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Home My WebLink AboutPACKET Town Board 2002-01-22Prepared 01/17 /02 The Mission of the Town of Estes Park is to plan and provide reliable, high- value services for our citizens, visitors, and employees. We take great pride ~ ensuring and enhaihcing the quality of life in our community by being good stewards of public resources and ouf natural setting. BOARD OF TRUSTEES - TOWN OF ESTES PARK Tuesday, January 22,2002 7:00 p.m. AGENDA Acknowledgement: Rebecca van Deutekom, Deputy Town Clerk - Receipt of Certified Municipal Clerk designation. PUBLIC COMMENT TOWN BOARD COMMENTS 1. CONSENT AGENDA (Approval of): 1. Town Board Minutes dated January 8, 2002 and Study Session January 15, 2002. 2. Bills. 3. Committee Minutes: A. Light & Power, January 10, 2002: 1. Policy & Procedure Manual - Revised B. Public Works Committee, January 17, 2002: 1. 2001 Water Loop Project Change Order, $22,458.00, Kitchen and Co. 2. Causeway Underpass/Trail Project Construction Management Scope of Services, $53,900.00, Cornerstone Engineering. 3. Board Room Project Change Orders, $13,296.00, Thorn Associates. 4. Wildfire Ridge Annexation/Development Agreement - Request 60- day time extension from 2/06/02 to 04/09/02. 2. ACTION ITEMS: 1. INVESTMENT MANAGER - APPROVAL - Finance Officer Brandjord and MBIA Municipal Investors Service Corp.. 1 Continued on reverse side 2. FALL RIVER TRAIL PROJECT - PRELIMINARY REPORT. Mike Todd/Cornerstone Engineering. 3. REGULAR MUNICIPAL ELECTION, APRIL 2,2002. A. Resolution #3-02 - -Setting election and designation Town Clerk as Election Official. B. Agreement with Larimer County for Rental of Election Equipment. 4. TOWN ADMINISTRATOR'S REPORT. NOTE: The Town Board reserves the right to consider other appropriate items not available at the time the agenda was prepared. 2 Town Clerk's Office Memo To: Honorable Mayor Baudek Board of Trustees Town Administrator Widmer From: Vickie O'Connor, Town Clerk Date: January 18, 2002 Subject: Certified Municipal Clerk Designation Background. Rebecca van Deutekom, Deputy Town Clerk, was appointed in October, 1998. In July, 1999, she entered the 3-yr. Municipal Clerk's Institute Program at CU in Boulder. This accredited program is sponsored by the International Institute of Municipal Clerks (11MC) and hosted by the Colorado Municipal Clerks Association. 11MC grants the CMC (Certified Municipal Clerk) designation only to those municipal clerks who complete demanding education requirements, and who have a record of significant contributions to their local government, community and state. Rebecca earned her (CMC) designation this past November. On behalf of lIMC, CMCA and the Town of Estes Park, I am honored to endorse the conferring of CMC to Rebecca van Deutekom. 5*~m International Institute of Municipal Clerks //34/577/~L I 1 4~~ Los Angeles County, California 1212 N. San Dimas Canyon Rd. â€¢ San Dimas, California 91773 Phone (909) 592-IIMC â€¢ Messages (800) 251-1639 â€¢ Fax (909) 592-1555 E-mail: hq@time.com November 30, 2001 - BOARD OF DIRECTORS-2001-2002 80 r:= ring REC rn 1 R , :7 \ 154 R .- 1 P='. 11 %,. f - 'n. i , Executive Committee 1 11 1Â·- - '64 Li L L~ 2~7Â·1~ U# RANErrE LARSEN, MMC 41)'r- /1/ 2-f President City Secretary Garland. Texas Iii 'f' ~[jj< DEC 7 2301 ~ ~ PIERRE PAGE. CMC 1 st Vice President Honorable John Baudek 1 2-0, ' 1-1 4 Director ef Secretariat Sen,kes/City Clerk Ottawa. Ontario. Canada Mayor JEAN M. BAILEY. CMC Town of Estes Park 2nd Vice President City Clerk P.O. Box 1200 Rocky Mount. North Carolina SUSAN A. LAMBLACK. MMC Estes Park, Colorado 80517 Immediate Past Preskient City Secretary/Treasurer Newark. Delaware Dear Mayor Baudek: Directors-2002 Expiration ELIZABETH H. KISS, MMC Municipal Clerk East Brunswick Township, New Jersew Rebecca Van Deutekom, Deputy Town Clerk of the Town of Estes Park, CINDY GREENWOOD, CMC Colorado, has earned the designation of Certified Municipal Clerk, which is SE Deputy City Clerk West Memphis. Arkansas awarded by the International Institute of Municipal Clerks, Inc. EVELYN L. WOULFE, CMC City Clerk Bloomington. Minnesota 11MC grants the CMC designation only to those municipal clerks who MARY E. REED, CMC City Clerk/Assistant City Manager complete demanding education requirements; and who have a record of Parsons. Kansas LORRAINE GALLEGOS, CMC significant contributions. to their local government, their community and Town Clerk - Taos. New Mexico state. EVELYN L. ORTH, CMC Director Council - Adminestrative Services/Regional Clerk Regional Municipality qf Waterloo The International Institute of Municipal Clerks, founded in 1947, has 10,300 Kitchener Ontario. Canada members throughout the United States, Canada and 15 other countries, GYSBERT RErTZ HOFMEYR Director Coiporate Services and the mission of this global non-profit corporation is to enhance the City qf Capetown. Tygerberg. South Africa Directors-2003 Expiration education opportunities and professional development of its diverse PATRICIA P. ULATOWSKI, MMC membership. Town Clerk - Strafford. Connecticut ELIZABETH WEST FORTNER, CMC City Clerk - Clinton. North Caroltna In light of the speed and drastic nature of change these days, lifelong HARRELL GRANBERRY, CMC City Clerk - Yazoo City, Mississippi learning is not only desirable, it is necessary for all in local government to MARILYN CHITTICK, CMC Clerk/Treasurer - Frankfort. Indiana keep pace with growing demands and changing needs of the citizens we JANE A. WILMS, MMC serve. Your city can take immense pride in Rebecca's educational Village Clerk - Germantown, Wisconsin SANDRA L. WILLIAMS, CMC accomplishments and achievement of this milestone. City Clerk - Branson. Missouri PAMYLA NIGLIAZZO, MMC City Clerk - Napa. California On behalf of the 11MC Board of Directors, I am honored to endorse the BRUCE A. HAWKSHAR CMC City Clerk conferring of CMC to Rebecca Van Deutekom, your Deputy Town Clerk. 1Vorth Vancouver. B.C. Canada We share your pride in this achievement and we applaud your support of Directors -2004 Expiration DENISE L. MacALONEY, MMC the role Rebecca plays in your city. Town Clerk - Westminster Massachusetts LINDA M. HESS, MMC Clerk/Treasurer/Assistant City Manager Sincerely, Taneytown, Maryland SANDRA WOODALL. MMC City Clerk - Dunedin. Florida SHARON K. CASSLER, CMC Clerk Qf Council - Cambridge. Ohio GazzÂ» BONNIE MOR/rZ, MMC City Recorder - Cedar City Corpomtion. Utah BARBARA PRICE, CMC Ranette Larsen, MMC City Clerk - Pugallup. Was/ungton GARMT KOLHORN CUM Clerk/City Manager Noordoostpolder. the Netherlands President, 11MC Us J. W. (Joe) Tiernay Executiue Director Francis L. Adshead, Ph.D Director Qf Education May 19-23, 2002 . . 56th IIMC Annual Conference , . San Antonio, Texas (Academy May 18) Town of Estes Park, Larimer County, Colorado, January 8,2002 Minutes of a Regular meeting of the Board of Trustees of the Town of Estes Park, Larimer County, Colorado. Meeting held in the Municipal Building in said Town of Estes Park on the 8th day of January, 2002, Meeting called to order'"by Mayor John Baudek. Present: John Baudek, Mayor Susan L. Doylen, Mayor ProTem Trustees Jeff Barker Stephen W. Gillette David Habecker Lori Jeffr-ey-Clark G. Wayne Newsom Also Present: Rich Widmer, Town Administrator Vickie O'Connor, Town Clerk Gregory A. White, Town Attorney Absent: None Mayor Baudek called the meeting to order at 7:00 p.m. PUBLIC COMMENT None. TOWN BOARD COMMENTS Mayor Baudek presented his "State of the Town" Address for 2002: growth, transportation study, affordable housing projects, EPURA projects, Estes Valley Planning Commission activities, Knoll Property, and PRPA projects. "Because of the strong business community that we have in the Town of Estes Park, the professionalism of the town staff, and most importantly the residents of Estes Park, I believe that this community will continue to be one of the premier resort communities in the United States in the year 2002, as well as in years to come, and will continue to be a good place to live and raise a family." 1. CONSENT AGENDA (Approval of): 1. Town Board Minutes dated December 11, 2001. 2. Bills. 3. Committee Minutes: A. Public Safety, January 3,2002: 1. Furniture Purchase, $10,000 2. Estes Valley Victim Advocates Contract for Services, $5,000. 4. Estes Park Housing Authority, November 14, 2001 (acknowledgment only) 5. Estes Valley Board of Adjustment, January 8,2002 (acknowledgement only). 6. Estes Valley Planning Commission December 18, and Special Meeting December 20, 2001(acknowledgement only). Board of Trustees-January 8,2002 - Page 2 7. Firemen's Pension Board, December 12, 2001 (acknowledgement only). 8. Resolution #1-02 - Public Place Designation to post notices of meetings. It was moved and seconded (Doylen/Gillette) the Consent Agenda be approved, and it passed unanimously. lA. PLANNING COMMISSION AGENDA (Approval of): - If the Town Board, Applicant(s), Staff or the Public wish to speak on a particular item, Mayor Baudek will open Public Hearing(s). Public Hearings are conducted as follows: - A. Mayor - Open Public Hearing B. Staff Report C. Public Testimony D. Mayor - Close Public Hearing E. Motion to Approve/Deny 1. CONDOMINIUM MAP. Â· Preliminary and Final Condominium Map, Sunset Ridge, Intersection of Big Horn and Virginia Drives, Roy & Michele Johnson/Applicants. t 2. CONDOMINIUM MAP. Preliminary and Final Condominium Map, Creekside Suites, Lot 1, Block 4, Fall River Estates, Randy Collins/Applicant. 3. SUBDIVISION. Brown Subdivision of Lot 8A of the Amended Plat of a Portion of Lots 7 and 8, Summervilla Addition, EPCO, Inc./Applicant. 4. REPLAT. Replat of Lot 2, Pine View Subdivision, David & Brenda Lemke/Applicants. Trustee Newsom cited a conflict of interest with Item 1, stated he would not participate in discussion or vote, and requested removal from the consent agenda to be voted upon separately. Citizen John Spooner requested Item 3 be removed from the consent agenda and discussed in a public hearing. Mayor Baudek granted both requests. Thus, it was moved and seconded (Gillette/Habecker) Items 2 (Preliminary and Final Condominium Map, Creekside Suites) and 4 (Replat of Lot 2, Pine View Subdivision) be approved, and it passed unanimously. It was moved and seconded (Habecker/Gillette) Item #1 (Preliminary and Final Condominium Map, Sunset Ridge) be approved, and it passed, with Trustee Newsom Abstaining. Item #3 - Brown Subdivision. Mayor Baudek opened the public hearing, and Community Development Dir. Joseph presented the staff report, stating the Applicant desires to divide the property into two lots of 1.25'and 1.35 acres; the proposed lots do meet minimum lot size and other applicable standards of the EVDC. The Planning Commission has recommended conditional approval of the plat. Current zoning is E-1 Estate. Audience comments were heard from: John Spooner, 527 Hondius Cir. (maintenance/widening of roadway). Town Attorney White confirmed that he previously advised the Planning Commission that it is not legally appropriate to require the Applicant to participate in roadway maintenance. Board of Trustees - January 8,2002 - Page 3 There being no further public testimony, Mayor Baudek closed the public hearing. Following further clarification, it was moved and seconded (Habecker/Newsom) the Brown Subdivision of Lot 8A of the Amended Plat of a portion fo Lots 7 and 8, Summervilla addition be approved, including the three Planning Commission conditions identified in the Staff Report dated January 3,2002, and it passed unanimously. Trustee Doylen encouraged the new owners or properties to assist in the cost of maintaining the common road. 2. ACTION ITEMS: 1. STAUFFER ADDITION ANNEXATION AND FINAL PLAT. Mayor Baudek opened the Public Hearing, and Community Development Dir. Joseph presented the Staff Report. The property is located on Riverside Dr.; existing zoning is A-1 Accommodations; and the existing land use is single-family residential. Adjacent property owners (Paula Steige, PresidenUProspect Park Homeowner's Assn. letter dated 12/11/01 and M/M John Spooner letter, undated) have requested that portion of the property lying south of Riverside Dr. be rezoned to Single- Family Residential. Rezoning this property from Accommodations to Residential would preclude any use beyond single-family. The zoning history and use thereof, relative to the EVDC, was also presented. Two duplexes are planned on Lot 1; the current and potential owners of Lot 2 object to the rezoning request. Trustee comments were heard concerning maximum units available under A-1 zoning, building setbacks, parking requirements, surrounding zoning, and roadway maintenance. Town Attorney White read Resolution #2-02 and Ordinance #1-02 with the Accommodations A-1 Zoning designation. Public Testimony was heard from John Spooner, 527 Hondius Cir./Prospect Park Homeowners Assn., who provided his interpretation of the historical background relative to zoning and expressed the Association's strong desire to preserve the character of the neighborhood. Kerry Prochaska/Cornerstone Engineering, added that the steepness of the slope precludes maximum use of 4 units, the Applicant has dedicated a pedestrian easement along the river, 50' right-of-ways, and worked within the Code. The Applicant opposes any rezoning of Lot 2. Dir. Joseph commented on the research conducted between the County and his office to ascertain the zoning history of this parcel. There being no further testimony, Mayor Baudek closed the Public Hearing. Following discussion, it was moved and seconded (Gillette/Habecker) Resolution #2-02 and Ordinance #1-02, including A-1 Accommodations Zoning for the annexation be approved, as well as the Final Plat, and it passed unanimously. 2. TOWN ADMINISTRATOR'S REPORT. A. Building Permit Annual Report. The Building Permit Report indicates a valuation of 21.1 Million, as compared to 19.6 Million in 2000. B. Town Board Room and Dispatch Remodeling Projects - Update. The Board Room Project is on schedule: most of the concrete slab was poured last week, and all foundation and backfill work has been completed. The Dispatch Remodel Project is due to be completed 1/18 and this project is also on schedule 3. REQUEST TO ENTER EXECUTIVE SESSION. Mayor Baudek cited Section 24- 6-402(4)(a), C.R.S. - purchase, acquisition, lease, transfer or sale of properly Board of Trustees - January 8,2002 - Page 4 interest and requested an Executive Session. It was moved and seconded (Doylen/Gillette) the Town Board enter Executive Session based on C.R.S. Section 24-6-402(a), and it passed unanimously. Following completion of all agenda items, Mayor Baudek adjourned the meeting to Executive Session at 8:08 p.m. John Baudek, Mayor Vickie O'Connor, Town Clerk BRADFORDPUDI-ISHINGCO. RECORD OF PROCEEDINGS Town of Estes Park, Larimer County, Colorado, January 15, 2002 Minutes of a Regular meeting of the TOWN BOARD STUDY SESSION of the Town of Estes Park, Larimer County, Colorado. Meeting held in the Municipal Building in said Town of Estes Park on the 15th day of January, 2002. Town Board: Mayor Baudek, Trustees Barker, Doylen, Gillette, Habecker, Jeffrey-Ciark, Newsom Attending: All Also Attending: Town Administrator Widmer, Assistant Town Administrator Repola, Town Attorney White, Directors Joseph, Linnane and Smith, Clerk O'Connor, Art Anderson/DSW, Roger Tanner/CDOT, Holly Miller and Dave Hattan/FHU, Dirextors Hinze, Matzke Absent EPURA Commissioners Putney, Jackson, Jarolimek, Steige, Swank, Wasson Mayor Baudek called the meeting to order at 2:35 p.m. TRANSPORTATION PLAN - DISCUSSION. Felsburg, Holt & Ullevig, BRW, DSW, Balloffet & Assoc., and Hammer Siler George Assoc., and representatives from the Town, County, CDOT, RMNP, EVPC, EPURA, CRA, Business Advocates, Community Services Coalition, and citizen members (4) have been working on the 'Estes Valley Transponation Alternatives Study", and an overview was given on project understanding, goals, study area, existing design day travel patterns, future design day travel patterns, potential transit services, bicycle and pedestrian routes, potential highway improvement projects, and potential parking (new and expanded). Two open houses will be scheduled to share information and gain recommendations and phasing. PAID PARKING - DISCUSSION. One of the Town Board goals is to improve utilization of downtown parking. A Team, consisting of Linnane, Repola, Widmer, Smith, Trustees Habecker and Jeffrey-Clark has been studying this issue, and in a memo dated 12/7/01, Committee Chairman Linnane and Smith provided historical background. Points of interest include: - â€¢ Establishment of a Team â€¢ Exploration of a complete pay-parking system for the entire downtown area, including public parking lots. â€¢ Initial Internet research conducted â€¢ Attendance at the International Parking Institute Annual Meeting â€¢ Met with the City of Aspen and Schlumberger Serna firm Â· Schlumberger Serna preliminary proposal for the placement of multi-space parking meters. Mayor Baudek commented that perhaps a paid parking system for the entire downtown area is a good idea, however, it may be best to consider initiation in the future. Consensus was reached to continue studying the paid parking system as a portion of the Transportation Plan. - BRADFORDPUBLISH INGCO RECORD OF PROCEEDINGS Town Board Study Session - January 15, 2002 - Page 2 ESTES VALLEY DEVELOPMENT CODE - DISCUSSION. Condominium Conversions. Director Joseph and Attorney White reviewed the marked trend of converting commercial accommodations into condominium ownership. It is clear that the current real estate market is driving the conversion of both old and new properties at an increasing rate, and this trend can be expected to continue. Prior to adoption of the EVDC (2/1/00), the Town had no regulatory review of the creation of a condominium. The EVDC provides for review of the creation of a condominium, and this issue is being discussed to address potential impacts on the environment and on the public services and facilities of the Town and the Estes Valley. Policy Discussion #1 - Adequate Public Facilities. Direction is requested on how adequate public facilities standards are applied to condominium conversion of existing developments-three options below: 1. Current practice is to review condominiums for adequate public facilities (roads, utilities, fire protection). A case-by-case determination is made as to what : improvements can reasonably be made to the property (economically feasible). Condominium conversations have not been denied if the property owner is unable to satisfy a standard because it is beyond their means. This involves some risk of a legal challenge due to inconsistent application of the standards. 2. Exempt condo conversions from public adequate facility standards. This alternative avoids legal challenges, but is likely to perpetuate substandard housing. 3. Consistently require all condo conversion requests to meet adequate public facility standards. This approach involves risk of a legal challenge under the state law noted above. Discussion followed, with consensus reached to approve Option #3 to include ' specific definitions. Staff will also present this item to the Larimer County Commissioners for their approval. Policy Discussion #2 - Landuse and Tax Base. Multi-family residential use is a "use by right" within the commercial accommodations zoning district. Nearly all of the RM , zoned land is already built-out, thus developers are now turning to the vacant land zoned "A" to satisfy the demand for residential condominiums. Also, the Larimer County Assessofs Office is reclassifying all real property that has been condominiumized as residential. The effect is to change commercial accommodation property, that has been taxed at the commercial rate (29% of actual value) to residential property, taxed at the residential rate (9.15% of actual value for 2001/2002). This change has little effect on revenues available to the Town due to the Town's low mill level, however, the loss of real property tax revenue does have significant impact on those entities, that rely on real properly taxes as a substantial part of their revenues (EVRPD, EVPLD, School Dist., County). In reviewing this matter with County personnel, staff believes the County is not classifying condos properly. Thus, staff is recommending (1) authorization to formally discuss the classification of condominium conversions (commercial to residential) with the Larimer County Assessors Office, and (2) removal of multi-family residential use as a principal use by right in the A-Accommodations district on future projects. This will protect the Town's commercial accommodations from further erosion, and may enable the tax assessor to more easily maintain these properties on the commercial tax rolls. Consensus was reached to proceed with staff recommendation #1 and, and staff provide an analysis for item #2, discuss this subject with the Larimer County Assessor, and return to the Town Board for further discussion. Policv Discussion #3 - Kitchens. The traveling public now desires larger accommodation units with at least some kitchen facilities. This trend can be expected to continue, thus it also makes most new accommodations prime candidates for condo conversion. BRADFORD/UBLISHING CO. RECORD OF PROCEEDINGS Town Board Study Session - January 15, 2002 - Page 3 The EVDC bases density calculations on the use of the property. Currently, a commercial accommodation use has permitted density that is 3 times greater than a residential multi-family use. The EVDC differentiates between a commercial accommodation unit and a multi-family residential unit by limiting the commercial accommodation unit to a limited kitchen facility. The physical distinction between the two above is no longer discernable as a practical matter. One of the purposes of the increased density for commercial accommodations is to encourage the construction and operation of commercial accommodation facilities in the Estes Valley. As the Town's economy is substantially visitor based, conversion of commercial accommodation units to residential units results in potential loss of sales tax revenue to the Town. Staff is recommending the EVDC be revised to provide a square footage size limitation on commercial accommodation unit (units allowed at the higher density). How a kitchen is equipped would no longer be the primary determining factor in the density calculation. Consensus was reached to approve Maffs recommendation for the sq. footage size limitation, with staff exploring regulation alternatives for kitchens, deed restrictions, and a review of other municipalities. PolicY Discussion #4 - Reservation of Future Development Rights. State Statutes regulating condos require that any future development rights to be held by the developer be disclosed on the original condo map and declarations. This would apply to either new developments originally planned as condos, or to conversion of existing developments that have some potential for future expansion. Staff is recommending the EVDC be revised to expressly require Development Plan approval prior to reservation of any future development rights. Consensus was reached to approve staffs recommendation. Floor Area Ratio and Impervious Coverage. Staff is proposing upward adjustments to allow more effective utilization of the limited area zoned for commercial purposes, without compromising the basic goal of protecting the character of the Estes Valley. The Board reviewed Table 4-5. Impervious Coverage for I-1 Zone. At the direction of the Planning Commission, staff is recommending raising the maximum lot coverage for the I-1 Light Industrial Zone from 60% to 80%. Discussion followed on the floor ratio, with consensus reached for staff to provide additional information. There being no further business, Mayor Baudek adjourned the meeting at 5:40 p.m. 922 2-â‚¬6.ati Vickie O'Connor, CMC, Town Clerk BRADFOROPUBLISHINGCO RECORD OF PROCEEDINGS Town of Estes Park, Larimer County, Colorado, January 10, 2002 Minutes of a Regular meeting of the LIGHT AND POWER COMMITTEE of the Town of Estes Park, Larimer County, Colorado. Meeting held in the Municipal Building in said Town of Estes Park on the 10th day of January, 2002. Committee: Chairman Jeffrey-Clark, Trustees Habecker and Newsom Attending: Chairman Jeffrey-Clark and Trustee Newsom Absent Trustee Habecker Also Attending: Town Administrator Widmer, Light & Power Director Matzke, Deputy Town Clerk van Deutekom Chairman Jeffrey-Clark called the meeting to order at 8:00 a.m. ~ POLICY AND PROCEDURE MANUAL- LINE EXTENSION POLICY - AMENDMENT. Director Matzke presented amendments to the Light & Power Policy and Procedure Manual regarding a five-year contract for commercial connection extensions under the following conditions: 1. Extension cost must exceed $1,000 per connection 2. In lieu of a prorated refund, new connections would be included in the 20% annual credit. 3. Total credit will not exceed original contract amount. For residential and commercial service upgrades, the 20% credit would be determined by subtracting the base electrical cost from the electric cost each year of the contract. The base electric cost would be the total electric costs on the existing service the twelve months immediately preceding the contract date. There have been a total of 31 commercial line extensions exceeding $1,000 since January 1997 for an average impact to electric revenues of $27,175 per year. The Committee recommends approval of the amendments to the Policy and Procedure Manual as presented. BLACK CANYON LOOP TRENCHING CONTRACT CHANGE ORDER - APPROVAL. Director Matzke presented a change order request of $1,015.45 from Duell Excavating to cover the cost of additional trench required for the Black Canyon Subdivision Loop Trenching project. The change order will be funded from 2001 Budget. The Committee recommends approval of the change order request of $1,015.45 from Duell Excavating as presented. REPORTS Platte River Power Authority (PRPA): Director Matzke reported that the 2002 Budget was approved. Mayor Baudek was elected as Secretary of the Board of Directors. The first of the gas turbine units (Unit A) has been installed and should be on-line this summer. Units B and C should be delivered later this year. Financial Report: The November and December graphs were reviewed and discussed. ORADFORDPUBLISHING CO. RECORD OF PROCEEDINGS Light and Power Committee - Jahuary 10, 2002 - Page 2 Project Updates: The Black Canyon Loop project is complete. The Estes Duct Bank extension concrete vaults have been installed and conduit and trenching are near completion. A pre-bid meeting for the Big Thompson Three Phase and Baldpate Three Phase projects is scheduled today. Looping upgrades are underway in the Windcliff Subdivision to improve service to the area. The remaining poles for the Bond Park demonstration lighting project have yet to arrive. The poles should be shipped next week. An article on the Fall River Hydroelectric Plant appeared in Colorado History Now, a newsletter of the Colorado Historical Society. Copies were distributed. There being no further business, Chairman JeffrerCIark adjourned the meeting at 8:38 a.m. ORVAL 46103 Rebecca van Deutekom, Deputy Town Clerk DRADFORDPWOLISHINGCO RECORD OF PROCEEDINGS Town of Estes Park, Larimer County, Colorado, January 17, 2002 Minutes of a Regular meeting of the PUBLIC WORKS COMMITTEE of the Town of Estes Park, Larimer County, Colorado. Meeting held in the Municipal Building in said Town of Estes Park on the 17th day of January, 2002. Committee: Chairman Barker, Trustees Doylen and Gillette Attending: Chairman Barker and Trustee Doylen Absent Trustee Gillette Also Attending: Town Administrator Widmer, Public Works Director Linnane, Deputy Town Clerk van Deutekom Chairman Barker called the meeting to order at 8:00 a.m. ~ CARDBOARD RECYCLING DUMPSTER - STUDENT REQUEST TO PLACE DUMPSTER ON TOWN-OWNED PROPERTY. Libby Evans, President of the EPHS National Honof Society (NHS), requested approval to place a 20' cardboard recycling dumpster on Town-owned property. Possible sites identified were the Hwy 34 frontage between the Park Shop and The Chamber OR Stanley Park adjacent to Fourth Street. Waste Mgmt. will donate a dumpster and the NHS will monitor the site for trash and periodically remove the cardboard and transfer it to the Safeway store. Safeway has agreed to receive, bale, temporarily store, and transport the cardboard to a distribution point in Denver. Any proceeds from the recycling project will be donated to the NHS. Staff explained that the Hwy 34 frontage location would not be appropriate for a recycling dumpster. However, a container could be placed in the Stanley Park area adjacent to Fourth Street near the bulk water dispenser. The NHS recognizes that the project's success depends on good management by its members and the Town could request removal of the container should problems arise. The NHS did contact Waste Mgmt., Safeway, and the School District (Dr. Kastendieck) to discuss use of their properties for this project. None approved the request. Discussion was held regarding transportation logistics, optional sites, NHS responsibilities, and advertising. The Committee recommends approval to place a cardboard recycling dumpster in the Stanley Park area adjacent to Fourth Street for a trial period until June 2002 as outlined above. The NHS will coordinate delivery of the dumpster with Waste Management and Director Linnane will provide a status report at the June 2002 Committee meeting. 2001 WATER LOOP PROJECT - CHANGE ORDER REQUEST. Director Linnane reported that during the bidding process of the 2001 Water Loop Stanley Circle Project, 394 linear feet were mistakenly omitted from the bid quantity sheet. As a result of this error, the Kitchen and Company bid should be increased by $22,458 for a total of $180,420. This error does not impact the outcome of the bid as Kitchen and Company remains the low bidder and sufficient funds are available. The Committee recommends approval of the change order in the amount of $22,458 submitted by Kitchen and Company. BRADFORD PUBLISHING CO. RECORD OF PROCEEDINGS Public Works Committee - January 17, 2002 - Page 2 WATER MAIN EASEMENT ON TOWN-OWNED TRACT B, RESERVE SUBDIVISION 2~ FILING - REQUEST BY GOOD SAMARITAN SOCIETY. Good Sam Society has requested a 20' utility easement across Town-owned Tract B, Reserve Subdivision 2 The water line connection will add a needed pressure nd Fang. boost to the Town's water line system along Dry Gulch. Town Attorney White has reviewed the request and has no concerns. The Committee recommends granting the water main easement as presented. SANITARY SEWER EASEMENT ON TOWN-OWNED BIRCH/BIKLE PROPERTY - REQUEST BY ESTES PARK SANITATION DISTRICT. The Estes Park Sanitation District requested a 15' sewer easement across the Town- owned Birch/Bikle property to provide service to 220 Virginia Drive. The connection will allow for abandonment of an older sewer line that parallels MacGregor Ave. Town Attorney White has reviewed the request and has no concerns. The Committee recommends granting the. sewer easement as presented. Chairman Barker directed staff to include site restpradon requirements with construction of the sewer line. CAUSEWAY UNDERPASS/LAKE TRAIL PROJECT CONSTRUCTION MANAGEMENT SCOPE OF SERVICES - APPROVAL. Staff budgeted $54,000 for Construction Management Services for the Causeway Underpass and Lake Trail construction to begin in 2002. Cornerstone Engineering will provide full-time construction observation to ensure the project is constructed per the intent of the plans and specifications at a cost of $53,900. The Committee recommends approval of the Scope of Services in the amount of $53,900 as submitted by Cornerstone Engineering. BOARD ROOM PROJECT - CHANGE ORDER REQUEST. Director Linnane presented a change order request from Thorp Associates for the following changes to the Board Room design: 1) Upgrade the connection from the electrical transformer to the new panel board for the additional space to avoid a future upgrade associated with future expansions. ($1,204 plus electrical contingencies) Cost: $1,700 2) Construction of an ADA acceptable access ramp and wall for the front entrance, as shown on the attached sketch. Cost: $6,825 3) Board Room Tables' front finished trim. Cost: $1,771 4) Concrete heat mats (snow melt) for the north Police Dept sidewalk and west front door sidewalk and steps, and the ADA ramp. Price includes all electrical wiring, switches, and control panel work. The total cost is to be split $3,000 to this project and $8,500 to the maintenance budget. Cost: $3,000 BRADFOROPUBLISHINGCO. RECORD OF PROCEEDINGS Public Works Committee - January 17, 2002 - Page 3 Possible future change orders may include lobby chairs and fire code requirements that are currently being discussed. Chairman Barker expressed concerns with the ADA ramp oversight. Concluding all discussion, the Committee recommends approval of the change order submitted by Thorp Associates in the amount of $13,296 as presented. FALL RIVER TRAIL PROJECT PRELIMINARY REPORT Mike Todd/Cornerstone Engineering, presented a preliminary report for the Fall River Trail Project. Areas discussed include survey results, right-of-way easements, trail placement, safety issues, and set-back requirements. The Committee recommends presentation of this report at the January 22nd Town Board meeting. REPORTS. None. There being no further business, Chairman Barker adjourned the meeting at 9:30 a.m. 9.yan- -al Rebecca van Deutekom, CMC, Deputy Town Clerk Jan. 3,2002 Bob Joseph Town ofEstes Park '' Estes Park Colorado Dear Bob, With negotiations continuing on the Wildfire project it is unlikely that we will meet the Feb. 1St closing date. As the current owner ofthe Wildfire project, I am requesting the Town Trustees grant a 60-day extension ofthe existing Development Agreement. Please place this request in the appropriate channels in order to have the extension prior to February gth, 2002. Thank you for your help Norman R Carver MEMORANDUM TO: HONORABLE MAYOR BAUDEK, BOARD OF TRUSTEES, TOWNT ADMINISTRATOR WIDMER FROM: PETE BRANDJORD, FINANCE OFFICER ~ SUBJECT: INVES'IMENT MANAGER REOOMMENDATION DATE: 1/10/2002 CC: Background. Up to the current time, the investments of the Town of Estes Park have been managed internally. Investments have been limited to bank deposits, certificates of deposits, local government investment pools and treasury bills. To optimize investment revenue for the Town, it is recommended that the Town enter into an agreement with external professional investment managers, specifically the MBIA Municipal Investors Service Corporation Customized Asset Management program, to provide expert investment advice and support. Additionally, it is recommended that the investment portfolio be diversified to include other investments commonly used by local governments and allowed by Glorado state statute. These other prudent fixed investments could include federal agencies, an example being the Federal National Mortgage Association. It is felt that improved investment earnings can be attained with this approach for the following reasons. Because of preferential pricing for large trades, an outside firm enjoys economies of scale in trading thar the Town does not benefit from when acting individually. A large external firm also has the ability to devote professional staff, extensive computer systems and expensive proprietary software to monitoring the market in fixed securities, providing for better trading effectiveness and increased earnings. - Several Glorado communities that have been using the MBIA Municipal Investors Service Grporation Customized Asset Management program were interviewed on their experience with the service. These communities ranged from larger cities; such as Boulder and Colorado Springs, to towns; which included Frisco and Lafayette. The portfolio sizes ranged from 170 million dollars to slightly over 10 million dollars in funds under management. Each of the respondents related favorable experience with the program, and felt that the investment advice, transaction coordination, and reporting of financial information were very good. Respondents also stated that investment revenue, net of management fees, exceeded what could be obtained internally. Budget Investment earnings are an important revenue source for the Town of Estes Park. In the year 2000, interest revenue from all funds combined totaled over 1.25 million dollars. Enhancing this non-tax revenue source allows the Town more flexibility in funding services for the community. This is also a -critical time for this revenue source. As a result of economic conditions and the eleven decreases in Fed rates passed during 2001, fixed investment rates and returils are at 40 year lows. Action Policy Issues - An Investment Policy wai adopted in 2001 by the Board of Trustees. The policy requires that any investment manager sign a copy of the policy, signifying agreement to comply with the requirements of the policy. It is also recommended that a specified amount of investments be directed to 16cal financial institutions bythe investment manager. Technical Issues - This financial solution provides additional, expertise without increasing staffing, and should enhance revenues to the Town. Staff recommends entering into an agreement with MBIA Municipal Investors Service Corporation to provide Customized Asset Management services to the Town. 2 . 52 4- 23 0, 1 E 11 86 1 9 O #11. - E /6,6/4-:. - .7...13&1483. r 09 NO*al#4 & u= C.f.-4 1 4 1 < 4* - 4* 1 Q Â· W. 1 .li 1 ~~Iâ€¢ 1- 1*6 1 724. ; AVIC ' 1. j 4 21 + 4f. . AC 1./ 143*000*ar -2331*4%7:irl~1> d:F,Â£ r-/41. U- 39>kEG E I \Ad 1 1 1 Vd S312 30 NM01 1 1 - 1 - 1 1 1 1 1 1 2 21 ... 1 4*.ki-h ' - 1 I 9 fo iolk V..rk 1 '00 1 i,*5~kil.Wit.Nuagill 1 .~..~10:1 1 Â« 1 1 Strength & AM Performance ted AAA by three NRSRO FMd~JuD' uo~A 0Â°FE: 1 1 1 1 1 1 1 4) r. 1==G----- 42*6. 15 Q *6- .LU e. 1 6- J 41 1 h /.1.,1,. f j .. Ill Se Â»1- X . C 1 , .1 1 customized asset management iChztor siesse oq~jiu~ Irqpqo~ 0 suolleUP@Die leuoiss@Joid â€¢ 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 A <5~ -1/'--Il-'1:..12UI 1 My Â£4#*83EG 3/~26-irtilaillimillill I / Â·)0~t~ .Â·--471-.1.-IM-iM-il. -Â£;6Al//./*/ - 1 *ISM 1 1 Proposal 1 for 1 Investment Management Services Forthe 1 1 TOWN oF ESTES PARK 1 MBIA Municipal Investors Service Corporation 1 January 22,2002 1 1 MBIA Municipal Investors Service Corporation 1700 Broadway, Suite 2050 Denver, CO 80290 Phone: 888-637-2662 Fax: 303-860-0016 1 11 PW 1 Ilityl 10....1 : ,-all~.