428,363

(1,226) (1,226) 2,687 2,687

4,006 (2,012) (1,994) 101,348 (98,740) (2,608)

662,478 1,257,783 53,853 16,641 (1,226) 1,989,529


STATEMENT OF ACTIVITIES

Year Ended December 31, 2016

Temporarily Restricted Permanently Restricted

Unre-stricted

Restricted for

Resident Support

Restricted for

Charitable Gift

Annuities

Restricted for

Specific Purposes

Restricted for

Resident Support

Restricted for

Specific Purposes Total

Support and revenue: Contributions and bequests Investment income Net realized and unrealized gains on investments Change in value of beneficial interest in trust Change in value of gift annuity agreements Release of net assets:

Satisfaction of annuity restrictions Satisfaction of income restrictions Total support and revenue

Expenses: Contributions to the Community Support of residents and community Distributions to annuitants Administrative support Investment management fees Interest

Total expenses

Excess (deficiency) of support and revenue over expenses

Net assets, beginning of year

Net assets, end of year


6,614 98,740 33,620 27,748 64,634 960 28,142 65,591 11,833 973 35,673

6,614 98,740 33,620 93,342

106,539 35,673

230,537 130,225 11,833 1,933

374,528

431,941 1,127,558 42,020 14,708 (1,226) 1,615,001

4,518,927 9,575,641 319,478 73,238 1,209,404 82,396 15,779,084

$4,950,868 $10,703,199 $361,498 $ 87,946 $1,208,178 $82,396 $17,394,085

3

Unre- stricted

$ 203,371 143,896

(247,479)

24,728 104.458

Restricted for

Resident Support

$ 28,032 353,187

(565,561)

Restricted for

Charitable Gift

Annuities

Restricted for

Specific Purposes

(8,504)

Restricted for

Resident Support

(29,741)

Restricted for

Specific Purposes

$ 7,200

Total

$ 238,603 523,185

(833,481) (29,741) (18,592)

$ - $ - $ 21,149 4,953

(18,592)

119 (24,847) (95,954)

(12,046) (8,395)

228,974

33,232 95,954 34,033 28,718 26,189 30,682

248,808

(280,177) (34,336) (11,946)

67,178 990 61,017 10,500 899

128,195 10,500 1,889

7,200 (120,026)

33,232 95,954 34,033 96,886 98,605 30,682

389,392

(29,741)


STATEMENT OF ACTIVITIES

Year Ended December 31, 2015

Temporarily Restricted Permanently Restricted

Support and revenue: Contributions and bequests Investment income Net realized and unrealized losses on investments Change in value of beneficial interest in trust Change in value of gift annuity agreements Release of net assets:

Satisfaction of annuity restrictions Satisfaction of income restrictions Total support and revenue

Expenses: Contributions to the Community Support of residents and community Distributions to annuitants Administrative support Investment management fees Interest

Total expenses

(Deficiency) excess of support and revenue over expenses

Net assets, beginning of year

Net assets, end of year


(19,834) (408,372) (44,836) (13,835) (29,741) 7,200 (509,418)

4,538,761 9,984,013 364,314 87,073 1,239,145 75,196 16,288,502

$4,518,927 $9,575,641 $319,478 $ 73,238 $1,209,404 $ 82,396 $15,779,084

4

(100,000)

(100,000)

(49,320)

131,830

(100,000)

(100,000)

(134,509)

266,339

$ 82,510 $ 131,830


STATEMENTS OF CASH FLOWS


2016 2015 Cash flows from operating activities:

Excess (deficiency) of support and revenue over expenses Adjustments to reconcile excess (deficiency) of support and revenue

over expenses to net cash provided by operating activities: Net realized and unrealized (gains) losses on investments Change in value of beneficial interest in trust Change in value of charitable gift annuities Changes in operating assets and liabilities:

Increase in interest receivable Increase (decrease) in due to affiliate (Decrease) increase in accounts payable

Net cash provided by operating activities

Cash flows from investing activities: Purchases of investments Proceeds from sale of investments

