Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
04-26-12 (2)
1505610140 REV-1500 EX (01-10) PA Department of Revenue OFFICIAL USE ONLY Bureau of Individual Taxes Coun Code Year ~ File Number Po Box 28oso1 INHERITANCE TAX RETURN Harrisburg, PA 17128-0601 RESIDENT DECEDENT 2 1 1 1 0 7 3 0 ENTER DECEDENT INFORMATION BELOW Social Security Number Date of Death MMDDYYYY Date of Birth MMDDYYYY 4 2 0 1 1 0 7 1 8 1 9 2 6 Decedent's Last Name Suffix Decedent's Firs t Name MI W A T T S G L A D Y S M (If Applicable) Enter Surviving Spouse's Information Below Spouse's Last Name Suffix Spouse's First Name MI Spouse's Social Security Number THIS RETURN MUST BE FILED IN DUPLICATE WITH THE REGISTER OF WILLS FILL IN APPROPRIATE OVALS BELOW Q 1. Original Return ^ 2. Supplemental Return ^ 3. Remainder Return (date of death prior to 12-13-82) ^ 4. Limited Estate ^ 4a. Future Interest Compromise (date of ^ 5. Federal Estate Tax Return Required death after 12-12-82) ^ 6. Decedent Died Testate ^ 7. Decedent Maintained a Living Trust ~ 8. Total Number of Safe Deposit Boxes (Attach Copy of Will) (Attach Copy of Trust) ^ 9. Litigation Proceeds Received ^ 10. Spousal Poverty Credit (date of death ^ 11. Election to tax under Sec. 9113(A) between 12-31-91 and 1-1-95) (Attach Sch. O) CORRESPONDENT -THIS SECTION MUST BE COMPLETED. ALL CORRESPONDENCE AND CONFIDENTIAL TAX INFORMATION SHOULD BE DIRECTED TO: Name Daytime Telephone Number S T A N L E Y J A L A S K O W S K I 7 1 7 2 3 2 7 6 6 1 r-a First line of address C A L D W E L L & Second line of address 3 6 3 1 N O R T H City or Post Office H A R R I S B U R G REGISTER `~ WILLS USE (~MtY ~ Y~_ :.~ ~.- - ,, ,-~ ,~4 c -- ', F R O N T S T R E E T ~ -~ r=='' = State ZIP Code D7~'fE FILED , 'O r _-. c , P A 1 7 1 1 0 Correspondent's a-mail address: SIaSkOWSkICcDCklegal.llet Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct and complete. Declaration of preparer other than the personal representative is based on all information of which preparer has anv knowledge. ADDRESS , j~ - ~~a~s! ~ ~CC~u~ ; ~ e • ~G3/ ,~: ~ito~, i. 5i bG>~~vLi,S 624 ~.~¢ /7/~v PLEASE USE ORIGINAL FORM ONLY '.~,,7 ..... ,-~ ;~ +- ' , -:, -__~ ?TY c~ --ri Side 1 L 1505610140 1505610140 J SIGN ~R ER OT E THA R RE ENT IVE ~~ N~~' ~ DATE u,..~G y. G~ ~_~"- col / 7 . 1505610240 REV-1500 EX Decedent's Social Security Number Decedent's Name: G L A D Y S M• WATTS RECAPITULATION 1. Real Estate (Schedule A) ......................................... .. 1 2 8 5 6 0 2 9. 0 0 2. Stocks and Bonds (Schedule B) .................................... . .. 3. Closely Held Corporation, Partnership or Sole-Proprietorship (Schedule C) ... .. 3. 4. Mortgages and Notes Receivable (Schedule D) ........................ .. 4. 2 0 6 9 . 0 0 5. Cash, Bank Deposits and Miscellaneous Personal Property (Schedule E)..... .. 5. 6. Jointly Owned Property (Schedule F) ^ Separate Billing Requested ..... .. 6. 1 0 5 2 4 9 0 0 7. Inter-Vivos Transfers 8 Miscellaneous N-Probate Property ~ 3 0 0 9 0 4 0 0 Separate Billing Requested ..... (Schedule G) .. 7. , 8. Total Gross Assets (total Lines 1 through 7) ......................... .. 8. 1 2 6 4 2 5 1. 0 0 9. Funeral Expenses and Administrative Costs (Schedule H) ......... ....... .. 9• 4 4 2 0 2 . 0 0 10. Debts of Decedent, Mortgage Liabilities, and Liens (Schedule I) .... ....... .. 10. 11. Total Deductions (total Lines 9 and 10) ...................... ....... .. 11. 4 4 2 0 2 . 0 0 12. Net Value of Estate (Line 8 minus Line 11) ................... ....... .. 12. 1 2 2 0 0 4 9 . 0 0 13. Charitable and Governmental Bequests/Sec 9113 Trusts for which an election to tax has not been made (Schedule J) ........... ....... .. 13. 14. Net Value Subject to Tax (Line 12 minus Line 13) ............. ....... .. 14. 1 2 2 0 0 4 9 . 0 0 TAX CALCULATION -SEE INSTRUCTIONS FOR APPLICABLE RATES 15. Amount of Line 14 taxable at the spousal tax rate, or transfers under Sec. 9116 0 0 0 15 0. 0 0 . (a)(1.2)x.o _ . 16. Amount of Line 14 taxable 1 1 9 0 0 4 9 0 0 1s 5 3 5 5 2. 2 1 . at lineal rate X .045 . 17. Amount of Line 14 taxable 3 0 0 0 0 0 0 17 3 6 0 0. 0 0 at sibling rate x .12 . 18. Amount of Line 14 taxable 0 0 0 18 0. 0 0 at collateral rate X .15 . 19 5 7 1 5 2 2 1 19. ............................................ TAX DUE ........ . .. 20. FILL IN THE OVAL IF YOU ARE REQUESTING A REFUND OF AN OVERPAYMENT Side 2 1505610240 1505610240 REV-1500 EX Page 3 Decedent's Comulete Address: File Number 21 11 0730 DECEDENT'S NAME GLADYS M. WATTS __ STREET ADDRESS 1920 LULA LANE CITY STATE Zip ENOLA PA 17025 Tax Payments and Credits: 1• Tax Due (Page 2, Line 19) 2. Credits/Payments A. Prior Payments 51,810.35 B. Discount 2,72g,7g 3. Interest 4. If Line 2 is greater than Line 1 + Line 3, enter the difference. This is the OVERPAYMENT. Fill in oval on Page 2, Line 20 to request a refund. (1) 57,152.21 Total Credits (A + B) (2) 54, 537.13 (3) (4) 0.00 5. If Line 1 + Line 3 is greater than Line 2, enter the difference. This is the TAX DUE. (5) 2,615.08 Make check payable to: REGISTER OF WILLS, AGENT PLEASE ANSWER THE FOLLOWING QUESTIONS BY PLACING AN "X" IN THE APPROPRIATE BLOCKS 1. Did decedent make a transfer and: Yes No a. retain the use or income of the property transferred : ............................................................ .......... ^ 0 b• retain the right to designate who shall use the property transferred or its income; ..................... .......... ^ Q c. retain a reversionary interest; or .......................................................................... ^ ............ d. receive the promise for life of either payments, benefits or care? ............................................. .......... .......... ^ Q 2. If death occurred after December 12, 1982, did decedent transfer property within one year of death without receiving adequate consideration? .............................................................................. ......... ^ 3. Did decedent own an "intrust for" or payable-upon-death bank account or security at his or her death? ......... Q ^ 4. Did decedent own an individual retirement account, annuity or other non-probate property, which contains a beneficiary designation? ......................................................................................... ......... ~ ^ IF THE ANSWER TO ANY OF THE ABOVE QUESTIONS IS YES, YOU MUST COMPLETE SCHEDULE G AND FILE IT AS PART OF THE RETURN, For dates of death on or after July 1, 1994, and before Jan. 1, 1995, the tax rate imposed on the net value of transfers to or for the use of the surviving spouse is 3 percent [72 P.S. §9116 (a) (1.1) (i)]. For dates of death on or after Jan. 1, 1995, the tax rate imposed on the net value of transfers to or for the use of the surviving spouse is 0 percent [72 P.S. §9116 (a) (1.1) (ii)]. The statute does not exempt a transfer to a surviving spouse from tax, and the statutory requirements for disclosure of assets and filing a tax return are still applicable even if the surviving spouse is the only beneficiary. For dates of death on or after July 1, 2000: • The tax rate imposed on the net value of transfers from a deceased child 21 years of age or younger at death to or for the use of a natural parent, an adoptive parent or a stepparent of the child is 0 percent [72 P.S. §9116(a)(1.2)]. • The tax rate imposed on the net value of transfers to or for the use of the decedent's lineal beneficiaries is 4.5 percent, except as noted in 72 P.S. §9116(1.2) [72 P.S. §9116(a)(1)]. • The tax rate imposed on the net value of transfers to or for the use of the decedent's siblings is 12 percent [72 P.S. §9116(a)(1.3)]. Asibling is defined, under Section 9102, as an individual who has at least one parent in common with the decedent, whether by blood or adoption. REV-1503 EX + (6-98) SCHEDULE B COMMONWEALTH OF PENNSYLVANIA STOCKS & BONDS INHERITANCE TAX RETURN RESIDENT DECEDENT t~ IAI t or FILE NUMBER GLADYS M. WATTS 21 11 0730 All property jointly-owned with right of survivorship must be disclosed on Schedule F. ITEM VALUE AT DATE NUMBER DESCRIPTION OF DEATH 1, Cnl Income Properties, Inc. -Acct. No. 300039392 45,000.00 2. Inland Reit Inland Western Retail Real Estate Trust -Acct. No. 504062568 88,776.00 3. Jackson National Variable Annuity Fund -Acct. No. 9171173A 456,622.00 (ITEMS 1-3 -See Attachment A) 4. Resource Real Estate IV, Limited Partnership -Account No. 170221743 121,894.00 (See Attachment B) 5. Resource Real Estate VII, Limited Partnership -Account No. 0107-00069 122,218.00 (See Attachment C) 6. Lincoln Financial Group -The Lincoln National Life Insurance Company -Annuity - 21,519.00 No. A005305925 - $768.52/mo. x 28 mos. - to October 20, 2013 (See Attachment D) TOTAL (Also enter on line 2 Recapitulation) I $ 856 029 (If more space is needed, insert additional sheets of the same size) REV-1508 EX+ (11-10) Pennsylvania DEPARTMENT OF REVENUE INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE E CASH, BANK DEPOSITS, 8~ MISC. PERSONAL PROPERTY t~ I A i t ut: FILE NUMBER: GLADYS M. WATTS 21 11 0730 Include the proceeds of litigation and the date the proceeds were received by the estate. All property jointty owned with right of survivorship must be disclosed on Schedule F. ITEM VALUE AT DATE NUMBER DESCRIPTION OF DEATH 1. Washington National -Insurance refund 859.00 2. Household goods, furniture and furnishings, clothing and personal items 500.00 3. I Cash TOTAL (Also enter on Line 5, Recapitulation) I $ If more space is needed, insert additional sheets of paper of the same size 710.00 REV-1509 EX+ (01-10) pennsylvania DEPARTMENT OF REVENUE INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE F JOINTLY-OWNED PROPERTY ~~ i N i ~ vr: FILE NUMBER: GLADYS M. WATTS 21 11 0730 If an asset was made jointly owned within one year of the decedent's date of death, it must be reported on Schedule G. SURVIVING JOINT TENANT(S) NAME(S) ADDRESS RELATIONSHIP TO DECEDENT A. Joel A. Watts 1920 Lula Lane Son Enola, PA 17025 13 c. JOINTLY•OWNED PROPERTY: ITEM NUMBER LETTER FOR JOINT TENANT DATE MADE JOINT DESCRIPTION OF PROPERTY INCLUDE NAME OF FINANCIAL INSTITUTION AND BANK ACCOUNT NUMBER OR SIMILAR IDENTIFYING NUMBER. ATTACH DEED FOR JOINTLY-HELD REAL ESTATE. DATE OF DEATH VALUE OF ASSET % OF DECEDENT'S INTEREST DATE OF DEATH VALUE OF DECEDENT'S INTERESI 1. A. 4/25/03 1920 Lula Lane, Enola, PA, Tax Parcel No. 200,000.00 50. 100 000.00 10-14-0837-015; Deed Book 256, Page 3644, Recorder , of Deeds, Cumberland County, PA (See Attachment E) 2. A. 3/13/92 PNC Checking Account No. 50-7007-0226 10,498.00 50. 5 249.00 (See Attachment F) , TOTAL (Also enter on Line 6, Recapitulation) I $ 105 249 00 If more space is needed, use additional sheets of paper of the same size. REV-1510 EX+ (08-09) pennsylvania DEPARTMENT OF REVENUE INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE G INTER•VIVOS TRANSFERS AND MISC. NON-PROBATE PROPERTY ESTATE OF FILE NUMBER GLADYS M. WATTS 21 11 0730 This schedule must be completed and filed if the answer to any of questions 1 through 4 on page three of the REV-1500 is yes. ITEM DESCRIPTION OF PROPERTY INCLUDE THE NAM11E OF THE TRANSFEREE, THEIR RELATIONSHIP TO DECEDENT AND DATE OF DEATH % OF DECD'S EXCLUSION TAXABLE NUMBER THE DATE OF TRANSFER.ATTACHACOPYOFTHEDEEDFORREALESTATE. VALUE OF ASSET INTEREST IirAaPUCne~el VALUE 1. Opportunity REIT, Inc. -Account No. 31987 12,665.00 100.00 12,665.00 2. Inland American Real Estate Trust, Inc. -Account No. 31,662.00 100.00 117879 3. Pro Equities Brokerage Account -Account No. NPC075447 256,577.00 100.00 (ITEMS 1-3 -See Attachment A) TOTAL (Also enter on Line 7 Recapitulation) ~ $ 3 If more space Is needed, use addltlonal sheets of paper of the same size. 31,662.00 256,577.00 REV-1511 EX+ (10-09) pennsylvania DEPARTMENT OF REVENUE INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE H FUNERAL EXPENSES AND ADMINISTRATIVE cn~rc ESTATE OF FILE NUMBER GLADYS M. WATTS 21 11 0730 Decedent's debts must be reported on Schedule I. ITEM NUMBER DESCRIPTION A~Al11 IAIT A• FUNERAL EXPENSES: 1. Malpezzi Funeral Home B. 2. 3. ADMINISTRATIVE COSTS: Personal Representative Commissions: Name(s) of Personal Representative(s) Street Address City State ZIP Year(s) Commission Paid: Attorney Fees: Caldwell & Kearns, PC Family Exemption: (If decedent's address is not the same as claimant's, attach explanation.) Claimant 4 5. 6. 7. 8. 9. 10. 11. Street Address City State ZIP _ Relationship of Claimant to Decedent Probate Fees: Cumberland County Register of Wills Accountant Fees: Tax Return Preparer Fees: Kern & Company, P.C., Asset valuation, limited partnerships Rey Woof Appraisals -Real estate appraisal (1920 Lula Lane, Enola, PA) Legal Notice Advertisement -Sentinel and Cumberland Law Journal 2011 PA Income Tax Wagoner Frutiger & Daub, LLP, CPA tax services TOTAL (Also enter on Line 9, Recapitulation) ~ $ 9,840.00 6,500.00 844.00 25,843.00 350.00 254.00 121.00 450.00 If more space is needed, use additional sheets of paper of the same size. REV-1513 EX+ (Ot-10) pennsylvania DEPARTMENT OF REVENUE INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE J BENEFICIARIES wiHitu GLADY~ NUMBER I. 1. 2. 3. 4. 5. 6. II. 1 r: M. WATTS NAME AND ADDRESS OF PERSON(S) RECEIVING PROPERTY TAXABLE DISTRIBUTIONS [Include outright spousal distributions and transfers under Sec. 9116 (a) (1.2).] Joel A. Watts 1920 Lula Lane Enola, PA 17025 Jessica A. (Watts) Krist 1920 Lula Lane Enola, PA 17025 Lillie J. Krist 1920 Lula Lane Enola, PA 17025 Gregory Watts 100 Number Road Newport, PA 17074 Ida M. Sponsler 601 Locust Point Road Dillsburg, PA 17019 Lois A. May 601 Locust Point Road Dillsburg, PA 17019 FILE NUMBER: 21 11 073 RELATIONSHIP TO DECEDENT Do Not List Trustees) Lineal Lineal Lineal Lineal Sibling Sibling AMOUNT OR SHARE OF ESTATE X75% Residuary 15% Residuary 10% Residuary 20,000.00 15,000.00 15,000.00 ENTER DOLLAR AMOUNTS FOR DISTRIBUTIONS SHOWN ABOVE ON LINES 15 THROUGH 18 OF REV-1500 COVER SHEET, AS APPROPRIATE. NON-TAXABLE DISTRIBUTIONS: A, SPOUSAL DISTRIBUTIONS UNDER SECTION 9113 FOR WHICH AN ELECTION TO TAXIS NOT TAKEN: B. CHARITABLE AND GOVERNMENTAL DISTRIBUTIONS: TOTAL OF PART II -ENTER TOTAL NON-TAXABLE DISTRIBUTIONS ON LINE 13 OF REV-1500 COVER SHEET. I $ If more space is needed, use additional sheets of paper of the same size. LAST WILL AND TESTAM-ENT OF GLADYS M. WATTS I, GLADYS M. WATTS, of, Cumberland County, Pennsylvania, being of sound mind, memory and understanding, do make, declare and publish this to be my Last Will and Testament, hereby revoking and making void all former Wills and Codicils made at any time heretofore by me. ITEM I. I appoint my son. JOEL A. WATTS, to serve as Executor of my Estate. In the event that my son, JOEL A. WATTS does not survive me or otherwise fails to qualify as Executor, I appoint my sister, IDA M. SPONSLER, to be and act as Executrix of this, my Last Wil; and Testament. ITEM II. The fiduciaries herein named shall not be required to file or post bond or any other security for the faithful performance of their duties. ITEM III. My son, JOEL A. WATTS, and I are now the joint owners of a .residence at 1920 Lula Lane, Enola, Cumberland County, Pennsylvania, which is our usual home. if, however, my son survives me anti at my death our homy, whether it be the o;~ which we now own or the one which is hereafter acquired by us, is held in any manner which will not result iri the passage of full title to my son, JOEL A. WATTS, by operation of law, I hereby give and devise my entire interest in said home to him. ITEM IV. I hereby give and bequeath to my son, JOEL A. WATTS, if he survives me, all furniture, antiques, clothing. jewelry, pictures, statuary, world of art, si~~r, ~ _._ o ~;r, ~°-- ~_; ; ~- ~ r'- - 4Y~~ r_ CJ~ ~ "' ObO ~~ (. "-~ ~} ~ '-- l.•. i plate, ornaments, brie-a-brae, tapestry, household goods or supplies, books, linen, china, glass, automobiles, boats, and all implements, plants and tools that may be in or at our home at the time of my death, together with all policies of insurance thereon. _ _ __ ITEM V. I hereby give, devise and bequeath the following: A. The sum of Twenty Thousand Dollars ($20,000.00) to my son, Gregory Watts, if he shall survive me. I have intentionally made no additional provisions in this Will for my son, Gregory Watts, and the distribution of any additional property passing under this Will as a part of my probate estate to him. It is my further intention that no further provision be made for my son, Gregory Watts. and that he be excluded from any additional share of my estate which shall pass under the laws of intestate succession. This is because I have made prior dispositions of my property to my son, contributed payment toward his debts and obligations, including but not limited to a loan to Wells Fargo International and other inter vivos monetary gifts and stipends. B. The sum of Fifteen Thousand Dollars ($15,000.00) to my sister, Ida M. Sponsler, if she shall survive me. C. The sum of Fifteen Thousand Dollars ($15,000.00) to my sister. Lois A. May, if she shall survive me. ITEM VI. All of the rest, residue and remainder of my property and Estate, of whatsoever nature and wheresoever situated, including property over which I hold a power of appointment which I have not exercised, together with all policies of insurance thereon, I hereby give, bequeath and devise as follows: 2 A. Seventy-five (75%) percent to my son, JOEL A. WATTS, per stirpes. B. Fifteen percent (15%) percent to my granddaughter, JESSICA WATTS; provided, that if my granddaughter, JESSICA WATTS, shall be under the age of forty-five (45) years at the time of my death, then this share shall be given to my Trustee to be held in a separate Trust for my granddaughter, JESSICA WATTS, to be administered and distributed in accordance with the following uses, purposes and provisions' 1. Until my granddaughter, JESSICA WATTS, attains the age of forty-five (45) years, the Trustee shall hold all of the assets of the Trust and shall collect and receive income therefrom, and shall pay and distribute such amounts of income and principal to or on behalf of my granddaughter, JESSICA WATTS, as the Trustee, in his sole discretion deems necessarv and proper for her care, support, welfare and education (including college education, both undergraduate and graduate, trade or vocational education) taking into consideration all other assets and sources of income and support available to her for such purposes from all sources known to the Trustee. My Trustee may accept but is not obligated to accept as final and conclusive, the written statement of my granddaughter, JESSICA WATTS, as to her readily available assets and sources of income and support. 2. When my granddaughter, JESSICA WATTS, attains the age of thirty (30) years, ten percent (10%) of the then remaining balance of principal and accumulated net income shall be distributed to her. 3. When my granddaughter; JESSICA WATTS, attains the agP of thirty-five (35) years, ten percent (10%) of the then remaining principal balance of principal and accumulated net income shall be distributed to her. 4. When my granddaughter, JESSICA WATTS, attains the age of forty (40) years, ten percent (10%) of the then remaining balance of principal and accumulated net income shall be distributed to her. 5. The entire then-remaining balance of principal and accumulated net income shall he distributed to my granddaughter, JESSICA WATTS, upon her attaining age forty-five (45) years, and this Trust for my granddaughter, JESSICA WATTS, shall terminate. 3 6. If my granddaughter, JESSICA WATTS, shall not survive me or shall die before receiving final distribution of her share of this Trust, the undistributed balance of my granddaughter's Trust shall be distributed in trust to her issue, per stirpes, subject to the provisions of Item VI(C) hereof, and-in default-of-all of such-issue; then shall be-given and distributed-to-my son, JOEL A. WATTS, per stirpes. C. Ten percent (10%) in equal shares to the issue of my granddaughter, JESSICA WATTS; provided, that if the issue of my granddaughter, JESSICA WATTS, shall be under the age of thirty (30) years at the time of my death, then this share shall be given to my Trustee to be held in a separate Trust for such beneficiary to be administered and distributed in accordance with the following uses, purposes and provisions: 1. Until such beneficiary attains the age of thirty (30) years, the Trustee shall hold all of the assets of the Trust and shall collect and receive income therefrom, and shall pay and distribute such amounts of income and principal to or on behalf of my beneficiary, as the Trustee, in his sole discretion deems necessary and proper for their care, support, welfare and education (including college education, both undergraduate and graduate, trade or vocational education), taking into consideration all other assets and sources of income and support available to them for such purposes from all sources known to the Trustee. My Trustee may accept as final and conclusive the written statement of my beneficiary, as to my beneficiary's readily available assets and sources of income and support. 2. .When my beneficiary, attains the age of twenty-five (25) years, one-half (1/2) of the then remaining balance of principal and accumulated net income shall be distributed to my beneficiary. 3. The entire then-remaining balance of principal and accumulated net income shall be distributed to my beneficiary, upon my beneficiary attaining age thirty (30) years, and this Trust shall terminate. 