OFFIcIAL STATEMENT $62,960,000 cERTIFIcATES …rmu4you/City/MO SpringfieldUtilities LP...$6,450,000 4.125% Term Certificate due December 1, 2021; Price 99.00%; Yield 4.212%; CUSIP

NEW LEASE Ratings: Insured: Moody’s: AaaBook-Entry Only Standard & Poor’s: AAA Fitch: AAA Underlying: Moody’s: A1 Standard & Poor’s: AA- Fitch: AA SEE “RATINGS.”

In the opinion of Gilmore & Bell, P.C., Kansas City, Missouri, Special Tax Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Service of 1986, as amended, the interest components of the Lease Payments under the Lease and distributed to the registered owners of the Certificates (including any original issue discount properly allocable to an owner thereof) are not includable in gross income for federal and Missouri income tax purposes and are not items of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. However, the interest components will be taken into account for purposes of computing the federal alternative minimum tax on corporations in determining adjusted current earnings. The Certificates are not “qualified tax–exempt obligations” within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. See “TAX MATTERS” herein.

OFFIcIAL STATEMENT

$62,960,000cERTIFIcATES OF PARTIcIPATION,

SERIES 2006A AND SERIES 2006BEvidencing Undivided Fractional Interests in

Lease Payments to be made pursuant to a Lease/Purchase Agreement byTHE BOARD OF PUBLIc UTILITIES OF THE cITY OF SPRINGFIELD, MISSOURI

Dates, Principal Amounts, Interest Rates, Prices and Yields, Maturities and cUSIPs as shown on Inside Front cover

The Certificates of Participation consist of Series 2006A Certificates and Series 2006B Certificates (collectively, the “Certificates”) evidencing undivided fractional interests in Series 2006A Lease Payments and Series 2006B Lease Payments (collectively, the “Lease Payments”) to be made by the Board of Public Utilities of the City of Springfield, Missouri (“City Utilities”) under a Lease/Purchase Agreement dated as of the date of its delivery (the “Lease”). The proceeds of the Certificates will be used (i) to pay the costs of acquiring, installing and constructing a landfill gas-to-energy project and associated equipment and facilities and a natural gas peak shaving project and associated equipment and facilities (collectively, the “New Projects”), (ii) to prepay a Lease/Purchase Agreement dated as of June 1, 2001, between City Utilities and UMB Bank, N.A., as trustee, and the related Certificates of Participation respecting two 50-megawatt gas-fueled electric generation turbines and related equipment (the “Existing Project,” and together with the New Projects, the “Projects”), and (iii) to pay certain costs related to the delivery of the Certificates. The Trustee (defined below) will lease the Projects to City Utilities under the Lease. The Certificates are being executed and delivered pursuant to a Declaration of Trust dated as of February 9, 2006, made by The Bank of New York Trust Company, N.A., as trustee (the “Trustee”).

The Certificates are deliverable only in fully registered form, without coupons, and, when executed and delivered, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Certificates. Purchases of the Certificates will be made only in book–entry form, in the denomination of $5,000 or any integral multiple thereof. Purchasers will not receive Certificates representing their interests in Certificates purchased. So long as Cede & Co. is the registered owner of the Certificates, as nominee of DTC, references herein to the owners or registered owners of the Certificates shall mean Cede & Co and shall not be the Beneficial Owners (herein defined) of the Certificates. So long as Cede & Co. is the registered owner of the Certificates, as nominee of DTC, payments of the principal components and interest components of the Lease Payments represented by the Certificates will be made directly to Cede & Co. Disbursement of those payments to DTC Participants (herein defined) is the responsibility of DTC and disbursement of those payments to Beneficial Owners is the responsibility of DTC Participants.

The interest components of the Lease Payments represented by the Certificates are payable semi-annually on each June 1 and December 1, commencing June 1, 2006. The principal components of the Lease Payments represented by the Certificates are payable annually on December 1 in the years and in the amounts set forth below. The Certificates are subject to prepayment prior to maturity as described herein. See “THE CERTIFICATES – Prepayment.”

Payment of the principal components and interest components to be received by owners of the Certificates when due will be insured by a financial guaranty insurance policy issued by MBIA Insurance Corporation.

THE CERTIFICATES REPRESENT INTERESTS IN THE LEASE PAYMENTS. NEITHER THE CERTIFICATES NOR THE LEASE PAYMENTS ARE GENERAL OBLIGATIONS OF CITY UTILITIES OR THE CITY OF SPRINGFIELD, MISSOURI. THE LEASE PAYMENTS WILL BE SPECIAL OBLIGATIONS, PAYABLE SOLELY FROM THE AVAILABLE REVENUES (HEREIN DEFINED) FROM CITY UTILITIES’ ELECTRIC, NATURAL GAS AND TRANSPORTATION SYSTEM, AS DESCRIBED HEREIN. THE LEASE PAYMENTS ARE SUBORDINATE TO CITY UTILITIES’ REVENUE BONDS AND ONE SENIOR LEASE AND WILL BE ON A PARITY BASIS WITH ANY PARITY LEASES, AS DESCRIBED HEREIN.

THE CERTIFICATES DO NOT CONSTITUTE AN INDEBTEDNESS, LIABILITY, GENERAL OR OTHER OBLIGATION OF THE TRUSTEE, AND THE TRUSTEE SHALL NOT BE OBLIGATED TO PAY THE PRINCIPAL OR INTEREST COMPONENTS OF THE CERTIFICATES.

This cover page contains certain information for quick reference only. It is not a summary of the Certificates or the Lease. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.

Certain legal matters will be passed upon for City Utilities by its General Counsel and certain legal matters respecting the Certificates and the Lease will be passed upon by Gilmore & Bell, P.C., Kansas City, Missouri, Special Tax Counsel for City Utilities. It is anticipated that the Certificates will be available for delivery on or about February 9, 2006.

The date of this Official Statement is January 26, 2006.

MATURITY SCHEDULE

$57,625,000 SERIES 2006A CERTIFICATES

Dated: Date of Delivery Due: December 1, as shown below

Maturity December 1

Amount

Interest Rate

Price

Yield

CUSIP

2007 $2,850,000 3.50% 100.432% 3.25% 851016 AQ8 2008 2,935,000 3.50% 100.529% 3.30% 851016 AR6 2009 3,020,000 3.50% 100.493% 3.36% 851016 AS4 2010 3,130,000 3.50% 100.348% 3.42% 851016 AT2 2011 3,235,000 3.50% 100.000% 3.50% 851016 AU9 2012 3,350,000 5.00% 108.384% 3.60% 851016 AV7 2013 3,525,000 5.00% 108.743% 3.70% 851016 AW5 2014 3,695,000 4.00% 101.481% 3.80% 851016 AX3 2015 3,845,000 4.00% 100.966% 3.88% 851016 AY1 2016 5,005,000 5.00% 108.550% 3.94% 851016 AZ8 2017 5,255,000 5.00% 108.127% 3.99% 851016 BA2 2018 5,525,000 5.00% 107.875% 4.02% 851016 BB0 2019 5,805,000 5.00% 107.455% 4.07% 851016 BC8

$6,450,000 4.125% Term Certificate due December 1, 2021; Price 99.00%; Yield 4.212%; CUSIP 851016 BD6

$5,335,000 SERIES 2006B CERTIFICATES

Dated: Date of Delivery Due: December 1, as shown below

Maturity December 1

Amount

Interest Rate

Price

Yield

CUSIP

2007 $275,000 3.250% 100.000% 3.25% 851016 BE4 2008 285,000 3.250% 99.863% 3.30% 851016 BF1 2009 295,000 3.300% 99.783% 3.36% 851016 BG9 2010 305,000 3.375% 99.798% 3.42% 851016 BH7 2011 315,000 3.500% 100.000% 3.50% 851016 BJ3 2012 325,000 3.600% 99.936% 3.61% 851016 BK0 2013 335,000 3.700% 99.861% 3.72% 851016 BL8 2014 350,000 3.750% 99.402% 3.83% 851016 BM6 2015 360,000 3.875% 99.631% 3.92% 851016 BN4 2016 375,000 3.875% 98.907% 4.00% 851016 BP9 2017 390,000 4.000% 99.622% 4.04% 851016 BQ7 2018 405,000 4.000% 99.104% 4.09% 851016 BR5 2019 425,000 4.000% 98.533% 4.14% 851016 BS3 2020 440,000 4.000% 97.914% 4.19% 851016 BT1 2021 455,000 4.000% 97.250% 4.24% 851016 BU8

