$14,710,000 CONSOLIDATED BELL MOUNTAIN RANCH …bmrmetro.org › ...General_Obligation_Limited_Tax... · income Llnderlederal income tax laws pursuant to Section 103 ,,(the blternal

NEW ISSUE BOOK-ENTRY-ONLY BANK QUALIFIED

RATING: Standard & Poor's "AAA" (negative outlook) INSURANCE: ASSURED GUARANTY MUNICIPAL CORP.

(formerly known as Financial Security Assurance Inc.) UNDERLYING RATING: Standard & Poor's "BBB+"

(See "MISCELLANEOUS-Ratings")

III the opiniol1 of Shennan & Howard LL C, Bond Counsel, assuming cOllIinuous compliance with certain covenants described herein, interest all the Bonds is excludedfrom gross income Llnderlederal income tax laws pursuant to Section 103 ,,(the blternal Revenue Code of 1986, as amended to the date of ddiva)' ,,(the Bonds (the "Tax Code"), interest all the Bonds is exc/udedfrom alternatil'e minimum taxa hie income as defined in Section 55(h)(2) of the Tax Code except that such illterest is required to he included in calculatinK the adiusted current earnings adjustment applicable to corporatiolls for purposes of computing The alternative minimum taxable illcome (?f corporations, and interest on the Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colonu/o income tax laws in ~/fect as of the date of delive.), of the Bonds. See "TAX MATTERS." The District has designated the Bonds as "qual(fied tax-exempt obligations" for purposes ~lSecrion 265(b)(3) of the Tax Code. See "FINANCIAL INSTITUTION INTEREST DEDUCTION."

$14,710,000 CONSOLIDATED BELL MOUNTAIN RANCH METROPOLITAN DISTRICT

DOUGLASCOUNT~COLORADO GENERAL OBLIGATION LIMITED TAX REFUNDING BONDS

SERIES 2010

Dated: Date of Delivery Due: December 1, as shown below

Thc Bonds arc limited tax general obligations of the District secured by and payable from the Plcdged Revenue, consisting of the moneys derived by thc District from imposition of the Required Mill Levy. after payment of any costs of collection, plus any other legally available moneys which the District determines, in its absolute discretion, to transfer to the Trustee for application as Pledged Revenue. The Required Mill Levy is generally defined as an ad valorem mill1evy imposed upon all taxable property of the District each year in an amount sufficient. when combined with moneys in the Bond Fund and. in the discretion of the District. moneys in the Surplus Fund in excess of the Target Surplus Amount, to pay the principal of. premium if any, and interest on the Bonds as the same become due and payable, but not in excess of 73.417 mills (as cun'ently adjusted) and, tl)r so long as the Surplus Fund is less than the Target Surplus Amount, not less than 60.000 mills (as cUlTently adjusted). The Bonds are also secured by a Reserve Fund and a Surplus Fund. For a more detailed description of the Required Mill Levy, the Reserve Fund and the Surplus Fund, see the information herein under the caption "THE BONDS-Security for the Bonds and -Indenture Provisions." The Bonds are being issued pursuant to an Indenture of Trust dated as of June I, 2010 between the District and UMB Bank, n.a., Denver, Colorado, as Trustee. The Trustee will also act as Registrar and Paying Agent for the Bonds and DTC will act as securities depository for the Bonds. The Bonds will be issued in book entry only form and purchasers of the Bonds will not receive certificates evidencing their ownership interests in the Bonds. The Bonds are being initially issued in denominations of 5:;,()00 or any integral multiple thereof as fully registered bonds. Interest on the Bonds is payable semiannually on June 1 and December I each year, commencing December 1, 2010, at the rates set forth below. Capitalized terms used on the cover page of this Official Statement are defined in the Introduction herein.

MATURITY SCHEDULE CUSIP07813T I.V

Maturity Date Principal Interest Maturity Date Principal Interest (December 1) Amount Rate Yield CUSIP' (December 1) Amount Rate

2010 $300,000 2.500% 1.400% AG3 2018 $340,000 3.625% 2011 290,000 2.500 1.650 AHI 2019 355,000 4.000 2012 285,000 2.500 1.910 AJ7 2020 370,000 4.000 2013 295,000 2.750 2.240 AK4 2021 385,000 4.000 2014 300,000 3.000 2.600 AL2 2022 400,000 4.100 2015 310,000 3.250 2.980 AMO 2023 415,000 4.150 2016 320,000 3.250 3.330 AN8 2024 430,000 4.200 2017 330,000 3.375 3.580 AP3 2025 450,000 4.300

$2,580,000 4,625% Term Bond Due December 1, 2030 - Price 98.373% CUSIP 07813T AY 4 I."

$3,245,000 4.875% Term Bond Due December I, 2035 - Price 98.209% CUSIP07813T AZI 1.0

$3,310,000 S.OOO% Term Bond Due December 1, 2039 - Price 99.236% CUSIP 07813T BAS I."

I The District takes no responsibility for the accuracy of CUSIP numbers, which are included solely for the convenience of owners of the Bonds. ~ Copyright 20to, Amcrican Bankers Association, Standard & Poor's, CUSIP Service Bureau, A Division "fThe McGraw-Hill Companies, Inc.

Yield CUSIP'

3,770% AQI 3.930 AR9 4.050 AS7 4.120 AT5 4.210 AU2 4.290 AVO 4.370 AW8 4.450 AX6

The scheduled payment of principal of and interest 011 the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by ASSURED GUARANTY MUNICIPAL CORP. (FORMERLY KNOWN AS FINANCIAL SECURITY ASSURANCE INC.)

AsSURED GUARANIY

MUNICIPAL

Proceeds from the sale of the Bonds will be used by the District for the purposes of (a) refunding the District's outstmding general obligation bonds; (b) funding the Reserve Fund; and (e) paying the costs of issuance of the Bonds.

'Ille Bonds are subject to optional and mandatory sinking lund redemption prior to maturity at the prices and upon the terms set forth in this Official Statement. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read this entire Official Statement to obtain information essential to the making of an informed investment decision paying particular attention to the section entitled "INVESTMENT CONSIDERATIONS,"

The Bonds are offered when, as and if issued by the District, subject to prior sale, withdrawal or modification of the ofter without notice and subject to the approval of legality by Sherman & Howard L.L.C., Denver, Colorado, as Bond Counsel, and certain other conditions. C.ertain matters will be passed upon by Collins & Cockrel, P.C., Denver. Colorado, as General Counsel to the District. Kutak Rock LLP. Denver, Colorado, has acted a' counsel to the Underwriter and, in such capacity. has assisted in the preparation of this Official Statement. The Bonds are expected to be available for delivery through the facilities of DTC on or about June 8. 2010.

D.A. Davidson & Co. '~~~

This Official Statement is dated May 18, 2010.

CONSOLIDATED BELL MOUNTAIN RANCH METROPOLITAN DISTRICT IN DOUGLAS COUNTY, COLORADO

Board of Directors

Jeanne Dassel Alan Cobb

Robert J. Brabec Russell Grant Kirk Fischer

General Counsel to the District

Collins & Cockrel, P.C. Denver, Colorado

Underwriter

D.A. Davidson & Co. Denver, Colorado

Trustee

UMB Bank, n.a. Denver, Colorado

Bond Counsel

Sherman & Howard L.L.c. Denver, Colorado

Underwriter's Counsel

Kutak Rock LLP Denver, Colorado

No dealer, salesman, or other person has been authorized to give any information or to make a~ representation, other than the information contained in this Official Statement, in connection with the offering of the Bonds, and, if given or made, such information or representation must not be relied upon as having been authorized by the District or the Underwriter. The information in this Official Statement is subject to change without notice, and neither the delivery of this Official Statement nor a~ sale hereunder will, under a~ circumstances, create a~ implication that there has been no change in the affairs of the District since the date hereof This Official Statement does not constitute an offir or solicitation in a~ jurisdiction in which such offer or solicitation is not authorized. or in which a~ person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. The iriformation set forth herein has been furnished by the District and obtainedfrom other sources which are believed to be reliable. Neither the contents of this Official Statement nor any prior or subsequent communications from the District or a~ of its officers, directors, employees or agents constitute legal, tax, accounting or regulatory advice. Before purchasing, prospective investors should consult with their own legal counsel and business and tax advisors to determine the consequences of an investment in the Bonds and should make an independent evaluation of the investment.

TABLE OF CONTENTS

INTRODUCTION .................................................. 1 Accounting Policies and Financial INVESTMENT CONSIDERATIONS ..................... 5 Statements ...................................................... 29

GeneraL .......................................................... 5 Budget and Appropriation Procedure .............. 30 Risk of Reductions in Assessed Value; Historical and Budgeted Financial Market Value of Land ...................................... 5 Information .................................................... 31 Secondary Market ............................................ 5 Risk Management. .......................................... 35 Enforcement of Collection Remedies ................ 5 Deposit and Investment of District Funds ........ 35 Enforceability of Bondholders' Remedies Constitutional Amendment Limiting Taxes Upon Default ................................................... 6 and Spending .................................................. 35 Legal Constraints on District Operations .......... 6 DEBT STRUCTURE ............................................ 36

BOND INSURANCE ............................................. 6 Required Elections ......................................... 36 Bond Insurance Policy ..................................... 6 General Obligation Debt.. ............................... 37 Assured Guaranty Municipal Corp. LEGAL MATTERS .............................................. 38 (Formerly Known as Financial Security Sovereign Immunity ....................................... 38 Assurance Inc.) ................................................ 6 Pending and Threatened Litigation

THE BONDS ......................................................... 8 Involving the District.. ................................... .39 Description ...................................................... 8 Legal Representation ...................................... 39 Prior Redemption ............................................. 9 TAX MATTERS ................................................... 39 Application of Bond Proceeds ........................ 10 FINANCIAL INSTITUTION INTEREST Security for the Bonds .................................... 11 DEDUCTION ...................................................... .41 Indenture Provisions ...................................... 13 MISCELLANEOUS ............................................. .42 Debt Service Requirements ............................ 19 Ratings .......................................................... .42

THE DISTRICT ................................................... 20 Registration of Bonds .................................... .42 Organization and Description ......................... 20 Interest of Certain Persons Named in This District Powers .............................................. 20 Official Statement ......................................... .43 Governing Board ........................................... 20 Undertaking to Provide Ongoing Disclosure .. .43 Administration ............................................... 21 Underwriting .................................................. 43 Material District Agreements ......................... 21 Additional Information .................................. .43 Facilities and Services Provided by the Official Statement Certification ..................... .43 District .......................................................... 22 Other Services Available Within the District .. 24 Development Within the District.. .................. 24

DISTRICT FINANCIAL INFORMATION ........... 25 Ad Valorem Property Taxes ........................... 25 Ad Valorem Property Tax Data ...................... 27 Specific Ownership Taxes .............................. 29 Other Revenues .............................................. 29

APPENDIX A

APPENDIXB APPENDIXC APPENDIXD APPENDIXE APPENDIXF

District Audited Financial Statements for the Year Ended December 31, 2009 Economic and Demographic Information Form of Bond Counsel Opinion Book-Entry-Only System Form of Continuing Disclosure Undertaking Specimen Municipal Bond Insurance Policy

Assured Guaranty Municipal Corp. (formerly known as Financial Security Assurance Inc.) ("AGM" or the "Insurer") makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading "Bond Insurance" and "Exhibit F - Specimen Municipal Bond Insurance Policy."

Neither the Securities and Exchange Commission nor any securities regulatory authority of any state has approved or disapproved the Bonds or this Official Statement. Any representation to the contrary is unlawful.

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INDEX OF TABLES

TABLE Page

I Debt Service Requirements ....................................................................................................... 19 II History of District's Assessed Valuation and Mill Levies .......................................................... 27 III 2009 Assessed and "Actual" Valuation of Classes of Property in the District ............................ 28 IV Historical Property Tax Collections .......................................................................................... 28 V Sample Total 2009 Mill Levies ................................................................................................. 29 VI History of General Fund Revenue, Expenditures and Changes in Fund Balances ....................... 31 VII History of Debt Service Fund Revenue, Expenditures and Changes in Fund Balances ............... 32 VIII History of Capital Projects Fund Revenue, Expenditures and Changes in Fund Balances ........... 32 IX General Fund Budget Summary and Comparison ...................................................................... 33 X Debt Service Fund Budget Summary and Comparison .............................................................. 34 XI Capital Projects Fund Budget Summary and Comparison .......................................................... 34 XII Estimated Overlapping General Obligation Debt.. ..................................................................... 37 XIII Historical Debt Ratios ............................................................................................................... 38

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CONSOLIDATED BELL MOUNTAIN RANCH METROPOLITAN DISTRICT AERIAL

IV

VICINITY MAP

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INTRODUCTION

This Official Statement is furnished to prospective purchasers of$14,710,000 General Obligation Limited Tax Refunding Bonds, Series 2010 (the "Bonds"), issued by Consolidated Bell Mountain Ranch Metropolitan District (the "District"), in Douglas County (the "County"), Colorado (the "State"). The offering of the Bonds is made only by way of this Official Statement, which supersedes any other information or materials used in connection with the offer or sale of the Bonds. This Official Statement speaks only as of its date, and the information contained herein is subject to change.

The information set forth in this Official Statement has been obtained from the District and from other sources believed to be reliable but is not guaranteed as to accuracy or completeness.

The following introductory material is only a brief description of, and is qualified by, the more complete information contained throughout this Official Statement. A full review should be made of the entire Official Statement and the documents summarized or described herein.

The District........................... The order and decree of the District Court of Douglas County, Colorado, (the "County Court") forming the District by consolidating the Bell Mountain Ranch Phase II Metropolitan District (the "Phase II District"), the Bell Mountain Ranch Phase III Metropolitan District (the "Phase III District") and the Bell Mountain Ranch Park District and Recreation District (the "Park District" and together with the Phase II District and the Phase III District, the "Predecessor Districts") was entered on January 4, 1999, after the approval at an election held within each of the Predecessor Districts for that purpose on November 3, 1998. The District was organized subject to a service plan (the "Service Plan") approved by the Board of County Commissioners of Douglas County (the "County Commissioners") to provide essential public improvements within and without the boundaries of the District serving the Bell Mountain development. The District, generally located approximately three miles south of the central commercial district of the Town of Castle Rock (the "Town"), originally encompassed approximately 2,040 acres. Subsequent to an order of inclusion granted by the County Court in November 2008 for the inclusion of approximately 70 acres, the current acreage of the District is approximately 2,110 acres. See "THE DISTRICT" and the VICINITY MAP.

The District is platted for 321 single family lots which, with the exception of four vacant lots, are fully developed with single family dwellings. Approximately 51 acres land within the District is comprised of property approved for commercial development. At this time, the existing commercial development within the District consists solely of an Equestrian Center. According to District officials, additional commercial development is not anticipated in the near future as the result of costs associated with providing water service to such property. As a result of a recent inclusion of 70-acres of property within the boundaries of the District (the "Larrick Property"), there is the potential for 16 additional homes to be constructed on the Larrick Property. See "THE DISTRICT."

Authority for Issuance ......... The Bonds are issued in full conformity with the constitution and laws of the State of Colorado, including Title 11, Article 57, Part 2, Colorado Revised Statutes, as amended (the "Supplemental Public Securities Act") and Title 32, Article 1, Colorado Revised Statutes, as amended (the "Special District Act"); pursuant to an authorizing resolution adopted by the District's Board of Directors (the "Board") prior to the issuance of the Bonds (the "Bond Resolution"); and an Indenture of Trust (the "Indenture") dated as of June 1, 2010 between the District and UMB Bank, n.a., as trustee (the "Trustee").

Sources ofPayment.............. The Bonds are limited tax general obligations of the District secured by the Pledged Revenue, which consists of the moneys derived by the District from the Required Mill Levy (defined herein), after payment of any costs of collection, plus any other legally available moneys which the District determines, in its absolute discretion, to transfer to the Trustee for application as Pledged Revenue. The Bonds are additionally secured by a Reserve Fund to be funded from Bond proceeds in the amount of $92,387.63 (the "Required Reserve") and by a Surplus Fund initially funded at closing in the amount of$641,038.00 from moneys on deposit in prior debt service and reserve funds and accounts relating to the Refunded Bonds (defined below). Subsequent to the issuance of the Bonds, the Surplus Fund is to be funded, if necessary, from Pledged Revenue up to the amount of $400,000 (the "Target Surplus Amount"). F or a more detailed description of the Pledged Revenue, the Reserve Fund, the Surplus Fund, and the definition of Required Mill Levy, see information under the captions "THE BONDS-Application of Bond Proceeds, -Security for the Bonds, and -Indenture Provisions."

Bond Insurance .................... Assured Guaranty Municipal Corp. (formerly known as Financial Security Assurance Inc.) ("AGM" or the "Insurer") has committed to issue, effective as of the date of issuance of the Bonds, a policy of insurance (the "Insurance Policy" or "Policy") guaranteeing the payment, when due, of the principal of and interest on the Bonds. The insurance extends over the life of the issue and cannot be canceled by AGM. Payment under the policy is subject to the conditions described in "BOND INSURANCE." A specimen of the Insurance Policy is attached as APPENDIX F to this Official Statement. See "BOND INSURANCE."

Purpose ................................. Proceeds from the sale of the Bonds will be used by the District for the purposes of (a) refunding all of the District's outstanding general obligation debt, consisting of the District's Series 1999 Bonds, Series 1999B Bonds, and Series 2003 Bonds (each, defined below and, collectively, the "Refunded Bonds"); (b) funding the Reserve Fund; and (c) paying the costs of issuance of the Bonds. See "THE BONDSApplication of Bond Proceeds and, for a description of the Refunded Bonds, see the information therein under the caption -Refunding Plan."

Payment Provisions .............. The Bonds mature and bear interest (computed on the basis of a 360-day year of twelve 30-day months) at the rate set forth on the cover page hereof. Interest on the Bonds is payable semiannually on June 1 and December 1 of each year, commencing on December 1,2010. Payment

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Book-Entry-Only

of the principal of and interest on the Bonds will be made as described in "APPENDIX D-Book-Entry-Only System."

Registration .......................... The Bonds will be issued in fully registered form and will be registered initially in the name of "Cede & Co." as nominee for The Depository Trust Company, New York, New York ("DTC"), a securities depository. Beneficial ownership interests in the Bonds may be acquired in denominations of $5,000 in principal amount or integral multiples thereof through brokers and dealers who are, or who act through, participants in the DTC system (the "Participants"). Such beneficial ownership interests will be recorded on the records of the Participants. Persons for whom Participants acquire interests in the Bonds (the "Beneficial Owners") will not receive certificates evidencing their interests in the Bonds so long as DTC or a successor securities depository acts as the securities depository with respect to the Bonds. So long as DTC or its nominee is the registered owner of the Bonds, payments of principal and interest on the Bonds, as well as notices and other communications made by or on behalf of the District pursuant to the Indenture will be made to DTC or its nominee only. Disbursement of such payments, notices, and other communications by DTC to Participants, and by Participants to the Beneficial Owners, is the responsibility of DTC and the Participants pursuant to rules and procedures established by such entities. See "APPENDIX D-BookEntry-Only System" for a discussion of the operating procedures of the DTC system with respect to payments, registration, transfers, notices, and other matters. Except as otherwise provided herein, the term "Owner" shall refer to the registered owner of any Bond, as shown by the registration books maintained by the Bond Registrar.

Exchange and Transfer ........ While the Bonds remain in book-entry-only form, transfer of ownership by Beneficial Owners (as defined by the rules of DTC) may be made as described under the caption "APPENDIX D-Book-Entry-Only System."

Prior Redemption................. The Bonds are subject to optional redemption and mandatory sinking fund redemption prior to maturity as described in "THE BONDS-Prior Redemption."

Tax Status ............................. In the opinion of Sherman & Howard L.L.C., Bond Counsel, assuming continuous compliance with certain covenants described herein, interest on the Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the Bonds (the "Tax Code"), interest on the Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the adjusted current earnings adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations, and interest on the Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in

3

effect as of the date of delivery of the Bonds. See "TAX MATTERS." The District has designated the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Tax Code. See "FINANCIAL INSTITUTION INTEREST DEDUCTION."

Financial Statements ............ Appended hereto are the audited financial statements of the District as of and for the year ended December 31,2009, being the most recent audited financial statements available for the District. See "DISTRICT FINANCIAL INFORMATION."

Offering and Delivery Information .•....••••....•••....••.•. The Bonds are offered when, as, and if issued by the District and

accepted by D.A. Davidson & Co. (the "Underwriter"), subject to prior sale, approval of legality and other matters by Bond Counsel and certain other conditions. It is expected that the Bonds will be available for delivery through the facilities ofDTC on or about June 8,2010.

Debt Ratios •......••.....•...•.•...... The following are selected District debt ratios upon issuance and delivery of the Bonds.

District 2009 Assessed Valuation 1 ............................................................................ .

District 2009 Statutory "Actual" Valuation 1 .............................................................. .

Current Estimated Population 2 ................................................................................. ..

District General Obligation Debt Outstanding Upon Issuance of the Bonds 1 .............. .

District Debt as a Ratio of: 2009 District Assessed Valuation 1 ........................................................................ ..

2009 District Statutory "Actual" Valuation 1 .......................................................... ..

District Debt Per Capita 1 ...••••••.•••••.•••••....................•••.•••••••••••••.•.....•......•••••.•...•••••••...

Estimated Overlapping General Obligation Debt 1 ..................................................... .

Sum of District and Overlapping Debt ...................................................................... . District and Overlapping Debt as a Ratio of:

District 2009 Assessed Valuation 1 ........................................................................ ..

District 2009 Statutory "Actual" Valuation 1 .......................................................... ..

District and Overlapping Debt Per Capita .................................................................. .

$17,843,860 $217,222,317

1,054 $14,710,000

82.44% 6.77%

$13,956 $2,147,355

$16,857,355

94.47% 7.76%

$15,994

I For definitions of and descriptions of the methodology used in computing assessed valuation, statutory "actual" value, estimated population, general obligation debt outstanding, and estimated overlapping general obligation debt, see "THE BONDS-Security for the Bonds," "DISTRICT FINANCIAL INFORMA nON" and "DEBT STRUCTURE." 2 Estimated; based on an assumed population of approximately 3.5 persons per single family home completed and sold within the District which, as of March 31, 2010, was 301 single family homes according to District officials. Sources: Douglas County Assessor's Office, the District and individual overlapping taxing entities

Additional Information ......•. ALL OF THE SUMMARIES OF THE STATUTES, RESOLUTIONS, INDENTURE, OPINIONS, CONTRACTS, AND AGREEMENTS DESCRIBED IN THIS OFFICIAL STATEMENT ARE SUBJECT TO THE ACTUAL PROVISIONS OF SUCH DOCUMENTS. The summaries do not purport to be complete statements of such provisions and reference is made to such documents, copies of which are either publicly available or available upon request and the payment of a reasonable copying, mailing, and handling charge from: Consolidated Bell Mountain Ranch Metropolitan District, c/o Collins & Cockrel, P.C., 390 Union Blvd., Suite 400, Denver, Colorado 80228-1556, Telephone:

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(303) 989-1551; or D.A. Davidson & Co., 1600 Broadway, Suite 1100, Denver, Colorado 80202, Telephone: (303) 764-5700.