4. If my beneficiary, shall not survive me or shall die before receiving final distribution of my beneficiary's share of this Trust, the undistributed balance of my beneficiary Trust shall be distributed outright to my beneficiary's issue, per stirpes, and in default of such issue, then shall be given and distributed to my son, JOEL A. WATTS, per stirpes. 4 ITEM VII. In the event that my son, JOEL A. WATTS, and his issue do not survive me, then and in that event all of the rest, residue and remainder of my property and Estate of whatsoever nature and wheresoever situated, which is provided to my son as set -- _--- forth in Item 6, including property over which I hold a power of appointment which I have not heretofore exercised, together with all policies of insurance thereon, I hereby give, bequeath and devise in equal shares to my granddaughter, JESSICA WATTS, my sister, IUA M. SPONSLER, and my sister, LOTS A. MAY, per stirpes. ITEM VIII. Should any legatee or devisee underthis Will die within and not survive me by thirty (30) days after the date of my death, he or she shall be deemed to have not survived me for all purposes under this Will. If my son, JOEL A. WATTS shall not survive me by thirty (30) days, he shall have during that portion of such thirty (30} days as he in fact survives me, the right to the use and enjoyment as a life tenant of all property in which his interest will fail by reason of his death within such thirty (30) days. ITEM IX. I direct that all Estate, inheritance and succession taxes that may be assessed in consequence of my death, of whatsoever nature and by whatsoeve-• jurisdiction imposed on all property passing underthis Will and forming a part of my probate Estate; shall be paid out of the principal of my general Estate to the same effect as if said taxes were expenses of administration, and shall be free and clear thereof. ITEM X. No interest, whether in income or principal, of any beneficiary of my Estate shall be subject to anticipation, pledge, assignment, sale or transfer in any manner; nor shall any such beneficiary have any power in any manner to charge or encumber his interest, whether in income or principal; nor shall the interest, whether in income or principal, of any such beneficiary be liable or subject in any manner while in the 5 possession of my Executrix or any trustee or guardian for any liabilities of such beneficiary, whether such liabilities arise from his death, debts, contracts, torts or engagements of any type. ITEM XI. In the administration of my Estate, myfiduciaries shall have the following powers, in addition to such powers as they may have by law: A. To invest any funds of my Estate in any stock, bonds, notes or other securities or property, real or personal; notwithstanding that such investment may not be ofi a character allowed to fiduciaries by statute or general rules of law; B. To sell or otherwise dispose of any property, real or personal at any time forming a part of my Estate, for cash or upon credit, in such manner and upon such terms and conditions as they may deem best, and no persons dealing with them shall be bound to see to the application of any funds paid; C. To manage, operate, repair, improve, mortgage or lease for any term any real Estate at any time held or owned by my Estate; D. To borrow money for the payment of taxes or for any other proper purpose in the administration of my Estate; E. To distribute in cash or in kind, upon any division or distribution of my Estate; and F. In general, to exercise all powers in the management of my Estate which any individual could exercise in the management of similar property owned in his own right, upon such .terms and conditions as to them may seem best, and to execute and deliver all instruments and to do all acts which they may deem necessary or proper to carr3~ out the purposes of this Will. ITEM XII. Subject to the provisions of Item 6 hereof, any amounts, either of income or principal, which are otherwise payable to a minor under this Will may at the sole discretion of my Executor be paid either to~a parent of such minor, to a guardian over the person or property and Estate of such minor, to the person who has custody over such minor, or directly to such minor, and evidence of the payment or application of such amount shall be a full and complete discharge of my Executor to the extent of such payment or application. ITEM XIII. I appoint my son, JOEL A. WATTS, Trustee under any Trust created by this Wiil. Should my son, JOEL A. WATTS, fail to qualify, cease to act or be unable or unwilling to act as Trustee, I then appoint my sister, IDA M. SPONSLER, as alternate "trustee. ITEM XIV. I direct that the expenses of my last illness and funeral be paid from my Estate as soon as practicable after my death. IN WITNESS WHEREOF, I, the said Testatrix; hereby set my hand and seal this _~ day of September, 2009. p ~ ' / ~ 't3 GLADY~ M. WATTS The foregoing instrument, consisting of this and six (6) preceding typewritten pages, was on the date thereof signed, published and declared by Gladys M. Watts, the Testatrix therein named, as her Last Will and Testament, in the presence of us, who at her request and in the presence of h other, have subscribed our names as witnesses. residing at _7 4 ~ Z G r ~~r ~a ~ It 2d~~ ~~~~' c~ lZ 1 l Z ~_ ' "~~-; -`_~~~. residing at ~ ~./~` 1°,~~~Q ~~~ ~~~. 7 COMMONWEALTH OF PENNSYLVANIA ~ COUNTY OF DAUPHIN I ss: I, GLADYS M. WATTS, whose name is signed to the attached foregoing instrument, have been duly qualified according to law, and do hereby acknowledge that I signed and executed such instrument as my Last Will and Testament; that I signed the same willingly; and that I signed it as my free and voluntary act for the purposes therein expressed. ~~.~~~~Ir~~ _ GLADYS .WATTS Subscribed; sworn to, affirmed and acknowledged before me, a Notary. Public, by Glad s M. Watts, this h Y ~ r day of September, 2009. ~ ~~-F~ NOTARY PUBLIC COMMONWEALTH OF PENNSYLVANIA My Commission Expires: lo~ i3-~o~t na~seai McNsa M. Lucas. Notary PubNc MY ~ bnT ~ ~ ~h, Member, Pennsylvania Association of Notaries COMMONWEALTH OF PENNSYLVANIA ~ COUNTY OF DAUPHIN ~ ss: WE, C ~ 2 1. ~ . ~ ~S S and ~~I~,~,,,i/.e;~ ~sk~~,~1c, ,the witnesses whose names are signed to the attached foregoing instrument, being duly qualified according to law, do depose and say that we were present and saw the Testatrix sign such instrument willingly and execute it as his free and voluntary act for the purposes therein expressed; that each of us in the hearing and sight of such Testatrix signed such Last Will as witnesses thereto; and that to the best of our knowledge, such Testatrix was at that time eighteen (18) or more years of age, of sound mind and under no constraints or undue influence. Subscribed, sworn to, affirmed and acknowledged before me byCc~rl ~ w~iss and ~}~_ Wit', LKs ~ct;~~, ~; ,witnesses, this ~_ day of September, 2009. WITNESSES: (- My Commission Expires: 1v-.3-~~+~ 02648001/151088 ~i.~~, NOTARY PUBLIC COMMONWEq(.TH~ gyLVAN1A Notarial Seal Melisa M. Lucas, Nohdry PubBc Susquehama Twp., Dauphin ~Y MY ~-unission E~ires Od 13, 2011 Member, Pennsylvania Association o(Notaries Wealth Development Council April 4, 2012 Gladys M. Watts Estate Attn: Joel A. Watts, Executor 1920 Lula Ln Enola, PA 17025 RE: Jackson National Annuity contract #9171173A Dear Joel: 426 S. Third Street, Suite 203 Lemoyne, PA 17043 Phone: 7'17.774.7200 Fax: 717.685.3641 w4vw.WealthDeveiopmentcouncil.cam The enclosed Consolidated Account Summary summarizes the date of death values for the investment accounts owned by Gladys M. Watts. Please note that the market value of the Jackson National Variable Annuity is included in the $456,621.61 death benefit amount reported by Jackson National on Form 712. Please eel free to contact me vykth~ny ay~ditianal questions you may have. tames D. Good, CLU®,YcFP~, Chl°C~, Investment Advisor Representative Enclosures: Consolidated Account Summary, Date of Death Values Form 712 InvestmenC AdvisC~r Representative of Investment Advisclrs, a registered Investment adviser and. dig Securities offered drrr~>ugh ProEquities, Inc., a Registered Broker-l~ealc r. Member, FIT Wealth Deve.k~ptnent Council is independent of ProEquities Cnc. Positions x Page 1 of 2 Search. ~ Group ~ R~Str~ti4ns I P4SISi0ns ~ A4#ivity I Money Line ~ Add New M~n~al. C~stomQr Posting Selected Acco_u_nts ~ Posting -_All Accounts. ~ Cross Posting ~ Totals ~ Pnnt Positions Repprt ~ Data.Sources ~ Help Client Rep01't5 Consolidated Statement All mutual fund pricing is NAV Rep No: GB7 Acct No: 31987 - Gladys M Watts Subject To Dst Tod Rules... Description Ticker Symbol Shares Last Price Value Opportunity Reit I, Inc 1.6......5...3.442__ (6/1/11) 7.66 (6/24/11) $12,665.37 Total Value of This Account: $12,665.37 Rep No: GB7 Acct No: 117879 -Gladys Watts Tod Multiple Beneficiaries On File... Description Ticker Symbol Shares Last Price Value Inland American Real Estate Trust Inc ~4 (6/1/11) 8.03 (6/27/2011) $31,662.29 Total Value of This Account: $31,662.29 Rep No• GB7 Acct No• 300039392 - Gladys M Watts Description Ticker Symbol Shares Last Price Value Cnl Income Propertie S Inc. 45 0 (6/1/11) SO (6/24/11) $45,000.00 Total Value of This Account: $45,000.00 Rep No: G67 Acct No: 504062568 -Gladys Watts Description Ticker Symbol Shares Last Price Value Inland Reit Inland Western Retail Real Estate Trust 12.9.59.930.2.... (6/1/11) 6.85 (8131/09) $88,775.52 Total Value of This Account: $88,775.52 Rep No: G67 Acct No: 9171173A - Gladys M Watts Description Ticker Symbol Shares Last Price Value Jackson National Life 1 Guaranteed Account- 1 Yr 1.1.566.2.21 (6/7/11) 1 (6/27/2011) $115,662.21 Jackson National Life 1 Jnl/Aim Small Cap Growth 1.2....8...9..7447. (6/7/11) 15.747498 (6/24/11) $20,310.25 JnI/Aim Global Real Estate Fund 1604.6409 (6/7/11) 12.333419 (6/24/11) $19,790.71 Jnl/Goldman Sachs Mi d Cap Value Fund ].S.SZ..$z7S (6/7/11) 12.926661 (6/24/11) $20,072.87 Jnl/Jpmorgan Midcap Growth 735...2.46 (6/7/11) 23.360458 (6/24/11) $17,175.68 Jnl/Mellon Cap Mgt C onsumer Brands Sec 1.814.92_54 (6/7/11) 11.130979 (6/24/11) $20,201.90 ]nl/Mellon Cap Mgt C ommunications Sect 37.6...0..1491_ (6/7/11) 5.347866 (6/24/11) $20,108.77 Jnl/Mellon Cap Mgt H ealthcare Sector 1655.3331 (6/7/11) 12.138612 (6/24/11) $20,093.45 Jnl/Mellon Cap Mgt S &P 400 Mid Cap Ind 1.036,.697$. (6/7/11) 16.707584 (6/24/11) $17,320.72 Jnl/T Rowe Price Mid -Cap Growth 372,_1..3..8.1. (6/7/11) 46.037767 (6/24/11) $17,132.41 Total Value of This Account: $287,868.97 Rep No• GB7 Acct No• NPC075447 - Gladys M Watts Tod Dtd 02/19/2009... Description Ticker Symbol Sha res Last Price Value 3M Co Com MMM 75 (6/3/11) 90.89 (6/24/11) $6,816.75 Aberdeen Asia-Pacific Income FAX 100 (10/13/09) 7.23 (6/24/11) $723.00 American Capital Ltd Com ACAS 219 (8/10/09) 9.14 (6/24/11) $2,001.66 B & G FoodsInc New Com BGS 250 (3/30/11) 20.75 (6/24/11) $5,187.50 Cellcom Israel Ltd Shs CEL 400. (5/7/10) 28.55 (6/24/11) $11,420.00 Dodge & Cox Income Fund DODIX 1572.3.2...7 (8/25/09) 13.57 (6/24/11) $21,336.48 Encore Energy Partners Lp Com Unit Int ENP ..2....0..0.. (4/19/10) 20.5 (6/24/11) $4,100.00 Exelon Corp Com EXC 1$0 (3/16/11) 42.02 (6/24/11) $7,563.60 Exxon Mobil Corp Com XOM 19Q. (12/28/09) 76.78 (6/24/11) $7,678.00 Federated Capital Reserve ..3...919.5.91_ (6/24/11) 1 (6/27/2011) $39,195.91 Gabelli Global Gold Nat Res & Income Tr GGN 750 (10/5/10) 17.25 (6/24/11) $12,937.50 Illinois Tool Works Inc Com ITW 290. (3/14/11) 54.35 (6/24/11) $10,870.00 Johnson & Johnson Com JNJ 198. (5/18/11) 65.06 (6/24/11) $12,881.88 Mcdonalds Corp MCD 100. (5/27/11) 81.84 (6/24/11) $8,184.00 Nuveen Diversified Commodity Fd Com CFD 2~9 (3/30/11) 24.75 (6/24/11) $6,187.50 Otelco Inc Income Dep Secs Ids OTT 100 (12/31/10) 17.9 (6/24/11) $1,790.00 Pepsico Inc PEP 117 (4/29/11) 68.45 (6/24/11) $8,008.65 Posco Spon Adr PKK 50 (1/4/11) 104.05 (6/24/11) $5,202.50 Proshares Tr Proshares Ultrashort TBT 200 (8/12/09) 32.5 (6/24/11) $6,500.00 Prudential FinlIncInternotes 6.400% 05/15/23 B/E 30000 (2/24/09) 100.927 (6/24/11) $30,278.10 Templeton Global Bond Fund Class A TPINX 2151.541 (6/17/11) 13.77 (6/24,/11) $29,626.72 Tim HortonsInc Com THI 5.0 (4/28/11) 46.29 (6/24/11) $2,314.50 Toro Co TTC 125 (4/14/11) 59.73 (6/24/11) $7,466.25 V F Corp VFC 79 (4/14/11) 105.14 (6/24/11) $8,306.06 Total Value of This Account: $ 256,576.56 https://apps.proequities.com/apBRC/Accounts/accounts~ositions.aspx 6/27/2011 Positions Page 2 of 2 Total Value of All Displayed Positions: $722,548.70 The following securities were entered into this report directly by your financial advisor based on information provided to the advisor by third party sources. (Click the Description'to edit the position.) Click here to view positions marked inactive. nr.~ t~- ~ ~ ~ ~ Select Position Type Adc Pi ~ . C~., .~a~ ~er GLADYS WATTS Select Position Type Rep No: G87 Acd No: 170221743 Gladys Watts Limited Partnerships... Description Shares Price As Of Date Value * Resource Real Estate IV N/A N/A 11/10/2006 100,000.00 At,d Neil Pasitio°i Select Position Type Total value of this account: $100,000.00 Rep No: GB7 Acct No: 0107-00069 Gladys Watts Gladys Watts... Description Shares Price As Of Date Value * R~sot~irGe.....R....e...i31, Estdtg...V..I.I N/A N/A 9/2/2008 50,000.00 {luc Ne ~~ Position Seleot Position Type Total value of this account: $50,000.00 Total value of (Manually Entered Securities): $150,000.00 Total value of both: (Downloaded Se Manually Entered Securities):;872,548.70 Information from Third Parties This site can be used to produce reports that contain information about customer accounts. These reports are being made available solely for your convenience. Information contained in these reports is provided by third party sources, and no representation or warranty is made as to the accuracy, completeness, timeliness, or suitability of the contents of such reports for any purpose. The information contained in these reports may be incomplete, and may not reflect all positions or transactbns in a custaner's account. These reports are not a replacement or substitute for the actual statements provided by the responsible Bearing house, holding company, w investment sponsor w provider, and should not be relied upon as such. * Information with respect to this security was entered into this report directly by your financial advisor based on information provided to the advisor by third party sources. i I! . P. si ions' To Morn'p to https://apps.proequities.com/apBRC/Accounts/accounts~ositions.aspx 6/27/2011 y;L,r,(1~.~1 a.~~.', Aft FFr7M: Fax tGGS 1't;; w,. ill i ~,..,,-~64;. PA.E: Or72 Q~L Firm 712 tftav. April 2006) pnpatrnCrr, d ttre Treascry dttst'nal Ravc*x~o r~vbe Life Insurance Statement OMB Nct. t5C5-0022 DeC@tjetlt-Ir1SUYed (To be filed by the execr~ta with Form 706, United States =stale (anc Generation-Skipping Transfer) Tax Return, a Form !p~-NA, United States estate (and Generation-Skipping Trarufer) Tax R~tm, Estate of nonreskfent not a citizen of the Unites States.) 1 Decedent's first name and middles Willa' 2 Decedent's last name 3 Decedent's socia+ security number 4 Date of death Gladys M yya~ ff Known) xxx-xx-1743 06!2412011 5 Name and address of insurance company Jackson Life Insurance Company 1 Corporate Way Lansing M148951 8 Type of policy 7 Policy number Variable Annuity 009171173A 8 owners name. Ii decHdent is not owner. 9 Dale issued iD Assignor`s name. Attach copy of 11 Date assigned attach copy of application. assignment. r>. ~~~ ~~ Gladys M Wafts 1 011 812 0 0 3 ~~ ':~, ~""^,. t2 Va ue of the pot cy at the 13 Amount of premium (see instruc;titxts) 14 Name of benefic arias ~ < h,me of assignment Joe A Watts, Testaments ~ Tru r~ biished in Last $350,000AO Flexible Will $ Testamentd 13 15 Face amount of policy _ _ ~,~ . . ' - ~' ~ 45fi,fi21.fi1 16 Indemnity benefits _ - r,. _ ~ 16 17 Additional insurance _ _ _ '+~ 17 $ 18 Other benefits _ _ _ _ - - '-- _ - - - 18 19 Principal of any indebtedness to the company that is deductible in detern~l ~~i~'~~,,proceeds 19 $ 20 Interest on indebtedness (fine 19j accrued to date of death. _ :'+~ _ . _ - 20 ` 21 $ 21 Amount of accumulated dividends _ ~_ _ 22 Amount of post-mortem dividends _ - - - 22 $ 23 Amount of returned premium - ;~" t - - _ 23 $ 24 Amount otproceeds if payable in one sum ' . ~~.~ ~~ '" _ 24 $ 438,821.81 z 25 Value of proceeds as of date of death (if not payable in one i ~~ ~~ _ 25 $ 26 Policy provisions concerning deferred payments or insy~`~ nts^;~ Note. If other than lump-sum settlement is authorize:~f~,~ ~~'~.;r,, i ~~ ~p~:;;~~, attach a copy of the insurance policy. 1 r 27 Amount of installments r' ~~ `` . 27 $ 28 Date of birth, sex, and name of any FfY4son t`~ ~,~ -r~• of ~ahc~e ~~t may measure the number of payments. _ r ..-------- ----~---•----- -----•---~-r-- r.•-- t -__-----•-•-----------•----------------------•- 29 Amount applied by th,:~ i~r~ut :nce company :s,~~`singie premium representing the purchase of instaNment benefts _ ~:; :"";. - 29 30 Basis (mortality t~;~a~e `~a;~ ~~~ of interest) used by insurer in valuing instaQment benefits. 31 Were theca.; ~~ ?"?"<_t~:rs~Jf the policy within the three years prior to the death of the decedent? ^Yes ®No 32 Date nr,.t,,,ar;~~rC'; ~~,~nsfer: 1 / !vtorih Day fear 33 Was the ir~?~~r±d the annuitant or ioeneficiary of any annuity contract issued by the company? _ _ ®Yes ^ No 34 Did the dece~ent have any incidents of ownership on any policies on hislher life, but not owned by him/her at the date of death? _ _ ^Yes ®No 35 Names of companies with which decedent carried other polls es acrd amount of such polices # th s informat on is disclosed by your records. Ttra t;ndersigned oiirc;er of the abeva-named irsuranee company (or approFuia~t (edaral agency or retirerr.ert system official) hereby eart~es tt,at this statement sacs forth tole and cxxrFr t irtnnnatinn. y~ f 8!2120'11 Signahira - ~Q.l~lt.- ~1.tLtTJ Title - Vice President Date of Certira;alion - For Paperwork Reduction Act Notice, see page 3. cat. No. 101 joy Form 712 (nev. a-2006) VALUATION REPORT OF RESOURCE REAL ESTATE INVESTORS IV, LP AS OF JUNE 24, 2011 ISSUED FEBRUARY 15, 2012 2331 Market Street Camp Hill, PA 17011 717.763.0888 TEL 717.763.1581 FAX KERN AND COMPANY, PC [This page intentionally left blank] KERN AND COMPANY, PC TABLE OF CONTENTS Page Opinion letter The conclusion of value report: Purpose and use of the valuation Premise of value Process of valuation Assumptions and limiting conditions Company background and description Ownership and restrictive agreements Economic outlook Valuation methods Appendices: List of documents reviewed Conclusion of value calculation Present value calculations Historic and projected distributions and net operating income Financial ratios and analysis Historical financial statements Professional biographies 4 5 6 7 8 9 10 13 18 19 20 25 27 29 33 KERN AND COMPANY, PC 2331 Market Street Camp Hill, PA 17011 717763.0888 TEL KERN AND COMPANY, PC 717763.1581 FAX ~CCrJUN+A~VTS ~N,^. SUSiNESS AD~IISORS kern@panetwork.com Opinion Letter Joel A. Watts, Executor Estate of Gladys Watts 1920 Lula Lane Enola, PA 17025 Dear Mr. Watts: i Accompanying this letter is our detailed Conclusion of Value Report of the Estate's investment in Resource Real Estate Investors IV, LP (the Company), as of June 24, 201 l . "The issue date of the report is February 15, 2012. Specifically, we were engaged to value the portion of Resource Real Estate Investors IV, LP that the Estate of Gladys Watts owns including stating and defining the "standard of value". We are independent of Resource Real Estate Investors IV, LP and our compensation is fee based and not contingent. Purpose of the Valuation The purpose of valuing the Company as of June 24, 2011 is to provide a conclusion of value for the portion of Resource Real Estate Investors IV, LP that the Estate of Gladys Watts owns for reporting requirements for the Pennsylvania Inheritance Tax. Interest Valued and Standard and Premise of Value Currently, the Estate of Gladys Watts owns a 0.3 3 82 percent interest in the limited partnership of the company. The standard of value we applied was fair market value, which is defined as the value, expressed in cash or its equivalent, at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts. Conclusion As To Valuation Results We have performed a valuation engagement, as that term is defined in the Statement on Standards for Valuation Services (SSVS) of the American Institute of Certified Public Accountants, of Resource Real Estate Investors IV, LP as of June 24, 2011. This valuation was performed solely to assist in the matter of valuing the portion of Resource Real Estate Investors TV, LP that the Estate of Gladys Watts owns for reporting requirements in connection with the Pennsylvania Inheritance Tax; the resulting fair market value should not be used for any other -1- ~ ,; purpose or by any other party for any purpose. This valuation engagement was conducted in accordance with the SSVS and standards established by National Association of Certified Valuation Analysts (NACVA). The estimate of value that results from a valuation engagement is expressed as a conclusion of value. Based on our analysis, as described in this valuation report, the estimate of value of a 0.3382 percent interest in Resource Real Estate Investors IV, LP as of June 24, 2011 was $121,894. This conclusion is subject to the Statement of Assumptions and Limiting Conditions found in the limiting conditions section of this report and to the Valuation Analyst's Representation found in this report. We have no obligation to update this report or our conclusion of value for information that comes to our attention after the date of this report. In arriving at our conclusion of value, we considered five commonly accepted approaches