No person has been authorized to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as statements of City Utilities. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale by any person, in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. The information and opinions expressed herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the operations of City Utilities since the date of this Official Statement. This Official Statement should be considered in its entirety and no one factor considered less important than any other by reason of its position in this Official Statement. Where statutes, reports or other documents are referred to herein, reference should be made to such statutes, reports or other documents for more complete information regarding the rights and obligations of parties thereto, facts and opinions contained therein and the subject matter thereof. The information contained in the Official Statement is subject to completion, amendment, or other change without notice. TABLE OF CONTENTS Page SUMMARY STATEMENT................................................................................................................................................(i) INTRODUCTION................................................................................................................................................................. 1 THE NEW PROJECTS......................................................................................................................................................... 2 PREPAYMENT OF EXISTING LEASE AND RELATED CERTIFICATES OF PARTICIPATION; THE EXISTING PROJECT ............................................................................................................................................... 2 SOURCES AND USES OF FUNDS ................................................................................................................................... 3 CITY UTILITIES.................................................................................................................................................................. 3 THE CERTIFICATES .......................................................................................................................................................... 3 BOOK-ENTRY ONLY SYSTEM ....................................................................................................................................... 5 SECURITY ........................................................................................................................................................................... 7 PAYMENT OBLIGATIONS ............................................................................................................................................. 10 MBIA INSURANCE CORPORATION AND THE MBIA POLICY.............................................................................. 11 RISK FACTORS................................................................................................................................................................. 13 SUMMARY OF CERTAIN LEGAL DOCUMENTS ...................................................................................................... 17 TAX MATTERS................................................................................................................................................................. 26 LEGAL MATTERS............................................................................................................................................................ 27 FINANCIAL ADVISOR .................................................................................................................................................... 27 UNDERWRITING.............................................................................................................................................................. 27 RATINGS............................................................................................................................................................................ 28 CONTINUING DISCLOSURE ......................................................................................................................................... 28 NO LITIGATION ............................................................................................................................................................... 28 MISCELLANEOUS ........................................................................................................................................................... 29 APPROVAL OF OFFICIAL STATEMENT..................................................................................................................... 29 Appendix A - Information Regarding City Utilities and the City of Springfield, Missouri.......................................... A–1 Appendix B - Audited Financial Statements of the Board of Public Utilities of the City of Springfield, Missouri...... B–1 Appendix C - Opinion of Special Tax Counsel............................................................................................................... C–1 Appendix D – Specimen MBIA Policy ............................................................................................................................ D-1

[THIS PAGE INTENTIONALLY LEFT BLANK]

(i)

SUMMARY STATEMENT

$62,960,000 CERTIFICATES OF PARTICIPATION,

SERIES 2006A AND SERIES 2006B Evidencing Undivided Fractional Interests in

Lease Payments to be made pursuant to a Lease/Purchase Agreement by THE BOARD OF PUBLIC UTILITIES OF THE CITY OF SPRINGFIELD, MISSOURI

Introduction: The Certificates of Participation consist of Series 2006A Certificates and Series 2006B

Certificates (collectively, the "Certificates") evidencing undivided fractional interests in Series 2006A Lease Payments and Series 2006B Lease Payments respectively (collectively, the "Lease Payments") to be made by the Board of Public Utilities of the City of Springfield, Missouri ("City Utilities") under a Lease/Purchase Agreement with the Trustee (defined below) dated as of the date of its delivery (the "Lease"). The final Lease Payment is due on December 1, 2021. The proceeds of the Lease will be used (i) to pay the costs of acquiring, installing and constructing a landfill gas-to-energy project and associated equipment and facilities (the "Landfill Project") and a natural gas peak-shaving project and associated equipment and facilities (the "Natural Gas Project" and together with the Landfill Project, the "New Projects"), (ii) to provide for the prepayment of a Lease/Purchase Agreement dated as of June 1, 2001 (the "Existing Lease"), between City Utilities and UMB Bank, N.A., as trustee, and the related Certificates of Participation respecting two 50-megawatt gas-fueled electric generation turbines and related equipment (the "Existing Project"), and (iii) to pay certain costs of delivery of the Certificates and the Lease. The New Projects and the Existing Project are referred to herein collectively as the "Projects." See "THE NEW PROJECTS" and "PREPAYMENT OF EXISTING LEASE; THE EXISTING PROJECT." City Utilities will lease the Projects from the Trustee under the Lease. Pursuant to the Lease, City Utilities is to make Lease Payments described herein. The Certificates evidence undivided fractional interests in the Lease Payments. The Certificates will be executed and delivered pursuant to a Declaration of Trust dated as of February 9, 2006 (the "Declaration of Trust"), made by The Bank of New York Trust Company, N.A., as trustee (the "Trustee").

Lessee: The Board of Public Utilities of the City of Springfield, Missouri ("City Utilities") Trustee: The Bank of New York Trust Company, N.A. Denomination: $5,000 or integral multiples thereof Date of Delivery: On or about February 9, 2006 Principal Components: Payable annually on each December 1 as shown on the inside front cover page, subject to

prepayment as described under "THE CERTIFICATES - Prepayment." Interest Components: Payable on each June 1 and December 1, commencing June 1, 2006. Prepayment Provisions: The Certificates are prepayable at the option of City Utilities in whole or in part at any time

on or after December 1, 2015, at a prepayment price equal to 100% of the principal components being prepaid plus accrued interest. The Certificates are also prepayable in part if excess proceeds remain in the Acquisition Fund upon the completion of the New Projects and are prepayable in whole in certain circumstances upon the damage, destruction or condemnation of any substantial part of the Projects, in either case on a date a Lease Payment is due at a prepayment price equal to 100% of the principal components being prepaid. In addition, the Series 2006B Lease Payments are prepayable in whole or in part at any time on or after December 1, 2006, at a prepayment price equal to 100% of the principal components

(ii)

being prepaid plus accrued interest from proceeds of any clean renewable energy bonds that may be issued to refinance the Landfill Project. See "THE CERTIFICATES - Prepayment."

Security: The Certificates represent interests in the Lease Payments which will be special obligations

payable solely from Available Revenues from City Utilities' "Public Utility" system (the "Public Utility System"), which includes electric, natural gas and transportation departments and certain other minor services. (City Utilities also operates a separate water utility that is not currently a part of the Public Utility System.) "Available Revenues" are revenues from the Public Utility System after payment of the operating expenses of the Public Utility System and after all deposits have been made to any operating, debt service, debt service reserve, maintenance, repair, replacement and improvement funds or accounts as required by the City's bond ordinance for its existing Public Utility Refunding Revenue Bonds, Series of 2001, and any other bond ordinances enacted by the City from time to time to authorize future revenue bonds for the Public Utility System. The Lease Payments, as to payment from Available Revenues, are subordinate to the City's existing and future revenue bonds and to one Senior Lease (as defined herein) and will be on a parity with any Parity Leases (as defined herein). The Lease Payments will also be secured by a security interest in the Projects as described under "SECURITY – The Projects." See "SECURITY" herein.

THE CERTIFICATES REPRESENT INTERESTS IN THE LEASE PAYMENTS.

NEITHER THE CERTIFICATES NOR THE LEASE PAYMENTS ARE GENERAL OBLIGATIONS OF CITY UTILITIES OR THE CITY OF SPRINGFIELD, MISSOURI. THE LEASE PAYMENTS WILL BE SPECIAL OBLIGATIONS, PAYABLE SOLELY FROM AVAILABLE REVENUES (HEREIN DEFINED) FROM CITY UTILITIES' ELECTRIC, NATURAL GAS AND TRANSPORTATION SYSTEM, AS DESCRIBED HEREIN. THE LEASE PAYMENTS ARE SUBORDINATE TO CITY UTILITIES' REVENUE BONDS AND ONE SENIOR LEASE AND WILL BE ON A PARITY BASIS WITH ANY PARITY LEASES, AS DESCRIBED HEREIN.

Taxation: In the opinion of Gilmore & Bell, P.C., Kansas City, Missouri, Special Tax Counsel, under

existing law and assuming continued compliance with certain requirements of the Internal Revenue Service of 1986, as amended, the interest components of the Lease Payments under the Lease and distributed to the registered owners of the Certificates (including any original issue discount properly allocable to an owner thereof) are not includable in gross income for federal and Missouri income tax purposes and are not items of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. However, the interest components will be taken into account for purposes of computing the federal alternative minimum tax on corporations in determining adjusted current earnings. The Certificates are not "qualified tax–exempt obligations" within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. See "TAX MATTERS" and APPENDIX C.

