MORAGA, CALIFORNIA 94570

www.campo-hoa.org

November 25, 2006

Dear Campolindo Homeowner,

At the November meeting the Board of Directors approved the attached budget for 2007. This budget holds or decreases the line on most expenses except for the amount for capital reserves.

California law requires that Homeowner Associations set aside monies for the timely replacement of assets. The budget complies with this law by setting aside necessary funds for replacement of assets, which have reached the end of their useful life. The attached schedule shows how we calculate the property replacement provision, the liability on December 31, 2006, and how much will be transferred to the property replacement account in 2007. As of year-end the current balance in the reserve fund is $95,000. Based on our study the required amount is $171,000 (55% funded). We anticipate that we will be reducing this liability by increasing our allocation over the next few years. This increased allocation will be funded by a combination of increased interest, rental income and dues. The dues will increase to $375 per year or 4% over 2006. This increase is in compliance with our CC&R’s.

A copy of our most recent balance sheet, the auditors report for 2005, the assessment collection policy, and a copy of California Civil Code Section 1365.1.1 is available at our web site http://www.campo-hoa.org.This is the same policy that was available to all homeowners last year. The policy complies with the current state law.

This year our primary insurance carrier for property and general liability is the Western World Insurance Company. Our excess liability insurance carrier is the Colony Insurance Company. The insurance coverage remains the same as in prior years, which is $411,000 on the building and $3,000,000 liability.

If you have any questions please write to us and we will answer your questions as soon as possible.

Thank you,

Board of Directors

Campolindo Homeowners Association