INVESTMENT CONSIDERATIONS

PROSPECTIVE INVESTORS IN THE BONDS SHOULD READ THIS ENTIRE OFFICIAL STATEMENT AND SHOULD GIVE PARTICULAR CONSIDERATION TO THE FOLLOWING INVESTMENT CONSIDERATIONS IN CONNECTION WITH THE PURCHASE OF THE BONDS.

General

The purchase of the Bonds involves certain investment considerations which are discussed throughout this Official Statement, and each prospective investor should make an independent evaluation of all information presented in this Official Statement in order to make an informed investment decision. The Bonds should only be purchased by investors who can bear the continuing risk of an investment in the Bonds. Particular attention should be given to the factors described below which, among others, could affect the payment of debt service on the Bonds.

Risk of Reductions in Assessed Value; Market Value of Land

The owners of the Bonds are dependent upon the assessed value of property within the District to provide a tax base from which ad valorem tax revenues are collected for the payment of debt service on the Bonds. The assessed value of property within the District is determined by multiplying the "actual value" of the property by an assessment rate, and the "actual value" of the property is determined by the county assessor, all as more particularly described under "DISTRICT FINANCIAL INFORMA TIONAd Valorem Property Taxes." Assessed valuations may be affected by a number of factors beyond the control of the District.

Property owners are also entitled to challenge the valuations of their property each year, and no assurance can be given that owners of property in the District will not seek to do so. The values of finished lots and homes may be reduced if market prices decline due to economic factors. Should the actions of property owners result in lower assessed valuations of property in the District or in an exemption from property taxation, there can be no assurance that property tax revenue from the Required Mill Levy would be sufficient to pay debt service on the Bonds. In either case, the security for the Bonds would be diminished, increasing the risk of non-payment.

Secondary Market

While the Underwriter expects, insofar as possible, to maintain a secondary market for the Bonds, no assurance can be given concerning the future existence of such a secondary market or its maintenance by the Underwriter or others at a particular price, and prospective purchasers of the Bonds should therefore be prepared, if necessary, to hold the Bonds to maturity or prior redemption.

Enforcement of Collection Remedies

The duty to pay property taxes does not constitute a personal obligation of the property owners within the District. Instead, the obligation to pay property taxes is tied to the properties taxed, and if timely payment is not made, the obligation constitutes a lien against the specific properties. To enforce the liens for delinquent (but not future) property taxes, the county treasurer has the power to sell such tax

5

liens and, if not redeemed within the statutory period of approximately three years, the county treasurer has the right to issue a tax deed vesting title of such property to the person or entity owning such tax liens, as provided by law. Such remedies for realization of delinquent property taxes are time consuming and expensive and there is no assurance that such procedures will result in recovery of all amounts due.

Enforceability of Bondholders' Remedies Upon Default

The remedies available to the owners ofthe Bonds upon a default are in many respects dependent upon judicial action, which is often subject to discretion and delay under existing constitutional law, statutory law, and judicial decisions, including specifically the federal Bankruptcy Code. The legal opinions to be delivered concurrently with delivery of the Bonds will be qualified as to enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, and insolvency or other similar laws affecting the rights of creditors generally, now or hereafter in effect; to usual equity principles which may limit the specific enforcement under State law of certain remedies; to the exercise by the United States of America of the powers delegated to it by the federal constitution; and to the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies, in the interest of serving an important public purpose.

Legal Constraints on District Operations

Various State laws and constitutional provisions govern the assessment and collection of ad valorem property taxes and the issuance of bonds; impose limitations on revenues and spending of the State and local governments, including the District; and limit rates, fees and charges imposed by such entities. State laws, constitutional provisions and federal laws and regulations apply to the obligations created by the issuance of the Bonds. There can be no assurance that there will not be changes in interpretation of, or additions to, the applicable laws and provisions which would have a material adverse effect, directly or indirectly, on the affairs of the District.

BOND INSURANCE

Bond Insurance Policy

Concurrently with the issuance of the Bonds, Assured Guaranty Municipal Corp. (formerly known as Financial Security Assurance Inc.) ("AGM" or the "Insurer") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement.

The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.

Assured Guaranty Municipal Corp. (Formerly Known as Financial Security Assurance Inc.)

AGM is a New York domiciled financial guaranty insurance company and a wholly owned subsidiary of Assured Guaranty Municipal Holdings Inc. ("Holdings"). Holdings is an indirect subsidiary of Assured Guaranty Ltd. ("AGL"), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol "AGO." AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure

6

and structured finance markets. No shareholder of AGL, Holdings or AGM is liable for the obligations of AGM.

On July 1, 2009, AGL acquired the financial guaranty operations of Holdings from Dexia SA ("Dexia"). In connection with such acquisition, Holdings' financial products operations were separated from its financial guaranty operations and retained by Dexia. For more information regarding the acquisition by AGL of the financial guaranty operations of Holdings, see Item 1.01 of the Current Report on Form 8-K filed by AGL with the Securities and Exchange Commission (the "SEC") on July 8, 2009.

Effective November 9, 2009, Financial Security Assurance Inc. changed its name to Assured Guaranty Municipal Corp.

AGM's financial strength is rated "AAA" (negative outlook) by Standard and Poor's Ratings Services, a Standard & Poor's Financial Services LLC business ("S&P") and "Aa3" (negative outlook) by Moody's Investors Service, Inc. ("Moody's"). On February 24, 2010, Fitch, Inc. ("Fitch"), at the request of AGL, withdrew its "AA" (Negative Outlook) insurer financial strength rating of AGM at the then current rating level. Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of any security guaranteed by AGM. AGM does not guarantee the market price of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn.

Recent Developments

Ratings

On May 17, 2010, S&P published a Research Update in which it affirmed its "AAA" counterparty credit and financial strength ratings on AGM. At the same time, S&P continued its negative outlook on AGM. Reference is made to the Research Update, a copy of which is available at www.standardandpoors.com. for the complete text ofS&P's comments.

In a press release dated February 24, 2010, Fitch announced that, at the request of AGL, it had withdrawn the "AA" (Negative Outlook) insurer fmancial strength rating of AGM at the then current rating level. Reference is made to the press release, a copy of which is available at www.fitchratings.com. for the complete text of Fitch's comments.

On December 18, 2009, Moody's issued a press release stating that it had affirmed the "Aa3" insurance financial strength rating of AGM, with a negative outlook. Reference is made to the press release, a copy of which is available at www.moodys.com. for the complete text of Moody's comments.

There can be no assurance as to any further ratings action that Moody's or S&P may take with respect to AGM.

For more information regarding AGM's financial strength ratings and the risks relating thereto, see AGL's Annual Report on Form 10-K for the fiscal year ended December 31,2009, which was filed by AGL with the SEC on March 1,2010 and AGL's Quarterly Report on Form 10-Q for the quarterly period ended March 31,2010, which was filed by AGL with the SEC on May 10,2010. Effective July 31, 2009,

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Holdings is no longer subject to the reporting requirements of the Securities and Exchange Act of 1934, as amended (the "Exchange Act").

Capitalization of AGM

At March 31, 2010, AGM's consolidated policyholders' surplus and contingency reserves were approximately $2,220,015,145 and its total net unearned premium reserve was approximately $2,228,912,193 in accordance with statutory accounting principles.

Incorporation of Certain Documents by Reference

Portions of the following documents filed by AGL with the SEC that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof:

(i) The Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (which was filed by AGL with the SEC on March 1, 2010); and

(ii) The Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010 (which was filed by AGL with the SEC on May 10,2010).

All information relating to AGM included in, or as exhibits to, documents filed by AGL pursuant to Section 13 (a), 13(c), 14 or 15(d) of the Exchange Act after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC's website at http://www.sec.gov, at AGL's website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp. (formerly known as Financial Security Assurance Inc.): 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) 826-0100).

Any information regarding AGM included herein under the caption "BOND INSURANCE -Assured Guaranty Municipal Corp. (formerly known as Financial Security Assurance Inc.)" or included in a document incorporated by reference herein (collectively, the "AGM Information") shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded.

AGM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading "BOND INSURANCE".

THE BONDS

Description

The Bonds are limited tax general obligations of the District and are being issued in the total principal amount, dated as of the dated date, maturing on the dates and bearing interest at the rates set forth on the cover page hereof. Certain matters relating to the Bonds are described in detail in

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"INTRODUCTION" and are not restated under this caption. These include prOVlSlons regarding registration and denominations of the Bonds; exchange and transfer of the Bonds; payment of the principal of and interest on the Bonds; a description of the authority for issuance of the Bonds; and information regarding delivery of the Bonds. See the caption "INTRODUCTION" for a description of the matters referred to in the previous sentence, as well as other information relating to the Bonds.

Prior Redemption

Optional Redemption. Bonds maturing on and after December 1,2021, are subject to redemption prior to maturity, at the option of the District, as a whole or in integral multiples of$5,000, in any order of maturity and in whole or partial maturities, on December 1, 2020, and on any date thereafter, upon payment of par and accrued interest, without redemption premium.

Mandatory Sinking Fund Redemption. The Bonds maturing on December 1, 2030 are also subject to mandatory sinking fund redemption, in part, by lot, commencing on December 1, 2026, and on each December 1 thereafter prior to the maturity date of such Bonds, upon payment of par and accrued interest, without redemption premium, in the annual amounts set forth below:

Year of Redemption (December 1)

2026 2027 2028 2029 2030 1

1 Final maturity, not a sinking fund redemption.

Redemption Amount

$470,000 490,000 515,000 540,000 565,000

The Bonds maturing on December 1, 2035 are also subject to mandatory sinking fund redemption, in part, by lot, commencing on December 1, 2031, and on each December 1 thereafter prior to the maturity date of such Bonds, upon payment of par and accrued interest, without redemption premium, in the annual amounts set forth below:


2031 2032 2033 2034 2035 1

1 Final maturity, not a sinking fund redemption.

Redemption Amount

$590,000 620,000 645,000 680,000 710,000

The Bonds maturing on December 2039 are also subject to mandatory sinking fund redemption, in part, by lot, commencing on December 1, 2036, and on each December 1 thereafter prior to the maturity date of such Bonds, upon payment of par and accrued interest, without redemption premium, in the annual amounts set forth below:

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2036 2037 2038 2039 1

I Final maturity, not a sinking fund redemption.

Redemption Amount

$745,000 785,000 825,000 955,000

With respect to each maturity of the Bonds subject to mandatory sinking fund redemption, on or before 45 days prior to each sinking fund installment date for such maturity as set forth above, the Trustee shall select for redemption, by lot in such manner as the Trustee may determine, from the Outstanding Bonds of that maturity, a principal amount of such Bonds equal to the applicable sinking fund installment. The amount of the applicable sinking fund installment for any particular date and maturity may be reduced by the principal amount of any Bonds of that maturity which prior to said date have been redeemed (otherwise than through the operation of the sinking fund) and cancelled and not theretofore applied as a credit against a sinking fund installment. Such reductions, if any, shall be applied in such year or years as may be determined by the District.

General Redemption Provisions. If less than all of the Bonds within a maturity are to be redeemed on any prior redemption date, the Bonds to be redeemed shall be selected by lot prior to the date fixed for redemption, in such manner as the Trustee shall determine. The Bonds shall be redeemed only in integral multiples of $5,000. In the event a Bond is of a denomination larger than $5,000, a portion of such Bond may be redeemed, but only in the principal amount of $5,000 or any integral multiple thereof. Such Bond shall be treated for the purpose of redemption as that number of Bonds which results from dividing the principal amount of such Bond by $5,000. In the event a portion of any Bond is redeemed, the Trustee shall, without charge to the Owner of such Bond, authenticate and deliver a replacement Bond or Bonds for the unredeemed portion thereof.

Notice and Effect of Redemption. In the event any of the Bonds or portions thereof are called for redemption as aforesaid, notice thereof identifying the Bonds or portions thereof to be redeemed will be given by the Trustee by mailing a copy of the redemption notice by first class mail (postage prepaid), not less than 30 days prior to the date fixed for redemption, to the Owner of each Bond to be redeemed in whole or in part at the address shown on the registration books maintained by or on behalf of the District by the Trustee. Failure to give such notice by mailing to any Owner, or any defect therein, shall not affect the validity of any proceeding for the redemption of other Bonds as to which no such failure or defect exists. The redemption of the Bonds may be contingent or subject to such conditions as may be specified in the notice, and if funds for the redemption are not irrevocably deposited with the Trustee or otherwise placed in escrow and in trust prior to the giving of notice of redemption, the notice shall be specifically subject to the deposit of funds by the District. All Bonds so called for redemption will cease to bear interest after the specified redemption date, provided funds for their redemption are on deposit at the place of payment at that time.

Application of Bond Proceeds

Refunding Plan. The Bonds are being issued to effect a refunding of all of the District's outstanding general obligation debt consisting of its: General Obligation Limited Tax Refunding Bonds, Series 1999 originally issued in the principal amount of $8,055,000 and currently outstanding in the principal amount of $7,345,000, bearing interest at the rate of 6.625% (the "Series 1999 Bonds"); the General Obligation Limited Tax Bonds, Series 1999B originally issued in the principal amount of

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$3,450,000 and currently outstanding in the principal amount of $2,675,000, bearing interest at the rate of 7.375% (the "Series 1999B Bonds"); Subordinate General Obligation Limited Tax Bonds, Series 2003 originally issued in the principal amount of $3,970,000 and currently outstanding in the principal amount of$3,515,000, bearing interest at the rate of7.90% (the "Series 2003 Bonds" and together with the Series 1999 Bonds and Series 1999B Bonds, the "Refunded Bonds"). Pursuant to the authorizing resolutions of the Series 1999 Bonds and Series 1999B Bonds, the Series 1999 Bonds and Series 1999B Bonds are subject to redemption prior to maturity between November 15, 2009 and November 14, 2010 upon payment of the principal amount so redeemed, plus accrued interest thereon to the date of redemption, with a redemption premium of 2.0% (the "1999 Redemption Price"). Pursuant to the authorizing resolution for the Series 2003 Bonds, the Series 2003 Bonds are subject to redemption prior to maturity between November 15,2009 and November 14,2010 upon payment of the principal amount so redeemed, plus accrued interest thereon to the date of redemption, with a redemption premium of 3.0% (the "2003 Redemption Price"). A portion of the proceeds from the Bonds will be used to pay the 1999 Redemption Price and 2003 Redemption Price on the date of issuance of the Bonds.

Sources and Uses of Funds. The sources and uses of the proceeds of the Bonds are as follows:

SOURCES: Par amount of the Bonds ...................................................................... . Net Original Issue Discount/Original Issue Premium ............................. . Amounts in Funds Relating to Refunded Bonds .................................... .

Total. ................................................................................................. .

USES: Deposit to Escrow Account. .................................................................. . Deposit to Surplus Fund ........................................................................ . Deposit to Bond Fund ........................................................................... . Deposit to Reserve Fund ....................................................................... . Costs of issuance, including professional fees, insurance fees, rating agency fees, printing costs,

. d d .. d' 1 contmgency, an un erwntmg Iscount .............................................. . Total .................................................................................................. .

1 See "MISCELLANEOUS-Underwriting." Source: The Underwriter

Security for the Bonds

$14,710,000.00 ( 140,626.80) 935,623.00

$15,504,996.20

$14,041,126.30 641,038.00 143,729.00 92,387.63

586,715.27 $15,504,996.20

The Bonds are general obligation limited tax obligations of the District secured by and payable from the Pledged Revenue, consisting of the moneys derived by the District from the Required Mill Levy, after payment of any costs of collection, plus any other legally available moneys which the District determines, in its absolute discretion, to transfer to the Trustee for application as Pledged Revenue. The District levied 63.869 mills for debt service in 2009 for collection in 2010. The District has covenanted to levy the Required Mill Levy, defined below, to pay the principal of, premium if any, and interest on the Bonds as the same become due and payable. See "-Required Mill Levy" below.

THE BONDS ARE SOLELY THE OBLIGATIONS OF THE DISTRICT. UNDER NO CIRCUMSTANCES SHALL ANY OF THE BONDS BE CONSIDERED OR HELD TO BE AN INDEBTEDNESS, OBLIGATION OR LIABILITY OF DOUGLAS COUNTY, THE STATE OF COLORADO OR ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE DISTRICT.

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Required Mill Levy. The definition of Required Mill Levy is set forth below. The Bonds are not secured by property lying within the District, but rather by, among other things, the District's obligation to annually determine, fix and certify a rate of levy, not to exceed the Required Mill Levy, for ad valorem property taxes to the Douglas County Board of County Commissioners in an amount sufficient to pay, along with other legally available revenues, the principal of and interest on the Bonds when due, replenish the Reserve Fund to the Reserve Requirement, and fund the Surplus Fund to the Target Surplus Amount. See "-Covenant to Impose the Required Mill Levy" below and "INVESTMENT CONSIDERA TIONSEnforcement of Collection Remedies."

Definition of Required Mill Levy. The Indenture defines "Required Mill Levy" as follows:

The Indenture defines "Required Mill Levy" as follows:

(a) Subject to paragraph (b) below, an ad valorem mill levy (a mill being equal to 1110 of 1 cent) imposed upon all taxable property of the District each year in an amount sufficient, when combined with moneys in the Bond Fund and, in the discretion of the District, moneys in the Surplus Fund in excess of the Target Surplus Amount, to pay the principal of, premium if any, and interest on the Bonds as the same become due and payable, and to fund the Reserve Fund in an amount up to the Required Reserve, but not in excess of 60.000 mills, and for so long as the Surplus Fund is less than the Target Surplus Amount, not less than 49.0349 mills, or such lesser mill levy which, when combined with other Pledged Revenue then held in the Bond Fund, will permit the District to fully fund the Bond Fund for the next Bond Year and pay the Bonds as they come due, to fund the Reserve Fund up to the Required Reserve, and to fund the Surplus Fund up to the Target Surplus Amount; provided however, that in the event the method of calculating assessed valuation is or was changed after September 30, 1998, the date of approval of the Service Plan, the minimum and maximum mill levies provided herein will be increased or decreased to reflect such changes, such increases or decreases to be determined by the Board in good faith (such determination to be binding and final) so that to the extent possible, the actual tax revenues generated by the mill levy, as adjusted, are neither diminished nor enhanced as a result of such changes. For purposes of the foregoing, a change in the ratio of actual valuation to assessed valuation shall be deemed to be a change in the method of calculating assessed valuation.

(b) Notwithstanding anything herein to the contrary, in no event may the Required Mill Levy be established at a mill levy which would cause the District to derive tax revenue in any year in excess of the maximum tax increases permitted by the District's electoral authorization, and if the Required Mill Levy as calculated pursuant to the foregoing would cause the amount of taxes collected in any year to exceed the maximum tax increase permitted by the District's electoral authorization, the Required Mill Levy shall be reduced to the point that such maximum tax increase is not exceeded.

Current Adjusted Mill Levies. The maximum and minimum mill levies set forth above in the definition of Required Mill Levy are the mill levies that were in effect as of September 30, 1998, the date of approval of the Service Plan. These mill levies have been adjusted by the Board of Directors of the District as a result of subsequent changes in the ratio of actual valuation to assessed valuation which have occurred since September 30, 1998. The Bond Resolution provides that, in light of the fact that the method of calculating assessed valuation has changed since September 30, 1998, the Board determined that as of the date of the Bond Resolution, the minimum mill levy set forth in the definition of Required Mill Levy in the Indenture is currently 60.000, and the maximum mill levy set forth in such definition is currently 73.417 mills. The current maximum and minimum mill levies of 73.417 mills and 60.000

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mills reflect adjustments in such levies as a result of changes in the method of calculating assessed valuation which occurred after September 30, 1998, the date of approval of the Service Plan.

Covenant To Impose the Required Mill Levy. The Indenture provides that for the purpose of paying the principal of, premium if any, and interest on the Bonds, funding the Surplus Fund to the Target Surplus Amount and, if necessary, replenishing the Reserve Fund to the Required Reserve, the District covenants to cause to be levied on all of the taxable property of the District, in addition to all other taxes, direct annual taxes in each of the years 2010 to 2038, inclusive (and, to the extent necessary to make up any overdue payments on the Bonds, in each year subsequent to 2038) in the amount of the Required Mill Levy. Nothing in the Indenture shall be construed to require the District to levy an ad valorem property tax for payment of the Bonds and funding of the Reserve Fund and Surplus Fund in excess of the Required Mill Levy.

The Indenture further provides that it is the duty of the Board, annually, at the time and in the manner provided by law for levying other District taxes, to ratify and carry out the provisions of the Indenture with reference to the levying and collection of taxes; and the Board is pursuant to the terms of the Indenture to levy, certify, and collect said taxes in the manner provided by law for the purpose of paying the principal of, premium, if any, and interest on the Bonds.

Indenture Provisions

The following is a description of certain provisions of the Indenture and is subject in all respects to the more specific provisions of the Indenture.

Creation of Funds and Accounts. Under the Indenture there are created and established the following funds and accounts, which will be established with the Trustee and maintained by the Trustee in accordance with the provisions of the Indenture:

(a) the Bond Fund;

(b) the Surplus Fund; and

(c) Reserve Fund.

For the purpose of paying the redemption price of the Refunded Bonds, there is also established the Escrow Account, which is to be maintained by UMB Bank, n.a., in its capacity as the Escrow Bank, in accordance with the provisions of the Bond Resolution and, if executed, the Escrow Agreement between the District and the Escrow Bank.

Flow of Funds. Upon issuance of the Bonds, the District will transfer to the Trustee any moneys then held by the District which constitute Pledged Revenue, and thereafter the District will transfer all amounts comprising Pledged Revenue to the Trustee as soon as may be practicable after the receipt thereof. The Trustee will apply the Pledged Revenue in the following order of priority. For purposes of the following, when credits to more than one fund, account, or purpose are required at any single priority level, such credits will rank pari passu with each other.

FIRST, the credit of the Bond Fund, the amounts required below under "-Bond Fund," and to the credit of any other similar fund or account established for the payment of the principal of, premium if any, and interest on any Parity Bonds, the amounts required by the resolution or other enactment authorizing issuance of the Parity Bonds;

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SECOND, to the credit of the Reserve Fund, the amounts required below under "Reserve Fund," and to the credit of any other similar fund or account established to secure payment of the principal of, premium if any, and interest on any Parity Bonds, the amounts required by the resolution or other enactment authorizing issuance of the Parity Bonds;

THIRD, to the credit of the Surplus Fund, the amounts below under "-Surplus Fund," and to the credit of any other similar fund or account established to secure payment of the principal of, premium if any, and interest on any Parity Bonds, the amounts required by the resolution or other enactment authorizing issuance of the Parity Bonds;

FOURTH, to the credit of any other fund or account hereafter established for the payment of the principal of, premium if any, and interest on Subordinate Bonds, including any sinking fund, reserve fund, or similar fund or account established therefor, the amounts required by the resolution or other enactment authorizing issuance of the Subordinate Bonds; and

FIFTH, to the credit of any other fund or account as may be designated by the District, to be used for any lawful purpose, any Pledged Revenue remaining after the payments and accumulations set forth above.