Ratings: Moody's Investors Service, Inc., Standard & Poor's Ratings Services and Fitch Ratings, Inc.

have assigned ratings of "Aaa," "AAA" and "AAA," respectively, to the Certificates based upon the assumption that the Financial Guaranty Insurance Policy will be issued by MBIA Insurance Corporation upon delivery of the Certificates. In addition, Moody's Investors Service, Inc., Standard & Poor's Ratings Services and Fitch Ratings, Inc. have assigned ratings of "A1," "AA-" and "AA," respectively, to the Certificates without taking into account the benefit of the Financial Guaranty Insurance Policy. See "RATINGS."

Financial Advisor: Additional information may be obtained from the Financial Advisor, Public Financial

Management, Inc., Two Logan Square, Suite 1600, Philadelphia, Pennsylvania 19103, Attention: Brett Matteo (215) 557-1491.

OFFICIAL STATEMENT

$62,960,000 CERTIFICATES OF PARTICIPATION,

SERIES 2006A AND SERIES 2006B Evidencing Undivided Fractional Interests in

Lease Payments to be made pursuant to a Lease/Purchase Agreement by THE BOARD OF PUBLIC UTILITIES OF THE CITY OF SPRINGFIELD, MISSOURI

INTRODUCTION This Official Statement, including the cover page, the inside front cover page and appendices attached hereto (the "Official Statement"), is provided to furnish information with respect to the sale and delivery of Certificates of Participation, consisting of Series 2006A Certificates and Series 2006B Certificates (collectively, the "Certificates") representing interests of the registered owners (collectively, the "Owners") thereof in Series 2006A Lease Payments and Series 206B Lease Payments respectively (collectively, the "Lease Payments") to be made by the Board of Public Utilities of the City of Springfield, Missouri ("City Utilities") as the rental for certain projects (collectively, the "Projects") under the Lease/Purchase Agreement dated as of the date of its delivery (the "Lease"), between City Utilities, as lessee, and the Trustee (defined below), as lessor. The Certificates are being executed and delivered pursuant to a Declaration of Trust dated as of February 9, 2006 (the "Declaration of Trust"), made by The Bank o New York Trust Company, N.A., as trustee (the "Trustee").

The proceeds of the Certificates will be used (i) to pay the costs of acquiring, installing and constructing a landfill gas-to-energy project and associated equipment and facilities (the "Landfill Project") and a natural gas peak-shaving project and associated equipment and facilities (the "Natural Gas Project" and, together with the Landfill Project, the "New Projects"), (ii) to provide for the prepayment of a Lease/Purchase Agreement dated as of June 1, 2001 (the "Existing Lease"), between City Utilities and UMB Bank, N.A., as trustee, and the related Certificates of Participation respecting two 50-megawatt gas-fueled electric generation turbines and related equipment (the "Existing Project"), and (iii) to pay certain costs of delivery of the Certificates and the Lease. The New Projects and the Existing Project are collectively referred to herein as the "Projects." See "THE NEW PROJECTS" and "PREPAYMENT OF EXISTING LEASE; THE EXISTING PROJECT." City Utilities will lease the Projects from the Trustee under the Lease. Pursuant to the Lease, City Utilities is to make Lease Payments described herein. The Certificates are deliverable only in fully registered form, without coupons, and, when executed and delivered, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Certificates. Purchases of the Certificates will be made only in book-entry form, in the denomination of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their interests in Certificates purchased. So long as Cede & Co. is the registered owner of the Certificates, as nominee of DTC, references herein to the owners or registered owners of the Certificates shall mean Cede & Co., as aforesaid and shall not mean the Beneficial Owners (herein defined) of the Certificates. Interest components of the Lease Payments with respect to the Certificates are payable on each June 1 and December 1, commencing June 1, 2006, until maturity or prepayment, at the annual rates set forth on the inside front cover page of this Official Statement, calculated based on a 30-day month and a 360-day year. The Certificates mature as shown on the inside front cover page hereof, subject to prepayment as described under "THE CERTIFICATES - Prepayment." So long as DTC or its nominee, Cede & Co., is the registered owner of the Certificates, those payments will be made directly to that Certificate Owner. DTC is expected, in turn, to remit those principal components and interest components to the DTC Participants (herein defined) for subsequent disbursement to the Beneficial Owners. City Utilities is an administrative board of the City of Springfield, Missouri, (the "City") duly organized under the Charter of the City of Springfield to operate and control the public utilities of the City. THE CERTIFICATES REPRESENT INTERESTS IN THE LEASE PAYMENTS. NEITHER THE CERTIFICATES NOR THE LEASE PAYMENTS ARE GENERAL OBLIGATIONS OF CITY UTILITIES OR THE CITY OF SPRINGFIELD, MISSOURI. THE LEASE PAYMENTS WILL BE SPECIAL OBLIGATIONS,

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PAYABLE SOLELY FROM AVAILABLE REVENUES (HEREIN DEFINED) FROM CITY UTILITIES' ELECTRIC, NATURAL GAS AND TRANSPORTATION SYSTEM, AS DESCRIBED HEREIN. THE LEASE PAYMENTS ARE SUBORDINATE TO CITY UTILITIES' REVENUE BONDS AND ONE SENIOR LEASE AND WILL BE ON A PARITY BASIS WITH ANY PARITY LEASES, AS DESCRIBED HEREIN.

THE NEW PROJECTS

A portion of the proceeds of the Certificates will be used to provide funds to acquire, install and construct the New Projects. The New Projects consist of the Landfill Project and the Natural Gas Project.

The Landfill Project. City Utilities and the City of Springfield have agreed to a joint venture to develop the Landfill Project at the City of Springfield's Noble Hill Landfill. The Landfill Project will use methane gas produced and collected at the landfill to fuel a 3.2 megawatt electric generating facility. The Landfill Project will include an electric generation system and gas collection and condensation treatment systems. The Landfill Project will also require upgrades and improvements to the electric transmission and distribution system. City Utilities' budgeted cost for the Landfill Project is $5,788,688, of which $5,210,000 plus interest earnings thereon is budgeted to be paid from proceeds of the Certificates (see "SOURCES AND USES OF FUNDS."). Construction of the Landfill Project began in 2005, and City Utilities' management currently expects the Landfill Project to be completed by September, 2006.

The Natural Gas Project. City Utilities will construct a propane-air peak shaving plant to provide supplemental capacity to City Utilities’ natural gas distribution system. The plant will blend propane gas with air such that the mixture is similar to that of natural gas. City Utilities will then blend this mixture with its natural gas for delivery to customers during peak demand periods. The capacity of the plant is planned to be 25,000 dekatherms/day. Storage of propane gas for the plant will be provided by twelve 60,000-gallon tanks, which will provide the equivalent of approximately two days of continuous operation at the plant’s maximum capacity of 25,000 dekatherms/day. Plant facilities will consist of the propane tanks, propane vaporizers, air compressors, and propane-air blending equipment as well as required control, safety and security features. City Utilities' budgeted cost for the Natural Gas Project is $4,534,267, of which $3,940,000 plus interest earnings thereon is budgeted to be paid from proceeds of the Certificates (see "SOURCES AND USES OF FUNDS."). City Utilities' management has scheduled construction of the Natural Gas Project to begin in March, 2006, and currently expects the Natural Gas Project to be completed by January, 2007.

PREPAYMENT OF EXISTING LEASE AND RELATED CERTIFICATES OF PARTICIPATION; THE EXISTING PROJECT

A portion of the proceeds of the Certificates will be used to provide for the prepayment of the Existing Lease. Proceeds of the Existing Lease were used to pay a portion of the cost of constructing and acquiring the Existing Project. The Existing Project consists of two 50-megawatt simple-cycle gas-fueled electric generation turbines and related equipment installed at a site in northeast Springfield adjacent to City Utilities' existing 161 kilavolt transmission facilities. The original principal amount of the Existing Lease was $53,000,000, all of which remains outstanding. Simultaneously with the sale and delivery of the Certificates, a portion of the proceeds of the Certificates, together with other available moneys, will be transferred to UMB Bank, N.A., as escrow agent for deposit in the Escrow Fund (the "Escrow Fund") established under the Prepayment Fund Escrow Agreement dated as of the date of delivery of the Lease between City Utilities and that escrow agent. Moneys deposited in the Escrow Fund will be used to purchase direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (the "Escrow Securities"), maturing in such amounts and at such times, according to the report described below, as will be sufficient, together with the interest to accrue thereon and beginning cash in the Escrow Fund, to pay the Lease Payments under the Existing Lease coming due on or before December 1, 2009, and to prepay on December 1, 2009, the remaining Lease Payments under the Existing Lease and the related Certificates of Participation evidencing undivided fractional interests in those Lease Payments at a prepayment price equal to 100% of the principal amount thereof. The Arbitrage Group, Inc., Tuscaloosa, Alabama, certified public

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accountants, will deliver to City Utilities their report verifying the accuracy of the mathematical computations of the adequacy of the Escrow Securities and beginning cash to pay when due the Lease Payments under the Existing Lease. Upon deposit of the appropriate amount of proceeds of the Certificates in the Escrow Fund and the purchase of the Escrow Securities, the lien of Existing Lease on the Existing Project will be discharged.

