DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS
PAGE 25

ARTICLE V (cont.)

5.2.  Maintenance Funds of Association (cont.).
may establish to the extent necessary under the Declaration's provisions. Nothing contained herein precludes the establishment of additional Maintenance Funds by the Association, so long as the amounts assessed, deposited into, and disbursed from any such Fund are designated for purposes authorized by this Declaration.

5.3.  Purpose of Assessments.
The assessments shall be used exclusively to (a) promote the Owners' recreation, health, safety and welfare, (b) operate, replace, improve and maintain the Common Property, and (c) discharge any other Association obligations under the Declaration. All amounts deposited into the Maintenance Funds must be used solely for the common benefit of all of the Owners for purposes authorized by this Declaration. Disbursements from the Operating Fund shall be made by the Board for such purposes as are necessary for the discharge of its responsibilities herein for the common benefit of all of the Owners, other than those purposes for which disbursements from the Reserve Fund are to be used. Disbursements from the Reserve Fund shall be made by the Board only for the purposes specified in this Article V and in Section 1365.5(c) of the California Civil Code, as amended. If the Association decides to use or transfer reserve funds to pay for litigation, the Association must notify its Members of the decision the next available mailing. Such notice shall provide an explanation of why the litigation is being initiated or defended, why operating funds cannot be used, how and when the reserve funds will be replaced, and a proposed budget for the litigation. The notice must state that the Members have a right to review an accounting for the litigation which will be available at the Association's office. The accounting shall be updated monthly. Association assessments or funds may not be used to abate any annoyance or nuisance emanating from outside the boundaries of the Property or in support of Federal, State or local political activities intended to influence governmental action affecting areas outside the boundaries of the Property (e.g., endorsement or support of political candidates, legislative or administrative actions by any governmental agency). Annual Assessments shall only be used to satisfy Common Expenses as provided herein and in the Bylaws.

5.4.  Limitations on Annual Assessment Increases.
The Board shall levy Annual Assessments as follows:

(a)  Maximum Authorized Annual Assessment for Initial Year of Operations.  Until the first day of the Fiscal Year immediately following the Fiscal Year in which Annual Assessments commence, the Board may levy an Annual Assessment per Condominium in an amount which exceeds one hundred twenty percent (120%) of the amount of Annual Assessments disclosed for the Property in the most current Budget filed with and approved by DRE at the time Annual Assessments commence only if the Board first obtains the approval of Members casting a majority of votes at a meeting or election of the Association in which more than fifty percent (50%) of the Members are represented ("Increase Election"). Notwithstanding the foregoing, this Section does not limit Annual Assessment increases necessary for addressing an "Emergency Situation" as defined in Section 5.4(e).

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