A great place to

Live, work, and visit.

2009 Annual Meeting

it’s an exciting time to be part of Lutheran Life villages, a

premier retirement-living provider with a focus on life-enrichingopportunities. whether you’re

looking for a great place to live, work—or just visit family

and friends—Lutheran Life villages offers a better way of living.

For over 75 years, we’ve been providing outstanding retirement

options for older adults in northern indiana. it’s a legacy we plan to continue for many

years to come.

Another year of positive changeAs I wrap up my second year of leading Lutheran Life Villages, I once again find myself owing a debt

of gratitude to all the people who make this organization what it is today — a premier retirement-

living provider with a focus on life-enriching opportunities. I consider it a huge blessing to be part

of a team with such a strong foundation — over 75 years and counting.

As much as I appreciate our heritage, I’m even more excited about our future. Last year, I presented

to you our dream to make Lutheran Life Villages a place where people want to live, professionals

want to work, and family and friends want to visit. That kind of vision requires commitment,

dedication, and belief in a cause beyond ourselves.

It’s exactly that kind of devotion that I see every day in our staff, residents, volunteers, and

supporters. As you read through this report, you’ll see specific examples of the ways we’ve

made that dream a reality. Lutheran Life Villages truly is a great place to live, work, and visit.

ChallengesThat’s not to say that the road toward this dream has been without obstacles. Our census has

decreased 15 percent over the past year. In addition, it has become increasingly clear that in

order for our organization to sustain our current market position — let alone take that next step

of growth — we need to overcome financial obstacles. We have a multitude of growth options

to consider, but limited financial resources to commit. It’s evident that we need clear direction

now as our plan from last fall has been disrupted by the economy.

In addressing these challenges, we’ve made some tough decisions in the past year. We’ve adjusted

our staffing levels to “right size” our organization for these lean economic times. Our current team of

Letter from the President and CEO

of employees has stepped up with significant cost savings, implementing these decisions with

an attitude that says, “We can do it!” Streamlining is never easy, but today we can move forward

as a more efficient and stronger organization than ever before.

We’ve also created the Lutheran Life Villages Foundation to serve as the fundraising arm

of Lutheran Life Villages. In the few short months since its inception, Lutheran Life Villages

Foundation is not just meeting our expectations; it’s surpassing them. Through strategies such

as planned giving, annual giving, and charitable gift annuities, the foundation is helping raise

crucial funds for Lutheran Life Villages.

And let’s not forget CrabFest ’09, the first fundraising event of its kind at Lutheran Life Villages.

Thanks to the work of Jon Dize, vice president of development, and all of you who joined us for this

event, CrabFest proved wildly successful — so much so that we had to move the venue two weeks

prior to the event to accommodate what would have been an overflow crowd. Normally, just to

break even for a first-time fundraising event is considered success. CrabFest exceeded this goal

and actually raised more than $13,000! Great job, everyone!

Plans for the futureSo where does this leave us for the future? Let me suggest three areas where we can focus our

attention in the next year:

North Fort WayNe campus – We remain steadfast in our pursuit of a retirement-living campus

on the north side of Fort Wayne. We’re currently considering a very intriguing option and hope to

finalize that decision by the spring of 2010.

home health services – We also continue to pursue the option of launching home health services.

Starting or acquiring a home health agency would be advantageous and would:

• Makeustheonlyretirementcommunityintheregionwithahomehealthagency.

• Actasanatural“filler”forassistedlivingandnursingcareforourcampuses.

• Spreadourreachfarbeyondourwalls.

• Trulydiversifyourrevenuestream.

A key driver to watch closely regarding this option is health-care reform to see if more federal

and state dollars will be shifted to home and community-based services.

“Everything we accomplish here is the result of a total

team effort, and our residents don’t hesitate to show us their

heartfelt appreciation for our hard work and dedication.”

— Keith SheltonDirector of Environmental Services

Fort Wayne

“Impacting residents’ lives at Lutheran Life Villages gives me a sense of purpose and

self-worth. I would not trade these moments for anything

in the world.”