SOURCES AND USES OF FUNDS City Utilities' estimate of the sources and uses of funds related to the Certificates is as follows:

Sources of Funds: Principal Amount of Certificates ....................................................................... $62,960,000.00 Plus Net Original Issue Premium........................................................................ 2,350,028.25 Total .................................................................................................................... $65,310,028.25 Uses of Funds: Acquisition of New Projects: Natural Gas Project ........................................................................................ $ 3,940,000.00 Landfill Project................................................................................................... 5,210,000.00 Deposit to Escrow Fund for Prepayment of Existing Lease ............................... 55,160,171.34 Costs of delivery of the Certificates and the Lease 1 ......................................... 999,856.91 Total .................................................................................................................... $65,310,028.25 ___________________ 1 Including underwriter's discount, Financial Guaranty Insurance Policy premium, rating, legal, financial advisor and

trustee's fees and expenses and printing costs.

CITY UTILITIES

City Utilities of Springfield, Missouri ("City Utilities"), is a municipally owned utility which is a component unit of the City of Springfield, Missouri (the "City"). The Public Utility portion of City Utilities is engaged in the production and distribution of electricity, distribution of natural gas and the providing of public transportation and certain other minor services for the City. The Water Utility portion of City Utilities is operated as a separate financial enterprise engaged in the treatment and distribution of water for the City. The ordinance authorizing the issuance of certain waterworks revenue bonds provides for the possible future financial consolidation of the Water Utility and the Public Utility system upon the satisfaction of certain conditions. In the event such conditions are satisfied and the Water Utility and the Public Utility System are consolidated, waterworks revenue bonds will become revenue bonds of the Public Utility System, the payment of which will be senior and superior to the payment of the Lease Payments under the Lease. City Utilities has no current plans to go forward with the consolidation, and it is not certain that the consolidation will occur even if all of the conditions to consolidation are satisfied. Certain information with respect to City Utilities and the City is set forth in APPENDIX A. The audited financial statements for City Utilities for the fiscal year ended September 30, 2005, are attached hereto as APPENDIX B.

THE CERTIFICATES

General The Certificates represent interests of the Owners in the Lease Payments and are in the aggregate principal amount of $62,960,000. Interest components are payable on each June 1 and December 1, commencing June 1, 2006. Principal components are payable in the years and in the amounts set forth on the inside front cover page hereof, subject to prepayment as described under "Prepayment." Interest components are calculated based on a 30-day month, 360-day year, at the rates set forth on the inside front cover page hereof. While the Certificates remain in book entry only form, payments to Beneficial Owners (as defined herein) are governed by the rules of DTC as described under

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"BOOK-ENTRY ONLY SYSTEM." In the event that DTC ceases to act as securities depository for the Certificates, payment may be made as described in the Declaration of Trust. Prepayment Mandatory Prepayment of Series 2006A Term Certificates. The Series 2006A Term Certificates maturing December 1, 2021, will be subject to mandatory prepayment prior to maturity on December 1 in each of the years set forth below, at a prepayment price equal to 100% of the principal amount thereof plus accrued interest to the prepayment date, without premium:

Series 2006A Term Certificates Maturing December 1, 2021 Year Principal Amount 2020 $6,105,000 2021* 345,000 _______________ *Maturity Optional Prepayment. The Certificates due on or after December 1, 2016, may be prepaid at the option of City Utilities on December 1, 2015, and thereafter on any date in whole or in part from the series and maturities selected by City Utilities, at a prepayment price equal to 100% of the principal amount thereof plus accrued interest to the prepayment date, without premium. Extraordinary Prepayment. The Certificates are also subject to prepayment as follows: (a) If funds remain in the Acquisition Fund upon completion of the acquisition, construction

and installation of the New Projects (see "THE NEW PROJECTS"), City Utilities shall prepay part of the unpaid principal components of Lease Payments, and thus the Certificates, to the extent of such remaining funds (rounded down to the nearest multiple of $5,000) on the first date a Lease Payment is due occurring more than 45 days after such completion at a Prepayment Price equal to 100% of the portion of the principal components being prepaid, without premium. The Certificates of each series to be prepaid shall be selected proportionately according to the relative amount of Certificate proceeds initially allocated to each New Project ($3,940,000 for the Series 2006A Certificates and $5,210,000 for the Series 2006B Certificates), and within a series shall be selected from the maturities selected by City Utilities.

(b) If any substantial part of any Project is damaged, destroyed or condemned and its repair or replacement is impracticable in the reasonable judgment of City Utilities, City Utilities shall prepay all of the unpaid Lease Payments, and thus the Certificates, attributable to that Project on the first date a Lease Payment is due occurring more than 45 days after City Utilities determines its repair or replacement is impracticable at a prepayment price equal to 100% of the unpaid principal components, without premium. (c) The Certificates are subject to prepayment in whole at any time at the principal amount thereof plus accrued interest if an Event of Default has occurred under the Lease and the Trustee has declared the Lease Payments and accrued interest thereon to be immediately due and payable as provided in the Lease.

Prepayment of Series 2006B Certificates from Clean Renewable Energy Obligation Proceeds. The principal components of the Series 2006B Lease Payments, and thus the Series 2006B Certificates, are prepayable in whole or in part from the maturities selected by City Utilities at any time on or after December 1, 2006, from proceeds of any clean renewable energy obligations that may be issued to refinance the Landfill Project at a Prepayment Price equal to 100% of the principal components being prepaid, plus accrued interest to the date of payment, without premium. The Energy Tax Incentives Act of 2005 authorizes up to $800 million of clean renewable energy obligations to be issued by qualified issuers to finance certain renewable energy projects, with that $800 million to be allocated among qualified issuers for qualified projects. City Utilities intends to seek an allocation for clean renewable energy obligations to refinance the Landfill Project and, if City Utilities receives all or part of the requested allocation for that purpose, it intends to prepay Series B Lease Payments, and thus Series 2006B Certificates, from the proceeds of those obligations.

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Notice. The Trustee shall give written notice of prepayment to the registered owners of the Certificates to be prepaid, said notice to be mailed, first class postage prepaid, not less than 30 days nor more than 60 days prior to the prepayment date. So long as the book entry system is used for the Certificates, the Trustee will give any notice of prepayment or any other notices required to be given to registered owners only to DTC. Any failure of DTC to advise any DTC Participant, or of any DTC Participant to notify the Beneficial Owner, of any such notice and its content or effect will not affect the validity of the prepayment of the Certificates called for prepayment. Beneficial Owners may desire to make arrangements with a DTC Participant so that all notices of prepayment or other communications to DTC which affect such Beneficial Owners, including notification of all interest payments, will be forwarded in writing by such DTC Participant. See "BOOK-ENTRY ONLY SYSTEM." Registration and Transfers

For so long as the Certificates are in book-entry form, transfers of the Certificates may be made only as described under "BOOK-ENTRY ONLY SYSTEM." At any other time, Certificates are transferable by the registered owner thereof or by such person's duly authorized attorney upon surrender of such Certificate for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form approved by the Trustee, and any Certificate may be exchanged at the trust office of the Trustee for a like aggregate principal amount of Certificates of any authorized denomination or denominations of the same series and maturity. The Trustee will require the owner of the Certificate requesting such transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. The Trustee may also require such owner of the Certificate to pay a reasonable sum to cover expenses incurred by City Utilities or the Trustee in connection with such transfer or exchange; provided, however, that no such payment of expenses will be required with respect to the first such transfer or exchange.

BOOK-ENTRY ONLY SYSTEM

The Certificates are available in book-entry form and beneficial ownership interests therein may be purchased in the principal component of $5,000 or an integral multiple thereof. Purchasers of the Certificates will not receive certificates representing their interests in the Certificates.