to value -book value, the asset-based approach, the income approach, the discounted net cash flow approach, and the market approach -each with several underlying methods. The asset- based approach is most often used in valuing anon-operating business, business with continuing losses, or for liquidations. Since the asset-based approach to business valuations is not useful in valuing operating businesses, valuation techniques using the asset-based approach had to be disregarded in valuing Resource Real Estate Investors IV, LP. Because of the lack of comparability between the Company, and any located publicly traded companies, valuation techniques using the market approach also had to be disregarded. The income approach was disregarded due to the lack of earnings reported by the Company. Book value also was not appropriate because it does not generally include any goodwill and the Company has a moderate history and a good reputation in its market. Due to the Company's history of positive cash-flow, we determined that the appropriate method for determining fair market value of Resource Real Estate Investors IV, LP is the discounted net cash flow method. We calculated the gross terminal value of the partnership by applying a multiple derived from the average residual capitalization rate to the projected net operating income. We then deducted projected mortgage amounts to be satisfied and related selling expenses, from the gross terminal value of the partnership assets to determine the projected terminal. year cash available for distribution. We then applied the ownership percentage of 0.3382 percent to the projected terminal year net cash available for distribution to determine the amount of cash that would be distributed to the Estate of Gladys Watts in the year of partnership termination. We then discounted this amount back to the date of death of Ms. Watts, June 24, 2011. In addition to calculating the terminal cash distributions, we also computed the annual cash distributions she was entitled to receive up to the point of the partnership's terminal year. These distributions were then discounted back to Ms. Watts' date of death in the same manner we did for the terminal cash distribution. We combined the two discounted amounts to determine the fair market value of a 0.3382 percent ownership in Resource Real Estate Investors IV, LP. Based on this information, we concluded that the fair market value of a 0.3382 percent limited partnership ownership in the Company is $121,894. This conclusion of value and report are prepared in accordance with NACVA Professional Standards and the SSVS. - 2 " KERN AND COMPANY, PC Limitations on Use of this Report We have no responsibility to update this report for events and circumstances occurring, subsequent to the date of the report. This report's distribution is restricted solely for use by the Company's members, legal and financial counsel in connection with the purpose stated above. We are not, by virtue of performing the valuation or preparing the report, required neither to give expert testimony nor to be in attendance in court or at any government hearing with reference to the matters contained herein, unless prior arrangements have been made with us. Sincerely, ~ ` ~-1~~~ Charles L. Kern BS/MBA/CPA/CVA/CFA/AEP/ABV/CFF - 3 - KERN AND COMPANY, PC Purt~ose and Use of the Valuation We have been engaged to determine the fair market value of Resource Real Estate Investors IV, LP. The conclusion of value derives a fair market value fora 0.3382 percent interest in Resource Real Estate Investors IV, LP as of June 24, 2011, for the purpose of valuing the portion of Resource Real Estate Investors IV, LP that the Estate of Gladys Watts owns for reporting requirements in connection with the Pennsylvania Inheritance Tax. Joel A. Watts, Executor of the Estate of Gladys Watts, has engaged us. 4 KERN AND COMPANY, PC Premise of Value Premise of value is the assumption regarding the transactional nature applicable to the valuation under consideration. Two general transactional natures are going concern and liquidation. Liquidation is the forced or orderly sale of the entity's assets resulting in the termination of the business. The premise of value known as going concern simply states that the entity is operational and for the investment horizon will continue to be in operation. The evidentiary data supporting the going concern premise can be supported by, but is not limited to, the entity having a trained workforce, an operational facility, and possessing systems, procedures, and licenses to support it. Since the evidence supports these transactional characteristics the going concern assumption will be used as the premise of value for this conclusion of value. Process of Valuation All financial statements, operating results and data pertaining to Resource Real Estate Investors IV, LP for the years 2006 through 2010 have been taken from the Company's annual financial statements, which have been audited by an outside CPA firm. All related facts, comments and statistical information set forth in the report have been obtained from sources believed to be knowledgeable, reliable and accurate. All claims to property have been assumed valid and no investigation of legal fee title to `real or personal property has been conducted within the scope of this report. Liens and encumbrances that may be against the property have been given no consideration except as may be specifically set forth in this report. Our conclusions are based on the assumption that there shall be a continuation of the present management policies over whatever period is reasonable and necessary to maintain the character and integrity of the Company. The conclusion of value was prepared under the premise that anon-compete/non-solicitation agreement is in place for all current members of key management. '- No opinion has been rendered concerning the existence or possible impact on value of potentially hazardous construction materials, toxic waste or the ability of the Company to meet Environmental Protection Agency standards. No responsibility is assumed for the subject ' Company to meet environmental approvals. Detection of hazardous substances is beyond the appraiser's scope and requires consultation with an expert in this field. The fair market value determined in this report is only valid for the date specified. The standard of value used in arriving at our conclusion of value is fair market value. Fair market value is defined as the amount at which property would change hands between a hypothetical willing seller and a hypothetical willing buyer when neither is acting under compulsion and when both have reasonable knowledge of the relevant facts. In arriving at our valuation ~~ conclusion, we considered five commonly accepted approaches to value -the book value approach, the asset-based approach, the income approach, the discounted net cash flow approach, and the market approach. We analyzed each approach and method to determine which generates the most reasonable conclusion of value of Resource Real Estate Investors IV, LP as of June ;?4, 2011. After careful consideration of each method, underlying assumptions and variables, we ' concluded the discounted net cash flow approach to be the most appropriate (see Valuation Methods section of the report -page 13). d - 6 KERN AND COMPANY, PC Assumptions and Limiting Conditions This report has been prepared for the specific purpose of a 0.3382 percent limited partnership interest in Resource Real Estate Investors IV, LP as of June 24, 2011, and is intended for no other purpose. This report's distribution is restricted solely for use by the Estate of Gladys Watts in connection with the purpose stated earlier in this report. Information, estimates, and opinions contained in this report are obtained from sources considered to be reliable. However, we assume no liability for such sources. Resource Real Estate Investors IV, LP and its representatives warranted to us that the information they supplied was complete and accurate to the best of their knowledge and that the financial statement information reflects the Company's results of operations and financial conditions in accordance with generally accepted accounting principles, which is in accordance with generally accepted accounting procedures (GAAP), unless otherwise noted. Information supplied by management has been accepted as correct without further verification and we express no opinion on that information. Possession of this report, or a copy thereof, does not carry with it the right of publication of all or part of it, nor may it be used for any purpose by anyone but the client without the previous written consent of the client or us and, in any event, only with proper attribution. We are not required to give testimony in court, or be in attendance during any hearings or depositions, with reference to the company being valued, unless previous arrangements have been made. The various estimates of value presented in this report apply to this valuation only anti may not be used out of context presented herein. This conclusion of value is valid only for the purpose or purposes specified herein. This conclusion of value assumes that the Company will continue to operate as a going concern, and that the character of its present business will remain intact. The conclusion of value contemplates facts and conditions existing as of the conclusion of value date. Events and conditions occurring after that date have not been considered, and we have no obligation to update our report for such events and conditions. We have assumed that there is full compliance with all applicable federal, state, and local regulations and laws unless otherwise specified in this report. Neither the professionals who worked on this engagement nor Kern and Company, P.C. have any personal interest with respect to the parties involved, or any other interest that might prevent us from performing an unbiased conclusion of value. Our compensation is not contingent on action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. -7- KERN AND COMPANY, PC 1_ Company Background and Description Resource Real Estate Investors IV, LP owns and operates or invests in multifamily residential properties located throughout the United States. The Company's headquarters are in Philadelphia, Pennsylvania. The Company has over a five year history and has become large provider of residential apartments in the United States. The primary customers of the Company are the renters at the Company's various }apartment complexes. The apartment complexes are multi-unit facilities. The apartment ;complexes are located throughout the United States. Specifically, the Company has apartment :complexes in Tennessee, Texas, and Kansas. As with all businesses there is inherent risk associated with the course of any business. 4s discussed in the Economic Outlook section of this report the market for apartment rentals is gone of the promising areas of the economy. 3 l There have not been any recent sales or exchanges of partnership interests. The Company has had stable rental income over the last five years. The Company has also had strong cash flows from operations over that same time period. The company is at or is better than their industry peers with their financial ratios. Resource Real Estate Investors IV., LP has better liquidity, debt to equity, and operating profit than its peers. Although its fixed assets are higher a percent than the industry its equity position is better than most it$ peers. l m z ,~ - 8 KERN AND COMPANY, PC Ownershi and Restrictive A reements Resource Real Estate Investors IV, LP is a limited partnership with the various limited partners with no voting interest and a general partner as of December 3I, 2010. As of December 3 I , 2010, there was a restrictive agreement in place for the sale of limited partnership interest. The limited partners are only allowed to redeem their interest back to the partnership prior to the partnership termination at a price set by a redemption formula. 9 KERN AND COMPANY, PC Economic Outlook The Livingston Survey, December 2011, predicts the economy's output (real GDP) to increase to 2.5 percent in the second half of 2011, and the economist further predict real GDP to slow to an annual rate of 2.1 percent in the first half of 2012. The forecast also suggest that the unemployment rate will slowly recover over the next two years. Interest rates, both short and long term, are expected to rise over the next two years. The national economy was able to reach positive growth in 2010; the result of the positive growth was primarily due to growth in exports and nonresidential investments. During 2010 the economy grew at a rate of 2.9% which was above the decline of 2.4% in 2009. The Federal Reserve helped promote the economy's growth by maintaining the federal funds target interest. rate of 0.25%. Economic growth is expected to rise by approximately 3.8% in 2011; this is expected to be due to the benefits of increased private sector investments and results of the increase in private sector investments are to become evident in the second half of 2011. The benefits of these private sector investments are also expected to help improve growth into 2012. Personal consumption expenditures make up over 70% of the economy and are largely the F_ greatest measure of current economic performance. In 2010, personal economic expenditures grew at a 1.8% as compared to 2009 which saw a decline of 1.2%. The largest contributors to > slow the economic growth were unemployment, high debt levels, and continued defaults. Although there was growth in 2010 of personal consumption expenditures it was not enough to create a significant impact on unemployment. The export sector increased in 2010 by 11.7%, a large increase from 2009 in which the export sector had a decline of 9.5, the 11.7% growth made the export sector the leading growth sector in 2010. A leading reason for the increase in the export sector derives from the low value of the dollar. Even though the dollar was weak in 2010 there was still a growth in the import sector as they experienced an increase of 12.6% after having declined 14.2% in 2009. The increase however slowed economic growth in 2010 as imports generally have a negative impact `~ on the economy even though exports grew at a quicker rate than that of imports. Imports are currently growing at a significantly larger base, so the balance of trade continues to be in a deficit. The second leading growth sector was in nonresidential investments. Nonresidential >~ investments experienced growth of 5.5% in 2011, significantly down from 2009's growth percentage of 17.9%. Residential investments continued their decline in 2010 as they dropped 3.0% however it is still significantly less than 2009's decline of 20.4%. Although the continued decline in residential investments, it is not a key component of long term economic growth. The federal government experienced growth of 4.8% in 2010 slightly down from 5.5% in 2009. The federal government which is usually one of the leading growth sectors has remained sta grant as military and defense expenditures continue to outpace the non-defense expenditures. The federal government expenditure growth is expected to continue into 2011 as efforts to rejuvenate the economy continue, however it is expected that by 2012 the private sector should. show sustained growth and governmental expenditures will decline. - 1 0 - KERN AND COMPANY, PC s Concerns revolving around inflation in 2010 remained low, as the Consumer Price index (CPI) rose by a mere 1.5% in 2010 down from 2009's number of 2.7%. While Iow levels of inflation can be desirable extremely low levels are typically associated with significant recessions. The core inflation rate was 0.8% in 2010 down from 2009's number of 1.8%, most economist prefer the core inflation rate as they feel that it yields a better indication of underlying inflation by deducting the volatile sectors that are represented in the CPI, therefore the core inflation rate indicates a more stable rate of inflation as compared to the CPI. In 2010, the unemployment rate of 9.4% was a slight decrease from the 2009 rate of 9.9%. This rate of 9.4% is largely higher than the administrations target rate of 5.2%. The increased rate of unemployment is due to many things particularly a leveraged economy. The weakened value of the dollar was able to increase jobs for manufacturing companies as exports increased but it was not enough to offset a loss of 1.3 million jobs in manufacturing from 2009. The 90-day Treasury bill was priced to a mere 0.14% in December 2010, slightly up from the December of 2009 percentage of .06%. The rate that the bilt is priced at reflects the Federal Reserve's near zero federal funds rate target. The more important rate remains the long term rate as they are more critical to economic growth as corporations and governments borrow to invest into growth projects. The 20-year Treasury bond was priced at 4.13% in 2010 year end, down from the 4.58% rate at year end for 2009. Consumer confidence is another area that has an effect on the economic growth as consumers are likely to cut cost on entertainment and travel expenditures. The consumer confidence level was 53.3 in 2010 up from 52.5 in 2009. The index has slightly rebounded from all time lows over the past two years, however consumers still remain concerned about the near term economy while the investment public continues to have optimistic views. Real Estate Investors IV, currently has operations in Texas, Kansas, and Tennessee. The Federal Reserve District has these areas broken down into two districts. They have one district in Kansas City, Kansas and another district in Dallas, Texas. Kansas City, Kansas, which is referred to as the tenth district by the Federal Reserve, noted that the economy had edged higher in October and early November but remained at a moderate level overall. There was strong growth reported by high tech firms and also in the energy industry. Transportation reported stable activity, and agricultural activity was mixed due to varying weather conditions. Prices remained flat and wage pressure was limited outside of s several skilled labor positions. Residential and commercial. real estate was lackluster in the tenth district, though improvements were noted. Housing starts dropped and construction of higher priced homes was relatively weak. The future of homebuilding remained slow and materials were generally available. Residential construction supply firms reported increased sales due to an increase in remodeling as more consumers updated existing homes. Home sales increased slightly but still remain weak overall. Expectations for future home sales were more positive than that of previous ' months, and mortgage lending activity was positive and remained above last year's numbers. 1 1 - KERN AND COMPANY, PC Commercial real estate was up from prior months but still remains sluggish and little improvement is expected. Vacancy rates had dropped however they are expected to increase iri future months. Office prices and rents increased but remain below levels from a year ago and are expected to remain consistent. Dallas, Texas, which is referred to as the eleventh district by the Federal Reserve, noted that the regional economy grew at a modest pace. Manufacturing held steady and demand for business services was flat. The transportation sector experienced mixed results and retailers had moderate sales growth. The financial services sector reported that loan demands were soft, while the energy industry experienced strong growth. Agricultural conditions were weak and employment levels were stable and price pressures were subdued. The housing sector noted that there was continued improvement as inventories of existing homes reduced and new home inventories were lean. Single family home sales are performing better however many potential home buyers remain as economic conditions remain uncertain. ,A F Apartment demand rose since prior reports and there is a very positive outlook on the future, respondents also noted that there were increased sales of apartment complexes to investors. ' There was an increased demand for industrial, retail and business leases; however sales of commercial properties remained sluggish. In November 201 1 Moody's reported that the national commercial apartment property price index was at 143.43, which was an increase of 6.3% as compared to the prior quarter, and up 5% from a year ago. Moody's feels that the economic outlook for commercial apartment property on a national scale are very favorable and are forecasting that the index will increase by SO points by the year 2018. 