Net cash used by investing activities

Cash flows from financing activities: Payments on line of credit

Net cash used by financing activities

Decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental disclosures of cash flow information: Interest paid

$ 1,615,001 $ (509,418)

(1,428,363) 1,226

(55,620)

(10,826) 8,225 (888)

128,755

833,481 29,741

(43,139)

(8,311) (27,442)

2,851

277,763

(2,197,471) (4,364,507) 2,119,396 4,052,235

(78,075) (312,272)

$ 35,673 $ 30,682


5


NOTES TO FINANCIAL STATEMENTS


I. Description of Organization and Summary of Accounting Policies

Organization

The Havenwood-Heritage Heights Trust Fund (the Trust Fund) was established on August 16, 1982 for the purpose of meeting the minimum needs of residents of the United Church of Christ Retirement Community, Inc. (the Community) and for general support of the Community. Requests for funds from the Trust Fund are made by the Board of Trustees of the Community (the Community Board) and payment is made at the discretion of the Trustees of the Trust Fund.

The Trustees of the Trust Fund elect their own members and may include members of the Community Board or others designated by the Community. A majority of the Board must be independent of the Community.

Community Interest in Fund Net Assets

The Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 958 requires that a specified beneficiary recognize its rights to assets held by a recipient organization as an asset unless the donor has explicitly granted the recipient organization variance power. Management of the Community and the Trust Fund has determined that the Trust Fund has not been granted such variance power. Therefore, the Community's interest in the net assets of the Trust Fund has been recognized in the Community's financial statements.

Basis of Accounting and Presentation

The accompanying financial statements have been prepared on the accrual basis of accounting.

Cash and Cash Equivalents

The Trust Fund considers all highly liquid, short-term investments with an original maturity of three months or less to be cash equivalents. The Trust Fund maintains its cash in a bank deposit account which, at times, may exceed federal depository insurance limits. The Trust Fund has not experienced any losses in such account and believes it is not exposed to any significant risk on this account.

Use of Estimates

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 the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates, by their nature, are based on judgment and available information. The most significant area which is affected by the use of estimates includes the charitable gift annuity liability. Actual results could differ from these estimates.

6




1. Description of Organization and Summary of Accounting Policies (Continued)

Concentration of Credit Risk

Financial instruments which subject the Trust Fund to credit risk consist of cash and cash equivalents and investments. The risk with respect to cash equivalents is minimized by the Trust Fund's policy of investing in financial instruments with short-term maturities issued by highly rated financial institutions. The Trust Fund's investment portfolio consists of diversified investment funds, which are subject to market, interest rate, and credit risks, among others. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in value will occur in the short-term and that such changes could be material. See Notes 3, 4 and 8 for additional information related to investments.

Investments

Investments are stated at fair value in the statements of financial position. See Note 8 for further discussion regarding fair value.

Gains and losses on securities are determined on a specific identification method. Investment income or loss (including realized and unrealized gains and losses on investments and interest and dividends) is allocated to the related net asset classifications within the unrestricted and temporarily restricted net asset classes.

With the exception of investments for its charitable gift annuity program, the Trust Fund utilizes a pooled investment fund basis for managing its investments.

Donor-Restricted Gifts

Unconditional promises to give cash and other assets are reported at fair value at the date the promise is received. The gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Donor-restricted contributions whose restrictions are met within the same year as received are reported as unrestricted contributions in the statement of activities.

Income Taxes

The Internal Revenue Service determined that the Trust Fund is a publicly-supported charity under Internal Revenue Code Section 501(c)(3) and, therefore, not subject to federal income taxes or federal excise taxes imposed upon private foundations.

Tax-exempt organizations could be required to record an obligation for income taxes as the result of a tax position they have historically taken on various tax exposure items including unrelated business income or tax status. In accordance with accounting principles generally accepted in the United States of America, assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions are judged to not meet the "more-likely-than-not" threshold, based upon the technical merits of the position. Estimated interest and penalties, if applicable, related to uncertain tax positions are included as a component of income tax expense.