-- ' 1 8 MI-g4 -d-lill=-&-- 1/7.gmilill?7~~~T,~ i/.4-.1//1.li/66'll/& rillill'llill'll'll'll'll'll'll'll'll'llil 84 1 -SM Why Use an Investment Advisor? Independent investment advisors are used by public entities to increase the performance of their investment portfolios. Performance is measured in terms of the return on and the quality of the portfolio. These advisors assist the finance or treasury officer by providing resources that they often are unable to tap on their own. These resources can be grouped into three fundamental areas: Access, Expertise, and Managerial Information. ACCESS â€¢ Independent investment advisors offer a broader access to the market by dealing with many primary broker/dealers on a competitive basis. â€¢ Institutional investment advisors provide their clients with an entrde into the institutional departments of primary broker/dealers, where large volume transactions and expanded inventories can lead to superior returns. Â· Investment advisors have access to market information and possess buying power, absolutely crucial when negotiating the fixed-income market, ensuring that the portfolio reaches its full potential. â€¢ Institutional investment advisors are armed with the most sophisticated analytical tools to help them identify possible investment opportunities. EXPERTISE â€¢ MBIA's investment advisors work with each client to develop a discip/Med approach to investing that is consistent with the goals (preserving principal) and objectives (safety, liquidity and yield) governing their investments. â€¢ Investment advisors employ active investment strategies to achieve safety, liquidity and long-term performance, the investment objectives of most public agencies. This is done by continually realigning and diversifying the portfolio to reduce volatility in a constantly changing fixed-income market environment. â€¢ A dedicated fu//-time portfo/io manager is constantly monitoring the market to ensure that all possible investment opportunities are identified. Using the analytical tools at their disposal, portfolio managers evaluate these opportunities and structure the portfolios to maximize these advantages. â€¢ MBIA's investment advisors have developed the skills to effectively negotiate the ever- changing fixed-income market. Town of Estes Park Page 1 -- Ji - --4%7 g ' - .F ..4 , *19~,6.:2~5*20 . ./ 1 -BLâ€¢ â€¢ Independent investment advisors can avoid conflicts of interest that arise when brokers are paid on a transaction-by-transaction basis. â€¢ Independent investment advisors ensure continuity of your investment program by providing portfolio oversight, analytical tools and dedicated investment staff that most public entities cannot afford on their own. MANAGERIAL INFORMATION â€¢ Investment advisors can provide their clients with state-of-the-art portfolio reports that detail not only the portfolio ho/ding information but also the performance information that is so vital in evaluating the portfolio's success. 1 1 This information combined with our expertise helps to ensure the portfo/io's compliance with the local investment policy and state statutes. â€¢ Investment advisors have the portfolio accounting staff to produce this information in a timely and accurate manner, saving clients both time and money. â€¢ Investment advisors also provide supporting documentation such as bank credit analysis, broker/dealer due diligence and competitive bids to ensure full disclosure. â€¢ MBIA's reports are completely GASB compliant, simplifying your accounting and year- end audit. â€¢ Better information is another form of risk management and ensures the integrity of the program. Why MBIA? Unlike local and regional investment advisors, MBIA brings you Capital Strength and Triple-A Performance. MBIA's Customized Asset Management (CAM) program offers individualized portfolio management by experienced investment professionals, using the most sophisticated information and portfolio management tools available. 1 - MBIA invests significantly in the growth and deve/opment of its emp/oyees, in continuing the development of its state-of-the-art portfo/io management capabi/ities, and in having the qua/ity and quantity of professiona/s where our clients need them. â€¢ Each of MBIA's full-time portfolio managers has years of institutional investment experience, working exclusively for public-sector clients. â€¢ MBIA's investment advisors provide a broader access to the market by dealing with as many as 13 primary broker/dealers on a competitive basis. Town of Estes Park Page 2 -~ A,LE.1.-- 1. ./.:lw~ *'382gg,59*.l.**#/Fill 2 Â£*LATE .9 -'~a,mA,(49.1.1& 1 *ISM â€¢ MBIA's internal audits of each portfolio provide an additional layer of safety to public funds. Â· All securities in portfolios managed by MBIA are held by a third-party safekeeping bank in the name of the pub/ic entity â€¢ Under MBIA's non-discretionary portfolio management, the public entity satisfies its fiduciary responsibility by maintaining control of its investment decisions. â€¢ MBIA provides second-to-none service to its customers. â€¢ MBIA Municipal Investors Service Corporation is a SEC-registered investment advisor. â€¢ A list of public sector client references is included in Exhibit 3. MBIA's Customized Asset Management MANAGEMENT APPROACH AND STRATEGIES MBIA's portfolio managers work as a team to develop overall strategies relating to the current market conditions and future expectations. 1 â€¢ MBIA believes that our team approach to portfolio management provides clients with the broadest possible input and greatest depth of combined expertise. Such broad decision making may be related to extending or shortening portfolio duration and the evaluation of relative value of certain sectors in the market in order to capture the greatest yield spread. â€¢ Each portfolio manager develops specific portfolio strategies within each client's unique investment guidelines and anticipated cash flow needs. This is done on a daily, ongoing basis. â€¢ With the team approach, portfolio managers provide backup for each other during periods of absence. The team of portfolio managers in the Denver office also benefits from the strength and depth of MBIA's New York investment specialists. â€¢ Our investment policy and strategy decisions are forged through an interactive process, which includes input from MBIA's Investment Policy Committee as well as internal and external research analysts and fixed-income traders. Armed with knowledge of both macro and micro trends, this collective process enables the team of portfolio managers to implement strategies that impact individual portfolio performance. Town of Estes Park Page 3 5, .4/al -\*lim:~4.2,/1// 1*~Cl,~ i F i, .1 1 -BL. â€¢ While MBIA does have opinions on interest rates, in general the firm does not employ interest rate anticipation or market-timing strategies for portfolios due to the inherent return uncertainty of such strategies. However, MBIA's investment philosophy emphasizes uncovering value within a framework of key areas, which has proven to provide good performance and principal stability. Relative Value MBIA's ability to uncover those areas of the fixed-income markets which are undervalued and which can result in superior returns with the least amount of risk is supported by extensive research capabilities and access to historical databases. a Sector analysis focuses on uncovering anomalies in yield differentials or "spread" relationships between different sectors of the fixed-income markets. Spread ana/ysis is performed daily on various maturities between different sectors of the market (for example, U.S. Treasury vs. agency). â€¢ Valuation ana/ysis enables portfolio managers to identify sectors of the fixed-income markets that present the investor with relatively higher value when compared with similar alternative investment options. â€¢ Through the application of historical spread analysis, MBIA identifies sectors of the fixed- income markets that are trading at spreads above the historical mean when compared to Treasury securities. By purchasing securities with spreads that exceed their historic means, MBIA can add value to the portfolio by locking in higher relative yields than are normally offered. Maturity MBIA employs a similar process when analyzing maturity relationships to identify the cheapest securities along the allowable maturity spectrum. â€¢ A thorough analysis of the client's cash flow needs, combined with an historical analysis of maturity spreads, enables us to determine the appropriate maturity mix and weighted average maturity target for each client's portfolio. â€¢ MBIA's maturity profile typically utilizes a /addered approach in order to immunize the portfolios against interest-rate risk. Staggered maturities provide a steady stream of principal to meet the client's cash flow needs as well as to reinvest at market rates. Types of Securities Superior risk management is a hallmark of MBIA. As a company with a full-time investment risk manager, MBIA is committed to preserving the principal and interest of its clients. Town of Estes Park Page 4 ' /,9/Immil' Al .5- 17'kilo.*al/-ym'92//// :- .. ~r -23=r.Â»2+1~ 71' 2.~ ./ - 9/- 1 -SM â€¢ Each of MBIA's clients' portfolios is individually managed to optimize its returns in the context of each client's unique cash flows. Only this customized approach can provide the client with a portfolio that meets its financial objectives. â€¢ Safety and /iquidity are the highest priorities in MBIA's investment philosophy. â€¢ To achieve these objectives, MBIA's portfolio managers invest in U.S. Treasury, governmental agency and instrumentality securities and other short-term, high-quality securities as permitted by statute and policy. â€¢ These securities are of the highest credit quality and are among the most liquid of all securities. This limits the credit risk to the portfolio and ensures liquidity in the portfolio while protecting against unnecessary market risk. â€¢ The term of securities within the portfolio is primarily determined by the liability cash f/ows that the portfolio is being structured to meet. â€¢ Stress tests are performed on all portfolios on a regular basis as part of determining the proper weighted average maturity/duration for the portfolio. These tests gauge the upside and downside impact on the portfolio given an immediate movement of basis points in the yield curve. The tests serve to uncover the "worst case" scenario to the portfolio, given a large immediate movement in interest rates. An understanding of market movements combined with our investment outlook allows our portfolio managers to insu/ate our clients' portfolios against such market volatility. Additional Program Features CORPORATE COMPLIANCE REVIEW MBIA takes an active role in the portfolio management process. Not only are the markets monitored daily to ensure that the investment strategies fully exploit the present market conditions, but customer portfolios are frequently reviewed to ensure that they employ the most effective strategies. In addition to the constant review by portfolio managers, our parent company's corporate compliance program monitors all portfolios for which an MBIA subsidiary acts in an investment advisory capacity. Such portfolios are subject to a quarterly compliance review by the MBIA corporate compliance officer. This compliance officer is charged with verifying that the portfolio manager is investing the portfolio assets in accordance with the entity's written investment policy. The review includes the verification that all securities meet the minimum credit standards as set forth in the investment policy. The review also investigates whether the portfolio has violated either the maturity restrictions or the asset allocation restrictions. This oversight is an additiona/ safeguard that few investment advisors can match. Town of Estes Park Page 5 .4-1--in -'I/-~=; 8 1 -BW COMPETITIVE TRANSACTIONS All security transactions conducted by MBIA are performed on a competitive basis with broker/dealers specifically chosen and approved by each client. The execution of competitive transactions adds value by assuring that trades are done at the best possible price for current market conditions. Competitive prices received for each trade are documented and recorded in the client's monthly statement, adding another layer of defensibility to the program. MONTHLY ACTIVITY AND PERFORMANCE REPORTS As part of MBIA's comprehensive services, all clients are provided with detailed monthly portfolio accounting, activity and performance reports. The monthly reports provide information on both the amortized cost basis and the fair value basis of accounting, which is in compliance with GASB Statement No. 31. Because MBIA's monthly report format was designed by CPAs and government finance practitioners, it is especially useful to clients' accountants and auditors. The reports are universally acclaimed as "state-of-the-art" in investment accounting and reporting. MBIA uses the Princeton Asset Management (PAM) system, an industry leader in portfolio accounting, for its portfolio accounting database. Muller Data Corp., a nationally recognized, independent pricing service, electronically feeds security prices to MBIA through PAM. CLIENT CONTACT Meeting the investment management needs of its clients has always been the primary goal of MBIA. The MBIA staff has long felt that client contact is the key to fully understanding those needs. Therefore, MBIA takes great pride in the fact that its staff members communicate frequenUy with our clients. In fact, many of our clients feel that MBIA staff members are part of their organization. Prudent investment decisions require a daily routine for analyzing the market and developing investment strategies, an expertise in interpreting market signals to implement investment plans, and state-of-the-art technology to provide powerful analytical tools. MBIA combines all of these necessary ingredients in ongoing active portfolio management. An active portfolio management style will require more frequent contact between the portfolio manager and the client. The frequency of contact may vary greatly depending on market conditions, the investment strategy employed at the time and the time constraints of the client. Some clients may require daily contact while others need only weekly or monthly contact. CLIENT REVIEWS One or more MBIA staff members generally meet with each client on an annual basis to review the status of the investment management program. This might be a presentation to the Town of Estes Park treasurer, investment staff, finance committee and/or governing body to provide Town of Estes Park Page 6 -r 11 $41;3 -' . J ~ r.=r@fe,~ A -- 4%i"trr,Â·Â¥6 -,1,~ ill-- . 1 ...U 7 I. 1 . 69 . '1'.-Cle0&,g~ . 1 --4 performance updates and review investment strategies. The frequency of on-site meetings as well as telephone contact is determined by each client's preference. Reviews and updates to the investment policy and procedures are performed annually. Professional Staff The portfolio managers of MBIA work as a team when managing portfolios. This ensures that an absence by one team member does not negatively affect the performance of the portfolio. Each new account is assigned a lead portfolio manager who serves as the primary client contact and a portfolio manager who serves as a backup. Brief biographical information follows. Neil S. Waud, CFA, Assistant Vice President and Portfolio Manager, joined the firm in January 1998. His areas of expertise include evaluating short-term market conditions and trends, predominately in the U.S. Treasury, instrumentality and high-grade commercial paper markets. Mr. Waud develops investment portfolios that are optimized by matching future cash flow needs with securities to meet the client's investment objectives. He maintains frequent contact with clients as Mr. Waud is also responsible for investing the daily cash for client portfolios and monitoring client cash flows. He is in close contact with banks and brokers, ensuring timely trade settlements. Mr. Waud holds the designation of Chartered Financial Analyst through the Association for Investment Management and Research. He received his Bachelor of Arts degree in economics from the University of Colorado. Mary Donovan, CFA, Vice President and Portfolio Manager, joined the firm in September 1990. Ms. Donovan coordinates the portfolio management group within the Denver office. Her areas of expertise include U.S. Treasury, instrumentality and high-grade corporate securities and bond swap analytics. Ms. Donovan monitors the credit markets and economic conditions daily to develop active portfolio management strategies consistent with each client's investment objectives and cash flow needs. She is in frequent contact with clients in the management of their portfolios and the development of their investment programs. She is a past president of the Colorado Treasury Management Association, the Colorado chapter of the Association for Financial Professionals. Ms. Donovan holds the designation of Chartered Financial Analyst through the Association for Investment Management and Research. She received her Bachelor of Science degree in finance and management from the University of Colorado and is pursuing a master's degree through Regis University. Proposed Scope of Services MBIA Municipal Investors Service Corporation would provide the following services for Town of Estes Park: â€¢ Provide full-time non-discretionary management of the portion of the investment portfolio under advisement. Town of Estes Park Page 7 4* iggmar.,1/-*44.. ,~~~- LU-~i-~-~ j, i :214= 2 -LI=-. ..,7.=2Â£#2~; I 1 -BLâ€¢ â€¢ Develop and implement investment strategies for the portion of the portfolio under advisement that will enhance portfolio performance under current and future market conditions within the parameters of the investment policy and cash flow needs. â€¢ Provide technical and fundamental market research including yield curve analysis. â€¢ Obtain and document competitive prices for securities transactions. â€¢ Assist with trade settlements. â€¢ Provide monthly investment reports for the portfolio detailing securities holdings, portfolio composition and sector analyses, portfolio return and weighted average maturity, and daily transaction activity. â€¢ Provide semi-annual and annual portfolio performance reports. â€¢ Perform due diligence reviews of current and proposed broker/dealers. â€¢ Evaluate safekeeping and custodial procedures and agreements. â€¢ Provide training to staff on cash and investment management subjects. â€¢ Attend meetings with the Town of Estes Park treasurer, investment staff, finance committee and/or governing board upon request. Investment Advisor's Compensation The proposed fee for providing the above services for the fixed-income portion is 17 basis points per annum (1.4167 basis points per month). Fees are payable monthly based on the average net asset value of the funds under management for the month. Example fee calculation: If the net asset value of the portfolio were $15,000,000, the annual fee would be $25,500 (based on $15,000,000 x .0017). If the net asset value of the portfolio were $15,000,000 on January 31, 2002, the monthly fee would be $2,125 ($15,000,000x .00014167). Town of Estes Park Page 8 1 1 1 1 2 1 1 1 1 1 1 1 1 e 0 0 C 1 3/ 08 .9 a 68 2 k * 00 0 %6 -Â¤02 roo. i .0 Â£ g @ O , M D21*2 IS i m 1 uite 2050 x: 303 860 0016 SAMPLE REPORT IOOE 'OÂ£ ioquioldoS - I ioquioldos Pouod 01[1 Joi suodoy 628 : M 2 4& 2~.r s ~ 2 2 - 2 2, 6 CS r -O M g 4 g UL ~E .48% i 5 5 5 4 E c .E g e = i & C * 0 :2 4 1 28*C E K 2 4 SE M = U C ..0 E â‚¬ 2 >..E -C 4 te 1 5 â‚¬ U -0 - -2 0 8- 1 14 2.42 Z Z 1 u; 0 % 0 15 = 0= 5 5 dZ â‚¬ U U=. 0 -0 Eg 9-5 i g Â·tRi -23 2 C c w , 5 <c Â· - 10 6- 50 5 - "q 4 ~ M *& 5* *7-9 -2 E 08 cE E ~ C â‚¬ 1 -6 -1 --0 5 *- 45 2 -2 0 -= 2 40 3 Uk 9 E 0 -- 2.E b -- 2 2 -1 5 6 U 1 2 -9551 : 1 2 6 ~R 12 E â‚¬ b 2 0 -0 g C Z I *SNX - - U = te # 07= 4 E =EZE M E C & E .9 04*3 E E , 4 2 2 E- - 01 1 0 7 0 ....7:. 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The 4180!luumIp poddoip sp[0!X Kinsuo-11 - spea/as 111340 0,S) '%99-t;' 2 0/A S unSE@11 iuoK-0 1 pUU 41UOUI 041 JO pug (1 1.11343 <Js) .UOIJEJJSIU!Ulpll 10/AOqUOSIE[ 041 0OU!S UO 1 u +0[ E '0/ot'LE quloldOS J pu 0 j41 1V 'l.{luoul 341 .to~~~}Jj.~2~Y -z uoâ„¢log puoids oq 541 114 %9/ g p 9/'A SpUOq le ok-All!41 900Â£-2 puno.IE S[1!q 41UOUI economic ac vity in the ard revisions to fore ts for GDP and interest tic effect on the financial markets was a significant flight to pons Fed funds rate by another 50 basis points on uotiatod.[03 JOIAJOS SIOJSOAUI [edot 1 VIHIN Â·,iÂ·'-1 Sioqtuooli] LUO.1.3 paluudoN SUI?q) the next formal eeting of the Federal Open Market omm e P 13 1 OUUS@AUE JOLUnSUOO pUE St;JUIsnq olfinui Ul p~ UORD!12 -sn puE S)[OP.118 K.lepUODOS JOAO SU.130UOO SU [OqUI liDA MOU .113Â· -2 041 'so!1!Jtljos K.lnsuall JO UOA 1[96 olou .120 041 puu LITUOUI 041 Supnp %LL'Z )!K A,O[ scounting n additional 50 sis po 8 SUIAOLU 0113 KO![od Kielouotu pul? [80%41 eq 05Â£ Suquiol sino 011'J 41!* poidnoO lnO XE} uo[!11.0 E 1 $ A, spuoq .troK-Ot puli were alre their way 10 ! >turg OAJOSON [EJOpod 041 -Kluouooo 41 OUI-Â£ '%Â£Â£.1 punole Suipull 010& slliq 41UOUI Fixed Income Market Review to 270 basis points at -*00 ,-0: 9:? a .-M:f#KTN 1 9 10-'00 10 02/00 - 09/28/01 4- X 2 4 2 002 N eÂ·- =f O Lâ€¢K lrI -r- C *80 55 C M = $ C - 0 97 2 - 3 0%0, e - 99, CO - , 0=Z 22 a - In rr, 0 -4 q 2 Cr, _ Ir, E t : E E 9 = 2 -0 3 5 0 tfil ER 0 2 4 b- - 2 EX - A. 8 602 = E g E 1 - 2 8 - 0, 2 3 9 =faijif, f f VO n 9 VI 00 - Q r- 00 - N râ‚¬ N 01 N re, ID 1 <f Cn / / U E 9 2 -- E 3 7 U 0 I C = M re, =. 0%! =f S - ./ er, g g g 0 Re8 d tr; CO c' N C er, 2 f 2 0 : Accrued Interest Sold 72.99 31,231.65 89.57 127,343.92 Aceretion Realized I (Amortization) Gain (Loss) Income Withdrawals 70,039.85 10.561.41 161,324.42 10'%9L'09 1 It-195'01 (UOUEZIUOU,V) uo[10.130V Et'KE'191 0110Juod UO oulooul Imol %617.t %Â£917 11!El-14}un]Al E 19'Ol.6'81*'EE Iso) It?OuoiSIH xpea 9813.IJAV %6*-t %0517 [PH-1 1{luow 9 SKE(l tsÂ¥ Al.InJOIN RAIROUU OSE.10/\Â¥ pjlliAI % It 17 %99t %I 6't7 oloN-1 JEJA 5 uollu.lod.101 00IA.los s.lols) 1 11?di,Iun IN Vigil I 0813,1 Amortized Cost Basis Activity Summarv Detail of Amortized Cost Basis Return for the period Sep - September 30, 2001 Activity a nd Perfo nce Summary 5003 jo WN 018<1 01 leDA lunloN po-zilunu %16'E %Â£9.t MON-1 lt?JA E Report les and Maturities lunloN poz[[unuuV â‚¬00.1 JO loN ulnlok] Pozi[Enuuv Realized Gain (Loss) on Sales 66' 1 5' anit?A .1182[ NUnpul 9L'9Â£8'610'1 (Ssol) UIED POZ[leOJUR 41!0~ 341 -ION NU:I'lt-'1 4}UOR 9 :lu!1!Ell 4}uok U U.In,321 JO Â§91%21 JA!JE.ledIUO) %68'E %L6*t' spund Por] %58-2 %1617 OdoM 148,0.10)AO %0Â£ 8/06Â£'f MON- 1. Â·maA I Beginning Amortized Cost Value Accrued 1 nterest Purchased 28,7 2 POI.lod 041 101 (UOIWZIUOUIÂ¥) UOIWOOV aniEA 1%02) paz!)Â·lou'V Nuipul Additions Contributions Interest Received 1 0.00 0.00 Gain on Sales rotal Additions Fees Paid Loss on Sales Total Deductions 3" 1 ./ 00 g d U & CD 45 - e ./ 0 4 R F l.r - 'A - E E 1 U Â£ 7 - 2 b Â·3 b S -8' 22 E > 0 6 .E= Eme 9 ./ S 9 =- 2 1192 R Z r.2 v A c u J . 2 E u. @E -Â·- N 1 -- E 2 Em 5 2 ZE S 6%38: I bo *= U / n E :ZE 3 E 152*41 2 40 - cz t . 0 02 2 0 rn 0 - 1 CD O% O 45 A M N 3 - m N - - 1 1 -. 6* aff= 2= m=22.2 C M rr N 0 - -Â© =Â£ 4- - Â© i U 0.00 Accrued Interest Sold 0.00 31,158.66 17.951.50 49,110.16 243,012.06 358.666.41 Deductions 3,950.00 (1,880.0()) 2,070.00 Withdrawals 70,039.85 259,083.56 409,846.57 10'Â£92091 95'Â£80'652 l.Â§*9Â·78'60t OI[Ojl.lod UO OUUOOUI odok[ 14*IU.10*) 19'OZ.6'REt''EE Isoj luouolxIH X[lea %E6-fl %119 sica *59 %86-6 MON-1 mA Z Beginning Fair Value hangein ir Value uoticiod.102) Joillos s.lolsoAUI ludioluniN VIE!]A[ E otied Fair Value Basis Activity Summarv Detail of Fair Value Basis Return po!Â·lad 341 101 oIlolliod uo U.In,a}I %!ses anleA 40,1 Jo A.luumin~ for the period S(*tember 1,200 eptember 30, 2001 +03.4.jo loN ole<1 01 le@A lunioN pozilulluuÂ¥ %99 1Z %LE-C Klume]A[ 0AllojJJ3 OBB.IJAÂ¥ pol[10!0/6 5/85'EE %80-El MON-1 -moA 5 99'Â£80'651 pollod 941 Â·10.1 onieA .1103 u[ 0801?q{) %88'Z %68*1 %l.6'f spund pol 66' 1 Ed'Zt8'ft ani'tx mu :lulpt,3 %6L*L 11!EN. 41uoIN 9 Contributions 0.00 Interest Received 165,325.00 Fees Paid 3,739.73 Accrued Interest Purchased 28.732.92 UOIN 9 Nu!1!ell [IJUOI~ 3 1 %1617 %9Â£9 1143-1 41uoR E Additions Total Additions 165,3 Suo!,inpaa lgol %8L1'I sOO .1 Jo WN u.in 1311 Pozi len 6I'll %*CL moN- 1 -leaA I I.. M 2 U - \Â© r.- *co - Ii E * C,= d 3 Unrealized ghted Cost Fair Value Maturity in Days .122,398.44 7,124,800.48 7.257,875.00 133,074.52 240 ,512,007.73 26.668.509.75 27.555,271.99 886,762.24 606 ,663,781.17 33,822,685.23 34,842,521.99 1,019,836.76 528 Weighted Average Final Maturity 528 Days Weighted Average Effective Maturity 354 Days torical Amortized (}ain 29.375.00 29,375.00 29,375.00 0.00 â€žodal[ Recap curities Held September 30,2001 Â·stseq â€ž190&\ 01 ploii, u uo poleinop st piDIA OSEJOAV poll{SI0N1* uoiluou!Â§.IJAIG o!.Ion.lod * 1Â§02) le ploIA 0813.1-Â¥ pol[1810?A .*103 1 Egg 2 0 2 d 2-- -WMMO U 92:RR# E82 0 - 00 2 i = 1- U 0 11 1- C - rf; 12 2 =r 4 E 2 1* 1 1 - E= UC S.Ini i .13\0 S.183, 3 01 1 sKEP 081 0 1 06 14.91% 180 days to I year 32.06% 35.07% 5.95% 33,663,781 100.00% uoiltuodiol 001110!; sjois:,Aul ludiolunw VIE]IN under 90 days 4,044 70 12.01 Sample Report Maturity Distribution of Securities Held leak [ 0, skup 08 [ sxeP 06 lapun Maturity 90 to 180 days 1 to 2 years 2 to 5 years over 5 years -00051 -00001 -0009 00()'S) 0\ 0 - V-, 1 - N <1 . en 1 M IN O C 0 C N F 0%1 4- i RED o 0 e 0 0 * F, 0 9 0 - .1 n Q . N - - g 0 CD Lr 1 rr 1 X- E M # dEF #I 00 - 23= - V 1 000 00 00 0 O 16 0 0 OM 0 8%8882800 -0 02 24 M u 2 0 20 0 00000 M- aGee -- 5 04 N 33 5 < I fr 0% 9 01 .0 00 --=22% x; cl 0- 0 + In - 1 4 - v< 04 - r.- 00 1-Â·Â· 5 2 9 3 -1 C N M 0 | Er. ~, r' 25% 0 0 9 1 9 9 9 9 n i /3~ UU- -* - - - - - h Â© 0 0 88 88 , 28 5 9 E3:g 1 s 0 n 1 REW,g *2 151 *~ En no MO 0 2 r-- t.--- 2 E m - I I n en '- 2 Z- 1 0 & 00 -- 3 0 N S g 0 * - 53 - CNI O 0 8 e C 3 C> N =r -5 =r 0 - %rr,MI-Ntn & 0 - 0 -Ii-- 0 e E 1 - 9 61 A o ims h U gui U N3 %3 3 "2 ME al E 62 3 8 3 12 MZ Â°Â°Z 32 eNZ n i = 3 I m 4 3-FL MA MA ENÂ· 54 3Â» 32 Int Receivable 09/30/01 0.000 10/01/2001 29,375.00 29.375.00 0.00 0.00 0.00 0.00 0,09 0.00 06/11/99 5.875 11/30/2001 1.000.000.00 1.002,109.38 1,000,140.16 5.169.84 0.00 4.815.57 19,743.85 2.98 5.78 12 272L5 06/11/99 6.250 02/28/2002 1.000,000.00 1.010,156.25 14,095.82 0.00 5.179.56 52.21 3.00 5.84 085 BEE Ld'611'1 #08Â£'5 00 0 Of-886'62 IS LgL'901'1 00'000'001'I ZOOZ/1 E/LO 000-9 66/0Â£/80 KOELER Historical Cosu Amortized Cost/ Fair Value/ U Total % n Date Coupon Call Date Shares Purchased (Amorti7.ation) in Received Earned Interest Cost Yield TOTAI. 29.375.00 0. 0 0.00 0.00 0.00 0.09 Purchase Rate/ Maturity/ Par Value/ [nterest Accretion Interest Interest Accrued Po 91-IZ 98 OIO'RR 99-851'li 0()-SLE'6Z 25*t,LO'[El ff'86['ZE 1'(. 00-000'001'L lv101 EU) 10'Â£ 00-OZI EY 00'OOI 5 00 0 69 958'1 1 5[8'FIO'l 00 000.010.1 loous 1/11 000'9 66/Â£0/El 1 9 Z{)t t,6~979'L 1 80-LLS'E 00*0 009[COZO' 1 LI'ESE'flo'I OL ZZE'SIO'I 000000101 ZOOZ/FO/50 052't 10/01/80 [3.1.HINEEZE uolin.lodio') 00:A.los S.loisoAUI IndioiunIN VIHIN I ojed - SSUIPIOH 276C1 05/01/00 6.375 04/30/2002 1.000,000.00 994,218,75 998,326.69 24.173.31 0.00 5,197.01 MtÂ·-E08 05'LEtal-O I 00*000'000.1 ZOOUOE/60 9Lf;'9 10/9Z/60 6,fELZ8 %585't 00'0 68 900'94 11 Ul'166 91'959'186 00000000.1 ZOOZ/ 1 E/Z 1 ra'Â§ 00/Ll/LO t'1'9 Wl SE916,62 ZIESL'Â§ 000 9[-285'91 St-Â£9 1 0VIL6'80Â£'1 55 Â£26'88Z'I 00'000'51Â£'I COOZESZ/+0 ORS 66/9 I/Il 1 8!75X6 02/10/00 6.375 01/31/2002 1.000,000.00 994.062.50 1,012,810.00 13.814.68 0.00 5.197.01 10,740.49 2.95 6.70 00*0 16' 9L' 1 00-870'050'Z 601782' I Â£0'E LtÂ¢'Elt'666' 1 00 000'080'Z 2002/EO/50 000 0 10/tl/90 ZHM 68Â§ 0.00 (320.00) 00'808'51 EE 6Z8'9 00 0 00050.9 11 ['009) 06'Â§95'It September 30,2 0.00 237.91 90'085 00 0 66'Ll.8 0.00 0.00 0.00 0.00 00'0 00'0 00'0 U.S. Treasurv 1 /28 rn i E CK> 0 0 H O 04 4 R /= E F 3 3 - 4 N 61 1% e c 5 ./ 16 0 0 N â‚¬10 0 e 4. 64 .0 E . 9 MMO M U 00 3 - râ‚¬ - M M O - - ID- i *2 ; 553 U Â©0 o nh P RER N *f E 9 h 'r' 1 1{i X X = i E R:9 4 4 2 0 1. 21 1 <D -9 16 u H - 00 8-2- S N P. r 0 * - - SEE - 4 - 0 - 0 0 M <E i =~y 0 0 CD 0 Â© h Cl r, .... rn h "1 0 "t 6 g Min C 28 al /3 I Z 0 N N 61 2 N & 9 3 ) 1 20 -- N 00 00 3% B 122 i Coe rl 0 %0 30 3 220 =1 - N 2 3 20 2 1 C h r.0 9 NU < U %1 0 J : <>E &1 53 *5 %% 3% 0% 15 Em *2 8% Em am 15 *2 Tz SES EX n U. rr. 16 rr, . cc & rr~ L.4 rn U. rn, 4 rn 1 r,44 21. rr, 2.- 0, 2. 9, U. Cr, 2- rn U. te Coupon Calt Date Shares Purchased in Fair Value Received Earned Interest t Yield 11/30/99 5.500 05/15 1,208.000.00 1.183,462.50 1,230,650.00 0.00 5.536.67 25.099.56 .5 2 6.40 08/11/00 6.750 08/15 2002 1,200.000.00 1.201,104.00 1,200,478.30 1.244,256.00 0.00 6,750.00 10,350.00 3.57 6.70 23/00 6.250 10/15/2002 1.000.000.00 982,395.00 993,085.70 1.037,810.00 44.724.30 0.00 5.208.33 28,81 .4 2.92 6 99 31/00 6.250 11/15/2002 1,155,000.00 1.132,604,55 91 9 1.201,558.05 55.568.98 0.00 6,015.62 3.36 7.02 31359MDF7 25/00 5.250 01/15/2003 1.033.000.00 1.000,470.83 1,015,449.90 50,802.37 0.00 4,519.37 11.449.08 2.97 6.69 Ul C 04/23/01 5.300 1/24/2003 1,005.000.00 1,011,532.50 1, 7 6.071.87 0.00 4,438.75 9,913.21 3.00 4.40 05/29/01 5.720 02/04/2 1.125.000.00 1.144.518.75 1. 0 24,492.04 0.00 5.362.50 10,188.75 3.40 4.63 59MDT7 03/27/00 5.750 04/15/200 1,037,000.00 1,000,253.91 1. 1,081,393.97 62,898.96 0.00 4,968.96 27.494.90 2,97 7.06 t'17-L Â£6-1 11*198'LE Â£8 5+71.9 00'0 6* 009'OL 00 069'690'I 19'680'666 00*0Â£iI'866 00 000'000.1 E OZ/51/SO SLE-L 00/92/90 101, 96-5 EZZZI B 99991'L 00 0 LR-ILB'El 00 00510'Z 09 Z 18'ZOO'Z 00'000'000.Z OZ/LER 00Â£-t' 10/l E/80 3 699 55-17 44 #9'E EE.EES.9 00'000'It 616LLZ0 I 00'800'699' I 00 889'ZES-1 00 000'009 1 FOOZ/1/60 Wi-5 00/El/60 89-9 EOT SZ+959 El E9 06Â£'5 00'0 60-6L 6'178 09'+90'601'1 15 680'1â‚¬0'1 96 f90 Of) 1 00 000 5Â£01 2/9 1/Lo 0Â§Z-9 00/IE/60 ZINAE 95'9 +63 95'080'E L9)*I fE,6 00-05+ 9 9 00-ONEIL 00'08Â£'t,LO'Z 00'000'000'Z 00 000.000.1 00'000.000'E foof/12/20 995 10/[E/[0 0 9ll 66'251''Otâ‚¬ 961759.51 1 00Â·05*'96 fE Z9L'988 66'ILE'Â§59'LE 0 8)9'9E EL-L.00 ZI 9'9E 00 000'Eze'91 1Â¥101 605 965 6888Â£'01 l.9991'6 00'0 9E'ILB'15 0009Â£'ESOZ fL 888 100'Z 00-El'FOO.Z 00 000.000'2 009*5 10/LZ/ZO O 0.)I]116 LE'Â§ 46'5 L9)-916'LE 00-OSL'X 00 0 Et'-BOL S 00 009'LOO'Z LS'168'866'1 00 OSL'866' 1 00'000.000'Z ij go osT+6 1 0/1 E/Â§0 0 0,1 1 E DEL ZOE 68Â£19'171 L 1'62'5 00 0 9Â£ 94Â£ 901 00 000'560'1 49'ESE'886 00 00t'Z86 00-000 000'1 -0 2/51/10 SLB-9 00/01/ZO Purchase Rate/ Mat Par Value/ Accrued Interest Interest Interest Accrued I uolle.Iod.103 001,1.109 S.10)SOAUI IndioiunIN VIHIN 2 68Ed- sjuip[of 1 Historical Cost/ Amortized Cost/ Fair Value/ Unrealized 0 ()0 820.65 5,278.96 0.00 9 10.822.35 0.00 (710.05) 567 80 0.00 1,925.00 00'061'El ZZ 9t 00-0 00-OOL El (GL-897 99+96 00~000'92 00*0 0.00 (45.12) 7.884.00 00 092 91 (OL-ILI) 00*0 55 299'IZ f9'lEE 00 0 00-OLE'*Z Ll FOZ 00 0 90'110 El'gif'gl 0.00 989.57 12,962.50 2001 FNMA 0.00 1.117.84 Â£9 fE L9-916'Z 0.0() LOOZ/1Z/EO : LU fu 3 d Â£ 2 h M cr storical Cost/ Amortized Cost/ Fair Value/ Unrealized Total 'MI CUSIP/ Purchase Rate/ Maturity/ P crued Interest Accretion Change Interest Acl:rued Port GRAND TOTAL 33,952,375.00 33,663,781.17 33,822,685.23 34,842,521.99 1,019,836.76 125.825.00 146.813.01 428,463.85 100.00 uoun.lodIOJ 30[A.toâ‚¬ golsoAUI ind!3[uniN VIE]IN Â£ osed - SBUIppH 15,438.13 11.762.56 260.963.56 iti RseHeld C=callable Description Date Coupon Call Date Purchased (Amortization) in Fair Value (Loss) Received Interest Cost Yield 1 - i %3 .C 1 4 NU 0 U 1 %n 1 2 -5 U. U U NZ 0 + Par Value/Shares Unit Cost Principal Cost Interest Purchased Yield 8273J9 09/26/01 5.875 09/30/02 1,000,000.00 103.344 1,033.437.50 28,732.92 2.50 391 Accrued TOTAL 1.000,000.00 1,033,437.50 28.732.92 GRAND TOTAL 1,000,000.00 1,033,437.50 28.732.92 uo iltuodito 3 001 /UOS N.101143Au l ludi oi un IN V I H IN 1 OSEd - SONULpind eptember 1, 2001 - September 30, 2001 Sample Re Securities Putle U.S. Treasury lÂ·r; e 9 Â« i 24 66* ./ E . 0@ U = 32 EN o I 6- I ' h lad: 1 - Ii. Lr, 1 1 . 53<f 1 3 .1 W 0.- 6 -- r - . . C 0 0 0.- N 9 4 1 f f - - N 238% f S 0 2: 1 3# 3 4 UD 0 1 = rs 5, l 3400NN9 09/19/01 7 900 09/19/01 1,000,000.00 1.059.190.00 1,000,000.00 too.000 1,000.000.00 0 00 0.00 39,500.0() 3.950,00 5.27 GRAND TOTAI. 1,000,000.00 1,059,190.00 1,000,000.00 1,000,000.00 0.00 39,500.00 3.950.00 Date Coupon Call I)ate Shares Cost Received Earned Yield IOTAL 1,000,000.00 1.059.190.00 1.000.000.00 1,000,000.00 0.00 39,500.00 o.()() uot 18.todjo ) 01[Alos S.IOTS0AU1 [edIBIun IN VIE] IN I ded - so[US for the period September 1, 2001 - September 30, 2001 Sale or atunty Realized A (1.880.00) (00*088'1) (1,201.15) (1,880.00) Securities Sold and Matured Maturity Rate/ Maturity/ Par Value/ Interest In est 0 00 0.00 Historical r; 1 t h Â¢ N a 6 CD i 583 fn 0.00 CUSIP [)ate Transaction Description Par Value/Shares Principal income Transaction Total Balance M5QB9 09/15/01 Interest FIll.B 09/15/03 1,600,000.00 41,000.00 41,000.00 41,000.00 00NN9 09/19/01 Matured Fl ILMC 09/19/01 1,000,000.00 1,000,000.00 39.500.00 1,039.500.00 1,080.500.00 3133MDMQ3 09/21/01 Interest F}-11.B Call 03/21/05 2,000,000.00 55.450.00 55,450.00 1.135,950.00 9]28273.J9 09/26/01 ight T-Note 09/30/02 1,000,000.00 1.033.437.50 28,732.92 (1,062,170.42) 73.779.58 thdrawal September Fee MBIA-MISC 3,739.73 3,739.73 (3,739.73) 70,039.85 00-SLE'6Z 00'5LE'GE 00 9LE'62 00'000'000' 1 ZO/0060 0]ON-1 iso.,#lul 10/0Â£/60 6fELZHE [ 6 Uoilt.lodlo) 03'A.IOS S.10]KJAul indi:Iunw VIE]IN 1 0#Ed - 1.lodoli uouoUSUE.Il EL'6Â£L'Â£$ 41UOIN 041 101 pIEd SON Imo I 58'6E0'OLS tliuOIN 041 10 I ICA\13.lpt[JI/\\ loN 00 0$ I[luoIN 741 Â·toi uounquluod) loN for the period September 1, September 30, 2001 Sample Report Transactio quatuked ha-Ia}Ul pUR %31}1Â·Inlik UIOJJ Jiqt,A!.33}1 4%BI) Beginning Balance aiquA! aiatl 3% a.,a,ul le)01 b Â© C 1 ~3 0 90 1 *m 1 2 - = 00 [)ate I)escription Rate Maturity Par Value/Shares Broker Bid/Offer *Accepted Comments UOile.IOdIO'-) 00[Alos s.tolsoxul ludimunIN VIEWN 1 Otied - 131IO pUE pIEI 09/26/01 T-Note 09/30/02 1,000,000.00 Banc of America Securities 103.1275/ UBS Paine Webber 103.1225/ Merrill Lynch 103.1100/ *Accepted le Report for the period September 1 - September 30, 2001 3.875 1 1 1 1 1 1 1 1 1 1 3 1 1 1 1 1 1 1 1 1 ';#..I-. # 7tl . Â»17.I/=SL Aif~ i' -6~--: 458 - ----- *:*F 1 20 . 1 - ..;r. 4*yau;.1.Nk#J- 4* ABL4 MBIA Municipal Investors Service Corporation Customized Asset Management Public Sector Client List Municipalities City of Greeley 1000 10th Street City of Boulder Greeley, CO 80631 PO Box 791 Contact: Mr. Timothy Nash, Director of Finance Boulder, CO 80306 (970) 350-9730 Contact: Ms. Kathleen Simson Love, Client since February 2000 Director of Finance and Record (303) 441-3009 City of Lafayette Client since January 1993 1290 S. Public Rd. Lafayette, CO 80026 City of Colorado Springs Contact: Mr. Robert Hartwig, Finance Director 30 South Nevada Avenue (303) 665-5588 Colorado Springs, CO 80903 Client since March 2001 Contact: Ms. Marge Tantanella, Accountant (719) 385-5111 City of Littleton Client since June 1993 2255 W. Berry Avenue Littleton, CO 80165 City of Englewood Contact: Mr. Jim Harmon, Finance Director 1000 Englewood Parkway (303) 795-3781 Englewood, CO 80110 Client since May 1999 Contact: Mr. Steve Dazzio, Chief Accountant (303) 762-2410 City of Longmont Client since May 1991 Civic Center Complex, 350 Kimbark St. City of Fort Lupton Longmont, CO 80501 130 S. McKinley Avenue Contact: Ms. Betty Simpson, Assistant Director of Fort Lupton, CO 80621 Finance Contact: Mr. W. Alan Ruge, Finance Director (303) 651-8670 (303) 857-6694 Client since December 2000 Client since July 2001 City of Steamboat Springs Town of Frisco PO Box 775088 PO Box 4100 Steamboat Springs, CO 80477 Frisco, CO 80443 Contact: Mr. Don Taylor, Director of Financial Contact: Mr. Clayton G. Brown, Town Manager Services (970) 668-5276 (970) 879-2060, ext. 240 Client since July 1998 Client since January 1993 City of Golden City of Westminster 911 10th Street 4800 West 92nd Avenue Golden, CO 80401 Westminster, CO 80030 Contact: Ms. Crystal Dorsey, Chief Accountant Contact: Mr. Bob Eichem, Treasury Manager (303) 384-8021 (303) 430-2400, ext. 2043 Client since January 1994 Client since June 1998 1700 Broadway, Ste. 2050 Denver, CO 80290 Telephone 303-860-1100 Fax 303-860-0016 - -' :1-66 4 .f-,7.3 -E'-~I--- 1 /2 - 4~ 41~k- 81J~ , 2 .i@*41W/Bte/// " F =i- .-1. 2. .==2 eli 1 8 BL4 Counties Colorado Springs School District #11 1115 North El Paso Eagle County Treasurer Colorado Springs, CO 80903 PO Box 479 Contact: Mr. Glenn Gustafson, Executive Director of Eagle, CO 81631 Financial Services Contact: Ms. Karen Sheaffer, Treasurer (719) 520-2010 (970) 328-8868 Client since May 1995 Client since September 1997 Self-Insurance Pools Garfield County Treasurer P.O. Box 1069 CEBT c/o The Urman Company Glenwood Springs, CO 81602 5660 Greenwood Plaza Blvd., Suite 330 Contact: Ms. Georgia Chamberlain, Englewood, CO 80111 Treasurer and Public Trustee Contact: Mr. Frank Urman, President (970) 945-6382 (303) 773-1373 Client since January 2000 Client since November 1995 LaPIata County Treasurer Colorado Intergovernmental Risk Sharing PO Box 99 Agency Durango, CO 81302 3665 Cherry Creek North Dr. Contact: Mr. Ed Murray, Treasurer Denver, CO 80209 (970) 382-6244 Contact: Mr. Patrick Priest, Chief Financial Officer Client since August 1997 (303) 757-5475 Client since September 2001 Park County Treasurer 501 Main St. Colorado School Districts Self Insurance Pool Fairplay, CO 80440 455 Sherman St., Ste. 500 Contact: Ms. Michelle Miller, Treasurer and Public Denver, CO 80203-4405 Trustee Contact: Ms. Adele Ghiazza, Manager of Financial (719) 836-4334 Services Client since June 2001 (303) 722-2600, ext. 15 Client since August 1999 Routt County Treasurer P.O. Box 770907 Special Districts Steamboat Springs, CO 80477 Contact: Ms. Jeanne Whiddon, Treasurer/Public Centennial Water and Sanitation District Trustee 62 West Plaza Drive (970) 870-5420 Highlands Ranch, CO 80129 Client since December 1999 Contact: Mr. Bruce Lebsack, Director, Finance and Administration School Districts (303) 791-0430 Client since July 1995 Academy School District #20 7610 North Union Boulevard Cherokee Metropolitan District 1992 Bond Colorado Springs, CO 80920 Reserve Contact: Mr. Wilson Hatcher, District Fiscal Officer 1335 Valley St. (719) 598-2570 Colorado Springs, CO 80915 Client since April 1992 Contact: Mr. Stuart Loosley, General Manager (719) 597-5080 Client since March 2001 1700 Broadway, Ste. 2050 Denver, CO 80290 Telephone 303-860-1100 Fax 303-860-0016 1!rÂ¢*- - 1 ..,AL- 1 -BLâ€¢ Eagle River Water and Sanitation District Other 846 Forest Road Vail, CO 81657 COLOTRUST Contact: Ms. Becky Bultemeier, Finance Manager 1700 Broadway, Suite 2020 (970) 477-4442 Denver, CO 80290 Client since October 1989 Contact: Mr. Bert E. Huszcza, Chairman, Board of Trustees Highlands Ranch Metropolitan District No. 1 (719) 269-6407, ext. 3022 62 West Plaza Drive Client since October 1997 Highlands Ranch, CO 80129 Contact: Mr. Bruce Lebsack, Director, Finance and Housing Authority of the City of Colorado Administration Springs (303) 791-0430 PO Box 1575 Client since July 1995 Colorado Springs, CO 80901-1575 Contact: Mr. Richard M. Sullivan, Executive Director Highlands Ranch Metropolitan District No. 2 (719) 385-5317 62 West Plaza Drive Client since May 1996 Highlands Ranch, CO 80129 Contact: Mr. Bruce Lebsack, Director, Finance and Administration (303) 791-0430 Client since July 1995 Highlands Ranch Metropolitan District No. 3 62 West Plaza Drive Highlands Ranch, CO 80129 Contact: Mr. Bruce Lebsack, Director, Finance and Administration (303) 791-0430 Client since March 1999 Highlands Ranch Metropolitan District No. 4 62 West Plaza Drive Highlands Ranch, CO 80129 Contact: Mr. Bruce Lebsack, Director, Finance and Administration (303) 791-0430 Client since July 1995 Southgate Sanitation District 3722 E. Orchard Rd. Littleton, CO 80121 Contact: Mr. Duane Tinsley, General Manager (303) 779-0261 Client since March 2001 Southgate Water District 3722 E. Orchard Rd. Littleton, CO 80121 Contact: Mr. Duane Tinsley, General Manager (303) 779-0261 1700 Broadway, Ste. 2050 Client since March 2001 Denver, CO 80290 Telephone 303-860-1100 Fax 303-860-0016 1 1 1 1 1 1 1 1 1 1 1 1 1 4 1 1 1 1 1 1 " FIRM Structured Finance FITCH IBCA, DUFF & PHELPS 1 1 Managed Funds City of Colorado Springs, Credit Analysis Colorado Investment Portfolio 11 Rating â€¢ Summary 11 City of Colorado Springs, Colorado The City of Colorado Springs, Colorado Investment Portfolio, with Investment Portfolio..................AAA/V1 + approximately $120.8 million in assets, is rated 'AAA/Vl+'. The rating is assigned only to the investment portfolio that is advised Analysts through a nondiscretionary agreement with MBIA Municipal Investors 11 Katherine P. Lynch Service Corp. (MBIA-MISC). Investment portfolios and pools rated 1 212 908-0892 'AAA' meet the highest credit quality standards for underlying assets, katherine.lynch@fitchratings.com diversification, management, and operational capabilities. The portfolio 's volatility rating reflects low market risk and a strong 11 Lara Storm capacity to return stable principal values to meet cash flow 1 212 908-0243 requirements, even in severely adverse interest rate environments. lara.storm@fitchratings.com Portfolio valuation reports are submitted to Fitch monthly. 