6 a 1 - 12 KERN ANp COMPANY, PC ~...::. ~ i Valuation Methods The valuation methods eve considered in performing our conclusions include the following: • Book Value approach • Asset Based approach -adjusted net assets method • Market Approaches -comparable companies • Income approaches -capitalization of earnings • Discounted net cash flow The following sections of this report describe the methods used and the conclusions reached. Book Value This method is based upon generally accepted accounting principles (GAAP) and, as such, does not purport to reflect fair market value of most financial statement components and does not include the value of the business' on-going goodwill. This approach would ignore the long history and reputation of the Company. Adiusted Net Assets Methods Under this method, the book value of the assets are adjusted to fair market value, or replacement value, or liquidation values as applicable, and this value is they reduced by the value 'F of recorded and unrecorded liabilities. This valuation method does not reflect the earnings potential of the Company or the various market forces that affect valuation. This method is normally a beginning value and is usually only considered if there is no better basis available or if the Company being valued has little or no earnings. Market Approach i The market approach to valuation assumes that values can be estimated from analyzing recent sales of comparable publicly traded companies and/or comparative transactions. Because of the lack of comparability between the Company, and any located publicly traded companies, valuation techniques using the market approach have been disregarded. Capitalization of Earnings This method is used to value a company based upon its future estimated earnings. The method assumes that all of the assets, tangible and intangible, are indistinguishable components of the business, and does not attempt to value each as separate components. It is also a powerful method for establishing an estimated value for businesses that are not capital intensive such as service organizations. - 13 - KERN AND COMPANY, PC Since the subject entity's value is almost completely identifiable with particular real estate holdings; because the activities are structured to minimize current earnings; because the overwhelming income and cash flows are anticipated to be in or near the terminal years; and ~.' because cash flows of income distributions have been steady, this method was not used. Discounted Net Cash Flow This approach is inherently and conceptually sound, given that the value of any investment can be defined as the present value of future cash flows available to the owner(s) in their role as owners, as opposed to their role as employees, suppliers, or vendors, etc. to the business. One of the historic problems with this approach, related to its use by small closely held businesses, is the common dilemma of the difficulty of measuring the amount and timing of future cash flows. This problem does not exist in the case of the subject entity of this report. In the case of this subject entity, cash flows have been consistent, dependable, more readily determinable and predictable, given the nature and character of the cash flows. Rental income is regular, periodic, and contractually based. In addition, mortgages on the subject M entity's assets are predominantly interest only until the anticipated liquidation date of the subject a entity. Other significant cash flows will result from the sales of rental assets in or near the year of >;' the subject entity liquidation. Those "one time" future cash flows will consist of the selling prices of the real estate less the costs of selling, payment of mortgages, and any entity termination costs. Consequently, the discounted net cash flow method is selected for this valuation. ' In order for us to determine the discounted net cash flow, we first had to project annual cash distributions and annual net operating income to the anticipated date of partnership termination of May 3 1, 2014. Our projections were based on historic amounts for annual cash distributions and net operating income from 2008 through 2010. We did not use the amounts from 2006 and 2007 because the partnership was still acquiring properties through 2007 and using these two years would distort our projections. We calculated the projected net operating income by determining the average yearly increase in net operating income for the years 2008 through 2010. We did not use the amounts from 2006 and 2007 because the partnership was still acquiring properties through 2007 and using these two years would distort. our projections. We determined that the average percentage =h increase of net operating income was 12.359 percent for this time period. We applied this growth rate of 12.359 percent to the 2010 net operating income of $3,603,530 to determine the projected net operating income for :2011 of $4,048,890. We continued applying the same growth rate to the net operating income until we arrived at the projected net operating income for 2014, the terminal year, of $5,743,287. Since the annual cash distributions varied from year to year we elected to use the average annual distributions to Ms. Watts from 2008 to 2010 as a percent of total net operating income of the company of 0.13 percent. We applied this percentage to the projected net operating income for 201 1, 2012 and 2013 of $4,048,892, $4,549,298, and $5,111,548 respectively. This produced - 14 - KERN AND COMPANY, PC ~._ projected distributions of $5,264, $5,914, and $6,645 for 2011, 2012, and 2013 respectively. W"e did not include an annual distribution for 2014 in our projection because this is the year of anticipated partnership termination and the annual cash distribution would be included in the terminal cash distribution. We then capitalized the terminal year projected net operating income using an average residual capital rate from the PwC Real Estate Investor Sarrvey, published by PricewaterhouseCoopers, of 6.24 percent, which equates to a 16.03 multiple. A residual capital rate is used to estimate the resale value of a property at the end of a holding period. We computed a gross terminal value of partnership assets of $92,064,891. We then reduced the gross terminal value of partnership assets by the total projected mortgage amounts to be satisfied of $52,905,000 and the estimated selling expenses of $7,825,516 (8.50 percent of gross value) which resulted in projected terminal year cash available for distribution of $31,334,375. We then took the projected terminal year cash available for distribution of $31,334,375 and applied the ownership percentage of the Estate of Gladys Watts which is 0.3382 percent which resulted in the terminal cash distribution of the Estate of Gladys Watts of $105,977. We then discounted this amount to its present value at the date of death of Ms. Watts which resulted in the present value of terminal cash distribution of $104,230. We used a discount rate of 0.57 percent which was the 3 year treasury rate on June 24, 2011, the date of Ms Watts' death. We used the three year treasury rate because this is the same time period from Ms. Watts' death until the anticipated partnership termination. We also calculated the present value of future annual cash distributions using the same discount rate of 0.57 percent utilized for the terminal cash distribution. This resulted in the present value of future annual cash distributions of $17,664. We then added together the present value of the terminal cash distribution of $104,230 and the present value of future annual cash distributions of $17,664 and arrived at the discounted net cash flow value of $121,894. These projections, calculations, and related assumptions are addressed in the following sections of this report: • Assumptions and limiting conditions • Appendices: o List of documents reviewed -page 18 o Conclusion of value calculation-page 19 o Present value calculations-page 20 o Historic and projected distributions and net operating income-page 25 o Financial ratios and analysis-page 27 o Historical financial statements-page 29 ;~ r Su~,y Our calculation of the fair market value of the Company using the discounted net cash flows ~,~,as deemed the most appropriate valuation method for the purpose of providing an - 15 - KERN AND COMPANY, PC ^ estimate of value for the Estate of Gladys Watts to be used in connection with reporting the value for Pennsylvania Inheritance Tax. After considering the above facts and calculations, we arrived at a fair market value of $121,894 for the 0.3382 percent limited partner interest owned by the Estate of Gladys Watts in Resource Rea] Estate Investors IV, LP. Marketability and Minority Interest Discounts Marketability of a business involves the liquidity of an interest, or how quickly an investment can be converted to cash at the owners' discretion. Factors that create the necessity for a discount include the lack of apre-established market for the stock of a closely-held company, the high costs of going public, the greater degree of risk associated with a smaller company, and other various restrictions concerning registry of stock. '' Minority interests are by their very nature less valuable than a majority interest due to the aspect of control. In such a case a discount would be applied. to• the total capitalized value in order to reflect the lack of control in the interest being valued. A calculation of such discounts was not applicable in this instance because we were able to calculate the present value of cash flows attributable to the particular investor, the Estate of Gladys Watts. k - 1 6 - KERN AND COMPANY, PC ~: Appendices 1 ~ KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS IV, LP LIST OF DOCUMENTS REVIEWED 1. PricewaterhouseCoopers, "PwC Real Estate Investor Survey" 2. Front Door, "Home Selling Checklist" 3. Resource Real Estate Investors IV, LP - 2006 K-1 for Gladys Watts 4. Resource Real Estate Investors IV, LP - 2008 K-1 for Gladys Watts 5. Resource Real Estate Investors IV, LP - 2009 K-1 for Gladys Watts 6. Resource Real Estate Investors IV, LP - 2010 K=1 for Gladys Watts 7. Resource Real Estate Investors IV, LP - 2006 Financial Statements 8. Resource Real Estate Investors IV, LP - 2007 Financial Statements 9. Resource Real Estate Investors IV, LP - 2008 Financial Statements 10. Resource Real Estate Investors IV, LP - 2009 Financial Statements 11. Resource Real Estate Investors IV, LP - 2010 Financial Statements 12. RMA Annual Statement Studies 2011-2012 13. Federal Reserve, "Livingston Survey", December 8, 2011. 14. Bureau of Economic Analysis, National Accounts Data, January 2011. 15. Economic Report of The President, Submitted to Congress, January 2011. 16. Federal Reserve, Statistical Releases and Historical Data, February 2011. 17. Federal Reserve Press Release, January 2011. 18. Ba~reau of Labor Statistics, Most Requested Series, January and February 2011. 19. Moody 's Investors Service, Moody's/REAL Commercial Property Price Indices, November 2011. 20. Yahoo Finance, February 2011. 21. Federal Reserve District, Current Economic Conditions, November 2011 ~.x_ -18- KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS IV, LP CONCLUSION OF VALUE Projected Net Operating Income in Year of Termination Average Residual Cap Rate k Gross Terminal Value of Partnership Assets Total Projected Mortgage Amounts to be Satisfied ' Selling Expenses Projected Terminal Year Cash Available for Distribution Gladys Watts Ownership Percentage Gladys Watts Terminal Cash Distribution Present Value of Terminal Cash Distribution Present Value of Future Annual Distributions Discounted Future Cash Flow -19- $ 5,743,287 16.03 92,064,891 (52,905,000} (7,825,516} $ 31,334,375 0.3382140% $ ] 05,977 $ 104,230 17,664 $ 121,894 KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS IV, LP PRESENT VALUE CALCULATION OF TERMINAL VALUE OF PARTNERSHIP Formula: PV -Present Value A -Terminal Value - $105,977 r -Rate of Interest - 0.57% q -Compounding per year - 12 or monthly n -Number of years - 2 years and 11 months or 3 5 months Calculation: PV = 105,977/(1 + .0057/12)35 PV = 105,977/(1.000475)35 PV = 105,977/(1.01676) PV = $104,230 Present value amount of $104,230 represents the terminal value of the partnership at the anticipated date of partnership termination, May 31, 2014, discounted to the date of Ms. Watts' death on June 24, 2011. - 2 ~ KERN AND COMPANY, PC r.. ~< ,? << ,'; ;: i f GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS IV, LP PRESENT VALUE CALCULATION OF FUTURE CASH DISTRIBUTIONS Present Value of Projected Future Cash Distributions 201 1 - $5,249 2012 - $5,864 2013 - $6,551 Total - $17,664 Present value amount of $17,664 represents the total present value amount of all anticipated future cash distributions from the partnership for the years 201 1, 2012, and 2013. We did not include a distribution for 2014 in our calculation because this is the year of anticipated termination of the partnership and this distribution would be included in the terminal value calculation. , -21- KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS IV, LP PRESENT VALUE CALCULATION OF FUTURE CASH DISTRIBUTIONS Formula For 201 1 Distributions: PV -Present Value A -Future Cash Distribution - $5,264 r -Rate of Interest - 0.57% q -Compounding per year - 12 or monthly n -Number of years - .5 years or 6 months Calculation For 2011 Distributions: PV = 5,264/(1 + .0057/12)6 PV = 5,264/(1.000475)6 PV = 5,264/(1.002853) PV = $5,249 Present value amount of $5,249 represents the discounted value of the projected future cash distribution from the partnership for 201 1. 2 2 KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS IV. LP PRESENT VALUE CALCULATION OF FUTURE CASH DISTRIBUTIONS Formula For 2012 Distributions: PV -Present Value A -Future Cash Distribution - $5,914 r -Rate of Interest - 0.57% q -Compounding per year - 12 or monthly n -Number of years - 1 years and 6 months or 18 months Calculation For 2012 Distributions PV = 5,914/(1 + .0057/12)'8 PV = 5,914/(1.000475)18 PV = 5,914/(1.008584) PV = $5,864 Present value amount of $5,864 represents the discounted value of the projected future cash distribution from the partnership for 2012. - 2 3 - KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS IV, LP PRESENT VALUE CALCULATION OF FUTURE CASH DISTRIBUTIONS Formula For 2013 Distributions- PV -Present Value A -Future Cash Distribution - $6,645 r -Rate of Interest - O.S7% q -Compounding per year - 12 or monthly n -Number of years - 2 years and 6 months or 30 months Calculation For 2013 Distributions• PV = 6,645/(1 + .OOS7/12)30 PV = 6,645/(1.000475)30 PV = 6,645/(1.014348) PV = $6,SS1 Present value amount of $6,SS 1 represents the discounted value of the projected future cash distributions from the partnership for 2013. - 2 4 - KERN AND COMPANY, PC ~ r'~ rn o 0 0 0 N O M ~ N W M N O D\ 00 M oa r oo M O ~i " ~ f~ -- O O F-' d ~ ~. 69 V ~ 69 69 h V ¢ Q Q N z z z z ~. o N ~., ~' vi ~. N sa 00 ss 0. ~n o 0 0 ~r o v ~n o rn ~n rn r ~ ~ ~ ~ rh ^ M M r~ ~ - n Qv ~D O O O ~ N ~n - ~~ cV ~ 69 E~3 69 '~ ~T O O 00 N d' 0 0 0 0 0 ''`~ U N ^ O .--. U V' ^ O r~l U M _ ix7 ~ O N 4\ N ~n ~ ^ M hl Z' ~ .n r` O O ~ N V 6A 9 9 ` N bq O ~' ~ N U O ~ O N N o0 V 0 \ o 0 \ 0 0 \ 0 ~ cC a O~ ~O V O D\ y cC g 00 W rf1 O N ~n ~O N M M M ~ ` ~ g .~ V n ~n O O `~ °J O O N o v .n •- m ~ m O ~ N N ~ !,~. 64 69 64 ~ ~ cd bU y ~ ~ bn v !~ ~ ~ ~ 'a ~ > 0. .~ . N N ~ N L . .+ L bq i N ~ > O > ~j O ~ L c f- ~ ~ [n M ~n L N w w C ~ ~ L O °J ~ O • ~o z o ~ v w c o ~ = ~ ~-~ ~ _ _ - N ~ a cn ~ ~, N ~ ~ .Y o > O v y w ~ ~ ~ ~ ~ z ~ ~ .] ¢ Q C[ av C N n. O v _ O _ rn W _ 0.. Q ) .r ~ C 4 cd ~ W v ~ C ~ ~_ ~ '~ w O U f- '- N }? a O v . O v O a> L O ~ > .' " cC W :: •°~ Y m a m a r ~ z o Z o z W C c C C ~~ L ~c ~ % ~ Q ~ a~ ~ ai ~ v ~ y . ~ ~ r ~ ~ ~ ~ Q E ~ -~ ~ fl- Q n. m io m U a Oz ~ ~ ~ ~ Q ~~~ m ti o.. ~ E E ~ ~~o ~aaz ~ cn [x• (- O ~ ~ a0i a0i a~ a: Q E z ~ O _ ~ ~ ~ m ., ~-. Q z ° z ° 3 o Q ~ ~ °' .~ E v~ W ~ .~. F ~ N N a~ U o o ~ ' O U w ` ` o o Q z p a . n . a`. z O V G - 2 6 - KERN AND COMPANY, PC `i r N r - - ~~ N T "7 rl y ~ .3 O C ~ f~ - - o(c r N _ (~ nl L M ~~ r - ~1 r.l ~I v^ ~1 ~i y O r~ M - N C ~ Y r I C `I - M rl .r, fi r ~ L ,... - ~ C, L - y _ J w ~ _G C~ - j - ~ G y f. _ ~ "r _ rl c` ~ r- :J ~ _ n V ` ._ - C CL - n - - - v, - ~ _ v LI..1 'J ` F-- v v G J r l C _ !' F" " .~ ~ ~ I i. LLJ - - _ - _ - _ _1 ? _ ._ _ _ _ _ ~ _ - _ Cu - 'n ~ ^i r.i '~~ ~~~ v v v - L L-7 J - v ^' v _ _ ~ 1 - ~ I. ~ U J CL J - - fi LL C ~f ~ z _ -~ '-~ w G a ti -t J Z _ ~.. ? ~ J,. J : W i y ~z v ~ c :~ _ J i ~l~ = ~ - J ~ L/ `~ ~ ~_. cl~ ~ L _ _ _.~ ~ Z ? v -~ ~ ;~ C N ~ ~ W J r, Z = v av .- v .. - ,ii v - ~ 2 ~ KERN AND COMPANY, PC %~ ~~-- ~ e , o a _ - .. rt= ~~ _rt °~ =- - ~ a, n~ ~ _ _ i - r ~ - ~ ~ _ -r ° i r'n .~ - _ - r'i T r r~ i ~ I _ _ _ c C G ~f. - , J r L '~ . c c ~ ri - _ '~ ,c - - i ~ W ~ GV ~ ~ - - ~ ~ p ~ - - ~ .: Z F- H r W J W W J L v ~. :r`,. W v ~- v C[ ti _ v _ ~-- C v - _ F-. J F ~' ~ c ~.. c v y "~ v~ ~ G zZ2 (~F-=2 f-ia.-? I.uZF=QF~G ¢ ?'tu '~ r. w {.- i v ~ - _ _ - ~ _ J Z C' '~ ? n G v ~ .J-. J J ~ Z J v - - _ - j 1 '' -' m I- -i F- F __ KERN AND COMPANY, PC ,. c - - _ - c - - _ .~ ~ - - - .~ / . ~ - c ~ r- ~ ~ Uj m - - - ~ __ _ - .'~ C _ - CJ i v G G C C. '" - ~ ~ ~ v~ ~ .ri C ~ /J s, - - C _ _ - ~ '0 - - __ __ ~ _ _ _ .~ - ^iI - J .. - - r - - - - T 7 G - - - ~I . •~. r r .. - 'j - r 1 ~. ~ ~ v ~ C ~ C ~ I I P - - ! I ~ - - T ~ C T G P ~ -J W .i. - 'J - J - - i = ~ I G _ ^~ p .: ~ W ~j, ~ I ? .~ T j - - ? v ~ - - _ - W ~ T _ ~ _ T W - W - _ H W Z T v ? ~ ui m L W v. __ ~' L 7_ _ - - W W w w ? _ - CC ~ - ~ - h- - __ - ~_. 1 = l - W - F- T ? f J W ~ ~ _ ,-~ ...1 _ t ~ - C - _ 4i ~ Z 'f - _ _ - - _ ~? a W v _ J L= ` _ _ -- _ _ ? ~ ~ - ~ v ~i - ~ _ n ~ ? ti f ~ _ _ ~. ~~ w .. cG L e= ~ ~ m ~ .~ -f U G C r . ~ ? U 'L W W ,J . .~ ~ = - J ~ -29- ;~..Q /. J .7 - _ - ~ _ Yi C i~ - ~ ~ ~~ - .~ _ 3 ' ~ P ~ _ _ - ~ C ~ P ? _ t ~. j j - i. ~ J - .~. C Al - ~i u - - _ - - - - !~ ~ .-~ C Y4 = - T - .r. v. = _ - J ? r _ %~ j - ~ ~r . i~ G ~4 - - - _ - - - C _' - - - - ~ ~ G S9 ~ T ~ '~ _ - - - - - ~ - ~ G !. ~ r G - r - ri - ~i O H r. - - r. W •'~' U. y K W G J L u - F- v, ~ - W - v J I- ~ ~ W .I - V W r m C C ~ L F- W F T _ r _ _ _ - ~ -~ - J ~ W J - 'J _ _ J L C' J W J T ~~ v ~ r _ _ - W W v J ~ T H W .v _ ~ _ _ `. ~ _ J L J CL = L Z ~- d T W T J = KERN AND COMPANY, PC ~,.~_ I I F~- i ~ Q O , Q v i e ~ o o O a ~D N O r~ - O N - CO R Q ~ P r t~ r I O ~ O~ v~ - o c r i c W 0 0 o a O O ~O j~ O. o ~ ri r o ~ h r ° ~ ~o ~i ~ ~ o ~ o o h a o rn - a~ r ~ ~ r o: c w o a o 0 o O rn h o n rt ~~1 O C 0 `~ o c 0 ,,, h ~ ~ ~I O O O IX h oo .gyp p o ~~ r 0 0o v vi ~o c o ~.i _ w e 0 0 0 0 o o ~n rn o ~ - h o c o vi h o ~c o n PI O h N ~ p v O O ~ ~ O O _ ~ 7 - 7. r .c o_ ~n K W oa vi W j o 0 0 0 0 ~ ° z ° o p o 0 0 p o ~i r o a W o Z W ~ h ~ a Q'j of O h -. r ~ CC (y] 1 h i p - O rl - y„ n V oo v a o n ~ J J ~ - ~ ~ O bq a k. O ' f- F- z ~ z W F a O~ .O` a+ o. N b N ni r~ R ri e 0 r~ ~O ~D nl PI ~~ e r n 0 1 H O ~~ o a o~~~ O V C O O. O O O O `(O ~ <f P O O ~ - N O r- ~ O h. N ~ h ~ ~ a 'n - N o 00 c o o ~~ o a 'S O O ~O C O rn c ~ 0 0 ~ 'n oha m ~ - ~., ri d O ~~ rn rn ~a 't 0 o e o ~' o h ~1 rn O o ~ `* ~ v o o r - ' c - o o - N h ~ ~ ~ O ~ P ~n r1 j~ ~ ~ o r c o h h e e a e o e ~~ ~ h h 0 0 0 0 i o o -r ~`~ ~ 0 0 0 - N ~O o0 O ~ ~ V ~/? 1 O r~1 r~ ~ h ri O y o e o ~ o h ~ ~ .p o ~ -r v+ ~ N 0 0 0 - 0 ao 00 ~n vi ~O h N ~ a °~ `O h O ~O ~ ri - „"" .p vl F Q F- u F- ~ ~ WI V] W W ~ N N ~ - ~ .a O ~ O ~ C U v „, ; ~ w~ n. ~ ~ _ o ?' ~ o ~ N m L N W `" % z W ~ ~ p C ~ y J 'o W O O J ;n ~ a FL- N ~ v v ~ ~ ¢ ~~ vWi E ~ ~ m F, c ~ m Q _ Z _ i o Q C ~ N. E N W N N O ~ aWa,, O v i H W ~ O ~ ~ ~ ^~ ~-1 ¢ °_ u v c ` om ~ ~~ ~ u N. ~° ~ ~~ s ~ y N .E a i Y . ` Q U O ~ c°'n cn m m O _ EO ~ . ~ c .3 `o ~' `u ~ .~ °' ._°t ='• ,,, Q ,Z rn c c ~ c p... Z u ° o_ U `v o F' Z Z z ~, O ~ J W w a ca O i U O O ~ U T - 3 O - KERN ANp CONIRANY~ PE ~. r ri C r~ W c O] r~ G (,i W W W z W T _- ~ rl W ~"' J 'L L.L _) ~ i J rJ. W ~ ~ rte, 1- _ !t l W '~ j J z W ~ ~ z W F- t G W W ~ ~' W '~- ~ f. W ~ z .~ W f, L W W W ? J ~ ~ W W 4? ? ~ J r 3 s" ~` ~, ~ ../ z ~' c z ~- z ~ 2 } T f .J $j ~- ~ CC € ' = z c t ~../ J L ~: C _ ~ U ~+ r` - 'n r` rl Y 'n U z .^ ri ri r` .~' ~.. r` ri vi v. - `r -r r~i 7 r` --r ` Y ~ ~ r - C ef: 'T Y_ r. s4 Y --t x r r` r` . _ C ... ~= r` 7 C - r - r~ r~ ~ r~ ri -f - ~- ~' - ri "' -- - C" C C^ C C C .. C .._ O C O C C -- - ^ t r~ r` C ` C r~ r~ -P 'n n O~ -f - ' o^ rl r` Y fn ~ - 00 ~D 00 07 - - ~r ri C ~ C - C C O C O C C - - -' C C. O C O O C _ G ~ _. m = - r^i ri o~ r~i = o~ -t ri ru 'ri i • vi r r c -r r i - v~ r-~ c - ~. r r` l - "' - - - rt ri - 'n rl 't 'r, r` ~: r` V r` r` rt rl ' r` r •n U O r` A U r` O 'n. C.p ~ C rte. - r~l v. - r•~ ri -7 ~' rr 'n O C - - r` - - - 'n _ - v r l r~ - - - tb ,~ n C n Y C) 'r, m ri Y C 'n l .~, ~ v - _ v v 'v v _ ~ ~ - r• ~ c - - - v - 'n G ~ ~ oi~ - ~ = - c - r v ~J v .J - - _ v, r 'U ,f v ~ - _ v - `~ ~ _ - " _ tip' _ ~ ~ v 'Ji 2 Z v ~ ~~' 'n 'I~ = v L v .., r G v ~ v m~ v r' r '" T v CL 'U rte-' , - r _ .- i ry ~ 1. .V L v •r v _ = = J ' y L / G - 'll '~ I'll G -_ - - - /, ~ v W _ ~ C _ - .~. _ _- - v CC - j '~ _ ~ ~ :1~ C ~f, ~ ~ I ~' ~ - v - = J W V - 4 ,~ v ,- v ~ ~ v ~ v U % ,~ ~ ~ ?~ u = v v Z G - r - - v , v ~ z 2 , rJ J -31- KERN AND COMPANY, PC _R~. . r1 L.I..I ~ m ~ ~ rl u.~ J W G G W G z rY y I ~ o rI u s y H J ~ ~ J i - ~`. t~ ~ J ,f, ,~;, u.~ 'C ~ ~~ z ~ z ~- _ ,,, w W J ~' T u..i ~ LL] :f. J ,r-. ~ z ~_ l., L ~ I.U i ~ ~ _ f ~ [.tl ~ ~ ~ ~ L] I. ~ Z F- F- ~ z ~ f. C! 