Annual Report

Fiscal Year 2008

For the past several years, as we put this document together, the same key phrases come forth: It was a building year, a new vision, we took key steps toward, and plans are in the works for. On the surface, it seems like it would be more impressive to have a grand announcement to hang our collective hats on, but truly, I cant think of a more positive set of phrases. John Knox Village is not the type of organization to focus its time and resources only on a single grandiose project. We are a dynamic organization with new projects always on the horizon and ongoing projects always in the works. At John Knox Village, it is always a building year, a planning year, and a year in which we are looking toward the future. In todays business environment, it is not wise to just sit back on your laurels. While you are patting yourself on the back, your competitors are planning and launching new initiativesand pretty soon, your laurels arent worth resting on any longer. Weve spent the past year asking questions of ourselves and the people we serve, getting feedback on how were doing and what we should be doing differently, and working togetherresidents, family members, board members, and associates at all levelsto plan our goals for the next five years, and beyond.

No one person can, or should, be the expert on every single thing we do. Good leaders surround themselves with people who are experts, and work together to create something bigger and better than could have been done alone. As we plan, build and envision a future for our organization, it is essential that we do not limit our vision, time or resources to the physical boundaries of our campus. Our mission calls for us to continue to provide excellent care and services to the residents on our existing John Knox Village campus while also serving the needs of older adults across the metro area and beyond. And as we work to provide for the individual needs of those we serve today, we must always consider, too, those who may be living at or being served by John Knox Village 10, 15 or 25 years from now. What will never change or waiver is our purpose of serving older adults. We are committed to providing a diverse array of dependable, high quality care and services at an exceptional value that, above all, enrich lives and build community.

Daniel D. Rexroth CEO/President, John Knox Village

What will never change or waiver is our purpose of serving older adults.

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Inside and out, were making the Village more beautiful than ever.

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. Volunteered to serve Thanksgiving Dinner to residents of the Village Care Center and their families.

. Donated hundreds of gift items to create our Holiday . In addition, the John Knox Village Auxiliary awarded $20,000 in scholarships for those pursuing careers in the field of health care.

Shop at the Village Care Center so our long-term care residents can have a place to do some of their holiday shopping without leaving the building.

A giving

Volunteers and Auxiliary

earnings: $306,195

community

. Volunteer Hours: 72,673 . John Knox Village Auxiliary Thrift and Gift Shop
John Knox Village Foundation

. Raised $25,677 through contributions by associates

The associates and residents not only give of themselves day in and day out through the work and volunteer service they perform, but they are also an extraordinarily generous group, as well. In the past fiscal year they have:

. Donations: $1,098,334 . Projects Funded: More than 40 different projects

and programs including resident financial assistance and scholarship assistance for associates children to attend The Childrens Village.

and residents for the United Way and for the Foundation to use toward the purchase new playground equipment for The Childrens Village.

. Donated enough cash and school supplies to provide . Provided

more than 100 children with a brand-new set of backto-school supplies. holiday gifts for 190 children and 36 Village residents in need through nearly $10,000 in gifts and cash donated by associates, residents and the John Knox Village Foundation.

. Donated cash and payroll deduction contributions to

support the John Knox Village Food Pantry, which provided more than 360 sacks of non-perishable foods for residents and associates in need of assistance.
ANNUAL REPORT - FISCAL YEAR 2008 I PAGE 13

Who we serve

as providers of care

. Independent Living Residents 1,420 . Home Health 1,700 . Village Care Center 1,400 . Ambulance Services 980 . Childrens Village 120 . Hospice 140 . Valley View Residential Care and Memory Care 190 . LifeStyle Services 40
TOTAL: 5990*

Every year we provide care and services to nearly 2,000 residents who live within the boundaries of our existing campus. But our mission does not limit us to working inside those boundaries. There are thousands of other older adults in need of health care services across the greater Kansas City area. When you also include those we serve in a year through some of the off-campus services we offer, you get a snapshot that looks like this:

John Knox Village serves nearly 6,000 individuals each year, and we touch the lives of many more who love and care for those people. So, while the number of people living in our retirement community has stayed roughly the same, the number of people we serve offcampus is growing and will continue to grow as we create new ways to reach out to older adults and others in need of our services. *Estimates based on 2007 figures, adjusted to remove duplicate patients/clients across services.
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Everyone treats me so nice, it makes me feel important.