Bond Fund. Pursuant to the Indenture, the Bond Fund is established and held as an account of the Trustee. Subject to the receipt of sufficient Pledged Revenue, there will be credited to the Bond Fund each Bond Year an amount of Pledged Revenue which, when combined with other legally available moneys in the Bond Fund (not including moneys deposited thereto from other funds pursuant to the terms hereof), will be sufficient to pay the principal of, premium if any, and interest on the Bonds which has or will become due in the Bond Year in which the credit is made.

Moneys in the Bond Fund (including any moneys transferred thereto from other funds pursuant to the terms of the Indenter) will be used by the Trustee solely to pay the principal of, premium if any, and interest on the Bonds, in the following order:

FIRST, to the payment of interest due in connection with the Bonds (including without limitation current interest, accrued but unpaid interest, and interest due as a result of compounding, if any); and

SECOND, to the extent any moneys are remaining in the Bond Fund after the payment of such interest, to the payment of the principal of and premium, if any, on the Bonds, whether due at maturity or upon prior redemption.

In the event that available moneys in the Bond Fund (including any moneys transferred thereto from other funds pursuant to the terms hereof) are insufficient for the payment of the principal of, premium if any, and interest due on the Bonds on any due date, the Trustee will apply such amounts on such due date as follows:

FIRST, the Trustee is to pay such amounts as are available, proportionally in accordance with the amount of interest due on each Bond.

SECOND, the Trustee is to apply any remaining amounts to the payment of the principal of and premium, if any, on as many Bonds as can be paid with such remaining amounts, such payments to be in increments of $5,000 or any integral multiple thereof, plus any premium. Bonds or portions thereof to be redeemed pursuant to such partial payment will be selected by lot from the Bonds the principal of which is due and owing on the due date.

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Reserve Fund. The Reserve Fund will be maintained by the Trustee in accordance with the provisions of the Indenture for so long as any Bond is Outstanding. Except as provided hereafter with respect to any Reserve Fund Guaranty (defined below), moneys in the Reserve Fund will used by the Trustee, if necessary, only to prevent a default in the payment of the principal of, premium if any, or interest on the Bonds, and the Reserve Fund is hereby pledged to the payment of the Bonds. In the event the amounts credited to the Bond Fund and the Surplus Fund are insufficient to pay the principal of, premium if any, or interest on the Bonds when due, the Trustee will transfer from the Reserve Fund to the Bond Fund an amount which, when combined with moneys in the Bond Fund and the Surplus Fund, will be sufficient to make such payments when due. In the event that moneys in the Reserve Fund, the Bond Fund, and the Surplus Fund are together insufficient to make such payments when due, the Trustee will nonetheless transfer all moneys in the Reserve Fund to the Bond Fund for the purpose of making partial payments. Amounts in the Surplus Fund will be used for payment of the Bonds before any use of moneys in the Reserve Fund.

Subject to the receipt of sufficient Pledged Revenue, the Reserve Fund will be maintained in the amount of the Required Reserve for so long as any Bond is Outstanding. If at any time the Reserve Fund is drawn upon or valued so that the amount of the Reserve Fund is less than the Required Reserve, then the District will deposit to the Reserve Fund and will pay to the issuer of any Reserve Fund Guaranty, amounts sufficient to bring the amount credited to the Reserve Fund to the Required Reserve. Such deposits and payments will be made at the earliest practicable time, but in accordance with and subject to the limitations of "-Flow of Funds" above. Nothing in the Indenture is to be construed as requiring the District to impose an ad valorem mill levy for the purpose of funding of the Reserve Fund in excess of the Required Mill Levy. For purposes of this section, investments credited to the Reserve Fund will be valued on the basis of their current market value, as reasonably determined by the District, which value will be determined at least annually, and any deficiency resulting from such evaluation will be replenished as aforesaid. The amount credited to the Reserve Fund will never exceed the amount of the Required Reserve.

In lieu of all or any portion of the moneys required to be credited to the Reserve Fund pursuant to the Indenture, the District may at any time or from time to time deposit or pledge to the Reserve Fund a Reserve Fund Guaranty or multiple such guaranties in or to the Reserve Fund, in full or partial satisfaction of the Required Reserve. From and after the issuance of any Reserve Fund Guaranty: (a) the amounts available under any Reserve Fund Guaranty will be used (in addition to the amount of any cash or the original cost of investments credited thereto) in calculating the amount available in the Reserve Fund; (b) the District may transfer moneys from the Reserve Fund to any other fund or account of the District to be used for any lawful purpose of the District, so long as the Required Reserve is maintained; and (c) moneys credited to the Reserve Fund pursuant to "-Flow of Funds" may be used for the purpose of paying amounts due in connection with such Reserve Fund Guaranty, as determined by the District.

Reserve Fund Guaranty. The Indenture defines a Reserve Fund Guaranty as an insurance policy, surety bond, letter of credit, guaranty, financial guarantee bond, or similar instrument issued by a financial institution whose unsecured, unenhanced, and uncollateralized indebtedness is rated "BBB" or better by Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, or "Baa" or better by Moody's Investors Services Inc., which instrument shall unconditionally insure or guarantee the deposit to the Reserve Fund of the amounts specified in the Indenture with respect thereto on or before the dates on which moneys in the Reserve Fund may be required to be used under the Indenture terms; provided that the issuance of a Reserve Fund Guaranty shall require the prior written consent of the Insurer.

Surplus Fund. The Surplus Fund will be maintained by the Trustee in accordance with the provisions of the Indenture for so long as any Bond is Outstanding. Moneys in the Surplus Fund is to be

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used by the Trustee, if necessary, only to prevent a default in the payment of the principal of, premium if any, or interest on the Bonds, and the Surplus Fund is hereby pledged to the payment of the Bonds. In the event the amounts credited to the Bond Fund are insufficient to pay the principal of, premium if any, or interest on the Bonds when due, the Trustee will transfer from the Surplus Fund to the Bond Fund an amount which, when combined with moneys in the Bond Fund, will be sufficient to make such payments when due. In the event that moneys in the Bond Fund and the Surplus Fund are together insufficient to make such payments when due, the Trustee will nonetheless transfer all moneys in the Surplus Fund to the Bond Fund. The Indenture provides that nothing therein shall be construed as preventing the District from establishing the Required Mill Levy in an amount which assumes a draw upon the Surplus Fund, so long as the amount credited thereto is not reduced below the Target Surplus Amount.

The Surplus Fund will initially be funded upon issuance of the Bonds in the amount of$641,038 from amounts on deposit in prior debt service and reserve funds or accounts held for payment of the Refunded Bonds. Such amount of the initial funding is in excess of the Target Surplus Amount, which is $400,000. Subsequent to the issuance of the Bonds, the Surplus Fund is to be funded, if necessary, solely from deposits of Pledged Revenue as described in the section above under the caption "-Flow of Funds," up to the Target Surplus Amount, and except to the extent Pledged Revenue is available as provided in the Flow of Funds, the District has no obligation to fund the Surplus Fund in any amount after the initial issuance of the Bonds. Investments credited to the Surplus Fund will be valued on the basis of their current market value, as reasonably determined by the District, which value will be determined at least annually.

Amounts in the Surplus Fund (a) are to be used for payment of the Bonds before any use of moneys in the Reserve Fund; and (b) are not be used to redeem Bonds being called pursuant to any optional redemption provisions hereof, but will be used to pay Bonds coming due as a result of any mandatory redemption provisions hereof.

Use of Interest Income on Funds. The Indenture provides that except as provided above for investments of the Reserve Fund and the Surplus Fund, the interest income derived from the investment and reinvestment of any moneys in any fund or account held by the Trustee under the Indenture will be credited to the fund or account from which the moneys invested were derived. With respect to the Reserve Fund, so long as the amount of the Reserve Fund is equal to the Required Reserve, all interest income from the investment or reinvestment of moneys credited to the Reserve Fund will be credited to the Bond Fund; provided that if the amount of the Reserve Fund is less than the Required Reserve, then such interest income will be credited to the Reserve Fund. With respect to the Surplus Fund, so long as the amount of the Surplus Fund is not less than the Target Surplus Amount, all interest income from the investment or reinvestment of moneys credited to the Surplus Fund will be credited to the Bond Fund; provided that if the amount of the Surplus Fund is less than the Target Surplus Amount, then such interest income will be credited to the Surplus Fund.

Additional Covenants of the District. The District hereby further irrevocably covenants and agrees with each and every Owner that so long as any of the Bonds remain Outstanding:

(a) The District will not dissolve, merge, or otherwise alter its corporate structure in any manner or to any extent as might materially adversely affect the security provided for the payment of the Bonds, and will continue to operate and manage the District and its facilities in an efficient and economical manner in accordance with all applicable laws, rules, and regulations; provided however, that the foregoing will not prevent the District from dissolving pursuant to the provisions of the Act.

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(b) At least once a year the District will cause an audit to be performed of the records relating to its revenues and expenditures, and the District will use its best efforts to have such audit report completed no later than 180 days after the end of any calendar year. The foregoing covenant will apply notwithstanding any state law audit exemptions that may exist. In addition, at least once a year in the time and manner provided by law, the District will cause a budget to be prepared and adopted. Copies of the budget and the audit will be filed and recorded in the places, time, and manner provided by law.

(c) The District will carry general liability, public officials liability, and such other forms of insurance on insurable District property upon the terms and conditions, and issued by recognized insurance companies, as in the jUdgment of the District would ordinarily be carried by entities having similar properties of equal value, such insurance being in such amounts as will protect the District and its operations.

(d) Each District official or other person having custody of any District funds or responsible for the handling of such funds, will be fully bonded or insured against theft or defalcation at all times.

( e) In the event any ad valorem taxes are not paid when due, the District will diligently cooperate with the appropriate county treasurer to enforce the lien of such unpaid taxes against the property for which the taxes are owed.

(t) In the event the Pledged Revenue and other moneys available hereunder for payment of the Bonds is insufficient or is anticipated to be insufficient to pay the principal of, premium if any, and interest on the Bonds when due, the District will use its best efforts to refinance, refund, or otherwise restructure the Bonds so as to avoid such insufficiency.

Additional Bonds. As set forth in the Indenture, the District will not incur any additional debt or other financial obligation having a lien upon the Pledged Revenue or any part thereof superior to the lien thereof of the Bonds. The District will not issue or incur any Additional Bonds except as provided in this section. The District may issue Additional Bonds if such issuance is consented to by either the Consent Parties with respect to a majority in aggregate principal amount of the Bonds then Outstanding, or the Bond Insurer, acting alone; provided that, with or without either such consents, the District may issue Additional Bonds if each of the following conditions are met, as of the date of issuance of the Additional Bonds:

(a) Indenture;

the District is m substantial compliance with all of the covenants of the

(b) the District is current in the accumulation of all amounts required to be then accumulated in the Bond Fund and Reserve Fund, as required by the Indenture; and

(c) upon issuance of the Additional Bonds, the Debt to Assessed Ratio of the District will be 50% or less.

A written certificate by the President or Vice President or Treasurer of the District that the conditions set forth in the Indenture are met will conclusively determine the right of the District to authorize, issue, sell, and deliver Additional Bonds in accordance with the Indenture. Nothing therein will affect or restrict the right of the District to issue or incur obligations which are not Additional Bonds as defined in the Indenture.

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Events of Default. The occurrence of anyone or more of the following events or the existence of anyone or more of the following conditions will constitute an Event of Default under the Indenture (whatever the reason for such event or condition and whether it be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree, rule, regulation, or order of any court or any administrative or governmental body), and there will be no default or Event of Default thereunder except as provided below:

(a) The District fails or refuses to impose the Required Mill Levy or to apply the Pledged Revenue as required by the Indenture;

(b) The District defaults in the performance or observance of any other of the covenants, agreements, or conditions on the part of the District in the Indenture or the Bond Resolution, and fails to remedy the same after notice thereof pursuant to the Indenture; or

(c) The District files a petition under the federal bankruptcy laws or other applicable bankruptcy laws seeking to adjust the obligation represented by the Bonds.

Due to the limited nature of the Pledged Revenue, failure to pay the principal of or interest on the Bonds when due will not, of itself, constitute an Event of Default under the Indenture.

Remedies on Occurrence of Event of Default. Upon the occurrence and continuance of an Event of Default, the Trustee will have the following rights and remedies which may be pursued:

Receivership. Upon the filing of a bill in equity or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Owners, the Trustee will be entitled as a matter of right to the appointment of a receiver or receivers of the Trust Estate, and of the revenues, income, product, and profits thereof pending such proceedings, subject however, to constitutional limitations inherent in the sovereignty of the District; but notwithstanding the appointment of any receiver or other custodian, the Trustee will be entitled to the possession and control of any cash, securities, or other instruments at the time held by, or payable or deliverable under the provisions of the Indenture to, the Trustee.

Suit for Judgment. The Trustee may proceed to protect and enforce its rights and the rights of the Owners under the Act, the Bonds, the Bond Resolution, the Indenture, and any provision of law by such suit, action, or special proceedings as the Trustee, being advised by Counsel, will deem appropriate.

Mandamus or Other Suit. The Trustee may proceed by mandamus or any other suit, action, or proceeding at law or in equity, to enforce all rights of the Owners.

No recovery of any judgment by the Trustee will in any manner or to any extent affect the lien of the Indenture or any rights, powers, or remedies of the Trustee under the Indenture, or any lien, rights, powers, and remedies of the Owners of the Bonds, but such lien, rights, powers, and remedies of the Trustee and of the Owners will continue unimpaired as before.

If any Event of Default, pursuant to the Indenture, have occurred and if requested by the Owners of not less than 25% in aggregate principal amount of the Bonds then Outstanding, the Trustee will be obligated to exercise such one or more of the rights and powers conferred by the Indenture as the Trustee, being advised by Counsel, will deem most expedient in the interests of the Owners; provided that the Trustee at its option will be indemnified by the Indenture. For purposes of the foregoing, so long as the

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Bond Insurer is not in default of its payment obligations under the Policy, it will be deemed to be an Owner ofthe Bonds insured by the Policy.

Notwithstanding anything to the contrary, acceleration of the Bonds will not be an available remedy for an Event of Default.

Debt Service Requirements

Set forth in the following table are the debt service requirements for the Bonds. page of this Official Statement for the actual interest rates for the Bonds.

TABLE I Debt Service Requirements I

Year Principal Interest Total

2010 $ 300,000 $ 308,217 $ 608,217 2011 290,000 633,876 923,876 2012 285,000 626,626 911,626 2013 295,000 619,501 914,501 2014 300,000 611,389 911,389 2015 310,000 602,389 912,389 2016 320,000 592,314 912,314 2017 330,000 581,914 911,914 2018 340,000 570,776 910,776 2019 355,000 558,451 913,451 2020 370,000 544,251 914,251 2021 385,000 529,451 914,451 2022 400,000 514,051 914,051 2023 415,000 497,651 912,651 2024 430,000 480,429 910,429 2025 450,000 462,369 912,369 2026 470,000 443,019 913,019 2027 490,000 421,281 911,281 2028 515,000 398,619 913,619 2029 540,000 374,800 914,800 2030 565,000 349,825 914,825 2031 590,000 323,694 913,694 2032 620,000 294,931 914,931 2033 645,000 264,706 909,706 2034 680,000 233,263 913,263 2035 710,000 200,113 910,113 2036 745,000 165,500 910,500 2037 785,000 128,250 913,250 2038 825,000 89,000 914,000 2039 955,000 47,750 1,002,750 Total $1427102000 $12A68A06 $2721782406

1 Assumes no redemptions, other than mandatory sinking fund redemptions, prior to maturity. Figures have been rounded and thus may vary slightly from actual payment and may not total. Source: The Underwriter

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See the cover

THE DISTRICT

Organization and Description

The District is a quasi municipal corporation and a political subdivision of the State of Colorado created pursuant to the Special District Act, Title 32, C.R.S., for the purpose of financing and constructing public improvements. The order and decree of the County Court, forming the District by consolidating the Predecessor Districts, was entered on January 4, 1999, after the approval at an election held within each of the Predecessor Districts for that purpose on November 3, 1998. The District currently encompasses approximately 2,110 acres of land (subsequent to an order of inclusion) generally located approximately three miles south of the central commercial district of the Town. See "-District Powers-Inclusion and Exclusion" below. For more information on property within the boundaries of the District, see "-Development Within the District" below.

District Powers

The rights, powers, privileges, authorities, functions and duties of the District is established by the laws of the State of Colorado, particularly the Special District Act, which provides that the District has the power: to have a perpetual existence, to have and use a corporate seal, to enter into contracts and agreements; to sue and be sued and to be a party to suits, actions and proceedings; to borrow money and incur indebtedness and to issue bonds; to acquire, dispose of and encumber real and personal property, and any interest therein; to have the management, control and supervision of all the business affairs of the District; to appoint, hire and retain agents, employees, engineers and attorneys; to fix and from time to time to increase or decrease fees, rates, tolls, penalties or charges for services, programs or facilities furnished by the District; to waive or amortize all or part of any such fees or extend the time period for paying all or part of such fees for property within the District; to furnish services and facilities without the boundaries of the District and to establish fees, rates, tolls, penalties or charges for such services and facilities; to accept real and personal property for use of the District and to accept gifts and conveyances made to the District; and to have and exercise all rights and powers necessary in, incidental to or implied from the specific powers granted to the District.

Inclusions and Exclusions. Subject to compliance with statutory procedures, the Board may order the inclusion or exclusion of real property to or from the District, as the case may be, thereby modifying the boundaries of the District; however, if any property is excluded from the boundaries of the District subsequent to the issuance of the Bonds, such excluded property would be obligated to the same extent as all other property within the District for the payment of the Bonds.

The District originally encompassed approximately 2,040 acres. Subsequent to an order of inclusion granted by the County Court and recorded the County records in November 2008, for the inclusion of approximately 70 acres, the current acreage of the District is approximately 2,110 acres.

Governing Board

The District is governed by a five member Board. The Board members must be eligible electors of the District as defined by State law and are elected to alternating four year terms of office at successive biennial elections. Vacancies on the Board are filled by appointment of the remaining Board members, the appointee to serve until the next regular election, at which time the vacancy is filled by election for any remaining unexpired portion of the term. Pursuant to State statute, with certain exceptions, no judicial elected official of any political subdivision of the State can serve more than two consecutive terms in office; however, such term limitation was eliminated pursuant to District voter approval.

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The Board holds regular meetings and special meetings as needed. Current Board members may receive a maximum compensation of $1 ,600 per year, not to exceed $100 per meeting attended. With the exception of this compensation, Board members may not receive compensation from the District as employees of the District. Currently, the District's Board receives no compensation for meeting attendance. Each Board member is entitled to one vote on all questions before the Board when a quorum is present. The present Board, their positions on the Board, principal occupations and years of service are as follows.

District Board of Directors

Years Term Expires Name/Office Occupation of Service (May)

Jeanne Dassel, President Retired 4 2012 Alan Cobb, Vice President Real Estate Broker 3 2012 Robert J. Brabec, Secretary/Treasurer Retired 4 2010 Russell Grant, Assistant Secretary/Treasurer Facilities Engineer 5 2010 Kirk Fischer, Director Health Care Consultant 2 2010

Pursuant to State law, directors are required to disclose to the Colorado Secretary of State and the Board potential conflicts of interest or personal or private interests which are proposed or pending before the Board. All members of the Board are homeowners and residents of the District. Mr. Brabec sits on the board of the Bell Mountain Ranch Homeowner's Association (the "HOA"), and all of the Board members also serve as the board of directors for the BMR Metropolitan District, which provide the only potential conflicts of interest.

Administration

The Board is responsible for the overall management and administration of the affairs of the District. The District has no employees and day to day management functions of the District are provided by independent contractors. The District retains R.S. Wells L.L.C. (the "Manager") as its administrative manager. Pursuant to its contract with the District, the Manager provides a range of administrative services to the District, including preparing meeting agendas and assisting the Board with budgets, elections and other matters. The person primarily responsible for managing the District's affairs is Chuck Reid. Mr. Reid is experienced in the management of special districts in Colorado. The Manager currently acts as manager for approximately 120 Colorado special districts. The District retains Simmons & Wheeler, P.C., Centennial, Colorado as the District's accountant, and L. Paul Goedecke, P.C. as the District's auditor. Collins, Cockrel & Cole serves as the District's general counsel and Tetra Tech, Inc. serves as the District's engineer.

Material District Agreements

Trail Use Agreement. The District and R&M Devco LLC, a Colorado limited liability company ("R&M"), entered into a Trail Use Agreement on June 21, 1999 ("Trail Use Agreement"), which detailed plans for the District's equestrian trail system (the "Trail System"). The purpose of the Trail Use Agreement was for the District to grant R&M, as designers, financers, and constructors of the "Equestrian Center" (as part of the Trail System), an in-District exclusive commercial use license (the "License") for the users and customers of the Equestrian Center to use the Trail System. Pursuant to the Trail Use Agreement, the License is for a period of 25 years from the date of the Trail Use Agreement, and R&M has the option to extend the License for an additional 25 years. R&M agreed to keep and maintain the Equestrian Center in continuous operations for the entire period of the Trail Use Agreement, as well as to

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be responsible for maintaining the Trail System according to the District's standards from the date of the execution of the Trail Use Agreement through December 31, 2003.

The Trail Use Agreement is currently not followed by either of the parties to such agreement. At a Board meeting held September 7, 2004, the Board approved and executed a number of agreements and easements including a Termination of Trail Use Agreement, a new Trail Use Agreement and a First Amendment to License Agreement (collectively, the "2004 Agreements"). None of these agreements or easements, however, were signed by R&M. In May of 2007 the Board reviewed the matter and determined that in 2004, R&M rejected the Board's 2004 offer to sign new agreements. The Board's then and current position is that there are no agreements in effect with R&M relating to either trail use or trail maintenance.

In 2007 the District and R&M tried to negotiate new agreements, but were not successful. At the conclusion of the failed negotiations, R&M took the position that the 2004 Agreements are in effect even through they were never executed by R&M. The parties have reopened discussions and are now trying to negotiate a new set of agreements that would allow R&M, at its cost and expense, to expand the existing outdoor horse arena. The stables and its borders would be permitted to utilize the District's trail system on terms and conditions that are the same as those afforded in-District residents, except that certain fees and costs normally imposed would be waived in exchange for the continued operation and maintenance of the Equestrian Center.

