MASTER ANNUAL REPORT

Frenchman’s Creek, Inc. and Subsidiary

Notes to Consolidated Financial Statements ______________________________________________________________________________________________________________

Note 7. Long-Term Debt and Lines of Credit (Continued) In conjunction with the renovations of the back of the house and the fitness center, the Association entered into a non-revolving line of credit with the total borrowings not to exceed $3,300,000 at an interest rate based on the one-month LIBOR rate plus 2.0% (3.90% as of April 30, 2018). The Association is required to make monthly principal and interest payments through the maturity date of May 1, 2024. The line of credit is secured by the Associations’ personal property and its right to assess the members as described in the se- curity agreements. On June 30, 2016, the Association modified the $3,300,000 line of credit to a term loan in the amount of $1,924,602, the balance as of the modification date. All other terms of the loan remain con- sistent with the original agreement. The outstanding balance on the term loan as of April 30, 2018 and 2017, was $1,538,928 and $1,745,817, respectively.

Estimated minimum principal payments required on this term loan as of April 30, 2018, are as follows:

Amount

Years ending April 30: 2019

$

200,548 231,944 246,277 262,171 278,425

2020 2021 2022 2023

Thereafter

319,563 1,538,928

$

On May 26, 2010, the Association entered into, in conjunction with the new aforementioned non-revolving credit agreement, an interest rate swap agreement with the bank to limit the impact of changes in interest rates on the $3,300,000 line of credit. Under this agreement on January 1, 2011, the original notional princi- pal amount of debt was $2,800,000, which reduces as debt principal payments are made, with a maturity of May 1, 2024. Under the agreement, the fixed interest rate on those borrowings is 4.00% and the floating rate on the borrowings is equal to the one-month LIBOR plus 2.0% (3.90% as of April 30, 2018). However, the interest rate to the Association under both the swap and the non-revolving credit agreement is fixed at 6% unless the Association elects to terminate the agreements before maturity. As of April 30, 2018 and 2017, the fair value of the interest rate swap agreement was a liability of $66,205 and $146,501, respectively, as estimated by the financial institution using a proprietary model, and is included on the consolidated balance sheets. The Association has recognized financing income of $80,296 and $96,652 for the years ended April 30, 2018 and 2017. Note 8. Commitments Maintenance contract: On May 2, 2014, the Association renewed the landscape maintenance contract for a three-year period through April 30, 2017 at a cost of $184,541 per month through April 30, 2017. The total expense related to this vendor for the year ended April 30, 2017, was approximately $926,000, of which ap- proximately $923,000 of expenses related to the contract. This contract was terminated effective September 30, 2016.

2018/2019 Annual Report Page 40