ANNUAL REPORT - FISCAL YEAR 2008

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Building

More effective communications

Everything we do at John Knox Village is centered around relationships. Our goal is to create long-standing relationships with all those people we serve: residents, family, clients, customers, patients, associates, and business partners. But no relationship can even begin without effective communication. We made great strides this year in providing even more effective communication through:

positive relationships based on RESPECT

Planning for the new John Knox Village branding initiative started several years ago, and we have been introducing new elements of our branding concept since then, including our Brand Essence: Enriching Livings Building Community. RESPECT in Action is a broad-reaching initiative to enhance our business culture by providing associates with strategies to guide how they interact with those they serve, be it resident, patient, customer, client or co-worker. The emphasis is consistently on building positive relationships using communication, empathy and trust. These tools help create the kind of relationships that keep people coming back to John Knox Village and inspire them to tell others.

. e-Connections: Our weekly e-newsletter for John

Knox Village associates was inaugurated in April 2007 to provide a more timely sharing of information for a more connected team of employees. The John Knox Village Voice Magazine: This monthly magazine, published by and for the residents, underwent a total re-design, making it a more effective tool to help keep residents in touch with whats happening all around the Village.

Harmony at Work
The Harmony at Work Committee, made up of associates from a variety of departments and levels within the organization, strives to identify opportunities to develop respect and value for and celebrate the uniqueness of each member of the John Knox Village community. By helping our associates learn how to understand and embrace the differences in the people they interact with each day, they are better able to provide high quality service and care to residents and the customers of the Village. As a more diverse organization, we are more dynamic, too, through the breadth of unique ideas and experiences our associates bring to our planning and decision-making processes.

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Growing

our business

The practice of listening and learning gives us the information we need as we work each day to fulfill our mission of enriching lives and building community. Its at the root of every undertaking, from our business culture of RESPECT in Action to our campus beautification and improvement efforts, strategic planning initiatives, Home for Life Solutions and more. But above all, John Knox Village will continue to grow, develop and innovate to create a new model of successful aging that enhances every persons potential and remains consistent with our purpose of serving older adults.

Welcome to Forest Lake www.forestlakeatjkv.org

Forest Lake, our newest neighborhood, is currently in development. With the Information Center and model home complete, retirement counselors are now able to showcase the refined prairie-style architecture planned for the 141 apartment homes and 32 villas. After signing up 300 priority members who were promised first access to all information, tours and home selections, the sales team has begun signing contracts with the first wave of future residents. This new housing option keeps us competitive with the retirement communities being built in the area. The homes will be more spacious, and will add a new set of progressive services and amenities to our community. Forest Lake offers a new residency plan that is 100 percent refundable, allowing residents to pay as needed for any of the Villages full continuum of health care services.

Home for Life Solutions: Helping seniors age in their homes www.homeforlifesolutions.com
Growing numbers of older adults are embracing technology that will enable them to more successfully age in place. To help meet those needs, John Knox Village and its sister company, PremierLife Enterprises, Inc., have begun offering easy-to-use in-home tools and innovative services that can help those who face health challenges live independently in their own homes. Home For Life Solutions offers three core services that can remain separate or be combined for people who face physical or memory challenges: safety, security and assistance with daily living; in-home health monitoring; and medication management. The John Knox Village Foundation has donated generously to this and other technological initiatives for the Village, including advances in the use of electronic medical records at the Village Care Center and the point-of-care bedside medical record system used by our home health and hospice nurses and therapists.
ANNUAL REPORT - FISCAL YEAR 2008 I PAGE 9

Taking a fresh approach to retirement living.