The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the

Certificates. The Certificates will be deliverable as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Certificate will be executed and delivered for each maturity of the Certificates, each in the aggregate principal amount of such maturity and will be deposited with DTC. DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest

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rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. Purchases of the Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificate (the "Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Certificates, except in the event that use of the book-entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of the Certificates with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such Certificates are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Certificates, such as prepayments, defaults, and proposed amendments to the Lease. For example, Beneficial Owners of the Certificates may wish to ascertain that the nominee holding the Certificates for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Prepayment notices shall be sent to DTC. If less than all of the Certificates within a maturity are being prepaid, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be prepaid. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Certificates unless authorized by a DTC Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to City Utilities as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Certificates will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from City Utilities or the Trustee, on the payment date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, its nominee, the Trustee or City Utilities, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest on the Certificates to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Trustee. Disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Certificates at any time by giving reasonable notice to the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained Certificates are required to be printed and delivered.

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The Trustee may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Certificates will be printed, registered in the name of DTC's partnership nominee, Cede & Co. (or such other name as may be requested by an authorized representative of DTC), and delivered to DTC (or a successor securities depository), to be held by it as securities depository for Direct Participants. If, however, the system of book-entry-only transfers has been discontinued and a Direct Participant has elected to withdraw its Certificates from DTC (or such successor securities depository), Certificates may be delivered to Beneficial Owners in the manner described herein under "THE CERTIFICATES – Registration and Transfers." THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC'S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM DTC. THE TRUSTEE AND CITY UTILITIES TAKE NO RESPONSIBILITY AS TO THE ACCURACY OR COMPLETENESS THEREOF, AND NEITHER THE INDIRECT PARTICIPANTS NOR THE BENEFICIAL OWNERS SHOULD RELY ON THE FOREGOING INFORMATION WITH RESPECT TO SUCH MATTERS. THERE CAN BE NO ASSURANCE THAT DTC WILL ABIDE BY ITS PROCEDURES OR THAT SUCH PROCEDURES WILL NOT BE CHANGED FROM TIME TO TIME.

SECURITY General THE CERTIFICATES REPRESENT INTERESTS IN THE LEASE PAYMENTS. NEITHER THE CERTIFICATES NOR THE LEASE PAYMENTS ARE GENERAL OBLIGATIONS OF CITY UTILITIES OR THE CITY OF SPRINGFIELD, MISSOURI. THE LEASE PAYMENTS WILL BE SPECIAL OBLIGATIONS, PAYABLE SOLELY FROM THE AVAILABLE REVENUES (HEREIN DEFINED) FROM CITY UTILITIES' ELECTRIC, NATURAL GAS AND TRANSPORTATION SYSTEM, AS DESCRIBED HEREIN. THE LEASE PAYMENTS ARE SUBORDINATE TO CITY UTILITIES' REVENUE BONDS AND ONE SENIOR LEASE AND WILL BE ON A PARITY BASIS WITH ANY PARITY LEASES, AS DESCRIBED HEREIN. The Certificates represent interests in the Lease Payments which will be special obligations payable solely from Available Revenues from City Utilities' "Public Utility" system (the "Public Utility System"), which includes electric, natural gas and transportation departments and certain other minor services. (City Utilities also operates a separate water utility that is not currently a part of the Public Utility System.) "Available Revenues" are revenues from the Public Utility System after payment of the operating expenses of the Public Utility System and after all deposits have been made to any operating, debt service, debt service reserve, maintenance, repair, replacement and improvement funds or accounts as required by the City's bond ordinance for its existing Public Utility Refunding Revenue Bonds, Series of 2001 (the "Existing Bond Ordinance"), and any bond ordinances enacted by the City from time to time to authorize future revenue bonds for the Public Utility System. The Lease Payments, as to payment from Available Revenues, are subordinate to the City's existing and future revenue bonds and to one Senior Lease (as defined below) and will be on a parity with any Parity Leases (as defined below). The Lease Payments will also be secured by a security interest in the Projects as described under "The Projects." The Projects City Utilities will grant a security interest in the Projects to secure the Lease Payments. City Utilities may purchase all of the Trustee's interest in any of the Projects by prepaying the portion of the Lease Payments attributable to the Project or Projects purchased or by providing for their payment as described under "THE CERTIFICATES – Prepayment." Upon any such purchase, the security interest in the Project or Projects purchased will terminate, and the remaining Lease Payments will no longer be secured by that Project. Revenue Bonds, Senior Lease and Parity Leases On November 26, 2001, the City adopted the Existing Bond Ordinance providing for the issuance of the City's Public Utility Refunding Revenue Bonds. The Existing Bond Ordinance authorized up to $26,580,000 of Public Utility Refunding Revenue Bonds to refund certain of the City's outstanding Public Utility Revenue Bonds and also authorized the City to issue additional Public Utility Revenue Bonds on a parity with all of the City's prior Public Utility Revenue

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Bonds and secured by a lien on the revenues from the Public Utility System. The Lease Payments are subordinate, as to payment from revenues of the Public Utility System, to any revenue bonds of the City for City Utilities ("Revenue Bonds"), or any part thereof, secured by a pledge of the revenues of the Public Utility System, whether the Revenue Bonds are issued before or after the execution and delivery of the Lease or under the Existing Bond Ordinance or under any bond ordinance hereinafter enacted by the City. As of January 1, 2006, City Utilities had $5,675,000 principal amount of Revenue Bonds outstanding. For a discussion of City Utilities' plans that may involve the issuance of a significant amount of Revenue Bonds, see "CITY UTILITIES - The Public Utility System – Future Plans" in APPENDIX A. The Lease Payments are also subordinate, as to their payment from Available Revenues, to the lease payments due in connection with the Lease Purchase Agreement dated as of February 9, 2001 in the original principal amount of $10,720,000 between City Utilities and Stifel Financial Corp. (the "Senior Lease"). The outstanding principal amount of the Senior Lease is $7,870,000. In addition, the Lease Payments will be payable on a parity basis, as to payment from revenues of the Public Utility System, with lease payments under future lease/purchase agreement (the "Parity Leases") if the conditions described in "Limitations on Additional Revenue Bonds and Parity Leases" are met. For a discussion of City Utilities' plans that may involve entering into Parity Leases, see "CITY UTILITIES – The Public Utility System – Future Plans" in APPENDIX A. As noted above, the Water Utility portion of City Utilities is operated as a separate financial enterprise. In 2003, City Utilities issued $35,520,000 principal amount of bonds payable from the revenues of its Water Utility, of which $32,130,000 remain outstanding as of January 1, 2006. See the financial statements, including note 5 thereto, included in this Official Statement as APPENDIX B. During the term of the Lease, the annual debt service for the 2003 waterworks bonds ranges between approximately $3,095,712 to $3,539,063. The ordinance authorizing the issuance of those bonds provides for the possible future financial consolidation of the Water Utility and the Public Utility System upon the satisfaction of certain conditions. If those conditions are satisfied and the Water Utility and the Public Utility System are consolidated, waterworks revenue bonds will become revenue bonds of the Public Utility System, the payment of which will be senior and superior to the payment of the Lease Payments under the Lease. City Utilities has no current plans to go forward with the consolidation, and it is not certain that the consolidation will occur even if all of the conditions to consolidation are satisfied. Limitations on Additional Revenue Bonds and Parity Leases The Lease will provide that City Utilities shall not issue or incur lease obligations that have rights to payment from Revenues (defined below) which are superior to City Utilities' obligation to make Lease Payments under the Lease. The Lease will further provide that (i) the City may issue Revenue Bonds which have rights to payment from Revenues that are superior to payment of Lease Payments and (ii) City Utilities may enter into Parity Leases if City Utilities has delivered to the Trustee the following:

(1) A certificate of City Utilities' chief financial officer to the effect that the Net Revenues Available for Debt Service and Lease Payments for the fiscal year immediately preceding the incurrence of the obligations shall have been equal to at least 100% of the maximum annual amount required to be paid out of Net Revenues Available for Debt Service and Lease Payments in any fiscal year on account of both principal (at maturity or upon mandatory redemption) and interest becoming due with respect to all such bonds and lease obligations of City Utilities, including such payments respecting such proposed bonds or Parity Leases. In determining the Net Revenues Available for Debt Service and Lease Payments for the purpose of this subparagraph, City Utilities may adjust the Net Revenues Available for Debt Service and Lease Payments by adding thereto, in the event City Utilities shall have made any increase in rates for the use and services of the Public Utility System and such increase shall not have been in effect during all of the fiscal year immediately preceding the incurrence of those additional obligations, the amount, as estimated by City Utilities, of the additional Net Revenues Available for Debt Service and Lease Payments which would have resulted from the operation of the Public Utility System during said preceding fiscal year had such rate increase been in effect for the entire period; or

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(2) A certificate of City Utilities' chief financial officer to the effect that the estimated Net Revenues Available for Debt Service and Lease Payments for the fiscal year immediately following the fiscal year in which the improvements to the Public Utility System, the cost of which is being financed by such obligations are to be placed in commercial operation, shall be equal to at least 100% of the maximum annual amount required to be paid out of Net Revenues Available for Debt Service and Lease Payments in any fiscal year on account of both principal (at maturity or upon mandatory redemption) and interest becoming due with respect to all such bonds and lease obligations of City Utilities, including such payments respecting such proposed bonds or Parity Leases. In determining the amount of estimated Net Revenues Available for Debt Service and Lease Payments for the purpose of this subparagraph, City Utilities may take into account any estimated increase in Net Revenues Available for Debt Service and Lease Payments resulting from any increase in rates for the use and services of the Public Utility System which, in the opinion of City Utilities, are economically feasible, and reasonably considered necessary based on projected operations of the Public Utility System.

