News from the Board

Dear Fellow La Cumbre Members, I’d like to provide a mid-year financial report as well as share some preliminary thoughts on financial issues, all of which are being discussed by the entire Board. In addition to first half financial results and June balance sheet information, I have included information about the final tally on the patio bar and grill (PB&G), the status of the Bridge Bond financing and golf course project, the status of our clubhouse renovation, and a summary of the information we have received from Club Benchmarking, the industry-leading consulting firm on country club economics. June Year-to-Date Operating Results: Total revenues of the club were $7.1 million versus $6.6 million last year. The increase was entirely the result of dues revenue, as operating revenues (food and beverage, golf fees, etc.) were down year over year due to the shutdown of the PB&G and some heavy rains limiting club activities. Operating expenses were $5.0 million versus $4.5 million last year. Labor costs are on budget. The year-over-year increase was largely attributable to the filling of open and new positions. For example, we operated without a GM or a Director of Operations for the first half of last year. Salary adjustments for key personnel and inflationary wage pressures accounted for the balance. Total salary expenses are in line with industry norms. It is not that any individual salary has gotten too high, but that our salaries were previously below market, as were our staffing levels. The Board is committed to bringing the service levels and professionalism of the club to the higher standards that you have indicated you wish to experience, as revealed through the membership satisfaction survey. All new employee salaries are checked against market data. As the increase in operating revenues was almost exactly offset by higher expenses, operating income before maintenance expenses was flat with last year at approximately $2.1 million. Golf course and facilities maintenance was $2.0 million for the first six months compared to $1.65 million last year. Total salaries and benefits accounted for $200 thousand of this $350 thousand increase. The balance is the result of more frequent repairs required on aging infrastructure and inflation. Including maintenance costs, net operating income was $50 thousand versus $400 thousand last year. The club also incurred about $100 thousand of non-recurring costs for recruiting and strategy consultants not included in the above numbers, bringing net income to a loss of $50 thousand, consistent with our objective of break-even results as a not-for-profit enterprise. June 30 Balance Sheet: The club had $13.0 million of cash (mostly assessment cash being held for the clubhouse project) and $14.7 million of net property, plant and equipment accounting for 93% of our total assets of $29.8 million. The balance of assets are predominately accounts receivable and inventory. Total liabilities on June 30 were $3.6 million comprised mostly of accounts payable and accrued expenses. Patio Bar and Grill Project: The original estimate for this project was $1.8 million. County and Hope Ranch requirements imposed on us during the permitting process added $260 thousand to the cost. Club-controlled design and equipment changes added an additional $250 thousand (These changes were done with consideration to the long-term efficiency and service possibilities of the PB&G and leadership deemed it the right thing to do). Cost overruns above these amounts were approximately 8%. Cost overruns above the original budget and only the regulatory requirement costs were approximately 21%. All are aware of the bar height issue. Discussions are underway to see how we can correct this problem. We learned a lot during this project and certainly made some mistakes. The internal volunteers, management, external consultants, and construction team will be much smarter as we embark on the larger, more complex clubhouse project. Golf Course Project and Bridge Bond Status: The contract for our golf course vendor has been signed. Work will commence in February or March 2025 and materials may start to be delivered as early as this December. The Bridge Bonds are healthily oversubscribed based on non-binding commitments received to date. All equity members are invited to participate with a minimum investment size of $100 thousand. I’d like to get a much higher participation rate. Drafts of official documents were received from outside counsel last week. They need to be reviewed and edited. This may take a couple of weeks of back and forth with the lawyers. I hope to get final documents out the third week of August to all who have provided me with their interest in participating. Based on recent market activity, it looks like rates may be coming down, which will make the financing cheaper. The rate on the Bridge Bonds will be the higher of the fed funds prime rate (currently 8.5%) and a floor of 7%. The interest rate on the bonds will be set in January 2025. Clubhouse Project: Planning and permitting efforts have been vigorously underway. You will recall that at the time of the assessment in the Fall of 2022, the estimate for this project was $18 million. Approximately $2 million has been spent to date, mostly on soft costs (architect, permit fees, insurance, consultant fees, etc.) As we saw with the golf course project, inflation has happened in a much bigger way than we had anticipated. Additionally, in a perfect world, and with money no object, fairly substantial scope increases would happen. I mentioned above that we have $13 million of cash on hand at the end of June. Between the receipt of the remaining assessment payments, as some members chose to defer their assessment over three, five or indefinitely, and the collection of membership transfer and initiation fees (VCI) between now and year-end, we should have approximately $16 million available for the clubhouse project, consistent with our original estimates ($18 million less $2 million spent to date). Unfortunately, primarily because there was an under assumption of the effects of inflation from 2022 to 2025 it is unlikely to be sufficient to fully complete the original scope of work. And certainly, not the expanded scope on the clubhouse which is inevitably required. Therefore, hard choices will have to be made. We will spend what we have as efficiently as possible and complete as much of the work that was originally contemplated as possible. Some Learnings from Club Benchmarking: Club Benchmarking is the leading source of data collection and analysis of clubs around the country. No one else comes close in terms of both the amount of data they have collected from thousands of clubs and the detailed analysis they have done regarding responsible club financial management. We intend to have them come to La Cumbre and present to the membership. Some key findings: 1. Only 8–10% of clubs nationwide provide any reimbursement to departing members choosing to leave their clubs. Of those that do have some reimbursement, our two-thirds of sale price reimbursement put us in the first decile. In other words, we are an extreme outlier. 2. Clubs have three principal sources of revenue, all of which are critical to their long-term financial health. They are: a) Dues revenue (both operating and capital), b) Other operating (activity) revenues such as food and beverage, golf course fees and the like, and c) Membership sales revenues. Annual operating dues and activity revenues are meant to cover all operating expenses, including normal, recurring maintenance. Membership sales and capital dues are meant to fund major maintenance projects as well as improvements. Until last year, the club had, for years, been using capital revenues to pay for a shortfall in operating revenues (dues), leaving very little for major maintenance and improvements. Hence, the need for our assessment and the need to debt finance the golf course. Hence also, the need for large dues increases over the last two years to begin to correct this flaw in our operating model, by bringing operating and activity revenues into line with operating expenses. 3. At an equity sales price of $225,000, the club currently receives one-third, or $75,000. Compare this to a non-HOA member of Birnam Wood, where the club currently receives $125,000 which 100% of the sales price goes to the club. Our club receives 40% less for long-term upkeep and improvements. A couple of years ago, when our sales price was in the $125-150 thousand range, the club was only receiving about $45 thousand or a 65% discount to what Birnam currently receives. And for many years until 2023, we also spent a significant portion of what we did receive to subsidize operations, it’s not hard to see then how we fell behind in the upkeep of our club. All of this is food for thought and will require changes in the future for our club to thrive. My obligation as Treasurer of the club is to make sure we are on sound, conservative financial footing, not just for the next twelve months, but for the next twenty years. Over the last 2 years, our overall financial model has been in the process of being repaired, but there is still much to be done to be on a long-term solid footing. Our physical plant, property and equipment account for 80% of our total assets (excluding the assessment cash). We need to fund future major maintenance and should have as our goal to be constantly improving the club to remain competitive and to provide the level of services that are demanded in a world where expectations constantly change. Please reach out to me via email or in-person to discuss any of the information in this communication. Thank you, Mike Nicolais, Treasurer

