Dancing Willows Condominium HOA, Inc.

Dancing Willows Condominium HOA, Inc. October 28, 2013 C/O Stillwater Community Management 15400 W 64 th Ave Suite 9E53 Arvada, CO 80007 p. (303) 872-9224 f. (303) 309-0468 Holly.Bristol@scmhoa.com RE: Association Property Insurance and Personal Homeowners Policies Dear Homeowner, It is very important that you are aware that the Association s property insurance carries a 2% Wind and Hail deductable. Please share this information with your homeowners insurance broker/carrier and adjust your homeowners policy accordingly. Special Assessment insurance is available for a very minimal cost on personal homeowners policy and this may be coverage suggested by your carrier or broker based on the information provided below. Insurance costs have increased dramatically over the last two years. In 2010 and 2011, Colorado experience several hail storms that resulted in very large claims for roof damage all across the front range of Colorado. For this reason, insurance cost has increased as insurance companies try to limit their exposure to these types of claims. For 2013, insurance companies either don t cover wind and hail damage, have added a 2% of the policy value as a deductable for wind and hail, or made wind and hail a separate rider on the policy. Quotes for a rider to cover Dancing Willows Condominium HOA for wind and hail damage were over $25,000 on top of the $9,800 base policy cost. Spread across 84 homeowners that cost would have meant an increase in dues of over $25 per month. The option selected by the HOA Board of Directors is to have a 2% wind and hail deductable. In the event of a wind or hail claim, the deductable would be 2% of the total policy value of $9,020,000 or a $180,000 deductable in round numbers. Some of the deductable would be paid out of the Association reserves funds. The rational is that a roof installed in 2008 will last for 20 years and will be replaced in 2028 with reserve funds saved over 20 years. A new roof installed in 2013 would need replacing in 2033 and funds saved between 2008 and 2013 would be used to pay the insurance deductable. The balance of the deductable would be paid via a SPECIAL ASSESSMENT by the homeowners. It is important to discuss special assessment insurance with your personal homeowner policy carrier or broker. This coverage is significantly less expensive than the cost of a wind and hail rider and is the least expensive way of covering wind and hail deductibles at this time. Yours Sincerely, Dancing Willows Condominiums HOA Board of Directors

Dancing Willows Condominium HOA, Inc. Simms and Bowles Littleton, CO 80127 Association Budget 2013 2013 Monthly Assessment of: $145.00 2012 Assessments: $138.00 Percentage Increase 5% Date Revised: October 26, 2012 Approved: December 20, 2012 Prepared by: Scott Bristol Stillwater Community Management, LLC 15400 W 64th Ave. Arvada, CO 80007 p. 303-872-9224 ext. 102 scott.bristol@scmhoa.com CONFIDENTIAL 2009 Copyright Stillwater Community Management, LLC. 15400 W. 64th Ave, Arvada CO 80007 (303) 872-9224 ext. 102

Dancing Willows Condominium Homes HOA 2013 Cash Balance January through December 2013 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Operating Beginning of Month Cash Balance 58.00 329.90 1,188.23 1,538.32 1,204.87 1,026.71 254.40 2,080.30 4,318.02 4,653.02 6,298.88 10,271.61 Monthly Net Income (Loss) 271.90 858.33 350.09 (333.45) (178.16) (772.31) 1,825.90 2,237.72 335.00 1,645.86 3,972.73 5,012.70 End of Month Cash Balance (see note) 329.90 1,188.23 1,538.32 1,204.87 1,026.71 254.40 2,080.30 4,318.02 4,653.02 6,298.88 10,271.61 15,284.31 Reserve Beginning of Month Cash Balance 41,994.00 43,226.75 44,534.28 45,886.92 47,239.66 48,592.65 49,945.85 51,360.30 52,804.94 54,278.46 55,752.73 57,226.63 Monthly Net Income (Loss) 1,232.75 1,307.53 1,352.64 1,352.74 1,352.99 1,353.20 1,414.45 1,444.64 1,473.52 1,474.27 1,473.90 1,472.96 End of Month Cash Balance (see note) 43,226.75 44,534.28 45,886.92 47,239.66 48,592.65 49,945.85 51,360.30 52,804.94 54,278.46 55,752.73 57,226.63 58,699.59 2013 Forcast Based on Monthly Assessment of: $145.00 2012 Assessments: $138.00 Percentage Increase 5% Notes: 1. Projections of cash balances based on net income assume revenues and expenses in a given month approximate total collections from homeowners and on time payments to vendors. Page 1 of 2

