MORAGA, CALIFORNIA 94570

www.campo-hoa.org

November 1, 2003

Dear Campolindo Homeowner,

At the October meeting the Board of Directors approved the budget for 2004, which is attached as Exhibit I. This budget holds the line on most expenses with only a small increase in expenses for payroll, utilities, office expense, audit & legal, and buildings & grounds. The one exception to this is the cost for insurance. Insurance costs have sky rocketed with insurance premiums increasing over 88%, or over $ $10,275 for the year. This does not include workers compensation insurance, which went up approximately 50%.

To fund this budget the Board was forced to increase the dues to $350, which represents a 2.9% over the prior year. This is the first increase in dues since 2001. The semi-annual dues will now be $175.

California law requires that the 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. Exhibit II shows how we calculate the property replacement provision, the liability on December 31, 2003, and how much will be transferred to the property replacement account in 2004. As of year-end we estimate our liability to be $170,000. We anticipate that we will be reducing this liability over the next few years as we complete the currently scheduled repairs and build up the reserve.

Exhibit III is a copy of our most recent balance sheet dated October 31, 2003.

Exhibit IV is a copy of our auditors report for 2002, which indicates that our books have been audited and are in order.

California law requires that we send to each homeowner our assessment collection policy along with a copy of California Civil Code Section 1365.1. Enclosed is this policy along with the required section of the civil code. This is an updated policy of the one that was mailed to all homeowners last year. The updated policy complies with the current state law.

This year our insurance carrier is the Lexington Insurance Company. This Company is part of the AIG Insurance Group, and carries an A++ rating. 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