Dear Members, Tomorrow, you will receive an email from our independent voting services provider, GGA Partners. The email will be sent by GGA Partners on the Club’s behalf but will still read as “from” La Cumbre Country Club and will be from the email address vote@simplyvoting.com . If you have not received the email described above to access online voting by 5:00 p.m. Friday, May 31st, or need assistance accessing your ballot, please contact support@ggapartners.com . Please find a link HERE to the Notice of Meeting and Bridge Bond materials, which are located on the secure side of our member website. Respectfully, Adam Zubek Secretary, General Manager/COO

Board of Directors Minutes Welcome and opening remarks by Alan Harden. Alan noted that the approval of a $100,000 deposit for Heritage Links as the General Contractor for the coursework was not necessary at this time. The Board minutes from November 2023 and December 2023 were approved. The 2023 Annual Meeting minutes were received and approved for the members who will approve these at the 2023 Annual Meeting, which can be found here. The Consent Agenda was accepted as circulated. Adam provided updates on Campus Revitalization activities, Operations, People, Housekeeping, and Director coordination. As recommended by the Renovation Committee, a formal motion was passed to approve the Patio Bar and Grill GMP Contract to Frank Schipper Construction for $1,362,691.00 with a $95,000 allowance for additional items. The Budget for this project is $2.244M. Long-Range Planning Committee update by Greg Moss. Greg provided an update on selecting Rule No. 1 as the desired consulting firm to assist the board and club in developing a purpose statement, mission, vision, and values. The budget and scope of work were circulatedand approved. This is a 3-month engagement that will involve work with the LRPC, Board, and various member groups. Membership applications for John and Sue Burk, Delene Bliss, George and Sue Walseth, and Megan and Christian Vanderwall were approved. As a new best practice, supported by the GM/COO, an Executive Session was held without Management. The meeting adjourned at 5:45 PM.