7:15 AM 10/30/12 Cash Basis Dancing Willows Condominium Homes HOA 2013 Budget Overview January through December 2013 TOTAL Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan - Dec 13 Number of Homes 82 87 90 90 90 90 94 96 98 98 98 98 Ordinary Income/Expense Income 4000 Assessments - Homeowners 11,890 12,615 13,050 13,050 13,050 13,050 13,630 13,920 14,210 14,210 14,210 14,210 161,095 4050 Working Capital 1,450 870 - - 580 580 - - - - 3,480 4200 Late Fees - - - - - - - - - - - - - 4400 Fines 150 150 Total Income 13,340 13,485 13,200 13,050 13,050 13,050 14,210 14,500 14,210 14,210 14,210 14,210 164,725 Expense 5020 Electric Power 230 204 191 179 175 181 143 133 126 140 219 232 2,152 5080 General Maintenance 50 50 50 50 50 50 50 50 50 50 50 50 600 5100 Grounds Improvements 1,000 1,000 1,000 1,000 4,000 5120 Grounds Maintenance 975 975 975 1,075 1,075 1,075 1,075 7,222 5140 Grounds Repair Sprinklers 150 150 150 150 150 150 150 1,050 5180 Snow Removal 1,024 1,024 1,024-1,140 1,140 1,140 6,492 5200 Trash Removal 772 819 847 847 847 847 885 904 923 923 923 923 10,460 5220 Water/Sewer 4,574 6,825 7,087 6,432 5,531 6,117 4,520 5,343 5,192 5,211 5,071 4,019 65,922 5240 Security Monitoring 520 520 520 520 520 520 520 520 520 520 520 520 6,240 5260 Back Flow Testing 1,460 1,460 5280 Building Repairs - Mechanical 250 250 500 5300 Building Repairs - Structure 1,000 1,000 1,000 1,000 1,000 5,000 6020 Administrative 445 20 20 20 20 20 20 20 20 20 20 20 665 6040 Audit Tax 150 150 6120 Insurance 3,416 804 804 804 804 804 804 804 804 804 10,650 6180 Legal Fees 250 250 500 6280 Postage and Delivery 4 4 4 4 4 4 4 4 4 4 4 4 48 6300 Property Management 780 780 780 780 780 780 780 780 780 780 780 780 9,360 6390 Bank Fees 23 22 23 23 23 25 24 40 27 27 40 40 338 6420 Transfer to Reserve 1,230 1,305 1,350 1,350 1,350 1,350 1,410 1,440 1,470 1,470 1,470 1,470 16,665 Total Expense 13,068 12,627 12,850 13,383 13,228 13,822 12,384 12,262 13,875 12,564 10,237 9,197 149,474 Net Ordinary Income 272 858 350 (333) (178) (772) 1,826 2,238 335 1,646 3,973 5,013 15,251 Other Income/Expense Other Income 8000 Transfer from Operating 1,230 1,305 1,350 1,350 1,350 1,350 1,410 1,440 1,470 1,470 1,470 1,470 16,665 8420 Interest Reserve Fund 3 3 3 3 3 3 4 5 4 4 4 3 41 Total Other Income 1,233 1,308 1,353 1,353 1,353 1,353 1,414 1,445 1,474 1,474 1,474 1,473 16,706 Net Other Income 1,233 1,308 1,353 1,353 1,353 1,353 1,414 1,445 1,474 1,474 1,474 1,473 16,706 Net Income 1,505 2,166 1,703 1,019 1,175 581 3,240 3,682 2,558 3,120 5,447 6,486 31,952 Page 2 of 2