Emergency Interconnect and Easement Agreement. In March of 2009, the District, BMR, Bromley, Silver Peaks Metropolitan District No. 1 ("Silver Peaks"), the Town of Lochbuie, the United Water and Sanitation District and the Ravenna Metropolitan District entered into an Amended and Restated Emergency Interconnect and Easement Agreement (the "Emergency Interconnect Agreement"). The Emergency Interconnect Agreement provides that the water system serving the District may be connected during an emergency to the Silver Peaks' water distribution system at each Silver Peaks well. The cost to install piping to effectuate these interconnects must be paid for by the District or BMR. The Emergency Interconnect Agreement clarifies under what terms and conditions these interconnections can be made, activated and maintained, and provides a method for compensating Silver Peaks or one of the Silver Peaks Non-Operating Parties (as defined in the Emergency Interconnect Agreement) for the water that is used by the District. The Emergency Interconnect Agreement provides a water backup option in addition to the trucking in of water discussed below in "-Facilities and Services Provided by the District-Water Well System."

Facilities and Services Provided by the District

The District has the authority pursuant to the Service Plan to provide for the financing, construction, acquisition and installation of street and safety protection, park and recreation, water, sanitary sewer and storm drainage, transportation, mosquito control and television relay and translation facilities and services all in accordance with its Service Plan. According to the District, all infrastructure necessary to serve the development within the District has been completed and has been dedicated to the appropriate entities for operation and maintenance, with the exception of the approximately 70 recently included in the District. See "-District Powers-Inclusion and Exclusion" above. Water service is provided by BMR Metropolitan District, as discussed below.

Water Well System. BMR Metropolitan District ("BMR") pursuant to a contractual arrangement with the District provides water service to the property and inhabitants of the District (the "Bell Mountain Community"). The District owns the right to withdraw 500 acre-feet per year of Denver Basin nontributary water to serve the property within its boundaries. The District also owns 240 acre-feet per year from the Arapahoe Aquifer and 260 acre-feet per year from the Denver Aquifer. To date, the District

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has installed an Arapahoe Aquifer well (Permit No. Sl78S-F) which was constructed in 2000 and has the capacity to pump 500 gallons per minute. Other than emergencies (discussed below), the Arapahoe well is currently the sole source of water to supply the domestic and landscape irrigation needs for the Bell Mountain Community. In the event of an emergency (i.e., the Arapahoe well goes down), BMR by contract arranges for trucking potable water from the Town of Castle Rock, Colorado to the BMR water treatment plant. BMR has obtained the necessary permits from the Town of Castle Rock to purchase potable water in bulk at a cost of $3.6711,000 gallons of water. BMR also has the opportunity to truck in water to meet normal peak summer demands, which it from time to time is unable to meet under its onewell system. The cost to truck the water from Castle Rock is approximately $2,000 per day. In order to eliminate the risks associated with even a temporary failure of its single supply well, including avoiding highly inefficient and costly trucking of water into the subdivision, and otherwise to provide necessary supply and system redundancy, BMR has plans to drill a second well, which will develop the District's Denver Aquifer supply. The District has been issued a permit for this Denver Aquifer well, in the amount of 260 acre-feet per year. The Denver Acquifer well is in the process of being designed and BMR is applying to the Colorado Water Resources and Power Development Authority to obtain the financing necessary to drill and construct the well. If the loan is obtained, it is believed that the new well will be constructed and online in late 2010 or in early 2011.

Although BMR and the District continue to review various alternatives to provide an additional long term water supply to serve the residents of the District, in the event of an operational failure of the Arapahoe well, there can be no assurance that the District will have sufficient water through its back-up resources or that the District will have sufficient funds to effectuate the provision of such water. See "Material District Agreements- Emergency Interconnect and Easement Agreement" above.

Water Service. On December 8, 1998 BMR and the District entered into a Regional Facilities Agreement (the "Regional Facilities Agreement"). In accordance with the Regional Facilities Agreement the District constructed and installed water facilities within the District and conveyed the same to BMR. BMR, through its Water Enterprise Fund, established rates, fees, tolls and charges and rules and regulations with respect to the use of the water system. Pursuant to the Regional Facilities Agreement ownership of the water system was to be transferred to the District on the first to occur of, the issuance of the 30Sth Certificate of Occupancy within the District or December 3 1,2008.

In lieu of transferring the water system to the District, on January 13,2009 BMR and the District entered into a Restated and Amended Regional Facilities Agreement ("Restated Regional Facilities Agreement"), which provided for transferring control ofBMR to the District in a manner that provides for the BMR water system to continue to be operated for the benefit of the persons and property located within the Bell Mountain Community. Pursuant to the Restated Regional Facilities Agreement, BMR's governing body now consists of the same five individuals who serve on the governing body of the District. At the present time BMR provides water service to the Bell Mountain Community, pursuant to the Restated Regional Facilities Agreement via a community water system supplied by the Arapahoe well. Other components of the water system include a treatment plant and distribution piping and one water storage tank containing a total of 300,000 gallons of storage.

The raw water from the Arapahoe well is transmitted to the treatment plant for treatment. The water is treated and is stored in a water storage tank. The storage tank has a capacity of 300,000 gallons. Customers are billed monthly for water service. There is a base charge of $100 per month that is imposed regardless of how much water is consumed. In addition, BMR has adopted the following tiered water rate structure:

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Monthly Water Usage Fee

Usage (Gallons)

1,000 to 20,000 20,001 to 30,000 30,001 to 40,000

Over 40,000

Fee Per 1,000 Gallons

$ 4.50 6.10 8.36

13.90

A central filtration system was installed in the treatment plant during 1998. The treatment plant is designed to incorporate additional filters if needed. The treatment plant currently processes 150 gallons per minute of water, with a capacity of300 gallons per minute; the plant also houses high capacity service pumps to supply water throughout the distribution system to the individual homes.

BMR maintains the water system within the District. The District may supplement BMR's maintenance as it deems necessary or desirable to benefit its tax payers.

According to District officials, a permanent interconnection option between the Town of Castle Rock to the District's existing water well system may become a viable alternative in the future, however, it may be several years before the Town of Castle Rock's system is expanded to an area adjacent to the District. The Town of Castle Rock may require interconnect costs payable by the District of over $1,000,000 plus an additional tap fee per residential unit of approximately $23,000. At the present time the District deems this cost to be prohibitive. In the meantime, the District through BMR intends to actively pursue the construction of a second well to provide for future water needs of the District.

Other Services Available Within the District

Fire protection for the District is provided either by the Larkspur Fire Protection District or by the Town of Castle Rock through an agreement between the Town and the Castle Rock Fire Protection District, depending on the location of the property. Police protection is provided by the Douglas County Sheriffs Department. Intermountain Rural Electric Association provides electric service and Peoples Gas provides natural gas services. The property in the District is within Douglas County School District No. R-l.

Development Within the District

The District is platted for 321 single family lots which, with the exception of four vacant lots, are fully developed with single family dwellings. Approximately 51 acres land within the District is comprised of property approved for commercial development. At this time, the existing commercial development within the District consists solely of an Equestrian Center. According to District officials, additional commercial development is not anticipated in the near future as the result of costs associated with providing water service to such property. As a result of a recent inclusion of 70-acres of property within the boundaries of the District (as previously defined, the "Larrick Property"), there is the potential for 16 additional homes to be constructed on the Larrick Property, although development of the Larrick Property does not appear to be imminent.

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DISTRICT FINANCIAL INFORMATION

Ad Valorem Property Taxes

The Board has the power, subject to constitutional and statutory guidelines, to certify a levy for collection of ad valorem taxes against all taxable property within the District. Property taxes are uniformly levied against the assessed valuation of all taxable property within the District. The property subject to taxation, the assessment of such property, and the property tax procedure and collections are discussed below.

Property Tax Reduction/or Senior Citizens and Disabled Veterans. Property Tax Reduction for Senior Citizens and Disabled Veterans. On November 7,2000 and November 7, 2006, respectively, the electors of the State of Colorado approved Referendum A and Referendum E, constitutional amendments granting a property tax reduction to qualified senior citizens and qualified disabled veterans. Generally, the reduction (a) reduces property taxes for qualified senior citizens and qualified disabled veterans by exempting 50% of the first $200,000 of actual value of residential property from property taxation; (b) requires that the State reimburse all local governments for any decrease in property tax revenue resulting from the reduction; and (c) excludes the State reimbursement to local governments from the revenue and spending limits established under Article X, Section 20 of the State Constitution. However, during the 2009 Legislative Session the Colorado State Legislature disallowed the qualified senior exemption for the 2009 levy year (2010 collection year).

Property Subject to Taxation. Both real and personal property located within the boundaries of the District, unless exempt, are subject to taxation by the District. Exempt property generally includes property of the United States of America; property of the State and its political subdivisions; public libraries; public school property; charitable property; religious property; irrigation ditches, canals and flumes; household furnishings; personal effects; intangible personal property; inventories of merchandise and materials and supplies which are held for consumption by a business or are held primarily for sale; livestock; agricultural and livestock products; agricultural equipment which is used on the farm or ranch in the production of agricultural products; and non-profit cemeteries.

Assessment 0/ Property. All taxable property is listed, appraised and valued for assessment as of January 1 of each year. The "actual" value of taxable property is determined by the county assessor. In addition, in each year that the County determines that residential growth is severely impacting local governments and adopts a resolution implementing the statutory provisions relating to assessment of new taxable buildings constructed in the County between January 1 and July 1 of the following year ("New Growth"), then the New Growth valuation for assessment is added to the abstract for assessment for that assessment year ("New Growth Assessed Valuation"). For buildings still under construction as of July 1, the New Growth Assessed Valuation equals one-half of the difference between the valuation of assessment on January 1 and July 1; for buildings complete as of July 1, the New Growth Assessed Valuation equals the new valuation pro-rated based upon the month of completion. The "actual" value of most taxable property is determined based on a "level of value," which is the "actual" value of such property as ascertained from manuals and associated data prepared and published by the State property tax administrator for a statutorily defined period preceding the assessment date. The statutorily defined period for the valuation of property for any odd numbered year is the period beginning two years and ending six months prior to January 1 of such year. The statutorily defined period for the valuation of property does not change during even numbered years. The classes of property the "actual" value of which is not determined by a level of value include oil and gas leaseholds and lands, producing mines and other lands producing nonmetallic minerals.

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The assessed value of taxable property is then determined by multiplying the "actual" value (determined as described in the immediately preceding paragraph) times an assessment ratio. The assessment ratio of residential property is subject to change from year to year based on a constitutionally mandated requirement to keep the ratio of the assessed value of commercial property to residential property at the same level as it was in the property tax year commencing January 1, 1985 (the "Gallagher Amendment"). The Gallagher Amendment requires that statewide residential assessed values must be approximately 45% of the total assessed value in the State with commercial and other assessed values making up the other 55% of the assessed values in the State. In order to maintain this 45%/55% ratio, the commercial assessment rate is established at 29% of the actual value of commercial property (including vacant land and undeveloped lots) and the residential assessment rate fluctuates. Over the past nine years the residential ratio has decreased from 9.74% for the 2000 levy year and 9.15% for the 2001 and 2002 levy years, to 7.96% for the 2003 through 2009 levy years. The Colorado Legislative Council Staffs December 2009 forecast (as contained in its "Focus Colorado: Economic and Revenue Forecast, 2009 2012"), projects that the residential assessment ratio will remain at 7.96% through the 2012 levy year (for tax collection in 2013).

Beginning in May of each year, each county assessor hears taxpayers' objections to property valuations, and the county board of equalization hears assessment appeals. No later than August 25 each year, the assessor must certify to the District the assessed valuation, statutory "actual" valuation and New Growth Assessed Valuation of taxab Ie property within the District. The abstract of assessment prepared therefrom is reviewed by the State property tax administrator. Assessments are also subject to review at various stages by the State board of equalization, the State board of assessment appeals and the State courts. Therefore, the District's assessed valuation may be subject to modification as a result of the review of such entities. In the instance of the erroneous levy of taxes, an abatement or refund must be authorized by the board of county commissioners; and in no case will an abatement or refund of taxes be made unless a petition for abatement or refund is filed within two years after January 1 of the year following the year in which the taxes were levied. Refunded or abated taxes are prorated among all taxing jurisdictions which levied a tax against the property.

Taxation Procedure. The assessed valuation and statutory "actual" valuation of taxable property within the District is required to be certified by the county assessor to the District no later than August 25 each year. Such. value is subject to recertification by the county assessor prior to December 10. The Board then determines a rate of levy which, when levied upon such certified assessed valuation, and together with other legally available revenues, will raise the amount required annually by the District for its General Fund and Bond Fund to defray its expenditures during the ensuing fiscal year. In determining the rate of levy, the Board must take into consideration the limitations on certain increases in property tax revenues as described in "-Constitutional Amendment Limiting Taxes and Spending" and "-Budgetary Process and Information." The Board must certify the District's levy to the board of county commissioners no later than December 15.

Upon receipt of the tax levy certification of the District and other taxing entities within the county, the board of county commissioners levies against the assessed valuation of all taxable property within the county the applicable property taxes. Such levies are certified by the board of county commissioners to the county assessor, who thereupon delivers the tax list and warrant to the county treasurer for the collection of taxes.

Property Tax Collections. Taxes levied in one year are collected in the succeeding year. Taxes certified in 2010, for example, will be collected in 2011. Taxes are due on January 1 in the year of collection; however, they may be paid, at the election of the taxpayer, in either one installment (not later than the last day of April) or two equal installments (not later than the last day of February and June 15) without interest or penalty. Taxes which are not paid within the prescribed time bear interest at the rate of

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1 % per month until paid. Unpaid amounts become delinquent on, and interest thereon will accrue from, March 1 (with respect to the first installment) and June 16 (with respect to the second installment) until the date of payment, provided that if the full amount of taxes is to be paid in a single payment, such amount will become delinquent on May 1 and will accrue interest thereon from such date until paid. The county treasurer collects current and delinquent property taxes, as well as any interest, penalties, and other requirements and remits the amounts collected on behalf of the District to the District on a monthly basis.

With respect to revenue received pursuant to new growth valuations, the Board of County Commissioners, after depositing into the County general fund moneys for projected budgeted administrative costs, distributes the remaining new growth tax revenue deposited in the capital growth fund to the taxing authorities where the newly constructed taxable buildings are actually located in the same manner as all other property tax revenues collected on similar taxable buildings are distributed; except that such moneys are to be used by the taxing authority for capital expenditures only and not for operating expenses.

All taxes levied on real and personal property, together with any interest and penalties prescribed by law, as well as other costs of collection, until paid, constitute a perpetual lien on and against the taxed property. Such lien is on a parity with the liens of other general taxes. It is the county treasurer's duty to enforce the collection of delinquent real property taxes by sale of the tax lien on such realty in December of the collection year and of delinquent personal property taxes by the distraint, seizure and sale of such property at any time after October 1 of the collection year. There can be no assurance, however, that the value of taxes, penalty interest and costs due on the property can be recovered by the county treasurer. Further, the treasurer may set a minimum total amount below which competitive bids will not be accepted, in which event property for which acceptable bids are not received will be set off to the county. Taxes on real and personal property may be determined to be uncollectible after a period of six years from the date of becoming delinquent and canceled by the board of county commissioners.

Ad Valorem Property Tax Data

The District's assessed valuation and mill levies from 2004 to date are set forth in the following table. See "-Ad Valorem Property Taxes-Assessment of Property" above for a description of the assessment ratios for taxable property used in each of such years. See "DISTRICT FINANCIAL INFORMATION-Constitutional Amendment Limiting Taxes and Spending."

TABLE II History of District's Assessed Valuation and Mill Levies

Levy/Collection Assessed General Fund Bond Fund Total Year Valuation Mill Levy Mill Levy Mill Levy

2004/2005 $16,209,730 15.000 63.869 78.869 2005/2006 17,446,050 15.000 63.869 78.869 2006/2007 17,730,376 15.000 63.869 78.869 2007/2008 18,230,350 15.000 63.869 78.869 2008/2009 18,241,740 15.000 63.869 78.869 2009/2010 17,843,860 1 15.000 63.869 78.869

I According to the Douglas County Assessor's office, the decrease in the District's assessed valuation for the 2009 levy year is the result ofthe general downturn in the economy resulting in a decrease in the assessed valuations of residential property within the District. Sources: State of Colorado, Colorado Department of Local Affairs, Division of Property Taxation, 2004-2008 State of Colorado Property Tax Annual Reports and the Douglas County Assessor's Office

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The following table sets forth the 2009 assessed and "actual" valuations of specific classes of property within the District. As shown below, residential properties account for the largest percentage of the assessed valuation.

TABLE III 2009 Assessed and "Actual" Valuation of Classes of Property in the District

Assessed Percent of "Actual" Class Valuation Assessed Valuation Valuation

Residential $17,086,610 95.89% $214,611,176 Vacant 732,950 4.10 2,527,356 Agricultural 2,560 -.Ml 8,820

Total $171822!120 100.00% $2171147!352

1 Such values differ slightly from the certified assessed valuations set forth elsewhere herein. Source: Douglas County Assessor's Office

Percent of "Actual" Valuation

98.83% 1.16

-.Ml 100.00%

The following table sets forth a history of the District's ad valorem property tax collections within the District since 2004 on a calendar year basis.

TABLE IV Historical Property Tax Collections

Levy/Collection Total Current Percent of Year Taxes Levied Tax Collections 1 Levy Collected

2004/2005 $1,278,445 $1,273,331 99.6% 2005/2006 1,375,953 1,379,011 100.0 2006/2007 1,398,377 1,393,306 99.6 2007/2008 1,437,809 1,430,858 99.5 2008/2009 1,438,708 1,437,544 99.9 2009/2010 2 1,407,327 687,462 48.8

1 Figures include interest and delinquent tax collections. Treasurer's fees have not been deducted from these amounts. 2 Tax collections through April 30, 2010. Sources: Douglas County Treasurer's Office and the District

The top ten largest taxpayers within the District consist of R&M Devco LLC, a Colorado limited liability company, and nine individual homeowners, collectively representing approximately 8.0% of the District's total 2009 assessed valuation. As provided by the Douglas County Assessor's Office, R&M Devco LLC represents the largest taxpayer within the District owning three vacant parcels having a total assessed valuation of $418,390, or 2.3% of the District's total assessed valuation for the 2009 levy year (2010 collection year). No other taxpayer represents more than 0.75% of the District's total 2009 assessed valuation.

Numerous entities located wholly or partially within the District are authorized to levy taxes on property located within the District. According to the Douglas County Assessor's Office, there are currently 17 entities overlapping all or a portion of the District. As a result, property owners within the District are currently subject to one of two total mill levies depending upon the location of their property. The following table is representative of those sample total 2009 mill levies (for payment in 2010)

28

attributable to taxpayers within the District. Additional taxing entities may overlap the District in the future. See also "DEBT STRUCTURE-General Obligation Debt-Estimated Overlapping General Obligation Debt."

TABLE V Sample Total 2009 Mill Levies 1

Taxing Entity

Castle Rock Fire Protection District Cedar Hill Cemetery District Douglas County Douglas County Law Enforcement Authority Douglas County Library District Douglas County School District RE-l Douglas County Soil Conservation District Larkspur Fire Protection District:

Sample Overlapping Mill Levy The District:

Sample Total Mill Levy

Mill Levy (Castle Rock Fire)

5.827 0.233

19.774 4.500 4.016

46.681 0.000

81.031 78.869

159.900

Mill Levy (Larkspur Fire)

0.233 19.774 4.500 4.016

46.681 0.000

13.137 88.341 78.869

167.210

lOne mill equals 1110 of one cent. Mill levies certified in 2009 are for the collection of ad valorem property taxes in 2010. Source: Douglas County Assessor's Office

Specific Ownership Taxes

Specific Ownership Taxes represent the amounts received by the District from the State pursuant to statute primarily on motor vehicle licensing. Such tax is collected by all counties and distributed to every taxing entity within a county, such as the District, in the proportion that the taxing entity's ad valorem taxes represents the cumulative amount of ad valorem taxes levied county-wide. See "THE BONDS-Security for the Bonds."

Other Revenues

The District may apply other legally available funds and revenues to the payment of debt service on the Bonds, and upon the application of such other funds and revenues, the debt service mill levy may, to that extent, be diminished. However, the Bonds do not constitute a lien or encumbrance on such revenues. Other revenues available to the District include interest and other earnings on investments and, to the extent not prohibited by other contractual obligations, fees for services and facilities allowed under the Service Plan.

Accounting Policies and Financial Statements

The District maintains three governmental funds, the General Fund, the Debt Service Fund and the Capital Projects Fund. The General Fund is the general operating fund of the District and is used to account for all financial resources except those required to be accounted for in another fund. The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general obligation long-term debt, including principal and interest and related costs. The Capital Projects Fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities.

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In accordance with Title 29, Article 1, Part 6, C.R.S., an annual audit is required to be made of the Districts financial statements at the end of the fiscal year unless an exemption from audit has been granted by the State Auditor's Office.

Budget and Appropriation Procedure

The District's budget is prepared on a calendar year basis as required by §29-1-1 01, et seq., C.R.S. The budget must present a complete financial plan for the District, setting forth all estimated expenditures, revenues, and other financing sources for the ensuing budget year, together with the corresponding figures for the previous fiscal year. On or before October 15th of each year, the District's budget officer must submit a proposed budget to the Board for the next fiscal year. Thereupon notice must be published stating, among other things, that the proposed budget is open for inspection by the public and that interested electors may file or register any objection to the budget prior to its adoption.

Before the beginning of the fiscal year, the Board must enact an appropriation resolution which corresponds with the budget. The income of the District must be allocated in the amounts and according to the funds specified in the budget for the purpose of meeting the expenditures authorized by the appropriation resolution. District expenditures may not exceed the amounts appropriated, except in the case of an emergency or a contingency which was not reasonably foreseeable. Under such circumstances, the Board may authorize the expenditure of funds in excess of the budget by a resolution adopted by a two-thirds vote of the Board following proper notice. If the District receives revenues which were unanticipated or unassured at the time of adoption of the budget, the Board may authorize the expenditure thereof by adopting a supplemental budget and appropriation resolution after proper notice and a hearing thereon. The transfer of budgeted and appropriated moneys within a fund or between funds may be accomplished only in accordance with state law. The Board adopted the District's 2010 budget and appropriation resolution as set forth above and filed such budget with the State Division of Local Government.

[Remainder of page intentionally left blank]

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Historical and Budgeted Financial Information

Set forth hereafter is a comparative statement of revenues, expenditures, and changes in fund balance for the District's governmental funds. Such information should be read together with the financial statements and accompanying notes appended hereto.