11 Issuer Contact 1 Rating Considerations Steve Hilfers Director of Finance â€¢ Conservative investment policies and practices, as evidenced by 11 1719385-5919 maturity limits and avoidance of volatile derivative securities. â€¢ High standards for credit quality and diversification. â€¢ High degree of liquidity resulting from maturity profile and . 0. composition of portfolio cash flow needs. â€¢ Solid management oversight and operational controls. â€¢ Overview COLORADO . Colorado Springs is located in El Paso County, CO. The primary 11 Bouldero Englewood 00 Denver revenue sources are sales and property taxes. The city's investment portfolio represents the pooling of the city's cash management funds oGrand for investment purposes. The investment portfolio is composed of 1 1 Junction general operating funds, debt service, and airport funds. MBIA-MISC Colorado Springs provides investment management services, including the development of an investment strategy. The director of finance is responsible for o Durango defining the investment policy, procedures, and controls. The city's 11 and MBIA-MISC's objectives in managing the portfolio, in order of priority, are safety of principal, maintenance of sufficient liquidity to meet anticipated cash flows, attainment of a market value of return 11 commensurate with the preservation of principal and liquidity, conformance with all applicable regulations, and diversification. â€¢ Investment Practices The city, with MBIA-MISC's assistance, pursues its investment objectives by investing in a portfolio of high-quality money market and intermediate-term securities, maintaining a cash position sufficient 11 to meet liquidity needs, and maintaining a weighted average maturity (WAM) of less than three years. Maturity distribution is managed by a "laddered" approach through diversifying across securities with 11 maturities from overnight to five years. .. 11 September 6, 2001 www.fitchratings.com 11 FicÂ¢i Structured Finance FITCH IBCA, DUFF & PHELPS Portfolio Weighted Average Maturity Portfolio Maturity Profile ~ (AsofJune 30,2001) (Days) 600 (%) 30 - 500 X_--â‚¬C._-_ - -- 400 | 25 20 300 ~..1,1 200 1 5 1--~ 100 ' o lifi 0 1 1 <30 042 40 0 40 qf 40 #P <f rf Â¢04 6104 0 70 /4 % 93 4> 9 4 04 AO CO y CP MBIA-MISC manages the portfolio in accordance 30,2001. The remaining composition of the portfolio with the Colorado Revised Statutes (CRS). Allowable consisted of 18% in repurchase agreements and 4.5% investments, as stated in the investment policy, in cash equivalent. The city also periodically include: U.S. Treasury securities, including strips; purchases CP. Although the city's investment policy obligations of certain federal government allows investment in bankers' acceptances, instrumentalities; purchases of U.S. Treasury certificates of deposit, money market fund and local securities, subject to a repurchase agreement with a government investment pools, and obligations of termination date of within 180 daysi certificates of Colorado Springs, the fund historically has not used deposit; bankers' acceptances; money market and these options for investment opportunities. local government investment funds; highly rated commercial paper (CP); and obligations of the City The WAM of securities held in the portfolio was . of Colorado Springs. Commercial paper securities approximately 433 days ( 1.19 years) as of June 30, must have maturities of less than 270 days and be 2001. By policy, the portfolio must maintain a WAM issued from a program of more than S200 million. o f three years or less and may not purchase individual With regard to U.S. instrumentality securities, the securities with a final maturity greater than five city may invest in callable securities but not floating- years, except by prior written approval of the director or variable-rate securities. of finance. In recent years, the portfolio has been composed The investment portfolio further manages its maturity primarily of U.S. Treasury and federal profile by using an investment strategy that combines instrumentality securities, representing 33.9% and a significant liquidity position with securities 43.6% of the total portfolio, respectively, as of June laddered with maturities of up to five years. TO further meet liquidity needs, 5% of the total Portfolio Composition investment portfolio must be invested in securities (As of June 30, 2001) with maturities of 30 days or less. In this regard, the u.s. city has adopted certain maturity diversification Treasuries guidelines, but, generally, MBIA-MISC maintains a 33.9% more conservative position than required by the city's guidelines. â€¢ Liquidity Repurchase The portfolio conservatively manages its maturity ~ Agreements \ ~ profile to ensure a high degree of liquidity to meet 18.0% U.S. Agency/ Instrumentalities anticipated and unanticipated cash needs. As ofJune 30, Cash 43.6% 2001, 26.2% of the portfolio was invested in Equivalent 4.5% securities maturing in one-90 days, with 18% in cash equivalent holdings in overnight repurchase â‚¬ City of Colorado Springs, Colorado Investment Portfolio 2 i YTC Structured Finance FITCH IBCA. DUFF & PHELPS agreements. In addition, the city positions some portfolio invests only in 'AAA' quality U.S. Treasury investments to provide liquidity for certain and instrumentality securities, high-quality commercial predictable obligations, such as debt service paper, certificates of deposit, bankers' acceptances, payments. The funds are under the control of the city. local government investment pools, money market Thus, the portfolio has added cash flow stability that mutual funds, obligations of the City of Colorado would not be present in a local government Springs, and repurchase agreements with counterparties investment pool or money market fund with that have outstanding short-term debt ratings of 'F1' voluntary participants or shareholders who may or higher by Fitch. withdraw their funds at any time for reinvestment elsewhere. MBIA-MISC provides investment 1 Investment Management management services, including a review of cash Colorado Springs has used American Money flow projections and the development of an Management Associates, Inc, (AMMA) as an external investment strategy. The director of finance has money manager since August 1993. Portfolio securities ultimate responsibility and authority for the are held through a safekeeping arrangement with Wells investments. The investment income derived from Fargo. AMMA was merged with its parent company, this account is allocated to the various funds based on MBIA-MISC, effective May 2000. MBIA-MISC and each fund's respective participation. Portfolio MBIA Capital Management are wholly owned beneficiaries include operation funds, airport funds, subsidiaries of MBIA Inc. Formed in 1990, MBIA- and debt service funds. MISC currently provides investment management services for public entities and local government â€¢ Credit Quality investment pools and cooperatives, with The portfolio has the highest credit quality based on approximately $10 billion in assets in 19 states and investment practices, diversification standards, Puerto Rico. operational controls, and management oversight. The Copyright Â© 2001 by Filch. One State Street Plaza. NY, NY 10004 Telephone: New York, 1-MOO-753-4824. (212) 908-0500, Fax (212) 480-4435: Chicago, IL, (312) 368-3100. Fax (312) 263-1032: London. 011 44 20 7417 4222, Fax OI l 44 20 7417 4242: San Francisco, CA. 1-800-953-4824, (415) 732-5770. Fax (415) 732-5610 Printed by American Direct Mail Co., 1nc. NY, NY 10014. Reproduction in whole or in part prohibited except by permission. Fitch ratings are based on mformation obtained from fund managers, underwriters, sponsors, investment advisors, and other sources Fitch believes to be rchable. Fitch does not audit or verify the truth or accuracy of such intbrmation. Ratings may be changed. suspended. placed on Fitch Alert. or withdrawn as a result o 1- changes in. or the unavallahility o f. inthrrnal inn or for /her reasong Ratings are not a recommendation to buy, scH. or hold any fund. Ratings do not comment on the adequacy of yield levels, the suitability of-any fund 1-or a particular investor, or the lax-exempt nature of any fund. Fitch receives fees from fund managers, sponsors, investment adusors, and underwriters for raling funds. Such fees generally vary from $4,000 to $150,000 per issue. The assignment, publication. or d~ssemination o f a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statemenl filed under the federal sccurilies laws. Fitch initial fund volatility ratings are an opinion as to the relative sensitivity of the total return (including price) of a fund's shares to a broad array of assumed changes in (where relevant) interest rates. niongage prepayment speeds. liquidity of the portfulio. spreads, currency exchange rates. and other market cond,tions. Volatillty ratings are expressed on a scale of 'V 1 +' (least volatile) through â€¢V 1 0' (most volatile). The 'V1+' rating is assigned only to money market funds or local government investment pools thal should not experience loss of principal value to shareholders or participants even in severely adverse interest rate environments. Volatility ratings, however, do not predict the direction or magnitude of changes in such market conditions and. therefore, do not predict whether, or the extent to which, any particular bond fund will perform favorably or adversely in the future. Also. the total returns of bond funds with the same volatility ratings but dissimilar portfolio securittes may move m different duectins and magnitudes under the same market conditions. For example, while both a high-yield bond fund, which is sensitive primarily to changes I credit risk, and an international bond fund, which is sensitive primarily to changes in currency exchange rates, might have 'V6' ratings, they are likely to perform differently under the same market conditions. The price of one can increase while that of the other can decrease, or each mighl tnerease or decrease in different magnitudes. Moreover, a fund with a 'VE' rating might increase in price. while a fund with a 'V3' rating might decrease in price. Nevertheless, a fund with a lower risk volatilitv rating is hkely to exhibit less total return sensitivity than a fund with a higher risk volatility rating across a broad and varied range of market conditions. Investors should understand that funds wilh any volatility rating other than a 'V 14' may experience losses in the event of adverse changes in market conditions. Moreover, these ratings do not conslitute a recommendation to purchase. sell or hold any securities or funds. as they do not comment on the adequacy of the price paid for any security or fund or the suitability of any security or fund l'or any investor. Fitch's mutual fund volatility ratings are based on information provided to Fitch by sources deemed to be reliable. However, Fitch does not verify the accuracy of this underlying information. Due to the relative efficiency of electronic publishing and distribution, Fitch Research may be available to electronic subscribers up to three days earlier than print subscribers. City of Colorado Springs, Colorado Investment Portfolio 3 Dear Clients and Friends, Enclosed is your copy of the MBIA Inc. 2000 Annual Report. The efforts we made in 1999 to strengthen our balance sheet produced solid results in 2000. It was a year of expanding our global franchise as we furthered our commitment to no-loss underwriting, our Triple-A ratings and building shareholder value for our owners. We invite you to follow our progress through 2001 by visiting our web site, www. mbia.com. JAY BROWN GARY DUNTON Chairnian President MBIA 2000 Annual Report . - .I-2 I.-7 /"I. /NIF t.r, le. * \>r 4 1 i#/4 /u 36. 4 4Â·â‚¬7 : - 14 '.A l 1 Capital Strength 1,2 Triple-A Performance - *1%.#0*%*1* $13 billion in interest costs since inception 26 ~~~~~~~~~'~i_ *6,084*&*AGAR=iRR.*~WK '*#A'*61% MBIA also provides revenue enhancement revenue enhancement services to the public years ago. tax sources. and private sectors. MBINs Triple-A pledge on municipal bonds Â¥*4*#R#*4*##O*#44*0#*Pli- ~011)~kim-40*W,j~AlV<-A and structured finance transactions around the ment management options for state and local Poor's Rating Services, Fitch and Rating and IA#'#1*04%04*9*h~i]*MiÂ¥@*jll?' iN'iljolw! Wilwl'KIM'***#h:- Investment Information, Inc. net-worth individuals. Our success resides in our unparalleled financial resources as well as our human capital-the expertise and commitment of our employees. These are valuable assets that we invest in, protect and nurture to generate Triple-A performance for our Company and our shareholders. Together our financial and human capital create results for our clients. ESULIS Security > Financings insured by MBIA - from an airport in South Australia to an art museum in San Francisco - are backed by our unconditional and irrevocable guarantee of full and timely payment of principal and interest in the event of default. That translates to security for issuers and investors alike. Solutions > MBIA's investment management products and rev- enue enhancement services provide innovative solutions for public- and private-sector entities by optimizing their assets while safeguarding funds. Strength > MBIA's capital strength. financial resources and staff expertise are the foundation upon which our industry-leading franchise is built. in millions except per sh@re amounts 2000 1999 1998 2000 VS 1999 1999 vs 1998 Net income $ 529 $ 321 $ 433 65% -26% Gross premiums written 687 625 677 10% -8% Revenues 1.057 964 912 10% 6% Total assets 13,894 12,264 11.826 13% 4% Shareholders' equity 4.223 3.513 3.792 20% -7% Per share data: Net income Basic $ 5.37 $ 3.22 $ 4.37 67% -26% Diluted 5.33 3.19 4.32 67% -26% Diluted core earnings - 4.91 4.34 4.19 13% 4% Book value 42.89 35.34 38.15 21% --- - -71 - Adjusted book vallie 60.40 52.51 53.28 15% -1% Return on average shareholders' equity 13.7% 8.8% 12.1% Total claims-paying resources $9.140 $8.539 $7.797 7% 10% 2 =LU.82 A 1 s 11. 22 r ...=Â¥If 624. 2, ta ~Â·.Â· ' imf Â£ :L -I, ~.d l..Â« 0 ji ~~~~~~~~~~ 1997 1998 ~~ Revenue Diluted Core Earnings and Book Value & Adjusted Book Dollars in millions Diluted Earnings per Share ($) Value per Share ($) I Diluted earnings per sh@re I Book vatue per share I Diluted core earnings per share* â€¢ Adjusted book vatue per share* *Excludes net income effects of refundings *Includes after-tax effeds of deferred premium rev- of insured issues. capital gains and losses. enue (net of reinsurance and related expenses). pres- and one-time charges. ent value of future installment premiums and the unre- @lized gains or tosses on investment contract liabilities. 2 > Financial Highlights. 3 > Letter to Shareholders. 7 > QU with Gary Dunton. 10 > Review of Operations. 28 > Human Capital. 30 > MBIA-at-a-Glance. 33 > Financial Review. 63 > Board of Directors and Senior Officers. 65 > Shareholder Information. ~ c. I To Our Owners In my letter ........ ek 1 ~ to you last year, I reported that lip.%% Â¢~Â»11 IlllIN#07.â€¢ we initiated a number of steps I =6-,1~ in 1999 to position us better for ~~ long-term growth, though they -7~//~.<W)%?i penalized our short-term z.,.~5~ financial results. I am pleased ..~~ to report that these steps bore fruit in 2000, as both our under- lying and reported numbers notched up nicely, albeit at the lower end of our stated objectives of a 15% ROE and growth of 12% to 15% annually Equally important, we ended the year with our balance sheet on a very strong footing and strong prospects in all of our businesses. While I will not be satisfied unless we do a bit better in the years ahead, this was an acceptable year. Although the day-to-day execution of our busi- increase in variable pay for a slightly reduced ness plan contains many risks and challenges, our staff. This tracked with the better performance core strategy is based on some pretty simple we delivered for our owners this year compared principles. First, we need to make sure we have to last. the best team. This means recruiting, trainiiig, Secondly, our core insurance operation motivating, retaining and encouraging those peo- requires that we strive to achieve perfection ple who can execute our plan and rise to the through a no-loss underwriting approach. It will challenges presented by the market and our com- be many years before this year's decisions "age" petitors. As we asked for more from every enough to know how close we came, but the employee, we also put more days of training in year-end assessment looks strong. Our third place and rotated a significant number of the core strategy is to niaintain a strong Triple-A insurance team. With better numbers came an franchise for both existing customers and to Jay Brown "IMP/-. Â·'31-- 13.....*...1 - 3 i ~ . ~.4*f~*ti~ ... - 4, 4 ..# 4 V Â·Â· ..1,2k*428 lia*A/1/ i- - provide opportunities for the future. By all out the nuances of a Joint Venture. David Elliott measures we ended the year stronger than we made a great decision iii initiating the partner- began. Our last goal is to build value for our ship with Ambac and providing a great platform owners. On this front we are back on track to to build on as we go forward. Jack Caouette increasing the value of the enterprise at a 12% moved to London and led his team to a 40% to 15% annual compound rate. growth. We fully expect to see around 25% com- 4 - We did make one major strategic decision pound annual growth iii the next five years in 5 early in the year. It was a tough call after five these rapidly expanding markets. extraordinarily successful years in operating My partner Gary Dunton continued leading internationally through a Joint Venture with our our push on underwriting high quality credits at major domestic competitor Ambac; the decision an acceptable margin in our insurance opera- was reached that both companies could now tions. Quality increased and we maintained inar- succeed alone. We started the Joint Venture in gins comfortably above what will be needed for the mid-nineties to minimize expenses and us to achieve our 15% ROE and profit objectives. maximize our reach as the global capital mar- Despite another year of reduced opportunities in kets developed. Having established a major pres- the domestic public finance market, we saw ence for the financial guarantee industry outside opportunities in domestic structured and inter- of the United States, we concluded that the orig- national business that allowed us to increase inal premise of expense savings had been adjusted gross premiums 11%. Our continued achieved and both companies could effectively focus on balancing our portfolio resulted in our compete in the large and growing market with- ceding 28% of our premium well in excess of my Executive Policy Committee > Ram Wertheim. Kevin Silva. Bob Wheeler. Mark Zucker Gary Dunton 4 I A41. a... ililill ..1 lifill,Â£4 I Itiz::4#.Ill'll'llf. 9.4. 2 . v. r. ...... ' gpi *R 0 4.: .> M, 9%241 *~6 ... 42 09/......min....... ./Â£*1 forecast last year of 17% to 20%. Given the unallocated loss reserve grew 12% to $259 mil- diversity of risks we see in our expanded opera- lion and total loss reserves were up 7% to $468 tions, it would seem that this ratio will bounce million. Although the decision to increase this around quite a bit from year to year so I will not provision in 1999 was painful, it will serve us try and give a precise forecast again this year. well as we go through the inevitable bumps we Gary, Neil Budnick and the entire insurance see from time to time. team did a fine job in bringing our expense MuniServices had another very challenging growth back in line in 2000. Policy acquisition year as they 11arrowed their focus to a smaller expenses before deferrals were tlat and operating number of accounts. New profitable production expenses grew only 4%. While we saw improve- and a further reduction in expenses allowed them ment in our statutory expense ratio from the to achieve their 2000 goal of making a modest 23.6% we recorded last year to 22.1%, we will $600 thousand profit versus the $12 million loss not be satisfied until we hit our goal of getting recorded in 1999. We expect Tom Wilkerson and below 20%. his team will see nice progress in the Year ahead Neil and the finance team continued to focus as they push towards becoming a significant cash on maintaining a strong balance sheet for our and profit generator for our owners. insurance operations. With our overall portfolio Our asset management operations had quality notching up a bit, we were able to grow another fabulous year under the leadership of claims-paying resources at the same 7% growth Thacher Brown, increasing assets under man- we saw in aggregate net debt service and provide agement to $36 billion, an increase of 22% from strong cash flow to our holding company. Our the prior year. Operating margins held firm in John Pizzarelli. Dick Weill Ruth Whaley, Jack Caouette, Neil Budnick the mid-forties with operating income increas- pay out $81 million in dividends to our owners. ing 38% to $56 inillion. The team at 1838 led As we closed the year the value of our insur- the way with a 59% increase in income, and ance product is again in the news. Holders of Marc Morris and his team also had a fine year MBIA-insured debt of utilities based in recording a 41% increase. MISC and CMC also California know their cash flows are secure and saw double-digit increases in assets under man- have seen virtually no change in value as values agement and continued to make solid contribu- for uninsured debt have fallen by as much as tions to the bottom line. 50%. While the energy situation in California is In contrast to 1999 where write-offs and complex, it is essential that electricity will flow balance sheet actions dominated the story, the and we remain optimistic that an acceptable reported numbers were a tad more positive iii solution will ultimately be achieved with 2000. With some help from the drop in interest minimal losses, if any. rates and a return to solid profitability, our own- Having returned to performance consistent ers equity increased 20% to $4.2 billion and a with our past and at the low end of our long- 6 corresponding increase in book value per share term range of objectives, we are looking forward was recorded from $35.34 to $42.89. Although to another year of building our franchise value. I 7 we achieved an 11% increase in adjusted gross continue to be excited and challenged by the premiums written, we only achieved a 9% bright prospects we see in our core business and increase in deferred revenue resulting in a more feel energized leading the team of talented modest 15% growth in adjusted book value to MBIA employees who are working hard and $60.40 per share. smart to create value for our owners. MBIA's net income exceeded a half billion for the first time in 2000. This was driven by a core income per share increase of 13% to $4.91, at the low end of our targeted range. A significant drop in refunded premiums held our operating 942 income growth to 8% at $5.12 per share but ... operating ROE was acceptable at 13%. These JOSEPH W. BROWN good results and our strong balance sheet Chairman and Chief Executive Officer allowed us to buy back 1.7 million shares and March 6,2001 Q&A with MBIAs President *PifiNA' - --~- During the course of the year, 3~. I.-1 - we field various questions from shareholders. analysts. 1 - clients, rating agencies and the ~ 04 ..~ Ri N fl- media. Gary Dunton answers . 5 fi some of these questions for 4"/1 1~, : /1/ -0 1 you here. . ri .Ilif CAN MBIA COMPETE SUCCESSFULLY WITH SINCE MBIA IS THE LARGEST MONOLINE. WHY MULTILINE INSURERS SEVERAL TIMES ITS SIZE? DOESN'T IT HAVE THE LOWEST EXPENSE RATIO? Yes, much as in the way a single-event For many years we did have the lowest expense Olympian can successfully compete against a ratio - but the lowest expense ratio per se is decathlon athlete - through focus and concen- not the most important element of our busi- tration of resources. We are an insurance com- ness or our financials, especially given the pany specializing in credit enhancement for increasing breadth of our business opportuni- public finance and structured finance clients ties. No-loss underwriting and strengthening globally. All of our critical resources are con- our leading business franchise are more centrated on those two markets - new business important elements. Having said that, we are production, underwriting, product develop- very determined to lower our statutory ment, surveillance and portfolio management. expense ratio to 20% or lower in the current As a result of our resolute and limited focus we year. It may or may not be the lowest in the have developed the scale and very competitive industry. In any event, we will continue to skills necessary to both underwrite effectively invest significantly in our future -in the and provide second-to-none service to our cus- growth and development of our employees, in tomers in these markets. continuing the development of our state-of- the-art portfolio management capabilities, and in having the quality and quantity of profes- Gary Dunton sionals where our customers need them - to more capital than even our current attractive name but three key initiatives. business prospects require. Such capital has been and will be used to repurchase shares MBIA HAS HAD BAD EXPERIENCES IN THE MUNICIPAL when we feel the price is attractive. However, SERVICE SECTOR. WHY DOESN'T IT SELL MUNISERVICES? we would much prefer to use our capital for the Yes, we have certainly learned our lessons further profitable expansion of our franchise. regarding diversification into businesses that are new to us and/or capital intensive. Iii the MBIA HAS STATED IT IS TRYING TO ALIGN EMPLOY- case of Capital Asset, it's been both. Our EES' INTERESTS WITH THOSE OF ITS OWNERS BY remaining MuniServices platform centers EMPHASIZING MORE STOCK-BASED INCENTIVES. IS around providing municipal governments with THIS CHANGING THE CULTURE? revenue enhancement services - tax discovery, Our culture is definitely moving toward more audit and collection and the provision of tax- alignment between employees and sharehold- payer information. We both understand this ers. All officers of MBIA, from the vice president 8 business and believe it to have decent prof- level and above (43% of the total employee 9 itable growth prospects. We are however keep- base) have a significant percentage of their ing our eyes open for potential partners who total compensation tied to both the price of might help us grow this business further. our stock as well as to the growth in adjusted book value. The percentage ranges from 15% HOW DOES MBIA MAKE CAPITAL ALLOCATION DECI- for vice presidents to over 80% for Jay and me. SIONS? SHOULDN'T IT JUST BUY BACK MORE STOCK? In addition, all of the company match for our We allocate capital based upon business oppor- 401k plan is in the form of MBIA stock. An tunities to grow our core credit enhancement example of our employees' concern is instruc- and asset management businesses profitably. As tive. We frequently have all employee meetings a result of our recent success at getting more to discuss important business issues. The most price for our insurance product coupled with well attended meeting over the past few years prudent risk and capital management, we have was one we called when our stock price sank been able to strengthen our capital base. For to $36 last year. EVERYBODY was concerned the first time in many years we are generating and incentivized! Â¥ I <>Â« h I -4 3 "4 - f .' J . 4 11 014 4 F ; 2 - 80,1 â‚¬ 0 3 . 43 0;11 1 2 5,4- . i .\1 - -*I :~*& -Â£ MBIA HAS A NO-LOSS UNDERWRITING APPROACH. MBIA HAS THE LARGEST UNALLOCATED LOSS WHY DOES IT KEEP HAVING LOSSES? RESERVE AMONG THE MONOLINES. WHY DOES IT Our no-loss underwriting standard - no losses KEEP ADDING RESERVES AT A FASTER PACE THAN ITS under the worst probable case scenario - is the COMPETITORS AND PENALIZING CURRENT SHARE- most important discipline that we have as a HOLDER RETURNS? Triple-A-rated credit enhancement company. It A key to our success as a Triple-A-rated credit is applied to every transaction we underwrite, enhancement company is to have a balance every day. However, on an overall portfolio sheet of unquestioned financial strength. One basis we have had and fully expect to incur important element is the absolute size and rel- occasional "unexpected" losses. That is why we ative strength of our unallocated loss reserve. have unallocated loss reserves. Over our history At any point iii time we would rather have our statutory incurred losses approximate 3 more than less. In addition, our "more is bet- basis points of our total net debt service writ- ter" approach provides us with further pricing ten. We try very hard to avoid losses through discipline as these reserve costs need to be careful team underwriting and aggressive port- funded out of current premiums. If we find folio management, but clearly it is difficult to over the years that we are being too conserva- be perfect. tive, we can always adjust our additions accordingly. This is certainly better than the other way around. The quality of current earn- ings is very important to us. .,2 + -m~ I, 4472 9Â¢ 1 - :0. 44Â¥t~%~ At . it I Iii I- 6 9 1 . l ty# h 10 + .9,2 7/ / 4 2 0 1, 5 e Â·Â·f : 442 4.74 : 544 445 li0 1 ler- 't=- *., e.,- 4.- , / P 74'e, 1 41'rfi&'A.Al; 1 I , 4. .1% f .. It , d . 1 ,-la \1 , -I'- 198#,-i//f:. jillillillillillillilil -11:Mmmgmil From upper left. Cindy Praschnik. David White > International Paul Mansour > Public Finance. Deborah Zurkow > International. James Allen > Public Finance. Nick Ferreri > Business Analysis. David Dubin > International Hai Hong> International Public Finance. Center: Nick Sourbis > Structured Finance ....... a a. : A .. 0 - . ... ... 0 -- a 1 . . .0-0-- 0 0 - 8 - .... --. . 0 0 . . ... a I I .. . 0 . .. 0. 1 ..- :A A - . 0 . 1. O . .... ...0- 8- 0- 00 0 .. . .... a ...... .0 0 a : A .... .0 0 . 0 1 a . - 0-0 00 0 - . 0 -1 0 0 -- 1 :A ... . 0. 0 . . 0.0 - 0 -0... a. .... 0- a . - 0. 0 ... . a. ... 1 - - .0 - . .. 0 0 0- A. 0- .- a - . ... . a. .0- - a a . . A 1.1 Global A. General Obligation 32% ~~ Public B. Utilities 16% (44 Finance C. Health Care 14% ~-~ G ~H~~ D. Special Revenue 12% '92 E. Transportation 9% a E ~ A F. Investor-Owned Utilities 6% 4449 G. Higher Education 6% 73 H. Housing 4% I. Sovereign/Sub-Sovereign 11;411Â· < ~ c ~ B - This fundamental concept of using Triple-A-rated guarantees to lower interest bor- rowing rates and enhance investor appeal is also embodied in the highly complex worlds of domestitÂ»d interitational*truttured finance. Though the transactions we insure in these markets are innovative and often challenging - from collateralized debt obligations and global infrastructure financings to credit card receivables and franchise loans - the result is always the same: it's a winning strategy for all concerned. And it was, in fact, a winning year overall for MBIA's insurance operations. MBIA led the industry in adjusted gross premium (AGP), which consists of both upfront premi- ums written and the present value of estimated installment premiums for new business writings. AGP increased 11% to $803 million from $724 million in 1999. Insurance operations achieved a 36% increase in insurance operating income to $698 million from $515 million in 1999. Excluding a one-time pre-tax charge of $153 million to increase loss reserves in 1999, insurance operations income rose 5%. Expected rates of return among all our insurance business lines reached record levels for 2000. Significantly, these results were achieved while maintaining strong underwriting cri- teria, as 75% of our par insured was rated "A" or above. Our commitment to zero-loss underwriting and conservative risk management practices underscores the safety, strength and longevity of MBIA's Triple-A ratings, and it preserves our high quality p 9.v insured portfolio while enhancing shareholder value. This commitment is constant across our Public, Structured and International lines of business, and it is the founda- tion upon which our success was, and will continue to be, built. BUILDING STRENGTH IN PUBLIC FINANCE > MBIRs Public Finance Division helps serve the nation's financing needs, offering specialized expertise in general obligation and rev- enue bonds in all municipal sectors. The company also insures bonds in the secondary market for all of these credit types, for the benefit of individual investors as well as for unit investment trusts and bond funds. Higher interest rates led to a sharp decline in new issuance and refundings through- out 2000 - a 25% downturn in insured volume from $104 billion in 1999 to $78 billion in 2000. Despite significantly reduced market activity, AGP for the Division decreased just 5% to $361 million in 2000 from $378 million in 1999. Profitability was exception- ally strong in 2000 through record growth in its secondary market business, restructur- ing opportunities in its health care portfolio and the ability to win mandates to do select deals with the highest possible rate of return. One of the many interesting deals the Public Finance Division insured in 2000 was the $107 million San Francisco Asian Art Museum transaction. The Museum, which opened in 1966 and is today one of world's largest museums of Asian art, had space to exhibit just 15% of its extensive collection. ri--F a- , . I. '. . Ar.\ I ~ ~ ~"~%2*. ~ M.Â¢tÂ·'* 141.1 . Melissa Brice-Johnson > Business Analysis. Carl Favelukes > Risk Management. Bill Cody > Structured Finance MBIA worked with the underwriter and the Museum's finance team to recommend an innovative deal structure. Although the California Infrastructure and Economic Development Bank issued the bonds on behalf of the Museum's Foundation (its fundraising arm), the base loan payments are a direct, absolute and unconditional obli- gation of the Foundation. In addition, the Foundation granted a security interest in its gross revenues to further secure the base loan payments. Today, plans are well underway to relocate the Asian Art Museum from Golden Gate Park to its new home iii the historic San Francisco Civic Center district. Scheduled to open in fall 2002, the new Museum will be a world-class destination for visitors and a source of pride for all San Franciscans, who will finally have a remarkable showcase for this important collection. During the year, the Division furthered the company's commitment to take a lead- ership position in the e-commerce revolution. In Tuly we began offering online insurance quotes on secondary market trades through BondLink, a web-based, real- 14 15 time bond trading service for fixed-income securities. While this technology shows important promise, this year's online activity was modest. We view this endeavor as just the first of several web-based partnerships that will enhance our distribution channels and make MBIA insurance easily accessible through the Internet, as the retail demand for online securities continues to grow. 1/'llim...... [ 0 - 4.- ./04 I - 444,? Jack Lohrs > Risk Management. Lina Chew > International. Steve Citron > Risk Management Global t. tA Pooled Corporate Structured "t Obligations & Other 27% :~ *~ ~HI - Finance fB. H6me Equity 21% - its> 54/ /~ F \ \ 1 A ~ .61â‚¬. Other Asset-Backed 14% f'U / - \\1 (El. Other Mortgage-Backed 11% ~ E ~1 ~ i iE. Auto 10% .c~ df t >45. $ E First Mortgage 9% 33*f D ~ \ B .: 8. Financial Risk 5% . 4225% C\ f 1'11. Leasing 3% STRUCTURING SUCCESS IN THE ASSET-BACKED ARENA > Well-balanced market cover- age, a diversified stream of revenues, and unique market opportunities shaped MBIA's growing structured finance businesses in 2000. Nearly a decade after writing its first pol- icy, the Structured Finance Division's ability to attract new issuers while expanding globally and into a variety of asset classes has resulted in solid results across the board. Despite aggressive underwriting competition in a number of market sectors, the Division achieved AGP of $278 million, up 22% from the year before. Among the Structured Finance business units, the Consumer Asset-Backed Department, which insures transactions backed by a variety of consumer loans, reported steady insured vol- ume growth in automobile loans and credit card receivables and established a number of new issuer relationships. One of the group's noteworthy transactions in 2000 was its $600 million guarantee for Spiegel, Inc., a leading U.S. retailer. The notes are backed by credit card receivables created through cardholder purchases at Spiegel's retail facilities, which include Eddie Bauer, Newport News and Spiegel Catalog. Working with Spiegel's finance team and the lead. underwriter, Banc of America Securities, MBIA helped struc- ture an efficient and unique deal which resulted in significant cost savings and a diversi- fication of funding for Spiegel. The Division's achievements are due primarily to its principal competitive advan- tages: exceptional staff expertise and global client relationships. The combined skills of 40Â°3":44.-? 