Dancing Willows Condominium HOA, Inc. Date Revised: October 26, 2012 Notes for Association Budget 5020 Electric Power Electric and Gas for Fire systems closet, fire monitoring system and sprinkler clocks. 5080 General Maintenance Common area general maintenance. 5100 Grounds Improvements Landscape plant material repair and improvement. 5120 Grounds Maintenance Grounds maintenance is based on landscape contract bidding process. Keesen was the successful bidder for 2013. Contract cost increase in July is due to landscape maintenance on additional building. 5140 Grounds Repair Sprinklers Sprinkler repair. 5180 Snow Removal Snow removal is based on snow removal services contract bidding process. Verdi Services was the successful bidder for 2013. 5200 Trash Removal Trash removal is provided by Waste Management and includes a rate increase of 3% for 2013. 5220 Water/Sewer Water and Sewer covers domestic and irrigation water services and is provided by Willowbrook Water. Willowbrook has not set their rates for 2013 but an increase of 5.5% is expected and incorporated into the 2013 Budget. 5240 Security Monitoring Security Monitoring is fire alarm system monitoring provided by Integrated Systems. A project to replace dedicated phone line monitoring with cellular phone monitoring was undertaken at the end of 2011. System replacement cost was $3,560 and reduced the monthly fire system monitoring cost from $96 to $57 per building per month. Cost of installation was spread over fiscal year 2012 and is now complete. After installation pay back, Association saved $184 in Security Monitoring cost in 2012 and will save $4,680 in 2013. 5260 Back Flow Testing Cost of required annual Backflow Valve testing. 5280 Building Repairs - Mechanical Building mechanical repairs. 5300 Building Repairs - Structure Building exterior maintenance and repair. The reserve item for unit exterior painting has been moved from every 5 years to every 7 years. A yearly operating expense item of $4,000 has been budgeted to provided for annual unit exterior touch up and trim painting. The reserve item for exterior unit repainting has been decreased because the yearly touch up painting will make major painting to be less costly and less frequent. This change is based on experience over the last few years with other similar builder projects and has been advised as a higher quality solution by painting industry experts. 6020 Administrative Association costs associated with providing payment coupons, office supplies and copies. 6040 Audit Tax Annual tax return preparation.

6120 Insurance Annual Property and Casualty, Umbrella, Directors and Officers and Fidelity insurance required by the Governing Documents. Contract is bid to AA or higher rated carriers as required by the Governing Documents. 2013 Property and Casualty insurance carries a 2% wind and hail deductable. Please see attached "Association Property and Casualty Insurance" letter for further detail. 6180 Legal Fees Cost for Association legal support. 6280 Postage and Delivery 6300 Property Management HOA Management provided by Stillwater Community Management. 6390 Bank Fees Bank fees are for providing ACH services to the HOA. 6420 Transfer to Reserve Monthly transfer to the Reserve Account as detailed in attached "Twenty Year Reserve Plan."

Dancing Willows Condominium HOA. Inc. Simms and Bowles Littleton, CO 80127 Twenty Year Reserve Plan Study Base Year: 2007 Revised and Reviewed: November 12, 2012 Approved: December 20, 2012 Prepared by: Scott Bristol Stillwater Community Management, LLC 15400 W 64th Ave. Arvada, CO 80007 p. 303-872-9224 ext. 102 scott.bristol@scmhoa.com CONFIDENTIAL 2009 Copyright Stillwater Community Management, LLC. 15400 W. 64th Ave, Arvada CO 80007 (303) 872-9224 ext. 102

Dancing Willows Condominium HOA. Inc. Revised and Reviewed: November 12, 2012 PLAN REVISION NOTES 2013 This is a reserve plan designed to project long term costs associated with fixed assets under the responsibility of the HOA. The goal of the plan is to identify timing of long-term costs and save accordingly. It is important the reserve plan is reviewed and revised annually as part of the annual HOA budget process. Below is a description and associated details of revisions to the reserve plan for the current year. 1 The unit closure forecasts available for the prior reserve plan revision in October 2011 were conservative and reflected the flat forecasts of the housing market in general. The 2012 reserve plan forecasted community build-out to occur in 2015. Home sales have accelerated mid 2012 and closings are forecasted to increase at a faster rate than previously predicted. Closings for 2013 are significantly ahead of what was forecast in the 2012 reserve plan. Community build-out is now projected for early 2014. Because of the faster build-out, per unit contribution to reserves has been decreased because the reserve fund is growing more rapidly than anticipated. 2 The reserve item for unit exterior painting has been moved from every 5 years to every 7 years. A yearly operating expense item of $4,000 has been budgeted to provided for annual unit exterior touch up and trim painting. The reserve item for exterior unit repainting has been decreased because the yearly touch up painting will make major painting to be less costly and less frequent. This change is based on experience over the last few years with other similar builder projects and has been advised as a higher quality solution by painting industry experts. 3 The irrigation system reserve item has been increased from $800 to $1,800 to more accurately reflect the cost of sprinkler control units. 4 Long term landscape replacement has been removed from the Reserve Plan and added to the operations budget annually.