TABLE VI History of General Fund Revenue, Expenditures and Changes in Fund Balances

2005 2006 2007 2008 2009 REVENUE:

Property Taxes $246,473 $262,273 $265,589 $272,133 $273,405 Specific Ownership Taxes 26,694 26,264 26,546 23,277 20,455 Interest Income 2,101 8,022 835 1,269 10,833 Other 82 48 2,755 Reimbursements 12,996 5,061 Conservation Trust Fund 3,351 4,311 4,149 4,294 4,082

Total Revenues 278,619 300,870 310,197 306,082 311,530

EXPENDITURES: Accounting and Audit 12,023 10,991 10,121 9,946 10,077 District Management 25,192 31,525 34,656 34,884 25,301 Engineering 6,325 12,156 37,208 15,282 167 Insurance 6,928 5,734 5,996 6,026 5,925 Landscape Maintenance 52,572 51,695 55,812 54,175 56,019 Legal 30,060 57,615 94,673 113,167 64,425 Miscellaneous 2,737 3,268 2,243 1,645 5,600 Open Space Maintenance 5,712 245 4,480 Snow Removal 16,035 35,110 45,120 25,095 38,451 Street Maintenance 23,938 39,009 54,942 35,078 38,349 Trail Maintenance 5,585 850 2,920 Treasurer's Fees 4,184 4,145 4,058 4,100 4,116 Capital Expenditures 17,740 Utilities 1,818 1,072 1,315 1,021

Total Expenditures 179,994 253,064 357,198 319,548 256,851

Excess of Revenues Over (Under) Expenditures 98,625 47,806 (47,001) (13,466) 54,679

OTHER FINANCING SOURCES (USES): Operating Transfers In (Out) (30,000) (95,483) (30,000) (30,000) (30,000)

Total Other Financing Sources (Uses) (30,000) (95.483) (30,000) (30,000) (30,000)

Excess (Deficiency) of Revenues Over (Under) Expenditures and Other Financing Sources 68,625 (47,677) (77,001) (43,466) 24,679

Fund Balance-Beginning 83,829 152,454 104,775 27,774 (15,692) Fund Balance-Ending $152.454 $104,775 $ 27,774 $ (15,692) $ 8,987

Source: District Audited Financial Statements 2005-2009

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TABLE VII History of Debt Service Fund Revenue, Expenditures and Changes in Fund Balances

2005 2006 2007 2008 2009 REVENUE:

Property Taxes $1,049,465 $1,116,738 $1,130,860 $1,158,725 $1,164,139 Specific Ownership Taxes 113,661 111,830 113,029 99,113 87,095 Interest Income 40,987 61,513 56,757 22,028 15,965

Total Revenues 1,204,113 1,290,081 1,300,646 1,279,866 1,267,199

EXPENDITURES: Bond Interest Expense 1,046,878 1,116,738 1,022,621 1,005,555 984,275 Bond Principal 110,000 210,000 225,000 280,000 300,000 Paying Agent Fees 1,550 450 450 450 450 Treasurer's Tees 17,812 17,650 17,277 17,459 17,526

Total Expenditures 1,176,240 1,344,838 1,265,348 1,303,464 1,302,251

Excess of Revenues Over (Under) Expenditures 27,873 23,348 35,298 (23,598) (35,052)

Fund Balance-Beginning 647,424 675,297 698,645 733,943 710,345 Fund Balance-Ending $ 675,297 $ 696,645 $ 733,943 $ 710.345 $ 675,293

Sources: District Audited Financial Statements 2005·2009

TABLE VIII History of Capital Projects Fund Revenue, Expenditures and Changes in Fund Balances

REVENUE: Interest Income Reimbursements

Total Revenues

EXPENDITURES: Extraordinary Street Repairs Miscellaneous Capital Expenditures

Total Expenditures

Excess of Revenues Over (Under) Expenditures

OTHER FINANCING SOURCES (USES): Operating Transfers In (Out)

Total

Excess (Deficiency) of Revenues Over (Under) Expenditures and Other Financing Sources

Fund Balance-Beginning Fund Balance-Ending

Source: District Audited Financial Statements 2005·2009

2005

$

30,000

63,429 $93.429

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$

2006

64,525 64,525

242,533 242,533

(178,008)

95,483 95,483

(82,525)

93,429 $ 10,904

2007

$ 918

----

918

30,000 30,000

30,918

10,904 $41.822

2008

$

16,069 54,740 70,809

(70,809)

30,000 30,000

(40,809)

2009

$

28,209

(28,209)

1,791

...LQ.U $ 2,804

The following tables set forth the District's 2009 and 2010 budget summary and comparison for the District's governmental funds, and the District's year-to-date unaudited financials for 2010.

TABLE IX General Fund Budget Summary and Comparison

Adopted Budget Adopted Budget 2009 2010

Beginning Balance $ 16,821 $ 11,897

Revenues: Property Taxes 273,626 267,658 Specific Ownership Taxes 24,626 21,815

Interest and Other Income 1,500 8,000 Conservation Trust Fund 4,000 4,000

Total Revenues 303,752 301,473 Total Funds Available 320,573 313,370

Expenditures: Accounting! Audit 10,500 10,500

Legal 35,000 28,300

Legal-Water 10,000 9,000 District Management 30,000 29,000

Insurance 6,300 6,800 General Engineering 12,000 Election Expense 5,000

Utilities 1,500 1,493

Treasurer Fees 4,104 4,020

Miscellaneous 2,000 6,500 Snow Removal 30,000 34,000 Street Maintenance 40,000 40,000 Landscape Maintenance 40,000 40,000

Trail Maintenance 15,000 5,000 Open Space Maintenance 15,000 5,000

Emergency Reserve 7,542 7,542

Contingency 31,627 41,215 Transfer to Capital Project 30,000 40,000

Total Expenditures 320,573 313,370

Ending Balance $ $

1 Unaudited figures through February 28, 2010. Source: District 2009 and 2010 Budget documents and the District

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Unaudited Year-to-Date

2010·

$ 8,987

103,093 2,906

457

106,456 115,442

6,359 9,638 3,068 4,067 6,110

421 630

1,548 34

12,545 2,000 1,888

48,308 $ 67,135

TABLE X Debt Service Fuud Budget Summary and Comparison

Beginning Balance Revenues:

Property Taxes Specific Ownership Taxes Interest Income

Total Revenues Total Funds Available

Expenditures: Bond Interest Series 1999A Bond Interest Series 1999B Bond Principal Series 1999B Bond Interest 2003A Series Bond Principal2003A Series Treasurer's Fees Paying Agent Fees

Total Expenditures Ending Balance

Adopted Budget 2009

$ 720,217

1,165,082 104,857 25,000

1.294,939 2.105.156

486,606 211,294 190,000 286,375 110,000 17,476 2,500

1.304,251 $ 710,905

I Unaudited figures through February 28, 2010. Source: District 2009 and 2010 Budget documents and the District

TABLE XI

Adopted Budget 2010

$ 683,176

1,139,669 91,174 15,000

1.245,843 1.929,019

486,606 197,282 225,000 277,685 135,000

17,095 2,500

1,341.168 $ 587,851

Capital Projects Fund Budget Summary and Comparison

Beginning Balance Revenues:

Reimbursements Transfers In Other Income

Total Revenues Total Funds Available

Expenditures: Chip Sealing and Striping

Total Expenditures Ending Balance

Adopted Budget 2009

$ 918

30,000

30,918 30,918

$ --

I Unaudited figures through February 28,2010. Source: District 2009 and 2010 Budget documents and the District

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Adopted Budget 2010

$ 884

40,000

40,000 40,884

40,884 40,884

$ --


2010 I

$ 675,293

438,965 12,372

1.076 452,413

1.127,705

6,589

6,589 $1.121.117


2010 I

$2,804

Risk Management

The District is a member of the Colorado Special Districts Property and Liability Pool, an organization created by intergovernmental agreement to provide common liability and casualty insurance coverage to its members at a cost that is considered economically appropriate. The Board acts to protect the District against loss and liability by maintaining certain insurance coverages which the District's Board believes to be adequate. However, there can be no assurance that the District will continue to maintain their current levels of coverage. See Note 7 to the District's audited financial statements attached as APPENDIX A hereto.

Deposit and Investment of District Funds

State statutes set forth requirements for the deposit of District funds in eligible depositaries and for the collateralization of such deposited funds. See Note 2 to the District's audit appended hereto. The District also may invest available funds in accordance with applicable State statutes. The investment of the proceeds of this issue also is subject to the provisions of the Tax Code. See "TAX MATTERS."

Constitutional Amendment Limiting Taxes and Spending

On November 3, 1992, Colorado voters approved an amendment to the Colorado Constitution, which is commonly referred to as the Taxpayer's Bill of Rights, or Amendment One ("TABOR"), and now constitutes Section 20 of Article X of the Colorado Constitution. TABOR imposes various limits and new requirements on the State and all Colorado local governments which do not qualify as "enterprises" under TABOR (each of which is referred to in this section as a "governmental unit"). Any of the following actions, for example, now require voter approval in advance: (a) any increase in a governmental unit's spending from one year to the next in excess of the rate of inflation plus a "growth factor" based on the net percentage change in actual value of all real property in a governmental unit from construction of taxable real property improvements, minus destruction of similar improvements, and additions to, minus deletions from, taxable real property for government units other than school districts, and the percentage change in student enrollment for a school district; (b) any increase in the real property tax revenues of a local governmental unit (not including the State) from one year to the next in excess of inflation plus the appropriate "growth factor" referred to in clause (a) above; (c) any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase for a property class, extension of an expiring tax or a tax policy change directly causing a net tax revenue gain; and (d) except for refinancing bonded indebtedness at a lower interest rate or adding new employees to existing pension plans, creation of any multiple fiscal year direct or indirect debt or other financial obligation whatsoever without adequate present cash reserves pledged irrevocably and held for payments in all future fiscal years. Elections on such matters may only be held on the same day as a State general election, at the governmental unit's regular biennial election or on the first Tuesday in November of odd numbered years, and must be conducted in accordance with procedures described in TABOR.

Revenue collected, kept or spent in violation of the provisions of TABOR must be refunded, with interest. TABOR requires a governmental unit to create an emergency reserve of 3% of its fiscal year spending (excluding bonded debt service) in 1995 and subsequent years. TABOR provides that "[w]hen [a governmental unit's] annual ... revenue is less than annual payments on general obligation bonds, pensions, and final court judgments, the [voter approval requirement for mill levy and other tax increases referred to in clause (c) of the preceding paragraph and the voter approval requirement for spending and real property tax revenue increases referred to in clauses ( a) and (b) of the preceding paragraph] will be suspended to provide for the deficiency." The preferred interpretation of TABOR will, by its terms, be the one that reasonably restrains most the growth of government.

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De-Brucing. District voters have approved revenue and spending limits for the District that exceed the limitations imposed by TABOR.

Proposed Amendments-November 2010 Election. The State Constitution provides that people of the State reserve to themselves the power to propose laws and amendments to the State Constitution (referred to as initiatives), and to enact or reject such initiatives by a vote of the people by a Statewide ballot. Three initiated measures (the "Ballot Initiatives") have been placed on the November 2010 statewide general election ballot which would amend TABOR (as well as Article XI of the Colorado Constitution) through the addition of the following:

Proposition 101 would, if passed, amend State tax statutes to reduce several sources of State and local revenue, including the State income tax, vehicle fees and taxes and telecommunication charges.

Amendment 60 would amend the Colorado Constitution to further restrict the ability of local governments to impose and collect property taxes, require voter approval of property tax increases and extensions of expiring taxes but limit the effectiveness of such approvals to 10 years, and prohibit voters from approving the collection and spending of property tax revenues in excess of TABOR limits (as described in "-De-Brucing" above) for periods greater than four years. If Amendment 60 is approved, it could decrease the property taxes available to the District for its general operations. However, Amendment 60 is not anticipated to impact the District's ability to impose the debt service mill levy required for payment of the Bonds because it provides that nothing therein "shall limit the payment of bonded debt issued before 2011."

Amendment 61 would, if passed, amend the Colorado Constitution to (a) prohibit the State, its agencies and instrumentalities, from borrowing, entering into lease purchase agreements or contracting loans in any other form for any purpose or any period of time and (b) require a broad range of government financing, including traditional governmental bonds but also some financing transactions that historically have not been treated as debt under State law to be approved by the voters of the local government unit and to mature within 10 years, without extension. Amendment 61 would, if passed, also lower the debt limit of the District from the current limit, which is the greater of $2 million or 50% of the assessed valuation of real and personal taxable property within the District (subject to certain exceptions; see "DEBT STRUCTURE-General Obligation Debt-Statutory Debt Limit"), to 10% of the assessed valuation of only real property in the District.

Each of the Ballot Initiatives would take effect January 1, 2011. It is not possible to predict whether any or all of the Ballot Initiatives will be approved by a majority of the voting electors at the November 2010 election.

DEBT STRUCTURE

The following is a discussion of the District's authority to incur general obligation indebtedness and other financial obligations and the amount of such obligations presently outstanding.

Required Elections

Various State constitutional and statutory provisions require voter approval prior to the incurrence of general obligation indebtedness by the District. Among such provisions, Article X, Section 20 of the Colorado Constitution requires that, except for refinancing bonded debt at a lower interest rate, the District must have voter approval in advance for the creation of any multiple fiscal year direct or indirect district debt or other financial obligation whatsoever without adequate present cash reserves pledged irrevocably and held for payments in all future fiscal years. See "THE BONDS-Application of Bond

36

Proceeds" and "DISTRICT FINANCIAL INFORMATION-Constitutional Amendment Limiting Taxes and Spending."

General Obligation Debt

Statutory Debt Limit. The District is subject to a statutory debt limitation established pursuant to § 32-1-1101(6), C.R.S. Said limitation provides that, with specific exceptions, the total principal amount of general obligation debt issued by a special district will not at the time of issuance exceed the greater of $2 million or 50% of the District's assessed valuation. The issuance of the Bonds is permitted by § 32-1-1101(6)(a)(I), C.R.S. because the Bonds are rated in one of the four highest investment grade rating categories by one or more nationally recognized organizations which regularly rate such obligations.

Outstanding and Authorized but Unissued Debt. On November 3, 1998, District voters authorized the issuance of $19,950,000 of general obligation bonds and an additional $20,000,000 in authorization for refunding bonds, some of which will be used for the issuance of the Bonds. Upon issuance, the Bonds will represent the District's only outstanding general obligation debt and the District will have $4,174,762 in voted authorization remaining for "new money" general obligation bonds and $15,946,364 in voted authorization remaining for refunding bonds. The Service Plan, however, restricts the District's maximum debt to $17,515,000. The issuance of additional debt is further restricted by the Indenture. See "THE BONDS-Indenture Provisions."

Estimated Overlapping General Obligation Debt. Certain public entities whose boundaries may be entirely within, coterminous with, or only partially within the District are also authorized to incur general obligation debt, and to the extent that properties within the District are also within such overlapping public entities such properties will be liable for an allocable portion of such debt. For purposes of this Official Statement, the percentage of each entity's outstanding debt chargeable to District property owners is calculated by comparing the assessed valuation of the portion overlapping the District to the total assessed valuation of the overlapping entity. To the extent the District's assessed valuation changes disproportionately with the assessed valuation of overlapping entities, the percentage of general obligation debt for which District property owners are responsible will also change. The following table sets forth the estimated overlapping general obligation debt chargeable to properties within the District as of the date of this Official Statement. The District is not financially or legally obligated with regard to any of the indebtedness shown on the immediately following table. Although the District has attempted to obtain accurate information as to the outstanding debt of the entities which overlap the District, it does not warrant its completeness or accuracy as there is no central reporting entity which is responsible for compiling this information.

TABLE XII Estimated Overlapping General Obligation Debt 1

Estimated Net Debt Chargeable to Properties in the District

Overlapping Public Entity

Douglas County School District RE-l

Outstanding General Obligation Debt

$580,366,279

Percent

0.37%

I Other taxing entities overlap the District, but do not currently have any general obligation debt outstanding. Source: Douglas County Assessor's Office; and individual taxing entities

37

Amount

$2,147,355

General Obligation Debt Ratios. Set forth in the following table are selected historical general obligation debt ratios for the District for the last five years. See "INTRODUCTION-Debt Ratios" for general obligation debt ratios for the District upon issuance and delivery of the Bonds.

General Obligation Debt Outstanding Estimated Population 1

Debt Per Capita Assessed Value Ratio of Debt to Assessed Value Personal Income Per Capita

(Douglas County) Ratio of Debt Per Capita to Personal

Income Per Capita (Douglas County)

TABLE XIII Historical Debt Ratios

Fiscal Years Ended December 31 2005 2006 2007 2008

$14,550,000 $14,340,000 $14,115,000 $13,835,000 350 525 700 875

$41,571 $27,314 $20,164 $15,811 $17,446,050 $17,730,376 $18,230,350 $18,241,740

83.40% 80.88% 77.43% 75.84%

$47,838 $52,562 $57,390 $60,361

86.90% 51.97% 35.14% 26.19%

2009

$13,535,000 1,054

$12,842 $17,843,860

75.85%

unavailable

unavailable

1 Estimated based on an assumed construction of 50 homes annually between 2004 and 2009 with a population of approximately 3.5 persons for each single family home constructed within the District. Sources: District Audited Financial Statements, 2005-2009; Douglas County Assessor's office; State of Colorado, Division of Property Taxation, Annual Reports 2005-2008; Regional Economics Information System Bureau of Economic Analysis and the District

LEGAL MATTERS

Sovereign Immunity

The Colorado Governmental Immunity Act, Title 24, Article 10, C.R.S. (the "Governmental Immunity Act"), provides that, with certain specified exceptions, sovereign immunity acts as a bar to any action against a public entity, such as the District, for injuries which lie in tort or could lie in tort.

The Governmental Immunity Act provides that sovereign immunity does not apply to injuries occurring as a result of certain specified actions or conditions. In such instances, the public entity may be liable for injuries arising from an act or omission of the public entity, or an act or omission of its public employees, which are not willful and wanton, and which occur during the performance of their duties and within the scope of their employment. The maximum amounts that may be recovered under the Governmental Immunity Act, whether from one or more public entities and public employees, are as follows: (a) for any injury to one person in any single occurrence, $150,000; (b) for an injury to two or more persons in any single occurrence, $150,000 per person not to exceed the sum of $600,000. Suits against both the District and a public employee do not increase such maximum amounts which may be recovered. The District may not be held liable either directly or by indemnification for punitive or exemplary damages. In the event that the District is required to levy an ad valorem property tax to discharge a settlement or judgment, such tax may not exceed a total of ten mills per annum for all outstanding settlements or judgments.

The District may be subject to civil liability and may not be able to claim sovereign immunity for actions founded upon various federal laws. Examples of such civil liability include, but are not limited to, suits filed pursuant to 42 U.S.C. § 1983 alleging the deprivation of federal constitutional or statutory rights of an individual. In addition, the District may be enjoined from engaging in anti-competitive practices which violate the antitrust laws. However, the Governmental Immunity Act provides that it applies to any action brought against a public entity or a public employee in any Colorado State court having jurisdiction over any claim brought pursuant to any federal law, if such action lies in tort or could lie in tort.

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Pending and Threatened Litigation Involving the District

General Counsel to the District is expected to render an opinion upon delivery of the Bonds stating that, to the best of its actual knowledge, there is no action, suit or proceeding now pending or threatened against the District that will materially and adversely affect the financial condition or operations of the District or the District's power to levy the Required Mill Levy, or the District's power to issue and deliver the Bonds, or execute and perform the obligations of the Indenture.

Legal Representation

Legal matters incident to the authorization and issuance of the Bonds are subject to approval by Sherman and Howard L.L.C., Denver, Colorado, as Bond Counsel. Kutak Rock LLP has acted as Underwriter's Counsel and, in such capacity, has assisted the District in the preparation of this Official Statement. Certain matters will be passed upon by Collins & Cockrel, P.C., Denver, Colorado, as General Counsel to the District.

The legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to legal issues expressly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of the result indicated by that expression of professional judgment, or of the transaction on which the opinion is rendered, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

TAX MATTERS

In the opinion of Sherman & Howard L.L.C., Bond Counsel, assuming continuous compliance with certain covenants described below, interest on the Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the Bonds (the "Tax Code"), interest on the Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, except that such interest is required to be included in calculating the adjusted current earnings adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations, and interest on the Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the Bonds. For purposes of this paragraph and the succeeding discussion, "interest" includes the original issue discount on certain of the Bonds only to the extent such original issue discount is accrued as described herein.

The Tax Code and Colorado law impose several requirements which must be met with respect to the Bonds in order for the interest thereon to be excluded from gross income, alternative minimum taxable income, Colorado taxable income and Colorado alternative minimum taxable income. Certain of these requirements must be met on a continuous basis throughout the term of the Bonds. These requirements include: (a) limitations as to the use of proceeds of the Bonds; (b) limitations on the extent to which proceeds of the Bonds may be invested in higher yielding investments; and ( c) a provision, subject to certain limited exceptions, that requires all investment earnings on the proceeds of the Bonds above the yield on the Bonds to be paid to the United States Treasury. The District will covenant and represent in the Indenture that it will take all steps to comply with the requirements of the Tax Code and Colorado law (in effect on the date of delivery of the Bonds) to the extent necessary to maintain the exclusion of interest on the Bonds from gross income and alternative minimum taxable income under such federal income tax laws and Colorado taxable income and Colorado alternative minimum taxable income under such Colorado income tax laws. Bond Counsel's opinion as to the exclusion of interest on

39

the Bonds from gross income, alternative mlmmum taxable income, Colorado taxable income, and Colorado alternative minimum taxable income is rendered in reliance on these covenants, and assumes continuous compliance therewith. The failure or inability of the District to comply with these requirements could cause the interest on the Bonds to be included in gross income, alternative minimum taxable income, Colorado taxable income, or Colorado alternative minimum taxable income, or a combination thereof, from the date of issuance. Bond Counsel's opinion also is rendered in reliance upon certifications of the District and other certifications furnished to Bond Counsel. Bond Counsel has not undertaken to verifY such certifications by independent investigation.

Section 55 of the Tax Code contains a 20% alternative minimum tax on the alternative minimum taxable income of corporations. Under the Tax Code, 75% of the excess of a corporation's "adjusted current earnings" over the corporation's alternative minimum taxable income (determined without regard to this adjustment and the alternative minimum tax net operating loss deduction) is included in the corporation's alternative minimum taxable income for purposes of the alternative minimum tax applicable to the corporation. "Adjusted current earnings" includes interest on the Bonds.

With respect to Bonds that were sold in the initial offering at a discount (the "Discount Bonds"), the difference between the stated redemption price of the Discount Bonds at maturity and the initial offering price ofthose bonds to the public (as defined in Section 1273 of the Tax Code) will be treated as "original issue discount" for federal income tax purposes and will, to the extent accrued as described below, constitute interest which is excluded from gross income, alternative minimum taxable income, Colorado taxable income, or Colorado alternative minimum taxable income under the conditions and subject to the exceptions described in the preceding paragraphs. The original issue discount on the Discount Bonds is treated as accruing over the respective terms of such Discount Bonds on the basis of a constant interest rate compounded at the end of each six-month period (or shorter period from the date of original issue) ending on June 1 and December 1 with straight line interpolation between compounding dates. The amount of original issue discount accruing each period (calculated as described in the preceding sentence) constitutes interest which is excluded from gross income, alternative minimum taxable income, Colorado taxable income, and Colorado alternative minimum taxable income under the conditions and subject to the exceptions described in the preceding paragraphs and will be added to the owner's basis in the Discount Bonds. Such adjusted basis will be used to determine taxable gain or loss upon disposition of the Discount Bonds (including sale or payment at maturity). Owners should consult their own tax advisors with respect to the tax consequences ofthe ownership of the Discount Bonds.