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President Dan Rexroths goals are now based on the plan. Then all associates, from vice presidents to frontline staff, have created their goals based on Dans and supporting their supervisors. Through this, we will all align our efforts and build a common purpose and shared goals for the success of those who live and work here.

National nursing shortage

means competitive advantages are vital
With an aging population and fewer students going into healthcare, our nation doesnt have enough RNs, LPNs and CNAs to fill all of the job openings. Kansas City is an intensely competitive healthcare job market. Associate survey results are helping us create a work environment in which nursing associatesand all associatesfeel that they are valued and that their opinions matter. Our nursing goals are to attract and keep nurses and certified nursing assistants who want to develop long-term relationships with their patients and who want to make a difference in the lives of those they serve and care for.

All-Associate Survey
In January 2008, we asked our associates what they thought about working for John Knox Village through an all-associate survey. In comparing our results to a similar survey in 2006, we saw positive changes in our overall results. We are now working to keep that momentum through continuous improvement processes. As promised, we have been proactive in sharing the results with associates, and the information and opinions shared with us are being used by every manager to develop and implement new practices as we work to enhance the reputation of John Knox Village as a great place to work. It is important to our organization to create a work environment that encourages respect, responsibility and a desire to serve the needs of others. Good service leads to satisfied customers, which helps us bring in new business and builds a loyal base of existing customers, clients, residents and patients. The same is true for staffing. Associates who feel empowered and engaged in their work will be more likely to stay with us and are more likely to tell their friends and family what a great place this is to work.

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Listening

to those we serve

Leading to a common understanding

The dream of John Knox Village began in the hearts and minds of a few bold pioneers more than 40 years ago and became a reality in 1970 when the first residents arrived. Fast-forward to today and you will see how this organization has grown into a vast array of programs and services, both on and off this campus. Over the years, more than 10,000 seniors have lived here in independent living, and we are now serving nearly 6,000 people every year through our residential and community health services. Now is not the time to stop dreaming. Now is the time for us to form a new vision for serving the older adults of today and tomorrow by creating new means and methods that those early pioneers could only dream about.

Seeking first to understand

Reinventing who we are involves asking questions, listening to answers, observing our strengths, discerning our challenges, proposing solutions and evolving innovations. Some call it the art of listening. Fiscal Year 2008 has been a listening year. We have asked a lot of questions of a lot of people with a goal of crafting the right strategies to help us meet the needs of our many constituencies today, tomorrow and for years to come.

Strategic planning
One of the most comprehensive undertakings this past fiscal year was a strategic planning initiative that involved more than 300 residents, family members, associates and board members from all areas of the organization. Our philosophy was that the more voices we heard, the more likely we were to create a truly visionary plan that addressed the needs, desires and future business of John Knox Village. The Strategic Plan that has been developed as a result of those early brainstorming meetings will help direct the business decisions for John Knox Village for the next five years and beyond.

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Fiscal Year 2008

. STAY 4 Life, a wellness and fitness program for residents in independent living and Valley View Residential Care, launched in April 2007, providing assessments and wellness classes to help them stay healthy and independent longer. RESPECT in Action kicked off its second year of associate training and business culture development. (See page 12.) Home for Life Solutions: John Knox Village launched a product line of technology-based tools. (See page 7 to learn more.)

Highlights

(April 1, 2007 March 31, 2008)

. Began $7 million total renovation project in the A & C apartment buildings. . Began $1.4 million remodeling of the F/G/H Building complex. . Constructed four new single-family homes . Updated common areas and corridors at Lakeshore Manor. . Roof replacement projects wrap up
Completed most of the hail-damaged roof replacements in independent living homes. Repaired roofs of apartment buildings, the administrative center and Valley View Residential Care. The Pavilion roof continues into FY09. Costs covered by insurance. The Childrens Village celebrated its 15-year anniversary. John Knox Village Home Health Agencys Kansas offices combined operations and are now scheduling services from a single office in Lansing, Kan. Forest Lake sales team reached its goal of 300 priority memberships by August 2007. The Forest Lake Information Center opened in September 2007, and model home tours and sales efforts began in earnest in October. Fitness Center use offered to associates free of charge (previously $20 per month) as part of greater emphasis on associate health and wellness. Rehabilitation Services opened outpatient satellite office in Valley Views Windsor Room for independent living and Valley View residents, offering physical, occupational and speech therapy.