64'~, u~Sh.' izf* our domestic and international staff form a powerhouse of talent, offering an unmatched level of structuring expertise and product knowledge to clients throughout the U.S., Europe, Japan and the Asia-Pacific Rim. GROWING OUR FRANCHISE IN GLOBAL MARKETS > MBIA's International Division turned strong growth and opportunities in the global capital markets into outstanding results for the year, strengthening the company's global platform and spreading the benefits of our Triple-A rating into new markets. Our robust performance overseas benefited from five major trends that appear to be accelerating in the international markets, particularly in Europe. Privatization, disinter- mediation of the banking system, decentralization of public finance, a growing need for infrastructure finance, and reformation of pension systems all fuel prospects for credit ahantelirent. The-Division posted a 40% increase in-AGE to a record $165 million - _ from $117 million in 1999. 16 -- - In April, MBIA announced a restructuring of its international joint marketing and 17 reinsurance arrangements with Ambac Financial Group, Inc., which had been in place since 1995. The restructuring enabled both companies to market and originate interna- tional financial guarantee insurance separately. These new arrangements greatly increased MBIAs operational flexibility and effec- tiveness in global markets during 2000. The Division reinforced collaboration between 8 71 , 1 -' 1 u -SPO, 1 I . u." IIIIIIIIIIZIIIA f 8....S & ....i 0#-â€ž 0~~~ 1~ Phil Sullivan > International. Chris Chafizadeh > Public Finance its U.S. and international analysts and insured a wider range of transactions, including complex structured securitizations in Australia and Japan. The Collateralized Debt Obligation Department accomplished its goal of continued expansion into synthetic and cash market CDOs, both domestically and in the European markets. The Future Flow and Structured Trade Finance Group posted another strong year, highlighted by geographic diversification across three continents. One of the group's more noteworthy transactions was a $125 million guarantee for CVRD, Brazil's largest mining concern and one of the world's leading producers of iron ore. The securitization, backed by iron ore exports, was the first of its type in Brazil to achieve investment grade underlying ratings by Standard & Poor's Corporation and Moody's Investor Service. The International Division established its headquarters in London this year, and also includes Paris, Sydney, Tokyo, Madrid, Singapore, San Francisco and Armonk on its ros- ter of offices. Overall, this was a break-out year for our international business, and we expect growth prospects to be strong for the next several years. LOOKING AHEAD > We are optimistic about continued growth in all the markets we serve, with particularly strong opportunities overseas. All around the world, issuers and investors seek out the benefits of MBIA's Triple-A guarantee. Market conditions in the U.S. and abroad are favorable across all our insurance business lines, and our optimism is buoyed by ongoing demand for MBIAs unique value proposition. 841 . * K.' -Â·Â·Â· '4.-f:J#Nt. 154'*11*4 4:. ....... - - ./ 3 Eric Rosensweig > Structured Finance. Peter Fiala > International. Ileana Fuentes > International Public Finance . ' 1 - ''.- r 4r' r. 7 - 4*.' i 1/2 , 18 -ille - i~ *. ./ ...r; 1 ',- . /44 7 .4-1 . 19 I ;~ . % 4 4 4444 r. 14: 4 I - 2 .te' 4 - ' . 40 * 775.- 7 79 --- P From upper left. Cliff Corso > MBIA Capital Management Corp. (CMC). George Gephart > 1838 Investment Advisors. Laura Schneider > MBIA Investment Management Corp. (IMC). Francie Heller, Andrew Goodate > MBIA Municipal Investors Service Corporation (MBIA-MISC). Melissa Wright > CMC. Center: Marc Morris > IMC a ..0- a :AA . . ... a . 0 0.0 . 0. 1 - ..... a . ... .... -.. . 0 0 .. . 0 . 0 -0 - 00 - a . 0 00 ... . .. a ... III . .0- 1 ..... .. .... ... A 0 . . - 0 . .. . ... .a . 1 ..... . ... 0. -0 0 1 ... 0 0 0 1 1/0]~W Growth .....#// - I----**Y in assets under management :4 [in millions] ~ ~BL /9 -3. .... y 1 1 1 0 11.927 13.404 24.185 30.078 36.580 One of the group's business units is 1838 Investment Advisors LLC, a full-service asset management firm based in Radnor, Pennsylvania. The firm manages $14.3 billion in-asserk, tip 2796-over 1999, including domestic andinternationalequity, fixed-income- zo and balanced portfolios for a client base of high-net-worth individuals, mutual funds, 21 endowments, foundations and employee benefit plans. To efficiently manage its growth in assets under management, 1838 dramatically expanded its trading and administrative staff. The bulk of the new assets were raised in 2000 through 1838's extensive network of financial intermediaries, including a number of national and regional brokerage firms. This network grew significantly during the year as a number of new financial intermediaries signed on to become part of 1838's distribution channel. Another of 1838's products is TaxSmart, a personalized investment management tool designed to maximize investors' after-tax rates of return. Holdings are first analyzed for investment attractiveness, tax liability and contribution to portfolio diversification. Results are then compared with 1838's model portfolio, and the TaxSmart system rec- ommends trades that offer a well-balanced approach to return maximization, tax mini- mization and portfolio diversification. Despite a difficult market, assets in TaxSmart doubled by year-end 2000 to $3 billion from $1.5 billion in 1999. TaxSmart arms investors with a full understanding of their portfolio's tax implications, and helps them make better investing decisions. With its array of tax management tools, its superb record and its extensive distribu- tion network of financial intermediaries, 1838 expects continued strong growth in 2001. MBIA Municipal Investors Service Corporation (MBIA-MISC), an SEC-registered investment adviser, provides investment management services to the public and not- for-profit sectors. Its principal products are highly liquid, short-term pooled local gov- ernment cash management programs for school districts and municipalities. In addi- tion, MBIA-MISC provides services for state pools and investment programs sponsored by public sector associations, as well as customized asset management services. By year- end 2000, the group managed $8 billion in public funds. In May, MBIA-MISC turned its investment expertise into a consolidated invest- ment management business, and now offers its clients a full range of services - from CLASSÂ®, a short-term, highly liquid cash management program for school districts and municipalities, to CAM, a fully customized asset management program for pub- lic entities of all types. With this expanded product line, MBIA-MISC can assist clients in investing their operating funds, bond funds, and reserve funds. MBIA- MISC manages $2 billion in the CAM program and $6 billion through its pooled - /1- i.,-di ., fâ€ž 1.... -1.-, ./ I. ..../.-/. 2/r~ - I ,/ 3Â¥ . 1 Thacher Brown > 1838 Investment Advisors. Sue Voltz > CMC. Andrew Chintz > IMC products and administrative and accounting services. MBIA Investment Management Corporation (IMC) offers guaranteed investment agreements, flexible repurchase agreements and forward delivery agreements. With MBIA's guarantee on these investments, which are used primarily for bond proceeds and other dedicated funds, municipalities and other issuers can minimize risk while investing their money in a customized vehicle that will generate targeted returns until the money is needed for debt service payments, capital projects or other uses. IMC had an outstanding year, with $4.8 billion in investment and repurchase agree- ments outstanding at year-end 2000, and pre-tax operating profit up 41% over 1999. The fourth subsidiary is MBIA Capital Management Corp. (CMC), an SEC- registered investment adviser and NASD-member firm offering fixed-income asset management for public entities, not-for-profit organizations and corporationECMC also invests the assets of MISC, MBIA, IMC and 1838's fixed-income funds. 22 ---- In 2000, CMC delivered another year of solid growth as assets under management 23 grew 16%, topping $17.5 billion at year-end. The group achieved another record year of profitability and is strongly positioned for further growth in 2001. MBIA's investment management businesses offer the full range of core equity and fixed-income products to our clients. Building on year after year of solid growth, these businesses should continue to thrive in the coming years. Imm/Lvi 1............/ 1-'dkal........0/ 1 V"-"Ilill'lligi %1 - 11.-7,6~ 1 Â·, hz 1.4 %. Carol Blair. Robert Claiborne > CMC. John Springrose > 1838 Investment Advisors MUN ICI PA L S ERV ICES > In 1996, MBIA began offering revenue enhancement services to the public sector, chiefly through three separate, acquired companies offering tax dis- covery, tax compliance and tax information services. Two years later, we reorganized these companies into a single, national enterprise, the MBIA MuniServices Company (MMC). Immediately thereafter, MMC began a 24-month transition period with pro- found changes in every facet of the business - from products and services to business process and organization. As a result, in 1999, MMC began a run o f eight consecutive quarters with improved performance, culminating successfully at the end of 2000 with operating income over $600 thousand, up from a $12.4 million loss in 1999. Moderate growth is expected to continue for this group. Today, MMC is the nation's foremost supplier of revenue enhancement services to state and local governments. The company provides public-sector clients the unique capability to properly identify all taxpayers, establish the correct jurisdiction wherein they will owe taxes, accurately bill these taxpayers, and assist in the collection of due taxes across the full range of tax sources. In addition, it provides clients with a broad range of information services for strategic planning. As it enters 2001, MMC is focused upon using its proven services and products to open new markets while exploring the full envelope of revenue enhancement services to chart tomorrow's opportunities. -- 1=.. 4 1 ef' / I # ' I ./ MM 999~ - â€¢Mâ€¢â€¢11: I r Tom Wilkerson. Ed Dougherty > MuniServices 34 ' I+f - - - ~ - ~ -T,HMA A....1 1 ' '.-4 6, -4 4 , fl $ 25 -""u - ' 1*,uâ€žâ€ž1,'a- n.efbr - 6Â·. Â·Â·* 0/ .:.- ia Et: .e '.,F 7 - ..i..13 f . At ~.'.4,/r I ' . , From top, center. Karleen Strayer > IPM. Roger Harris > Information Technology (111 Emete Hassan > Fixed-Income Investor Relations. Jane Klemmer > Risk Management. Doug Hamilton, Roz Hume > Finance. Center: Judy Radasch > Equity Investor Relations G7 1: 4 .. . 0 :A ..A . O .... 0 0 . ...... .0 0 . . ... .. ..... -.... ..1 .. 0 a . - 0-1 . ..... -0 - - . . a . 0 0 0. . 0- . 0 -- 0. a .... 0. .... 0. . 0 0 - a .. ... . 1- 0 . - 0 .... 0 0 - a . .... 0 0 ..... . 1 . -.. - .- ... -- 0 0 . . 0. . -0 . 0.- . .. 0 - -0 1 1- a - -0. . . . . . . ......... ........... . 0 . ... 1.1 Claims- - + .11 :Ji~mi Paying Â· ,r .F Resources [in millions] 3 F- /. 5.819 6.785 7.797 8,539 9.140 We also use risk-based pricing tools to measure returns at appropriate and acceptable premium rates. We then apply this information, analysis and our negotiating skills to achieve the best deal we can for MBIA, often in the face of stiff competition. Once the transaction is insured, we diligently monitor its progress throughout its life. Our insured portfolio management actixiligge_deligned Â®gletect deterioration in credit-- quality early on, so that we can take the necessary steps to remediate the credit and avoid or mitigate claims on the policy. While they are extremely rare, claims do happen. In 26 years of business, MBIA has insured 71,000 issues, totaling $1.2 trillion in debt service. We have incurred losses total- ing $308 million on 37 of those issues, for an exceptionally low loss experience of 3 basis points. To cushion the potential impact of future losses, we carry loss reserves for each transaction we insure. This results in an unallocated loss reserve totaling approxi- mately 6 basis points of net par outstanding. We expect that our unallocated loss reserves will provide ample room to absorb any future loss activity. MEASURES OF SUCCESS > The steps we take to protect our Triple-A ratings are deeply etched into our culture, and their effectiveness is plainly evident in the extraordinary capital strength we've achieved. The quality and diversity of our insured portfolio is one measure of our success. Our geographically diversified portfolio consists of over 35,000 outstanding bond issues, with no one credit accounting for more than 1 % of total par 1996 1997 { 1998 1999 2000 insured. Fully 74% of our insured par is rated Single-A or higher. Our $7 billion investment portfolio of fixed-income securities is also very strong. With 86% rated Double-A or higher, the portfolio contains no derivatives for specula- tive purposes, no real estate and no junk bonds. CAPITAL STRENGTH > Two other critical measures of our capital strength are the size of our daims-paying resources and the ratio of our insured exposure to these resources. At year-end 2000, total claims-paying resources were $9.1 billion. Since our inception as a public company in 1987, these resources have grown an average of 18%, resulting in a ratio of net par outstanding to claims-paying resources of 46:1, the best in the industry. Another measure of MBIRs capital strength is our ready access to capital at attractive costs, and the flexibility to apply that capital to achieve maximum returns for our share- holders. This year, we raised $200 million through two debt offerings in December at very attractive prices. We have soft capital facilities of over $1 billion, represented by a stand-by line of credit facility and a stop-loss reinsurance agreement. Our continually strengthening capital position allows us to grow our businesses in vibrant areas such as structured and international finance. By every measure, the strengths of MBIAs operations are important aspects of, and also builders of, our capital strength, providing a strong foundation for future growth and profitability. Ar , 12> 4;02 %7 ,!L se., 6. --7j ;0â€¢A ' f " â‚¬ 4*' Joe Sevely > Finance. Michael Maguire > Risk Management. Ethel Geisinger > Government Relations. Human capital is the true wealth of business. It is the currency of knowledge, and with careful management, nurturing and development, it is the catalyst for a company's financial success. At MBIA, we are committed to managing the expertise of our employees to build profitability and shareholder value. We start with our most important asset, our people, whose depth and breadth of knowledge - in all credit sectors - is unparalleled in the industry We invest in them with powerful motivators like responsibility, technology challenging work, professional development and performance-based compensation. KNOWLEDGE FLOWÂ» WE tlitil jtrueture-Our their curriculum, as they help strengthen MBIA's organization to manage the flow of our employ- corporate risk culture and often result in long- 28 ees' knowledge and expertise. Each transaction lasting bonds between co-workers. 29 we insure is reviewed by a cross-functional team TECHNOLOGY TOOLS > Or it can mean making from New Business, Risk and Insured Portfolio large investments in advanced technology to Management to mine the expertise and intelli- deliver information and streamline processes, gence across a number of functions. As a result, freeing up staff time for other important work. the knowledge required to analyze and insure a With our entry into online trading, and ongoing toll road in Denver GaIl be easily transferred when investment in applications to facilitate functions insuring a toll road in Chile. This structure such as surveillance and research, we are giving ensures rich and rapid communication, builds our employees the best tools possible to keep our teams and reduces bureaucracy. competitive advantage secure. Another important component of our invest- As a team, MBIA employees are building a ment in our employees is providing them with great tradition and culture. They are the heart the best tools to do their jobs. That can mean and soul of our business, and position us as the training, such as our comprehensive workshops strongest team in the industry. Because of the in Risk Management and Managing and Leading. growing strength of our human capital, MBIA's The benefits of these programs extend beyond capital strength is stronger than ever. -- 4 '1 %414.94,9, A.)41, / 94 . - 21'râ€¢X, 0 . -lk 'Â· 0/*4'j&*Aillk,# "P 'A~ abilil i~ - i. F t A, r r M- ' f 'IMAW./.Li' .Pâ‚¬, -xvi Top: Linda Scott > Management Services.Tom Scherer > Risk Management. Jeff Relkin > II Poh Choo Lee > International Center: Errol Arne > Structured Finance. Charlie Williams > Fixed-Income Investor Relations. Diana York > Business Analysis. John Garrity > Finance Bottom: Lynne DeLaurentis > Public Finance. Corey Johnson > IPM. Tom Saccardi > IPM. Maria Kang > Risk Management kL MBIA is the global leader in credit enhancement services, with over 750 employees staffing 23 offices worldwide. Since its inception in 1974. the company has insured 71,000 municipal and structured finance transactions, saving issuers some $13 billion in interest costs. MBIA is also a leading provider of asset management and revenue enhancement services to the public, private and not-for-profit sectors. Financial Guarantee Products and Services secondary markets around the world. for Global Markets STRUCTURED DEALS > securitizations backed by MBIA's Triple-A rating means more than a lower commercial, consumer and mortgage-backed interest rate and easier access to capital. It means assets, proprietary funding vehicles such as that we provide an irrevocable pledge of full and commercial paper and medium-term notes, timely payment of principal and interest on all credit enhancement for issuers of and investors the transactions we insure. in Guaranteed Investment Contracts and other MUNICIPAL DEALS > general-Obtigattofi,-highel stable- value products,-CDOs, trade fuiance,___ education, tax-backed, housing. municipal and financial engineering, credit derivatives, and 30 investor-owned utilities, health care, student infrastructure leases around the world. 31 loans and transportation in the new issue and 9%4127 Revenue Sources 2000 A. Global Credit Enhancement 85% I C. Municipal Services 3% ~~ Â¢~4 ~ B. Asset Management 12% 9 k \\ #343.,ibf F..i *41 , (4: I.*,Â»0. .4,21 ~3~3~ 'C\ II1 - 7, f\\\ A 1 '1 0--- Andrea Randolph > IT. Mingsung Tang > Risk Management Cor=fyllillh.91 2 Â»,1% 17-Â« ti 22*37,01,1,- ' Assets Under /\El 1 2* rÂ¥'~ Management ($36-6 billion) ~ D~ | ~ .4*~I~ f<.1 E. CMC 6% Investment Management Products & Services â€¢ guaranteed investments for bond proceeds and MBIA offers highly specialized asset manage- other funds, and fund administration ment products and services to public-and pri- â€¢ fixed-income asset management for public vate-sector clients, including municipalities, entities, not-for-profit organizations and school districts, high-net-worth individuals, cor- corporations porations and not-for-profits to help them opti- â€¢ short-term cash management of pooled mize their assets while mitigating risk. Services municipal funds include: â€¢ customized asset maiiagement for individually â€¢ domestic and international equity management managed accounts Municipal Services â€¢ TAX REVIEW AND ANALYSIS > Through three distinct services, MBIA helps Our analysis of existing tax rolls and other rev- municipalities generate tax revenue more effi- enue sources has identified significant adminis- ciently: trative and processing errors that have yielded â€¢ TAX DISCOVERY AND COMPLIANCE > hundreds of millions of dollars of new revenue Our tax discovery and tax enforcement systems for clients. identify previously unknown taxpayers as well as â€¢ REVENUE INFORMATION SYSTEMS > taxpayers who are not fully compliant with the MBIAs specialized revenue information systems local tax codes. These discovered taxpayers are enhance the yield of revenue data through data then brought into compliance yielding what cleaning, monitoring, analysis, standardization amounts to new revenue for the jurisdiction. and integration. Drew Hoffman > Finance Corporate Headquarters MBIA Sucursal eli Espafia MBIA Municipal Investors Service MBIA Inc. Serrano, 20-2Â° Dcha Corporation 113 King Street 28001 Madrid, Spain 1700 Broadway, Suite 2050 Armonk, NY 10504 34 91 435 10 43 Denver, CO 80290 914-273-4545 303-860-1100 ww'w.mbia.com MBIA Assurance S.A. Branch Office 1838 Investment Advisors, LLC Financial Guarantee Business MBIA Insurance Corporation Five Radnor Corporate Center Offices Representative Office Suite 320 MBIA Insurance Corporation 1 Great St. Helen's 100 Matsonford Road 113 King Street London, EC3A6HX Radnor, PA 19087 Armonk, NY 10504 England 610-293-4300 914-273-4545 44-20-7920-6363 MBIA MuniServices 650 Fifth Avenue, 7th Floor MBIA Insurance Corporation (specialized financial services for tbe New York, NY 10019 Representative Office public sector) 212-713-6400 Mitsui Marine Building 113 King Street 9 Kanda Surugadal 3-chome_ ___jArmonk,NY 10504- --- The TransAmerica-Pyramid- -Chiyoda-ku, Tokyo, 101-8011 914-273-4545 600 Montgomery Street Japan 32 - JUREF 44VU 81-3-5282-4621 714 Market Street 33 San Francisco, CA 94111 3rd Floor 415-352-3050 MB1A (Singapore) Pte Ltd Philadelphia, PA 19106 9 Temasek Boulevard #38-01 800-627-3491 MBIA International Marketing Suntec Tower Two Services Pty. Ltd. 32107 West Lindero Canyon Road Singapore 038989 I.evel 29, The Chiftey Tower 65-334-2555 Suite 233 2 Chifiey Square Westlake Village, CA 91361 Sydney NSW 2000 Investment Management Offices 800-247-4406 Australia MBIA Investment Management 612 9375 2117 Corp. (investment agreepne}its) 3433 W. Shaw Avenue MBIA Capital Management Corp. Fresno, CA 93711 MBIA Assurance, S.A. (#xed-income asset nianagement) 800-800-8181 112 avenue Kldber 75116 MBIA Municipal Investors Service Paris, France Corporation (CLASS*, CAM) 33 1 5370 4343 113 King Street Armonk, NY 10504 914-273-4545 elm . I .0 ..... .... 0 - 0.- - 0 .... 0 0 ...... . ... . 0 . . ... a . 0. 0 . -0. . .... 08 - 0 - 0 0 ..-00/. a -- ..0--0. - a . 1 - 0 0 0 0.-0.- a . 0 0 0--0 -- - . . 0 0- 0 0 . ...0 - - .. MBIA Inc.and Subsidiaries Dollars in millions except per share amounts 2000 1999 1998 GAAP Summary Income Statement Data: Insurance: Gross premiums written $ 687 $ 625 $ 677 Premiums earned 446 443 425 Net investment income 394 359 332 1btal insurance expenses 170 315 140 Insurance income 698 515 643 Investment management services income (loss) 56 41 29 Income before income taxes 715 388 565 Net income 529 321 433 Net income per common share Basic 5.37 3.22 4.37 Diluted 5.33 3.19 4.32 GAAP Summary Balance Sheet Data: Total investments 12.233 10.694 10,080 Total assets 13,894 12,264 11,826 Deferred premium revenue 2,398 2,311 2.251 Loss and LAE reserves 499 467 300 Municipal investment and repurchase agreements 4.789 4.513 3.485 Long-terrn debt 795 689 689 Shareholders' equity 4,223 3.513 3.792 Book value per share 42.89 35.34 38.15 Dividends declared per common shaFe-------_________ 0.820 0.805 0.790 Statutory Summary Data: 34 Net income 544 522 510 35 Capital and surplus 2,382 2.413 2.290 Contingency reserve 2.123 1.739 1.451 Capital base 4,505 4.152 3,741 Unearned premium reserve 2.465 2,376 2.324 Loss and LAE reserves 209 204 188 Policyholders' reserves 7.179 6,732 6.253 Present value of installment premiums 886 732 644 Standby line of credit / stop-loss 1,075 1.075 900 Total claims-paying resources 9,140 8,539 7.797 Financial Ratios: GAAP Loss and LAE ratio 11.5% 44.8% 8.2% Underwriting expense ratio 26.7 26.4 24.7 Combined ratio 38.2 71.2 32.9 StatuL~s and LAE ratio 6.2 12.3 8.0 Underwriting expense ratio 22.1 23.6 16.8 Combined ratio 28.3 35.9 24.8 Net debt service outstanding $680.878 $635,883 $595,895 Net par amount outstanding $418,443 $384,459 $359,472 Â»f 83. 4/1. il $ 1 + ,/4/1/66/# Imil -:I<Â« 525-/: ~94-- r .*- M.. - Â°9 ./.il//2 ~1 136-Â· I./9,1/Il>fit. q1//P' alli'' â€¢ftâ€¢ 2 /2.-~//r/3 )b - e lk//9.Mivjita.//ilV*MA-*-*- -2 . I ---.I -.Zillimi 91 992% 93 ~4:{ 95.96.97 + *1 99 *Mi /j/&%44////f#*%///1.I///rali~////ir# 'â€¢ -3 1,59-As':21,1ETE-rfrim ~9 1%906 E 97 4 99 Â» al.,11{- .* Premiums Earned Net Investment Income Net Income per Common Share: Diluted Cdollars in millions) (dollars in millions) Cdollars) 3 1997 1996 1995 1994 1993 1992 1991 $ 654 $ 535 $ 406 $ 405 $ 504 $ 377 $ 269 351 294 244 241 249 169 132 302 265 233 204 189 155 132 141 117 100 89 86 65 59 530 453 385 360 353 260 207 17 18 11 5 (1 ) (1) (2) 525 448 375 347 339 249 190 406 348 290 270 268 193 145 4.18 3.68 3.21 3.00 3.00 2.24 1.89 4.12 3.62 3.15 2.96 2.95 2.20 1.87 8,908 8.008 6.937 5,069 3,735 2,701 1,961 10,387 9.033 7,671 5,712 4,320 3.234 2.438 2.090 1,854 1,662 1.538 1.413 1,202 1.019 105 72 50 47 37 28 21 3.151 3,259 2.642 1,526 493 - - 489 389 389 314 314 314 199 3,362 2,761 2.497 1.881 1.761 1.533 1,063 34.09 28.98 27.02 20.92 19.77 17.19 13.79 0.770 0.725 0.655 0.570 0.470 0.380 0.310 404 335 287 229 263 194 149 1,952 1.661 1.469 1.250 1.124 1.044 647 1.188 959 788 652 561 419 316 3.140 2,620 2.257 1,902 1,685 1,463 963 2.193 1.971 1.768 1,640 1.484 1,248 1.044 15 10 7 22 8 14 12 5,348 4.601 4.032 3,564 3.177 2,725 2.019 537 443 347 249 234 211 151 900 775 700 650 625 550 500 6.785 5,819 5,079 4,463 4.036 3.486 2.670 9.1% 6.9% 5.6% 3.9% 3.5% 3.6% 13.0% 31.0 32.9 35.2 32.9 31.2 34.6 30.1 40.1 39.8 40.8 36.8 34.7 38.2 43.1 1.2 1.7 0.4 8.7 0.3) 2.3 12.7 21.2 22.8 27.2 28.3 22.0 20.7 20.4 22.4 24.5 27.6 37.0 18.7 23.0 33.1 $513,736 $434.417 $359.175 $315,340 $273,630 $225,220 $184,604 $303,803 $252,896 $201.326 $173,760 $147,326 $114.317 $ 90,043 ~:449.5-694 -Imi.Er=0$61 Il,J ilitil .- rj.- 19%21.--%-$34= I .- .9/ p .39(~>4. ift~<4 -Alll. I :93-4/ -44 = -67 NO./.- ... /2 -- I '91= ell#~..4-4= -fl/lkli ft//91/47 -f - - Â¤./tz/%/an~./.'~1.~ Â¢ty. .....Im/21"lill....all -,Ii.~m~--- 91 ~~ 93 ,~ ./Wal./0 95 j., 97 U.a~ Total Assets Book Value per Share Total Claims-Paying Resources (dollars in millions) Cdollars) Cdollars in millions) MBIA Inc.and Subsidiaries OVERVIEW The company has entered into derivative transactions MBIA Inc. (MBIA or the company) is engaged in providing that do not qualify for the financial guarantee scope exception financial guarantee insurance, investment management serv- under SFAS 133 and, therefore, must be stated at fair value. ices and municipal services to public finance clients and The Insurance segment, which represents the majority of the financial institutions on a global basis. The company turned in company's derivative exposure and mark-to-market as of a solid year as we continue to focus on our Triple-A ratings. January 1, 2001. has insured derivatives primarily consisting of no-loss underwriting standards and building shareholder credit default swaps. The Investment Management Services value. Our insurance operations showed strong growth in the segment has entered into primarily forward delivery agree- structured finance and international businesses, which ments, interest rate and credit default swaps. The Corporate helped offset reduced activity in the domestic public finance segment has entered into derivatives to hedge foreign market. Our investment management operations had a exchange and interest rate risks related to the issuance of cer- record year in assets under management and operating tain MBIA long-term debt issues. earnings. Looking forward, the company is well positioned to Adoption of SFAS 133 on January 1, 2001 will result in take advantage of very favorable growth prospects domesti- cumulative after-tax reductions in net income of approxi- cally and internationally across all of our business lines. mately $12 million and other comprehensive income of approximately $4 million. In addition. the company will FORWARD-LOOKING AND CAUTIONARY STATEMENTS increase its assets by approximately $50 million and liabilities Statements included in this annual report which are not his- by approximately $66 million on an after-tax basis. torical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of the Private RESULIS OF OPERATIONS Securities Litigation Reform Act of 1998. The words "believe. SUMMARY "anticipate.' "project," "plan." "expect," "intend." "will likely The company uses various measures of profitability and result." or "will continue." and similar expressions identify intrinsic value. namely. "core earnings'. "operating earnings", forward-looking statements. These statements are subject to "adjusted gross premiums- and -adjusted book value" which certain risks and uncertainties that could cause actual results are not in accordance with accounting principles generally 36 to differ materially from historical earnings and those accepted in the United States of America. We view these 37 presently anticipated or projected. We wish to caution readers measures as the most meaningful measures of our perform- not to place undue reliance on any such forward-looking ance and the intrinsic value of the company. statements, which speak only to their respective dates. The The following chart presents highlights of our consoli- following are some of the factors that could affect our finan- dated financial results for 2000,1999 and 1998. cial performance or could cause actual results to differ mate- Percent Change rially from estimates contained in or underlying the compa- 2000 1999 ny's forward-looking statements: VS. VS. * fluctuations in the economic, credit or interest rate 2000 1999 1998 1999 1998 environment in the United States and abroad; Net income (in millions): * the level of activity within the national and international As reported $529 $321 $433 65% (26)% credit markets: Excluding one- * competitive conditions and pricing levels: time charges $529 $490 $482 8% 2% * legislative and regulatory developments; Per share data:* * technological developments; Net income: As reported $5.33 $3.19 $4.32 67% (26)% * changes in tax laws; Excluding one-time e the effects of mergers. acquisitions and divestitures; and, charges $5-33 $4.88 $4,81 9% 1% e uncertainties that have not been identified at this time. Operating earnings $5.12 $4.72 $458 8% 3% The company undertakes no obligation to publicly cor- Core earnings $4.91 $4.34 $4.19 13% 4% red or update any forward-looking statement if we later Book value $42.89 $35.34 $38.15 21% (7)% become aware that such results are not likely to be achieved. Adjusted book value $60.40 $52.51 $53.28 15% (1)% *All earnings per share calculations are diluted. NEW ACCOUNTING PRONOUNCEMENT In June 1998. the Financial Accounting Standards Board Core earnings, which exclude the effects of refundings (FASB) issued Statement of Financial Accounting Standards and calls on our insured issues, realized gains and losses on (SFAS) 133. "Accounting for Derivative Instruments and our investment portfolio and one-time charges. provide the Hedging Activities" which is effedive for the company as of most meaningful measure of our underlying profit. Core earn- January 1, 2001. SFAS 133 requires that all derivative instru- ings per share at $4.91 for 2000 grew by 13% over 1999, follow- ments be recorded on the balance sheet at their fair value. ing a 4% increase in 1999. The 2000 growth in core earnings per Changes in the fair value of derivatives will be recorded each share was the result of a 42% increase in investment manage- period in current earnings or other comprehensive income. ment services over 1999 and the elimination of losses in our depending on whether a derivative is designated as part of a municipal services segment. Insurance operations had growth hedge. and if so. the use and type of the hedge. in core earnings per share of 9% in 2000 compared with growth of 4% in 1999. although higher levels of reinsurance cessions continue to depress the growth in insurance operations income. MBIA Inc. and Subsidiaries Our 2000 net income increased by 8%. excluding one- Percent Change time charges in 1999, or by 9% on a per share basis. In 1999 net 2000 1999 income increased by 2% over 1998. excluding the one-time VS. VS. charges, which resulted in a 1% per share increase. Compared 2000 1999 1998 1999 1998 with core earnings per share. these results were lower due to Premiums written (in millions): the low level of refunding activity in 2000. with premiums AGP $803 $724 $832 11% (13)% earned from refundings down 47% compared with 1999. Net GPW $687 $625 $677 10% (8)% income as reported increased by 65% in 2000 over 1999, com- pared with a 26% decrease in 1999 over 1998. These variances Par insured {in billions): $99 $92 $119 7% (23)% are due to the one-time charges incurred in 1999. Operating earnings per share. which include refund- In 2000, our top line results continue to reflect a more ings but exclude the impact of realized gains and losses and profitable relationship between AGP and par insured for the one-time charges, increased by 8% and 3% for 2000 and 1999, period. AGP is composed of our upfront premiums as well as respectively The increases in operating earnings per share the estimated present value of current and future premiums were consistent throughout the year and highlight the pre- from installment-based insurance policies issued in the peri- dictable earnings pattern of the company. od. AGP was up 11%, while total par insured was up 7% which Our book value at year-end 2000 was $42.89 per share, translates into more premiums for each dollar of par value up 21% from $35.34 at year-end 1999. The increase was insured. This continues to be indicative of price improvements caused primarily by a 150% increase in the unrealized appreci- across our whole book of business and is consistent with our ation of our investment portfolio and an 18% increase in strategy to improve profitability on the business written. retained earnings. partially offset by the increase in treasury Furthermore. we did not sacrifice credit quality to capture stock from share repurchases. A more appropriate measure higher prices as 75% of the business written in 2000 was rated of a financial guarantee company's intrinsic value is its adjust- A or above. The average credit rating on new business in each ed book value. Adjusted book value is defined as book value of our insurance divisions continued to improve. As an indus- plus the after-tax effects of net deferred premium revenue net try leader. MBIA maintained a conservative 9% discount rate of deferred acquisition costs, the present value of unrecorded when calculating AGR and still continued to lead the market in future installment premiums, and the unrealized gains or terms of AGP market share at 40% for 2000, 37% for 1999 and losses on investment contract liabilities. Our adjusted book 46% for 1998. value per share was $60.40 at year-end 2000, a 15% increase We estimate the present value of our total future from year-end 1999 following a 1% decline in the preceding installment premium stream on outstanding policies to be year. The 2000 increase reflects the same factors that impad- $885 million at year-end 2000, compared with $732 million at ed book value. but is reduced by lower growth in net deferred year-end 1999 and $644 million at year-end 1998. The 21% premium revenue and a redudion in unrealized gains on growth in 2000 is due to the increase in structured finance investment contract liabilities. The following table presents and international installment insured policies. the components of our adjusted book value per share: GPW, as reported in our financial statements, primarily reflects cash receipts and does not include the value of future Percent Change 2000 1999 premium receipts expected from installment policies origi- VS VS. nated in the period. GPW increased 10% in 2000 following an 2000 1999 1998 1999 1998 8% decline in 1999 as both structured finance and intemation- Book value $42.89 $35.34 $38.15 21% (7)% al had significant growth over the prior year, partially offset by After-tax value of: a modest decline in public finance. Net deferred premium revenue, net of deferred acquisition costs 11.09 10.83 10.91 2% (1)% PUBLIC FINANCE MARKET > Domestic new issue public finance Present value of future market information and MBIA's par and premium writings in installment premiums* 5.85 4.78 4.21 22% 14% both the new issue and secondary domestic public finance Unreatized gain on markets are shown in the following table: investment contract liabilities 0.57 1.56 0.01 (63)% n/nn Percent Change Adjusted book value $60.40 $52.51 $53.28 15% (1)% 2000 1999 Domestic VS. VS. * The discount rate used to present value future instatlment premiums was 9%. Public Finance 2000 1999 1998 1999 1998 Total new issue market:* Par value (in billions) $168 $199 $257 (16)% (22)% FINANCIAL GUARANTEE INSURANCE Insured penetration 47% 52% 55% MBIA's production in terms of adjusted gross premiums MBIA market share 28% 26% 36% (AGP). gross premiums written (GPW) and par insured for the MBIA insured: Par insured (in billions) $33 $36 $60 (11)% 09)% last three years is presented in the following table: Premiums (in millions): AGP $361 $378 $435 (5)% (13)% GPW $332 $349 $431 (5) % (19)% * Market data are reported on a sale date basis while MBIA's insured data are based on closing date information. Typically. there can be a one to four week delay between the sale date and closing date of an insured issue. MBIA Inc.and Subsidiaries Although MBIAs public finance par insured for 2000 Percent Change was down 11% compared with last year. the insured market 2000 1999 was down 25%, indicative of our better than market perform- VS. VS. ance. AGP declined 5% in 2000 compared with a 13% decrease International 2000 1999 1998 1999 1998 in 1999. The greater decline in par insured compared with Par insured (in bitlions) $18 $8 $11 144% (29)% AGP once again exemplifies the positive effects of our pricing Premiums (in millions): discipline. This relationship between par insured and AGP AGP $164 $117 $189 40% 08)% was exhibited in most sectors within the public finance busi- GPW $167 $117 $112 43% 4% ness. Issues rated A and above remained over 80% for the third year in a row and the Standard & Poor's (S&P) capital International business tends to be less predictable and charges, which are intended to represent the likelihood of results will vary from year to year. Par insured was up 144% default as well as the magnitude of losses under default, in 2000 after being down 29% in 1999. while AGP was up 40% were the lowest they have been for many years. MBIA contin- after being down 38% in 1999. Almost 90% of business written ued to lead the industry in terms of market share for both in 2000 was rated A or better. substantially more than the 60% AGP and par insured, as we recorded a market share of 43% rated A or better written in 1999. This accounts for the weak- for AGP and 28% for par insured. ening of the AGP to par insured ratio. Our share of intema- tional AGP in 2000 was approximately 37%. despite using a STRUCTURED FINANCE MARKET > The details regarding the asset- higher discount rate (9%) than the rest of the industry. backed market and MBIA's par and premium writings in both On March 21, 2000 the company and Ambac Financial the domestic new issue and secondary domestic structured Group. Inc. (Ambac) announced the restructuring of the inter- finance markets are shown in the table below: national joint marketing and reinsurance arrangements that have been in place since 1995 with the formation of the MBIA- Percent Change AMBAC International joint venture. The company and Ambac 2000 1999 will continue having certain reciprocal reinsurance arrange- Domestic VS. VS. ments for international business in 2001 but will market and Structured Finance 2000 1999 1998 1999 1998 38 originate international business independently Additionally, - Total asset-backed market.