— Tricia MurphyDirector of Wellness

Fort Wayne

eNgagemeNt - We need to continue to look for opportunities to partner with churches, delegates,

and sister organizations, as well as communicate our stories to all levels of the community. Our

current marketing blitz announcing our new name has maximized the opportunity to tell our story

to a market ready to explore the options we provide.

In addition, we’ll continue to redefine retirement living in our current communities as we brand

ourselves as leaders in retirement services. I look forward to your help as we pursue these goals. In

the meantime, I hope you’ll enjoy reading about our accomplishments in the past year. We’ve truly

made Lutheran Life Villages a great place to live, work, and visit — thanks to you.

Bruce BlalockPresident and CEO

At Lutheran Life Villages, we’re focused on life, not just care. It’s all about a change in lifestyle for our

residents, keeping people active physically, emotionally, intellectually, socially, and spiritually. In doing so,

we’re helping them live the fullest life possible, wherever they are in our care continuum. It’s just that simple.

Heritage TrailIn the last year, one of the ways we’ve greatly enhanced the quality of life for our Fort Wayne

campus residents is through our Heritage Trail, dedicated August 10. A scenic paved path that

encircles and connects the various communities on the 42-acre campus along South Anthony

Boulevard, Heritage Trail is a welcome addition to Lutheran Life Villages’ Fort Wayne campus.

This ongoing, privately funded project will provide residents and community members alike

with multiple opportunities for recreation, exercise, and renewal. The winding walkways, quiet

water features, rose gardens, and picnic areas and benches slated for the trail provide a welcome

atmosphere for a relaxing stroll or vigorous walk. And don’t forget the putting green, ready to

provide hours of golfing enjoyment.

While Phase I of the trail is completed, connecting South Anthony Boulevard to Independent Living

and extending around to the back of the chapel, we’re looking for support of Phase II and III to finish

the circuit around the entire campus.

Rehabilitation unitsAnother way we’re making the Fort Wayne campus a great place to live is through a separate

rehabilitation unit, which occupies the second floor of the main building. The Rehab Suites promise

tocompetewellinthemarketplace.Moreimportantly,thisnewareaprovidesaplaceforshort-term

patients to transition from hospital to home in a setting designed for their unique needs.

Likewise, we’re creating a similar unit in Kendallville, where we’re changing 10 of the 16 rooms

onournorthwingintoaMedicarerehabilitation“transitionalunit.”Thisareawillbedesigned

specifically for short-term rehabilitation patients, giving them the opportunity to continue their

recovery after a hospital stay before they return home. These units are just one more way we’re

making our communities great places to live.

A great place to Live

“We tell people that living here is like being on a cruise. We’re having a ball! We have to pick and choose our activities or we’d be busy all the time.”

— Charlie and Marty ImlerIndependent Living Residents

A five-star communityInaddition,we’reproudtoreportthatKendallvilleremainsafive-star-ratedMedicarefacility,

offering the very best in retirement living to our residents. Lutheran Life Villages is currently the only

retirement community in Noble County with this five-star rating.

Continued focus on wellnessOn both campuses, we continue to integrate the six dimensions of wellness into everything we do

on a daily basis, with some amazing results. Here are just a few examples of the way our wellness

approach is enriching the lives of our residents every day. In the past year, we:

• Launched a “Getting to Know Your Bodies” series, in which guest speakers present health and wellness topics to our residents twice a month. Recent seminars included diabetes management, fall prevention, and oral hygiene.

• Addeddaily“finishingtouches”—achancefor8-10womentogatherafterbreakfast in the beauty shop for facial cleansing, make-up application, and a chance to catch up on the latest news. Our ladies now have something to look forward to each morning and love one another’s company.

• Replacedconcentratedjuices,sodas,andsugarysnacksatactivitieswithhealthier alternatives, such as whole fruit and water. Our residents have responded to this change very positively, admitting that they were eating unhealthy foods just because they were put in front of them.

• Madecampusintegrationareality.Residentsfromindependentlivingnowenjoythe company of our assisted-living residents for Wii bowling, exercises, and other social events. And memory-care residents now participate in wellness programming outside of their neighborhoods.

• Increasedintergenerationalactivities,withresidentsinalllevelsofcareinteracting with Children’s Village students.