. .

John Knox Villages

. . . . .

facility with long-term care, post-acute care and memory care services John Knox Village Home Health Agency: Providing home health services to those living in the greater Kansas City area and beyond LifeStyle Services: Private duty services in the home throughout greater Kansas City and beyond Village Hospice: End-of-life care in greater Kansas City and beyond Home for Life Solutions: Products for safety and security, in-home health monitoring and medication management

. Independent Living: With more than 1,300 homes on our 400+ acre campus . Valley View: Residential Care and Memory Care . Village Care Center: A 430-bed skilled nursing . . . .

family of services

ANNUAL REPORT - FISCAL YEAR 2008

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I love being able to squeeze in a workout during the day.

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fresh new look

Youll notice that the blue rectangle emblazoned with the words John Knox Village has been replaced with a fresher, brighter logo. No, were not changing what we do or why we do it; rather were taking a fresh look at our business environment and the needs and desires of the people we serve. The creation of this new logo was part of a larger branding strategy, to make sure our image reflects who we are today and whats important in our work: community, growth and relationships. The launch of the new logo is the culmination of several years of behind-the-scenes work to re-position how we see ourselves and how we want others to see us: As the leader among senior living communities and senior service providers in the Greater Kansas City area.

More than a

More than just a logo, the John Knox Village brand helps us stay focused on: Who we are What we do Where we are Where were going Who we serve How we serve them

Our Brand Essence: Enriching Lives, Building Community

Our Brand Promise:

John Knox Village will seek first to understand your individual needs. We will then help you design a plan from our unparalleled array of options to enrich your life at an exceptional value.
ANNUAL REPORT - FISCAL YEAR 2008 I PAGE 3

Awards

. Lisa Erickson, MSW, Village Hospice, was named

& Recognition . Jackie Byers, LPN, Valley

View Memory Care, named Employee Caregiver of the Year by the Missouri Association of Homes for the Aging (MoAHA).

a Hero in Healthcare by Kansas Citys Ingrams Magazine, an award based on qualities such as length of service in her profession, programs she initiated, and personal initiative to move her work forward for the benefit of those she cares for.

. Dan Rexroth, John Knox Village president and

CEO, was elected as Chairperson Communities Insurance Company. of Caring Uchtman and Kathy Simpson, LPN celebrated 35 years of fulfilling employment at John Knox Village.

. Two associates: Marilyn

. Rodney McBride, vice

president, health and community services group, was named chair of the Missouri Association of Homes for the Aging (MoAHA).

Coming in Fiscal Year 2009

. . . . . . .

Long-time JKV resident Florence Hoogesteger was honored at the Lees Summit Mayors Character Breakfast as an outstanding citizen who contributed nearly 40 hours a week of personal time to helping the Lees Summit Concert Association.

Full launch of new branding strategy CARF-CCAC re-accreditation process Campus beautification goes into full swing, including landscaping, signage and campus lighting improvements F, G and H Building renovations complete Roof repair projects reach completion A and C Buildings re-open Resident satisfaction survey

Community Health Services Director Barbara Elder Owens was elected to serve on the board for the Missouri Hospice and Palliative Care Organization in January 2008.