Owners who purchase Discount Bonds after the initial offering or who purchase Discount Bonds in the initial offering at a price other than the initial offering price (as defined in Section 1273 of the Tax Code) should consult their own tax advisors with respect to the federal tax consequences of the ownership of the Discount Bonds. Owners who are subject to state or local income taxation (other than Colorado state income taxation) should consult their tax advisor with respect to the state and local income tax consequences of ownership of the Discount Bonds. It is possible that, under the applicable provisions governing determination of state and local taxes, accrued original issue discount on the Discount Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment.

The Tax Code contains numerous provisions which may affect an investor's decision to purchase the Bonds. Owners of the Bonds should be aware that the ownership of tax-exempt obligations by particular persons and entities, including, without limitation, financial institutions, insurance companies, recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, foreign corporations doing business in the United States and certain "subchapter S" corporations may result in adverse federal and Colorado tax consequences. Under Section 3406 of the Tax Code, backup withholding may be

40

imposed on payments on the Bonds made to any owner who fails to provide certain required information, including an accurate taxpayer identification number, to certain persons required to collect such information pursuant to the Tax Code. Backup withholding may also be applied if the owner underreports "reportable payments" (including interest and dividends) as defined in Section 3406, or fails to provide a certificate that the owner is not subject to backup withholding in circumstances where such a certificate is required by the Tax Code. Certain of the Bonds may be sold at a premium, representing a difference between the original offering price of those Bonds and the principal amount thereof payable at maturity. Under certain circumstances, an initial owner of such Bonds (if any) may realize a taxable gain upon their disposition, even though such Bonds are sold or redeemed for an amount equal to the owner's acquisition cost. Bond Counsel's opinion relates only to the exclusion of interest (and, to the extent described above for the Discount Bonds, original issue discount) on the Bonds from gross income, alternative minimum taxable income, Colorado taxable income and Colorado alternative minimum taxable income as described above and will state that no opinion is expressed regarding other federal or Colorado tax consequences arising from the receipt or accrual of interest on or ownership of the Bonds. Owners of the Bonds should consult their own tax advisors as to the applicability of these consequences.

The opinions expressed by Bond Counsel are based on existing law as of the delivery date of the Bonds. No opinion is expressed as of any subsequent date nor is any opinion expressed with respect to pending or proposed legislation. Amendments to the federal or state tax laws may be pending now or could be proposed in the future that, if enacted into law, could adversely affect the value of the Bonds, the exclusion of interest (and, to the extent described above for the Discount Bonds, original issue discount) on the Bonds from gross income or alternative minimum taxable income or both from the date of issuance of the Bonds or any other date, or that could result in other adverse tax consequences. In addition, future court actions or regulatory decisions could affect the tax treatment or market value of the Bonds. Owners of the Bonds are advised to consult with their own tax advisors with respect to such matters.

The Internal Revenue Service (the "Service") has an ongoing program of auditing tax-exempt obligations to determine whether, in the view of the Service, interest on such tax-exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. No assurances can be given as to whether or not the Service will commence an audit of the Bonds. If an audit is commenced, the market value of the Bonds may be adversely affected. Under current audit procedures, the Service will treat the District as the taxpayer and the Owners may have no right to participate in such procedures. The District has covenanted in the Indenture not to take any action that would cause the interest on the Bonds to lose its exclusion from gross income for federal income tax purposes or lose its exclusion from alternative minimum taxable income for the owners thereof for federal income tax purposes. None of the District, the Underwriter, or Bond Counsel is responsible for paying or reimbursing any Registered Owner or Beneficial Owner for any audit or litigation costs relating to the Bonds.

FINANCIAL INSTITUTION INTEREST DEDUCTION

The Tax Code generally provides that a fmancial institution may not deduct that portion of its interest expense which is allocable to tax-exempt interest. The interest expense which is allocable to taxexempt interest is an amount which bears the same ratio to the institution's interest expense as the institution's average adjusted basis of tax-exempt obligations acquired after August 7, 1986 bears to the average adjusted basis of all assets of the institution. Tax-exempt obligations may be treated as if acquired on August 7, 1986 (and therefore are not subject to this rule), if they are "qualified tax-exempt obligations" as defined in the Tax Code and are designated for this purpose by the District.

The District has designated the Bonds for this purpose; however, under provisions of the Tax Code dealing with financial institution preference items, certain financial institutions, including banks, are

41

denied 20% of their otherwise allowable deduction for interest expense with respect to obligations incurred or continued to purchase or carry the Bonds. In general, interest expense with respect to obligations incurred or continued to purchase or carry the Bonds will be in an amount which bears the same ratio as the institution's average adjusted basis in the Bonds bears to the average adjusted basis of all assets of the institution.

Amendments to the Tax Code could be enacted in the future and there is no assurance that any such future amendments which may be made to the Tax Code will not adversely affect the ability of banks or other financial institutions to deduct any portion of its interest expense allocable to tax-exempt interest.

MISCELLANEOUS

Ratings

Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business ("S&P") is expected to assign the "AAA" (negative outlook) rating to the Bonds (based upon the insurance policy to be issued concurrently with the delivery of the Bonds by Assured Guaranty Municipal Corp. (formerly known as Financial Security Assurance Inc.» as set forth on the cover page of this Official Statement. S&P has also assigned to the Bonds an underlying rating as set forth on the cover page hereof.

Such ratings reflect only the view of the rating agency and any desired explanation of the significance of such ratings should be obtained from S&P at 55 Water Street, New York, New York 10041. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating agency if in the judgment of such rating agency circumstances so warrant. Any downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds.

Registration of Bonds

Registration or qualification of the offer and sale of the Bonds (as distinguished from registration of the ownership of the Bonds) is not required under the federal Securities Act of 1933, as amended, the Colorado Securities Act, as amended, or the Colorado Municipal Bond Supervision Act, as amended, pursuant to exemptions from registration provided in such acts. THE DISTRICT ASSUMES NO RESPONSIBILITY FOR QUALIFICATION OR REGISTRATION OF THE BONDS FOR SALE UNDER THE SECURITIES LAWS OF ANY JURISDICTION IN WHICH THE BONDS MAY BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED.

The "Colorado Municipal Bond Supervision Act," Article 59 of Title 11, C.R.S., generally provides for the Colorado Securities Commissioner (the "Commissioner") to regulate and monitor the issuance of municipal securities by special districts and certain other entities. Among other things, the act requires that all bonds, debentures, or other obligations (defined in the act as "bonds") issued by a special district must first be registered with the Commissioner unless exempt under the act. The Bonds qualify for an exemption from registration because they are rated in one the four highest rating categories by one or more nationally recognized organizations which regularly rate such obligations.

42

Interest of Certain Penons Named in This Official Statement

The legal fees to be paid to Bond Counsel and Underwriter's Counsel are contingent upon the sale and delivery of the Bonds.

Undertaking to Provide Ongoing Disclosnre

Pursuant to the requirements of the Securities and Exchange Commission Rule 15c2-12 (17 C.F.R. Part 240, § 240.1Sc2-12) ("Rule 15c2-12"), the District has covenanted, for the benefit of the holders of the Bonds, to provide certain financial information and other operating data and notices of material events after the Bonds are issued. The form of the District's Form of Continuing Disclosure Undertaking for the Bonds is attached as APPENDIX E to this Official Statement. The District has not failed to comply with any of its previous undertakings.

Underwriting

The Bonds are being sold by the District at an underwriting discount of $183,875.00 to the Underwriter pursuant to a purchase contract. See "THE BONDS-Application of Bond Proceeds." Expenses associated with the issuance of the Bonds are being paid by the District from proceeds of the issue. The right of the Underwriter to receive compensation in connection with this issue is contingent upon the actual sale and delivery of the Bonds. The Underwriter has initially offered the Bonds at the prices or yields set forth on the cover page of this Official Statement, plus accrued interest from the date of the Bonds. Such prices or yields, as the case may be, may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join with dealers and other investment banking firms in offering the Bonds.

Additional Information

Copies of statutes, resolutions, opinions, contracts, agreements, financial and statistical data, and other related reports and documents described in this Official Statement are either publicly available or available upon request and the payment of a reasonable copying, mailing, and handling charge from the sources noted in the "INTRODUCTION" hereto.

Official Statement Certification

The preparation of this Official Statement and its distribution have been authorized by the Board. This Official Statement is hereby duly approved by the Board as of the date on the cover page hereof. This Official Statement is not to be construed as an agreement or contract between the District and the purchasers or owners of any Bond.

CONSOLIDATED BELL MOUNTAIN RANCH METROPOLITAN DIS l'

43


APPENDIX A

DISTRICT AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2009

L. PAUL GOEDECKE P.C.

CERTIFIED PUBLIC ACCOUNTANT'S

Independent Auditor's Report

Board of Directors Consolidated Bell Mountain Ranch Metropolitan District

g50 WAOSWORTH BLVO.

SUITE 204

LAKEWOOD, COLORAOO 80214

TELEPHONE (303) 232 2888

FAX (303) 232·g452

IpgcP.Oqw •• totflc •. nat

We have audited the accompanying financial statements of the governmental activities and each major fund of Consolidated Bell Mountain Ranch Metropolitan District as of and for the year ended December 31, 2009, which collectively comprise the District's basic financial statements, as listed in the table of contents. These fmancial statements are the responsibility of the District. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit incluoes examining, on a test basis, evidence supporting the amounts and disclosures in the fmancial statements. An audit also includes assessing the accounting principles used· and significant estimates, made by the District, as well as evaluating the overall financial statement presentation. We believe that our audit provides reasonable basis for our opinions.

The District has not presented management's discussion and analysis that the Governmental Accounting Standards Board has determined is necessary to supplement, although not required to be part of, the basic financial statements.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Consolidated Bell Mountain Ranch Metropolitan District as of December 31, 2009, and the respective changes in financial position and the respective budgetary comparison for the general fund for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Our audit was made for the purpose of fonning an opinion on the financial statements taken as a whole. The supplemental information as listed in the Table of Contents is presented for purposes of additional analysis and is not a required part of the basic financial statements of Consolidated Bell Mountain Ranch Metropolitan District. Such infonnation has been subjected to the auditing procedures applied in the audit of the basic financial statements.and. in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

L. Paul Goedecke. P .C. February 16. 20 I 0

I

MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANlS AND COLORADO SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS


CONSOLIDATED BELL MOUNTAIN RANCH METROPOLITAN DISTRICT

BALANCE SHEET/ST ATEMENT OF NET ASSETS GOVERNMENTAL FUNDS

December 31, 2009

Statement Debt Capital of Net

Qmml Sm:i£c ~ I2l!l AslilliSDl!3ll1 MKIl ASSETS

Cash and investments S 23,065 S - S 2,804 S 25,869 S - $ 25,869

Cash and investments • restricted 668,584 668,584 668,584

Propcny taxes receivable • current 1,576 6,709 8,285 8,285

Propeny taxes receivable - deferred 267,658 1,139,669 1,407,327 1,407,327

Ac:counts receivable· other 3,300 3,300 3,300

Prepaid insurance 5,940 5,940 5,940 Capital assets. net of depreciation 10,906,927 10,906,927

Total Assets 301,539 1,814,962 2,804 2,119,305 IO,9{)6,927 13,026,232

LIABILITIES Accounts payable S 24,894 S - S - $ 24,894 24,894

Deferred propeny taxes 267,658 1,139,669 1,407,327 1,407,327

Accrued interest 0/1 bonds 118,550 118,550

Long-term liabilities Due within one year 360,000 360,000 Due in more than one year 15,933,394 15,933,394

Total Liabilities 292,552 1,139,669 1,432,221 16,411,944 17,844,165

FUND BALANCEINET ASSETS Reserved for:

Emergencies 7,542 7,542 (7,542)

Debt service 675,293 675,293 (675,293)

Capital projects 2,804 2,804 (2,804)

Unreserved 1,445 1,445 (1,445)

Total Fund Balances 8,987 675,293 2,804 687,084 (687,084)

Tow Liabilities and Fund Balance S 301,539 $ 1,814,962 S 2,804 S 2,1191305

Invested in capital assets net of related debt (5,386,467) (5,386,467)

Restricted for: Emergencies 7,542 7,542

Debt service 556,743 556,743

Capital projects 2,804 2,804 Unrestricted 1,445 1,445

Total Net Assets (Deficit) S !4,817,933, S l4,8171933,

The notes to the financial statements are an integral part of these statements. -I-

CONSOLIDATED BELL MOUNTAIN RANCH METROPOLITAN DISTRJC1

STATEMENT OF REVENUES. EXPENDITUllES AND CHANGES IN FUND BALANCFJST A TEMENT OF ACTIVITIES

GOVERNMENTAL FUNDS For the Year Ended Dea:mber 31. 2009

Statement Debt Capital of

Q.mml Smi££ £mim IJI1I.I AdjuSlmc;ntI ~

EXPENDITURES Aa:ounting and audit S 10.077 S S . S 10.077 S - S 10.077

District management 25.301 25.301 2'.301 Engineering 167 167 167

Insunnce 5.925 5.925 5.925 Landscape maintenance 56.019 56.019 56,019

Legal 36.584 36,584 36.584 legal. water 27,84\ 27.84\ 27,841

Miscel1aneoua expenses 5.600 5.600 5.600 Open space maintenance 4.480 4.480 4.480

Snow plowin, 38.451 38.451 38.451 Street maintenance 38.349 38,349 38.349 Trail maintenance 2.920 2.920 2,920

T reaswet's fees 4.116 17.526 21.642 21.642 Utilities 1.02\ 1.021 1.02\ EXlr80nlinary street n:pain 28.209 28.209 (28.209) Depreciation expense 650,628 650,628

Bond interest expense· Series 1999A 486,606 486.606 486.606 Bond principal· Series \999B 190.000 190.000 (190.000)

Bond interest expense· Series I999B 211.294 211,294 (1,728) 2090566 Bond principal. Series 2003A 110.000 110.000 (110,000)

Bond interest expense· Series 2003A 286.375 286,375 (1,071) 285,304 Paying agent fees 4SO 450 450

Total Expenditures 256,851 1.302,251 28.209 1,587,311 319,620 1.906.93\

GENERAL REVENUES Property taxes 273,405 1,164.139 1.437,S44 1.437.544 Specific ownership tlIltCS 20.455 87,095 107.550 107,550

Inte~ income 10,833 15,965 26.798 26,798

Other Income 2.755 2,755 2,755 Conservation trust fund 4.082 4,082 4,082

Total General Revenues 311,530 1,267,199 1,578,729 1,578,729

EXCESS (DEFICIENCY) OF REVENUES OVER

(UNDER) EXPENDITURES 54,679 (35.052) (28,209) (8,582) (319,620) (328.202)

OTHER FINANCING SOURCES (USES) Transfer (to) other funds (30,000) (30,000) 30,000 Transfer from other funds 30,000 30,000 (30,000)

Total OtheT Financing Sources (Uses) (30,000) 30.000

EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER (UNDER) EXPENDITURES AND OTHER USES 24,619 (35.052) 1,791 (8,582) 8,582

CHANGE IN NET ASSETS (328,202) (328,202)

FUND BALANCEINET ASSETS· BEGINNING OF YEAR (15,692) 710,345 1,013 695,666 (5,185,397) (4,489,731)

FUND BALANCEINET ASSETS· END OF YEAR S 8,987 S 675,293 S 2,804 S 687,084 S (5.so5.017) s (4,817,933)

The notes to the financial statements are an integral part of these statements. -2.


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE· BUDGET AND ACTUAL •

GENERAL FUND For the Year Ended December 31, 2009

Variance Original &; Final Favorable

~ &1YJl (!lnmvQmlll~)

REVENUES Propeny taxes S 273,626 S 273,405 S (221)

Specific ownership taxes 24.626 20,455 (4,171)

Interest income 1,s00 10,833 9,333

Other Income 2,755 2.755 Conservation trust fund 4,000 4.082 82

Total Revenues 303,752 311,530 7,778

EXPENDITURES Accounting and audit 10,500 10,077 423

District management 30,000 25,301 4,699

Engineering 12,000 167 11,833

Insurance 6,300 5,925 375

Landscape maintenance 40,000 56,019 (16,019)

Legal 35,000 36,584 (1,584)

Legal - water 10,000 27,841 (17,841)

Miscellaneous expenses 2.000 5,600 (3,600)

Open space maintenance 15,000 4,480 10,520

Snow plowing 30,000 38,451 (8,451)

Street maintenance 40,000 38,349 1,651

Trail maintenance 15.000 2.920 12,080

Treasurer's fees 4,104 4,116 (12)

Utilities 1,500 1,021 479

Contingern:y 31,627 31,627 Emergency reserve 7,542 7,542

Total Expenditures 290,573 256,851 33,722

EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 13,179 54,679 41,500

OTHER FINANCING SOURCES (USES) Transfer from (to) other funds (30,000) (30,000)

Total Other Financing Sources (Uses) (30,000) (30,000)

EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES AND OTHER FINANCING SOURCES (16,821) 24,679 41,500

FUND BALANCE - BEGINNING OF YEAR 16,821 (15,692) (32,513)

FUND BALANCE - END OF YEAR $ - S 8,987 S 8,987

The notes to the financial statements are an integral part of these statements. ·3-


Notes to Financial Statements December 31, 2009

Note 1: Summary of Significant ACCOunting Policies

The accounting policies of the Consolidated Bell Mountain Ranch Metropolitan District, located in Douglas County, Colorado, conform to the accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The following is a summary of the more significant policies consistently applied in the preparation of financial statements.

Definition of Reporting Entity The District was organized on January 4, 1999, as a quasi-municipal organization established under the State of Colorado Special District Act. The District consists of approximately 2,040 acres, containing 305 residential lots, space for limited commercial and industrial development, and parks, open space and arterial streets in the central portion of Douglas County. The District is comprised of the former Bell Mountain Ranch Phase II, Phase III, and Bell Mountain Ranch Park and Recreation Metropolitan Districts ("Predecessor Districts"). The District was established to provide water, sanitation, street improvement, safety protection services, television relay, transportation, mosquito control and park and recreation improvements that benefit the citizens of the District. The District's primary revenues are property taxes and improvement fees. The District is governed by an elected Board of Directors.

The District follows the Governmental Accounting Standards Board (GASB) accounting pronouncements which provide guidance for determining which governmental activities, organizations and functions should be included within the financial reporting entity. GASB pronouncements set forth the financial accountability of a governmental organization's elected governing body as the basic criterion for including a possible component governmental organization in a primary government's legal entity. Financial accountability includes, but is not limited to, appointment of a voting majority of the organization's governing body, ability to impose its will on the organization, a potential for the organization to provide specific financial benefits or burdens and fiscal dependency.

As required by GAAP, these financial statements present the activities of the District, which is legally separate and financially independent of other state and local governments. The District has no component units as defmed by the Governmental Accounting Standards Board (GASB), Statement No. 14, The Financial Reporting Entity and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units.

The District has no employees and all operations and administrative functions are contracted.

The District is not financially accountable for any other organization.

CONSOLIDATED BELL MOUNTAIN RANCH METROPOLITAN DISTRlCT


Note 1: SUtnIDaIY of Significant Accounting Policies (continued)

Basis of Presentation The accompanying financial statements are presented per GASB Statement No. 34 - Special Purpose Governments.

The government-wide financial statements (Le. the statement of net assets and the statement of governmental fund revenues, expenditures, and changes in fund balances/statement of activities) report information on all of the governmental activities of the District. The statement of activities demonstrates the degree to which expenditures/expenses of the governmental funds are supported by general revenues. For the most part, the effect of interfund activity has been removed from these statements.

The statement of net assets reports all financial and capital resources of the District. The difference between the assets and liabilities of the District is reported as net assets.

The statement of activities demonstrates the degree to which the direct and indirect expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are collected.

- 5-


Notes to Financial Statements December 31,2009

Note 1: Summary of Significant Accounting Policies (continued)

Governmental fund fmancial statements are reported using the cu"ent financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available jf they are collected within 60 days of the end of the current fiscal period. The material sources of revenue subject to accrual are property taxes and interest. Expenditures, other than interest on long-term obligations, are recorded when the liability is incurred or the long-term obligation is paid.

The District reports the following major governmental funds:

General Fund - The General Fund is the general operating fund of the District. It is used to account for all fmancial resources except those required to be accounted for in another fund.

Debt Service Fund - The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general long-term obligation principal, interest and related costs.

Capital Projects Fund - The Capital Projects Fund is used to account for financial resources to be used for the acquisition or construction of capital equipment and facilities.

As a general rule, the effect of interfund activity has been eliminated from the statements of net assets.

Budgetary Accounting Budgets are adopted on a non-GAAP basis for the governmental funds. In accordance with the State Budget Law of Colorado, the District's Board of Directors holds public hearings in the fall of each year to approve the budget and appropriate the funds for the ensuing year. The District's Board of Directors can modify the budget by line item within the total appropriation without notification. The appropriation can only be modified upon completion of notification and publication requirements. The budget includes each fund on its basis of accounting unless otherwise indicated. The appropriation is at the total fund expenditures level and lapses at year end.

-6-



Note 1: Summary of Significant Accounting Policies (continued)

Assets. Liabilities and Net Assets Fair Value of Financial Instruments The District's financial instruments include cash and cash equivalents, accounts receivable and accounts payable. The District estimates that the fair value of all financial instruments at December 31, 2009, does not differ materially from the aggregate carrying values ofits financial instruments recorded in the accompanying balance sheet. The carrying amount of these financial instruments approximates fair value because of the short maturity of these instruments.

Deposits and Investments The District's cash and cash equivalents are considered to be cash on hand and short-term investments with maturities of three months or less from the date of acquisition. Investments for the government are reported at fair value.

The District follows the practice of pooling cash and investments of all funds to maximize investment earnings. Except when required by trust or other agreements, all cash is deposited to and disbursed from a minimum number of bank accounts. Cash in excess ofimmediate operating requirements is pooled for deposit and investment flexibility. Investment earnings are allocated periodically to the participating funds based upon each fund's average equity balance in the total cash.

Interfund Balances Activity between funds that are representative oflending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds". These amounts are eliminated in the Statement of Net Assets.

Estimates The preparation of these financial statements in conformity with GAAP requires the District management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities.

- 7-



Note I: Summary of Significant Accounting Policies (continued)

Ca,pital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g. roads, bridges, sidewalks, and similar items), are reported in the applicable governmental activities columns in the government~wide financial statements. Such assets are recorded at historical or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend the life of the asset are not capitalized. Improvements are capitalized and depreciated over the remaining useful lives of the related fixed assets, as applicable using the straight-line method. Depreciation on property that will remain assets of the District is reported on the Statement of Activities as a current change. Improvements that will be conveyed to other governmental entities are classified as construction in progress and are not depreciated. Land and certain landscaping improvements are not depreciated.

