DIAMONDHEAD POA

FINANCIAL STATEMENTS, OCTOBER, 2007

John List, CFO

For the month of October, your Association had an operating loss of $43,708 and for the ten months ended October 31, $305,824. The operating results for the year to date are $199,097 worse than budget primarily due to generating less income then planned. This resulted from a decrease in the number of properties sold this year and a drop in building permits issued. The Country Club also experienced lower sales volumes than budgeted. Fortunately we benefited from a non-recurring insurance settlement of $400,000 that brought our final net income for the ten months to $94,176.

The good news is that after almost two years of the insurance company denying our claim for Katrina damages to the Golf Course, the court ordered mediation of our claim resulted in a $400,000 settlement. While this completes our recovery of Katrina insurance funds, we are continuing with projects to restore the amenities to better than pre-storm condition. The currently pending projects either underway or planned for 2008 include: Rebuilding Tennis World at the East Rec Sports Complex, building concrete cart paths and replacing greens at the Cardinal Golf Course with new “Champion” grass, replacing piers 1 and 2 along with the boat ramp and fuel pumps at the Marina and continuing with the project of identifying the best replacement for the old Yacht Club to meet the needs of all our members.

You have now received your annual letter regarding membership assessment dues for 2008. They have increased $5 to $70 per month or $800 for those who prefer to pay annually. This $5 increase will be used exclusively for paving roads. For 2008, the planned road paving budget is $676,440 or $10 per member monthly. Our goal is to repave 10% of our roads annually and with crude oil approaching $100 per barrel that becomes more expensive each year. $21 of your monthly assessment is a capital contribution to be used not only for road paving but also for other capital requirements to maintain the POA’s property. The tax laws allow us to defer this money tax free for planned capital projects.