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City of Roseville, Minnesota <br />February 4,2004 <br />11. <br />(b) Rebate Requirements <br />��� Bona Fide Debt Service Fund <br />All tax-exempt issues are subject to the <br />federal arbitrage and rebate requirements, <br />which require all excess earnings created by <br />the financing to be rebated to the U.S. <br />Treasury. The requirements generally cover <br />two categones: bond proceeds and debt <br />service funds. There are exemptions from <br />rebate in both of these categories. <br />The net proceeds of the Bonds will be <br />expended within 90 days of receipt. <br />Therefore, Bond proceeds will not be subject <br />to rebate. <br />The City must maintain a bona fide debt <br />service fund for the Bonds or be subject to <br />yield restriction. This requires restricting the <br />investments held in the debt service fund to <br />the yield on the Bonds and/or paying back <br />excess investment earnings in the debt <br />service fund to the federal government. A <br />bona fide debt service fund is a fund for <br />which there is an equal matching of revenue <br />to debt service expense, with carry over <br />permitted equal to the greater of the <br />investment earnings in the fund during that <br />year or 1/12 the debt service of that year. <br />Wth improvement bonds, such as this <br />Issue, additional diligence should be <br />exercised in monitoring the debt service <br />fund due to the potential accumulation of <br />assessment prepayments which could cause <br />the fund to become non-bona fide. <br />(d) EconomicLife The average life of the Bonds cannot <br />exceed 120% of the economic life of the <br />projects to be financed. Because the <br />average life of the Bonds is shorter than the <br />remaining average life of the Series 23 <br />Bonds, the Issue is within the economic life <br />requirements. <br />Continuing Disclosure The Bonds are subject to continuing <br />disclosure requirements set forth by the <br />Securities and Exchange Commission. The <br />SEC rules require the City to undertake an <br />annual update of certain Official Statement <br />informationand report any material events <br />to the national repositories. We understand <br />that the City has a procedure for managing <br />its continuing disclosure matters and that it <br />will continue that practice with this Issue. <br />Page 3 <br />