Fiscal Year 2008 John Knox Village Board of Directors

John D. Culver (Chair): Retired,
former Behavior Interventionist, Raytown School District (Missouri)

John Knox Village Corporate Staff

Daniel D. Rexroth: President/CEO James H. Franklin, RHP: Vice President,
Finance and Corporate Treasurer

George A. Pagels, M.D. (Vice Chair):

President and CEO, Saint Lukes East-Lees Summit; Senior Vice President and Chief Medical Officer, Saint Lukes Health System

Betty Freeman-Boots, SPHR:

Vice President, Human Resources

Rodney L. McBride: Vice President,

Health and Community Services Group

Roy Loven (Secretary): Resident Robert Ellis: Resident Thomas J. Langenberg: President and CEO,
Community Health Group (CHG)

Maria T. Timberlake:
Vice President, Senior Living

Carolyn Caldwell: President and CEO,

Centerpoint Medical Center

John Knox Village Foundation Board of Trustees

Katherine Katie Howell: Chair Ronald D. Kean: Vice Chair J. Mark Fountain: Secretary Sandy Langsford-Cox: Treasurer Stephen P Chinn . G. David Gale Michael D. McRobbie David Ross Eugene R. Wilson

Michael J. Blake: CEO and General Counsel,

Consolidated Insurance Services, LLC

Arthur F. Dewsberry: Resident Frank G. Janner: Retired, former

Vice President and Chief Financial Officer, Menorah Medical Center

400 N.W. Murray Road, Lees Summit, MO 64081 www.johnknoxvillage.org

Foundation Staff
William C. Bergosh, CFRE, President
ANNUAL REPORT - FISCAL YEAR 2008 I PAGE 19

JKV Consolidated Statement of Operations

FOR YEARS ENDED
March 31, 2008 March 31, 2007

John Knox Village Foundation Balance Sheets

ASSETS
Cash and cash equivalents Investments Estates receivable Pledges receivable Charitable remainder trusts Charitable gift annuities TOTAL ASSETS
March 31, 2008 March 31, 2007

Operating Revenues Resident service fees Annual agreement fees Health service fees, net Amortization of deferred revenue including attrition and move-outs Investment income Net assets released from restrictions used for operations Other

$8,210,864 7,219,415 40,504,442 3,164,354 2,783,816 922,580 3,194,799

$8,545,058 6,935,958 35,779,488 3,057,232 2,740,775 391,340 3,580,985 $61,030,836 30,386,974 5,539,251 5,147,869 5,057,128 5,678,558 1,542,456 2,665,011 2,165,891 7,530,971 (267) $65,713,842 $(4,683,006)

$631,248 2,079,118 164,971 70,878 107,451 438,627 $3,492,293

$261,343 2,342,836 405,411 36,301 113,975 472,759 $3,632,625

LIABILITIES AND NET ASSETS

Due to John Knox Village Annuity payment due on charitable remainder trusts Annuity payment due on charitable gift annuities Net assets TOTAL LIABILITIES AND NET ASSETS $44,718 33,411 250,958 3,163,206 $3,492,293 $329,184 33,411 246,294 3,023,736 $3,623,625

Total Operating Revenues $66,000,270 Operating Expenses Salaries and wages Associate benefits Professional fees and contract services Supplies Utilities, insurance and taxes Bad debt expense Other operating expenses Interest Depreciation (Gain) Loss on Disposal of Assets Loss on extinguishment of debt 30,665,106 5,876,146 5,228,399 4,897,089 5,672,558 1,314,506 3,106,627 2,604,456 7,822,065 1,027,114 1,609,719

Total Operating Expenses $69,823,785 Revenue Over (Under) Expenses $(3,823,515)

Contributions from JKV Auxiliary restricted for purchase of equipment 2,669 Transfers to parent Contribution to affiliate (400,399) Net change in unrealized gains (losses) on investments (1,418,714) Increase (Decrease) in Unrestricted Net Assets $(5,639,959)

2,949 (251,040) 490,840

$(4,440,257)

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JKV Consolidated Balance Sheets