The Lease also will provide that City Utilities may issue or incur revenue bonds or lease obligations that are payable only from Available Revenues and are junior and subordinate to City Utilities' obligation to make Lease Payments under the Lease and to pay any Parity Lease Payments so that if at any time City Utilities is in default in paying any Lease Payment or any Parity Lease Payments, City Utilities will make no payments of either principal of or interest on said junior and subordinate revenue bonds or any subordinate lease obligations until said default or defaults be cured. "Net Revenues Available for Debt Service and Lease Payments" means, for the period of determination, all Revenues less all Operating Expenses. "Revenues" means all income and revenues derived from the operation of the Public Utility System including investment and rental income, net proceeds from business interruption insurance, and any amounts deposited in escrow in connection with the acquisition, construction, remodeling, renovation and equipping of facilities to be applied during the period of determination to pay lease payments or interest on revenue bonds, but excluding any profits or losses on the yearly extinguishment of debt or on the sale or other disposition, not in the ordinary course of business, of investments or fixed or capital assets, any unrealized gains on investments and other noncash revenues and including any realized gains on investments.

"Operating Expenses" means City Utilities' expenses of operating the Public Utility System, including all costs due under any type of contractual arrangement in respect of power and power entitlements and supply, operation, maintenance, generation, production, transmission, distribution, repairs, replacements, engineering, transportation, administrative and general, audit, legal, financial, pension, retirement, health, hospitalization, insurance, taxes, and other expenses actually paid or accrued, including without limitation, any expenses of City Utilities applicable to the Public Utility System, as recorded on its books pursuant to generally accepted accounting principles appropriate to the public utility industry, but excluding costs and expenses for new construction, charges for depreciation, payments in lieu of taxes and interest expenses. Rate Covenant City Utilities will make the following covenants in the Lease: (a) City Utilities will fix, establish, maintain and collect such rates and charges for the services furnished by or through the Public Utility System, subject to approval of such rates, fees and charges by the City Council of the City as required by the City's Charter, as (i) will produce Revenues sufficient to pay the costs of the operation and maintenance of the Public Utility System, all lease obligations and the principal of and interest on all revenue bonds payable from Revenues, in each case as and when the same become due, and to provide reasonable and adequate reserves to make all lease obligations and the principal of and interest on all revenue bonds payable from Revenues and for the protection and benefit of the Public Utility System, and (ii) will enable City Utilities to have in the then current fiscal year Net Revenues Available for Debt Service and Lease Payments which will be not less than 100% of the amount required to be paid by City Utilities in that fiscal year on account of both principal components and interest components of all lease obligations and the debt service on all revenue bonds payable from Revenues at the time outstanding.

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(b) On or before August 1 in each year, City Utilities will complete a review of its financial condition for the purpose of estimating whether the Revenues will be sufficient to meet all requirements as specified in subparagraph (a). If City Utilities determines that the Revenues may not be sufficient to provide such payments and meet such other requirements, it shall forthwith make a study for the purpose of making a schedule of rates, fees and charges for the Public Utility System which will cause sufficient Revenues to be collected in the following fiscal year as will provide funds for all the payments and other requirements as specified in Subsection (a) for such following fiscal year and will cause additional Revenues to be collected in such following and later fiscal years sufficient to restore the amount of such deficiency at the earliest practicable time. If, in any fiscal year, the Revenues collected shall not have been sufficient to provide all of the payments and meet all other requirements as specified in subparagraph (a), City Utilities shall as promptly as permitted by law establish and place in effect rates, fees and charges that will cause sufficient revenues and income to be collected, subject to approval of such rates, fees and charges by the City Council of the City as required by the City's Charter. (c) City Utilities will do all things lawfully within its power to obtain and maintain approval by the City Council of the City of such rates, fees and charges and to exhaust all available reviews and appeals in the event such rates, fees and charges are not approved. (d) Except as provided by the Charter of the City, as now in effect or as hereinafter amended, or by other applicable law, City Utilities will not furnish or supply power, energy, water or any other service or commodity free of charge to any person, firm or corporation, public or private, and City Utilities will promptly enforce the payment of any and all accounts owing to City Utilities by reason of the ownership and operation of the Public Utility System, to the extent directed by sound business practice. (e) The failure in any fiscal year to comply with the covenants described in subparagraphs (a) and (b) shall not constitute an Event of default under the Lease, if City Utilities shall comply with subparagraphs (b) and (c).

PAYMENT OBLIGATIONS The following table sets forth City Utilities' outstanding payment obligations with respect to the Revenue Bonds, the Senior Lease and the Lease Payments under the Lease (for this purpose, treating payments due on October 1 as if due on September 30). Payments with respect to the Revenue Bonds are shown less certain contributions from and anticipated investment earnings on moneys in an investment account with respect thereto. The payment obligations for Revenue Bonds described below does not include the payment obligations on City Utilities' waterworks revenue bonds. See "SECURITY - Revenue Bonds, Senior Lease and Parity Leases."

Fiscal Year Revenue Senior Lease Payments Ended 9/30 Bonds Lease (Certificates) Total

2006 $5,816,875.00 $982,781.88 $ 846,663.23 $ 7,646,320.11 2007 981,657.50 2,721,417.52 3,703,075.02 2008 983,980.00 5,792,073.77 6,776,053.77 2009 979,800.00 5,776,736.27 6,756,536.27 2010 983,980.00 5,758,025.02 6,742,005.02 2011 981,382.50 5,760,385.65 6,741,768.15 2012 981,775.00 5,753,338.78 6,735,113.78 2013 984,682.50 5,726,613.78 6,711,296.28 2014 980,250.00 5,727,691.28 6,707,941.28 2015 983,291.25 5,737,906.28 6,721,197.53 2016 983,280.00 5,733,568.78 6,716,848.78 2017 6,692,303.15 6,692,303.15 2018 6,685,737.52 6,685,737.52 2019 6,685,337.52 6,685,337.52 2020 6,685,487.52 6,685,487.52 2021 6,712,146.89 6,712,146.89 2022 816,215.63 816,215.63

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MBIA INSURANCE CORPORATION AND THE MBIA POLICY

The following information has been furnished by MBIA Insurance Corporation ("MBIA") for use in this Official Statement. Reference is made to APPENDIX D for a specimen of MBIA's policy (the "MBIA Policy"). The MBIA Insurance Corporation Insurance Policy MBIA does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the MBIA Policy and MBIA set forth under the caption "MBIA INSURANCE CORPORATION AND THE MBIA POLICY." Additionally, MBIA makes no representation regarding the Certificates or the advisability of investing in the Certificates. The MBIA Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of City Utilities to the Trustee or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Certificates as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the MBIA Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless MBIA elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner of the Certificates pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law (a "Preference"). The MBIA Policy does not insure against loss of any prepayment premium which may at the time be payable with respect to the any Certificates. The MBIA Policy does not, under any circumstances, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Certificates upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. The MBIA Policy also does not insure against nonpayment of principal of or interest on the Certificates resulting from the insolvency, negligence or any other act or omission of the Trustee or any other paying agent for the Certificates. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by MBIA from the Trustee or any owner of a Certificate the payment of an insured amount for which is then due, that such required payment has not been made, MBIA on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Certificates or presentment of such other proof of ownership of the Certificates, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Certificates as are paid by MBIA, and appropriate instruments to effect the appointment of MBIA as agent for such owners of the Certificates in any legal proceeding related to payment of insured amounts on the Certificates, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Paying Agent payment of the insured amounts due on such Certificates, less any amount held by the Paying Agent for the payment of such insured amounts and legally available funds. MBIA Insurance Corporation MBIA Insurance Corporation ("MBIA") is the principal operating subsidiary of MBIA, Inc., a New York Stock Exchange listed company (the "Company"). The Company is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of