'J t { i" G ~ IJ J 7 $ ~ Z I q '..J ~/ _ ~~; rt r _ -r -T r~ r I r ~ ri -1" - r ~I ~ _ r rt rt ri ~~~ ~i - ~n - rt _ . r rt I c~ r ~~ ~ ri ~ r1 ~ 1~ _~ ~ ~ ~ r ri . ~ ~ ~~, , rt - - s ~ - . _ _ r` r` ri r ri r~ ,~ Y_' 1~ - rl r` Y ~- rq - Sri "^, ri ri rl ' - _ C C 1~ Sri T Y r - r r - ri ~ ~n r'l ~O ~ ~r'~ V1 rl 'n rl 'J JD ~~~ - 00 Y -t - ~ rl C C ~ ~ -r c - r m - r~ r ~~~ •~^. f~ M T - n v _ ri C h U~ ~r~ M -Y VJ '7' O C ~n •G - -, o ~ ~~: rt rn c~ 1~ U '1 ~i rl ri f ~n 't v', rt - _ r r T J rl rt ~n ~ ~ - r ~ ~n r 'n t` r1 rt O ~~ -t ri - r .G ~n rl ~ ~n ~ t` ~fl 'll ~ ~ ~C r rl r~ ~ - r -_ rt - r~ ~~, O O r O ~ -* ~ ~ ~n ~ v~ -r ~ rl - r1 - -P ~n ~n f T r i9 r C ~n sue, r^ r1 rl rt r rt rt „ x ,- ,~ ~_ ,,, v - ~' ~ v. v. I- ~ ~' v - ~ _ '~ 1! ~ J ~ y bi, - Ol, J ~ j _ ~ - 'J - .r, LL1 ,i ~ ;~, v z r T ~~, v ~ _ - ,~, , ~ ;,, r- ~ c v ~ - z - - ~ v J [i (~ ~ G ~~ - J ~- ~ ' _ - G ._. ~ ~ ~ _ ; ~. J ' _ 'J v r _ _ v _i _ /~--- ~ ~ ~ f -~ L r _ c ~ `" _ G_ ~ ~i ~ v cp v 2 2 u L "I. "L• - - ~- v, v, y ,- .y J =J z J 'J -32- KERN AND COMPANY, PC 2331 Market Street Camp Hill, PA 17011 717.763.0888 TEL r KERN AND COMPANY, PC 7,7.763.1581 FAX ~.C~OU'•t TAPdTS ARdC dU 5li4ES~ AD`J 15~^,R5 kern(~panetwork.com CHARLES L. KERN, BS, MBA, CPA, CVA CFA AEP ABV CFF Charles L. Kern is Chairman and CEO of Kern and Company, P.C. Founded in 1980, the firm serves the Eastern and Central Pennsylvania market. Charles is a CVA (Certified Valuation Analyst), CFA (Certified Fraud Auditor), AEP (Accredited Estate Planner), ABV (Accredited Business Valuator), and CFF (Certification in Financial Forensics) in addition to being a CPA. Charles began his career as a management consultant and auditor in the Philadelphia office of the international accounting firm of Ernst & Young. While at. Ernst & Young, he was a member of the audit/consulting teams doing work for, among others, the Federal Reserve Bank of Philadelphia, the Philadelphia School District, and the United States Army Defense and Readiness Command. His years of public accounting experience are complemented by several years in which he served as controller and treasurer of a Central Pennsylvania manufacturing firm. He has both a Master of Business Administration degree and a Bachelor of Science degree from the Pennsylvania State University. Charles is a published author with articles in the Central Penn Btsiness Journal, The Valuation Examiner, Builder-Architect Magazine, and The Journal of Forensic Accounting. He instructed junior, senior, and graduate accounting students at Penn State's Harrisburg Campus for twelve years, where he taught advanced level courses in auditing, taxes, and accounting. j:. ~, He is an active member of the American and the Pennsylvania Institutes of CPAs (PICPA), the National Association of CVAs (NACVA), and the Central Pennsylvania Estate Planning Council. He is a member and past chairman of the PICPA's committee on Continuing Professional Education, member and past chairman of the PICPA's committee on Forensic & Litigation Services, and chairman of the PICPA's committee on Business Valuation services. He is on NACVA's Committee on Recertification. He is an editor of the International Handbook on Business Valuation. He is a member of the Board of Directors of: Drug Free Pennsylvania, the Mechanicsburg Home for Children, Central Pennsylvania College's Advisory Council of the Business Administration Programs, and. The World's Forgotten Children's Foundation. Charles' hobbies and personal interests include travel. to LJ.S. national parks and foreign countries, pleasure reading, and his membership in The Delancey Scotsmen, a Scotch tasting club. 02/09 -33- VALUATION REPORT OF RESOURCE REAL ESTATE INVESTORS 7, LP AS OF JUNE 24, 201 1 ISSUED FEBRUARY l 5, 2012 2331 Market Street Camp Hill, PA 17011 717.763.0888 TEL 717.763.1581 FAX KERN AND COMPANY, PC it ! ~ ~ __. TABLE OF CONTENTS Pale Opinion letter The conclusion of value report: Purpose and use of the valuation Premise of value " Process of valuation Assumptions and limiting conditions Company background and description Ownership and restrictive agreements Economic outlook Valuation methods Appendices: List of documents reviewed Conclusion of value calculation Present value calculations Historic and projected distributions and net operating income Financial ratios and analysis Historical financial statements Professional biographies 4 5 6 7 8 9 10 13 18 19 20 27 29 31 34 KERN AND COMPANY, PC KERN AND COMPANY, PC ACCL'•JNTdNTS :>~JL` '3115i~JESS ADVISORS Opinion Letter Joel A. Watts, Executor Estate of Gladys Watts 1920 Lula Lane Enola, PA 17025 Dear Mr. Watts: 2331 Market Street Camp Hill, PA 17011 717.763.0888 TEL 717.763.1581 FAX kern@panetwork.com Accompanying this letter is our detailed Conclusion of Value Report of the Estate's investment in Resource Real Estate Investors 7, LP (the Company), as of June 24, 201 1. The issue date of the report is February 15, 2012. :~ Specifically, we were engaged to value the portion of Resource Real Estate Investors 7, LP that the Estate of Gladys Watts owns including stating and defining the "standard of value". We are independent of Resource Real Estate Investors 7, LP and our compensation is fee based and not contingent. Purpose of the Valuation The purpose of valuing the Company as of June 24, 201 1 is to provide a conclusion of value for the portion of Resource Real Estate Investors 7, LP that the Estate of Gladys Watts owns for reporting requirements for the Pennsylvania Inheritance Tax. Interest Valued and Standard and Premise of Value Currently, the Estate of Gladys Watts owns a 0.15294 percent of the limited partnership of the company. The standard of value we applied was fair market value, which is defined as the value, expressed in cash or it equivalent, at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts. Conclusion As To Valuation Results We have performed a valuation engagement, as that term is defined in the Statement on Standards for Valuation Services (SSVS) of the American Institute of Certified Public Accountants, of Resource Real Estate Investors 7, LP as of June 24, 201 1. This valuation was performed solely to assist in the matter of valuing the portion of Resource Real Estate Investors 7, LP that the Estate of Gladys Watts owns for reporting requirements in connection with the Pennsylvania Inheritance Tax; the resulting estimate of value should not be used for any other -1- ; k4 purpose or by any other party for any purpose. This valuation engagement was conducted in accordance with the SSVS and standards established by National Association of Certified Valuation Analysts (NACVA). The estimate of value that results from a valuation engagement is expressed as a conclusion of value. Based on our analysis, as described in this valuation report, the estimate of value of a .15294 percent interest in Resource Real Estate Investors 7, LP as of June 24, 201 1 was $122,218. This conclusion is subject to the Statement of Assumptions and Limiting Conditions found in the limiting conditions section of this report and to the Valuation Analyst's Representation found in this report. We have no obligation to update this report or our conclusion of value for information that comes to our attention after the date of this report. In arriving at our conclusion of value, we considered five commonly accepted approaches to value -book value, the asset-based approach, the income approach, the discounted net cash flow approach, and the market approach -each with several underlying methods. The asset- based approach is most often used in valuing anon-operating business, business with continuing losses, or for liquidations. Since the asset-based approach to business valuations is not useful in valuing operating businesses, valuation techniques using the asset-based approach had to be disregarded in valuing Resource Real Estate Investors 7, LP. Based on the lack of comparability between the company, and any located publicly traded companies, valuation techniques using the market approach also had to be disregarded. The income approach was disregarded due to the lack of earnings reported by the Company. Book value also was not appropriate because it does not generally include any goodwill and the Company has a moderate history and a good reputation in its market. Due to the Company's history of positive cash-flow, we determined that the appropriate method for determining fair market value of Resource Real Estate Investors 7, LP is the discounted net cash flow method. We calculated the gross terminal value of the partnership by applying a multiple derived from the average residual capitalization rate to the projected net operating income. We then deducted projected mortgage amounts to be satisfied and related selling expenses, from the gross terminal value of the partnership assets to determine the projected terminal year cash available for distribution. We then applied the ownership percentage of 0.15294 percent to the projected terminal year net cash available for distribution to determine the amount of cash that would be distributed to the Estate of Gladys Watts in the year of partnership termination. We then discounted this amount back to the date of death of Ms. Watts, June 24, 2011. In addition to calculating the terminal cash distributions, we also computed the annual cash distributions she was entitled to receive up to the point of the partnership's terminal year. These distributions were then discounted back to Ms. Watts' date of death in the same manner we did for the terminal cash distribution. We combined the two discounted amounts to determine the fair market value of a 0.15294 percent ownership in Resource Real Estate Investors 7, LP. Based on this information, we concluded that the fair market value of a 0.15294 percent limited partnership ownership in the Company is $122,218. This conclusion of value and report are prepared in accordance with NACVA Professional Standards and the SSVS. -2- KERN AND COMPANY, PC Limitations on Use of this Report We have no responsibility to update this report for events and circumstances occurring subsequent to the date of the report. This report's distribution is restricted solely for use by the Company's members, legal and financial counsel in connection with the purpose stated above- We are not, by virtue of performing the valuation or preparing the report, required neither to give expert testimony nor to be in attendance in court or at any government hearing with reference to the matters contained herein, unless prior arrangements have been made with us. Sincerely, Charles L. Kern BS/MBA/CPA/CVA/CFA/AEP/ABV/CFF 1 .. F 3 - KERN AND COMPANY, PC Purpose and Use of the Valuation We have been engaged to determine the fair market value of Resource Real Estate Investors 7, LP. The conclusion of value derives a fair market value for 0.1 X294 percent interest in Resource Real Estate Investors 7, LP as of June 24, 2011, for the purpose of valuing the portion of Resource Real Estate Investors 7, LP that the Estate of Gladys Watts owns for reporting requirements in connection with the Pennsylvania Inheritance Tax. Joel A. Watts, } Executor of the Estate of Gladys Watts, has engaged us. I F ~ 4 9 }~ 7 y .. -4- KERN AND COMPANY, PC Premise of Value Premise of value is the assumption regarding the transactional nature applicable to i:he valuation under consideration. Two general transactional natures are going concern and liquidation. Liquidation is the forced or orderly sale of the entity's assets resulting in the termination of the business. The premise of value known as going concern simply states that the entity is operational ~' and for the investment horizon will continue to be in operation. The evidentiary data supporting the going concern premise can be supported by, but is not limited to, the entity having a trained workforce, an operational facility, and possessing systems, procedures, and licenses to support it. Since the evidence supports these transactional characteristics the going concern assumption will g be used as the premise of value for this conclusion of value. 5 KERN AND COMPANY, PC .. _ . Process of Valuation All financial statements, operating results and data pertaining to Resource Real Estate Investors 7, LP for the years 2009 and 2010 have been taken from the Company's annual financial statements, which have been audited by an outside CPA firm. All related facts, comments and statistical information set forth in the report have been obtained ti-om sources believed to be knowledgeable, reliable and accurate. All claims to property have been assumed valid and no investigation of legal fee title to ' real or personal property has been conducted within the scope of this report. Liens and encumbrances that may be against the property have been given no consideration except as may be specifically set forth in this report. Our conclusions are based on the assumption that there shall be a continuation of the present management policies over whatever period is reasonable and necessary to maintain the character and integrity of the Company. The conclusion of value was prepared under the premise that anon-compete/non-solicitation agreement is in place for all current members of key management. 1 1 No opinion has been rendered concerning the existence or possible impact on value of potentially hazardous construction materials, toxic waste or the ability of the Company to meet Environmental Protection Agency standards. No responsibility is assumed for the subject Company to meet environmental approvals. Detection of hazardous substances is beyond the { appraiser's scope and requires consultation with an expert in this field. '' The fair market value determined in this report is only valid for the date specified. The standard of value used in arriving at our conclusion of value is fair market value. Fair market `' value is defined as the amount at which property would change hands between a hypothetical willing seller and a hypothetical willing buyer when neither is acting under compulsion and when both have reasonable knowledge of the relevant facts. In arriving at our valuation conclusion, we considered five commonly accepted approaches to value -the book value f approach, the asset-based approach, the income approach, the discounted net cash flow approach, and the market approach. We analyzed each approach and method to determine which generates the most reasonable conclusion of value of Resource Real Estate Investors 7, LP as of June '?4, 2011. After careful consideration of each method, underlying assumptions and variables, we concluded the discounted future cash flows approach to be the most appropriate (see Valuation Methods section of the report -page 13). a 6 KERN AND COMPANY, PC Assumptions and Limiting Conditions This report has been prepared for the specific purpose of a 0.15294 percent limited partnership interest in Resource Real Estate Investors 7, LP as of June 24, 201 1, and is intended for no other purpose. This report's distribution is restricted solely for use by the Estate of Gladys ''' Watts in connection with the purpose stated earlier in this report. Information, estimates, and opinions contained in this report are obtained from sources a considered to be reliable. However, we assume no liability for such sources. l Resource Real Estate Investors 7, LP and its representatives warranted to us that the information they supplied was complete and accurate to the best of their knowledge and that the financial statement information reflects the Company's results of operations and financial conditions in accordance with generally accepted accounting principles, which is in accordance with generally accepted accounting procedures (GAAP), unless otherwise noted. Information supplied by management has been accepted as correct without further verification and we express no opinion on that information. ~- Possession of this report, or a copy thereof, does not carry with it the right of publication of all or part of it, nor may it be used for any purpose by anyone but the client without the previous written consent of the client or us and, in any event, only with proper attribution. We are not required to give testimony in court, or be in attendance during any hearings or i depositions, with reference to the company being valued, unless previous arrangements have been made. ~~ , -, The various estimates of value presented in this report apply to this valuation only and may not be used out of context presented herein. This conclusion of value is valid only for the purpose or purposes specified herein. This conclusion of value assumes that the Company will continue to operate as a going concern, and that the character of its present business will remain intact. The conclusion of value contemplates facts and conditions existing as of the conclusion of value date. Events and conditions occurring after that date have not been considered, and we have no obligation to update our report for such events and conditions. We have assumed that there is full compliance with all applicable federal, state, and local regulations and laws unless otherwise specified in this report. Neither the professionals who worked on this engagement nor Kern and Company, P.C. have any personal interest with respect to the parties involved, or any other interest that might prevent us from performing an unbiased conclusion of value. Our compensation is not contingent on action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. -7- KERN AND COMPANY, PC ~~ Company Background and Description Resource Real Estate Investors 7, LP owns and operates or invests in multifamily residential properties located throughout the United States. The Company's headquarters are in Philadelphia, Pennsylvania. The Company has a three year history and has become large provider of residential apartments in the United States. The primary customers of the Company are the renters at the Company's various apartment complexes. The apartment complexes are multi-unit facilities. The apartment complexes are located throughout the United States. Specifically, the Company has apartment complexes in Texas, Georgia, and Maine. As with all businesses there is inherent risk associated with the course of any business. As discussed in the Economic Outlook section of this report the market for apartment rentals is one of the promising areas of the economy. z There have not been any recent sales or exchanges of partnership interests. The Company has had stable rental income over the last two years. The Company has also had strong cash flows from operations over that same time period. The company is at or is better than their industry peers with their financial ratios. Resource Real Estate Investors 7, LP has better liquidity, debt to equity, and operating profit than its peers. Although its fixed assets are higher a percent than the industry its equity position is better than most its peers. :.. -8- KERN AND COMPANY, PC Ownership and Restrictive Agreements Resource Real Estate Investors 7, LP is a limited partnership with the various limited partners with no voting interest and a general partner as of December 31, 2010. As of December 31, 2010, there was a restrictive agreement in place for the sale of limited partnership interest. The limited partners are only allowed to redeem their interest back to the partnership prior to the partnership termination at a price set by a redemption formula. -9- KERN AND COMPANY, PC Economic Outlook The Livingston Survey, December 2011, predicts the economy's output (real GDP) to increase to 2.5 percent in the second half of 201 1, and the economist further predict real GDP to slow to an annual rate of 2.1 percent in t11e first half of 2012. The forecast also suggest that the unemployment rate will slowly recover over the next two years. Interest rates, both short and long term, are expected to rise over the next two years. The national economy was able to reach positive growth in 2010; the result of the positive growth was primarily due to growth in exports and nonresidential investments. During 2010 the economy grew at a rate of 2.9% which was above the decline of 2.4% in 2009. The Federal Reserve helped promote the economy's growth by maintaining the federal funds target interest rate of 0.25%. Economic growth is expected to rise by approximately 3.8% in 201 1; this is expected to be due to the benefits of increased private sector investments and results of the '` increase in private sector investments are to become evident in the second half of 2011. The benefits of these private sector investments are also expected to help improve growth into 2012. Personal consumption expenditures make up over 70% of the economy and are largely the greatest measure of current economic performance. In 2010, personal economic expenditures grew at a 1.8% as compared to 2009 which saw a decline of 1.2%. The largest contributors to r slow the economic growth were unemployment, high debt levels, and continued defaults. ' Although there was a growth in 2010 of personal consumption expenditures it was not enough to create a significant impact on unemployment. The export sector increased in 2010 by 11.7%, a large increase from,2009 in which the export sector had a decline of 9.5, the 11.7% growth made the export sector the leading growth sector in 2010. A leading reason for the increase in the export sector derives from the low value of the dollar. Even though the dollar was weak in 2010 there was still a growth in the import sector as they experienced an increase of 12.6% after having declined 14.2% in 2009. The increase however slowed economic growth in 2010 as imports generally have a negative impact on the economy even though exports grew at a quicker rate than that of imports. Imports are currently growing at a significantly larger base, so the balance of trade continues to be in a deficit. 