Property, plant and equipment are depreciated using the straight~line method over the following estimated useful lives:

Capital improvements 10 - 40 years

Property Taxes Property taxes are levied by the District's Board of Directors. The levy is based on assessed valuations determined by the County Assessor generally as of January 1 of each year. The levy is normally set by December 15 by certification to the County Commissioners to put the tax lien on the individual properties as of January I of the following year. The County Treasurer collects the determined taxes during the ensuing calendar year. The taxes are payable by April or if in equal installments, at the taxpayers' election, in February and June. Delinquent taxpayers are notified in July or August and the sales of the resultant tax liens on delinquent properties are generally held in November or December. The County Treasurer remits the taxes collected monthly to the District.

Property taxes, net of estimated uncollectible taxes, are recorded initially as deferred revenue in the year they are levied and measurable since they are not normally available nor are they budgeted as a resource until the subsequent year. The deferred property taxes are recorded as revenue in the subsequent year when they are available or collected.

~8-



Note 1: Sum.mat:y of Simificant Accounting Policies (continued)

Fund Equity In the fund financial statements, government funds report reservations of fund balances for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific pwpose. Designations of unreserved fund balances indicate management's intention for future utilization of such funds and are subject to change by management. The District considers all unreserved fund balance to be "reserves" for future operations or capital replacements as defined by Article X, Section 20 of the Constitution of the State of Colorado (see Note 6). '

Emergency Reserves have been provided as required by Article X, Section 20 of the Constitution of the State of Colorado. $7,542 of the General Fund balance has been reserved in compliance with this requirement.

The reserved fund balance in the Debt Service Fund in the amount of$675,293 is reserved for the payment of the Long Tenn Debt (see Note 4).

The reserved fund balance in the Capital Projects Fund in the amount of $2,804 is reserved for capital improvements within the District.

When both restricted and unrestricted resources are available for use, it is the District's policy to use restricted resources frrst, then unrestricted resources as needed.

Note 2: Cash and Investments

As of December 31, 2009, cash and investments are classified in the accompanying financial statements as follows:

Statement of net assets: Cash and investments Cash and investments - Restricted Total

$ 25,869 668.584

$ 694,453

Cash and investments as of December 31,2009 consist of the following:

Deposits with financial institutions Community Banks of Colorado Investments - Federated Treasury

Obligation - Money Market

-9-

$ 25,869 511,758

156,826 $ 694,453



Note 2: Cash and Investments (continued)

DejXlsits Custodial Credit Risk The Colorado Public Deposit Protection Act, (PDPA) requires that all units oflocal government deposit cash in eligible public depositories. State regulators determine eligibility. Amounts on deposit in excess of federal insurance levels must be collateralized. The eligible collateral is determined by the PDP A. PDP A allows the institution to create a single collateral pool for all public funds. The pool is to be maintained by another institution, or held in trust for all the uninsured public deposits as a group. The market value of the collateral must be at least equal to the aggregate uninsured deposits. The State Commissioners for banks and financial services are required by statute to monitor the naming of eligible depositories and reporting of the uninsured deposits and assets maintained in the collateral pools.

At December 31,2009, the District's cash deposits had a bank balance 0[$537,318 and a carrying balance of $537,627.

The District does not have a formal policy for deposits. None of the District's deposits were exposed to custodial credit risk.

Investments Credit Risk The District has not adopted a formal investment policy, however the District follows state statutes regarding investments. Colorado statutes specify the types of investments meeting defined rating and risk criteria in which local governments may invest. These investments include obligations of the United States and certain U.S. Government agency entities, certain money market funds, guaranteed investment contracts, and local government investment pools.

Money Market Mutual Fund Federated Treasury Obligations Class 0 Corporate Trust Fund invests in U.S. Treasury Obligations, which is rated AAAm by Standard and Poor's.

Custodial and Concentration of Credit Risk None of the District's investments are subject to custodial or concentration of credit risk.

Interest Rate Risk Colorado revised statutes limit investment maturities to five years or less unless formally approved by the Board of Directors.

- 10-



Note 2: Cash and Investments (continued)

Restricted Cash Restricted cash includes a Reserve fund, established under the terms of a bond resolution for the Series 1999 $8,055,000 General Obligation Limited Tax Refunding Bonds, the Series 1999B $3,450,000 General Obligation Limited Tax Bonds and the Series 2003 Subordinate General Obligation Bonds in the amount of $668,584 (See Note 3).

As of December 31, 2009, the District had the following investments:

Investment Maturity Federated Treasury Weighted average Obligations Class D Under 60 days

Fair Value $ 156.826

Note 3: Long Teno Debt

A description of the long-term obligations as of December 31, 2009, is as follows:

$8,055,000 General Obligation Limited Tax Refunding Bonds Series 1999 On March 8, 1999, the District issued $8,055,000 of General Obligation Limited Tax Refunding Bonds Series 1999 dated March 1, 1999 for the purpose of (i) refunding certain general obligation and revenue bonds issued by the Predecessor Districts; (ii) to reimburse the Developer for amounts expended by the Developer in the construction ofinfrastructure improvements on behalf ofthe Predecessor Districts; (iii) funding a reserve fund for the Bonds; and, (iv) paying other costs in connection with the bonds. The bonds bear interest at the rate of6.625%, payable semiannually on each May 15 and November 15, commencing on May 15, 1999. The bonds are subject to a mandatory sinking fund redemption commencing on November 15,2000. The Bonds are subject to an early redemption at the option of the District commencing November 15,2009 and on any date thereafter upon payment of par, accrued interest and a redemption premium as follows:

Redemption date

November 15, 2009 through November 14, 2010 November 15, 2010 through November 14, 2011 November 15,2011 thereafter

Premium

2% 1% 0%

The 1999 Bonds are secured by Pledged Revenues including a limited mill levy, interest earnings, and improvement fees, rates, fees, tolls, and charges for the use of District facilities.

- 11 -



Note 3: Long-Term Debt (continued)

$3.450.000 General Obligation Limited Tax Bonds Series 1999B On November 30, 1999, the District issued 53,450,000 of General Obligation Limited Tax Bonds Series 1999B for the purpose of the construction of certain infrastructure improvements in the District. The bonds bear interest at the rate of7.375%, payable semiannually on each May 15 and November 15, commencing on May 15,2000. The bonds are subject to a mandatory sinking fund redemption commencing on November 15,2000. The Bonds are subject to an early redemption at the option of the District commencing November 15, 2009 and on any date thereafter upon payment of par, accrued interest and a redemption premium as follows:

Redemption date

November 15, 2009 through November 14, 20 10 November 15,2010 through November 14,2011 November 15, 2011 thereafter

Premium

2% 1% 0%

The 1999B Bonds are secured by Pledged Revenues including a limited mill levy . In addition to these bonds, a portion ofthe debt service on the prior bonds is also to be paid from the limited mill levy.

$3,970.000 Subordinate General Obligation Limited Tax Bonds Series 2003 On September 30,2003, the District issued S3,970,000 of Subordinate General Obligation Limited Tax Bonds Series 2003 for the purpose of refunding the District's $2,510,000 Series 2002 Bonds and to reimburse the Developer of the District for the cost of acquisition, construction and completion of pub tic infrastructure improvements. The bonds are subordinate to the Senior Bonds issued by the District in the outstanding principal amount ofSIO,745,000. The bonds are term bonds and bear interest at the rate of 7.900%, payable annually on each November 15, commencing on November 15, 2004. The bonds are subject to a mandatory sinking fund redemption commencing on November 15,2004. The Bonds are subject to an early redemption at the option of the District, as a whole or in integral multiples ofSl,ooo, commencing November 15, 2009 and on any date thereafter upon payment of par, accrued interest and a redemption premium as follows:

Redemption date

November 15,2009 through November 14, 2010 November 15,2010 through November 14,2011 November 15, 2011 through November 14, 2012 November 15,2012 thereafter

- 12 -

Premium

3% 2% 1% 0%



Note 3: Long-Term Debt (continued)

$3.970,000 Subordinate General Obligation Limited Tax Bonds Series 2003 (continued) The 2003 Subordinate Bonds are secured by Pledged Revenues including a limited mill levy presently at 63.869 mills adjusted for any changes in the ratio of actual valuation to assessed valuation (known as the Gallagher Amendment). The bonds are additionally secured by a reserve fund in the amount of $156,826 (See Note 2).

The following is an analysis of changes in long-term debt for the period ending December 31, 2009:

Balance Balance Current 01-01-09 Additions Deletions 12-31-09 Portion

Series 1999 - $8,055,000 General Obligation Refunding Bonds $ 7,345,000 $ - $ - $ 7,345,000 $ Series 1999B - $3,450,000 General Obligation and Improvement Bonds 2,865,000 190,000 2,675,000 225,000 Series 2003 - $3,970,000 Subordinate General Obligation Bonds 3,625,000 110,000 3,515,000 135,000

~Qn~lidatiQ!! Agreement Improvement Funding Agreements· 2,349,117 2,349,117 Operation Funding

Agreements • 409z277 4091277

$1615931394 $ - $ 3°°1°00 $16z293 z394 $ 360,000

• See Note 5 for discussions related to the Consolidation Agreement.

- 13 -

Note 3:



Long-Term Debt (continued)

The following is a summary of the combined annual long-term debt principal and interest requirements:

PrinciEaI Interest Total

2010 $ 360,000 $ 961,572 $ 1,321,572

2011 390,000 934,314 1,324,314 2012 455,000 904,944 1,359,944 2013 490,000 870,848 1,360,848 2014 570,000 834,459 1,404,459

2015-2019 4,030,000 3,451,488 7,481,488 2020-2024 5,840,000 1,682,786 7,522,786

2025 l z4001000 92z750 1,492,750

$ 13z535z000 $ 91733 1161 $ 23z268,161

Debt Authorization As of December 31, 2009, the District had remaining voted debt authorization of approximately $2,040,000. The District has not budgeted to issue any new debt during 2010. Per the District's Service Plan, the District can not issue debt in excess of $17,515,000.

Note 4: Capital Assets

An analysis of the changes in capital assets for the year ended December 31, 2009 follows:

Governmental Type Activities:

CaEitai assets being depreciated: Capital improvements

Total capital assets:

Accumulated Depreciation

Net capital assets being depreciated:

Government type assets, net

Balance 01-01-09

$ 16z662z9OO

16,662,900

{5,133z614)

11,529,346

$ 11,529,346

- 14-

Balance Additions Deletions 12-31-09

$ 28~09 $ - $ 16z691z169

28,209 16,691,169

~650z628) {5z784~42)

{622z419) 1O,906z927

$~622,419~ $ - $ IOz906,927


Note 5: Consolidation Agreement


The District and Bell MOWltain Ranch Associates, L.P. ("Developer") entered into a Consolidation Agreement dated May 1,2002, as part of the consideration for issuing $2,510,000 Subordinate General Obligation Limited Tax Bonds in 2002 (subsequently refunded in 2003). As of May I, 2002, previous Improvement Funding Agreements and Operation Funding Agreements (collectively "Funding Agreements") were terminated. The Consolidation Agreement quantifies the amount of the District's conditional obligation to reimburse the Developer for prior advances made pursuant to the terminated Funding Agreements.

As part of the settlement of the claims referenced in Note 8, the District and the Developer effective as of March 2010 tenninated the Consolidation Agreement and agreed that the District's conditional reimbursement obligations have been terminated.

Note 6: Tax, Spending and Debt Limitations

Article X, Section 20 of the Colorado Constitution, commonly known as the Taxpayer Bill of Rights (TABOR) contains tax, spending, revenue and debt limitations which apply to the State of Colorado and all local governments.

Spending and revenue limits are determined based on the prior year's Fiscal Year Spending adjusted for allowable increases based upon inflation and local growth. Fiscal Year Spending is generally defined as expenditures plus reserve increases with certain exceptions. Revenue in excess of the Fiscal Year Spending limit must be refunded unless the voters approve retention of such revenue.

TABOR requires local governments to establish Emergency Reserves. These reserves must be at least 3% of Fiscal Year Spending (excluding bonded debt service). Local governments are not allowed to use the emergency reserves to compensate for economic conditions, revenue shortfalls, or salary of benefit increases.

The District's management believes it is in compliance with the provisions of TABOR. However, TABOR is complex and subject to interpretation. Many of the provisions, including the interpretation of how to calculate Fiscal Year Spending limits will require judicial interpretation.

- 15 -


Note 7: Risk Management


Except as provided in the Colorado Governmental Immunity Act, 24-10-101, et seq., CRS, the District may be exposed to various risks ofloss related to torts, theft of, damage to, or destruction of assets; errors or omissions; injuries to agents; and natural disasters. The Colorado Special Districts Property and Liability Pool ("Pool") is an organization created by intergovernmental agreement to provide common liability and casualty insurance coverage to its members at a cost that is considered economically appropriate. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years.

The District pays annual premiums to the Pool for auto, public officials' liability, and property and general liability coverage. In the event aggregated losses incurred by the Pool exceed its amounts recoverable from reinsurance contracts and its accumulated reserves, the District may be called upon to make additional contributions to the Pool on the basis proportionate to other members. Any excess funds which the Pool detennines are not needed for purposes of the Pool may be returned to the members pursuant to a distribution formula.

Note 8: Emergency Interconnect and Easement Agreement

On September 4,2001, Bell Mountain Water Co., L.P., a Colorado limited liability partnership ("BMW"), Bell Mountain Water District Providers, L.L.C., a Colorado limited liability company ("Water Company"), and the District entered into an Emergency Interconnect and Easement Agreement ("Original Agreement"). The Original Agreement granted to BMW and Water Company certain blanket easements (to be superseded by specific easements) for the construction of a proposed water well and water transmission system within the Bell Mountain Ranch Subdivision, in exchange for the District having the right to connect the water distribution system serving the Bell Mountain Ranch community to the proposed Water Company or BMW water system, if and when such proposed water system was ever constructed. The interconnection, however, is limited to use only in the event of an emergency that prevents the water distribution system serving the Bell Mountain Ranch community from supplying water to the residents and properties located within that community.

Silver Peaks Metropolitan District has succeeded to the interest of BMW and Water Company's rights and obligations under the Original Agreement. On May 4, 2004, the Original Agreement was modified by a subsequent Emergency Interconnect and Easement Agreement ("Amended Agreement"), which supersedes in part the Original Agreement. The Amended Agreement expands the purpose for which the District may connect the water system currently serving the Bell Mountain Ranch community to the wells and production system that Silver Peaks Metropolitan District is constructing within the Bell Mountain Ranch Subdivision, from domestic nonirrigation to any use, including commercial, domestic, livestock, fire protection and irrigation.

- 16-



Note 8: Emergency Interconnect and Easement Agreement (continued)

On or about December 29,2003, the District received written notification from the Bell Mountain Ranch Homeowners Association ("HOA ") that the HOA claims the District lacked the authority to enter into both the Original and Amended Agreements. The District has denied the HOA's claims.

Subsequent to December 31,2009, The HOA, the District, BMW and the Water Company as well as Bell Mountain Ranch Associates, LP, the Silver Peaks Metropolitan District and other interested parties have negotiated a complex resolution and settlement of the HOA claims. In addition to entering into a comprehensive settlement agreement, various parties including the District and Silver Peaks entered into an Amended and Restated Emergency Interconnect Agreement, a Ratification and Relinquishment of Easements, and a Supplemental Easement Agreement. These documents taken together clarify the District's emergency interconnect rights and ratify with certain modifications the easement rights of the Silver Peaks Metropolitan District, its successors and assigns for the construction of water wells and water transmission lines within the Bell Mountain Ranch Subdivision.

Note 9: Regional Facilities Agreement

The District and BMR Metropolitan District ("BMR") entered into a Regional Facilities Agreement which provides, among other things, that at such time the 305th residence in the District obtains a certificate of occupancy or December 31, 2008, whichever shall first occur, BMR shall convey all of the assets of the water system to the District for ownership, operation and maintenance. In 2008, the District and BMR entered into a Restated and Amended Regional Facilities Agreement. The Restated and Amended Agreement terminated BMR's obligation to convey all water system assets to the District in exchange for the control of BMR being transferred to the District's Board. The District's five board members now also sit on and constitute the Board of Directors of BMR.

Note 10: Interfund and Operating Transfers

The transfer ofS30,OOO from the General Fund to Capital Projects Fund was to transfer funds for the purpose of funding street repairs.

- 17-



Note 11: Reconciliation of Government-Wide Financial Statements and Fund Financial Statements

The Government Funds Balance Sheet/Statement of Net Assets includes an adjustments column. The adjustments have the following elements:

1) capital improvements used in government activities are not financial resources and, therefore are not reported in the funds; and,

2) long-tenn liabilities such as bonds payable and accrued bond interest payable are not due and payable in the current period and, therefore, are not in the funds.

The Statement of Governmental Fund Revenues. Expenditures, and Changes in Fund Balances/Statement of Activities includes an adjustments column. The adjustments have the following elements:

I) governmental funds report capital outlays as expenditures; however, in the statement of activities, the costs of those assets are allocated over their estimated useful lives as depreciation expense;

2) governmental funds report interest expense on the modified accrual basis; however, interest expense is reported on the full accrual method on the Statement of Activities; and,

3) governmental funds report long-term debt payments as expenditures, however, in the statement of activities, the payment oflong-tenn debt is recorded as a reduction oflongterm liabilities.

- 18-

APPENDIXB

ECONOMIC AND DEMOGRAPIDC INFORMATION

APPENDIXB

ECONOMIC AND DEMOGRAPIDC INFORMATION

The following information is provided to give prospective investors information concerning selected economic and demographic conditions existing in the general area within which the District is located. Inclusion of the information regarding the general area in which the District is located does not imply that these conditions presently exist within the District. The information presented below has been obtained from the sources indicated and represent the most current information available from such sources. Because certain of the information is released only after a significant amount of time has passed since the time period to which such information applies, such information may not be indicative of economic and demographic conditions as they currently exist or conditions that may be experienced in the near future. In addition, other economic and demographic information not presented herein may be available concerning the area in which the District is located and a prospective investor may want to review such other information prior to making his or her investment decision. The following information is not to be relied upon as a representation or guarantee of the District or its officers, employees or advisors.

Population

The following table sets forth population statistics for the County and the Denver metropolitan area ("DMA") which includes the counties of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, and Jefferson, and the State.

Population Douglas County DMA Colorado

Year Total Percent Total Percent Total Percent Population Change Population Change Population Change

1960 4,816 859,945 1,753,947 1970 8,407 74.6% 1,106,384 28.7% 2,209,596 26.0% 1980 25,153 199.2 1,618,461 46.3 2,889,735 30.8 1990 60,391 140.1 1,848,319 14.2 3,294,394 14.0 2000 175,766 191.1 2,400,570 29.9 4,301,261 30.6 2008 1 283,951 61.6 2,788,765 16.2 5,011,390 16.5

I Estimate. Source: United States Department of Commerce, Bureau of the Census and Colorado Division of Local Government

Housing Stock

According to the U.S. Census, in 2000 there were 63,333 housing units in the County and in 2008 there were 103,680 housing units in the County for a 63.7% increase over that 8 year period.

Income

The following tables set forth historical median household income, the percentage of households by classification of household income and per capita personal income levels.

Douglas County Colorado United States

2005

$92,975 55,698 49,747

Median Household Income

2006

$105,424 58,522 51,546

2007

$111,256 60,976 53,154

Source: ERSI - Sourcebook of County Demographics 2005-2009

Percent of Households by

2008

$115,800 62,469 54,749

2009

$116,819 62,597 54,719

Household Income Distribution-2009 1

Less Than $25,000- $50,000-$25,000 $49,999 $99,999

Douglas County 3.8% 7.1% 32.1% Colorado 15.5 22.5 37.5 United States 20.9 24.4 35.3

1 Totals may not equal 100% due to rounding. Source: ERSI - Sourcebook of County Demographics -2009

Per Capita Personal Income

Douglas County Colorado United States

2004

$42,693 36,652 33,881

2005

$47,838 38,555 35,424

2006

$52,562 40,899 37,698

Source: United States Department of Commerce, Bureau of Economic Analysis

School Enrollment

$100,000- $150,000 $149,999

23.3% 15.8 11.7

2007

$57,390 42,449 39,392

or more

33.7% 8.6 7.6

2008

$60,361 43,021 40,166

The following table presents a five-year history of school enrollment for Douglas County School District No. RE-l, the school district serving the District.

School Enrollment Douglas County School District RE-l

Year

2005/2006 2006/2007 2007/2008 2008/2009 2009/2010

Enrollment

48,043 50,370 52,983 58,723 59,932

Source: Colorado Department of Education

B-2

Percent Change

4.8% 5.2

10.8 2.1

Building Activity

According to the Douglas County planning department, the majority of construction activity within the County is residential. The primary development is single family residences. Set forth in the following tables are historical building permit activity for the County.

Building Permit Activity in Douglas County

CommerciallIndustrial Single-Family Multi-Family Year Permits Valuation

2005 75 $ 38,820,882 2006 64 72,778,897 2007 73 121,888,426 2008 49 56,768,828 2009 69 34,388,076 2010 1 14 19,900,928

1 Permits issued through April 30, 2010. Source: Douglas County Building Division

Foreclosure Activity

Permits

1,642 897 727 527 419

84

Valuation Permits Valuation

$521,633,926 1,121 $150,203,457 303,813,698 559 154,213,779 248,309,345 358 109,544,717 160,106,586 93 66,820,793 81,660,210 51 8,829,186 27,143,901 33 6,851,885

The following table sets forth foreclosure activity in the County over the past five years.

Recent History of Foreclosures in Douglas County

Year Foreclosures Filed

2005 912 2006 1,258 2007 1,865 2008 2,180 2009 2,680 2010 1 655

1 Foreclosures filed through March 30, 2010. Source: Douglas County Public Trustee's Office

B-3

Percent Change

37.9% 48.3 16.9 22.9

Retail Sales

The retail trade sector employs a large portion of the County's work force and is important to the area's economy. The following table sets forth recent retail sales figures for the County and the State.

Retail Sales

Percent Percent Year Douglas County Change Colorado Change

2004 $5,047,110,408 $114,280,780,304 2005 5,742,564,897 13.8% 122,907,090,008 7.6% 2006 6,019,551,173 4.8 133,531,307,352 8.6 2007 6,517,181,125 8.3 148,673,215,731 11.3 2008 6,514,753,477 (0.0) 152,747,684,188 2.7 2009 I 4,325,973,386 95,895,752,607

1 Retail sales through September 30,2009. Source: State of Colorado, Department of Revenue, Sales Tax Statistics, 2004-2009

Employment

The following tables set forth most recent historical labor force estimates for the County, Denver-Aurora MSA and the State, and employment statistics by industry in the County.