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Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. MBIA has three branches, one in the Republic of France, one in the Republic of Singapore and one in the Kingdom of Spain. The principal executive offices of MBIA are located at 113 King Street, Armonk, New York 10504 and the main telephone number at that address is (914) 273-4545. Regulation As a financial guaranty insurance company licensed to do business in the State of New York, MBIA is subject to the New York Insurance Law which, among other things, prescribes minimum capital requirements and contingency reserves against liabilities for MBIA, limits the classes and concentrations of investments that are made by MBIA and requires the approval of policy rates and forms that are employed by MBIA. State law also regulates the amounts of both the aggregate and individual risks that may be insured by MBIA, the payment of dividends by MBIA, changes in control with respect to MBIA and transactions among MBIA and its affiliates. The MBIA Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Strength Ratings of MBIA Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa." Standard & Poor's, a division of The McGraw Hill Companies, Inc. rates the financial strength of MBIA "AAA." Fitch Ratings rates the financial strength of MBIA "AAA." Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the Certificates, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Certificates. MBIA does not guarantee the market price of the Certificates nor does it guarantee that the ratings on the Certificates will not be revised or withdrawn. MBIA Financial Information As of December 31, 2004, MBIA had admitted assets of $10.3 billion (unaudited and restated), total liabilities of $7.0 billion (unaudited and restated), and total capital and surplus of $3.2 billion (unaudited and restated) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of September 30, 2005, MBIA had admitted assets of $10.8 billion (unaudited), total liabilities of $7.1 billion (unaudited), and total capital and surplus of $3.7 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. For further information concerning MBIA, see the consolidated financial statements of MBIA and its subsidiaries as of December 31, 2004 and December 31, 2003 and for each of the three years in the period ended December 31, 2004, prepared in accordance with generally accepted accounting principles, included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2004, and the consolidated financial statements of MBIA and its subsidiaries as of September 30, 2005, and for the six-month periods ended September 30, 2005 and September 30, 2004, included in the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2005, which are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof.

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Copies of the statutory financial statements filed by MBIA with the State of New York Insurance Department are available over the Internet at the Company's web site at http://www.mbia.com and at no cost, upon request to MBIA at its principal executive offices. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Securities and Exchange Commission (the "SEC") are incorporated by reference into this Official Statement: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 2004; and (2) The Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. Any documents, including any financial statements of MBIA and its subsidiaries that are included therein or attached as exhibits thereto, filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the Company's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, and prior to the termination of the offering of the Certificates offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof from the respective dates of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part o this Official Statement. The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No. 1-9583. Copies of the Company's SEC filings (including (1) the Company's Annual Report on Form 10-K for the year ended December 31, 2004, and (2) the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2005, June 30, 2005 (included as restated in third quarter 10-Q) and September 30, 2005) are available (i) over the Internet at the SEC's web site at http://www.sec.gov; (ii) at the SEC's public reference room in Washington, D.C.; (iii) over the Internet at the Company's web site at http://www.mbia.com; and (iv) at no cost, upon request to MBIA at its principal executive offices.

RISK FACTORS

The payment of the Certificates is subject to certain risks. The following is a description of possible risks but is not necessarily exhaustive. General All Lease Payments under the Lease are payable solely from Available Revenues. City Utilities' obligation to make Lease Payments is subordinate to the payment of City Utilities' Revenue Bonds and one Senior Lease. See "SECURITY." Although City Utilities has covenanted to maintain a debt service coverage ratio with respect to the revenues of the Public Utility System as described under "SECURITY - Rate Covenant," there can be no assurance that City Utilities will be able to generate sufficient Available Revenues to pay the Lease Payments. Although the payment of the Certificates is insured by MBIA Insurance Corporation, a default with respect to such payments could, nonetheless, cause an acceleration and, thus, early payment of the Certificates. The likelihood that City Utilities will be able to generate sufficient Available Revenues to pay the Lease Payments represented by the Certificates throughout the term of the Lease is dependent upon certain factors which are beyond the control of City Utilities, including (a) the demographic conditions within the City, (b) the ability of City Utilities to generate sufficient revenues of the Public Utility System and control the expenses of the Public Utility System in connection with the provision of services, and (c) new legislation, regulations or judicial interpretations affecting utilities such as City Utilities.

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Matters Affecting Security In the event of a default by City Utilities under the Lease, it is possible that City Utilities would seek and obtain, on the grounds that City Utilities could not properly function without the Projects, injunctive relief restraining the Trustee or the Owners of the Certificates from repossessing the Projects or otherwise enforcing its rights under the Lease. No prediction can be made as to the extent to which such equitable relief might be available to City Utilities or the circumstances in which such equitable relief may be granted. The Projects consist of property for which there are limited alternative uses and which would be difficult to remove and sell. In the event that the Projects is repossessed for any reason and the Projects is sold or otherwise disposed of, it is likely that the proceeds from such disposition could be substantially less than the then unpaid principal components of the Lease Payments plus accrued interest. In the event the Projects are repossessed and operated on behalf of City Utilities there can be no assurance that the net revenues from the operation will be sufficient to pay the Lease Payments, nor that such operation would not adversely affect the tax-exempt status of the interest component of the Lease Payments represented by the Certificates. In the event that the Projects are sold, the proceeds of the sale will be distributed to the Owners of the Certificates on a pro-rata basis. Effect on Certificates of Lease Termination Special Tax Counsel has rendered no opinion with respect to the applicability of the registration requirements of the Securities Act of 1933, as amended, to any Certificates in the event of a termination of the Lease by reason of an Event of Default. If the Lease is terminated by reason of an Event of Default, there is no assurance that the Certificates may be transferred by an owner thereof without compliance with the registration provisions of the Securities Act of 1933, as amended, or the availability of an exemption therefrom. Special Tax Counsel has rendered no opinion as to the treatment for federal or State of Missouri income tax purposes of any moneys received by owners of the Certificates subsequent to a termination of the Lease by reason of an Event of Default. There is no assurance that any moneys received by the owners of the Certificates subsequent to an Event of Default will be exempt from federal or State of Missouri income taxation. Future Power Requirements City Utilities' management anticipates a need to supplement its current electric power supply resources to meet a growing demand load and to replace expiring power purchase agreements. City Utilities is considering various options, including a coal-fire base-load plant, a natural gas combined-cycle facility, a simple-cycle gas turbine, a power purchase contract or some combination of these options. These options may increase City Utilities' debt or other long-term obligations and operating costs. See "CITY UTILITIES – The Public Utility System – Future Plans" in APPENDIX A. In August, 2004, the City's electorate narrowly defeated a proposition that would have allowed the City to issue $515 million of revenue bonds to build a coal-fired base-load plant. Issuance of revenue bonds to finance a coal-fired plant or any of the other options requires voter approval. If revenue bonds are not issued, other options may be more costly and may adversely affect City Utilities' operations and net revenues. Future Revenue Bonds and Parity Leases In addition to the outstanding Revenue Bonds and Senior Lease, upon satisfaction of certain conditions the City may issue Revenue Bonds in the future that, as to payment from revenues of the Public Utility System, are superior to the payment of the Lease Payments, and City Utilities may enter into Parity Leases that, as to payment from revenues of the Public Utility System, are payable on a parity with the Lease Payments. See "SECURITY – Revenue Bonds, Senior Lease and Parity Leases," and "SECURITY – Limitations on Additional Revenue Bonds and Parity Leases" herein and "CITY UTILITIES - The Public Utility System – Future Plans" in APPENDIX A. Consolidation of the Public Utility System and Water Utility In 2003, City Utilities issued $35,520,000 principal amount of bonds payable from the revenues of its Water Utility, of which $32,130,000 remains outstanding. The ordinance authorizing the issuance of the bonds provides for