7




1. Description of Organization and Summary of Accounting Policies (Continued)

Management has evaluated the Trust Fund's tax positions taken on its filed tax returns and concluded that the Trust Fund has maintained its tax-exempt status, does not have any significant unrelated business income and has taken no uncertain tax positions that require adjustment to the financial statements.

New Accounting Pronouncements

In August 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-14, Presentation of Financial Statements for Not-for-Profit Entities (Topic 958) (ASU 2016-14). Under ASU 2016-14, the existing three-category classification of net assets (i.e., unrestricted, temporarily restricted and permanently restricted) will be replaced with a simplified model that combines temporarily restricted and permanently restricted into a single category called "net assets with donor restrictions". ASU 2016-14 also enhances certain disclosures regarding board designations, donor restrictions and qualitative information regarding management of liquid resources. In addition to reporting expenses by functional classification, ASU 2016-14 will require that the financial statements provide information about expenses by their nature, along with enhanced disclosures about the methods used to allocate costs among program and support functions. ASU 2016-14 is effective for the Trust Fund's fiscal year ending December 31, 2018, with early adoption permitted. The Trust Fund is currently evaluating the impact of the pending adoption of ASU 2016-14 on its financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) (ASU 2016-18), which provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. ASU 2016-18 will be effective for the Trust Fund beginning on January 1, 2018, and early adoption is permitted. ASU 2016-18 must be applied using a retrospective transition method. The Trust Fund is currently evaluating the impact of the adoption of this guidance on its financial statements.

Subsequent Events

Events occurring after the statement of financial position date are evaluated by management to determine whether such events should be recognized or disclosed in the financial statements. Management has evaluated subsequent events through April 10, 2017 which is the date the financial statements were available to be issued.

2. Classification of Net Assets

In accordance with the Uniform Prudent Management of Institutional Funds Act (UPMIFA), net assets are classified and reported based on the existence or absence of donor-imposed restrictions. Contributions are reported as permanently restricted or temporarily restricted depending upon specific language in the gift instrument. In accordance with UPMIFA, the Trust Fund considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

1. The duration and preservation of the fund 2. The purpose of the Trust Fund and the donor-restricted endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and the appreciation of investments 6. Other resources of the Trust Fund 7. The investment policies of the Trust Fund

8




2. Classification of Net Assets (Continued)

The following provides a description of the net asset classifications represented in the Trust Fund's assets:

• Unrestricted net assets includes amounts appropriated for expenditure from temporarily restricted net assets as well as all other funds not classified as endowment because there are no donor-imposed restrictions in the gift instrument. Income derived from unrestricted assets is classified as unrestricted.

• Temporarily restricted net assets includes the portion of donor-restricted endowment funds that are deemed to be restricted over the donor-specified period of the endowment by explicit donor stipulation. In addition, investment returns from permanently and temporarily restricted net assets are classified as temporarily restricted until appropriated for expenditure. Once appropriated, temporarily restricted assets are released to unrestricted assets. Such transfers are reported in the statement of activities as "release of net assets due to satisfaction of restrictions".

• Permanently restricted net assets includes the portion of donor-restricted endowment funds that are deemed to be petnianently restricted by explicit donor stipulation. The amount classified as permanently restricted includes the original fair value of the initial gift and any subsequent gifts. Investment returns from the investment of these assets are classified as temporarily restricted.

Investment and Spending Policies

The Trust Fund has adopted an investment policy that will allow for the annual withdrawal of income as needed for resident and community support and still increase the purchasing power of the Trust Fund prior to additions and without undue risk. The long-term objective of this policy is to generate a total return net of fees which is at least 5% in excess of inflation rate, as measured by the Consumer Price Index, over rolling ten-year periods. Total return is defined as dividend or interest income, plus realized and unrealized capital appreciation or depreciation at fair market value. The trustee approved annual spending rate should not exceed 5.5% of the three-year moving market value average. The approved spending rate for 2016 and 2015 was 5%. In 2016 and 2015, it was determined that the full rate of 5% for which the Trust was authorized to spend was not needed and the actual spending rate was approximately 1.0%.

