Aloha Fellow Maui Schooner owners,

If someone would have told me a year ago that the stock market would be down to the low 9000 range and gas would be between $3 and $4 per gallon, I would have thought that was unbelievable. But there is nothing funny about our current economic situation.

The rise in airfare to get to Maui and these uncertain economic times have created the need for your board to make many hard decisions looking at the remainder of 2008 and moving into 2009.

Operating Money & Reserves
Let me first speak to the money we currently have for operating and reserves. Gail Turner, our Trading Places International Controller responsible for our Association has been in constant communication with both Gordie Johansen, our Treasurer, and me regarding the safety of our Association funds. Gail informed the Board during our Budget Board meeting, that the safety of our funds is priority one, even above that of trying to obtain the highest return. Based on this philosophy, it is our goal to maintain all Association funds in FDIC-insured and/or U.S.-backed investments at all times. Gail explained the process: Maintenance fees are received through a payment processing center. Funds are then “swept” into a money market account and then are invested in $95,000 certificates of deposit with different banking institutions which are FDIC-insured. The certificates of deposit must be held at different banks because an Association’s funds are FDIC-insured up to only $100,000 at any one financial institution. Gail explained that even with the recent legislation that increased that amount to $250,000 through December 31, 2009, our certificates of deposits will remain under $100,000. The maturity dates on the certificates of deposit vary, depending on when the cash is needed for operations and reserves.

Cutting Costs
We are adjusting employee hours at the Schooner and eliminating the mid-week cleaning effective immediately. We also will no longer provide complimentary coffee, sugar, cream etc. in the rooms, however all the amenities will still be available for purchase in the lobby. We have also eliminated the arts and crafts department. These decisions were done after a collaborative effort with the board, management company and the on-site management. Cutting our employee hours is an action we regret but were forced to take to control our rising costs. These savings represent approximately $112,000 for 2009. After lengthy analysis we find that most other timeshares have either never offered these services or have also eliminated them.

Our budgeted operating expenses for 2009 will increase 15%. This is with the cuts that we are implementing now. If these cuts were not made we would be seeing an additional 15%-20% increase. The price of electricity and laundry service continue to rise at a rapid rate 20%-40% per year. We also have anticipated more bad debt in 2009 as we realize more of our owners may have difficulty paying their assessment. We are investigating a payment plan option and hope to have in place soon. We are grateful that our delinquency rate is only at 1.71% well below the industry average. Thank You.

Decreased Property Tax Value
With all of that said the property tax assessed value did decrease so we have that issue somewhat controlled at this time. With this decrease in taxes your overall maintenance fee increase will be approximately 10% higher than 2008. These fees are still comparatively lower than what other time shares are in Maui.

Increased Reserve Funding
We have also budgeted an increase in our reserve funding for 2009 of $278,740 over 2008 to help us rebuild our reserves and if need be buffer any unforeseen circumstances due to this economy. This was a responsible decision on behalf of the board, showing prudence as well as responsibility. Although no one knows where this economy will eventually end up we will continue to monitor and make decisions as needed on a regular basis.

I know my message does not paint a very bright outlook. And you may wonder what has changed so dramatically from the first e-blast several months ago. As the economy went from a slow decrease to a rapid free fall since mid September the board has been responsive and will continue to take appropriate action as needed, it is simply the right thing to do, although difficult.

Occupancy is Up!
With all of that said there also is some good news! Our occupancy rate is still at 90% year to date. This number is artificially low due to the ATA and Aloha airline shutdowns in the month of May where our occupancy dropped to 69%. For comparison purposes hotels are 76% occupied year to date. We also continue to get excellent reports from our guests regarding how much they enjoyed their stay at the Schooner.

Refurbishment Continues
We still are proceeding with the planning for a complete refurbishment of the interiors of our units. An owners committee has been selected being chaired by board member Tom Newman. The committee will begin shortly sorting through all of the details, agree on materials, propose a timeline for construction/completion and present to the board a proposal for the work to be done. Once approved by the Board, color boards will be on display in the lobby at the Schooner and pictures will be on our web site. When the time is right and with your approval we will be ready to move quickly.

Aloha Spirit
One constant in all of our efforts is our commitment to providing you with that special Aloha spirit so many of you have come accustomed to when visiting the resort. We are pleased and proud we have maintained our Premier rating with II. For this and for all of the owners standing by us as we all contend with this fluctuating economy, we’re sincerely grateful.

Thank you for being an owner,

Greg Gfeller
President