ASSETS
March 31, 2008 March 31, 2007

LIABILITIES, DEFERRED REVENUE AND NET ASSETS

March 31, 2008 March 31, 2007

Current Assets Cash and cash equivalents Accounts receivable, net Current portion of assets limited as to use Board designated Held by trustee Inventories Prepaid expenses and other Total Current Assets Assets limited as to use, net of current portion Board designated Held by bond trustee Restricted by donors Total Assets Limited as to Use Other Investments Property and Equipment Land and land improvements Buildings and leasehold improvements Furniture and equipment Construction in progress Accumulated depreciation Total Property and Equipment, net Deferred Financing Costs, net Due to/from Affiliates TOTAL ASSETS

$3,358,711 4,960,474 1,374,177 168,071 375,471 824,185 $11,061,089

$3,843,592 4,319,455 453,671 1,789,186 362,067 545,960 $11,313,931

Current Liabilities Current maturities of long-term debt Accounts payable and accrued expenses Accrued payroll and vacation pay Accounts payable for construction of property Estimated amount due to third party payer Accrued interest payable Total Current Liabilities Deferred Revenues and Deposits Deposits received in advance on entrance fees and refundable fees Deferred revenue, entrance fees and monthly service fees Total Deferred Revenues and Deposits Asset Retirement Obligation, net of current portion Long-Term Debt, net of current portion Total Liabilities and Deferred Revenue

$1,175,000 5,158,422 2,751,371 747,074 62,710 367,248 $10,261,825

$2,000,000 4,410,718 2,603,526 687,368 242,857 $9,944,469

31,367,818 11,440,087 2,210,393 $45,018,298 128,311 13,614,631 137,845,830 28,353,952 13,669,218 (93,852,705) $99,630,926

33,134,140 4,463,233 2,262,310 $39,859,683 488,861 12,615,699 134,698,794 26,228,238 7,105,480 (88,565,190) $92,083,021

5,905,298 44,393,889 $50,299,187

5,908,987 45,287,906 $51,196,893

3,089,638 63,311,482 $126,962,132 31,936,781 741,780 1,168,424 $33,846,985 $160,809,117

3,111,150 45,032,652 $109,285,164 37,576,740 883,414 1,060,818 $39,520,972 $148,806,136

I PAGE 17

836,569 4,133,924 $160,809,117

628,371 4,432,269 $148,806,136

Net Assets Unrestricted Temporarily restricted Permanently restricted Total Net Assets TOTAL LIABILITIES AND NET ASSETS

ANNUAL REPORT - FISCAL YEAR 2008

Fiscal Year 2008

Financial Summary

. . .

John Knox Villages annual report reflects the audited financial statements for the 2008 fiscal year. The organization saw improved operating financial results from the prior year, after considering losses resulting from the write-down of buildings associated with apartment building and housing renovation projects. Moreover, the statements reflect losses related to the refinancing of the Villages tax-exempt bond issues, an intercompany transfer and several extraordinary expenses, all totaling near $5 million. Revenues this past year improved 7.5 percent from the prior year, while expenses grew by only 6 percent and assets grew more than $12 million. The 2007 taxexempt bond issue was financed at a rate of less than five percent. The funds will be put toward: financing of the total renovation of three apartment buildings, introducing new larger and more marketable units centered around a courtyard activity area funding for common area renovations in several other apartment buildings funds for the beginning of a campus beautification program We are already observing a growth in occupancy in those buildings which have been renovated. Our new Forest Lake project, consisting of 173 units, is well underway with nearly $1 million of deposits by prospective residents. We continue to con-

front competition by distinguishing ourselves through a wide array of services offered in a quality manner and setting. The economy has had an impact on sales this past year, but we have begun to see noticeable improvement in the new fiscal year. Additionally, the Villages investment portfolio also reflected losses as a result of the economic changes. We are grateful to the John Knox Village Foundation and John Knox Village Auxiliary for their continued financial support of the Villages capital needs, educational programs and the resident financial assistance program.

James H. Franklin, Vice President of Finance

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