Â·* 39 Par value (in billions) $230 $191 $167 20% 14% during the third quarter of 2000 the company and Ambac dis- MBIA insured: solved a four-way joint venture in Japan. Par insured (in billions) $48 $48 $48 - - Premiums (in millions): REINSURANCE > Premiums ceded to reinsurers from all insur- AGP $278 $229 $208 22% 10% ance operations were $189 million.$171 million, and $156 GPW $188 $159 $134 18% 18% million in 2000.1999 and 1998, respectively Cessions as a * Market data exclude mortgage-backed securities and private place- percentage of GPW increased to 28% in 2000 from 27% in 1999 ments. and 23% in 1998. The increase in our cession rate since 1998 reflects increased cessions across all business lines, espe- For the year AGP was up 22% after an increase of 10% cially in public finance and international. Reinsurance is a in 1999. For 2000. par insured was $48 billion. which is con- cost effective capital substitute for MBIA. In addition to treaty sistent with the last two years. Here too, the relationship of reinsurance, the decision of whether to reinsure any particu- AGP to par insured was positive and is indicative of our pric- lar policy on a facultative basis is based on portfolio, single ing discipline. In 2000,63% of the business written was rated risk and other factors related to that policy. These reinsurance A or better compared with 54% in 1999, with a substantial por- activities continue to have a positive impact and are consis- tion rated Triple-A before our guarantee. During 2000 and tent with our emphasis on a strong balance sheet. In fact, the 1999 we saw a decline in mortgage related business, howev- ratio of insured net debt service outstanding to our statutory er, this was more than offset by an increase in other asset- capital base at year-end was 151 :1, down from 153:1 at the backed business. Despite the fact that we use a higher dis- end of 1999 count rate (9%) than others in the industry, we continue to lead At year-end 2000,98% of our outstanding ceded exposure in terms of AGP market share at 37% for 2000,32% for 1999, is with reinsurers who are rated Double-A or higher by S&R or and 44% for 1998. Single-A or higher by A M. Best Co. Although we remain liable for all reinsured risks. we are confident that we will recover the INTERNATIONAL MARKET > Our company's international business reinsured portion of any losses. should they occur. volume in the new issue and secondary markets for the last three years is illustrated as follows: PREMIUMS EARNED > The composition of MBIAs premiums earned in terms of its scheduled and refunded components is illustrated as follows: MBIA Inc. and Subsidiaries net of expected reinsurance and recoveries. is allocated with- Percent Change in the total loss and LAE reserve as a case-specific reserve. 2000 1999 We periodically evaluate our estimates for losses and VS. VS. In millions 2000 1999 1998 1999 1998 LAE and any resulting adjustments are reflected in current Premiums earned: earnings. We believe that our reserving methodology and the Scheduled $412 $379 $357 9% 6% resulting reserves are adequate to cover the ultimate net cost Refunded 34 64 68 (47)% (6)% of claims. However. the reserves are based on estimates. and Total $446 $443 $425 1% 4% there can be no assurance that any ultimate liability will not exceed such estimates. Upfront premiums are recognized over the life of the In 2000 and 1999 we reviewed our loss reserving bonds we insure. The extended premium recognition coupled methodology Each review included an analysis of loss- with compounding investment income from investing our reserve factors based on the latest available industry data, an premiums and capital form a solid foundation for consistent analysis of historical default and recovery experience for the revenue growth. In 2000, premiums earned from scheduled relevant sectors of the fixed-income market, and considera- amortization increased by 9%, augmented by the disciplined tion for the changing mix of our book of business. For the pricing strategy established in early 1999. In 1999 scheduled 2000 review, there were no adjustments to the company's premiums earned grew only 6% because of the increased loss and LAE reserves. For 1999, the review resulted in an usage of reinsurance. increase in our companys current loss and LAE reserving Refunded premiums earned declined significantly in factors and a one-time charge of $153 million. 2000 after a slight decrease in 1999, primarily reflecting the The following table shows the case-specific, reinsur- higher interest rate environment. When an MBIA-insured ance recoverable and unallocated components of our total bond issue is refunded or retired early. the related deferred loss and LAE reserves at the end of the last three years. as premium revenue is earned immediately. The amount of bond well as our loss provision for the last three years: refundings and calls is influenced by a variety of factors such as prevailing interest rates. the coupon rates of the bond Percent Change 2000 1999 issue, the issuer's desire or ability to modify bond covenants VS. VS. and applicable regulations under the Internal Revenue Code. In millions 2000 1999 1998 1999 1998 Case-specific: NET INVESTMENT INCOME > Our insurance-related investment Gross $240 $235 $219 2% 8% income (exclusive of net realized gains) was $394 million, up Reinsurance recoverabte from $359 million in 1999 and $332 million in 1998. These on unpaid losses 31 31 30 - 3% increases were primarily due to the growth of cash flow Net case reserves $209 $204 $189 2% 8% available for investment and a shift in the investment portfolio Unallocated reserves 259 232 81 12% 185% Net loss and LAE reserves $468 $436 $270 7% 62% from tax-exempt to taxable investments. Our cash flows were generated from operations, the compounding of previously Provision $51 $198 $35 (74)% 472% earned and reinvested investment income and the addition of funds from financing activities. POLICY ACQUISITION COSTS AND OPERATING EXPENSES > Expenses ADVISORY FEES > The company collects fee revenues in con- related to the production of our insurance business (policy junction with certain insured transactions. In addition. the acquisition costs) are deferred and recognized over the period company earns advisory fees in connection with its adminis- in which the related premiums are earned. Our company's tration of certain third-party-owned conduits. Fees are gener- policy acquisition costs. operating expenses and total insur- ally deferred and earned over the life of the related transac- ance operating expenses, as well as related expense ratios, tions. Certain fees, however are earned in the quarter they are shown below: are due and include administrative fees for transactions Percent Change where the fee is collected on a periodic installment basis, and 2000 1999 fees for transactions that terminate prior to the expected VS. VS. maturity date. Advisory fee revenues increased 3% in 2000. In millions 2000 1999 1998 1999 1998 This modest increase was due to a 13% increase in the recog- Policy acquisition costs. net $ 36 $ 37 $ 35 (2)% 6% nition of previously deferred fees partially offset by a reduc- Operating expenses 83 80 70 4% 14% tion in non-deferrable fees. Totalinsurance operating expenses $119 $117 $105 2% 11% LOSSES AND LOSS ADJUSTMENT EXPENSES (LAE) > We maintain a loss and LAE reserve based on our estimate of unidentified Expense ratio: losses from our insured obligations. The total reserve is cal- GAAP 26.7% 26.4% 24.7% Statutory 22.1% 23.6% 16.8% culated by applying a risk factor based on a study of issuer defaults to net debt service written. To the extent that we identify a specific insured issue with respect to which we anticipate a loss. the present value of our expected payment. MBIA Inc.and Subsidiaries For 2000. policy acquisition costs, net of deferrals, MBIA Asset Management Corporation is comprised of decreased slightly to $36 million. or 2% below 1999's $37 mil- 1838, MBIA Municipal Investors Services Corporation (MBIA- lion. This compares with $35 million in 1998. The decrease in MISC), MBIA Investment Management Corp. (IMC) and MBIA 2000 is attributable to the company's increased focus on Capital Management Corp. (CMC). The following provides a expense management and overall effort to control expense summary of each of these businesses: growth. The ratio of policy acquisition costs. net of deferrals. to earned premiums has remained steady at 8% in 2000,1999 1838 > is a full-service asset management firm with a strong and 1998. institutional focus. It manages over $14 billion in equity. fixed- Operating expenses increased by 4% in 2000 following income and balanced portfolios for a client base comprised of an increase of 14% in 1999. The increase in 2000 was due to municipalities, endowments. foundations. corporate employ- the company's increased building and equipment related ee benefit plans and high-net-worth individuals. In 2000, costs associated with its expanded Armonk, New York head- assets under management were up 27% compared with 57% quarters. The increase in 1999 was the result of expanded growth in 1999. international operations. Financial guarantee insurance companies also calcu- MBIA-MISC > provides cash management, investment fund late a statutory expense ratio (insurance operating expenses administration and fixed-rate investment placement services before deferrals as a function of net premiums written) as a directly to local governments and school districts. In late 1996, measure of expense management. The decrease in our MBIA-MISC acquired American Money Management statutory expense ratio for 2000 reflects increased net premi- Associates. Inc. (AMMA). which provides investment and um written and attentive expense control. The increase in treasury management consulting services for municipal and 1999 was related to a decline in premium volume for the year. quasi-public-sector clients. In May 2000. MBIA-MISC merged with AMMA and combined the investment expertise into a INSURANCE INCOME> In 2000 MBIAs insurance income consolidated investment management business. MBIA-MISC increased to $698 million or 36% from the $515 million record- is a Securities and Exchange Commission (SEC)-registered ed in 1999. This increase reflects the one-time addition to the investment adviser and at year-end had $7.9 billion in assets 40 loss and LAE reserves mentioned previously which reduced under management, up 20% over 1999's $6.6 billion. 41 1999's insurance income by $153 million. Excluding this factor insurance income increased by 5%. In 1999 insurance income, IMC > provides state and local governments with tailored adjusted for the one-time loss and LAE reserve addition, investment agreements for bond proceeds and other public increased 4% over 1998. reflecting revenue growth in the funds, such as construction, loan origination. capitalized structured finance and international businesses. interest and debt service reserve funds. At year-end 2000, principal and accrued interest outstanding on investment and INVESTMENT MANAGEMENT SERVICES repurchase agreements was $4.8 billion. compared with $4.5 In 1998, after our merger with 1838 Investment Advisors, Inc. billion at year-end 1999. At amortized cost. the assets sup- (1838). we formed a holding company MBIA Asset porting IMC's investment agreements were $4.9 billion and Management Corporation, to consolidate the resources and $4.6 billion at year-end 2000 and 1999, respectively These capabilities of our four investment management services. The assets are comprised of high-quality securities with an aver- success of our merger with 1838 showed immediate operat- age credit quality rating of Double-A. ing benefits and all of our investment management franchis- es experienced record performances in 1999. Continuing in CMC > is an SEC-registered investment adviser and National this vein. operating income in 2000 increased by 38% and we Association of Securities Dealers member firm. CMC special- ended the year with over $36 billion in assets under manage- izes in fixed-income management for institutional funds and ment. a record. up 22% from a year ago. Gains in assets provides investment management services for IMC's invest- under management were across the board, with all units ment agreements. MBIA-MISC's municipal cash management showing strong growth. The table below summarizes our programs and MBIA's insurance related portfolios. At year- consolidated investment management results over the last end 2000. CMC's third party assets under management three years: increased by 27% over year-end 1999. Percent Change MUNICIPAL SERVICES 2000 1999 MBIA MuniServices Company (MBIA MuniServices) was estab- VS. VS. lished in 1996 as part of the company's strategy to broaden its In millions 2000 1999 1998 1999 1998 product offerings to its core clients. leveraging its relationships Revenues $119 $87 $65 37% 33% and presence as a leading provider of products and services Expenses 63 46 36 36% 28% Operating income $ 56 $41 $29 38% 40% to the public sector. During 1999. the company completed a reorganization of the operations of two subsidiaries. Municipal Tax Bureau (MTB) and Municipal Resource Consultants (MRC). MBIA Inc.and Subsidiaries With the reorganization complete, this business, operating as 1998. The 1999 increase was due primarily to legal expenses, MBIA MuniServices, is now focused on delivering revenue expenses incurred for year 2000 computer contingencies and enhancement services and products to public-sector clients reorganization expenses. nationwide. consisting of discovery, audit, collections/recovery, enforcement and information (data) services. The Municipal ONE-TIME CHARGES > As discussed above, one-time charges for Services segment also includes Capital Asset Holdings GR 1999 includes a $102 million pre-tax charge which reflects the Inc. and certain affiliated entities (Capital Asset), a servicer of write-down of the carrying value of MBIAs investment in delinquent tax certificates. Capital Asset and the value of the loans provided by MBIA to In 2000, Municipal Services had operating income of $600 Capital Asset. Also included in one-time charges for 1999 is thousand compared with a loss of $12 million in 1999 and a loss the $3 million pre-tax loss on the sale of MuniFinancial. In of $11 million in 1998. This turnaround was due to operating 1998, one-time charges includes $55 million of pre-tax income from MRC and a breakeven result for Capital Asset. Both charges related to our mergers with CapMAC and 1838. and a subsidiaries recorded operating losses in 1999 and 1998. $20 million pre-tax charge related to the reorganization of our The company is a majority owner of Capital Asset municipal services business. which was in the business of acquiring and servicing tax tiera The company became a majority owner in December TAXES 1998 when it acquired the interest of the company's founder. Our tax policy is to optimize our after-tax income by main- In 1999. the company recorded a $102 million pre-tax charge taining the appropriate mix of taxable and tax-exempt invest- related to its investment in Capital Asset. MBIA Insurance ments. However. our tax rate fluctuates from time-to-time as Corp. continues to insure three securitizations of tax liens that we manage our investment portfolio on a total return basis. were originated and continue to be serviced by Capital Asset. Our effective tax rate for 2000 increased to 26.1 % from 17.4% in In the third quarter of 1999. Capital Asset engaged a specialty 1999 and 23.4% in 1998. For 1999. our tax provision is net of servicer of residential mortgages to help manage its busi- the benefit resulting from the one-time charges discussed ness and operations and to assist in administering the portfo- previously. as well as the benefit from the one-time increase lios supporting the securitizations. As of December 31. 2000, to the loss reserve. Excluding these benefits our effective tax the aggregate gross insured amounts in connection with these rate increased over 1999 as a result of a shift from tax- securitizations was approximately $318 million, and there can exempt investments to taxable investments to maximize be no assurance that MBIA Corp. will not incur losses under long-term after-tax income. such policies. In addition, Capital Asset and its subsidiaries have other contingent liabilities. including potential liabilities in CAPITAL RESOURCES connection with pending lawsuits. including class action law- We carefully manage our capital resources to optimize our suits. in which it is involved. The claims giving rise to these cost of capital while maintaining appropriate claims-paying lawsuits arose as a result of Capital Asset s business activities resources to sustain our Triple-A claims-paying ratings. At that took place primarily before the company obtained its year-end 2000, our total shareholders' equity was $4.2 billion. majority ownership of Capital Asset. Capital Asset is defending with total long-term borrowings of $795 million. We use debt these lawsuits. financing to lower our overall cost of capital, thereby increas- During the second quarter of 1999. MBIA MuniServices ing our return on shareholders' equity We maintain debt at Company sold its wholly owned subsidiary MBIA Muni- levels we consider to be prudent based on our cash flow and Financial, recognizing a $3 million pre-tax loss on disposition, total capital. The following table shows our long-term debt which is recorded in one-time charges. During 1998, the com- and the ratio we use to measure it: pany recorded reorganization-related pre-tax charges totaling 2000 1999 1998 $20 million consisting of the write-off of goodwill and other Long-term debt (in millions) $795 $689 $689 asset impairments. which is also recorded in one-time charges. Long-term debt to total capital 16% 16% 15% CORPORATE NET REALIZED GAINS > In 2000. net realized gains increased 31% In addition, MBIA Insurance Corporation (MBIA Corp.) to $33 million from $25 million in 1999, which decreased 28% has a $900 million irrevocable standby line of credit facility from $35 million in 1998. These gains were generated as a with a group of major Triple-A rated banks to provide funds result of ongoing management of the investment portfolio. for the payment of claims in the event of severe losses. The agreement is for a seven-year term, which expires on INTEREST EXPENSE > In 2000,1999 and 1998. respectively we October 31, 2007, and. subject to approval by the banks. may incurred $54 million, $54 million and $45 million of interest be renewed annually to extend the term to seven years expense. The increase in 1999 in interest expense refleds our beyond the renewal date. MBIA Corp. and its subsidiaries also long-term debt financings of $50 million in November 1998 maintain stop-loss reinsurance coverage of $175 million in and $150 million in September 1998. excess of incurred losses of $762 million. From time to time we access the capital markets to OTHER EXPENSES > Other expenses are composed primarily of support the growth of our businesses. In December 2000 general corporate expenses. In 2000, other expenses were $19 we issued 175 million Swiss Francs 10-year bonds (converted million compared with $21 million in 1999 and $11 million in to approximately $99 million) and $100 million of 40-year notes. MBIA Inc.and Subsidiaries In November 1998 we issued $50 million of 40-year The growth of our insurance-related investments in notes and in September 1998 we issued $150 million of 2000 was the result of positive cash flows. The fair value of 30-year debentures. investments related to our municipal investment agreement As of year-end 2000, total claims-paying resources business increased 11% to $5.0 billion at year-end 2000, for MBIA Corp. stood at $9.1 billion, a 7% increase over 1999. reflecting positive operations. Our investment portfolios are considered to be avail- LIQUIDITY able-for-sale. and the differences between their fair value and Cash flow needs at our parent company level are primarily amortized cost, net of applicable taxes, are reflected as an for dividends to our shareholders and principal and interest adjustment to shareholders' equity Differences between fair payments on our debt. These requirements have historically value and amortized cost arise primarily as a result of been met by upstreaming dividend payments from MBIA changes in interest rates occurring after a fixed-income Corp. which generates substantial cash flow from premium security is purchased, although other factors influence fair writings and investment income. In 2000, operating cash flow value. including credit-related actions. supply and demand was $640 million. forces and other market factors. The weighted-average credit Under New York State insurance law. without prior quality of our fixed-income portfolios has been maintained at approval of the superintendent of the state insurance depart- Double-A since our inception. Since we generally intend to ment, financial guarantee insurance companies can pay divi- hold most of our investments to maturity as part of our risk dends from earned surplus subject to retaining a minimum management strategy, we expect to realize a value substan- capital requirement. In our case, dividends in any 12-month tially equal to amortized cost. period cannot be greater than 10% of policyholders' surplus. During 2000, MBIA Corp. declared and paid $197 million of div- MARKET RISK idends and at year-end 2000 had dividend capacity in excess The fair values of some of our companys reported financial of $40 million without special regulatory approval. instruments are subject to change as a result of potential Our company has significant liquidity supporting its interest rate movements. This interest rate sensitivity can be businesses. At year-end 2000, cash equivalents and short- estimated by projeding a hypothetical increase in interest 42 term investments totaled $471 million. Should significant rates of 1.0%. Based on asset maturities and interest rates as 43 cash flow reductions occur in any of our businesses. for any of year-end 2000. this hypothetical increase in interest rates combination of reasons. we have additional alternatives for would result in an after-tax decrease in net fair value of our meeting ongoing cash requirements. They include. among company's financial instruments of $241 million. This project- other things. selling or pledging our fixed-income invest- ed change in fair value is primarily a result of our company's ments from our investment portfolio. tapping existing liquidity -fixed-maturity securities- asset portfolio, which loses value facilities and new borrowings. with increases in interest rates. Since our company is able Our company has substantial external borrowing and primarily expects to hold the securities to maturity, it does capacity We maintain two short-term bank lines totaling $650 not expect to recognize any adverse impact to income or cash million with a group of worldwide banks. At year-end 2000. flows under the above scenario. there were no balances outstanding under these lines. Our company's investment portfolio holdings are pri- Our investment portfolio provides a high degree of liq- marily U.S. dollar-denominated fixed-income securities uidity since it is comprised of readily marketable high-quality including municipal bonds. U.S. government bonds, mort- fixed-income securities and short-term investments. At year- gage-backed securities, collateralized mortgage obligations. end 2000. the fair value of our consolidated investment portfolio corporate bonds and asset-backed securities. In modeling increased 14% to $12.2 billion. as shown below: sensitivity to interest rates for the taxable securities, U.S. treasury rates are changed by 1.0%. Tax-exempt securities are Percent Change subjected to a change in the Municipal Triple-A General In millions 2000 1999 2000 vs. 1999 Obligation curve that would be equivalent to a 1.0% taxable Insurance operationsÂ· interest rate change based on year-end taxable/tax-exempt Amortized cost $ 7.108 $ 6.427 11% ratios. Simulation for tax-exempt securities is performed Unrealized gain(loss) 128 (223) 157% treating securities on a duration-to-worst-case basis. For the Fair value $ 7,236 $ 6.204 17% liabilities evaluation. where appropriate, the assumed dis- Municipal investment agreements: count rates used to estimate the present value of future cash Amortized cost $ 4,948 $ 4584 8% flows are increased by 1.0%. Unrealized gain(loss) 49 (94) 152% Fair value $ 4,997 $ 4.490 11% Total portfolio at fair value $12,233 $10.694 14% MBIA Inc.and Subsidiaries Report on management's responsibility Report of independent accountants To the Board of Directors and Shareholders of MBIA Inc. Management is responsible for the preparation. integrity and objectivity of the consolidated financial statements and other In our opinion, the accompanying consolidated balance financial information presented in this annual report. The sheets and the related consolidated statements of income accompanying consolidated financial statements were pre- and changes in shareholders' equity and cash flows present pared in accordance with accounting principles generally fairly in all material respects, the financial position of MBIA accepted in the United States of America. applying certain Inc. and its subsidiaries at December 31. 2000 and 1999. and estimates and judgments as required. the results of their operations and their cash flows for each of MBIA's internal controls are designed to provide rea- the three years in the period ended December 31. 2000, in sonable assurance as to the integrity and reliability of the conformity with accounting principles generally accepted in financial statements and to adequately safeguard. verify and the United States of America. These financial statements are maintain accountability of assets. Such controls are based on the responsibility of the Company s management; our respon- established written policies and procedures and are imple- sibility is to express an opinion on these financial statements mented by trained, skilled personnel with an appropriate based on our audits. We conducted our audits of these state- segregation of duties. These policies and procedures pre- ments in accordance with auditing standards generally scribe that MBIA and all its employees are to maintain the accepted in the United States of America. which require that highest ethical standards and that its business practices are we plan and perform the audit to obtain reasonable assurance to be conducted in a manner that is above reproach. about whether the financial statements are free of material PricewaterhouseCoopers LLR independent account- misstatement. An audit includes examining, on a test basis, ants. is retained to audit the company's financial statements. evidence supporting the amounts and disclosures in the finan- Their accompanying report is based on audits conducted in cial statements, assessing the accounting principles used and accordance with auditing standards generally accepted in the significant estimates made by management, and evaluating United States of America, which include the consideration of the overall financial statement presentation. We believe that the company s internal controls to establish a basis for our audits provide a reasonable basis for our opinion. reliance thereon in determining the nature, timing and extent of audit tests to be applied. The board of directors exercises its responsibility for RA,60+JAN!4(urs La these financial statements through its Audit Committee, which consists entirely of independent non-management New York, New York board members. The Audit Committee meets periodically February 2. 2001 with the independent accountants, both privately and with management present. to review accounting, auditing, internal controls and financial reporting matters. 942 ..2. Joseph W Brown Chairman and Chief Executive Officer NA 5 104 Neil G. Budnick Chief Financial Officer MBIA Inc. and Subsidiaries Dollars in thousands except per share amounts December 31, 2000 December 31.1999 Assets Investments: Fixed-maturity securities held as available-for-sale at fair value (amortized cost $6.612.498 and $6,006,506) $ 6,740.127 $ 5,783,979 Short-term investments, at amortized cost (which approximates fair value) 376,604 274.022 Other investments 119.591 146,038 7.236.322 6.204.039 Municipal investment agreement portfolio held as available-for-sale at fair value (amortized cost $4.947.653 and $4,583.920) 4.996.608 4.489,551 Total investments 12,232,930 10,693,590 Cash and cash equivalents 93,962 93.559 Securities borrowed or purchased under agreements to resell 314,624 261.171 Accrued investment income 152.043 135,344 Deferred acquisition costs 274,355 251.922 Prepaid reinsurance premiums 442,622 403.210 Reinsurance recoverable on unpaid losses 31.414 30.819 Goodwill (less accumulated amortization of $67,472 and $68,388) 104.322 110.023 Property and equipment. at cost (less accumulated depreciation of $62.026 and $50,469) 133.514 128.733 Receivable for investments sold 13.772 24,922 Other assets 100,780 130.606 Total assets $13,894,338 $12.263.899 Liabilities and Shareholders' Equity Liabilities: 44 Deferred premium revenue $ 2,397,578 $ 2.310.758 45 Loss and loss adjustment expense reserves 499,279 467.279 Municipal investment agreements 3,821.652 3.483.911 Municipal repurchase agreements 967,803 1.028.921 Long-term debt 795.102 689.204 Short-term debt 144.243 68.751 Securities loaned or sold under agreements to repurchase 489.624 288,750 Deferred income taxes 252.463 32.805 Deferred fee revenue 32,694 36.536 Payable for investments purchased 7.899 102.666 Other liabilities 262.588 241.217 Total liabilities 9.670.925 8,750,798 Shareholders' Equity: Preferred stock. par value $1 per share; authorized shares - 10,000,000: issued and outstanding - none - - Common stock. par value $1 per share: authorized shares - 200,000,000; issued shares - 100,773,295 and 100,072.846 100,773 100.073 Additional paid-in capital 1.219,587 1.191.108 Retained earnings 2.934.608 2.486.478 Accumulated other comprehensive income (loss). net of deferred income tax provision (benefit) of $57,141 and $(112.920) 85.707 (224.511) Unallocated ESOP shares (2,950) (4,363) Unearned compensation - restricted stock (10.659) (9,986) Treasury stock - 2,209,358 shares in 2000 and 520.722 shares in 1999 (103.653) (25,698) Total shareholders' equity 4,223,413 3.513.101 Total liabilities and shareholders' equity $13,894.338 $12.263.899 The accompanying notes are an integral part of the consolidated financial statements. MBA Inc.and Subsidiaries Years ended December 31 Dollars in thousands except per share amounts 2000 1999 1998 Insurance Revenues: Gross premiums written $687.408 $624.871 $677,050 Ceded premiums (189,316) (171.256) (156.064) Net premiums written 498,092 453.615 520.986 Increase in deferred premium revenue (51,739) (10.819) (96.436) Premiums earned (net of ceded premiums of $147,249. $119,879 and $92.802) 446,353 442.796 424,550 Net investment income 393.985 359.456 331,802 Advisory fees 28,284 27.486 26.130 1btalinsurance revenues 868,622 829.738 782.482 Expenses: Losses and loss adjustment 51,291 198,454 34.683 Policy acquisition costs. net 35.976 36.700 34.613 Operating 83,066 80,082 70.330 1btal insurance expenses 170.333 315.236 139.626 Insurance income 698,289 514.502 642.856 Investment management services Revenues 118,859 86.600 65.032 Expenses 62.535 45,920 36.012 Investment management services income 56,324 40.680 29,020 Municipal services Revenues 37,089 22.923 29,392 Expenses 36,479 35.372 40,682 Municipal services income (loss) 610 (12.449) (11.290) Corporate Net realized gains 32,884 25,160 34.976 Interest expense 53.756 53,935 44,620 Other expenses 19.494 21,052 10,701 One-time charges - 105,023 75,203 Corporate loss (40.366) (154,850) (95.548) Income before income taxes 714.857 387.883 565,038 Provision for income taxes 186.220 67.353 132.310 Net income $528.637 $320.530 $432,728 Net income per common share: Basic $5.37 $3.22 $4.37 Diluted $5.33 $3.19 $4.32 Weighted average number of common shares outstanding: Basic 98476442 99,590,870 98.978.641 Diluted 99.112,629 100,402,339 100,163,014 The accompanying notes are an integral parÂ·Â·t of the consolidated financial statements. MBIA Inc. and Subsidiaries Forthe years ended December 31, 2000,1999 and 1998 Accumulated Uneamed Additional Other Unatlocated Compensation Total Common Stock Paid-in Retained Comprehensive ESOP --RestMcted Treasury Stock Shareholders In thousands except per share amounts Shares Amount Capital Earnings Income (Loss) Shares Stock Shares Amount Equity Balance. January 1. 1998 98,754 $98.754 $1,133,950 $1.901,608 $236.095 $(4.083) $ (4,812) - - $3.361,512 Comprehensive income: Net income - - - 432.728 - - - - - 432,728 Other comprehensive income: Change in unrealized appreciation of investments net of change in deferred income taxes of $(25.384) - - - - 48.042 - - - - 48.042 Change in foreign currency translation - - - - 4.778 - - - - 4.778 Other comprehensive income 52.820 Totat comprehensive income 485.548 Treasury shares acquired - - 830 - - - - (22) (830) - Unallocated ESOP shares - - - - - 39 - - - 39 Uneamed compensation - restricted stock 71 71 4.449 - - - (1.995) - 2.525 Exercise of stock options 745 745 29.963 - - - - - - 30.708 Dividends (declared per common share $0.790. paid per common share $0.785) - - - (88.115) - - - - - (88.115) Balance. December 31.1998 99,570 99,570 1,169,192 2,246.221 288,915 (4.044) (6.807) (22) (830) 3,792,217 Comprehensive income (loss): Net income - - - 320.530 - - - - - 320.530 Other comprehensive income (loss): Change in unrealized appreciation of investments net of change in deferred income taxes of $270,330 - - - - (502.996) - - - - (502,996) 46 -- - Change in foreign currency translation - - - - (10,430 - --- (10.430) 47 (513,426) Other comprehensive loss Total comprehensive loss (192.896) Treasury shares acquired - - - - - - - (500) (24,698) (24,698) Unallocated ESOP shares - - 391 - - (319) - 13 462 534 Uneamed compensation - restricted stock 99 99 4.883 - - - 0.179) (12) (632) 1,171 Stock issued for acquisition 38 38 2,392 --- - - - 2,430 Exercise of stock options 366 366 14.250 - - - - - - 14.616 Dividends (declared per common share $0.805, paid per common share $0.800) - - - (80.273) - - - - - (80.273) Balance, December 31.1999 100,073 100.073 1,191,108 2.486.478 (224,511) (4,363) (9.986) (521) (25.698) 3.513.101 Comprehensive incomeÂ· Net income - - - 528.637 - - - - - 528.637 Other comprehensive income (loss): Change in unrealized depreciation of investments net of change in deferred income taxes of $(170,061) - - - - 316.010 - - - - 316.010 Change in foreign currency translation - - - - (5.792) - - - - (5.792) Other comprehensive income 310.218 Total comprehensive income 838.855 Treasury shares acquired - - - - - - - (1.680) (77.717) (77.955) Unallocated ESOP shares - - (43) - - 1.413 - - - 1.370 Uneamed compensation - restricted stock 76 76 5,463 - - - (673) (8) (238) 4,866 Exercise of stock options 624 624 23,059 - - - - - - 23.683 Dividends (declared and paid per common share $0.820) - - - (80,507) - - - - - (80.507) Balance. December 31. 2000 100.773 $100,773 $1,219,587 $2.934.608 $ 85,707 $(2,950) $(10.659) (2.209) $(103.653) $4.223.413 Disclosure of reclassification amount: 1998 1999 2000 Unrealized appreciation (depreciation) of investments arising during the period, net of taxes $78,142 $(448.686) $317.092 Reclassification of adjustment, net of taxes (30.100) (54.310) (1.082) Net unrealized appreciation (depreciation). net of taxes $48,042 $(502.996) $316.010 The accompanying notes are an integral part of the consolidated financial statements. MBIA Inc.and Subsidiaries Years ended December 31 Dollars in thousands 2000 1999 1998 Cash flows from operating activities: Net income $ 528.637 $ 320.530 $ 432.728 Adjustments to reconcile net income to net cash provided by operating activities: Increase in accrued investment income (16,699) (8.354) (5,900) Increase in deferred acquisition costs (22,433) (21.837) (13,920) Increase in prepaid reinsurance premiums (39,412) (50,511) (63.191) Increase in deferred premium revenue 91,151 61.329 159.627 Increase in loss and loss adjustment expense reserves. net 31,405 166.346 167,053 Depreciation 11.557 11,368 8,174 Amortization of goodwill 6,701 6.983 9.051 Amortization of bond discount, net (31,379) (25,338) (22.699) Net realized gains on sale of investments (32,884) (25.160) (34,976) Deferred income tax provision (benefit) 49.575 (40.505) 19,943 Other, net 64,124 48,400 26,155 Total adjustments to net income 111,706 122.721 249,317 Net cash provided by operating activities 640,343 443,251 682.045 Cash flows from investing activities: Purchase of fixed-maturity securities. net of payable for investments purchased (7,417,426) (6.778.179) (2,479.245) Sale of fixed-maturity securities, net of receivable for investments sold 6,543,563 6,144.650 1.102,460 Redemption of fixed-maturity securities, net of receivable for investments redeemed 282.540 288,710 745.515 (Purchase) sale of short-term investments (93,552) 113,896 (97,177) Purchase of other investments (24.697) (84,018) (51.769) Sale of other investments 43,235 33.402 1,785 Purchases for municipal investment agreement portfolio. net of payable for investments purchased (5.418,222) (2.672,918) (2,456,265) Sales from municipal investment agreement portfolio, net of receivable for investments sold 5.002,639 1,650,111 2,218.342 Capital expenditures, net of disposals (16,363) (58,650) (22,909) Other. net 8,297 11,146 (8.098) Net cash used by investing activities (1.089.986) (1.351.850) (1,047,361) Cash flows from financing activities: Net proceeds (repayment) from issuance (retirement) of long-term debt 192,363 (3,750) 197.113 Net (repayment) proceeds from (retirement) issuance of short-term debt (24.500) 65.001 (20.000) Dividends paid (80.708) (79.764) (85,667) Purchase of treasur'y stock (77.955) (24,698) - Proceeds from issuance of municipal investment and repurchase agreements 2.674.379 2,787,906 2,352.908 Payments for drawdowns of municipal investment and repurchase agreements (2.404,637) (1,770.418) (2.017,056) Securities loaned or sold under agreements to repurchase, net 147.421 (7.492) (98,229) Exercise of stock options 23,683 14.616 30,708 Net cash provided by financing activities 450,046 981.401 359,777 Net increase (decrease) in cash and cash equivalents 403 72.802 (5.539) Cash and cash equivalents - beginning of year 93,559 20,757 26,296 Cash and cash equivalents - end of year $ 93.962 $ 93,559 $ 20.757 Supplemental cash flow disclosures: Income taxes paid $ 96,395 $ 136,877 $ 108.297 Interest paid: Municipal investment and repurchase agreements $ 265,988 $ 210.495 $ 202,502 Long-term debt 53,234 53.466 39.499 Short-term debt _ - 1,057 The accompanying notes are an integral part of the consolidated financial statements. MBIA Inc.and Subsidiaries NOTE 1: BUSINESS AND ORGANIZATION business primarily through its wholly owned subsidiary Capital MBIA Inc. (MBIA or the company) was incorporated in Connedicut Markets Assurance Corporation (CMAC). On July 31.1998, MBIA on November 12,1986 asa licensed insurer and. through a completed a merger of its investment management business with series of transadions during December 1986, became the suc- 1838 Investment Advisors. Inc. (1838). Effedive December 31, 2000, cessor to the business of the Municipal Bond Insurance 1838 was converted into a limited liability corporation. See Note 3 Association (the Association), a voluntary unincorporated associa- for details on these two mergers. tion of insurers writing municipal bond and note insurance as In June 1998, MBIA Asset Management Corporation agent for the member insurance companies. The company oper- (MBIA-AMC) was formed as a wholly owned subsidiary of the ates its insurance business primarily through its wholly owned company to consolidate the resources and capabilities of the subsidiary MBIA Insurance Corporation (MBIA Corp.). company's investment management services. In July 1998, the Effective December 31, 1989, the company acquired for company contributed the common stock of MBIA-MISC. IMC. CMC $288 million all of the outstanding stock of Bond Investors Group, and 1838 to MBIA-AMC. Effective December 31. 