Dancing Willows Condominium HOA. Inc. Twenty Year Reserve Plan - Exhibit A Provided by: Stillwater Community Management, LLC Revised and Reviewed: November 12, 2012 Study Type: Full, With-Site-Visit/Off Site Review Base Cycle 1 2 3 4 5 6 7 8 9 10 Component Cost Year Term Start 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Concrete Sidewalk, Patio and Driveway 2,651 2007 7 2008 2,651 2,651 Concrete Sidewalk, Patio and Driveway 2,651 2007 7 2010 2,651 Concrete Sidewalk, Patio and Driveway 2,651 2007 7 2013 2,651 Common Area Structures Reserves 9,973 2009 10 2011 9,973 Unit Roof - Replace 2008 base year 92,732 2008 30 2008 Unit Roof - Replace 2009 base year 69,299 2009 30 2009 Unit Roof - Replace 2010 base year 23,433 2010 30 2010 Unit Roof - Replace 2011 base year 44,866 2011 30 2011 Unit Roof - Replace 2012 base year 44,866 2012 30 2012 Unit Gutter - replace 2008 base year 18,912 2008 30 2008 Unit Gutter - replace 2009 base year 14,184 2009 30 2009 Unit Gutter - replace 2010 base year 4,728 2010 30 2010 Unit Gutter - replace 2011 base year 9,456 2011 30 2011 Unit Gutter - replace 2012 base year 9,456 2012 30 2012 Repaint Units - Base Year 2008 18,488 2008 8 2009 18,488 Repaint Units - Base Year 2009 13,366 2009 8 2010 13,366 Repaint Units - Base Year 2010 8,122 2010 8 2011 8,122 Repaint Units - Base Year 2011 9,244 2011 8 2012 9,244 Repaint Units - Base Year 2012 9,244 2012 8 2013 9,244 Irrigation System 1,800 2007 10 2009 1,800 Total Scheduled Expenditures - - 2,651-21,139 13,366 9,922 11,895 19,217 2,651 Carryover of previous Year 41,994 57,854 75,161 89,823 107,142 103,330 107,289 114,693 120,127 118,242 Forecast Interest Earned 20 27 34 39 46 45 46 49 52 51 Added to Reserves 15,840 17,280 17,280 17,280 17,280 17,280 17,280 17,280 17,280 17,280 End of Year Reserve Balance 57,854 75,161 89,823 107,142 103,330 107,289 114,693 120,127 118,242 132,922 Number of Units 88 96 96 96 96 96 96 96 96 96 Monthly Unit Contribution 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 Estimated Rate of Inflation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Estimated Rate of Interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% CONFIDENTIAL 2009 Copyright Stillwater Community Management, LLC Page 1 of 3 Forecast

Dancing Willows Condominium HOA. Inc. Twenty Year Reserve Plan - Exhibit A Provided by: Stillwater Community Management, LLC Revised and Reviewed: November 12, 2012 Study Type: Full, With-Site-Visit/Off Site Review Base Cycle 11 12 13 14 15 16 17 18 19 20 Component Cost Year Term Start Concrete Sidewalk, Patio and Driveway 2,651 2007 7 2008 Concrete Sidewalk, Patio and Driveway 2,651 2007 7 2010 Concrete Sidewalk, Patio and Driveway 2,651 2007 7 2013 Common Area Structures Reserves 9,973 2009 10 2011 Unit Roof - Replace 2008 base year 92,732 2008 30 2008 Unit Roof - Replace 2009 base year 69,299 2009 30 2009 Unit Roof - Replace 2010 base year 23,433 2010 30 2010 Unit Roof - Replace 2011 base year 44,866 2011 30 2011 Unit Roof - Replace 2012 base year 44,866 2012 30 2012 Unit Gutter - replace 2008 base year 18,912 2008 30 2008 Unit Gutter - replace 2009 base year 14,184 2009 30 2009 Unit Gutter - replace 2010 base year 4,728 2010 30 2010 Unit Gutter - replace 2011 base year 9,456 2011 30 2011 Unit Gutter - replace 2012 base year 9,456 2012 30 2012 Repaint Units - Base Year 2008 18,488 2008 8 2009 Repaint Units - Base Year 2009 13,366 2009 8 2010 Repaint Units - Base Year 2010 8,122 2010 8 2011 Repaint Units - Base Year 2011 9,244 2011 8 2012 Repaint Units - Base Year 2012 9,244 2012 8 2013 Irrigation System 1,800 2007 10 2009 Total Scheduled Expenditures Carryover of previous Year Forecast Interest Earned Added to Reserves End of Year Reserve Balance Number of Units Monthly Unit Contribution Estimated Rate of Inflation Estimated Rate of Interest CONFIDENTIAL 2009 Copyright Stillwater Community Management, LLC 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2,651 2,651 2,651 2,651 9,973 18,488 13,366 8,122 9,244 9,244 1,800-2,651 18,488 13,366 10,773 9,244 13,695-12,624-132,922 151,410 167,256 167,270 172,407 180,138 189,402 194,219 212,732 218,629 57 64 71 71 73 76 79 81 89 91 18,432 18,432 18,432 18,432 18,432 18,432 18,432 18,432 18,432 18,432 151,410 167,256 167,270 172,407 180,138 189,402 194,219 212,732 218,629 237,152 96 96 96 96 96 96 96 96 96 96 16.00 16.00 16.00 16.00 16.00 16.00 16.00 16.00 16.00 16.00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Page 2 of 3 Forecast