In recognition of the prudence required of fiduciaries, reasonable diversification is sought where possible. Asset allocation parameters have been developed based on investment objectives, liquidity needs, and time horizon for intended use.

9





Endowment Net Asset Composition by Type of Fund

The major categories of endowment funds at December 31 are as follows:

Temporarily Permanently Unrestricted Restricted Restricted Total

2016 Resident support Charitable gift annuity program Other

Total endowment net assets

2015 Resident support Charitable gift annuity program Other

$10,703,199 361,498

87,946

$11,152,643

$ 9,575,641 319,478

73,238

$1,208,178

82,396

$1,290,574

$1,209,404

82,396

$11,911,377 361,498 170,342

$12,443,217

$10,785,045 319,478 155,634

Total endowment net assets $ — $ 9,968,357 $1,291,800 $11,260,157

Changes in Endowment Net Assets

The Trust Fund had the following endowment-related activities during the years ended December 31:


2016 Net endowment assets,

December 31, 2015

Investment return: Investment income Net depreciation (realized

and unrealized) Investment fees

Total net investment return

Change in value of gift annuity agreements

Contributions Appropriated for expenditure

Net endowment assets, December 31, 2016

$ 9,968,357

369,685

1,014,551 (78,397)

1,305,839

2,687 46,708

(170,948)

$1,291,800 $11,260,157

(1,226)

(1,226)

1,013,325 (78,397)

1,304,613

2,687 46,708

(170,948)

369,685

$ — $11,152,643 $1,290,574 $12,443,217

10






2015 Net endowment assets,

December 31, 2014

Investment return: Investment income Net depreciation (realized

and unrealized) Investment fees

Total net investment return

Change in value of gift annuity agreements

Contributions Appropriated for expenditure

Net endowment assets, December 31, 2015

Funds With Deficiencies

$10,435,400 $1,314,341 $11,749,741

379,289 379,289

(586,002) (29,741) (615,743) (72,416) (72,416)

(279,129) (29,741) (308,870)

(18,592) (18,592) 28,032 7,200 35,232

(197,354) (197,354)

$ 9,968,357 $1,291,800 $11,260,157

From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor requires the Trust Fund to retain as a fund of permanent duration. Deficiencies of this nature are reported in unrestricted net assets. There was no deficiency between the fair value of the investments of the endowment fund at December 31, 2016 and 2015 and the level required by the donor stipulation.

3. Pooled Investments

Pooled investments consist of the following at December 31:

2016 2015 Fair Fair

Cost Value Cost Value Cash equivalents and

certificates of deposit Common equity securities Fixed income mutual funds International equity mutual funds Corporate bonds Municipal bonds

$ 381,589 7,084,545

434,825 1,130,549 4,893,581

603,190

$ 382,141 11,338,605

427,305 918,831

5,113,146 620,198

$ 818,807 6,891,623

452,717 1,117,615 4,211,792

404,036

$ 817,697 10,327,827

439,473 867,384

4,412,814 414,992

$14,528,279 $18,800,226 $13,896,590 $17,280,187

11




3. Pooled Investments (Continued)

The schedule of corporate and municipal bond maturities at face value is as follows at December 31, 2016:

Less than 1 year 1 to 5 years 5 to 10 years 10 to 15 years Over 15 years

$ 1,050,000 1,450,000 2,200,000

300,000 500,000

$5,500,000

Total investment income, realized gains and losses, and net unrealized appreciation (depreciation) for pooled investments reported within the statements of activities for the years ended December 31 are summarized as follows:

2016 2015 Unrestricted:

Investment income Net realized and unrealized gains (losses) on investments

Total unrestricted net investment income (loss)

Restricted: Investment income Net realized and unrealized gains (losses) on investments

Total restricted net investment income (loss)

Total net investment income (loss)

$ 143,312 $ 143,896 413,812 (247,479)

