MASTER ANNUAL REPORT

Frenchman’s Creek, Inc. and Subsidiary

Notes to Consolidated Financial Statements ______________________________________________________________________________________________________________

Note 8. Commitments (Continued) On August 15, 2016, the Club entered into a new landscape maintenance contract with a different vendor for a three-year period beginning October 1, 2016 through April 30, 2019 at a cost of $179,167 per month through April 30, 2019. The Association has two renewal options, as more fully described in the documents. The total expense related to this vendor for the years ended April 30, 2018 and 2017, was approximately $2,608,000 and $1,537,000, respectively, of which approximately $2,150,000 and $1,254,000 of expenses related to the contract for 2018 and 2017, respectively. The vendor provided additional services during 2018 and 2017 relat- ed to the aftermath of Hurricane Mathew, Irma and tornado damages. Security contract: On July 1, 2013, the Association entered into a renewable nine-year security contract. The fees for the security contract are based upon the actual hours worked at hourly rates as outlined in the con- tract. For the years ended April 30, 2018 and 2017, the security fee was approximately $1,897,000 and $1,883,000, respectively, of which approximately $1,853,000 and $1,840,000 was directly related to the con- tract with the remaining expense for additional security functions. Cable and home alarm monitoring contract: On March 12, 2010, the Association entered into a ten-year cable contract which will supply internet and cable services to the residents of the Association. The contract began in January 2011 at the rate of $130 monthly, per unit for service and $15 per unit per month for taxes and fees. The fee is adjustable by up to 4% per year commencing January 2013. On April 29, 2015, the agreement was amended to extend the term another five years to 2025. The bulk rate was adjusted to $146.23 plus taxes and fees and guaranteed until January 1, 2017. On every January 1 from 2017 through January 2021, the bulk rate may be adjusted annually by an amount equal to 2.5%. On January 1, 2022 and 2023, the bulk rate may be adjusted up to 2%. In April 2015, the Association entered into a ten-year home alarm monitoring contract which will provide new home alarm equipment and monitoring to all the residents of the Association. Installation of the home alarm equipment took place during the year ended April 30, 2016. Payments under the contract commenced once the installment was completed in March 2016 at the rate of $26.50 monthly, per member. This monthly fee is fixed for the life of the contract. Employee benefit plan: The Association maintains a qualified deferred compensation plan under Section 401(k) of the Internal Revenue Code. Under the plan, eligible employees may elect to defer up to 15% of their salary, subject to Internal Revenue Service (IRS) limits. The plan allows for the Association to make discre- tionary contributions to eligible employees up to a maximum of 4% of their salary, subject to IRS limits. For the years ended April 30, 2018 and 2017, expenses associated with the plan were $292,582 and $262,722, re- spectively. Note 9. Fund Balances Activity The current membership certificate cost is $175,000 with refundable equity of $60,000. During the year ended April 30, 2018, 29 new and upgraded membership certificates were sold for $5,245,000 to new members and $1,728,950 was refunded to departing members. During the year ended April 30, 2017, 18 new membership certificates were sold for $3,265,000 to new members and $1,091,115 was refunded to departing members. The amount of equity that is refunded to departing members is determined by the year and the program that was in place when the Membership Certificate was purchased. For the years ended April 30, 2018 and 2017, the cable, internet and home monitoring service fees were ap- proximately $1,392,000 and $1,360,000, respectively, related to the contract.

2018/2019 Annual Report Page 41