Dancing Willows Condominium HOA. Inc. Twenty Year Reserve Plan - Exhibit A Provided by: Stillwater Community Management, LLC Revised and Reviewed: November 12, 2012 Study Type: Full, With-Site-Visit/Off Site Review Base Cycle Component Cost Year Term Start Concrete Sidewalk, Patio and Driveway 2,651 2007 7 2008 Concrete Sidewalk, Patio and Driveway 2,651 2007 7 2010 Concrete Sidewalk, Patio and Driveway 2,651 2007 7 2013 Common Area Structures Reserves 9,973 2009 10 2011 Unit Roof - Replace 2008 base year 92,732 2008 30 2008 Unit Roof - Replace 2009 base year 69,299 2009 30 2009 Unit Roof - Replace 2010 base year 23,433 2010 30 2010 Unit Roof - Replace 2011 base year 44,866 2011 30 2011 Unit Roof - Replace 2012 base year 44,866 2012 30 2012 Unit Gutter - replace 2008 base year 18,912 2008 30 2008 Unit Gutter - replace 2009 base year 14,184 2009 30 2009 Unit Gutter - replace 2010 base year 4,728 2010 30 2010 Unit Gutter - replace 2011 base year 9,456 2011 30 2011 Unit Gutter - replace 2012 base year 9,456 2012 30 2012 Repaint Units - Base Year 2008 18,488 2008 8 2009 Repaint Units - Base Year 2009 13,366 2009 8 2010 Repaint Units - Base Year 2010 8,122 2010 8 2011 Repaint Units - Base Year 2011 9,244 2011 8 2012 Repaint Units - Base Year 2012 9,244 2012 8 2013 Irrigation System 1,800 2007 10 2009 Next Pmt 20-Yr Balance Next Pmt 2036 1,136 2,651 2038 379 2,651 2034 1,894 2,651 2041 997 9,973 2038 134,377 167,971 2039 125,526 2040 42,446 2041 81,269 2042 81,269 2038 34,256 2039 25,692 2040 8,564 2041 17,128 2042 17,128 2033 18,488 2034 13,366 2035 8,122 2036 9,244 2037 9,244 2039 1,800 Total Scheduled Expenditures Carryover of previous Year Forecast Interest Earned Added to Reserves End of Year Reserve Balance Number of Units Monthly Unit Contribution Estimated Rate of Inflation Estimated Rate of Interest CONFIDENTIAL 2009 Copyright Stillwater Community Management, LLC Page 3 of 3 Forecast

Dancing Willows Townhomes Homeowners Association, Inc. RESERVE PLAN NOTES This is a reserve plan designed to catalog long term costs associated with fixed assets under the responsibility of the HOA. The goal of the plan is to identify timing of long-term costs and save accordingly. Base costs are estimates derived from installation cost and current price quotes from manufacturers of same or similar products. Timing of costs are derived from manufactures operations and maintenance documentation and commonly used industry specific values. This is not an engineering study but a Common Sense plan to match savings to long-term expenditures. 1 Concrete Sidewalk, Patio and Driveway Reserve plan includes a detailed take off of all concrete surfaces. There is a total of 27,790 square feet of concrete in various configurations. Concrete is expected to fail at a rate of 5% every 7 years due to cracking, Spaulding and heaving. Reserve plan takes into consideration different cost for each type of concrete installed. $ 7,954.78 Driveway 19,600 5% Failure 980 Cost per Square ft $ 4.91 Sub total curb and gutter $ 4,811.80 Sidewalk and Patio 9190 5% Failure 460 Cost per square ft $ 6.84 Sub total curb and gutter $ 3,142.98 2 Common Area Structures Reserves $ 9,973.00 Page 1 of 2 Plan Notes

Major maintenance and replacement of common area structures and retaining walls 3 Unit Roof - Replace Cost to replace roofs every 30 years. Base cost for roof is determined by year roof installed. 4 Unit Gutter - Replace Base cost year is the same as the roofs in item 9 5 Repaint Units Cost to repaint units every 7 years. Base cost for painting is determined by year building completed. Painting to include Trim and Hardy board dormer facia. Stucco is not to be painted. Touch up and trim painting has been added to the operating budget to alow for anual paint maintenance. 6 Irrigation System Cost to replace major irrigation system equipment every 10 years Page 2 of 2 Plan Notes