Perhaps the best example of the way our residents’ lives are changing for the better is

summed up in this simple comparison. Two years ago, the Lutheran Life Villages leadership

team could hear residents singing “The Wheels on the Bus” during Tuesday morning

leadership meetings. Today, during that same Tuesday meeting, we now hear the cadence

of the fitness instructor as she and our residents work out with bands, balls, and other

wellness equipment. Clearly, our residents are shifting their focus to health and wellness,

and their lives are richer because of it.

“It’s a blessing to be living here in a Christian atmosphere. And without the responsibilities of maintaining our own home, we can just enjoy life.”

— Paul and Dot NieterIndependent Living Residents

“Good friends, good food, wonderfulliving—that’s Lutheran Life Villages.”

— Ophelia WeitzmanIndependent Living Resident

A great place toWorkJust as we continue to make Lutheran Life Villages a great place to live, so we continue to make

it a place where professionals want to work. In fact, the two go hand in hand. This focus on

employee satisfaction leads to lower turnover and results in better care for our residents.

In the past two years, we’ve seen employee turnover change from 110 percent to a projected

34 percent for 2009. Here are just some of the ways we’ve continued to make Lutheran Life Villages

an employer of choice in the past year:

• Recognizedmorethan500positiveemployeeactsthroughournewWOW! (What Outstanding Work!) program that highlights outstanding performance

• Heldaseriesof“ListeningEvents”togetemployeefeedbackandadopted more than a dozen employee suggestions.

• OrganizedanEasteregghuntforthechildrenandgrandchildren of employees and for Children’s Village students. This event was sponsored byourEmployeeAppreciationTeam.

• HeldemployeedrawingsforfreeticketstoCrabfest’09.

• Continuedtoofferagenerous401(k)savingsplan.

• Implementedanimprovedemployeeperformancereviewprocess.

In addition, our wellness approach is producing some great results among our employees. Through

our Summer Fitness Challenge and our ongoing walking program, employees have lost weight and

lowered their blood pressure and body-fat percentages. We’ve continued to pair employees with

residents for our Wii bowling tournament, and we’ve recently started a “Don’t be a Stuffed Turkey”

program, an employee wellness program designed to encourage sensible eating and continued

exercise over the holidays.

Through all these improvements, we’ve made great strides toward making Lutheran Life Villages

an employer of choice, improving the lives of our residents in the process.

“Our residents are like members of our extended families. They share

their lives with us—the joy and the sorrow—and we share our

lives with them, too.”

— Marsha Harshman, R.N.

Staff Development CoordinatorKendallville

“My greatest reward is knowing that I work with

wonderful people, and together we’re making

a difference in the lives of our residents.”

— Sylvia Page, R.N.

Director of NursingFort Wayne

“Serving our residents is more than just a job. I’m part of something bigger than myself—I’m part of a legacy of helping people enjoy life to the fullest extent.”

— Bryan KellarExecutive Chef and ManagerIndependent Living Dining ServicesFort Wayne

“I don’t see my great-grand nieces and nephews often, so the kids at Children’s Village have become like family to me. They’re wonderful, and no two are alike.”

— Phyllis RabyAssisted Living Resident

Phyllis with Giovanni, a Children’s Village student.

A great place toVisitFinally, we continue to make Lutheran Life Villages a great place to visit. Take Heritage Trail, for

example. What other retirement community offers a scenic walkway — where a beautiful water

fountain welcomes visitors — in the midst of a busy city? Gardens, picnic areas, and a putting

green call to youth and seniors alike. Beautiful Heritage Trail gives residents and their families

a new way to experience Lutheran Life Villages as they enjoy family time together outdoors.

But that’s not all. Our fully equipped recreation room, complete with Wii sports, continues to

draw residents and their guests. For those who prefer a more relaxing form of entertainment,

the Weitzman Theater on our Fort Wayne campus offers a state-of-the-art viewing

experience. And music lovers of all ages are sure to enjoy a broad range of professional music

performances. Chaplain Dave Griebel orchestrates the monthly musical programs presented

inMemorialChapelinFortWayne,butthat’sjustthebeginning.Fromchurchchoirstobanjo

players, from programs presented by school children to a philharmonic concert, our residents

on both campuses enjoy a wide variety of musical programs that enhance their lives.