5 The second leading growth sector was in nonresidential investments. Nonresidential investments experienced growth of 5.5% in 201 1, significantly down from 2009's growth percentage of 17.9%. Residential investments continued their decline in 2010 as they dropped 3.0% however it is still significantly less than 2009's decline of 20.4%. Although the continued decline in residential investments, it is not a key component of long term economic growth. The federal government experienced growth of 4.8% in 2010 slightly down from 5.5°ro in 2009. The federal government which is usually one of the leading growth sectors has remained stagnant as military and defense expenditures continue to outpace the non-defense expenditures. :: The federal government expenditure growth is expected to continue into 201 1 as efforts to ~ rejuvenate the economy continue, however it is expected that by 2012 the private sector should how sustained growth and governmental expenditures will decline. - 1 0 - KERN AND COMPANY, PC Concerns revolving around inflation in 2010 remained low, as the Consumer Price index (CPI} rose by a mere 1.5% in 2010 down from 2009's number of 2.7%. While low levels of inflation can be desirable extremely low levels are typically associated with significant recessions. The core inflation rate was 0.8% in 2010 down from 2009's number of 1.8%, most economist prefer the core inflation rate as they feel that it yields a better indication of underlying inflation by deducting the volatile sectors that are represented in the CPI, therefore the core inflation rate indicates a more stable rate of inflation as compared to the CPI. In 2010, the unemployment rate of 9.4% was a slight decrease from the 2009 rate of 9.9%. This rate of 9.4% is largely higher than the administrations target rate of 5.2%. The increased j'' rate of unemployment is due to many things particularly a leveraged economy. The weakened `' value of the dollar was able to increase jobs for manufacturing companies as exports increased t but it was not enough to offset a loss of ] .3 million jobs in manufacturing from 2009. The 90-day Treasury bill was priced to a mere 0.14% in December 2010, slightly up from the December of 2009 percentage of .06%. The rate that the bilf is priced at reflects the Federal Reserve's near zero federal funds rate target. The more important rate remains the long term rate as they are more critical to economic growth as corporations and governments borrow to invest ' into growth projects- The 20-year Treasury bond was priced at 4.13% in 2010 year end, down from the 4.58% rate at year end for 2009- Consumer confidence is another area that has an effect on the economic growth as consumers are likely to cut cost on entertainment and travel expenditures. The consumer t confidence level was 53.3 in 2010 up from 52.5 in 2009. The index has slightly rebounded from ~ all time lows over the past two years, however consumers still remain concerned about the near •1 term economy while the investment public continues to have optimistic views. Resource Real Estate Investors 7 currently has operations in Texas, Georgia, and Maine. r The Federal Reserve District has these areas broken down into three districts. The districts are in Dallas, Texas; Boston, Massachusetts; and Atlanta, Georgia. Dallas, Texas, which is referred to as the eleventh district by the Federal Reserve, noted that the regional economy grew at a modest pace. Manufacturing held steady and demand for business services was flat. The transportation sector experienced mixed results and retailers had moderate sales growth- The financial services sector reported that loan demands were soft, while the energy industry experienced strong growth. Agricultural conditions were weak and employment levels were stable and price pressures were subdued. k The housing sector noted that there was continued improvement as inventories of existing homes reduced and new home inventories were lean. Single family home sales are performing better however many potential home buyers remain as economic conditions-remain uncertain.. Apartment demand rose since prior reports and there is a very positive outlook on the future, respondents also noted that there were increased sales of apartment complexes to investors. There was an increased demand for industrial, retail and business leases; however sales of commercial properties remained sluggish. - 1 1 - KERN AND COMPANY, PC Boston, Massachusetts, referred to as the first district by the Federal Reserve, reported increased revenues however the economic outlook remained uncertain. Retailers in the district reported mixed results while software and IT services companies saw an increase in demand growth. Commercial real estate sales were consistent with prior reporting with minimal improvements. Portland noted that there was slight increase in retail and Class B office space leasing and has had a strong overall leasing volume, although some new vacancies within Class A office market arose. Atlanta, Georgia, referred to as the sixth district by the Federal Reserve, reported that the economy was increasing at a modest pace. Retailers reported that sales were down from the prior period however auto dealers were experiencing great sales volume. Tourism remained strong while sales of new and existing homes remained weak and home prices continued to slide. Manufacturers reported a slight decline in production and most businesses reported that hiring plans remain subdued and are seeking alternative routes such as temporary workers or part-time employees. Residential real estate brokers reported that sales were relatively slow and were flat or slightly up when compared to last year as potential buyers were facing trouble obtaining financing or deals fell through due to changes in appraised value or negative inspection results. Home inventories were noted to be decreasing, however foreclosures and increasing levels of bank owned properties put downward pressure on the rest of the housing market. Commercial real estate markets noted slight improvement in nonresidential and leasing activity and brokers reported that vacancy rates were declining and rents are stabilizing across the district. However, most anticipate that the market will remain unchanged over the next several quarters. In November 201 1 Moody's reported that the national commercial apartment property price index was at 143.43, which was an increase of 6.3% as compared to the prior quarter, and up 5% from a year ago. Moody's feels that the economic outlook for commercial apartment property on a national scale are very favorable and are forecasting that the index will increase by 50 points by the year 2018. 12 KERN AND COMPANY, PC ti,>, Valuation Methods The valuation methods we considered in performing our conclusions include the following: • Book Value approach • Asset Based approach -adjusted net assets method • Market Approaches -comparable companies • Discounted future cash flows • Income approaches -capitalization of earnings The following sections of this report describe the methods used and the conclusions reached. Book Value This method is based upon generally accepted accounting: principles (GAAP) and, as such, does not purport to reflect fair market value of most financial statement components and '; does not include the value of the business' on-going goodwill. This approach would ignore the long history and reputation of the Company. Adiusted Net Assets Methods Under this method, the book value of the assets are adjusted to fair market value, or replacement value, or liquidation values as applicable, and this value is then reduced by the value ` of recorded and unrecorded liabilities. This valuation method does not reflect the earnings i potential of the Company or the various market forces that affect valuation. This method is normally a beginning value and is usually only considered if there is no better basis available or e if the Company being valued has little or no earnings. s .b r Market Approach The market approach to valuation assumes that values can be estimated from analyzing recent sales of comparable publicly traded companies and/or comparative transactions. Because of the Iack of comparability between the Company, and any located publicly traded companies, valuation techniques using the market approach have been disregarded. Capitalization of Earnings This method is used to value a company based upon its future estimated earnings. The method assumes that all of the assets, tangible and intangible, are indistinguishable components of the business, and does not attempt to value each as separate components. It is also a powerful method for establishing an estimated value for businesses that are not capital intensive such as service organizations. - 1 3 - KERN AND COMPANY, PC ~:, Since the subject entity's value is almost completely identifiable with particular real estate holdings; because the activities are structured to minimize current earnings; because the overwhelming income and cash flows are anticipated to be in or near the terminal years; and because cash flow of income distributions have been steady, this method was not used. Discounted Net Cash Flow This approach is inherently and conceptually sound, given that the value of any investment can be defined as the present value of future cash flows available to the owner(s) in their role as owners, as opposed to their role as employees, suppliers, or vendors, etc. to the business. One of the historic problems with this approach, related to its use by small closely held _° businesses, is the common dilemma of the difficulty of measuring the amount and timing of future cash flows. This problem does not exist in the case of the subject entity of this report. In the case of this subject entity, cash flows have been consistent, dependable, more readily determinable and predictable, given the nature and character of the cash flows. Rental income is regular, periodic, and contractually based. In addition, mortgages on the subject entity's assets are predominantly interest only until the anticipated liquidation date of the subject '. entity. Other significant cash flows will result from the sales of rental assets in or near the year of the subject entity liquidation. Those "one time" future cash flows will consist of the selling prices of the real estate less the costs of selling, payment of mortgages, and any entity termination costs. Consequently, the discounted net cash flow method is selected for this valuation. In order for us to determine the discounted net cash flow, we first had to project annual cash distributions and annual net operating income to the anticipated date of partnership termination of March 28, 2016. Our projections were based on historic amounts for annual cash distributions and net operating income from 2009 through 2010. We did not use the amounts from 2008 as this was the initial year of operations. We calculated the projected net operating income by determining the average yearly increase in net operating income for the years 2009 through 2010. We did not use the amounts from 2008 because this was the year that operations began and using these this year would distort our projections. We determined that the average percentage increase of net operating income was 14.396 percent for this time period. We applied this growth rate of 14.396 percent to the 2010 net operating income of $2,964,000 to determine the projected net operating income for 2011 of $3,390,697. We continued applying the same growth rate to the net operating income until we arrived at the projected net operating income for 2016, the terminal year, of $6,642,674. Since the annual cash distributions varied from year to year we elected to use the average annual distributions to Ms. Watts from 2009 to 2010 as a percent of total net operating income of ' the company of 0.089 percent. We applied this percentage to the projected net operating income for 2011, 2012, 2013, 2014, and 2015 of $3,390,697, $3,878,821, $4,437,216, $5,075,997, and $5,806,737 respectively. This produced projected distributions of $3,018, $3,452, $3,949, $4,518, and $5,168 for 2011, 2012, 2013, 2014, and 2015 respectively. We did not include an -14- KERN AND COMPANY, PC r~. annual distribution for 2016 in our projection because this is the year of anticipated partnership termination and the annual cash distribution would be included in the terminal cash distribution. We then capitalized the terminal year projected net operating income usi~lg an average residual capital rate from the Pu~C Real Estate Investor Survey, published by PricewaterhouseCoopers, of 6.24 percent, which equates to a 16.03 multiple. A residual capital rate is used to estimate the resale value of a property at the end of a holding period. We computed a gross terminal value of partnership assets of $106,482,064. We then reduced the gross terminal value of partnership assets by the total projected mortgage amounts to be satisfied of $28,622,000 and the estimated selling expenses of $9,050,975 (8.50 percent of gross value) which resulted in projected terminal year cash available for distribution of $68,809,089. We then took the projected terminal year cash available for distribution of $68,809,089 and applied the ownership percentage of the Estate of Gladys Watts which is 0.15294 percent which resulted in the terminal cash distribution of the Estate of Gladys Watts of $ l OS,237. We then discounted this amount to its present value at the date of death of Ms. Watts which resulted in the present value of terminal cash distribution of $102,427. "VVe used a discount rate of O.S7 percent which was the 3 year treasury rate on June 24, 201 1, the date of Ms Watts' death. We used the three year treasury rate because this is the same time period from Ms. Watts' death until the anticipated partnership termination. We also calculated the present value of future annual cash distributions using projected annual cash distributions and the same discount rate of O.S7 percent utilized for the terminal cash distribution. This resulted in the present value of future annual cash distributions of $19,791. We then added together the present value of the terminal cash distribution of $ 102,427 and the present value of future annual cash distributions of $19,791 and arrived at the discounted net cash flow value of $122,218. These projections, calculations, and related assumptions are addressed in the following sections of this report: Assumptions and limiting conditions Appendices: o List of documents reviewed -page 18 o Conclusion of value calculation-page 19 o Present value calculations-page 20 o Historic and projected distributions and net operating income-page 27 o Financial ratios and analysis-page 29 o Historical financial statements-page 31 Su- mmar<i Our calculation of the fair market value of the Company using the discounted net cash flows was deemed the most appropriate valuation method for the purpose of providing an estimate of value for the Estate of Gladys Watts to be used in connection with reporting the value for PA Inheritance Tax. -15- KERN ANp COMPANY, PC After considering the above facts and calculations, we arrived at a fair market value of $122,218 for the 0.15294 percent limited partner interest owned by the Estate of Gladys Watts in Resource Real Estate Investors 7, LP. Marketability and Minority Interest Discounts Marketability of a business involves the liquidity of an interest, or how quickly an investment can be converted to cash at the owners' discretion. Factors that create the necessity for a discount include the lack of apre-established market for the stock of a closely-held company, the high costs of going public, the greater degree of risk associated with a smaller company, and other various restrictions concerning registry of stock. Minority interests are by their very nature less valuable than a majority interest due to the aspect of control In such a case a discount would be applied to the total capitalized value in order to reflect the lack of control in the interest being valued. .. A calculation of such discounts was not applicable in this instance because we were able to calculate the present value of cash flows attributable to the particular investor, the Estate of Gladys Watts. - 1 6 - KERN AND COMPANY, PC Appendices -17- KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE NVESTORS IV, LP LIST OF DOCUMENTS REVIEWED f f q rt • PricewaterhouseCoopers, "PwC Real Estate Investor Survey" • Front Door, "Home Selling Checklist" • Resource Real Estate Investors 7, LP - 2008 K-1 for Gladys Watts • Resource Real Estate Investors 7, LP - 2009 K-1 for Gladys Watts • Resource Real Estate Investors 7, LP - 2010 K-1 for Gladys Watts • Resource Real Estate Investors 7, LP - 2009 Form 10 • Resource Real Estate Investors 7, LP -Form 10- For the • March 3 l , 2010 Q> Quarterly Period Ended. • Resource Real Estate Investors 7, LP -Form 10-Q, For the Quarterly Period Ended. June, 30, 2010 • Resource Real Estate Investors 7, LP -Form 10-Q, For the Quarterly Period Ended September 30, 2010 • Resource Real Estate Investors 7, LP -Form 10-K, For the Fiscal Year Ended December 31, 2010 • Resource Real Estate Investors 7, LP -Form 10-Q, For the Quarterly Period Ended March, 31, 2011 • Resource Real Estate Investors 7, LP -Form l 0-Q, For the Quarterly Period Ended June, 30, 201 l • Resource Real Estate Investors 7, LP -Form 10-Q, For the Quarterly Period Ended September, 30, 2011 • RMA Annual Statement Studies 201 1-2012 • Federal Reserve, "Livingston Survey", December 8, 201 1. • Barreau of Economic Analysis, National Accounts Data, January 201 1. • Economic Report of The President, Submitted to Congress, January 201 1. • Federal Reserve, Statistical Releases and Historical Data, February 201 1. • Federal Reserve Press Release, January 201 l . • Bureau of Labor Statistics, Most Requested Series, January and February 201 1. • Moody 's Investors Service, Moody's/REAL Commercia] Property Price Indices, November 201 l . • Yahoo Finance, February 201 1. • Federal Reserve District, Current Economic Conditions, November 201 1 -18- KERN AND COMPANY, PC .~ _ __ GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS 7, LP CONCLUSION OF VALUE Projected Net Operating Income in Year of Termination $ 6,642,674 Average Residual Cap Rate 16.03 Gross Terminal Value of Partnership Assets 106,482,064 Total Projected Mortgage Amounts to be Satisfied (28,622,000) Selling Expenses (9,050,975) Projected Terminal Year Cash Available for Distribution $ 68,809,089 Gladys Watts Ownership Percentage 0.1529400% Gladys Watts Terminal Cash Distribution 4 V Present Value of Terminal Cash Distribution Present Value of Future Annual Distributions Discounted Future Cash Flow -19- $ 105,237 102,427 19,791 $ 122,218 KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVES"TORS 7, LP PRESENT VALi~JE CALCULATION OF TERMINAL VALUE OF PARTNERSHIP Formula: PV -Present Value A -Terminal Value - $ l OS,237 r -Rate of Interest - O.S7% q -Compounding per year - 12 or monthly n -Number of years - 4 years and 9 months or S7 months Calculation: PV = lOS,237/(l + .0057/12)s~ PV = I OS,237/(l .000475)s' PV = lOS,237/(1.02744) PV = $ ] 02,427 Present value amount of $102,42 7 represents the terminal value of the partnership at the anticipated date of partnership termination, March 28, 2016, discounted to the date of Ms. Watts' death on June 24, 20l 1. -20- KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS 7. LP PRESENT VALUE CALCULATION OF FUTURE CASH DISTRIBUTIONS Present Value of Projected Future Cash Distributions 201 1 - $3,009 2012 - $3,423 2013 - $3,893 2014 - $4,429 20l 5 - $5,037 Total - $19,791 Present value amount of $19,791 represents the total present value amount of all anticipated future cash distributions from the partnership for the years 2011, 2012, 2013, 2014, and 2015. We did not include a distribution for 2016 in our calculation because this is the year of anticipated termination of the partnership and this distribution would be included in the terminal value. calculation. - 21 KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS 7. LP PRESENT VALUE CALCULATION OF FUTURE CASH DISTRIBUTIONS Formula For 201 1 Distributions: PV -Present Value A -Future Cash Distribution - $3,018 r -Rate of Interest - 0.57°% q -Compounding per year - 12 or monthly n -Number of years - .5 years or 6 months Calculation For 201 1 Distributions: PV = 3,018/(1 + .0057/12)f' PV = 3,018/(1.000475)6 PV = 3,018/(1.002853) PV = $3,009 Present value amount of $3,009 represents the discounted value of the projected future cash distribution from the partnership for 201 1. - 22 - KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS 7. LP PRESENT VALUE CALCULATION OF FUTURE CASH DISTRIBUTIONS Formula For 2012 Distributions- PV -Present Value A -Future Cash Distribution - $3,452 r -Rate of Interest - 0.57% q -Compounding per year -- 12 or monthly n -Number of years - 1 years and 6 months or 1.8 months Calculation For 2012 Distributions: PV = 3,452/(1 + .OOS7/12)18 PV = 3,452/(1.000475)18 PV = 3,452/(1.008584) PV = $3,423 Present value amount of $3,423 represents the discounted value of the projected future cash distribution from the partnership for 2012. - 2 3 KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS 7, LP PRESENT VALUE CALCULATION OF FUTURE CASH DISTRIBUTIONS Formula For 2013 Distributions: PV -Present Value A -Future Cash Distribution - $3,949 r -Rate of Interest - 0.57°/i q -Compounding per year - 12 or monthly n -Number of years - 2 years and 6 months or 30 months Calculation For 2013 Distributions: PV = 3,949/(1 + .0057/12)30 PV = 3,949/(1.000475)30 PV = 3,949/(1.014348) PV = $3,893 Present value amount of $3,893 represents the discounted value of the projected future cash distributions from the partnership for 2013. - 2 4 - KERN AND COMPANY, PC _,.., ._ GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS 7, LP PRESENT VALUE CALCt1LATION OF FUTURE CASH DISTRIBUTIONS Formula For 2014 Distributions PV -Present Value A -Future Cash Distribution - $4,S 18 r -Rate of Interest - O.S7% q -Compounding per year - 12 or monthly n -Number of years - 3 years and 6 months or 42 months Calculation For 2014 Distributions: PV = 4,S 18/(1 + .OOS7/12)4z PV = 4,518/(1.000475)42 ,F PV = 4,S 18/(1.020145) ., PV = $4,429 Present value amount of $4,429 represents the discounted value of the projected future cash distributions from the partnership for 2014. KERN AND COMPANY, PC GLADYS WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL ESTATE INVESTORS 7, LP PRESENT VALUE CALCULATION OF FUTURE CASH DISTRIBUTIONS Formula For 2015 Distributions: PV -Present Value A -Future Cash Distribution - $5,168 r -Rate of Interest - 0.57% q -Compounding per year - 12 or monthly n -Number of years - 4 years and 6 months or 54 months Calculation For 2015 Distributions: PV = A/(1 + r/q)~~ PV = 5,168/(1 + .0057/12)sa Pv = s,168/(LOOO47s)s~ PV = 5,168/(1.025975) PV = $5,037 Present value amount of $5,037 represents the discounted value of the projected future cash distributions from the partnership for 2015. 