2000. MBIA-AMC Inc. (BIG), the parent company of Bond Investors Guaranty was converted into a limited liability corporation. Insurance Company which was subsequently renamed MBIA TRS Funding Corporation (TRS) was formed to provide Insurance Corp. of Illinois (MBIA Illinois). The acquisition of BIG clients with innovative structured financing solutions. has been accounted for as a purchase, and the price was allocat- ed to the net assets of the acquired company based on the fair NOTE 2: SIGNIFICANT ACCOUNTING POLICIES value of such assets and liabilities at the date of acquisition. The consolidated financial statements have been prepared on the In 1990, the company formed MBIA Assurance, S.A. (MBIA basis of generally accepted accounting principles (GAAP). The Assurance). a wholly owned French subsidiary to write financial preparation of financial statements in conformity with GAAP guarantee insurance in the international community. MBIA requires management to make estimates and assumptions that Assurance provides insurance for public infrastructure financ- affect the reported amounts of assets and liabilities and disclo- ings. structured finance transactions and certain obligations of sure of contingent assets and liabilities at the date of the financial financial institutions. The stock of MBIA Assurance was con- statements, and the reported amounts of revenues and expenses tributed to MBIA Corp. in 1991 and, pursuant to a reinsurance during the reporting period. Actual results could differ from those agreement with MBIA Corp., a portion of the risks insured by estimates. Significant accounting policies are as follows: MBIA Assurance is reinsured by MBIA Corp. At the end of 1990, MBIA Municipal Investors Services CONSOLIDATION > The consolidated financial statements include the 48 - Corporation (MBIA-MISC) was formed as a wholly owned sub- accounts of the company its significant subsidiaries and entities 49 sidiary of the company. MBIA-MISC operates cooperative cash under its control. All significant intercompany balances have been management programs for school districts and municipalities. eliminated. Certain amounts have been reclassified in prior years' In 1993, the company formed a wholly owned subsidiary, financial statements to conform to the current presentation. MBIA Investment Management Corp. (IMC). IMC provides guaran- teed investment agreements to states, municipalities and munici- INVESTMENTS > The company's entire investment portfolio is consid- pal authorities that are guaranteed as to principal and interest. ered available-for-sale and is reported in the financial statements at In 1994, the company formed a wholly owned subsidiary, fair value. with unrealized gains and losses, net of deferred taxes. MBIA Securities Corp.. which was subsequently renamed MBIA reflected as a separate component of shareholders' equity. Capital Management Corp. (CMC). CMC provides fixed-income Bond discounts and premiums are amortized using the investment management services for the company and its affili- effective-yield method over the remaining term of the securities. ates and third party institutional clients. For pre-refunded bonds. the remaining term is determined based In 1996. MBIA-MISC acquired American Money on the contractual refunding date. Short-term investments are Management Associates. Inc. (AMMA). which provides invest- carried at amortized cost. which approximates fair value. and ment and treasury management consulting services for munici- include all fixed-maturity securities-other than those held in the pal and quasi-public-sector clients. In May 2000, MBIA-MISC municipal investment agreement portfolio-with a remaining merged with AMMA and combined the investment expertise into effective term to maturity of less than one year. Investment a consolidated investment management business. income is recorded as earned. Realized gains or losses on the In 1996, the company formed a wholly owned subsidiary. sate of investments are determined by specific identification and Strategic Services, Inc.. which was subsequently renamed MBIA are included as a separate component of revenues. MuniServices Company (MBIA MuniServices). Also in 1996. MBIA Investment income from the municipal investment agree- MuniServices acquired an interest in Capital Asset Holdings. Inc. ment portfolio is recorded as a component of investment manage- (Capital Asset), a limited partnership that buys, services and ment services revenues. Municipal investment agreement portfo- manages delinquent municipal tax liens. In December 1998. MBIA tio accrued interest income. receivables for investments sold and MuniServices acquired Capital Asset's founder's equity interest. In payable for investments purchased are included in the respective January 1997, MBIA MuniServices acquired a 95 percent interest consolidated accounts. in the Municipal Tax Bureau (MTB) of Philadelphia, a provider of Other investments include the company's interest in equi- tax compliance services to state and local governments. In July ty-oriented and equity-method investments. The company records 1997, MBIA MuniServices acquired MuniFinancial. a public its share of the unrealized gains and losses on equity-oriented finance consulting firm specializing in municipal debt administra- investments, net of applicable deferred income taxes. as a sepa- tion. In September 1999, MBIA MuniServices sold MuniFinancial. rate component of shareholders' equity. In January 1998, Municipal Resource Consultants (MRC). a rev- enue audit and information services firm. was acquired. CASH AND CASH EQUIVALENTS > Cash and cash equivalents include On February 17,1998. MBIA consummated a merger with cash on hand and demand deposits with banks. CapMAC Holdings Inc. (CapMAC). CapMAC operated its insurance MBIA Inc.and Subsidiaries SECURITIES BORROWED OR PURCHASED UNDER AGREEMENTS TO PROPERTY AND EQUIPMENT > Property and equipment consist of RESELL AND SECURITIES LOANED OR SOLD UNDER AGREEMENTS TO the company's headquarters. furniture. fixtures and equipment, REPURCHASE > Securities borrowed or purchased under agree- which are recorded at cost and are depreciated using the ments to resell and securities loaned or sold under agreements straight-line method over their estimated service lives ranging to repurchase are accounted for as collateralized transactions from 3 to 31 years. Maintenance and repairs are charged to and are recorded at principal or contract value. It is the compa- expense as incurred. ny's policy to take possession of securities borrowed or pur- chased under agreements to resell. These contracts are primarily LOSSES AND LOSS ADJUSTMENT EXPENSES > Loss and loss adjust- entered into to obtain securities that are repledged as part of ment expenses (LAE) reserves are established in an amount MBIA's collateralized municipal investment and repurchase agree- equal to the company's estimate of identified or case basis ment activity and are only transacted with high-quality dealer firms. reserves and unallocated losses. including costs of settlement. on The company minimizes the credit risk that counterparties the obligations it has insured. to transactions might be unable to fulfill their contractual obliga- Case basis reserves are established when specific lions by monitoring customer credit exposure and collateral value insured issues are identified as currently or likely to be in default. and requiring additional collateral to be deposited with the com- Such a reserve is based on the present value of the expected loss pany when deemed necessary. and LAE payments, net of recoveries under salvage and subroga- tion rights, based on a discounted rate of 6.12%. The total reserve POLICY ACQUISITION COSTS > Policy acquisition costs include only is calculated by applying a loss factor, determined based on an those expenses that relate primarily to, and vary with. premium independent rating agency study of issuer defaults. to net debt production. For business produced directly by MBIA Corp., such service written. When a case basis reserve is recorded, a corre- costs include compensation of employees involved in underwrit- sponding reduction is made to the unallocated reserve. ing and policy issuance functions, certain rating agency fees. Management of the company periodically reevaluates its state premium taxes and certain other underwriting expenses, estimates for losses and LAE, and any resulting adjustments are reduced by ceding commission income on premiums ceded to refleded in current earnings. Management believes that the reinsurers. Policy acquisition costs are deferred and amortized reserves are adequate to cover the ultimate net cost of claims: over the period in which the related premiums are earned. however, because the reserves are based on estimates. there can be no assurance that the ultimate liability will not exceed PREMIUM REVENUE RECOGNITION > Upfront premiums are earned such estimates. pro rata over the period of risk. Premiums are allocated to each In 2000 and 1999 the company reviewed its loss reserving maturity based on par amount and are earned on a straight-line methodology The reviews included an analysis of loss reserve basis over the term of each maturity Installment premiums are factors based on the latest available industry data. They included earned over each installment period-generally one year or less. the analysis of historical default and recovery experience for the When an insured issue is retired early is called by the issuer or is relevant sectors of the fixed-income market. Also factored in was in substance paid in advance through a refunding accomplished the changing mix of our book of business. The 1999 review result- by placing U.S. Government securities in escrow, the remaining ed in an increase in the company's current loss reserving factors. deferred premium revenue is earned at that time, since there is no longer risk to the company Accordingly, deferred premium MUNICIPAL INVESTMENT AGREEMENTS AND MUNICIPAL REPURCHASE revenue represents the portion of premiums written that is appli- AGREEMENTS > Municipal investment agreements and municipal cable to the unexpired risk of insured bonds and notes. repurchase agreements are recorded as liabilities on the balance sheet at the time such agreements are executed. The liabilities ADVISORY FEE REVENUE RECOGNITION > The company collects advi- for municipal investment and repurchase agreements are carried sory fees for services rendered in connection with advising clients at the face value of the agreement plus accrued interest, whereas as to the most appropriate structure to use for a given insured the related assets are recorded at fair value. Investment manage- transaction. In addition. the company earns advisory fees in con- ment services revenues include investment income on the assets nection with its administration of certain third-party-owned con- underlying the municipal investment agreement portfolio, net of duits. Most fees are deferred and earned pro-rata over the life of interest expense at rates specified in the agreements, computed the underlying transactions. Certain fees, however, are earned in daily based upon the outstanding balances. the quarter they are colleded and include administrative fees for transactions where the fee is collected on a periodic installment DERIVATIVES > The company's policies with respect to the use of basis and fees for transactions which terminate prior to the derivative financial instruments include limitations with respect to expected maturity date. the amount. type and concentration of such instruments. The company uses interest rate swaps and foreign currency swaps GOODWILL > Goodwill represents the excess of the cost of acquisi- for hedging purposes as part of its overall risk management tions over the tangible net assets acquired. Goodwill attributed to strategy Currently gains and losses on the derivative financial the acquisition of MBIA Corp. is amortized by the straight-line instruments that qualify as accounting hedges of existing assets method over 25 years. Goodwil[ attributed to the acquisition of and liabilities are included with the carrying amounts and amor- MBIA Illinois is amortized according to the recognition of future tized over the remaining lives of the assets and liabilities as an profits from its deferred premium revenue and installment pre- adjustment to interest income or expense. When a hedged asset miums. except for a minor portion attributed to state licenses. is sold or liability extinguished, the unamortized gain or loss on which is amortized by the straight-line method over 25 years. the related hedge is recognized in income. Gains and losses on Goodwill attributed to the acquisition of all other subsidiaries is derivative financial instruments that do not qualify as accounting amortized by the straight-line method over 15 years. hedges are recognized in income when realized. MBIA Inc.and Subsidiaries Effective January 1. 2001 the company will adopt issuance of 1.1 million shares of common stock. Each share of Statement of Financial Accounting Standards (SFAS) 133, 1838 was exchanged for 2.134 shares of MBIA Inc. "Accounting for Derivative Instruments and Hedging Activities. The mergers constituted tax-free reorganizations and See footnote 4 for an explanation of the impact the adoption of have been accounted for as "pooling of interests" under this statement will have on the company's financial statements. Accounting Principles Board (APB) Opinion No. 16. Accordingly, all prior period consolidated financial statements presented have INVESTMENT MANAGEMENT SERVICES OPERATIONS > Investment been restated to include the combined results of operations. management services results are comprised of the net invest- financial position and cash flows of CapMAC and 1838 as though ment income, operating revenues and expenses of MBIA-MISC, they had always been a part of MBIA Inc. IMC. CMC and 1838. There were no material transactions between MBIA Inc, CapMAC and/or 1838 prior to the combinations. and immaterial MUNICIPAL SERVICES OPERATIONS > Municipal services results are adjustments were recorded to conform CapMAC's and 1838's comprised of the net investment income, operating revenues and accounting policies. Certain reclassifications were made to the expenses of MTB. MRC and Capital Asset. and for 1999 and 1998 CapMAC and 1838 financial statements to conform to the compa- only MuniFinancial. ny's presentations. Effective April 1, 1998. CMAC ceded its portfolio of net CORPORATE > Corporate consists of net realized gains. interest insured obligations in exchange for cash and investments equal expenses. general corporate overhead expenses and one-time to its statutory uneamed premium and contingency reserves of charges. $176 million to MBIA Corp. Subsequent to this cession, the com- pany contributed the common stock of CMAC to MBIA Corp. INCOME TAXES > Deferred income taxes are provided with respect to the temporary differences between the tax bases of assets and NOTE 4: RECENT ACCOUNTING PRONOUNCEMENT liabilities and the reported amounts in the financial statements In June 1998, the Financial Accounting Standards Board (FASB) that will result in deductible or taxable amounts in future years issued SFAS 133. "Accounting for Derivative Instruments and when the reported amount of the asset or liability is recovered or Hedging Activities" which is effective for the company as of settled. Such temporary differences relate principally to premium January 1, 2001. SFAS 133 requires that all derivative instruments revenue recognition, deferred acquisition costs, unrealized appreci- be recorded on the balance sheet at their fair value. Changes in ation or depreciation of investments and the contingency reserve. the fair value of derivatives will be recorded each period in current - The Internal Revenue Code permits companies writing earnings or other comprehensive income, depending on whether 51 financial guarantee insurance to deduct from taxable income a derivative is designated as part of a hedge, and if so. the use amounts added to the statutory contingency reserve. subject to and type of the hedge. certain limitations. The tax benefits obtained from such deduc- The company has entered into derivative transactions that lions must be invested in non-interest-bearing U.S. Government do not qualify for the financial guarantee scope exception under tax and loss bonds. The company records purchases of tax and SFAS 133 and. therefore, must be stated at fair value. The loss bonds as payments of federal income taxes. The amounts Insurance segment, which represents the majority of the compa- deducted must be restored to taxable income when the contin- ny's derivative exposure and mark-to-market as of January 1, gency reserve is released. at which time the company may pres- 2001, has insured derivatives primarily consisting of credit default ent the tax and loss bonds for redemption to satisfy the additional swaps. The Investment Management Services segment has tax liability. entered into primarily forward delivery agreements, interest rate and credit default swaps. The Corporate segment has entered FOREIGN CURRENCYTRANSLATION > Assets and liabilities denomi- into derivatives to hedge foreign exchange and interest rate risks nated in foreign currencies are translated at year-end exchange related to the issuance of certain MBIA long-term debt issues. rates. Operating results are translated at average rates of Adoption of SFAS 133 on January 1. 2001 will result in exchange prevailing during the year. Unrealized gains or losses cumulative after-tax reductions in net income of approximately resulting from translation are included as a separate component $12 million and other comprehensive income of approximately $4 of shareholders' equity Gains and losses resulting from trans- million. In addition, the company will increase its assets by actions in foreign currencies are recorded in current income. approximately $50 million and liabilities by approximately $66 million on an after-tax basis. NET INCOME PER COMMON SHARE > Basic earnings per share are based on the weighted average number of common shares out- NOTE 5: ASSET IMPAIRMENT standing during the year. whereas diluted earnings per share Early in 1999. the company concluded that its investment in Capital also gives effect to all dilutive potential common shares that were Asset was not consistent with its strategic objedives, and took outstanding during the period. Dilutive potential common shares steps to restrudure it for divestiture. The company was unsuc- include stock options and other items that could potentially result cessful in its attempts to sell Capital Asset and in the second in the issuance of common stock. quarter of 1999, the company ceased these efforts and decided to limit the activities of Capital Asset primarily to the servicing of the NOTE 3: MERGERS WITH CAPMAC AND 1838 portfolios then being serviced by Capital Asset. In the second On February 17,1998. the company consummated a merger with quarter of 1999. the company completed a valuation of Capital CapMAC by exchanging 8.1 million shares of its common stock Asset's tax lien portfolio. and as a result the company determined for all of the common stock of CapMAC. Each share of CapMAC that it was necessary to write down its investment in Capital Asset was exchanged for 0.4675 of one share of MBIA Inc. common by $102 million. A one-time charge for that amount was recorded stock. On July 31.1998, the company completed a merger of its in the consolidated statement of income during the second quar- investment management business with 1838 through the ter of 1999. MBIA Inc.and Subsidiaries NOTE 6: SECURITIZATION OF FINANCIAL ASSETS The following is a reconciliation of consolidated share- In September 1999. Capital Asset sold substantially all of its holders' equity presented on a GAAP basis for the company and remaining tax lien portfolio through a securitization. This securiti- its consolidated subsidiaries to statutory capital and surplus for zation was the third in a series of such securitizations. Proceeds MBIA Corp, and its subsidiaries: from this transaction were used to extinguish an existing ware- house financing facility that had been guaranteed by the compa- ny The notes issued in connection with the securitizations have As of December 31 In thousands 2000 1999 been insured by MBIA Corp. In connection therewith. the compa- ny recorded a servicing liability which represents the fair value of Company's GAAP shareholders' equity $4.223.413 $3.513.101 such liability based upon the present value of projected servicing costs in excess of servicing revenues. discounted at 11%. The Contributions to MBIA Corp. 534.776 508.719 Premium revenue recognition (535,920) (491.766) servicing liability will be amortized in proportion to and over the Deferral of acquisition costs (274,355) (251,922) period of the estimated net servicing loss, and accordingly, $776 Unrealized (gains) losses (163,331) 322,739 thousand was amortized during the year ended December 31, Contingency reserve (2.123,403) (1.738.730) 2000. The balance of the servicing liability as of December 31. Loss and LAE reserves 258.706 232.004 2000 is $10.9 million. During the fourth quarter of 1999. a special- Deferred income taxes 266,593 44,917 ty servicing concern was engaged to oversee the management of Tax and loss bonds 202,195 219,195 Capital Asset. whose activities now primarily consist of the Goodwill (81,196) (86.075) administering and servicing of the securitizations and other Other 74,191 141.185 delinquent tax liens and related assets. Statutory capital and surplus $2.381,669 $2.413.367 NOTE 7: STATUTORY ACCOUNTING PRACTICES The financial statements have been prepared on the basis of In 1998. The National Association of Insurance GAAR which differs in certain respects from the statutory Commissioners (NAIC) adopted the Codification of Statutory accounting practices prescribed or permitted by the insurance Accounting Principles guidance, which replaces the current regulatory authorities. Statutory accounting practices differ from Accounting Practices and Procedures manuals as the NAIC's pri- GAAP in the following respects: mary guidance on statutory accounting effective as of January 1, * upfront premiums are earned only when the related risk has 2001. The Codification provides guidance for areas where expired rather than over the period of the risk: statutory accounting has been silent and changes current * acquisition costs are charged to operations as incurred rather statutory accounting in some areas: e.g. deferred income taxes than deferred and amortized as the related premiums are are recorded. earned; The New York State Insurance Department has adopted * a contingency reserve is computed on the basis of statutory the Codification guidance, effective January 1, 2001. The New York requirements, and reserves for losses and LAE are established State Insurance Department has not adopted the Codification at present value for specific insured issues that are identified rules on certain accounting issues. e.g. deferred taxes and good- as currently or likely to be in default. Under GAAR reserves are will. The effect of adoption on MBIA Corp's statutory surplus is established based on the company's reasonable estimate of the expected to be immaterial to MBIA Corp. identified and unallocated losses and LAE on the insured obli- gations it has written: NOTE 8: PREMIUMS EARNED FROM REFUNDED AND CALLED BONDS * federal income taxes are only provided on taxable income for Premiums earned include $34.0 million, $64.2 million and $68.4 which income taxes are currently payable. white under GAAR million for 2000,1999 and 1998, respectively. related to refunded deferred income taxes are provided with respect to temporary and called bonds. differences: * fixed-maturity securities are reported at amortized cost rather NOTE 9: INVESTMENTS than fair value: The company's investment objective is to optimize long-term, * tax and loss bonds purchased are reflected as admitted assets after-tax returns while emphasizing the preservation of capital as well as payments of income taxes: and through maintenance of high-quality investments with adequate * certain assets designated as -non-admitted assets" are liquidity The company's investment policies limit the amount of charged directly against surplus but are reflected as assets credit exposure to any one issuer. The fixed-maturity portfolio is under GAAR comprised of high-quality (average rating Double-A) taxable and Consolidated net income of MBIA Corp. determined in tax-exempt investments of diversified maturities. accordance with statutory accounting practices for the years ended December 31, 2000. 1999 and 1998 was $543.9 million. $521.8 million and $509.9 million. respectively. MBIA Inc.and Subsidiaries The following tables set forth the amortized cost and fair NOTE 10: INVESTMENT INCOME AND GAINS AND LOSSES value of the fixed-maturities and short-term investments includ- Investment income consists of: ed in the consolidated investment portfolio of the company as of Years ended December 31 December 31, 2000 and 1999. In thousands 2000 1999 1998 Fixed-maturities $389,159 $358.127 $331.857 Gross Gross Short-term investments 10,473 7.672 5.692 Amortized Unrealized Unrealized Fair Other investments 1.122 24 16 In thousands Cost Gains Losses Value Gross investment income 400,754 365,823 337,565 December 31. 2000 Investment expenses 6.769 6.367 5.763 Taxable bonds: Net investment income 393.985 359,456 331.802 United States Net realized gains (losses): Treasury and Fixed-maturities government agency $ 678.619 $ 35.292 $ (1.657) $ 712,254 Gains 58.349 62,300 50,438 Corporate and Losses (34.166) (28.360) (7,197) other obligations 5,546,960 73,564 (68.706) 5.551.818 Net 24.183 33.940 43.241 Mortgage-backed 1.956,200 26,857 (4,396) 1.978.661 Other investments Tax-exempt bonds: Gains 12,110 2,270 901 State and municipal Losses (3.409) (11,050) (9.166) obligations 3,754.976 127,916 (12.286) 3,870,606 Net 8,701 (8.780) (8.265) Total $11,936.755 $263.629 $ (87,045) $12,113,339 Total net realized gains 32.884 25.160 34,976 Total investment income $426.869 $384.616 $366,778 Gross Gross Amortized Unrealized Unrealized Fair Net unrealized gains (losses) consist of: In thousands Cost Gains Losses Value December 31. 1999 As of December 31 Taxable bonds: In thousands 2000 1999 United States Fixed-maturities: 52 Gains $263.629 $ 70.297 Treasury and 53 government agency $ 559.204 $ 8,679 $ (13.056) $554,827 Losses (87.045) (387.193) Corporate and Net 176.584 (316.896) other obligations 5,000.814 6,843 (171.015) 4,836,642 Other investments: Mortgage-backed 1,662,636 4.441 (28,079) 1,638,998 Gains 279 828 Tax-exempt bonds: Losses (13.531) (6,671) State and municipal (13.252) Net (5,843) obligations 3.641.794 50.334 (175.043) 3,517.085 Total 163.332 (322.739) Total $10.864.448 $ 70.297 $087.193) $10.547.552 Deferred income tax (benefit) 57,141 (112.920) Unrealized gains (losses), net $106.191 $(209,819) Fixed-maturity investments carried at fair value of $11.7 The deferred income tax (benefit) relates primarily to million and $11.6 million as of December 31, 2000 and 1999, unrealized gains and losses on the company's fixed-maturity respectively were on deposit with various regulatory authorities investments. which are reflected in shareholders' equity. to comply with insurance laws. The change in net unrealized gains (losses) consists of: A portion of the obligations under municipal investment and repurchase agreements require the company to pledge secu- Years ended December 31 rities as collateral As of December 31, 2000 and 1999. the fair In thousands 2000 1999 1998 value of securities pledged as collateral with respect to these Fixed-maturities $493,480 $(772,041) $80,903 obligations approximated $2.3 billion and $1.9 billion. respectively. Other investments (7,409) (1.285) (7,477) The following table sets forth the distribution by expected Total 486.071 (773.326) 73.426 maturity of the fixed-maturities and short-term investments at Deferred income tax amortized cost and fair value at December 31, 2000. Expected (benefit) 170,061 (270.330) 25.384 maturities may differ from contractual maturities because bor- Unrealized gains rowers may have the right to call or prepay obligations. (losses), net $316.010 $(502.996) $48.042 Amortized Fair In thousands Cost Value NOTE 11: INCOME TAXES Within 1 year $ 588.128 $ 588,128 The company files a consolidated tax return that includes all of its Beyond 1 yr but within 5 yrs 2,623.722 2,642,267 U.S. subsidiaries. The provision for income taxes is composed of: Beyond 5 yrs but within 10 yrs 1,630,315 1.643.653 Years ended December 31 Beyond 10 yrs but within 15 yrs 1,432,345 1.483.471 In thousands 2000 1999 1998 Beyond 15 yrs but within 20 yrs 1.544.195 1,598,390 Current $136.645 $107.858 $112.367 Beyond 20 yrs 2,161,850 2,178,769 Deferred 49.575 (40.505) 19,943 9,980,555 10,134.678 Total $186.220 $ 67,353 $132.310 Mortgage-backed 1.956,200 1.978.661 Total fixed-maturities and short-term investments $11,936,755 $12,113,339 MBIA Inc.and Subsidiaries The provision for income taxes gives effect to permanent NOTE 12: NET INCOME PER COMMON SHARE differences between financial and taxable income. Accordingly, The following table provides a reconciliation of the denominator the company's effective income tax rate differs from the statutory of the basic earnings per share (EPS) computation to the denomi- rate on ordinary income. The reasons for the company's lower nator of the diluted EPS computation: effective tax rates are as follows: Years ended December 31 Years ended December 31 2000 1999 1998 2000 1999 1998 Net income (in thousands) $528,637 $320.530 $432,728 Income taxes computed Basic weighted on pre-tax financial average shares 98.476,442 99,590.870 98,978.641 income at statutory rates 35.0% 35.0% 35.0% Stock options 543,437 674.295 1,042.537 Increase (reduction) in Unallocated ESOP shares 92.750 137174 141.836 taxes resulting from: Diluted weighted Tax-exempt interest (8-6) (16.1) (10.8) average shares 99.112,629 100,402,339 100,163,014 Amortization of goodwill 0.3 0.5 0.4 Basic EPS $5.37 $3.22 $4.37 Other (0.6) (2.0) (1.2) Diluted EPS $5.33 $3.19 $4,32 Provision for income taxes 26.1% 17.4% 23.4% Options to purchase 3,329,028,2,603,897 and 621,244 The company recognizes deferred tax assets and lia bill- shares of common stock during 2000.1999 and 1998, respectively. ties for the expected future tax consequences of events that have were not included in the computation of diluted EPS because the been included in the financial statements or tax returns. Deferred options exercise price was greater than the average market price tax assets and liabilities are determined based on the difference of common shares during the respective years. between the financial statement and tax bases of assets and lia- bilities using enacted tax rates in effect for the year in which the NOTE 13: BUSINESS SEGMENTS differences are expected to reverse- The effect on tax assets and MBIA Inc.. through its subsidiaries, is a leading provider of financial liabilities of a change in tax rates is recognized in income in the guarantee and specialized financial services. MBIA provides inno- period that includes the enactment date. vative and cost-effedive products and services that meet the credit The tax effects of temporary differences that give rise to enhancement, financial and investment needs of its public- and deferred tax assets and liabilities at December 31, 2000 and 1999 private-sector clients, domestically and internationally MBIA Inc. are presented below: has three principal businesses: financial guarantee, investment management services and municipal ser'vices. Each of these is a In thousands 2000 1999 business segment, with its respective financial performance Deferred tax assets: detailed in this report. Tax and loss bonds $199,607 $206.999 The financial guarantee business provides an uncondi- Unrealized losses - 112.920 tional and irrevocable guarantee of the payment of principal and Alternative minimum interest on insured obligations when due. tax credit carryforward 11.381 65.404 The investment management services business provides Loss and loss adjustment an array of products and services to the public and not-for-profit expense reserves 88.396 79.051 sectors. These include local government investment pools, Other 66.611 64,456 investment agreements, and discretionary and non-discretionary Total gross deferred portfolio management services. tax assets 365,995 528.830 The municipal services business provides revenue Deferred tax liabilities: enhancement services and products to public-sector clients Contingency reserve 317.631 330,125 nationwide. During 1999, the company completed its reorganiza- Deferred premium revenue 113,524 110,785 tion of the operations of two subsidiaries, Municipal Tax Bureau Deferred acquisition costs 96.024 88.173 (MTB) and Municipal Resource Consultants (MRC). With this reor- Unrealized gains 57.141 - ganization complete, this business, operating as MBIA Contingent commissions 620 408 MuniServices. is now focused on delivering revenue enhance- Other 33.518 32.144 ment services, consisting of discovery audit. collections/recovery. Total gross deferred enforcement and information (data) services. tax liabilities 618,458 561.635 Business segment results are presented gross of inter- Net deferred tax liability $252.463 $ 32.805 segment transactions, which are not material to each segment. The following provides each business segment's revenues. oper- The company believes that a valuation allowance is ating income, income (loss) and assets: unnecessary in connection with the deferred tax assets. MBIA Inc. and Subsidiaries Year ended December 31. 2000 Investment Financial Management Municipal In thousands Guarantee Services Services Total Operating revenues $ 868,622 $ 118,859 $ 37.089 $ 1,024.570 Expenses (170.333) (62,535) (36.479) (269,347) Income from segments $ 698.289 $ 56,324 $ 610 $ 755,223 Corporate loss (40,366) Pre-tax income $ 714.857 Segment assets $8,067,874 $5.768.793 $ 57,671 $13.894.338 Year ended December 31. 1999 Investment Financial Management Municipal In thousands Guarantee Services Services Total Operating revenues $ 829.738 $ 86.600 $ 22.923 $ 939.261 Expenses (315.236) (45.920) (35.372) (396,528) Income (loss) from segments $ 514,502 $ 40.680 $ (12.449) $ 542.733 Corporate loss (154.850) Pre-tax income $ 387.883 Segment assets $7.108.122 $5.073.269 $ 82.508 $12.263.899 Year ended December 31. 1998 Investment Financial Management Municipal 1n thousands Guarantee Services Services Total Operating revenues $ 782.482 $ 65.032 $ 29.392 $ 876.906 Expenses (139.626) (36.012) (40.682) (216.320) Income (loss) from segments $ 642,856 $ 29,020 $ (11 .290) $ 660.586 Corporate loss (95,548) 54 $ 565,038 Pre-tax income 55 Segment assets $7.163.316 $4.497,333 $165.806 $11.826.455 I For 2000,1999 and 1998 domestic premiums earned were 2000 and 1999, the company purchased 1.7 million and 0.5 million $377 million, $391 million and $387 million. respectively. For 2000, shares of common stock at an aggregate cost of $77.7 million and 1999 and 1998 international premiums earned were $69 million. $24.7 million. respectively. The company will only repurchase shares $52 million and $38 million. respectively. under this program when it is economically attractive and within the constraints of the company's Triple-A claims-paying ratings. NOTE 14: DIVIDENDS AND CAPITAL REQUIREMENTS Under New York state insurance law. MBIA Corp. may pay divi- NOTE 16: LONG-TERM DEBT AND LINES OF CREDIT dends only from earned surplus subject to the maintenance of a Long-term debt consists of: minimum capital requirement. The dividends in any 12-month As of December 31 period may not exceed the lesser of 10% of its policyholders' sur- In thousands 2000 1999 plus as shown on its last filed statutory basis financial state- 7.520% Notes due 2001-2002 $ 7,500 $ 11,250 ments or of adjusted net investment income, as defined. for such 9.000% Notes due 2001 100.000 100.000 12-month period, without prior approval of the superintendent of 6.880% Notes due 2008* 7.550 7,550 the New York State Insurance Department. 7.560% Notes due 2010 108.648 - In accordance with such restrictions on the amount of div- 9.375% Notes due 2011 100,000 100,000 idends that can be paid in any 12-month period, MBIA Corp. had 8.200% Debentures due 2022** 100,000 100.000 in excess of $40 million available for the payment of dividends to 7.000% Debentures due 2025 75,000 75.000 the company as of December 31. 2000. During 2000 and 1999. 7.150% Debentures due 2027 100.000 100.000 MBIA Corp. declared and paid dividends of $197 million and $180 6.625% Debentures due 2028 150.000 150.000 million to the company. 6.950% Notes due 2038 *** 50.000 50,000 The insurance departments of New York State, certain 8.000% Notes due 2040 â€žâ€ž 100,000 - other statutory insurance regulatory authorities, and the agencies 898,698 693.800 that rate the bonds insured by MBIA Corp. and its subsidiaries. Less current portion 103,750 3.750 have various requirements relating to the maintenance of certain Less unamortized discount 760 846 minimum ratios of statutory capital and reserves to net insur- Plus unamortized premium 914 ance in force. MBIA Corp. and its subsidiaries were in compli- Total $795.102 $689,204 ance with these requirements as of December 31. 