Moreimportant,however,LutheranLifeVillagesisagreatplacetovisitbecauseourfocus

is on life, not just care. Our wellness approach infuses our communities with a vibrancy

that newcomers notice and want to be around.

“I love doing projects with the kids at Children’s Village. But if you do something

for one, be prepared to do the same for everyone. That’s just part of the fun.”

— Bob TrueIndependent Living Resident

BobwithfriendsJamonnandEmma,Children’sVillagestudent.

“My time at Children’s Village is time well-spent.I love those little kids, and I feel as though I’m making a difference in their lives by giving them extra attention.”

— Alice FleckAssisted Living Resident

Alice with Trinity, a Children’s Village student.

Changing PerceptionsThrough all these changes, we’re moving away from traditional nursing home stereotypes and

creating an environment where people can come and thrive. It’s what will continue to set us apart

from other retirement-living communities in the years to come.

As we position ourselves for this kind of growth, we want our name and logo to reflect our true

identity: a premier retirement-living provider with a focus on life-enriching opportunities.

That’s why after much research, we chose a name — and a new look — that maximizes and enhances

that reputation. Our new identity — Lutheran Life Villages: A Better Way of Living — helps us

communicate all we are and hope to be in a community ready for a new era of care.

At a time when more and more people are reaching retirement age, the services we provide at

LutheranLifeVillageswillbecomemoreimportantthanever.Mostrecentlyretiredadultshavehigh

expectations and standards for their long-term retirement plans. These are needs and desires that

Lutheran Life Villages can readily fill. Where else are you going to find:

• Professionalmusicperformances

• Intergenerationalactivities

• Acertifiedfitnesscoach

• Activitiesbeyond“Bingo”

• Chef-prepareddiningatveryaffordableprices

All this — and all in one place!

“I’m so happy I came here to live. Everyone is so friendly, and my family has peace of mind—they

know I’m always safe and among friends.”

— Marjorie HaraderIndependent Living Resident

MarjoriewithAniyah,aChildren’sVillagestudent.

“Living at Lutheran Life Villages fits our needs perfectly. Members of the staff are very accommodating,

and the grounds are beautiful and well-maintained.”

— Walter HaydenIndependent Living Resident

REVENuE YEAR END 8/31/09 YEAR END 8/31/08

Gross Resident Services $21,975 $21,642

Benevolence Care -2,560 -2,616

Net Residents Services 19,415 19,025

Grants 337 345

Contributions 763 410

Investment Returns -821 -201

Other 775 742

TOTAL 20,469 20,320

ExPENSES

Wages and Benefits 14,876 14,566

Supplies, Food, Other 6,345 5,835

Depreciation and Amortization 1,578 1,395

Interest Expense and Related Fees 288 177

Provision for uncollectible accounts 338 205

Disposal of Property & Equipment 652 0

TOTAL 24,078 22,177

ASSETS

Cash & Short-Term Investments 2,076 4,116

Accounts Receivable 1,570 1,731

Property, Plant, and Equipment, net 15,283 16,073

Other assets 4,499 4,118

TOTAL 23,428 26,037

LIABILITIES AND NET ASSETS

Debt 5,254 4,521

Other Current Liabilities 2,826 2,482

Other Liabilities 2,145 2,221

Net Assets 13,204 16,813

TOTAL 23,428 26,037

2008—2009 Comparative Financial Results ($1,0 0 0 ’s)

An old Danish proverb says, “Age may wrinkle the face, but lack

of enthusiasm wrinkles the soul.”

That proverb sums up the changeswe’re making at Lutheran Life Villages. Instead of wrinkled souls—regardless

of our age—we want newcomers to notice a vibrancy that springs from the way we

experience life to the fullest. In other words, we want our enthusiasm to shine.

Thank you for your efforts to do just that—

making both campuses of Lutheran Life Villages great places to live, work, and visit. Those wrinkles mentioned in the proverb?

Let’s make sure they’re laugh lines.

Lutheran Life Villages6701 South Anthony Boulevard

Fort Wayne, Indiana 46816