2 6 KERN AND COMPANY, PC ~ ~ o ril G~ O o~ Q O o a N 'T M ail ` 00 O O L Ql 'S ~) nl a~ U P~ O ~~ ~,~ i Q `'y r, `~~ ~ r~ ~ .-. .n t ~~' T ~n .* o O O °O t~ _ 0 O O rrl ~O ~ rrl ~n r~l p~ F F^ EA n bF/ ~q .-. I~ '~ ° n~ C' o O o 0 ' ~n m O C' ~n o ip O~ ~ O n~ ~ ni O K ~ ni 00 O O M ~ 01 r1 -t nl N ~n .n ~, ~ ~ ~ E.y o o a 69 Q Q o M o ~: z z n~ o O nl ~ -~ ~ n N o t 0. O C ~ ~ r' O O ~ ~ O ~n 0 f- W ~ zZ m ~o ~~.. ~ U v ~o Wz o U ~ v _ f"^ C ~ ~ ? b!1 W ~ v G C Lt7 W c. U U ~ ;,~ ~ y c ~ OU c ~ a 1,,., ti a O O c ( C C C 1 J Q ,Z /' Imo C 4.. bf) C ~ :u (] ~z v ~ -' ti v ~ ~ z [~., <f bra ~~ c~ °~ v o rJ - _ - ~ n ~ d ~ O C ~ C C] ti ° ~ ~ c _ '~ ~ ~,""' 7 C_ N U v d Cj r Q U ~ ~ ~'' > r^- n C 11 , U m U) LL ti C :J C O U ~ y ca ` U d . ~ cC ~ - v ` ~ ~. ~:; U _.. E- z ~ ~ ;; r' - ~ G! ~ ~ ~ OD a ~ v ~ _n _ O Ca ~ ~ ~ , ~' rn ~ ~ c .~ o ~ ~ r, y p .~ o~c 3 ~ o J O B n ~ _ ,_ ~ C ~ = U K J U C n v ~ ~ C ~ z ~ m v, m 0. N N 7 N D O v 4 a~ v bn v L 'D C O bD v ro U s bn ti -~ y O c td O v n7 ~ p U (Z Q ~_ C1 O U cJ ~ Gz ~' IJ z 2 ~ KERN AND COMPANY, PS a _° _ _ O ~i ~, o c o ~~ o~ M ~ 2 Q Q Q M z z z z a o 0 o ~, .~ ~ ° .~ ~; - ~ - '^ ~ ~ o 0 o o a o o ~. -~ Q T a o 0 0 ~„ ~, ~, ~~ a o o e m T T O+ O a r.; ~ o O T r~ O O ? r1 /~ t!1 tf1 0 0 rl O T ~ O ~] r~ T O O ~ 00 r~ O O w ~n vi ~ ~ ~ '~ ,° ~` -a. o ~o, o o ~ o ,.~ 0 0 Q` r t1 O O O ~, ~ ~ ~ o~. 0 F" ~ 2 7 C QQ O ,r C E O F2-. ~ z ryJ -' ~ C - D ~ z ~ a ~~ v o a nW. '~ E ~ O ~ 0 0 0 U ~ LY W ~z Y v a o G ^Jl m 11 ~ .O A p Q z z z ~ ~ U ~ v v ~ ~ c ~ ~ a a v> ti O O ,~ o ~ _= V ~ ~ ,,, ~ ,~ t'J W + 2 ti ~ F- .~ ~ '° - ~ E E ~ o ~ ~ ~ ` 0 0 a O ~ _ ~ ~ ~ - ~ 0 _ ~ ~ ~zo ~ - ~ F 3~ O _ ~ , a Q a :-0 cyo ~n _ U W z o -o ~ ~. ~ ~ ¢ Q o ~ a ~- o C ' O O O O rl ~ O ~ ~ dl z 0 n. m ~ m `c ,y v v E ~ N i ~ O ~ ~ ~0 C O N ~ ~ a A i a v A L ~. L ~ .. C ~ b y r vi L C ~ o S C O ~ C A ` ~ C a Q ~ U z~ o= c 0 L C ~ i O ~ 5 Ka C v ~ n ~ m L J L d d 0 0 0 a a a z E E E h Q ¢" ¢" ¢" z y V T z° 2 8 - KERN AND COMPANY, Pt a\ 0 M r O O .-- ~ 'D '6 C W L :Q ~ I ~' r I r1 O O N o o r1 ^-» ~ O in ~ O O (`1 M ~ ~ N fr1 ~ '~ G N ~ ~ ~ T ~ ~ C ~ r_ Cti ~ -II ~, []. F ~ b a~ ~ o ~ ~ o an ~ an c c o ~ c a U ' ~ ~ ~ = ~ N ~ O ~ ~ ~ ~ ~ " O N >. ~ c >, ~ ~ ~ b O U ~ O f) M > _ rn ~ cn ~ 4a ~ '~ ~ vi vi r- r '- O r ,'"- G O ~ l `. O `" O C ~ C C ~ _ ~ ~ ~' ~ ~ ~ ~ ~ ~ - C . C' ~ _ ti G O r N ~ N ~ cO rn O ~ ~ ._ ~ ~ O `" t~ O _ O ~ I G a ~ u ~ `' ~ T O ~ ~ ~ rn h v C r~ ~ C~ N O t0 J N r`~ 00 ~ ~ ~~ c ~ w .G 'r O ' • L ~' ~ . . . + O - N ~ '7 ~ ~ O ~~~ O 7 r'~ ~ ~ p N ~n T> ~ L L + + ~ ~ ~1 ~ ~~, \o l`I W ,D O O ~ ~ N fr) 0 :~ > L _ ccs y h m UJ n `~ ~ cd U ~ ~ O ~ N ~ U Q bA _ -~ O ... ~ b _ +~ ~ ~ O .= oD - ~ O _ N w ~ ~ c0 U C ~ ~ ~ ril U VJ ~ ~ ~ Q dJ Q :Q ~ ~_ h ~ U Cn In ~ Cn ~ y v Q Q - 29 - KERN AND COMPANY, PC 0. I C~ t Q f-^ 1 w z w F- Q W w cG W U rY O w L O ~V,w~ ~-~O ~ ~ (- r G.1 ~ ,, ~ p 30~ ;~ ~ U o~z ~z~ ~ o ~ { ~. ~: ~ o V ~ ~ ~ h 0 O ~ o~ o C 0 0 o a NO W in .~ O O O N r`? N~ O ~n ~N ~ C N 0 0 0 ~' ~ W ,_, ~ a -. 3 w ~, >, o a ate., ~ ° o 0 0 ° ~ o o O ~n ~ p y. oo r~1 ~p .--. ~ r. 'fl H ~ r1 ~n in M nl In ~ ~ N N O C ~.. G O ~L. '~ ~ o o~ o o ° ° o o `n v p ~S o0 Q~ ~n ~ N ~ ~O vy L o\ \ o ~ o C o C ~ ~n oo r~ ~ ~ N ~? ~ O 0 0 0~ 0 0 0 ~ o o ~ ~ ~ '7' 0 0 [~ .-- ~ 0 0 '-' p~ 0 N 0 0 0 rr1 ~ p O n r~l O ~~~~ 0 r7 .-. ~ 7 O O~ '7 r7 ~p r1 O N ,n O °o pp _, O o o a ° ° o a o o ,_.., 7 0 7~ O p .~ rrt ~p O 'n r N O` o ~° ~~ 0 0 o a o oe .a o o ~o o .a cal rn O~ ~, o 0 co .-. O ~p ~O ~ O r~1 ° O~ O ~ ^ v E ~ T y 'n N ~ F'^ C1 N - ~ C C v v ~ ~ C vni ~, Q L_ U C ~ O ~ ~ .D T ~, ~ _ -n ~ N ~ ~ ~ - c ~ ~ al ~ ~, U 7 ~ ~ ~ y U ~ QJ u'J ,z ~ a~ ~ ~ .~ y = i U C il ~ c~ ~ ~ G ~ ~, O L U Q ~ L T~ ~ ~ CJ 7 ~ ~ N -o v O ~ ~ c O - ~ e~ E s 0 _U F-- r ~^ . ~ O ~ U ~' C Q E- Lt .~ G y W O '~ z~= ~ Q O C "" p eJ - ¢ 'v ~ " G' y ~ E-- ~o :=„~ _ rn il L v Q = r3 , L b ~ ~ -' - 3 0 - KERN AND COMPANY, PC C ti O O r\ nl o a ~ 0 0 0 0 0 0 -r ~i J O~ O o oo v~ 'n O ._ ~ .-. a v ~ - ~ .n r~ 00 -- O O O~ .--. O .-, O vl 00 - - ~ ~ O O O 0 O O O O O O O ~ O 0 O O O O O O O O O O ~S N N ~O V O O O O O 1~ n N ~--~ vl O N N N W ~ N 00 . ~ _ - r l f~ (~ V ~ ~ N - r1 [~ 1~ M N ~ ~ ~1 6q 0 0~ 0 0 o p a c ~ o c O r Q~ O .--_ ~O V N O o0 M O r1 M t~ O 7 O .-, O r - - O O O~ r'i -- O [~ Q~ .~ ._ ~ r O N p~ ~p ° - l~ ° N vl r ' V O O~ O ~D V O r^ N O ~7 U V N N ~O '7 O O~ N ~p f~ ~ r1 ~p ` 7 ~. ~ N `O S r1 ~ U O+ {~ op pp - N 1~ r -~ .--~ <t ~ ~1 Sq 0 0~ o o a o 0 0 0 o c N N ~ v N U ~p ~ ~p N N N 'n o ~ o rn N O O O O O O O O O O O 0 0 0 0 0 0 0 0 0 0 0 0 0 ° 0 ~ 0 0 0 0 0 0 0 o r~i .a N .-. ~ v .- r`i ~ r n- N O _' M 0 0 n ~-t ~n sa 0 0 o a~ o ~~ ~ o o a ~ O O ~ r~ lD T o0 `D - O O oo N ~O ~- 0 0 0 ^ f~ .- W 0 0 O O O O O ~~ O O O O O 0 0 0 0 0 0 0 <~ 0 0 0 0 0 0 0 0 0 00 O f~ O ~n f~ 00 ~D f4 OO i^ n O~ '1 ~ E r O N [~ N ~ n ~ - ~ O ~n C v 4. O O O r] C U GL.' 0 N r~ N ~ r1 _"' J 0.~ W ~ ~ cn ~' c W O U v N W a. W ~ ~ r z ~- w - W _ F- Z o ~ ~ N F-- W o W z ~° J¢ ~~ w W ' U z o ." L W 1l 1/ F" L[, Q O F' ~ L u [- ~ U L': ~ Z Q Paz ~'z~- 3 ° - i ~ U ~" J C Q U O ~z~ ~ V ' J 2 0 n N l ~ v C N_ C N Q - ~ O c v~ ap c > o 0 W O` v~ ~ ~ a ~ c m G ~ ~ v ~ ~ ~ ~ ~-- .- W U v a ~~ o a U ~ ~ ... W ~, ~- o ~ U ~ C ~ ~ W ~ U C > ~ L W __ c 2 U V] T) ~ O ~- y U 'U d V] ~ ~_ ~ C U U `L~ CC - ~ .~ 0] 0. U Q ~ ~ U - ~~ ~ 0 0 0 0 0 0 0 o a •` f~ l~ ° O ~o o .a r1 ' ~ ~ - 0 1 [ N N O ~ ~ ~ 0 ~- 0 0 0 O T ~n - ~O r1 r1 G C O O O O O O O O O O O ° ° O O ~ O O O O O O O O O O C O O O p p C C ,~ ,o ~ ~ r o~ ,n r-, .o ~n ad oo C - - N r` r~i a v7 t~ o ~ 0 0o co - y ~O _ r~ .7 ^ V N ~ 69 fq ~~ e o 0 0 0 ~ 0 0 o a FF ~~ O 1~ Q~ ~ ~p u7 W O O r U O~ N_ ~~ '- '-" O N 0 0 0 0 0 ~n -} .y~ O O N N O~ ~ ~p o0 - o0 r~ 1 D\ .n [~ D` W O i0 1~ ~ ~ r` I O. U ,° ca N ~n O --, oo [~ - - ~ O O ~D N i0 ~p ~ O ~O N - U t1 r1 ~ - ,n ~ (\ ~ ~ N ~ ~ N N ~ 64 bq ~~ ~ o o a o 0 0 o a o !H ~ 7 o -~ Q ~ O n ~ "' i ~' o ~~ o - .. o O ~-- 0 0 0 \~ o D r~ r '~ ° O O O 0 0 0 O 0 O O O O O O O 0 0 0 0 0 0 ° °° O 0 0 0 0 0 0 0 0 0 0 0 °° c o o ~O ~O W N U oo ~n r N r1 in ~n 0 T rn rn '' " - r~ o~ r o. ~ oo N r ~ - - r °° °~ .r - - y ri r~ ~p r1 ~ 7 _. N rl ~ ~ s9 a~ °~ a o 0 0 ~ o° o 0 s9 r'1 r1 O O 7 f~ r~ t` ~ ~ o -. . 7 O r'1 N~ ~ in O "t 'T O . . _. O O ~- .--.. C O O Cq -- O ~O r~ r.J O O O O 0 0 O 0 O O O O C O ° °° 0 0 o i- 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ° ° r N ~ ~- r~ M - DO f~ 7 v] ~ ~~ O 00 00 ~p ~ - f~ r~l ~D O~ ~O 7 O ~O riJ - - p N nl r N ~ ~ t` ~ `° W .~. 7 T O~ - - r.l .~ o O x U O y ~ -- ~ W C v ~ ~ f1+ U f- _ c~a '~ 'r n v, ~ ~ W C.. v v ~ r W ~ ~ h- ~ ~ H ~ - ~ : / ~ -- p ~ ~ n ~ = J F, ~ v ~ _ C - rJ ~ C ~, `'? cry y ~ ~ J ~_ _ _ ~ ~ '? c `, _ f , Q v z ~ F. ~ f-- _ z ,~ C ,.~ O U r ~ ~ U f C ~ Q d Q ~ _ ~ [ ~_. - ~ < .= ~ V) `~ w ,,• o_ - ^ - -r ,y ti ;- ~ ~' s - 3 1 - KERN AND COMPANY, PC L~ ._] C`~ O ~' F" z > w z z w ~ H ~ ~ LU ,~ ..~ O 2 U wz ~, u ~ ~ z ~ w O ~ ~ LtJ ~ cC 1 r~ O !/; J ~ i U ~~z ~~z Q ~ ~ 3 ono Q z r- J ~ ~ ~ U .= C O °\ c o o- o c c a o U O 01 vl vt W M O~ N N ~ O O O O C p N O " ° ,!, °O v ~1 ~ o 0 0 0 _ ~1 N ,7 ~ O O O O O O ~ ~ ~ ~ 0 0 0 0 0 0 O O O C O O p ~ C r C O ~ ' - vl - n ~ ~ O r'1 O ~' N - r ~p v1 - 00 G '~ r1 n. ~ 1 f~ ~ t"1 1 h N r N e9 69 09 ~ ~ a o 0 0 0 0 0 o a ~ O V o0 M O~ U ~D O O r1 ` 'l O O O '~ N ~ ~ ~ L Q1 -p ~ N 00 vl ~O t~ ~ ~ V O~ 00 O~ 1 '~ ~ r1 <f er ~ ~O Q~ ~ . 07 ~ C ~ a` ~ oo O ~O O~ O~ p , r\ r'1 r' 00 .- ... N O~ M O U ^ ~7 cr l rt - O O 'L ~ n M ~ O N ~ O ~ ~ n ~ C r1 _ r"1 i/) N N ~ O ~ . r~l r1 X ~ ~ a o 0 0 0 0 o c o b9 `~ 6F1 v O ~ i/1 m^~ R O O D 1 ` ~ ~~ 1 0 0 0 ~ O ~ N X 0 0 0 r O p O O O O 0 0 0 0 0 0 O O ~ ~ ~ p' O y., O~ O _ O O O O 0 0 p ~ 0 O O 'l O ~ O N N oo v~ (\ O+ N 0 ~ .- p N O~ •p o0 V 00 M ~, V ~O M O v1 O~ ~ N N M f1 N lp ~ r'1 N +9 b9 cq C J, 0 0 0 0 0 0 0 0 0 O ^ O O -- O~ [~ '1 n1 O o p ~ o oo ~ ~ - 0 ~ ~ a ~ N 0 0 - o r ~ ~ `~ O O O O O O O p O ~ O O O O O C W O 0 0 0 0 ~~ O O O O O O O O nl v n W O O N ' O O '_'~L.. c0 O t+1 V T 00 M N O rn 7 ~ ~ ~ `~ n O r O C r1 ._. ~.~ ~ N ' N ~ O .~ r 1 f"1 Y ~p vI 69 A 69 by v 0 U N v a J .- e ~ ~- ~. ~ v a ~; = ~ v .ti. 11 N ~ ~ U _ to N ~ O ~ y O ~ ~ N ~ N c a1 Q - oD _ Q L ~ ti. o N O O m 011 4J L ~ y Q ~ C y [1] ~- ~ ~ ~ ,Z _ v U ~ p0 j ~ U O .-, ,~ ~' C 7 q y z ~ __ o U `" ~ ti o C s Q rY 2 U Q ~ z n, U ~ Z ~ N z n W _.. y ~ o ~ ~ 0 3 , z -32- KERN AND COMPANY, PC GLADI'S WATTS ESTATE CONCLUSION OF VALUE OF RESOURCE REAL EST.~TE INVESTORS 7, LP IIISTORIG\L f=1N~WCL4L S Ts\TETv9ENTS - ST:\TE't~1ENT OF CASH FLOW -FOR THE PEAR ENDED DECEMBER 3 I. 6/30/2011 12/31/3010 6/30/2010 12/312009 CASI I FLOWS FROM OPERATING ACFIVITIES Nei Loss Adjustments: Depreciation expense Amortization of deferred financing costs Casualty Loss Luss on disposal of assets Deposit Refund Changes in operating assets and liahilities Restricted cash Tenant Recicvablcs Prepaid Expenses and other assets Accounts payable and accnied expenses Payables due to related parties F\ccrued Interest Prepaid Rent Security Deposits Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures Net Cash used in Investing Activities CASH FLOWS FROM FINANCING ACT1V1TlES Capital Contributions Offering Costs Distributions to limited partners Redemptions Principal payments on mortgage note payable Net cash used in Financing Activities Net hicrease (Decrease in Cash) Cash, beginning Cash, ending $ (670.000) $ (1.286,000) $ (597.336) $ (2 929.0001 1.048,000 2,045,000 1.011.637 ;,387.000 37,000 207,000 77, R7 142.000 42,000 4,000 3,000 _ - 73,000 (57,000) (91.000) 116.331 (555,1100) 9,000 (4,000) 2,039 31.0(10 92,000 4,000 (36.342) (50.000) (66,000) (173,000) (264,469) 732,000 33,000 329,000 147,200 I }2,000 (7,000) - (4.372) 240.000 - (6,000) (2.260) (89,000) 2,000 (4,000) 3,201 (2,000) 517,000 10$2 000 403,306 1,039,000 (292,000) (466,000) (204,601) (3.048,000) (292,000) (466,000) (204,601} (3,048,000) - 14,090,000 - - - (1,669,000) (818,000) (1,637,000) (817,468) (1,276,000) - (50,000) (50,000) _ (199,000) (13,000) (6,278) (12,000) (1,017,000) (1,?00,000) (873,746) 11,133,000 (792,000) (1,074,000) (675,041) 9,124 000 11,350,000 12,424,000 12,424,0 I I 3,300,000 $ ]0,558,000 $ 11,350,000 $ 11,748,970 $ 12 424 000 -33- KERN AND COMPANY, PC 2331 Market Street Camp Hill. PA 17011 717.763.0888 TEL KERN AND COMPANY, PC 717.763.1581 FAX +SCtif:1 ?11TAiU T~ -i ,SID 3USiNE~3 rk DVISORS kernC~ panetwork. com CHARLES L. KERN, BS, MBA. CPA CVA CFA AEP ABV CFF Charles L. Kern is Chairman and CEO of Kern and Company, P.C. Founded in 1980, the film serves the Eastern and Central Pennsylvania market. Charles is a CVA (Certified Valuation Analyst), CFA (Certified Fraud Auditor), AEP (Accredited Estate Planner), ABV (Accredited Business Valuator), and CFF (Certification in Financial Forensics) in addition to being a CPA. Charles began his career as a management consultant and auditor in the Philadelphia office of the international accounting firm of Ernst & Young. While at Ernst & Young, he was a member of the audit/consulting teams doing work for, among others, the Federal Reserve Bank of Philadelphia, the Philadelphia School District, and the United States Army Defense and Readiness Command. His years of public accounting experience are complemented by several years in which he served as controller and treasurer of a Central Pennsylvania manufacturing firm. He has both a Master of Business Administration degree and a Bachelor of Science degree from the Pennsylvania State University. Charles is a published author with articles in the Central Penn Business Journal, The Valuation Examiner, Builder-Architect Magazine, and The Journal of Forensic Accounting. He instructed junior, senior, and graduate accounting students at Penn State's Harrisburg Campus for twelve years, where he taught advanced level courses i.n auditing, taxes, and accounting. He is an active member of the American and the Pennsylvania Institutes of~ CPAs (PICPA), the National Association of CVAs (NACVA), and the Central Pennsylvania. Estate Planning Council. He is a member and past chairman of the PICPA's committee on Continuing Professional Education, member and past chairman of the PICPA's committee on Forensic & Litigation Services, and chairman of the PICPA's committee on Business Valuation services. He is on NACVA's Committee on Recertification. He is an editor of the International Handbook on Business Valuation. He is a member of the Board of Directors of: Drug Free Pennsylvania, the Mechanicsburg Home for Children, Central Pennsylvania College's Advisory Council of the Business Administration Programs, and The World's Forgotten Children's Foundation. Charles' hobbies and personal interests include travel to U.S. national parks and foreign countries, pleasure reading, and his membership in The Delancey Scotsmen, a. Scotch tasting club. 02/09 Lincoln National 3/28/2012 2:38:16 PM PAGE 3/003 Fax Server ~..a1~1~C~~.n. Financial Group The Lincoln National Life Insurance Company P.O. Box 7809 Fart Wayne, IN 46801-7809 Overnight Address: The Uncaln National fife Insurance Company ATTN: Annuitizatian 1300 South Clinton Street. Fort Wayne IN 468Q2 Fax: 260-455.4578 March 28, 2012 JOEL wATTs 1920 LULA LANE ENOLA PA 17025-1415 Dear Mr. Watts, Re: A005305925 Lincoln Financial Group has received your request concerning this contract. It is a 10 Year Certain Period annuity paying out monthly distributions of $768.52. It started November 20, 2003 with the last payment being October 20, 2013. The contract has no cash value and the contract cannot be surrendered, transferred or assigned but must continue as of the terms of the contract. If you have additional questions, please feel free to contact us at 1-800-487-1485, option 1, extension *8529, Monday through Friday 8:00 a.m. to 5:00 p.m. EST. Sincerely, ~~e J`J 6 ~/Y `~L~~v '~ Brenda Wilder, Registered Principal Processing Expert Accumulations & Payout Lincoln Financial Group Cc: James Good FAX: 717-685-3641 Uncoln Financia/Group is the marketing name for Lincoln Nat/onal Corporation and /ts a~lfates Certain affiliates act as the administrative agent for CTGNA Life Insurance Company and Connecticut Genera! L/fe Insu2nce Company. WOOF APPRAISAL GROUP File Na. PVT10461 APPRAISAL OF ~~~ R , L A SINGLE FAMILY RESIDENTIAL HOME LOCATED AT: 1920 LULA LANE ENOLA, PA 17025 CLIENT: STANLEY J. A. LASKOWSKI, ESQ. 3631 N FRONT ST HARRISBURG, PA 17110 AS OF: JUNE 24, 2011 APPRAISED VALUE: s2oo,o00 BY REYNOLD R WOOF JR PA CERTIFIED GENERAL REAL ESTATE APPRAISER 302 SOUTH FRONT STREET, WORMLEYSBURG, PA 17043 WOOF APPRAISAL GROUP Residential Appraisal Report File No. PVT10461 The purpose of this appraisal report is to provide the cliern with a aedible opinion of the defined value of the wbjea property, given the irnended use of the appraisal Cliern Namellrnended User STANLEY J. A. LASKOWSKI ESQ. E-mail SLASKOWSKI CKLEGAL.NET Client Address 3631 N FRONT ST C' HARRISBURG State PA Zi 17110 Addltional Irnended Usa s THE ESTATE OF GLADYS WATTS AND THEIR ASSIGNEES Irnerded Use ESTATE SETTLEMENT Pro Address 1920 LULA LANE C' ENOLA State PA Zi 17025 Owner of Public Record JOEL A & GLADYS M WATTS Coum CUMBERLAND L al Desai 'on e00K 256 PAGE 3644 Assessor's Parcel #~ 10-14-0837-015 Tax Year 2011 R.E. Taxes S 2 415.94 Nei hborhoodName HAMPDEN TOWNSHIP Ma Reference 14-0837 CensraTraa 3240-0113.03 Pro Ri MsA wised FeeSim a Leasehdd Other descdbe M research did did rrot reveal a 'a sales a transfers of the w 'ea fa dre three ars 'a to the effective date of this a isal. PdorSalelTransfer: Date Pdce Sources COUNTY DATA BANK Analysis of prig sale a transfer history of the wbjea property (and comparable sales, if applicable) THE APPRAISER HAS NOT APPRAISED THIS PROPERTY IN THE LAST THREE YEARS. Offerings, opfions and cernraas as of the effective date of the appraisal THE PROPERTY IS CURRENTLY NOT LISTED FOR SALE OR LISTED FOR SALE WITHIN THE LAST 12 MONTHS. Ne - cJa'taracterlst tcs One-OnIt HOUSI 7rerttls Orre~Unlt Present Lerd tl5e% London thban Suburban Rural Pro Values Inaeasin Stable Declinin PRICE AGE One-Unit 100 % BuiR-U Over 75% 25-75% Under 25% DemandlSu Shorta In Balance Over Su S IX)0 2-4 Unit % Growth Ra 'd Stable Slow Marked Time Under 3 mths 3-6 mths Over 6 mths 145 Low 10 MuMi-Famil % Neighborhood Boundades THE NEIGHBORHOOD IS BOUNDED ON THE NORTH BY WERTZVILLE ROAD, ON THE WEST 725 Hi h 65 Commarial % BY ORRS BRIDGE ROAD ON THE EAST BY THE TOWNSHIP LINE AND ON THE SOUiH BY MOUNTAIN VIEW ROAD. 225 Pred. 55 Other % Neighborhood Descdption THE SUBJECT PROPERTY IS LOCATED IN AN ESTABLISHED RESIDENTIAL NEIGHBORHOOD COMP RISED PREDOMINANTLY OF SINGLE FAMILY HOUSES. EASY ACCESS TO EMPLOYMENT CENTERS SCHOOLS SHOPPING AN D TRANSPORTATION. Market Conditions (including wpport fa the above conclusions) AREA REAL ESTATE MARKET IS CONSIDERED TO BE MODERATELY ACTIVE. LOAN DISCOUNTS, INTEREST BUYDOWNS AND OTHER CONCESSIONS ARE NOT TYPICAL IN THIS MARKET.CONVENTIONAL FINANCING IS READILY AVAILABLE. Dimensions SEE PLAT MAP Area 2.56 ACRES Sha a IRREGULAR View RESIDENTIAL S 'ficZoni Classification R-S Zoni Desai 'on SUBURBAN RESIDENTIAL Zonin Com fiance Le al Le I Norzmrnamin Grandfathered Use No Zoni ql al describe Is the highest and best use or the wgea property as improved (or as proposed per plans and specifications) the presern use? Yes No I(No, desrrbe. Utilities Public Other describe) Public Other describe Off-site lm rovemen[s-T a Public Private Elead ' Water WELL Street MACADAM Gas Sanita Sewer Alle SRe Comments LEGAL AND PARCEL DATA TAKEN FROM THE COUNTY WEB SITES. THE SITE EXTENDS TO ORRS BRIDGE ROAD. THE FIRST 470 FEET OF LULA LANE A PRIVATE STONE LANE IS OWNED BY THIS PARCEL OF LAND. THERE IS ALSO A 50' RIGHT-OF-WAY ALONG THE EASTERN SIDE OF THIS TRACT TO THE 1940 LULA LANE PROPERTY AT THE REAR OF THIS TRACT. GENERIIJ: DESCf2~'TN7N F-OIq~IW1T10N EXTE DE IPI'ION 9~T R Units One OnewlAcc urlA Conaete Slab Crawl S ace Foundation Walls CONC. BLKlAVE Floors CARPET/AVE. a of Stories 1 Full Basement Partial Basemem Exteda Walls BR&ALUMlAVE Walls PANEL 8 DRYWALL T Det. Att. S-DetlEnd Unit Basemern Area 1648 . ft. Roof Surface FIBERGL.SH.lAVE TriMFinish PINE/AVERAGE Existin Pro sed UnderConst. Basemern Finish 40% Gutters & Down uts ALUMINUM/AVE Bath Floor LAMINATE/GOOD Desi le RANCH OutsideE IEzft Sum Pum WindowT VINYL D.H./GOOD Bath Wainscot PLASTIC/GOOD Year Built 1972 StamSashllnsulated INSUTATEDlGOOD CarStaa a None Ellerxiw! A e rs 20 Screens H ALF SCREENSlGD Dmn'wa N of Cars 6 Attic None Heatin FWA HW Rariarn Amenities WoodStove s Al lkivewa Surface STONE Dra Stair Stairs Other Fuel ELECTRIC Fire ace s N Fence tiara e k of Cars Floc Scuttle Conlin Cenral Air Cond'roonin PatiolDeck PATIO Porth SEE SKETCH Ca M of Cars Finished Heated Individual Other WALL Pool Other Att. Det. Built-in A lances Refd rata X Ra Oven Dishwasher Dis sal Microwave WashalD er Other descdbe Finished area above rade contains: 6 Rooms 2 Bedrooms 1.5 Baths 1648 care Feet of Grass Livin Area Above Grade Additional Features REPLACEMENT THERMOPANE WINDOWS. Comments on the Imprrrvemerns THE ORIGINAL SECTION OF THE HOME IS A MODULAR HOME. AN ADDITION WITH A FULL BASEMENT WAS ADDED AND IS USED AS A LARGE LIVING ROOM. THE TWO BED ROOMS ARE CONSIDERED SMALL FORA 1648 SQUARE FOOT HOME. THE THIRD SMALL BED ROOM HAS BEEN CONVERTED INTO A LAUNDRY ROOM. THE APPRAISED PROPERTY IS IN ABOVE AVERAGE CONDITION FOR ITS AGE AND HAS BEEN WELL MAINTAINED. THE EFFECTIVE AGE OF THE HOME IS LESS THAN THE PHYSICAL AGE DUE UPKEEP AND BEING WELL MAINTAINED- NO FUNCTIONAL OR EXTERNAL INADEQUACIES NOTED. Rodcetl using An Awae. 800.2N.B'!21 wwx. ixeC,mn TMs form CapyrglR o ZOOS~N10 AO Dl~isim d I50 Ckims $e~i,.~s, lnc., AM Rigts Reiauctl. Page 1 d 4 (gPARTM) General Purp05e Apprarsal ReWR aL201n fDAR1 tea5Zfi2¢1¢ WOOF APPRAISAL GROUP RPSI(jP.F1tIA~ AODf21S8I RE!DOfL File No. PVT10461 FEATURE SUBJECT COMPARABLE SALE N0.1 COMPARABLE SALE NO. 2 COMPARABLE SALE N0. 3 1920 LULA LANE Address ENOLA 1 LULA LANE ENOLA 3825 SULLIVAN STREET MECHANICSBURG 808 WERTZVILLE ROAD ENOLA Proxim' to Su 'ed 0.07 MILES E 0.59 MILES SSE 0.67 MILES ENE Sale Price S S 278 000 S 185 000 f 216500 Sale PriceJGross Liv. Area E 0.00 . ft. f 117.50 . ft. E 138.68 . R. E 130.97 . ft. Dale Soa s ' MLS 10192154 MLS 10202262 MLS 10207512 Verification Sources COUNTY DATABAN K COUNTY DATABAN K COUNTY DATABAN K VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION .I~)s m~em DESCRIPTION .