2000. * Callable 3/2000 @ 100.00 .** Callable 11/2003 @ 100.00 NOTE 15: STOCK REPURCHASE PI-AN " Callable 10/2002 @ 103.99 .." Callable 12/2005 @100.00 In the third quarter of 1999. the company began acquiring shares of its common stock in connection with its stock repurchase plan The company's long-term debt is subject to certain announced in August 1999. The plan authorizes the company to covenants. none of which significantly restrict the company's repurchase up to 7.5 million outstanding common shares. During operating activities or dividend-paying ability. MBIA Inc. and Subsidiaries In December 2000, MBIA issued unsecured bonds denom- Principal payments due under these investment agree- inated in Swiss Francs. The principal amount of 175 million Swiss ments in each of the next five years ending December 31 and Francs is due June 15, 2010 and accrues interest at a rate of thereafter. based upon expected withdrawal dates, are as follows: 4.50%. which is paid annually These bonds are not redeemable In thousands Principal Amount prior to maturity, except in the event of cerlain changes involving Expected withdrawal date: taxation in the United States or the imposition of certain certifica- 2001 $1.932.918 tion. identification or reporting requirements. 2002 948.024 Simultaneous with the issuance of this debt, MBIA entered 2003 391.199 into a swap transaction which effectively converted MBIA's net 2004 86,869 interest expense to a U.S. dollar liability with a rate of 7.56%. 2005 26,893 which requires the payment of proceeds at maturity of approxi- Thereafter 1.352.377 mately $99.3 million in exchange for 175 million Swiss Francs Total $4.738.280 and interest thereon. In December 2000. MBIA also issued $100 million of 40-year IMC also provides agreements obligating it to purchase debentures with a coupon rate of 8.00% which is callable at MBIAs designated securities in a bond reserve fund at par value upon option after the fifth year. The proceeds of both debt offerings in the occurrence of certain contractually agreed-upon events. The 2000 will be used for general corporate purposes and for the repay- opportunities and risks in these agreements are analogous to ment of MBIAs $100 million 9.00% notes maturing February 15 2001. those of municipal investment agreements and municipal repur- Aggregate maturities of long-term obligations for each of chase agreements. The total par value of securities subject to the next five years commencing in 2001 are: these agreements was $25 million at December 31. 2000. Years ended December 31 NOTE 18: NET INSURANCE IN FORCE After MBIA Corp. guarantees the timely payment of principal and inter- In thousands 2001 2002 2003 2004 2005 Total est on municipal, asset-/mortgage-backed and other non-munic- $103.750 $3.750 - - $791,198 $898,698 ipal securities. MBIA Corp.'s ultimate exposure to credit loss in the event of nonperformance by the insured is represented by the MBIA Corp. has a standby line of credit commitment in the insurance in force as set forth in the tables that follow. amount of $900 million with a group of major Triple-A-rated The insurance policies issued by MBIA Corp. are uncondi- banks to provide loans to MBIA Corp. if it incurs cumulative loss- tional commitments to guarantee timely payment on the bonds es (net of any recoveries) from October 27,2000 in excess of the and notes to bondholders. The creditworthiness of each issuer is greater of $900 million or 5.60% of average annual debt service. evatuated prior to the issuance of insurance, and each insured The obligation to repay loans made under this agreement is a issue must comply with MBIA Corp.'s underwriting guidelines. limited recourse obligation payable solely from, and collateralized Further. the payments to be made by the issuer on the bonds or by, a pledge of recoveries realized on defaulted insured obliga- notes may be backed by a pledge of revenues. reserve funds. let- tions including certain installment premiums and other collateral. ters of credit. investment contracts or collateral in the form of This commitment has a seven-year term expiring on October 31, mortgages or other assets. The right to such money or collateral 2007. and contains an annual renewal provision subject to would typically become MBIA Corp.'s upon the payment of a claim approval by the bank group. MBIA Corp. also maintains stop-loss by MBIA Corp. reinsurance coverage of $175 million in excess of incurred losses Under certain structured asset-backed transactions. a of $762 million. pool of assets covering at least 100% of the principal amount The company and MBIA Corp. maintain bank liquidity facili- guaranteed under the insurance contract is sold or pledged to a ties totaling $650 million. As of December 31, 2000. there were no special-purpose bankruptcy remote entity. MBIA Corp.'s primary borrowings outstanding under these agreements. risk from such insurance contracts is the impairment of cash From time to time TRS will access the capital markets for flows due to delinquency or loss on the underlying assets. MBIA short-term asset-backed financings through a Al/Pl-rated commer- Corp. therefore evaluates alt the factors affecting past and future cial paper conduit under conditions that the rating agencies agree asset performance by studying historical data on losses, delin- will have no adverse impact on the rating of such conduit. Proceeds quencies and recoveries of the underlying assets. Each transac- are invested under various client programs, which provide opportu- tion is reviewed to ensure that an appropriate legal structure is nities for MBIA Corp. to issue financial guarantee policies. used to protect against the bankruptcy risk of the originator of the The company has outstanding letters of credit for MBIA- assets. Along with the legal structure. an additional level of first- MISC that are intended to support the net asset value of certain loss protection is also created to protect against losses due to investment pools managed by MBIA-MISC. These letters can be credit or dilution. This first level of loss protection is usually avail- drawn upon in the event the liquidation of such assets at below able from reserve funds, excess cash flows. overcollateralization cost is required. or recourse to a third party The level of first-loss protection depends upon the historical losses and dilution of the underlying NOTE 17Â· OBLIGATIONS UNDER MUNICIPAL INVESTMENT AGREEMENTS assets. but is typically several times the normal historical loss AND MUNICIPAL REPURCHASE AGREEMENTS experience for the underlying type of assets. Obligations under municipal investment agreements and munici- As of December 31. 2000, insurance in force, net of ces- pal repurchase agreements are recorded as liabilities on the bat- sions to reinsurers, had a range of maturity of 1 -49 years diversi- ance sheet based upon proceeds received plus unpaid accrued fied among 35,154 outstanding policies. The distribution of net interest from that date. Upon the occurrence of certain contractu- insurance in force by geographic location. excluding $5.4 billion ally agreed-upon events, some of these funds may be withdrawn and $4.5 billion relating to investment management transactions at various times prior to maturity at the option of the investor. As guaranteed by MBIA Corp. in 2000 and 1999, respectively is set of December 31, 2000. the annual interest rates on these agree- forth in the following table: ments ranged from 2.5% to 8.08%. MBIA Inc.and Subsidiaries As of December 31 2000 1999 Net % of Net Net % of Net $ in billions Insurance Insurance Insurance Insurance Geographic Location In Force In Force In Force In Force Domestic: California $ 80.0 11.8% $76.6 12.0% New York 71.1 10.4 71.3 11.2 A Florida 35.7 5.3 36.3 5,7 Texas 26.7 3.9 26.6 42 New Jersey 26.0 3.8 24.4 3.8 Pennsylvania 24.5 3.6 25.8 4.1 Illinois 22.6 3.3 22.1 35 Massachusetts 20.5 3.0 19.2 3.0 Michigan 14.8 2.2 15.0 2.4 Ohio 13.5 2.0 13.1 2.1 Subtotal 335.4 49.3 330.4 52.0 Nationally diversified 117.2 17.2 97.1 15.3 Other states 180.4 26.5 175.0 27.5 Total Domestic 633.0 93.0 602.5 94.8 International 47.9 7.0 33.4 5.2 Total $680.9 100.0% $635.9 100.0% The distribution of net insurance in force by type of bond is set forth in the table below: As of December 31 2000 1999 Net % of Net Net % of Net $ in billions Insurance Insurance Insurance Insurance Type of Bond In Force In Force In Force In Force Domestic: Public Finance: General obligation $152.7 22.4% $147.5 23.2% Utilities 77.9 11.4 78.1 12.3 Health care 68.3 10.0 70.6 11.1 Special revenue 61.4 9.0 52.5 8.3 56 Transportation 48.7 7.2 45.5 7.1 Investor owned 57 utilities 37.2 5.5 33.0 52 Higher education 28.8 4.2 27.1 4.3 Housing 73.3 477.6 75.2 24.4 3.6 23.3 3.7 Total Public Finance 499.4 Structured Finance: Mortgage backed: Home equity 33.8 5.0 43.2 6.8 Other 20.5 3.0 19.8 3.0 First mortgage 11.3 1.7 13.1 2.1 Asset backed: Other 23.3 3.4 16.9 2.6 Auto 14.7 2.2 8.7 1.4 Leasing 5.3 0.8 6.3 1.0 Pooled corp. obligation & other 18.9 2.8 10.7 1.7 Financial risk 5.8 0.8 6.2 1.0 Total Structured Finance 133.6 19.7 124.9 19.6 Total Domestic 633.0 93.0 602.5 94.8 International: Infrastructure: Sovereign 2.7 0.4 2.1 0.3 Utilities 2.5 0.4 1.6 0.2 Transportation 1.6 0.2 1.1 0.2 Investor owned utilities 1.4 0.2 1.1 0.2 Sub-sovereign 1.0 0.1 1 2 0.2 Healh care 0.6 0.1 0.7 0.1 Housing 0.5 0.1 0.6 0.1 Higher education 0.1 - 0.1 Total Infrastructure 10.4 1.5 8.5 1.3 Structured Finance: Mortgage backed: First mortgage 3.9 0.6 1.5 0.2 Home equity 0.4 0.1 - Other 0.2 - 0.2 - Asset backed: Other 1.7 0.2 1.8 0.3 Auto - - 0.1 - Pooled corp. obligation & other 27.9 4.1 17.6 2.8 Financial risk 3.4 0.5 3.7 0.6 Total Structured Finance 37.5 5.5 24.9 3.9 Total International 47.9 7.0 33.4 5.2 Total $680.9 100.0% $635.9 100.0% MBIA Inc. and Subsidiaries NOTE 19: REINSURANCE (Continued) MBIA Corp. reinsures exposure with other insurance companies under various treaty and facultative reinsurance contracts, both As of December 31 on a pro rata and excess of loss basis. In the event that any or all 2000 1999 of the reinsurers were unable to meet their obligations. MBIA % of % of Corp. would be liable for such defaulted amounts. Ceded Ceded Ceded Ceded Amounts deducted from gross insurance in force for rein- In billions Insurance Insurance Insurance Insurance surance ceded by MBIA Corp. and its subsidiaries were $143.3 Type of Bond In Force In Force In Force In Force billion and $129.0 billion at December 31.2000 and 1999. respec- International: tively. The distribution of ceded insurance in force by type of bond Infrastructure: is set forth in the following table: Transportation $ 1.7 1.2 $ 1.2 0.9 Sovereign 1.6 1.1 1.4 1.1 Utilities 1.1 0.8 0.7 0.5 As of December 31 Sub-sovereign 0.8 0.6 0.9 0.7 2000 1999 Investor owned % Of % of 06 0.4 0.5 0.4 utilities Ceded Ceded Ceded Ceded 0.4 0.3 0.4 0.3 Health care In billions Insurance Insurance Insurance Insurance Total infrastructure 6.2 4.4 5.1 3.9 Type of Bond In Force In Force In Force In Force Structured Finance: Domestic: Pooled corp.obligation Public Finance: & other 15.0 10.4 9.5 7.4 General obligation $198 13.9% $18-8 14.6% Financial risk 2.8 2.0 3.1 2.4 Transportation 18.4 12.8 14.7 11.4 Asset backed 1.8 1.2 2.4 19 Utilities 17.1 11.9 17.2 13.3 1.5 1.1 1.2 0.9 Mortgage backed Health care 15.3 10.7 15.7 12.2 Tbtal Structured Special revenue 9.4 6.6 8.8 6.8 21.1 14.7 16.2 126 Finance Investor owned Total International 27.3 19.1 21.3 16.5 utilities 6.1 4.2 5.7 4.5 Total $la,3 100.0% $129.0 100.0% Housing 2.8 1.9 2.7 2.1 Higher education 2.4 1.7 21 1.6 Total Public Finance 91.3 63.7 85.7 66.5 The distribution of ceded insurance in force by geographic , Structured Finance: location is set forth in the following table: MorÂ·tgage backed: As of December 31 Home equity 8.2 5.7 88 6.8 2000 1999 Other 2.0 1.4 1.5 1.2 % of % of First mortgage 1.6 1 1 2.1 1.6 Ceded Ceded Ceded Ceded Asset backed: In biltions Insurance Insurance Insurance Insurance Other 2.9 2.0 2.4 1.8 Geographic Location In Force In Force In Force In Force Auto 26 1.8 19 1.4 Domestic: Leasing 2.1 1.5 2.4 1.9 California $ 17.9 12.5% $ 17.6 13.6% Pool corp. obligation New York 13.7 9.5 14.0 10.9 & other 4.7 3.3 2.3 1.8 New Jersey 6.9 4.8 5.5 4.3 Financial risk 0.6 0.4 0.6 0.5 Texas 5.3 3.7 5.5 4.2 Total Structured Florida 4.7 3.3 5.0 3.9 Finance 24.7 17.2 22.0 17-0 Massachusetts 4.2 3.0 4.1 3.2 Total Domestic $116.0 80.9 $107.7 83.5 Pennsylvania 4.2 2.9 46 3-5 Colorado 3.8 2.7 2.4 1.9 Puerto Rico 3.7 2.6 3.2 2.5 Illinois 3.6 2.5 3.4 2.6 Subtotal 68.0 47.5 65.3 50.6 Nationally Diversified 18.8 13.1 14.4 11.2 Other States 29.2 20.3 28.0 21.7 Total Domestic 116.0 80.9 107.7 83.5 International 27.3 19.1 21.3 16.5 Total $143.3 100.0% $129.0 100.0% As part of the company's portfolio shaping activity in 1998, the company entered into facultative reinsurance agreements with highly rated reinsurers that obligate the company to cede future premiums to the reinsurers through January 1. 2005. Certain reinsurance contrads in 1998 were accounted for on a MBIA Inc.and Subsidiaries retroactive basis in accordance with SFAS 113, "Accounting and The board of directors of the company has authorized a Reporting for Reinsurance of Short-Duration and Long-Duration maximum of 9.311.122 shares of the company's common stock to Contracts." be granted as options under the 1987 plan. As of May 11. 2000, Components of premiums written including reinsurance 9161,959 options had been granted. net of expirations and can- assumed from and ceded to other companies is set forth in the cellations. On May 11, 2000, at the annual meeting of sharehold- following table: ers. the company adopted the 2000 Stock Option Plan (the 2000 plan). Upon adoption of the 2000 plan. the 149.163 shares avail- Years ended December 31 able for grant as of that date under the 1987 plan were canceled 2000 1999 1998 and no longer available for awards. The number of shares Direct $641.452 $590.597 $664,269 authorized under the 2000 plan is 4.900.000. As of December 31, Assumed 45.956 34,274 12,781 2000.456.228 options had been granted under the 2000 plan. net Gross 687,408 624.871 677.050 of expirations and cancellations. leaving the total available for Ceded (189.316) (171.256) (156,064) future grants at 4.443,772 Net $498.092 $453,615 $520,986 The stock option grants, which may continue to be award- ed every year, provide the right to purchase shares of common Ceding commissions received from reinsurers before stock at the fair value (closing price) of the stock on the date of deferrals were $37.3 million. $35.3 million and $37.2 million in the grant. In 2000.586,938 options were awarded under the 1987 2000,1999 and 1998. respectively In 1998. $170.0 million was and 2000 plans. These options vest over four or five years received in reinsurance recoveries related to the bankruptcy of a depending on the level of the recipient. Prior option grants are not Pennsylvania hospital group. taken into account in determining the number of options granted in any yeac NOTE 20: PENSION AND PROFIT-SHARING PLANS In December 1995. the MBIA Inc. Board of Directors The company has a non-contributory. defined contribution pension approved the -MBIA Long-Term Incentive Program." The incentive plan to which the company contributes 10% of each eligible program includes a stock option program and adds a compensa- employee's annual total compensation. Pension expense for the tion component linked to the growth in adjusted book vallie per 58 years ended December 31, 2000, 1999 and 1998 was $7.8 million, share (ABV) of the company's stock. Awards under the long-term 59 $7.8 million and $7.3 million, respectively The company also has a program are divided equally between the two components, with profit-sharing/401(k) plan that allows eligible employees to con- 50% of the award given in stock options and 50% of the award to tribute up to 10% of eligible compensation. The company matches be paid in cash or shares of company stock. , employee contributions up to the first 5% of total compensation. Target levels for the option/incentive award are estab- 1 Company contributions to the profit-sharing/401(k) plan aggregat- lished as a percentage of total salary and bonus, based upon the ed $2.8 million. $4.2 million and $2.9 million for the years ended recipient's position. Awards under the long-term program typical- December 31,2000,1999 and 1998, respectively. The profit-shar- ly will be granted from the vice president level up to and including ing/401(k) plan company match amounts are invested in common the chairman and chief executive officer. stock of the company Amounts relating to the above plans that The ABV portion of the long-term incentive program may exceed limitations established by federal regulations are con- be awarded every year. The 2000 award covers growth in ABV tributed to a non-qualified deferred compensation plan. from December 31, 2000 through December 31, 2003, with a base line growth of 13.5%. The 1999 award covers growth in ABV from NOTE 21: LONG-TERM INCENTIVE PLANS December 31, 1999 through December 31. 2002 and the 1998 On March 2, 1987, the company adopted a plan (the 1987 plan) for award covers growth in ABV from December 31, 1998 through key employees of the company and its subsidiaries to enable December 31, 2001, with a base line growth of 12% on both those employees to acquire shares of common stock of the com- awards. The amount to be paid in respect of such award will be pany or to benefit from appreciation in the price of the common adjusted upward or downward based on the actual ABV growth. stock of the company. Options granted will either be Incentive with a minimum growth of 8% necessary to receive any payment Stock Options (ISOs), where they qualify under Section 422(a) of and an 18% growth needed to receive the maximum payment of the Internal Revenue Code. or Non-Qualified Stock Options 200% of the target levels. The amount, if any. to be paid under this (NQSOs). portion of the program will be paid in early 2004 for the 2000 ISOs and NQSOs may be granted at a price not less than award, in early 2003 for the 1999 award and early 2002 for the 100% of the fair value of the company's common stock as deter- 1998 award in the form of cash or shares of the company's com- mined on the date granted. Options will be exercisable as specified mon stock, Subsequent awards, if any, will be made every year at the time of grant and expire ten years from the date of grant (or with concomitant payments occurring after the three-year cycle. shorter if specified or following termination of employment). During 2000,1999 and 1998. $13.6 million, $8.5 million and $5.5 million, respectively, were recorded as compensation expense related to ABV awards. In December 1995, the company adopted a restricted stock program whereby key executive officers are granted MBIA Inc.and Subsidiaries restrided shares of the company's stock. These stock awards provisions in SFAS 123 which require the pro-forma disclosure of may only be sold three to five years from the date of grant, at net income and earnings per share as if the recognition provi- which time the awards fully vest. sions of SFAS 123 had been adopted. SFAS 123 explicitly provides In 2000 and 1999, respectively, 76,512 and 96,968 restricted that employers may continue to account for their employee stock- shares (net of canceled shares) of the company's stock were based compensation plans using the accounting prescribed by granted to certain officers of the company The fair value of the APB Opinion No. 25, 'Accounting for Stock Issued to Employees" shares awarded in 2000 and 1999 determined on the grant date (APB 25). The company adopted the disclosure requirements of was $6.1 million and $5.0 million. respectively. and has been SFAS 123 effective January 1.1996 and continues to account for recorded as "Uneamed compensation-restricted stock" and is its employee stock-based compensation plans under APB 25. shown as a separate component of shareholders- equity. Accordingly. the adoption of SFAS 123 had no impact on the com- Uneamed compensation is amortized to expense over the appro- pany's financial position or results of operations. As the table priate three- to five-year vesting period. Compensation expense below shows, had compensation cost for the company's stock related to the restricted stock was $4.2 million, $1.9 million and option program been recognized based on the fair value at the $1.3 million for the years ended December 31. 2000. 1999 and grant date. consistent with the recognition provisions of SFAS 1998, respectively. 123, the impact on the company's net income and earnings per In 1992, CapMAC adopted an Employee Stock Ownership share would not have been material. However, since the options Plan (ESOP) to provide its employees the opportunity to obtain vest over five years and additional awards could be made in beneficial interests in the stock of CapMAC through a trust (the future years, the effects of applying SFAS 123 in 2000 are not like- ESOP Trust). The ESOP Trust purchased 350.625 shares of the ly to be representative of the effects on reported net income and company's stock. The ESOP Trust financed its purchase of com- earnings per share for future years. mon stock with a loan from the company in the amount of $10 million. The ESOP loan is evidenced by a promissory note deliv- Years ended December 31 ered to the company. An amount representing uneamed employ- 2000 1999 1998 ee compensation, equivatent in value to the unpaid balance of the Net income (in thousands): ESOP loan. is recorded as "Unallocated ESOP shares" and is Reported $528,637 $320.530 $432.728 shown as a separate component of shareholders' equity. Pro-forma 520,238 314.074 430.224 The company is required to make contributions to the Basic earnings per share: ESOP Trust. which enables the ESOP Trust to service its loan to Reported $5.37 $3.22 $4.37 the company Prior to 1999, the ESOP expense was calculated Pro-forma 5.28 3.15 4.35 using the shares allocated method. Shares were released for Diluted earnings per share: Reported $5.33 $3.19 $4.32 allocation to the participants and held in trust for the employees Pro-forma 5.25 3.13 4.30 based upon the ratio of the current year's principal and interest payment to the sum of principal and interest payments estimated over the life of the loan. Compensation expense related to the The fair value of each option grant is estimated on the ESOP was $1.3 million for the year ended December 31, 1998. date of grant using the Black-Scholes option pricing model with As of December 31, 1998. 208.789 shares were allocated to the the following weighted-average assumptions used for grants: participants. In July 1999, the company contributed 13,397 additional December December January December shares to the ESOP plan. Subsequent to this contribution the 2000 1999 1999 1998 ESOP plan was merged with the MBIA Inc. Employees Profit Exercise price $72.8750 $48.8125 $67.1250 $63.8152 Sharing and 401(k) plan. In conjunction with the merger of the Dividend yield 1.130% 1.680% 1.190% 1.254% plans. released ESOP shares are used to fund the 401(k) company Expected volatility .2834 .2512 .2392 .2392 match obligations. During 2000 and 1999, 44.424 and 10,190 Risk-free shares, respectively. were utilized for the 401(k) company match. interest rate 5.342% 6.28% 4.83% 4.63% As of December 31. 2000 and 1999. respectively, a total of 267,789 Expected option term (in years) 6.18 6.05 6.05 5.86 and 223,365 shares have been allocated to the participants. In October 1995, the FASB issued SFAS 123, 'Accounting for Stock-Based Compensation." effective for financial statements for fiscal years beginning after December 15, 1995. SFAS 123 required the company to adopt, at its election, either 1) the provi- sions in SFAS 123 which require the recognition of compensation expense for employee stock-based compensation plans. or 2) the MBIA Inc.and Subsidiaries A summary of the company's stock option plans as of NOTE 22: SHAREHOLDERS' RIGHTS PLAN December 31. 2000,1999 and 1998, and changes during the years In December 1991, the board of directors of the company ending on those dates. is presented below: declared a dividend distribution of one preferred share purchase right (a Right) for each outstanding share of the company's com- 2000 mon stock. Each Right entitles its holder to purchase from the Weighted company one one-hundredth of a share of the company's Junior Number Avg. Price Participating Cumulative Preferred Shares at a price of $160. sub- Options of Shares per Share jed to certain adjustments. Initially. the Rights are attached to the Outstanding at beginning common stock and will not be transferable separately nor of year 5.530.090 $50.7047 Granted 586,938 68.2659 become exercisable until the earlier to occur of (i) ten business Exercised 623,937 60.7741 days following the date of the public announcement by the com- Expired or canceled 205.629 60.7840 pany (the Shares Acquisition Date) that a person or group of per- Outstanding at year-end 5.287.462 $55.0067 sons has acquired or obtained the right to acquire beneficial Exercisable at year-end 1.765.194 $39.5690 ownership of 10% or more of the outstanding shares of the com- Weighted-average fair value pany's common stock and (ii) ten business days (or later as may per share of options be determined by the board of directors) after the announcement granted during the year $23.6069 or commencement of a tender offer or exchange offer which, if successful, would result in the bidder owning 10% or more of the 1999 outstanding shares of the company's common stock. However, no Weighted person shall be deemed to have acquired or obtained the right to Number Avg. Price acquire the beneficial ownership of 10% or more of the outstand- Options of Shares per Share ing shares of the company's common stock if the board of direc- Outstanding at beginning tors determines that such acquisition is inadvertent. and such ofyear 3,679,414 $42.2591 Granted 2,373.540 61.1806 person promptly divests itself of a sufficient number of shares to Exercised 365.816 64.0688 be below the 10% ownership threshold. 60 Expired or canceled 157.048 66.2718 If the acquiring person or group acquires beneficial own- 61 Outstanding at year-end 5.530.090 $50.6911 ership of 10% or more of the company's common stock (except Exercisable at year-end 2.092.322 $32.5158 pursuant to a tender or exchange offer for all outstanding com- Weighted-average fair value mon stock of the company, determined by the company's inde- per share of options pendent directors to be at a fair price and in the best interests of granted during the year $21.4250 the company and its shareholders). each holder of a Right (other than the acquirer) will be entitled to purchase, for $160. that num- 1998 ber of shares of common stock of the company having a fair Weighted value of $320. Number Avg. Price Similarly, if after an acquiring person or group so acquires Options of Shares per Share 10% or more of the company's common stock. the company is Outstanding at beginning acquired in a merger or other business combination and is not the of year 4,033.930 $37.0004 Granted 575.430 63.8152 surviving entity or its common stock is changed or exchanged in Exercised 744,670 69.6068 whole or in part. or 50% or more of the company's assets. cash Expired or canceled 185.276 61.2550 flow or earning power is sold. each holder of a Right (other than Outstanding at year-end 3,679,414 $42.2591 the acquirer) will be entitled to purchase, for $160. that number of Exercisable at year-end 2.095.767 $29.3827 shares of common stock of the acquiring company having a fair Weighted-average fair value value of $320. per share of options The board of directors may redeem the Rights in whole at granted during the year $18.1565 $.01 per Right at any time prior to ten business days following the Shares Acquisition Date. Further at any time after a person or The following table summarizes information about the plan's group acquires 10% or more. but less than 50%, of the company's stock options at December 31, 2000: common stock, the board of directors of the company may Weighted-Average Number Remaining Number Range of Average Outstanding Contractual Weighted-Average Exercisable Weighted-Average Exercise Price at 12/31/00 Life in Years Exercise Price 12/31/00 Exercise Price $17.5630-42-7800 1,207,297 2.85 $29.8921 1.187.297 $29.7255 $44.5630-57.5000 954,844 8.75 $49.1693 17.898 $53.7235 $57.9380-72.8750 3,125.321 7.81 $66.4918 559.999 $62.3175 Total 5,287.462 6.85 $55.0067 1,765,194 $39.5690 MBIA Inc.and Subsidiaries exchange the Rights (other than those held by the acquirer) in SECURITIES BORROWED OR PURCHASED UNDER AGREEMENTS TO whole or in part, at an exchange ratio of one share of common RESELL > The fair value is estimated based upon the quoted mar- stock per Right. The board of directors may also amend the ket prices of the transactions' underlying collateral. Rights at any time prior to the Shares Acquisition Date. The Rights will expire on December 12. 2001. unless earlier PREPAID REINSURANCE PREMIUMS > The fair value of the company's redeemed or exchanged. prepaid reinsurance premiums is based on the estimated cost of entering into an assumption of the entire portfolio with third-party NOTE 23: RELATED PARTY TRANSACTIONS reinsurers under current market conditions. Since 1989, MBIA Corp. has executed five surety bonds to guaran- tee the payment obligations of the members of the Association DEFERRED PREMIUM REVENUE > The fair value of the company's which had their S&P claims-paying rating downgraded from deferred premium revenue is based on the estimated cost of Triple-A on their previously issued Association policies. In the entering into a cession of the entire portfolio with third-party event that they do not meet their Association policy payment obli- reinsurers under current market conditions. gations. MBIA Corp. will pay the required amounts directly to the paying agent. The aggregate outstanding exposure on these LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES > The carrying surety bonds as of December 31. 2000 is $340 million. amount is composed of the present value of the expected cash flows for specifically identified claims combined with an estimate NOTE 24: FAIR VALUE OF FINANCIAL INSTRUMENTS for unidentified claims. Therefore. the carrying amount is a reason- The estimated fair value amounts of financial instruments shown able estimate of the fair value of the reserve. in the following table have been determined by the company using available market information and appropriate valuation LONG-TERM DEBT > The fair value is estimated based on the quot- methodologies. However, in certain cases considerable judgment ed market prices for the same or similar securities. has been necessarily required to interpret market data to develop estimates of fair value. Accordingly the estimates presented MUNICIPAL INVESTMENT AGREEMENTS AND MUNICIPAL REPURCHASE herein are not necessarily indicative of the amount the company AGREEMENTS > The fair values of municipal investment agree- could realize in a current market exchange. The use of different ments and municipal repurchase agreements are estimated market assumptions and/or estimation methodologies may have using discounted cash flow calculations based upon interest rates a material effect on the estimated fair value amounts. currently being offered for similar agreements with maturities consistent with those remaining for the agreements being valued. FIXED-MATURITY SECURITIES > The fair value of fixed-maturity secu- rities is based upon quoted market prices. if available. If a quoted SECURITIES LOANED OR SOLD UNDER AGREEMENTS TO REPURCHASE > market price is not available, fair value is estimated using quoted The fair value is estimated based upon the quoted market prices market prices for similar securities. of the transactions' underlying collateral. SHORT-TERM INVESTMENTS > Short-term investments are carried INSTALLMENT PREMIUMS > The fair value is derived by calculating at amortized cost which approximates fair value. the present value of the estimated future cash flow stream dis- counted at 9%. OTHER INVESTMENTS > Other investments include the company's interest in equity oriented and equity method investments. The DERIVATIVES > The fair vatue reflects the estimated amounts that fair value of these investments is based on quoted market prices. the company would receive or pay to terminate the transaction at the reporting date. MUNICIPAL INVESTMENT AGREEMENT PORTFOLIO > The municipal investment agreement portfolio is comprised of fixed-maturity securities and short-term investments. Its fair value equals the quoted market prices, if available, of its fixed-maturities plus the amortized cost of its short-term investments which, because of their short duration. is a reasonable estimate of fair value. If a quoted market price is not available for a fixed-maturity security. fair value is estimated using quoted market prices for similar securities. CASH AND CASH EQUIVALENTS. RECEIVABLE FOR INVESTMENTS SOLD. SHORT-TERM DEBT AND PAYABLE FOR INVESTMENTS PURCHASED > The carrying amounts of these items are a reasonable estimate of their fair value. MBIA Inc.and Subsidiaries As of December 31. 2000 As of December 31. 1999 Carrying Estimated Carrying Estimated In thousands Amount Fair Value Amount Fair Value ASSETS: Fixed-maturity securities $6,740.127 $6.740.127 $5.783.979 $5,783,979 Short-term investments 376,604 376.604 274.022 274.022 Other investments 119,591 119.591 146.038 146.038 Municipal investment agreement portfolio 4,996,608 4.996.608 4,489,551 4.489.551 Cash and cash equivalents 93.962 93,962 93.559 93.559 Securities borrowed or purchased under agreements to resell 314.624 332,179 261,171 260.819 Reinsurance recoverable on unpaid losses 31.414 31,414 30,819 30,819 Prepaid reinsurance premiums 442.622 380.047 403,210 342.837 Receivable for investments sold 13.772 13.772 24,922 24.922 LIABILITIESÂ· Deferred premium revenue 2,397.578 2,123,661 2.310.758 2.022.357 Loss and loss adjustment expense reserves 499.279 499.279 467,279 467.279 Municipal investment agreements 3,821,652 3.911.348 3.483.911 3,413,014 Municipal repurchase agreements 967.803 994,742 1,028.921 1.023.823 Long-term debt 795,102 799.345 689,204 660.567 Short-term debt 144.243 144.243 68,751 68,751 Securities loaned or sold under agreements to repurchase 489.624 504,739 288.750 289.469 Payable for investments purchased 7.899 7.899 102,666 102,666 OFF-BALANCE SHEET INSTRUMENTS: Installment premiums - 885.477 - 731,748 Derivatives* 9.386 25.603 - 9.617 *The estimated fair value for 2000 includes net derivative liabilities identified as part of the company's implementation of SFAS 133. 62 - NOTE 25: QUARTERLY FINANCIAL INFORMATION (UNAUDITED) 63 A summary of selected quarterly income statement information follows: In thousands except per share amounts 2000 First Second Third Fourth Year Gross premiums written $148.837 $189.295 $172,010 $177.266 $687,408 Net premiums written 105,871 127485 122,789 141.947 498.092 Premiums earned 104.704 109,152 113.153 119,344 446.353 Investment income and realized gains and losses 107.255 106.897 105,474 107.243 426.869 All other revenues 42.475 46,475 47,594 47,688 184.232 Income before income taxes 179,077 174.111 177,493 184.176 714.857 Net income $132,320 $129.393 $130.714 $136,210 $528,637 Net income per common share:* Basic $ 1.34 $ 1,32 $ 1.33 $ 1.39 $ 5.37 Diluted $ 1.33 $ 1.31 $ 1.32 $ 1.38 $ 5.33 1999 First Second Third Fourth Year Gross premiums written $154.910 $146,817 $152.749 $170,395 $624,871 Net premiums written 94.914 111.461 119.720 127.520 453.615 Premiums earned 112,111 107,217 110.139 113.329 442.796 Investment income and realized gains and losses 97.429 96.152 97.094 93,941 384.616 All other revenues 27.986 33,161 36.275 39,587 137,009 Income before income taxes 11,954 53.358 160.178 162.393 387.883 Net income $ 9.420 $ 56,793 $127.410 $126,907 $320,530 Net income per common share:* Basic $ 0.09 $ 0.57 $ 128 $ 1.28 $ 3.22 Diluted $ 0.09 $ 0.56 $ 1.27 $ 1.27 $ 3.19 *Due to the changes in the number of shares outstanding, quarterly per share amounts may not add to the totals for the years. The pre-tax one-time charge of $153 million relating to the increase in the company's loss reserving factor is included in the first quarter of 1999 results. The pre-tax one-time charge of $102 million relating to the impairment of the company's investment in Capital Asset is included in the second quarter of 1999 results. Board of Directors Board Committees Senior Officers Lawrence E. Levitz AS OF 12/31/00 1. Audit MBIA Insurance Corp. Managing Director 2. Committee on Directors Joseph W Brown [4] Dinah E. Bellis John D. Lohrs 3. Compensation and Chairman Managing Director Managing Director Organization Chief Executive Officer 4. Executive Beth E. Berman Michael J. Maguire MBIA Inc. 5. Finance Managing Director Managing Director Armonk, New York 6. Risk Oversight Age 51 Joseph W. Brown J. Paul Mansour Chairman Managing Director David C. Clapp [3,4,5,61 Senior Officers Chief Executive Officer MBIA Inc. Amy E. Mauer Litos Senior Director Goldman, Sachs & Co., Inc. Joseph W. Brown* Neil G. Budnick Managing Director New York, New York Vice Chairman Chairman Timothy J. McKeon Age 63 Chief Financial Officer Chief Executive Officer Managing Director Gary C. Dunton [5,6] Steven C. H. Citron Neil G. Budnick * Thomas G. McLoughlin President Managing Director Vice President Managing 1)irector MBIA Inc Chief Financial Officer John B. Caouette Armonk, New York Franklin Minerva Vice Chairman Age 45 John B. Caouette * Managing I)irector Head of International Vice President David H. Elliott [2,4,5] Robert L. Nevin, Jr. Head of International Steven S. Cooke retired Chairman Managing Director Managing Director MBIA Inc. Gary C. Dunton * Gerard E. Murray Armonk, New York President Clifford D. Corso Director Age 59 Chief Operating Officer Managing Director Controller Chief Investment Officer Claire L. Gaudiani [2,3] Douglas C. Hamilton David N. Penchoff President Vice President Kenneth L. Degen Managing Director Connecticut College Controller Managing Director New London, Connecticut John S. Pizzarelli John S. Pizzarelli* David H. Dubin Age 56 Managing Director Vice President Managing Director Head of Public Finance William H. Gray, III [ 1,2] Head of Public Finance Gary C. Dunton President Jack Praschnik Joseph L. Sevely President Chief Executive Officer Managing Director Vice President Chief Operating Officer United Negro College Treasurer Judith C. Radasch Fund, Inc. Lori M. Evangel Fairfax, Virginia Kevin D. Silva * Managing Director Managing Director Age 59 Vice President Jeremy E. Reifsnyder Chief Administrative Officer Carl E. Favelukes Freda S. Johnson [1,6] Managing Director Managing 1)irector President Richard L. Weill * Emmeline Rocha-Sinha Nicholas Ferreri Government Finance Vice President Managing Director Associates, Inc. Secretary Managing Director New York, New York Eric J. Rosensweig Ram D. Wertheim * Barbara L Flickinger Age 53 Managing Director Vice President Managing Director Daniel R Kearney [3,4,6] General Counsel Edward T. Ruddock Margaret Garfunkel Private investor Managing Director Marblehead, Massachusetts Ruth M. Whaley * Managing Director Vice President Thomas O. Scherer Age 61 Stephen C. Halpert Chief Risk Officer Managing Director Managing Director James A. Lebenthal [ 1] Robert T. Wheeler* Douglas C. Hamilton Joseph L. Sevely Chairman Vice President Managing Director Lebenthal & Co., Inc. Managing Director Chief Technology Officer New York, New York Roger Shields Drew D. Hoffman Age 72 Mark S. Zucker* Managing Director Managing Director Vice Presideiit John A. Rolls [ 1,3.4,5] Kevin D. Silva Head of Structured Finance Una M. Kearns President Managing Director Managing Director Therniion Systems * M EMBERS OF TI JE EXECUTIVE Chief Administrative Officer PC)LIa (.OMMilrEE Bruce J. Legan International Stamford, Connecticut Managing Director Age 59 Louis G. Lenzi Managing Director Deborah Z. Silverman Senior Officers John H. Springrose Managing Director MBIA Inc. Subsidiaries Managing Director Head of Marketing Nicholas Sourbis W Thacher Brown 1838 Investment Advisors Managing Director President LI.C MBIA Asset Management Karleen C. Strayer Hans van den Berg Managing Director Carol K. Blair Managing Director Managing Director Elizabeth B. Sullivan 1838 Investment Advisors MBIA Capital Management LLC Managing Director Corp. Philip C. Sullivan Thomas L. Wilkerson Clifford D. Corso Managing Director President President MBIA MuniServices Carolyn Tain MBIA Capital Management Company Managing Director Corp. Christopher W Tilley Joseph T. Doyle, Jr. Managing Director Managing Director 1838 Investment Advisors Carl Webb LLC Managing Director George W. Gephart, Jr. Christopher H. Weeks Managing Director Managing Director Head of Equity Management Richard L. Weill 1838 Investment Advisors Vice Chairman LLC Secretary Robert C. Hancock Ram D. Wertheim Managing Director 64 Managing Director 1838 Investment Advisors 65 General Counsel LLC Ruth M. Whaley Francie Heller President Managing Director Chief Risk Officer MBIA Municipal Investors Service Corporation Robert T. Wheeler Managing Director Robert W Herz Chief Technology Officer Managing Director 1838 Investment Advisors David White LLC Managing Director Thomas D. Jordan Charles E. Williams Managing Director Managing Director MBIA Municipal Investors Eric C. Williamson Service Corporation Managing Director Marc D. Morris President Mark S. Zucker MBIA Investment Managing Director Head of Structured Finance Management Corp. Robert M. Ohanesian Managing Director MBIA Capital Management Corp. Stock Exchange Listing Financial and Other 2001 Key Financial Dates Transfer Agent. Registrar MBIA Inc. common stock is Information Payment of future dividends and Dividend Disbursing listed on the New York Stock Quarterly earnings, annual is dependent upon results of Agent Exchange (symbol: MBI). reports, Form 10-K, corpo- MBIA's operations, financial ChaseMellon Shareholder The approximate number of rate news and other compa- condition ancl other business Services, LLC shareholders of record of ny information is available considerations. 