The following Level I (full update with-site-visit) reserve study was performed for HOA-POA ("property") located at 2237 Del Mar Scenic Parkway, Del Mar, CA, 92014. The property has 237 units and 4 different model types. The reserve study is for the fiscal year starting July 1, 2010, and ending June 30, 2011.

The purpose of this reserve study is to produce a reserve funding plan that will project future contributions and expenditures to assure that reserve funds are available as needed.

The calculations, projections and reports in this reserve study were generated using the PRA System (PRA). PRA has received a Quality Assurance Evaluation from a Certified Public Accounting firm verifying the system for accuracy and compliance with the AICPA's Audit and Accounting Guide for Common Interest Reality Associations, cash flow projections, and tax calculations consistent with IRS guidelines for 1120c and 1120h corporations. PRA provides for complete, flexible reserve study assumptions while allowing for either current cost or future cost projections while calculating interest and projecting cash flows on a monthly and annual basis.

As of July 1, 2010, the estimated reserve fund balance is $1,500,000.00. The estimated current replacement cost of the reserve items is $5,671,484.40, and with an annual compounded inflation rate of 3.00% the future replacement cost is $8,505,663.74.

The cash flow method was utilized in preparing the reserve plan with the objective that reserves funds would be available as needed. The following describes how the cash flow was produced:

• Reserve Fund Balance – projected from the date of the reserve study to the beginning of the fiscal year above;
• Reserve Item Data - for each reserve item the following was determined: description, category, basis cost, cost, quantity, estimated useful life and estimated remaining life;
• Expenditures - the reserve item data above was used to project when the initial and recurring expenditures will be incurred over the next 30 years (includes taxes on interest earned);
• Interest – calculated on the available funds;
• Contribution – determined based on the following: annual contribution increases, interest earned with related taxes and inflation on reserve items.

No items have been reserved for which have an estimated useful life of less than two years or a total cost less than $500.00.

Based upon the following financial assumptions:

Annual Contribution Increase - 2.00%
Interest Earned - 3.00%
Taxes on Interest Earned - 25.00%
Inflation on Reserve Items - 3.00%
Contingency -5.00%
Contingency Time - 6:00 Yr:Mo

The contingency amount is a percentage of the current cost of replacement, $5,671,484.40. This amount will be funded over the contingency time period. This will increase the total monthly contribution by $646.32.

The required reserve amount at the end of the current fiscal year utilizing the cash flow method is $1,500,000.00. The reserve plan, based on all the assumptions, assures that funds for major repairs and replacement will be available when needed and that this method is equitable for charging current rather than future owners with the cost of current use.

The annual contribution for the initial year of this reserve study is $10,000.00, $35,361.77 on a monthly basis and on an average of $149.21 per unit. The monthly contribution per unit type is:

The average interest rate earned before and after taxes for the initial of this reserve study are 3.00%, and 2.25%, respectively.

Based upon Percent Funding, as of July 7, 2010, with an estimated reserve fund balance of $1,500,000.00, 100% Funded being $2,801,945.55, the percent funded amount is 53.53%. If the cash flow funding plan is adhered to by the board of directors, sufficient funds should be available as needed.

If applicable, developer records, association records, and industry manuals were used for determining the current cost of reserve items. The financial representations set forth in this summary are based on the best estimates of the preparer at that time. The estimates are subject to change.