Labor Force Estimates

Denver-Aurora-Douglas County Broomfield MSA

Year Labor Percent Labor Percent Force Unemployed Force Unemployed

2005 136,780 3.6% 1,325,669 5.3% 2006 152,753 3.6 1,353,621 4.4 2007 155,898 3.2 1,379,211 3.9 2008 159,462 4.2 1,399,960 5.0 2009 158,548 6.6 1,381,284 7.9 2010 I 154,002 6.6 1,347,457 8.4

I Labor force estimate through February 28,2010. Source: State of Colorado, Division of Employment and Training

B-4

Colorado Labor Force

2,547,895 2,651,378 2,705,557 2,730,447 2,701,026 2,637,389

Percent Unemployed

5.0% 4.3 3.8 4.9 7.7 8.3

Total Business Establishments and Employment-Douglas County

Second Quarter 2008 Second Quarter 2009 Quarterly Cbange Average Average Average

Industry J Units Employment Units Employment Units Employment

Agriculture, Forestry, Fishing and Hunting 40 126 35 119 (5) (7) Mining 40 312 40 316 0 4 Utilities 2

Construction 1,147 8,880 1,066 6,859 (81) (2,021) Manufacturing 151 2,468 148 2,246 (3) (222) Wholesale Trade 1,110 3,225 1,099 3,192 (11) (33) Retail Trade 822 15,928 799 14,863 (23) (1,065) Transportation and Warehousing 90 819 88 689 (2) (130) Information 210 5,940 194 5,511 (16) (429) Finance and Insurance 709 5,619 685 5,417 (24) (202) Real Estate and Rental and Leasing 525 1,171 491 1,118 (34) (53) Professional and Technical Services 2,005 7,937 2,047 8,003 42 66 Management of Companies and Enterprises 116 2,484 120 2,451 4 (33) Administrative and Waste Services 573 3,617 573 3,370 0 (247) Educational Services 156 1,141 155 1,346 (1) 205 Health Care and Social Assistance 567 6,526 631 7,062 64 536 Arts, Entertainment and Recreation 127 3,347 114 3,446 (13) 99 Accommodation and Food Services 462 10,053 460 9,825 (2) (228) Other Services, Except Public Administration 701 2,897 690 2,866 (II) (31) Non-classifiable 19 17 25 35 6 18 Government --22 11,614 --22 11,715 _0 ---1Q!

Total M.ll ~ 2.m ~ ~ ~

J Information provided herein reflects only those employers who are subject to state unemployment insurance law. 2 Information suppressed due to confidentiality. Source: Colorado Department of Labor and Employment, Labor Market Information

The following table sets forth selected major employers in Denver metropolitan area. No independent investigation has been made of and there can be no representation as to the stability or financial condition of the entities listed below, or the likelihood that they will maintain their status as major employers in the DMA.

Selected Major Employers in the Denver Metropolitan Area 1

Firm

Federal Government State of Colorado Wal-Mart Stores Inc. University of Colorado System City & County of Denver Centura Health Jefferson County Public Schools Denver Public Schools Safeway, Inc. King Soopers, Inc.

1 As of May 2009.

Product or Service

Federal Government State Government Retail Discount Variety and Grocery Health Care Services City Government Health Care Services Education Education Retail Grocery Retail Grocery

Source: Denver Business Journal, May 29-June 4, 2009

B-5

Estimated Number of Employees

37,302 33,700 25,959 14,790 13,000 13,000 12,840 12,580 10,698 9,676


APPENDIXC

FORM OF BOND COUNSEL OPINION

APPENDIXC

FORM OF BOND COUNSEL OPINION

__ ,2010

Consolidated Bell Mountain Ranch Metropolitan District 390 Union Boulevard, Suite 400 Denver, Colorado 80228

Ladies and Gentlemen:

$14,710,000 Consolidated Bell Mountain Ranch Metropolitan District

Douglas County, Colorado General Obligation Limited Tax Refunding Bonds

Series 2010

We have acted as bond counsel to Consolidated Bell Mountain Ranch Metropolitan District, Douglas County, Colorado (the "District"), in connection with its issuance of $14,710,000 General Obligation Limited Tax Refunding Bonds, Series 2010 (the "Bonds"). In such capacity, we have examined the District's certified proceedings and such other documents and such law of the State of Colorado and of the United States of America as we have deemed necessary to render this opinion letter.

The Bonds are issued and secured pursuant to an authorizing resolution of the Board of Directors ofthe District adopted on May 4, 2010 (the "Bond Resolution"), and pursuant to that certain Indenture of Trust dated as of June 1, 2010 (the "Indenture"), between the District and UMB Bank, n.a., as trustee (the "Trustee"). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them by the Indenture.

Regarding questions of fact material to our opinions, we have relied upon the District's certified proceedings and other representations and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation.

Based upon such examination, it is our opinion as bond counsel that:

1. The Bonds are valid and binding limited tax general obligations of the District, payable solely from the Pledged Revenue and from funds and accounts pledged therefor under the Indenture.

2. All of the taxable property of the District is subject to the levy of an ad valorem tax, in the amount of the Required Mill Levy, for the purpose of paying the Bonds.

3. Assuming due authorization, execution, and delivery by the Trustee, the Indenture constitutes a valid and binding obligation ofthe District.

4. The Indenture creates a valid lien on the Pledged Revenue and on the funds and accounts pledged therein for the security of the Bonds, subject to the provisions, conditions, and limitations

contained in the Indenture. We express no opinion regarding the priority of the lien on the Pledged Revenue or on the funds and accounts created by the Indenture.

5. Interest on the Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Tax Code"), interest on the Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the adjusted current earnings adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations, and interest on the Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect as of the date hereof. The Bonds have been designated by the District as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Tax Code. The opinions expressed in this paragraph assume continuous compliance with the covenants and representations contained in the District's certified proceedings and in certain other documents and certain other certifications furnished to us.

The opinions expressed in this opinion letter are subject to the following:

(a) The obligations of the District pursuant to the Bonds, the Bond Resolution, and the Indenture are subject to the application of equitable principles, to the reasonable exercise in the future by the State of Colorado and its governmental bodies of the police power inherent in the sovereignty of the State of Colorado, and to the exercise by the United States of America of the powers delegated to it by the Federal Constitution, including without limitation, bankruptcy powers.

(b) We understand that Assured Guaranty Municipal Corp. (formerly known as Financial Security Assurance Inc.), a New York stock insurance company, has issued a municipal bond insurance policy relating to the Bonds. We express no opinion as to the validity or enforceability of such policy or the security afforded thereby.

(c) In expressing the opinions above, we are relying, in part, on a report of independent certified public accountants verifying the mathematical computations of the adequacy of the maturing principal amounts of and interest on the investments and moneys included in the Escrow Account to pay when due, at stated maturity or upon prior redemption, all principal of, any prior redemption premiums, and interest on the Refunded Bonds.

(d) In this opinion letter issued in our capacity as bond counsel, we are opining only upon those matters set forth herein, and we are not passing upon the accuracy, adequacy, or completeness of the Official Statement relating to the Bonds or any other statements made in connection with any offer or sale of the Bonds or upon any federal or state tax consequences arising from the receipt or accrual of interest on or the ownership or disposition of the Bonds, except those specifically addressed herein.

This opinion letter is issued as of the date hereof and we assume no obligation to revise or supplement this opinion letter to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.

C-2

APPENDIXD

BOOK-ENTRY -ONLY SYSTEM

APPENDIXD

BOOK-ENTRY -ONLY SYSTEM

The information in this section concerning The Depository Trust Company (HDTC'') New York, New York and DTC's book-entry-only system has been obtained from DTC, and the District and the Underwriter take no responsibility for the accuracy thereof

DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for the Bonds, as set forth on the cover page hereof, in the aggregate principal amount of each maturity of the Bonds and deposited with DTC.

DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC' s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation & Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book entry-system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative ofDTC. The deposit of Bonds with DTC and their registration

in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which mayor may not be the Beneficial Owners. The Direct and Indirect Participants remain responsible for keeping accounts of their holdings on behalf oftheir customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices will be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the Bonds are to be made to Cede & Co., or such other nominee as may be requested by an authorized representative ofDTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the District or Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee or District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other name as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to Tender or Remarketing Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to Tender or Remarketing Agent. The requirement for physical delivery of the Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC' s records and followed by a book-entry credit for tendered Bonds to Tender or Remarketing Agent's DTC account. .

D-2

DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.

The District may decide to discontinue use of the system of book entry only transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered to DTC.

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APPENDIXE

FORM OF CONTINUING DISCLOSURE UNDERTAKING

APPENDIXE

FORM OF CONTINUING DISCLOSURE UNDERTAKING

This Continuing Disclosure Undertaking (the "Undertaking") is executed and delivered as of June 8, 2010 by Consolidated Bell Mountain Ranch Metropolitan District, Douglas County, Colorado (the "District").

Section 1. Purpose. This Undertaking is being executed and delivered by the District in connection with the issuance of that certain issue of its $14,710,000 General Obligation Refunding Bonds, Series 2010, dated as of the date of delivery (the "Bonds"). The Bonds are issued pursuant to an approving resolution of the District finally adopted by the District Board prior to the date of issuance of the Bonds (the "Bond Resolution"). Capitalized terms used but not otherwise defined herein shall have the meanings assigned thereto in the Bond Resolution. This Undertaking is intended to facilitate compliance with Section (b)(5) of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (17 C.F.R. § 240.15c2-12) (the "Rule"), and to assist the Underwriter, as a Participating Underwriter under the Rule, to comply with the Rule.

Section 2. Definitions. The following capitalized terms shall have the following meanings for purposes of this Undertaking:

"Annual Financial Information" means the financial information or operating data with respect to the District, provided at least annually, of the type included in the following tables in the Final Official Statement: Tables I, II, III, IV, X and XI. Any financial statements included in the Annual Financial Information shall be prepared in accordance with generally accepted accounting principles ("GAAP") and the Governmental Accounting Standards Board ("GASB"). Such financial statements may, but are not required to be, Audited Financial Statements.

"Audited Financial Statements" means the District's annual financial statements, prepared in accordance with GAAP for governmental units as prescribed by GASB, which financial statements shall have been audited by such auditor as shall be then required or permitted by the laws of the State of Colorado.

"EMMA" means the MSRB's Electronic Municipal Market Access System, with a portal at http://emma.msrb.org.

"Final Official Statement" means the Official Statement with respect to the Bonds dated the date of adoption of the Bond Resolution.

"Material Event" means any of the following events, if material, with respect to the Bonds:

(a) principal and interest payment delinquencies; (b) nonpayment related defaults; (c) unscheduled draws on debt service reserves reflecting financial difficulties; (d) unscheduled draws on credit enhancements reflecting financial difficulties; ( e) substitution of credit or liquidity providers, or their failure to perform; (f) adverse tax opinions or events affecting the tax exempt status of the Bonds; (g) modifications to rights of holders of Bonds; (h) bond calls (other than mandatory sinking fund redemptions); (i) defeasances;

G) release, substitution or sale of property securing repayment of the Bonds; and (k) rating changes.

"Material Event Notice" means written or electronic notice of a Material Event.

"MSRB" means the Municipal Securities Rulemaking Board. The current address of the MSRB is Suite 600, 1900 Duke Street, Alexandria, Virginia 22314; Facsimile: (703) 797-6700.

Section 3. Information To Be Provided. The District undertakes to provide the following information as provided herein:

(a) Annual Financial Information, which information may, at the option of the District, be included in the Audited Financial Statements provided pursuant to clause (b) below or be provided separately therefrom;

(b) Audited Financial Statements, if any; and

(c) Material Event Notices.

Section 4. Procedures for Providing Information.

(a) Annual Financial Information. While any Bonds are Outstanding, the District shall provide the Annual Financial Information on or before December 31, 2010 and December 31 of each subsequent year (the "Report Date") to EMMA. If the District changes its fiscal year, it may change the Report Date to any date within 180 days of the end of the District's new fiscal year by written notice of the change of fiscal year and change in Report Date to EMMA. It shall be sufficient if the District provides to EMMA any or all of the District's Annual Financial Information by specific reference to (i) documents previously provided to EMMA; or (ii) documents filed with the Securities and Exchange Commission or, if such a document is a final official statement within the meaning of the Rule, available from the MSRB.

(b) Audited Financial Statements. If not provided as part of the Annual Financial Information provided pursuant to "-Annual Financial Information" above, the District shall provide the Audited Financial Statements to EMMA, when and if such Audited Financial Statements are available while any Bonds are Outstanding.

(c) Material Events.

(i) If a Material Event occurs while any Bonds are Outstanding, the District shall, in a timely manner, provide a Material Event Notice to EMMA, which Material Event Notice shall be captioned "Material Event Notice," shall prominently state the date, title and CUSIP numbers of the Bonds, and shall describe the Material Event.

(ii) For purposes of this Undertaking, a draw on the fund held by the Trustee under the Indenture known and referred to as the "Surplus Fund" shall not constitute a Material Event. The Surplus Fund is not a debt service reserve fund and, more importantly, a draw on the Surplus Fund would not be a reflection of financial difficulties of the District. The Surplus Fund is established primarily for the purpose of managing a generally consistent mill levy rate in each year of debt service on the Bonds which, among other things, allows both the taxpayers and the District to budget accordingly. In years where the levy rate produces excess tax revenue not needed for debt service, such

E-2

moneys are retained in the Surplus Fund for use in years where the mill levy rate does not produce the same level of tax revenue.

(d) Notices of Failure To Provide Annual Financial Information. The District shall provide in a timely manner to EMMA, notice of any failure by the District while any Bonds are Outstanding to provide to EMMA, District's Annual Financial Information on or before the Report Date.

(e) Means of Transmiuing Information. Unless otherwise required by law and subject to technical and economic feasibility, the District shall employ such methods of information transmission as shall be requested or recommended by the designated recipients of the information to be received pursuant to this Undertaking.

Section 5. Termination. The obligations of the District under this Undertaking shall terminate immediately once the Bonds no longer are Outstanding. This Undertaking, or any provision hereof, shall be null and void in the event that the District delivers to EMMA, an opinion of Bond Counsel to the effect that those portions of the Rule which require this Undertaking, or any such provision, are invalid, have been repealed retroactively or otherwise do not apply to the Bonds; provided that the District shall have provided notice of such delivery and the cancellation of this Undertaking or any provision hereof to EMMA.

Section 6. Amendment. Notwithstanding any other provlSlon of this Undertaking, this Undertaking may be amended by the District, without the consent of the holders of the Bonds, but only upon the delivery by the District to EMMA, of the proposed amendment and an opinion of Bond Counsel to the effect that such amendment, and giving effect thereto, will not adversely affect the compliance of this Undertaking and by the District with the Rule and that such amendment complies with this Section. Any such amendment shall satisfy, unless otherwise permitted by the Rule, the following conditions:

(a) The amendment may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law or change in the identity, nature or status of the District, or type of business conducted.

(b) This Undertaking, as amended, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances.

(c) The amendment does not materially impair the interest of holders of the Bonds, as determined by Bond Counsel, or by approving vote of holders of the Bonds pursuant to the terms of the Bond Resolution at the time of the amendment.

The initial Annual Financial Information provided by the District hereto after the amendment shall explain, in narrative form, the reasons for the amendment and the effect of the change in the type of operating data or financial information being provided.

Section 7. No Event of Default. Any failure by the District to perform in accordance with this Undertaking shall not constitute an Event of Default under the Bond Resolution, and the rights and remedies provided by the Bond Resolution upon the occurrence of an Event of Default shall not apply to any such failure. If the District fails to comply with this Undertaking, any Owner of a Bond may take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the District to comply with its obligations hereunder.

E-3

Section 8. Governing Law. This Undertaking shall be governed by and construed in accordance with the laws of the State of Colorado; provided that to the extent this Undertaking addresses matters of federal securities laws, including the Rule, this Undertaking shall be construed in accordance with such federal securities laws and official interpretations thereof.

Section 9. Beneficiaries. This Undertaking shall inure solely to the benefit of the Underwriter and the holders from time to time of the Bonds, and shall create no rights in any other person or entity.

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APPENDIXF

SPECIMEN MUNCIPAL BOND INSURANCE POLICY

f\sSURED GUARANTY-

MUNICIPAL

ISSUER:

BONDS: $ in aggregate principal amount of

MUNICIPAL BOND INSURANCE POLICY

Policy No.: -N

Effective Date:

Premium: $

ASSURED GUARANTY MUNICIPAL CORP:(FORMERI.;~: KNOWN ASlEINANCIA[i~~~!JRITY ASSURANCE INC.) ("AGM"), for consideration>(r~ceived, > hereby. UNCONDITIONALLYl;t.ND IRREVOCABLY agrees to pay to the trustee (the "Trustee';) or payin~f~~en~(the "Paying Agent") (asset forth in the documentation providing for thej~~ance ofa(1Q~ecuringtljrBohds) for the,Bonds, for the benefit of the Owners or, at the election of'AQ~,.9irectly taeabI:JOwner,s\-!~ject only to ttiet~pns of this Policy (which includes each endorsem~ hereto)~tl;l~t portionoft~~principal<9fand interest ~;ttte Bonds that shall become Due for Payment bl~t~fiall be unp~id;!)yreaSdtlofN9f1paymefifQY the Issl.ler.>

On the later of the c!~~,;oq>\Nhi~~~;~~Qh pri~d;:fT~n~";i~t~te~~~~9mes't5Uij •• ;f9r;~ayment or the Business Day next following ttleBuSil1e.ss Dayeq whichA(3Mstlall~~ve re(;;~ived N9ilee of Nonpayment, AGM will disburse to or for th~i\:)enefitof~ach owqer of a Bd"d ttie\1~~amou~trRfprincipal of and interest on the Bond that is then Due fer Payment but is then;unpaidb~reason9f Non~'yment by the Issuer, but only upon receipt bYA(3M, in a,form reasonably satfsfactory to 'it,. of (a),:evidence of the Owner's right to receive payment qf!l;leprincip~!>or interest then Due;Jor Payment ano)(b) evidence, including any appropriate instr~rn~nts of "assignment, that all of the OWr!~r's right~>&lWjth respect to payment of such principal or interestti"lat is Due for Payrnent shall thereupon ves! in AGM. A Notice of Nonpayment will be deemed reqe!¥~d on a given Busines$,Ii>~y if it is receiyed pridfJ9 1 :00 p.m. (New York time) on such Business>~ay;()therwise,jt willbe deell1~d receivedOt;l the'ryext Business Day. If any Notice of Nonpaymentreceived by AQ~jsinqomplete;/it shall be d~med not to have been received by AGM for purposes of the preceding se~,nceand AGM~p:~1I promptly so advise the Trustee, Paying Agent or OWner,as appr9priate,>Who may submit an amenc!~~~~ce of Nonpayment. Upon disbursement in r~speCtofa Bondt4~GM sl"1~11 becomethe own~r of the Bond, any appurtenant coupon to the Bond or right to,r~ceipt of payment of pri"cipal of orlq!erest on!he Bond and shall be fully subrogated to the rights of the Owner, including the €>W"er's right to re~ive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to ther1;ru.~ee or Paying Agent for the benefit of the Owners shall, to the extentt~ereof, discharge the obligation ofAGM under this Policy .

.. Except to the. extent expressly modified by an endorsement hereto, the following terms shall have

the meanings specified for all purp~~es of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day onwhich banking institutions in the State of New York or the Insurer's Eiscal Agent are authorized o~.required by law or executive order to remain closed. "Due for Payment" means (a) when refernngJo the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall liave'peen duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the

Page 2 of2 Policy No. -N

United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail,,:fiom an Owner, the Trustee or the Paying Agent to AGM which notice shall specify (a) the person or entitYcm~king the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount becam~%~ue for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpaym~nt, is entitled under the terms of such Bond to payment thereof, except that "Owner" shalllgQI~tf:lclude the I$~uer or any person or entity whose direct or indirect obligation constitutes the underlying secorttY'Vfor\tne Bond"~ ••

\;'~~~~~\' : '-; ,,~~~~:3'~~f~K~~t:f~>, ::' :,; " '~'t~:, AGM may appoint a fiscal agent (the "lnsure(~~tJS'~Ni\gent")"~fpr lp~~S of~!his Policy by

giving written notice to the Trustee and the Paying Agent~specifying the narrte.landnotip:t .• ad~ress of the Insurer's Fiscal.Agent. From .and after.the date of r~ipt of'~~eh notice by tliel:rrust~e\··a'i!!i!.'~~~ Paying Agent, (a) copies of all notices reqUired to be det,¥ered tO~S3Mlp~rsuantto> this POrrCY~1~~~1I be simultaneously delivered to the Insurer's Fiscal Agent a~pto AGM"~~~ s~~I'.not be d~~med receivea;~ntil received by both and (b) all payments required to be mad~l~y AGM undEilrttlts.policy maybe made direCtly by AGM or by the Insurer's Fiscal Agent on~.nalf of AGM,ll~~. Insurer'~FiscaIAgent is th~.agent of AGM only and the Insurer's Fiscal Agent shall.in noleY~nt be liableltoa~yOwner fOr any act of the lri~~~r's Fiscal Agent or any failure of AGM to deposi!iOr caus~to1;~e depdSited1.$ufficient fi.mds to make payments due under this Policy.

To the fullest extent~rmj.~ed~~~pPlicablel~w, A~'~~e~~lnAt to as~~1!;;~~~t1herebY waives, only for the benefit of each ~ner,all.~!ghts tWI1~ther bYCountetRlai~, setott()r otherwise) and defenses (including, without limitation,!he defehse of fra~d), wheth~r acqJ!!ir:~ld by 51.11>££gation, assignment or otherwise, to the extent that s~h rights and defensEa~ may belavaiTabJ~.lto AGfl/Ho avoid payment of its obligations under this!'?()licy in aCcordance with the expf~.ss proviSic>ps of tHis Policy.

This Policy sets forth infull the undertaking ofj.\.GM, and shall not be modified, altered or affected by any other ~greement or instrument, including any modification or amendment thereto. Except to the extent e)(pre!)sly mo~ified by an endorsement hereto, (a) anYPfemium paid in respect of this Policy is nonrefundC!ble for.any reason whatsoeveriincluding paym~nt, or provision being made for payment, of the Bonds priorto maturity and (b).Jhis Policy.may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERllY/CASUAL llY INSURANCE.Sl=CURlllY FUND SPECIFIED IN ARTICLE 76 OFTHE NEWYORK INSURANCE; LAW.

•. In witness;.)Nhet~of, ASSt.:iRl=D GUA,RANTY MUNICIPAL CORP. (FORMERLY KNOWN AS FINj.\./'.ICIAL SECURlllY.i\SSURANCE lt1jC.) has'l'lcsused this Policy to be executed on its behalf by its Authonzed Officer. . ..'

Form 500NY (5/90)

ASSURED GUARANTY MUNICIPAL CORP. (FORMERLY KNOWN AS FINANCIAL SECURITY ASSURANCE INC.)

By ______ ~~~~~------___ Authorized Officer

(212) 826-01 00