85 Challenger Road MBIAk common stock was on MBIA's web site: Overpeck Centre 1,008 as of December 31, www.mbia.com. Copies of Dividend Declarations Ridgefield Park, New Jersey 2000. MBIA's corporate financial March 15,2001 07660 information can also be June 13,2001 800-288-9541 Annual Meeting obtained by writing to September 14,2001 All shareholders are cordially Shareholder information at December 6, 2001 Auditors invited to attend the annual MBIA. PricewaterhouseCoopers shareholders' meeting, which Record Dates LLP, New York, New York will be held Thursday, May Members of the financial March 26,2001 10,2001 at MBIA Inc. in community seeking addi- June 25,2001 Trademarks Armonk, New York. A for- tional information about September 24,2001 The MBIA logo, MBIA mal notice of the meeting, MBIA should contact: December 19,2001 Insurance Corporation and together with a proxy state- CLASS are trademarks ment and proxy form, Judith C. Radasch Dividend Payment Dates of MBIA. will be mailed to all share- Managing Director, Equity April 16,2()01 holders. Investor Relations July 16,2001 914-7653014 October 15, 2001 e-mail: January 15,2002 judy. radasch@mbia.coni Charles E. Williams Common Stock Data Market Price* Managing Director, Fixed- Dividends Paid Per Share High Low Close Income Investor Relations 2000 914-765-3481 1st Quater $0.205 52Vi6 36% 521/16 e-mail: 2nd Quarter 0.205 593/i6 48316 483/6 3rd Quarter 0.205 711/Â§ 497/i6 711/6 charlie.williams@mbia.com 4th Quarter 0.205 741 516 647/t6 74lk 1999 Neil G. Budnick 1 st Quarter $0.200 701916 57 58 Vice Chairman, Chief 2nd Quarter 0.200 71946 57Â§46 643/4 3rd Quarter 0.200 669/16 46% 46% Financial Officer 45916 4th Quarter 0.200 571/16 521146 914-765-3020 *Based on New York Stock Exchange Trading Data e-mail: neil.budnick@mbia.com MBIA's mission is to promote growth and prosperity in communities around the world. We work toward fulfilling our mission by providing products and services of enduring quality that strengthen the financial resources and capabilities of state, local and sovereign governments. and our private- sector clients. MBIA conducts business in 31 countries, and touches the lives of many highly diverse groups including employees, clients, shareholders, business partners and taxpayers at large. In every business decision we make and every action we take, our employees are guided by five corporate values: customer service. performance excellence. integrity, teamwork and good corporate citizenship. These values extend to the commu- nities in which we live and work: MBIA provides matching grants and funding to a number of charitable organizations nationwide. TOWN OF ESTES PARK Inter-Office Memorandum DATE: January 17, 2002 TO: Town Board FROM: Bill Linnane (/U 7 - SUBJECT: Fall River Trail Preliminary Engineering Report and Cost Estimate BACKGROUND The Town budgbted approximately $300,000 to design and begin construction of a Fall River Road Trail System. This leg of the Valley Trail System has been determined to be very integral to the system as a whole and is anticipated to be a high-use pedestrian trail. Currently, pedestrians and bicyclists use the narrow shoulder of Fall River Road. An established Fall River Trail would improve safety, as well as provide a very positive trail experience. This trail would extend the existing and proposed Downtown Riverwalk to the western Town limit. Prior to construction and design of a trail, preparation of an R.O.W./access easement report has been necessary to assure good planning for all phases of the system. Cornerstone Engineering has been contracted and has submitted the attached Fall River Trail Preliminary Report. The trail map has been divided into eight regions, as shown on the attachments. It generally follows CDOT R.O.W. and is separated from the travel way. The estimated cost for the entire length is approximately $2,000,000 and consists of an 8-foot wide concrete path. Section 1, which is the recommended starting point is estimated to cost $300,000 and would begin at West Park Shopping Center and extend west toward the West Ell<horn/Bypass intersection. COST/BUDGET 2002 Budget: $300,000 ACTION Staff requests to proceed with the design and construction of the Fall River Trail in a multi-year, phased project and use this Fall River Preliminary Report as a planning tool. BL/lb Fall River Corridor Pedestrian Trail Study Prepared for: Town of Estes Park P.O. Box 1200 Estes Park, Colorado 80517 Prepared by: Cornerstone Engineering & Surveying, Inc. 437 S. Saint Vrain Estes Park, Colorado 80517 970.586.2458 CORN#sTONE ENGINEERING & (1 1 SURVEYING. INC ls; CES Job No. 203.005 January 2002 - (970) 586-2458 437 South St. Vrain Estes Park. CO 80517 Fax (970) 586-2459 ENGINEERING & ~.. - SURVEYING. INC. E-mail: ces@frii.com ly January 15, 2002 Mr. Bill Linnane Director of Public Works Town of Estes Park P.O. Box 1200 Estes Park, CO 80517 RE: Preliminary Draft for the Fall River Corridor Pedestrian Trail Study Dear Mr. Linnane: Per our Scope of Services, please find enclosed the Fall River Corridor Pedestrian Trail Study. The report has been revised per your comments to the pteliminary draft. If you have questions or need further information please do not hesitate to contact me. Sincerely, Cornerstone Engineering & Surveying, Inc. /Â«fayEL - Michael S. Todd, P.E. Principal TABLE OF CONTENTS 1.0 INTRODUCTION ............................... .......................1 1.1 History..........................................................1 1.2 Purpose .. .......................................................1 1.3 Acknowledgments ................................. ...............2 2.0 DATA ACQUISITION ..................................................2 2.1 Neighborhood Survey .............................................2 2.2 Base Map.............. ..........................................3 3.0 TRAIL ALIGNMENT ...................................................3 3.1 Alignment Criteria ................................................3 3.2 Proposed Alignment .............. ................................3 Reach 1 .........................................................4 Reach 2 .........................................................4 Reach 3 .. .......................................................5 Reach 4 .........................................................5 Reach 5 .. .......................................................5 Reach 6 .........................................................6 Reach 8 ................................................ .........7 4.0 SUMMARY OF COSTS .................................................8 5.0 RECOMMENDATIONS FOR PHASING .................................11 5.1 Phasing Criteria .................................................11 5.1 Recommendations ...............................................11 1.0 INTRODUCTION 1.1 History In 1995 construction on the Lake Estes Trail System began along the north edge of Lake Estes. Over the next six years, 21,000 feet of concrete trail, bridges, and a concrete underpass would be constructed at a cost of $2,000,000 completing a circuitous loop around Lake Estes. The trail system immediately became a popular community resource providing a safe recreation facility for users ofall ages. The project was completed through intergovernmental cooperation led by the Town of Estes Park and included the Estes Valley Recreation and Park District, Colorado Department of Transportation, Great Outdoors Colorado, Larimer County Open Lands and the Bureau of Reclaniation. The Town of Estes Park has continued its commitment to the development of bicycle/pedestrian trails with the construction of the Stanley Avenue sidewalk, planning of the U.S. Highway 36 underpass at Stanley Park and Stanley Park Trail, and the extension of the downtown river walk. "The Estes Park River Front West Corridor Master Plan," prepared by Design Studios West, would extend the downtown river walk from Park Theater Mall west across Moraine Avenue in the Fall River Corridor and continuing across Elkhorn Avenue through Tregent Park and finally concluding in a small meadow behind West Park Center (Performance Park). Estes Park Light and Power and the Estes Park Historical Museum in conjunction with Rocky Mountain National Park is currently evaluating the development of a trail connecting the Stanley Historical Power Plant with the Fall River Gateway Visitor Center and Aspen Glen Campground in Rocky Mountain National Park. , The development of a continuous network of trails throughout the community encourages more people to walk and bicycle. Increasing bicycling and walking offers the potential for clean air, heathier people and reduced congestion, more livable communities and more efficient use of precious road space and resources. The Town o f Estes Park with continued support for the development o f pedestrian and bicycle trails, has identified the Fall River Corridor for future trail improvements. The reach of the trail system wozild extend from West Park Center up the Fall River Corridor to Rocky Mountain National Park. A pedestrian/bicycle trail through the Fall River Corridor would be a positive neighborhood and community resource, providing a transportation system for recreational use and destination oriented travel. 1.2 Purpose The purpose of the Fall River Corridor Pedestrian Trail Study is to consolidate available information. The study identifies and analyzes existing and potential constraints along the Fall River Corridor relative to the placement of a pedestrian trail. In particular, the report: Evaluates the alignment of the proposed pedestrian trail from West Park Center up the Fall River Corridor to Rocky Mountain National Park. Â· Contacts private property owners along the reach as to interest, concerns and possible trail easements. -1- Develop construction and engineering costs for budgetary purposes associated with the project. â€¢ Make recommendations for scheduling and development of design. 1.3 Acknowledgments Integral to the preparation of the study was the professional involvement and direction provided by Mr. Bill Linnane, P.E., Public Works Director, Town of Estes Park for technical assistance on key issues, Mr. Mike Mangelsen, Estes Park Light and Power Department, Ms. Betty Kilsdonk, Estes Park Museum for information on the proposed trail alignment surrounding the Stanley Power Plant. 2.0 DATA ACQUISITION 2.1 Neighborhood Survey Informational letters were mailed out to property owners along Fall River and U.S. Highway 34 with possible connection to trail alignment. Included in the letter was a self addressed, stamped post card requesting property owner's responses. Information requested on the post card was as follows: PROPOSED PEDESTRIAN TRAIL EXPANSION West Elkhorn Avenue to Rocky Mountain Gateway Center Questionnaire Property Owner Name: Property Address: Mailing Address: Yes No Would you use a pedestrian/bicycle trail along the Fall River corridor? Would you support the development of a trail along the Fall River corridor? Would you be willing to provide a trail easement across a portion of your property? Comments: Thank you for your response. Cornerstone Engineering & Surveying, Inc. 970.586.2458 Ninety-seven letters were sent out with 44 postcards being returned. Property owners which were inadvertently missed during mailing and subsequently identified as critical to the proposed alignment have been contacted. Additionally, property owners which expressed negative feelings regarding an easement were subsequently contacted if their property was deemed critical for the trail alignment. -2- Responses from the survey are as follows: Number of Responses Yes No Would you use a pedestrian/bicycle trail along the Fall River corridor? 19 25 Would you support development of a trail along the Fall River corridor? ' 19 25 Would you be willing to provide a trail easement across a portion ofyour property? 20 31 2.2 Base Map Town of Estes Patk areal maps, Colorado Department of Transportation Highway Right- of-Way Maps, Larimer County assessor maps, subdivision plats, and development plans along the Fall River corridor were collected. Information fr6m the maps was compiled into base maps to help delineate physical and geographical constraints, property lines, public right-of-way, existing pedestrian easements and property owners. The base maps were then used to evaluate alternative alignments. 3.0 TRAIL ALIGNMENT , 3.1 Alignment Criteria The paramount concern of the trail alignment is the safety of the users. By providing'a real and perceived safe trail system the usage of the trail will increase. Primary to safety is separation from adjoining traffic and road.way crossings. Other safety concerns included sight distance, steep grades, fixed objects along the trail, curve radius, width and steep embankments or cliffs. Another important alignment criterion is usability of the trail. Usability includes minimizing grades to make the trail usable for all ages, congestion, perceived safety and access to and from the trail. The aesthetics of the trail also contribute to the trail experience. The trail should have its own identity and not feel like it is encroaching on another land use. This sense of place can be enhanced with grading and landscaping, thereby strengthening the atmosphere of the trail having its own distinct area. 3.2 Proposed Alignment The majority of the private property owners surveyed were opposed to providing easements for the trail. The few property owners willing to provide easements are isolated, which prevents a continuous trail away from public right-of-ways. Without easements, direct access to the river is not feasible for a majority of the alignment and the trail is primarily limited to existing public right-of-ways. Some trail easements have been developed adjacent to the public right-of-way through the Town of Estds Park planning process for development. These existing easements will allow the trail to be further separated from roadways. Existing road right-of-way through residential areas tend to be narrow with steep grades and multiple driveway crossings and would require the removal of numerous large trees. Specific residential right-of-ways not suitable for the trail are Fall River Lane, Fall River Drive and David Drive. The proposed trail alignment is to follow the U.S. Highway 34 Business (West Elkhorn Avenue) from West Park Center up to U.S. Highway 34 (Fall River Road); continue along the -3- south side of U.S. 34 to Fish Hatchery Road. Follow the south side of Fish Hatchery Road up past Estes Valley Memorial Gardens to the Town of Estes Park property. At town property the trail would extend to the Fall River Power Plant, Rocky Mountain National Park with an extension up to Rocky Mountain Gateway Visitors Center. The specific alignment is as follows: (Plates 1 through 4) REACH 1 STA 0+00 to STA 14+00 The trail would begin at the north side of the bridge in Performance Park, across from West Park Center. Performance Park is Town owned property and the termination point of the Estes Park River Front West Corridor Trail. The trail would follow the north side of the river in a westerly direction. Adjacent to Performance Park is Lot 16B of Sunny Acres Addition. Lot 16B is currently undeveloped and would require an easement. Following Lot 16B are the Willows Townhome Condominiums. An easement for a 'pedestrian trail is currently in place through the Willows property. This section of the trail should not be constructed until a final design for Performance Park with the trail incorporated into the plan is completed. If an easement cannot be obtained across Lot 16B prior to development, the easement should be made a condition of the development. The alternative alignment for this section would be to place the trail in the U.S. Highway 34 Business right-of-way on the north side of the asphalt roadway. The trail could be offset from the roadway approximately 10 to 15 feet. This alternative would require a pedestrian bridge across Fall River unless the existing highway bridge at approximately 500 West Elkhorn Avenue was widened to facilitate pedestrian traffic. Cost of Reach 1: Recommended Alignments: $ 75,300 Alternative Alignment: $113,000 REACH 2 STA 14+00 to 45+00 The trail would stay in the U.S. Highway 34 Business right-of-way on the north side of the roadway. The path would be separated from the driving lane approximately 5 to 10 feet. Rock excavation will be required from STA 27+00 to STA 29+00 in order to create adequate shoulder for the trail. Embankment will be placed from STA 25+00 to 31+00 to aid in grade transition. The north side of the highway is more adaptable to the trail placement than the south side. Numerous crossings of the highway should be minimized to avoid -4- conflicts with traffic. Placement of the trail on the south side would require considerably more embankment work. Placement of the trail along Fall River Lane and Old Ranger Drive were investigated; however, narrow right-of-ways, steep grades and numerous trees precluded this alignment. Cost ofReach 2: Recommended Alignment: $246,000 REACH 3 STA 45+00 to 60+00 The trail would continue along the north side of the roadway within the Highway right-of-way to approximately STA 50+00. At STA 50+00 the trail would cross U.S. Highway 34 Business to the south side of the highway. The area around STA 50+00 would provide adequate site distance for a surface crossing. A below grade crossing could also be incorporated in this area. From STA 50+00 to 60+00 the trail would follow the south side of the right-of-way requiring placement of embankment material. A 10 foot wide pedestrian trail easement currently exists along the north property line of the property abutting the south highway right-of-way allowing additional room' for the trail and separation from the traveled way. Cost of Reach 3: Recommended Alignment: $120,000 Highway Underpass Alignment: $200,000 REACH 4 STA 60+00 to 85+00 The trail would continue along the south side of U.S. Highway 34 right-of-way. The primary length of this section would be detached from the highway by 5 to 10 feet. Sections where horizontal clearance from the drive lane is hard to achieve, the trail should have a vertical separation from the drive lane with a curb and gutter. From STA 72+00 to 76+00 Fall River allows minimal offset from the highway drive lane. For this area a curb is recommended to elevate the trail from the highway and cantilever the trail out over the river bank. A safety rail would also be required along the outside of the trail. Cost of Reach 4: Recommended Alignment: $310,000 REACH 5 STA 85+00 to 95+00 Area between south highway right-of-way and the south edge of the highway is fairly limited; especially adjacent to the Black Hawk Lodge and Ponderosa Lodge (STA 85+00 to 90+00). The trail through this section would have minimal to no horizontal separation from the drive lane and would need a vertical separation with a curb. The driveway entrances would also need to be reconfigured to a conventional "T" entrance to limit the pedestrian trail and vehicular conflicts. From STA 90+00 to 95+00 the trail would require a built-up embankment along -5- the south edge of the right-of-way. An alternative alignment is to route the trail down the drive between Black Hawk Lodge and Trails West through Sleepy Hollow Subdivision and traverse through Summerset Condominiums. The alternative alignment would require two river crossings, acquiring trail easements and treatment of steep grades. Cost of Reach 5: Recommended Alignment: $ 113,500 Alternative Alignment: $175,000 REACH 6 STA 95+00 to 148+00 The trail would follow the southerly highway right-of-way. There currently exists minimal development between the highway and the river along the portion of the alignment. The trail could be located below the roadway elevation and closer to the river. Also, good separation from the highway would be available for most of this reach. From STA 117+00 to 119+00 the river approaches the highway minimizing usable area between the roadway and the river. Alternative methods for dealing with this situation would be retaining walls with embankment or the trail cantilevered out over the river. From STA 135+00 to 138+00 the river encroaches immediately adjacent to the highway. The trail would be taken across the river for about 300 feet, then brought back to the north side of the river. This would require the installation of two bridges. From STA 122+00 to 134+00 a 10 foot wide pedestrian easement exists along the north property line abutting the southerly right-of-way which will allow for separation of the trail from the highway traveled way. Cost of Reach 6: Recommended Alignment: $450,000 REACH 7 STA 148+00 to 198+00 The trail would leave U.S. Highway 34 right-of-way and follow the Fish Hatchery Road right-of-way. The trail would stay on the southerly side of Fish Hatchery Road (County Road 20C). From STA 149+00 to 153+00 (Evergreens) the property owner is adamantly opposed to allowing any kind of an easement for the trail. This area will require placement of embankment with retaining wall, curb and gutter, and guard rail. From STA 153+00 to 164+00 minimal area is available between the roadway and edge of right-of-way allowing minimal separation between the trail and roadway. -6- From STA 164+00 to 198+00 the trail would continue along the south side of Fish Hatchery Road. The area along the south side is open allowing for easy placement and adequate separation from the roadway traveled way. The adjacent property owners from STA 164+00 to 169+00 (Voiland), STA 177+00 to 190+00 (Harmony Foundation), and STA 190+00 to 198+00 (Estes Valley Memorial Gardens) are willing to work with the Town of Estes Park for trail easements in order to avoid trees and work with existing topography. Cost ofReach 7: Recommended Alignment: $404,000 REACH 8 STA 198+00 to Rockv Mountain National Park A number of alternative alignments exist across the Town of Estes Park property to Rocky Mountain National Park. The first alternative alignment would stay on th,e south side of Fall River along the existing dirt road to Rocky Mountain National Park at the Aspenglen Campground. Along this alignment a trail extension could be continued north across Fall River to the Fall River Power Plant. Mr. Larry Gamble of Rocky Mountain National Park (RMNP) has been contacted concerning the trail to Aspenglen Campground as an access into the National Park. The park service is opposed to allowing bicycle traffic into RMNP at Aspenglen Campground. Mr. Gamble of RMNP is currently working with Mike Mangelsen of Estes Park Light and Power and Betty Kilsdonk of the Estes Park Museum on the development of a trail connecting Aspenglen Campground with the Fall River Power Plant and Gateway Visitors Center. Also, Estes Park Light and Power is planning to install a pedestrian bridge across Fall River, south of the Fall River Power Plant. The current trail alignment anticipated from Aspenglen Campground to the Fall River Power Plant is on the north side of Fall River in the vicinity of the existing dirt road. The second alternative is to follow the south side of Fish Hatchery Road across Fall River. The trail would then go up to the existing dirt drive into the Fall River Power Plant. The trail would then follow along the north side of the dirt drive up ~ to the power plant. From the power plant area the trail could extend up to RMNP at Aspenglen Campground, up to Fall River Visitor Center or both. As the trail continued up to RMNP at Aspenglen Campground, it would need to be closed to bicycle traffic at or prior to the park boundary. With the trail continued up to the Fall River Visitor Center, access into Rocky Mountain National Park would be limited to the edge of U.S. Highway 34 with -7- little to no room for a detached trail. Due to high embankments on the south side of the highway, a highway crossing would be necessary in a high traffic area. Cost of Reach 8: STA 195+00 to Rocky Mountain National Park Alternative 1: $ 135,000 Extension off Alternative 1 to Fall River Power Plant: $ 86,000 Recommended Alternative 2: STA 195+00 to Fall River Power Plant: $ 135,000 Fall River Power Plant to Aspenglen Campground: $ 65,000 Fall River Power Plant to Fall River Visitor Center: $ 65,000 4.0 SUMMARY OF COSTS Fall River Corridor Trail Study West Park Center to Rockv Mountain National Park REACH 1 STA 0+00 to 14+00 Trail $ 56,000 Engineering $ 6,720 Contingency (20%) $ 12.580 Total $ 75,300 $ 75,300 Alternative Trail $ 44,000 Bridge $ 40,000 Engineering $ 10,800 Contingency (20%) $ 18.200 Total $ 113,000 REACH 2 STA 14+00 to 45+00 Trail $ 124,000 Rock Excavation $ 45,000 Embankment $ 14,000 Engineering $ 22,000 Contingency (20%) $ 41.000 Total $ 246,000 $ 246,000 -8- REACH 3 STA 45+00 to 60+00 Trail $ 88,500 Engineering , $ 10,600 Contingency (20%) $ 20.900 Total $ 120,000 $ 120,000 Pedestrian Underpass $ 200,000 REACH 4 STA 60+00 to 85+00 Trail $ 100,000 Embankment $ 28,500 Curb and Gutter $ 12,000 Cantilever Trail $ 54,000 Guardrail $ 34,000 Engineering $ 27,500 Contingency (20%) $ 54.000 Total $ 310,000 $ 310,000 REACH 5 STA 85+00 to 95+00 Trail ' $ 40,000 Curb and Gutter $Â· 10,000 Embankment $ 28,500 Driveway Crossing $ 6,800 Engineering $ 10,200 Contingency (20%) $ 18.000 Total $ 113,500 $ 113,500 Alternative Trail $ 80,000 Bridge $ 40,000 Easement $ 10,000 Engineering $ 15,600 Contingency(20%) $ 29.400 Total $ 175,000 REACH 6 STA 95+00 to 148+00 Trail $ 212,000 Embankment S 14,300 Retaining Wall S 32,700 Bridge (2) S 80,000 Engineering $ 41,000 Contingency (20%) S 70,000 Total S 450,000 $ 450,000 -9- REACH 7 STA 148+00 to 195+00 Trail $ 188,000 Curb and Gutter $ 16,000 Embankment $ 21,400 Retaining Wall $ 51,000 Railing $ 24,000 Engineering $ 36,000 . Contingency (20%) $ 67.600 Total $ 404,000 $ 404,000 REACH 8 STA 198+00 to RockÂ¥ Mountain National Park Alternative 1 - Trail $ 100,000 Engineering $ 12,000 Contingency (20%) $ 23,000 Total $ 135,000 Extension to Fall River Power Plant Trail $ 24,000 Bridge $ 40,000 Engineering $ 7,700 Contingency (20%) $ 14,300 Total $ 86,000 Alternative 2 - Recommended Trail $ 60,000 Bridge $ 40,000 Engineering $ 12,000 Contingency (20%) $ 23.000 Total $ 135,000 $ 135,000 Fall River Power Plant to Aspenglen Campground Trail $ 48,000 Engineering $ 6,000 - Contingency (20%) $ 11.000 Total $ 65,000 $ 65,000 Fall River Power Plant to Fall River Visitor Center Trail $ 48,000 Engineering $ 6,000 Contingency (20%) $ 11,000 Total $ 65,000 $ 65,000 Total Estimated Trail â‚¬ost West Park Center to Rocky Mountain National Park: $1,983,000 -10- 5.0 RECOMMENDATIONS FOR PHASING 5.1 Phasing Criteria Proper phasing of the Fall River Corridor Pedestrian Trail is critical to promoting public use and support of the trail system. Criteria used for phasing recommendation of the different reaches or partial reaches are as follows: â€¢ The trail needs to be accessible to users of all ages and all abilities. Having the trail adjacent to a public use area with parking provides a beginning point for many users. â€¢ Providing a destination point for users can give the traila goal oriented function. Destinations can include geographic locations, neighborhoods, shopping, recreation facilities, jobs, and accommodations, etc. A primary purpose of the trail is to provide a safe pedestrian/bicycle transportation corridor where one currently doesn't exist. â€¢ Provide an alternative transportation system for adjacent land owners. Subsequent phasing of the trail system needs to provide a continuous uninterrupted trail. â€¢ For this report phasing has been limited to approximately $300,000. 5.2 Recommendations Reach 4 Development of the trail along Reach 4 would greatly enhance the safety to pedestrian/bicycle traffic in this area. This section of the trail would benefit the adjacent land owners, primarily the accommodation users. The trail would provide safe access from the adjoining property to U.S. Highway 34 Business (West Elkhorn Avenue). Reach 6 Development of the trail along Reach 6 would also greatly enhance the safety to pedestrian and bicycle traffic in this area. This section of trail would benefit the adjacent land owners, primarily accommodation users. The trail could be connected to Fish Hatchery Road at the west end. Due to the existing highway right-of-way, existing trail easements and location of the river, Reach 6 would provide one of the nicer trail experiences along the Fall River Corridor. Even though Reach 4 and Reach 6 would be great improvements for pedestrians and bicycles in these areas, they would be isolated sections of trail mainly benefitting the adjacent property owners. Safe access to the general public would be greatly limited for these two reaches. Reach 1 and a Portion of Reach 2 Reach 1 would provide a beginning point for users, allowing for parking and easy, safe access to the trail. Also, Reach 1 would cohnect with the proposed Estes Park River Front walk providing users access to and from the downtown area. Reach 1 would also provide a nice trail experience along a section of Fall River. Reach 2 would enhance the safety of pedestrians and bicyclists along U.S. Highway 34 Business (West Elkhorn Avenue). Development of Reach 1 and a portion o f Reach 2 would provide an uninterrupted trail experience. By development of Reach 2 up to Valley Road or Fall River Lane, easy neighborhood access from the side roads would be provided. Extensions to the side roads would also provide destinations for other users, enabling them to incorporate a loop in their route. -11- Development cost of Reach 1 and a portion ofReach 2 is estimated around $300,000. Cornerstone Engineering & Surveying, Inc. recommends the trail development begin with Reach 1 and a portion of Reach 2 with subsequent development being a continuation from east to west in order to provide a continuous trail system. -12- 0 0 0 4- a-17 /7 .1 0 t2 4 00 0 -Z --/01 w m*O Vis 45 9 â€¢C % W x O dâ‚¬ i > 0- m # )18Â¥ . \31 w w ONÂ¥)1803~3 5* F =w ~ *s E-- 1% 0 R NZ I LI & *g 4,S f 39 1 - h 3 00% % -JI 25 = 0 w N , Â® Ni 5 0 CJ mW AR 2 1 ZE '9/ 1% 4 2 0,8 901 . f 0 a + 2.1 -. - u .00 Â® 3 00+* 1 Â¥ls Ile D=*~ U o : W 0,5 Â·Â· , 1 <3- j 4 t O - 1 -Il ,\ 0 . Â© 411 8 \%040 0 00*224 ~4. 4 1/3 - I . . D- 0 0 1 0 d 4. + . A 0 de 7& /10 0% 0 3 0 0 /1 2. 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O 1 DO 0 0 1 0 0 Â® 0 00* 2 8 lo t I 0Â£ 0 gu:9 Â® *010 0 0 013(00 0 00 ' co 0 0 0 . .0 .0 1 p f#' 4 ( /fo/ w 00*091 vigr FA 2 0I M 0 11 j i 00. rgef k 48 t ~ 4,21< 1 4% Z 0 1 0 \ trot 0 a V.. 0 00 1 f ect] 00Â£90 u h 00+861 Â¥15 02 0 0 .* 11 0 1% 0- -Illilly Z -~ ji 'be . 0 0:> e k 00/3 CD L. mi 04 Em Ra 00 4 m CL **02 ANTLERS POINT 1NI0d 319ng REACH #7 800 18800 8 11Â¥3 -~ lnE >IUVd 3 30 NA\01 HOIVH HS NÂ¥ 118]dOW /00-17 A 33VDS Ft 0 2 O 1 4 0 of--iJ - -J EN < Ed vi- as IE 0 0%%b RE-I 0 0 0~e : Mi @ E 1 mi ~R! %*&024 ' ~ Â«i. SM . 0 '4(2 4 Iii lo Â§5 4 20 /0 0 05 0 0 6 00 1 . F,260X 38Â¥d -'VINOUVN NtÂ¥1NnOM Â»100&1 47 251 0 0 0 800!blbl00 hl3AI /0017 A 33VOS - MUVd S31S3 30 NM01 9 30 9 %1 -5'tiTII .~2231.53 8# HOÂ¥38 Town Clerk's Office Menlo To: Honorable Mayor Baudek Board of Trustees Town Administrator Widmer From: Vickie O'Connor, Town Clerk Date: January 18, 2002 Subject: Election Documents Background. Resolution #3-02 is the standard resolution the Town utilizes to officially schedule a municipal election, established the polling place and time, voting equipment, name the Town Clerk as the Official Election Official, and set the fee for the Election Judges. There is no change in our voting format - we'll use the Accu-Vote equipment and standard ballots-not a "mail ballot." The only change is that I am relocating Early and Election Day voting to the upstairs meeting rooms. Election Equipment Rental - this is a standard agreement with Larimer County. I have arranged for two Accu-Vote voting units and four voting booths. There is no increase in the rental fee. RESOLUTION NO. 3-02 WHEREAS, by the Statutes of the State of Colorado, the 2nd day of April, 2002 is fixed as the time for a regular municipal election to elect three Trustees. WHEREAS, it is the duty of the Board of Trustees to provide for the holding of such an election; and WHEREAS, Section 31-10-401, C.R.S., 1973, allows the Board of Trustees to delegate to the Town Clerk, by Resolution, the authority and responsibility to appoint the Judges of Election. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF TRUSTEES OF THE TOWN OF ESTES PARK, COLORADO: 1. That a regular municipal election to elect three Trustees shall be held on Tuesday, April 2,2002. 2. That the only polling place shall be in the Municipal Building: Room 201, Municipal Building for Early/Walk-In Voting from March 21 through March 29, 2002,170 MacGregor Ave., Estes Park, Colorado. Rooms 201-203, Municipal Building on election day, April 2, 2002, 170 MacGregor Ave., Estes Park, Colorado. 3. That the polls for early/walk-in voting shall be open from 8:00 a.m. - 5:00 p.m. 4. That the polls on election day shall be open from 7:00 a.m. - 7:00 p.m. 5. That the Global Electronic Voting System "ACCUVOTE" shall be used in the municipal election and that the Town Clerk be and is hereby authorized and directed to perform all acts and functions necessary for the use of such voting equipment as required by the laws of the State of Colorado pertaining thereto. 6. That pursuant to Section 31-10-401, C.R.S., 1973, the Board of Trustees delegates to the Town Clerk, by Resolution, the authority and responsibility to appoint the Judges of Election. 7. That the Judges of Election shall receive for their services the sum of $100.00/ea. on Election Day, $10.00/ea. for Judges Training School, and, for those Judges so assigned, $10.00/hr. for Early/Walk-In Voting. 8. That the Town Clerk shall, at the expense of the Town, arrange for such materials and supplies for such election as may be necessary. DATED this day of 2002. TOWN OF ESTES PARK Mayor ATTEST: Town Clerk 1 LARIMER MYRNA J. RODENBERGER CLERK & RECORDER SCOTT DOYLE CHIEF DEPUTY Larimer County Clerk and Recorder AGREEMENT FOR RENTAL OF ELECTION EQUIPMENT This agreement is made effective this 4th day of January, 2002, between the COUNTY CLERK AND RECORDER, LARIMER COUNTY, COLORADO ("County"), and the TOWN OF ESTES PARK ("Entity"). The County hereby rents to the Entity and the Entity rents from the County the following equipment for use in the Entity's election in April 2002. 1. Two (2) voting units (ACCU-VOTE), at a charge of $100.00 per unit. An ender card, spare printer tape and ribbon for each unit, and two hours of training on ACCU-VOTE operations shall be provided by the County to the Town at no additional charge. 2. Four (4) voting devices at a chargeof $10.00 per device. The County will provide an additional two devices as spares, however, the County will not charge for the spares unless they are used by the Town. 3. The Town agrees to pick up the units and devices from the County. 4. The Town agrees to return the units and devices to the County within five working days after the election to be held on April 2,2002. 5. The Town agrees to pay for any uniUdevice repair or replacement cost for damages to the units and/or devices incurred during the rental period. It is agreed the replacement cost of each unit is $6,500.00. The replacement cost of each device is $250.00. AGREED: Jan Kuhnen COUNTY CLERK AND RECORDER TOWN OF ESTES PARK Elections Manager L--01 By: Motor Vehicle Division Elections Division Recording Division Loveland Annex Estes Park Annex P.O. Box 1280 P.O. Box 1547 P.O. Box 1280 205 E. 6th Street 1601 Brodie Avenue Ft. Collins, CO 80522 Ft. Collins, CO 80522 Ft. Collins, CO 80522 Loveland, CO 80537 Estes Park, CO 80517 (970) 498-7878 (970) 498-7820 (970) 498-7860 (970) 679-4521 (970) 577-2025 COMMITTED TO EXCELLENCE