(-ISaa r DESCRIPTION diEAa'mnenr Sale or Financing Concessions CASH 46 DOM CONVENTIONAL 5 DOM FHAWlHELP 6 DOM -9,500 Date of Sale(Time 06!25!2010 1229!2010 05/31!2011 Location SUBURBAN SUBURBAN SUBURBAN SUBURBAN LeasehddfFee Sim a FEE SIMPLE FEE SIMPLE FEE SIMPLE FEE SIMPLE Site 2.56 ACRES 3.94 ACRES -7 000 1.23 ACRES +6 700 0.97 ACRES +8 000 View RESIDENTIAL RESIDENTIAL RESIDENTIAL RESIDENTIAL Desi n le RANCH RANCH RANCH RANCH Qual' dConstrtrdion AVERAGE ABOVE AVE. -20000 AVERAGE AVERAGE Aciual A e 40 36 41 59 Condition ABOVE AVE. ABOVE AVE. ABOVE AVE. ABOVE AVE. Above Grade rural earns earns real eaaas aanrs tae! eamis earns real Bdims Bann Room Courn 6 2 1.5 9 6 2.0 -3 000 6 3 2.0 -3 000 7 3 1.0 +3 000 Gross Livi Nee 40.00 1648 . ft. 2366 . ft. -28 700 1 334 . ft +12600 1653 . ft. -200 Basement & Finished Rooms Below Grade FULL BASEMENT REC RM 8 DEN PART BASEMENT UNFINISHED +4,000 +6 000 FULL BASEMENT UNFINISHED +6 000 PART BASEMENT REC RM 8 BATH +4,000 ~ 000 Functional UUIi AVERAGE GOOD -10000 ABOVE AVE -5 000 ABOVEAVE -5 000 Heatin Codin EBBNVALL FHAlCA -6 000 FHAlCA ~ 000 FHAlCA -6 000 E Effidentttems THERMOPANES THERMOPANES NONE +4000 THERMOPANES Gera elCa OFF STREET OFF STREET 2 ATT. GARAGE 8000 1 GAR 1 CPT -5 000 PachlPaddDeck PATIO PORCH PATIO PORCH PATIO +2500 PATIO GAZEBO -1,000 FIREPLACE WOOD STOVE NO FIREPLACE +3,000 NO FIREPLACE +3 000 1 FIREPLACE -1 000 EXTRA'S ENC'D PORCH SCR'D PORCH COVD PATIO +3000 POOL -4000 EXTRA'S 1 200 SF BLDG 3 CAR DET GAR. 960 SF BLDG +4 000 1 200 SF BLDG Ne[ A ustmem dal * E 61 700 + S 19 800 + S 20 700 Adjusted SalePdce of Com grades Summa d Sales Com ad son A ach MY CO Net Adj. -22.2% NetAq. 10.7% Gross 31.5% S 216300 Gross 34.5% E 204 800 MPARABLE SEARCH AND RESULTS. THE COMPARABLE SEARCH INV Net Adj. -9.6% Gross 23.4% E 195 800 OLVED SEARCHING FOR SIMILAR SIZED AGE DESIGN AND CONDITION H OME SALES LISTING AND PENDING SALES IN THE LAST YEAR FROM THE DEFINED NEIGHBORHOOD. DUE TO THE 1 200 SQUARE FOOT OUTBUILDING LIMITED SALES WERE LOCATED IN THE LAST YEAR. MARKET DATA OF CLOSED SALES WAS STILL CONSIDERED SUFFICIENT TO ARRIVE AT AN OPINION OF VALUE. CONDITION ADJUSTMENTS BASED ON MULTI- LIST DESCRIPTIONS OF UPGRADES ON COMPARABLE SALES. ALL SALES WERE CLOSED AND CONSIDERED EQUALLY WHEN ARRIVING AT MARKET VALUE. C~STAAPROACHTOVALUE Site Value Commerns THE COST APPROACH WAS CONSIDERED NOT APPLICABLE DUE TO THE AGE OF THE PROPERTY. ESTIMATED REPRODUCTION OR REPLACEMENT COST NEW OPINION OF SITE VALUE .. ............................. ....... = E Saace of cost data Dwellin 1 648 S . Ft. @ S = E 0 Oua' ratin from cos[ service Effective date d cost data BSMT: 1648 SQ. FT. S . Ft. cd E = E 0 Commerns on Cost A oath ross livi area cakula6orrs, de eciation, etc. Gera e/Ca S . Ft. @ S = E Total Estimate dCost-New = S 0 Less P ical Functional EMernal De eciation = S 0 De elated Cost of lm emerfts ................................ = E 0 "As-is' Value of Site Im ovements ............. ............. ... = E INDICATED VALUE BY COST APPROACH ...................... = E 0 INCOMEAPPROACH.TOVALUE Estimated Month! Market Rern E X Gross Rern MuIU ier = f N!A Indicated Value Income A ch Summaryof Income Approach (ncluding support fa market rent and GRM) THE INCOME APPROACH WAS CONSIDERED NOT APPLICABLE DUE TO LIMITED RENTAL UNIT SALES. Indicated Valueh Sales Com arisonA roach E200000 Cos[A roach if develo ed E 0 IncomeA roach If develo ed E N!A ALL THREE APPROACHES TO VALUE WERE CONSIDERED. HOWEVER MARKET AREA LACKS AN ADEQUATE NUMBER OF RENTAL SALES TO USE THE INCOME APPROACH. MOST WEIGHT WAS PLACED ON THE MARKET DATA APPROACH DUE TO THE COST APPROACH BEING CONSIDERED NOT APPLICABLE DUE TO AGE OF THE PROPERTY. This appraisal is made "as is," wbject to wmpletion per plans and specifications on the basis of a hypdhetical condition that the improvemerRS have been completed. ^ subject to the fdlovdng repairs a alterations on the basis of a hypdhefical conation that [he repairs a alterations have been completed ^ subject to the fdlowing: APPRAISED "AS-IS". Based on [he scope of work, assumptions, limiting cond itions and appraiser's certification, my (our) opinion of the defined value of the real property tha[is the subject of this reportisE 200,000 as of 06242011 .which is the effective date o(this appraisal, ~N... nou~m us,rg au b..ee.aw...,,4,~, ~.a~.~ ~~~..~~~~wnv`-M.,-~,~~u ~,,.~~.,u~.,.~~<~„o .n..~......,~~~~aa ~.~,. Page 2 a A i9PAR^1 Genital Puryose Appr~ RI1001. ~OOS~zsmio Woof Appraisal Group WOOF APPRAISAL GROUP Residential Appraisal Report File No. PVT10461 Scope of Work, Assumptions and Limiting Conditions Scope of work is defined in the Uniform Standards of Professional Appraisal Practice as "the type and extent of research and analyses i n a n assignment." In short scope of work is simplywhattheappraiserdidanddidnotdoduringthecourseoftheassignment. It includes. but is not limited to: theextenttowhichthepropertyisiden[ifiedandinspected, the type and extent ofda[aresearched, the type andextentofanalysesapplied to arrive at opinions a conclusions. The scope of this appraisal and ensuing discussion in [his report are specific [o [he needs of the cl ient other identified intended users and to the intended use of the report. This report was prepared for the sole and exclusive use of the cl ient and other identified intended users for the identified intended use and its use by any other parties is prohibited. The appraiser is not responsible for unauthorized use of the report. The appraiser's certification appearing i n th is appraise I report is subject to [he fol lowing conditions and to such other specific conditions as are set forth by the appra iser i n the report. All extraordinary assumptions and hypo[hetica I conditions are stated in [he report and might have affected the assignment results. 1. The appraises aswmes no responsibility for mattes of a legal nature afieaing the property appraised a title therero, na does the appraiser render any opinion as to the title, which is assumed to be gaxl and marketable. The property is appraised as though under responsible ownership. 2. Any sketch in this report may show approximate dimensions and is included only to assist the reader in visualizing [fie property. The appraises has made no survey of the property. 3. The appraiser is not required to give testimony or appear in court because of having made the appraisal with reference to the property in question, unless arrangements have been previously maw thereto, 4. Neither all, nor any part of the contem of this repot copy a other media thereof (indWing wnGusions as to the property value, the identity of the appraiser, professional designations, or the firm with which the appraise is connected), shag be used fa any purposes by anyone but the client and dhes irRended uses as iderrofied in this report, nor shall h tle wrneyed by anyone to [Ile public through advertising, publk relations, news, sales, or other media, wtthout the written consent of the appraises. 5. The appraiser will not disdose the contesds of this appraisal repot unless required by applicade law or as specified in the Uniform Standards of Professional Appraisal Practice. 6. Information, estimates, and opinions furished to the appraiser, and contained in the report, wese obtained hom sources considered reliable and believed to be hue and caret. However, no responsibility fa accuracy of such items furnished to the appraises is aswmes by the appraises. 7. The appraiser aswmes that these are no hidden a unapparerR conditions of the property, wbsdl, a structures, which would rendes it more a less valuable. The appraises assumes no responsibility fa such condNOns, a for engineering a testing, which might be requred to discover wch fades. This appraisal is nor an environmesaal assessment of the property and shorAd not be wlnidesed as such. 8. The appraises spedalizes in the valuation of real property and is not a home inspeda, twildirg contrada, structural engineer, a similar expert, unless otherwise need. The appraiser 6d not wnduU the intensive type of field observations of the kind interMed to seek and diswves propesry defects. The viewing of the propesty and any improvemems is fa purposes of developing an opinion of the defined vakte of the property, given the imended use of tNs assignment. Statements regarding condition are based on surface observations only. The appraise daims no spedal expertise regarding iswes indudlrg, but nd Nmtted to: foundation settlement basemem mdstrxe problems, wood destroying (a she) insects, pest infestation. radon gas. lead based paint, mold a environmental issues. Unless otherwise indicated, mechartical systems were nd activated a tested. This appraisal report shoud not be used ro disdose the connlition of the property as it relates to the presencelabsence of defeds. The client is invhed and encouraged to employ qualified expests to insped and address areas of concern. If negative conditions are diswveed, the opinion of value may be aflected. Unless otherwise noted, [he appraiser assumes the components that constitute the subject property improvement(s) are fundamental ly sound and i n working order. Any viewing of the property by the appraises was limited to readily obsesvable areas. Udess otherwise noted, attics and crawl space areas were not accessed, The appraiser did nd move furniture, floor coverings a dhes items that may restdct the viewing of the property 9. Appraisals irnolving hypothetical conditions related to completion of new construction, repairs a ahesation are based on the aswmption that such wmpletion, attesatlon a repairs will be competently pesfamed. 10. Unless the imended use of this appraisal specifically includes issues of property irnaance coverage, this appraisal should nd be used for such peptises. Reproduction or Replacemem cost figures used in the ant approach are for valuation pugioses orgy, gven the imended use of the assignment. The Definition of Vauue used in this assignment is unlikely to be consistent with the definition of Insurable Value for property irnuance covesageluse. 11. The ACI General Purpose Appraisal Report (GPAR'^') is not intended for use in transactions that require a Fannie Mae 1004lFreddie Mac 70 form, also known as [he Uniform Residential Appraisal Report (URAR), Additional Comments Related To Scope Of Work, Assumptions and Limiting Conditions STATEMENT OF ADDITIONAL LIMITING CONDITIONS AND ASSUMPTIONS THIS APPRAISAL REPORT HAS BEEN PERFORMED FOR THE CLIENT INDICATED IN THE PRECEDING, WITH WHOM PROFESSIONAL STANDARDS REQUIRES ME TO MAINTAIN A STRICT REQUIREMENT OF CONFIDENTIALITY. I, BY REASON OF THIS REPORT, AM NOT REQUIRED TO GIVE TESTIMONY IN COURT WITH REFERENCE TO THIS APPRAISAL. IF ANYONE WISHES MY APPEARANCE, IT CAN BE ARRANGED ONLY BY PRIOR ARRANGEMENT BEING MADE WITH ME. SUCH APPEARANCES SHALL BE MADE AS AN EXPERT WITNESS AND THE FEE FOR SUCH APPEARANCES SHALL BEAT THE RATE OF $125lHOUR PORTAL TO PORTAL PLUS ANY REASONABLE COST INCURRED BY ME. PURPOSE THE PURPOSE OF THIS APPRAISAL IS TO ESTIMATE THE MARKET VALUE OF THE FEE SIMPLE INTEREST IN THE TITLE OF THE PROPERTY THE VALUE IS AS OF THE DATE OF DEATH, WHICH IS NOT THE DATE THE PROPERTY WAS LAST VIEWED IN ITS ENTIRETY AND PHOTOGRAPHED. SIGNATURE: THE ELECTRONIC SIGNATURE USED IN THIS REPORT ARE PROTECTED BY THE APPRAISER AND ONLY THE APPRAISER HAS COMPLETE CONTROL OF THE SIGNATURE. ADDITIONAL CERTIFICATION: THE INTENDED USER OF THIS APPRAISAL REPORT IS THE LENDER/CLIENT. THE INTENDED USER IS TO EVALUATE THE PROPERTY THAT IS THE SUBJECT OF THIS APPRAISAL FOR AN ESTATE, SUBJECT TO THE STATED SCOPE OF WORK, PURPOSE OF THE APPRAISAL, REPORTING REQUIREMENTS OF THIS APPRAISAL REPORT FORM, AND DEFINITION OF MARKET VALUE. NO ADDITIONAL INTENDED USERS ARE IDENTIFIED BY THE APPRAISER. waar~~,~i~, Rodred using Aq Sa1vMe, A00.2]19121 Mvw.x~.mn ilrs bm C~ighl o aMb.2010 Aa Oi~isian alw Claims Sev¢s.lre.. M a916 r@ ~1. ~~ r Je J a 1 IgYAH"'1 ~0¢/el F'u1p05¢ l~ae6811i¢pOR OSI"1010 GPM11 1005t6an0 WOOF APPRAISAL GROUP Residential Appraisal Report File NO. PVT10461 Appraiser's Certification The appra i serfs) certifies that, [o [he best of [he appraiser's knowledge and belief: 1. The statemerrts of fad contained in this repot are true and cortect 2. The reported analyses, opinions, and condusions are limited only by the reported assumptions and limitirg condNOns and are the appraiser's personal, impartial, and undased professional analyses, opinions, and conclusions. 3. Unless otherwise stated, the appraiser has no presets or prospective interest in the property that is the subjed of this report and has no personal interest with respect to the parties involved, 4. The appraiser has no bias wfih rasped to the property that is the sul>jed of this report or to the parties involved with this assignment. 5. The appraiser's ergagemerd in this assignment was not corrdngem upon developing or reporting predetermined results. 6, The appraisers compensatlon for completing this assignmerrt is rlo[ corrongem upon the developmerrt or reporting of a predetermined value or rfirection in value that favors the cause of the dienL the amount of the value opinion, the attainment of a stipulated rewlt or the occurrence of a subsequent event directly related to the intended use of this appraisal. 7. The appraiser's analyses, opinions, and wndusions were developed, and this report has been prepared, in conformky with the Uniform Standards of Professional Appraisal Pradice. 8, Unless otherwise noted, the appraiser has made a personal inspedion of the property that is the subjed of this report. g. Unless noted below. no one provided significant real property appraisal assistance to the appraiser sigrang this cerdfication. Sign rant real property appraisal assistance provided by: Additional Certifications: Definition of Value: ©Marketvalue ^OtherValue: Source of Definition: REAL ESTATE APPRAISAL TERMINOLOGY 'THE MOST PROBABLE PRICE WHICH A PROPERTY SHOULD BRING IN A COMPETITIVE AND OPEN MARKET UNDER ALL CONDITIONS REQUISITE TO A FAIR SALE, THE BUYER AND SELLER, EACH ACTING PRUDENTLY, KNOWLEDGEABLY AND ASSUMING THE PRICE IS NOT AFFECTED BY UNDUE STIMULUS." ADDRESS OF THE PROPERTY APPRAISED: 1920 LULA LANE ENOLA. PA 17025 EFFECTIVE DATE OF THE APPRAISAL: O6l24Y1011 APPRAISED VALUE OF THE SUBJECT PROPERTY S 200,000 APPRAISER Signature: ~~~~ Name: REYNOLD R WOOF JR State Certificatlon # GA000002L or License # a Other (desdibe): Slate #: State: PA Expiration Date of Certificadon or License: O6f30l2013 Date of Signature and Report: 04/03/2012 Date of Property Viewing: 03l2fiJ2012 ~De1gree of property viewing: iallmedor and Exterior ^ Extedor Only ^ Did not personally view l~ SUPERVISORY APPRAISER Signature: Name: State Certification # or License # State: Expiration Date of Cerfificauon or License. Date of Signatue: Date of Property Vievnrg: Degee of property viewing: ^ Intedor and Exterior ^ Exterior Only ^ Did rtot personally view Mme. 8 0 0131 8111 wmvacme0.am Tleslmn CgryiyloaxY3-MIO Aq D'nisiond150 gainrs Sav Page / d 1 19PARTM1 Gerx:rd Puryose Woof Appraisal Group SUBJECT PROPERTY PHOTO ADDENDUM FRONT VIEW OF SUBJECT PROPERTY Appraised Dale: ~uNe za, zoi i Appraised Value: S zoo,ooo REAR VIEW OF SUBJECT PROPERTY STREET SCENE COMPARABLE PROPERTY PHOTO ADDENDUM Cilerlt: STANLEY J. A. LASKOWSKI ESQ. Fiie NO.: PVT10461 _ Property Address• lszo LULA LANE Case No.: CII : ENOLA State: PA ZI :17025 ~1'!~ ~ {t k a. ' . e.° .` _ ~~ g~. ° ~~. z _~.. ~~~ ice,, iK" . ^4 III COMPARABLE SALE#1 1 LULA LANE ENOLA Sale Date: osrzs/2o1o Sale Price: S z7e,ooo COMPARABLE SALE#2 3825 SULLIVAN STREET MECHANICSBURG Sale Date: 12ns/zolo Sale Price: $ 1as,ooo COMPARABLE SALE#3 808 WERTZVILLE ROAD ENOLA $aie Dale: 05/31/2011 Sale Price: $ 21s,soo C~leflt: STANLEY J. A. LASKOWSKI ESQ. FI~e No.: PVT10461 _ Property Address• ~szo LuLA LANE Case No.: CIIV: ENOLA State: PA Zip: 17025 ~~ ~ I b .~ 1 •. , ! ~~ .. _.. II KITCHEN ADDITIONAL KITCHEN VIEW LIVING ROOM Rodre0 icing RCI soRVae, 800.7!/ 8127 xxw.acmeE.can FHT)10182070 C~ienl: STANLEY J A. LASKOWSKI ESQ. Ff~e ND.: PVT_10461 Property Address• ~s2o LULA LANE Case No.: Cit : ENOIA $lale: PA ZI :17025 i I %~ POWDER ROOM HOUSE BATH 30 X 40' METAL WORKSHOP /GARAGE WITH WOOD STOVE AND ELECTRIC Rodc0+'1 wing Pp soA~me. 8002318121 ww.acircp.mn R3131p182010 FLOORPLAN SKETCH Client: STANLEY J. A. LASKOWSKI, ESQ. File No.: PVT10461 Property Address:ls2o LuLA LANE Case No.: City: ENOLA Slate: PA Zlp: 17025 80.0' I I °i R I L Patb I I 48.0' t _12.0' ~ Bath Laundry Dining ROOM Kitchen I F Endosed Poroh 'o lV I H I Bedroom Bedroom r P.R. I ' 8 • '-. 22.0, . 4.0 i Living Room t a ~ Porch I I 30.0' I 8.0'T~ Sketch by Apex IV WindowsTM LMNG AREA BREAImOWN Bnwkdown ButKOhls First Floor 19.0 x 30.0 570.00 T 22.0 x 26.0 572.00 v 22.0 x 23.0 506.00 =~ s A 3 An:as Total (rounded) 164 CaN AREA CALCULATIONS SUMMARY D~uAptlon Sis Tohls GLA1 First Floor 1648.00 1668.00 BSMT Basanent 1648.00 1848.00 P/P PATIO 1200.00 ENCIA98D PORCH 264.00 PORCH 152.00 1616.00 TOTAL ENABLE (rounded) 1648 PLAT MAP C~Ief1I: STANLEY J. A. LASKOWSKI, ESQ. Flee No.: PVT10461 Property Address:lszo LuLA LANE Case No.: CII : ENOLA $la[e: PA ZI :17025 r_: ., ~ i ~ '; "~ ;i- c, ~ i uy ~ N ~ L ~" h 7 ~~ ~~ 0 ~~ r 11 i A 0.91 A c _ " Lt~ L~+. N F ~r~p;65 titi ~~ (A,D-1) 3.06 A c. O wa J r ~f +aan ruu+uwal~ 2.98 ~ c: V~/ _ -~~ •~d ! .,~ ~ 1~ 1S , i.; ~,_:: ~ ~:,~E v l ) N Q "~~~(~ 1rJQ,~ ~ ,y 1(i li.l+l-+NE ~~-~, 1 ~3.9p 1..47 A c .~ `~~ `B n aow.oos o o.oi Miles m~ LOCATION MAP Cllent: STANLEY J. A. LASKOWSKI, ESQ. Flle NO : PVT10461 Property Address: 1 s2o LuLA LANE Case No Clt : ENOLA State: PA ZI :17025 Hazzard Ln °' Annette Or ~ I Ra ',~ v ~ 70 T r o (` a ~ G~~~~e `~'~brd Dr v P ~~. Suse'0 Comparable Sale 3 `Qd~ °7~, a ~ 808 Wertzville Rd ~ ~ ~ ~ haron Rd Enola, PA 17025 °. S (0.67 MILES ENE) c ~~c ,-~~ ~•°a Wertzville Rd -'° S Subject 1920 Lula Ln h a Enola, PA 17025 O~ e\\ ~ a a o ati~~c. P9o n. Q ~,a A ° aA~~ L` Comparable Sale 1 er pc P i Lula Ln 4ee ~ Enola, PA 17025 (0 07 MILES E ,~ 4 . ) , Riverv+~ I Hillcrest R ~~ `• u, ~ C ~ ~n' ~ ' BPy o Calvett Dr I 1 n ~~ ro " e~ ,~yoM ~Q 0 ti ~a e c q' u Md % 9 N Z' 9d'o q , P'p c o A °- C Comparable Sale 2 d stone D ~ a 3825 Sullivan St r ~ Mechanicsburg, PA 17050 (0.59 MILES SSE) w ~Q ... y Y D O r ` m ~ffron Drm - i41U ild,'11~J arlLi _ tU 12 L;i~!.~ulC LC./p!a'a:iWt i i 0.34 mile , CIIef1I: STANLEY J. A. LASKOWSKI ESQ. File N0.' PVT10461 Property Address:ls2o LuLA LANE Case No City: ENOLA State: PA Zip• 1~ozs QUALJRICATIU;VS OF RLYNn1.11 R. WOOR. JR. PROFESSIONAL EXP'ERIENCF. Want Appraisal Group, Warmlc}xlwrp. P.A 194? - Preaer-t, flwmr npproiser for @II ~ta« nr prnprt,iCS. Harris tia>,~ings Hank_ Ilarrsburg. PA 19w1- 1 Q42. Staff appraiser fix rexidrntial prr~perties, including cons[ructian inspeetiam-. K. lcssr Rriteebach Assnrirrtrs. [.td., l..etnorrr. PA 1981 - 1989 . Vier President. appraiser rtn ell classes of prapcrties thrr-ughnut the I~listrm t )Hired States.. I'arrer 1fc Perk ('ampany, C utumhuv. ()T1in 1974 -- 1981. Staff appraiser for ell classes of resiclemial pmprftirc. C'F.RTIFIC,ATIt'.>M113, LICENSPS, ANp bFCIGNATIONS 1'A ('ertified [irrteral Real Estate Appraiser (iA(KKNN131. fF.aS - Vaiicmal Association orlnckpendenl Fee Appraiser. Senior Metnhrr ?dSS 1 EDUCATIONAL BACK(:R[HiND (.Jhio Starr Unirv;rtity,l3achelars of Scitnce to 13eccirrrss Admirristrotiat, atn~rrrinp in Real Istatr and I~rban Analtxis. .appraisal Institute C`oursrs. 101. 120, 210.310, 41(t. 430, 510. SdID, Narrative Rrpart R'ritrgt Srmirusr. Litiganion Valuation and tarlaue nee daw seminars. TEACHING Nartist±urq Area ("immunity College. York ("allege, Real F.statr Institute of 1"rnnsylvania, Institute of Real Estate Srudie!r. end l larrisiwrg Rrahars InstirWC. F:XPFRT \b'1TNF.~tR F~rlcnrl Court. <'r~brrland. r)euphin. Yark. and Pcm~ Coumies AERIAL PHOTO 2008 Client: STANLEY J. A. LASKOWSKI ESQ. Flle N0.' PVT10461 Property Address:ls2o LuLa LANE Case No.• Clt : ENOLA Slate: PA ZI :17025 C~le(II: STANLEY J. A. LASKOWSKI ESQ. Fide NO : PVT10461 Property Address:lszo LuLA LANE Case No : C~ ENOLA $Iale: PA ZI :17025 M"r ~iltrt7ll ~` Srgp1A1~' G ~' ~~ :~` ~- +,. .~.. 1D 0£a ::~ ~~, ~ar~y~ r, 9, >';~. ~~-: i AIMNOI~ I rs a•,. WOOF APPRAISAL GROUP File No. PVT10461 ********* INVOICE ********* file Number: Pvr1o461 STANLEY J A LASKOWSKI CALDWELL & KEARNS, PC 3631 N FRONT STREET HARRISBURG, PA 17110 InV01Ce # : PVT10461 Order Dale : o3r1srzo12 ESTATE OF GLADYS M WATTS 1920 LULA LANE ENOLA, PA 17025 APPRAISAL $ 350.00 Invoice Total $ 350.00 Deposit ($ ~ Amount Due $ 3so 00 Terms: DUE UPON RECEIPT ~~ Please Make Check Payable To: WOOF APPRAISAL GROUP 302 SOUTH FRONT STREET VVORMLEYSBURG, PA 17043 302 SOUTH FRONT STREET, WORMLEYSBURG, PA 17043 Feb, 9. 2012 4:02PM PNC BANK ~~ ]February 9, 2012 Caldwell & Kearns P.C. Stanley Laskowski 3631 N From St. Harrisburg, PA 17110 RE: Gladys M Watts: SSN: 170-22-1743 DOD: 06-24-2011 Dear Mr. Laskowski: No, 1458 P. 1 In response to your request for Date of Death (DOD) balances fax the customer noted above, our records 'show the following: Ci~eckiag Accaa~at Account # 5070070226 GLADYS M WATT5 JOEL WATTS DOD balance: $10,498.39 non-interest bearing Established: 03-13-1992 Please note that this office provides date of death balances for deposit accounts (IRAs, CDs, Checkuag az~d Savings}. We do snot pxocess any financial traa~.sactlana ox provide statements. If you need assistance with any of these items, please call 1-888-PNC-BANK (1-888-762-2265) or stop by your local PNC Bank branch office. Sincerely, National Financial Services Center PNC Bank., N.A. Member FDIC Phis message is intended far the use of the individual or entity to which it is addressed and may contain information that is privileged, confidential and exempt from disclosure under applicable law. If the reader of this message is not the intended recipient or the employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communications is strictly prohibited. If you have received this communication in error, please notify me immediately by reply or by telephone ai 800-762-1775 and immediately destroy this fenced document. Page 1 of 1 i ~~f ~` l ~-- r ~ ~`-) l ~~ ,~ 1 t.~ `, CSC'.