557,124 (103,583)

356,851 358,140 978,316 (573,956)

1,335,167 (215,816)

$ 1,892,291 $ (319,399)

4. Split Interest Agreements

The Community established a charitable gift annuity program in 1987 whereby donors may transfer assets to the Trust Fund in exchange for the right to receive an annuity during the donors' lifetime and/or the lifetime of a specified beneficiary. These split interest agreements with donors consist primarily of charitable gift annuities and irrevocable charitable remainder trusts for which the Trust Fund serves as trustee. Assets are invested and payments are made to donors and/or other beneficiaries in accordance with the respective agreements.

12




4. Split Interest Agreements (Continued)

When a donor contributes assets for a split interest agreement, the difference between the amount contributed and the present value of future annuity payments is recognized as temporarily restricted income at the date of the agreement. The present value is recognized as a liability for future annuity payments. The present value is determined using published life expectancy tables and the applicable federal rate published monthly in Internal Revenue Service Rulings.

The annuity liability is revalued annually based upon the recalculated present value that uses the current age of the annuitants to determine current life expectancies and the original discount rate for each annuity contract. Distributions paid and income earned on annuity investments are recorded as changes in the liability and increases or decreases in the temporarily restricted net asset class in the statement of activities. The annuity liability was $318,296 and $373,916 at December 31, 2016 and 2015, respectively. Distributions paid on the split interest agreements totaled $55,843 and $61,731 for the years ended December 31, 2016 and 2015, respectively.

Upon the death of the annuitant, the funds are transferred to the pooled investments of the Trust Fund and/or directly to the Community under the restrictions specified by the donor.

Investments for the charitable gift annuity program consist of the following at December 31:

2016 2015 Fair Fair

Cost Value Cost Value

Cash and cash equivalents Fixed income mutual funds International equity mutual funds Domestic equity mutual funds

$ 16,171 $ 16,171 $ 22,890 $ 22,890 124,598 123,404 106,769 104,432 64,623 62,597 66,974 66,116

385,334 477,621 427,652 499,956

$590,726 $679,793 $624,285 $693,394

Total investment income, realized gains and losses, and net unrealized appreciation (depreciation) for charitable gift annuity program investments reported within the statements of activities for the years ended December 31 are summarized as follows:

2016 2015

Investment income $ 12,834 $ 21,149 Net realized and unrealized gains (losses) on investments 36,235 (12,046)

Net investment income $ 49,069 $ 9,103

13




5. Beneficial Interest in Trust

The Trust Fund is an irrevocable beneficiary of a charitable remainder trust held by a bank as trustee. These resources are neither in the possession of, nor under the control of the Trust Fund. The terms of the trust provide for income of the trust to be distributed to the current beneficiary and upon termination of the trust, the principal is to be distributed to the Trust Fund. At December 31, 2016 and 2015, the Trust Fund has recorded its beneficial interest in trust of $332,346 and $333,572, respectively.

6. Line of Credit

The Trust Fund has entered into a demand line of credit with a financial institution of up to $4,500,000. At December 31, 2016 and 2015, $2,183,078 and $2,283,078, respectively, was outstanding under this agreement. These funds were for the purpose of supporting the construction to expand housing units by the Community. Advances under the line are based upon a formula based upon certain percentages of specified investment balances. Borrowings under the line of credit bear interest equal to the one month LIBOR rate plus 1.0% (1.75% at December 31, 2016), and are collateralized by the Trust Fund's unrestricted investments. The line of credit is subject to renewal on June 30 of each year.

The loan agreement places certain restrictions on the Trust related to incurring additional indebtedness, making certain loans or advances, selling or disposing of assets, and mergers, consolidations or acquisitions, among other restrictions.

7. Related-Party Transactions

The Trust Fund has no employees. It reimburses the Community for financial, administrative and fund development services. The amounts paid to the Community for these services were $75,000 in 2016 and 2015.

At December 31, 2016 and 2015, the Trust Fund owed the Community $46,333 and $38,108, respectively, for resident support related matters.

8. Fair Value Measurements

Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of nonperformance risk including the Trust Fund's own credit risk.

14




8. Fair Value Measurements (Continued)

The fair value hierarchy for valuation inputs prioritizes the inputs into three levels based on the extent to which input used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

• Level 1 — inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

• Level 2 — inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 — inputs are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

For the fiscal years ended December 31, 2016 and 2015, the application of valuation techniques applied to similar assets has been consistent. The following describes the valuation methodologies used to measure different financial assets at fair value:

Investments

The fair value of investments in cash equivalents, equity securities and mutual funds are based upon quoted prices in active markets for identical assets and are reflected as Level 1.

The fair value of investments in corporate and municipal bonds and certificates of deposit are based upon quoted prices in not active markets for identical and similar instruments and are reflected as Level 2.

The valuation of beneficial interest in trust is based on information from the trustee which is based on the fair market value of the underlying assets, which are investments with quoted prices in active markets or inactive markets for identical or similar investments.

15





Assets Measured at Fair Value on a Recurring Basis

The following table presents the Trust Fund's assets measured at fair value on a recurring basis at December 31:

Level 1 Level 2 Level 3 Total 2016 Cash equivalents and

certificates of deposit $ 97,760 $ 300,552 $ - $ 398,312 Common equity securities:

Consumer nondurables 1,426,449 - - 1,426,449 Consumer services 853,631 - - 853,631 Business products and services 2,034,048 - - 2,034,048 Capital goods 1,272,918 - - 1,272,918 Industrial/electronics 1,145,407 - - 1,145,407 Energy 856,370 - - 856,370 Basic industries 334,656 - - 334,656 Transportation 179,424 - 179,424 Financial 1,330,441 - - 1,330,441 Utilities 185,920 - - 185,920 International 954,212 - - 954,212 Other assets 765,129 - - 765,129

Fixed income mutual funds 550,709 - - 550,709 International equity mutual funds 981,428 - - 981,428 Domestic equity mutual funds:

Mid cap 67,757 - - 67,757 Large cap 23,459 - - 23,459 Blend 386,405 - - 386,405

Corporate bonds - 5,113,146 - 5,113,146 Municipal bonds - 620,198 - 620,198 Beneficial interest in trust - 332,346 - 332,346

$13,446,123 $6,366,242 $ - $19,812,365

Assets detailed above include: Investments, pooled $18,800,226 Investments, charitable gift annuities 679,793 Beneficial interest in trust 332,346

$19,812,365

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Level 1 Level 2 Level 3 Total 2015 Cash equivalents and

certificates of deposit $ 641,697 $ 198,890 $ - $ 840,587 Common equity securities:

Consumer nondurables 1,491 284 - - 1,491,284 Consumer services 752,375 - - 752,375 Business products and services 1,872 440 - - 1,872,440 Capital goods 1,476 166 - - 1,476,166 Industrial/electronics 790,712 - - 790,712 Energy 622,445 - - 622,445 Basic industries 478,822 - - 478,822 Transportation 215,300 - - 215,300 Financial 1,287 810 - - 1,287,810 Utilities 140,679 - - 140,679 International 738,727 - - 738,727 Other assets 461,067 - - 461,067

Fixed income mutual funds 543,905 - - 543,905 International equity mutual funds 933,500 - - 933,500 Domestic equity mutual funds:

Mid cap 55,496 - - 55,496 Large cap 51,458 - 51,458 Blend 393,002 - 393,002

Corporate bonds - 4,412,814 - 4,412,814 Municipal bonds - 414,992 - 414,992 Beneficial interest in trust - 333,572 - 333,572

$12,946,885 $5,360,268 $ - $18,307,153

Assets detailed above include: Investments, pooled $17,280,187 Investments, charitable gift annuities 693,394 Beneficial interest in trust 333,572

$18,307,153

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The Havenwood-Heritage Heights Trust Fund HAVENWOOD-HERITAGE HEIGHTS TRUST FUND AUDITED FINANCIAL...

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