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the possible future financial consolidation of the Public Utility System and City Utilities' Water Utility upon the satisfaction of certain conditions. In the event such conditions are satisfied and the Public Utility System and City Utilities' Water Utility are consolidated, City Utilities' waterworks revenue bonds will become Revenue Bonds within the meaning of the Lease, the payment of which will be senior and superior to the payment of the Lease Payments. It is not certain that the consolidation will occur even if all of the conditions to consolidation are satisfied. If the consolidation occurs, however, the payment of Lease Payments will also depend, in part, on City Utilities' ability to generate sufficient revenues from the Water Utility, combined, to pay their combined obligations. Changes in the Electrical Utility Industry General. The electric utility industry has been, and in the future will be, affected by a number of factors which will have an impact on the business, affairs and financial condition of both public and private electric utilities, including City Utilities. One of the most significant of these factors is the efforts on both the national and local levels to restructure the electric utility industry from a heavily regulated monopoly to an industry in which there is open competition for power supply service on both the wholesale and retail level. In addition, such factors include, among others, (i) effects of compliance with rapidly changing environmental, safety, licensing, regulatory and legislative requirements, (ii) changes resulting from conservation and demand-side management programs on the timing and use of electric energy, (iii) changes that might result from a national energy pool, (iv) increasing competition from independent power producers and markets and brokers, (v) "self generation" by certain industrial and commercial customers, (vi) issues relating to the ability to issue tax-exempt obligations, (vii) service restrictions on the ability to sell to nongovernmental entities electricity from generation projects financed with outstanding tax-exempt obligations, (viii) changes from projected future load requirements, (ix) increases in costs, and (x) shifts in the availability and relative costs of different fuels. Any of these factors (as well as other factors) could have an effect on the financial condition of any given electric or natural gas utility and likely will affect individual utilities in different ways. City Utilities cannot predict what effects these factors will have on the business, operations and financial condition of City Utilities or the Public Utility System, but the effects could be significant. The following sections of this caption provide brief discussions of certain of these factors. However, these discussions do not purport to be comprehensive or definitive, and these matters are subject to change subsequent to the date of this Official Statement. Extensive information on the electric and natural gas utility industries is, and is expected to be, available from legislative and regulatory bodies and other sources in the public domain. Energy Policy Act of 1992 and FERC Regulation. The Energy Policy Act of 1992 (the "1992 Energy Act") made fundamental changes in the federal regulation of the electric utility industry, particularly in the area of transmission access. With the passage of the 1992 Energy Act, the United States Federal Energy Regulatory Commission ("FERC") was given authority to direct utilities to make their transmission systems available for use by others at rates and terms comparable to the owners' uses of their own systems. In particular, the 1992 Energy Act provides the FERC with the authority, upon application by an electric utility, federal power marketing agency or other power generator, to require a transmitting utility to provide transmission services to the applicant essentially on the cost of service basis. Municipally-owned electric utilities are "transmitting utilities" for purposes of these provisions of the 1992 Energy Act. This "open access" environment has begun to provide an expanded and more competitive market for both generators and wholesale purchasers of electricity, and such increased competition is expected to continue in the future. City Utilities operates under the Southwest Power Pool Regional Transmission Authority. As such, City Utilities is required to provide transmission services under applicable tariff agreements. Pursuant to various mandates of FERC, full open access to the electric transmission network, including City Utilities' transmission network, is now available to all electric providers seeking to transmit electricity for resale. The authority to order retail wheeling, which allows a retail customer to be located in one utility's service area and to obtain power from another utility or non-utility source, is presently specifically excluded from the enhanced authority granted to the FERC under the 1992 Energy Act. However, while the states may have authority to determine whether retail wheeling will be permitted, FERC has determined that it has jurisdiction over the rates, terms and conditions of retail wheeling but has declined to exercise that authority. Several states have implemented or are in the process of implementing varying degrees of retail wheeling. How quickly competition will be implemented and how far

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competition will be extended is uncertain. The Missouri Public Service Commission has not yet taken any action relating to retail wheeling. Under certain FERC regulations, FERC has required open-access, mandatory transmission tariffs to be placed into effect for all jurisdictional utilities. Utilities are authorized to file for changes in their tariffs under the Federal Power Act. The goal of these regulations, according to FERC, is to deny to an owner of transmission facilities any unfair advantage over its competitors that exists by virtue of such owner's control of its transmission system. Although municipally-owned utilities, including City Utilities, are not subject to FERC's jurisdiction with respect to these tariffs, the regulations could have a significant effect on those utilities. FERC stated that its overall objective was to ensure that all participants in wholesale electricity markets have non-discriminatory open-access to transmission service, including network transmission service and ancillary services. FERC also indicated that it intends to apply the principles set forth in the regulations to the maximum possible extent to municipal and other non-jurisdictional utilities, both in deciding requests for transmission services orders, as described above, and by requiring such utilities to agree to provide open access transmission service as a condition to securing transmission service from jurisdictional investor-owned utilities under open access tariffs. These regulations may allow existing customers of City Utilities greater access to alternative sources of electric sales service if retail wheeling is permitted. Energy Policy Act of 2005. The Energy Policy Act of 2005 (the "2005 Energy Act") was signed into law by President Bush in August, 2005. The 2005 Energy Act addresses, among other things: energy deficiency; appliance standards; low income energy assistance programs; renewable energy; nuclear energy; electricity; and provides incentives for oil and gas production and encourages deployment of clean coal technology. The electricity portion of the 2005 Energy Act addresses the following areas: (i) the need for modernization of existing transmission facilities, transmission rate reform and improved operations of existing transmission facilities; (ii) electric reliability standards; (iii) repeal of the Public Utility Holding Company Act and amendments to the Public Utility Regulatory Policies Act; (iv) market transparency, round trip trading prohibition and enforcement; and (v) merger reform. The 2005 Energy Act imposes mandatory electric reliability standards to be defined through NERC and enforced by FERC. The 2005 Energy Act also provides for tax incentives that further encourage production, conservation and the use of technology to stabilize energy prices and protect the environment. City Utilities cannot predict at this time the final forms and possible effects of all the consequent rulemaking and programs that will be enacted to implement the 2005 Energy Act. Clean Air Act. In May 2005, the Environmental Protection Agency (the "EPA") published two final rules affecting power plants. These are described below: On July 11, 2005, the EPA Clean Air Interstate Rule (the "CAIR") became effective. The CAIR will permanently cap emissions of sulfur dioxide and nitrogen oxide in the eastern United States. When fully implemented, the CAIR is expected to reduce sulfur dioxide emissions by approximately 70 percent and nitrogen oxide emissions by over 60 percent. The first phase calls for more than a 50 percent reduction of nitrogen oxide and sulfur dioxide emissions by 2009 and 2010, respectively. The second phase calls for more than a 65 percent reduction of the two pollutants by 2015. On July 18, 2005, the EPA's Clean Air Mercury Rule (the "CAMR") became effective. The CAMR is the first federal rule to permanently cap and reduce mercury emissions from coal-fired power plants. The United States is the first country in the world to regulate mercury emissions from coal-fired power plants. The CAMAR establishes standards of performance limiting mercury emissions from new and existing coal-fired power plants and creates a market-based cap-and-trade program that will reduce nationwide utility emissions of mercury in two distinct phases. Under the first phase cap of 38 tons emissions will be reduced primarily by taking advantage of "co-benefit" reductions – that is, mercury reductions achieved by reducing sulfur dioxide and nitrogen oxide emissions under the CAIR. In the second phase, due in 2018, coal-fired power plants will be subject to a second cap, which will reduce emissions to 15 tons upon full implementation. In order to meet the second phase cap it will require the installation of yet-to-be provided technology.

To comply with these rules, management of City Utilities anticipates significant capital investments will be required for the installation of emissions control equipment. City Utilities’ 2006 Long Range Plan reflects these expenditures, which exceed $44 million in years 2007 through 2010, to be financed with bond or capital lease proceeds.

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Proposed Deregulation Initiatives. During several past sessions of the United States Congress, numerous bills were introduced (i) to restructure the electric utility industry, including providing choice of power suppliers at the retail level for customers of investor-owned and, under certain circumstances, consumer-owned utilities, including utilities owned by municipalities and other political subdivisions (certain of such bills included provisions relating to stranded cost recovery) and (ii) impacting the federal tax exemption of interest on bonds issue, and to be issued, to finance or refinance facilities owned by municipalities and political subdivisions used in the wholesale and retail power supply business (in certain cases, preserving such exemption and, in other cases, negatively impacting such exemption). Certain of these bills were introduced in furtherance of proposals by the Clinton Administration to restructure the electric utility industry (including proposals relating to such federal tax exemption). All of these bills expired without being enacted. City Utilities is not able to predict initiatives that may be proposed and whether any initiatives will be enacted into law. Further, City Utilities is unable to predict the extent to which any such electric utility restructuring legislation (i) would provide retail customers of investor-owned electric utilities, and possibly customers of consumer-owned utilities, including utilities owned by municipalities and other political subdivisions, with some form of ability to choose their supplier of electricity by a date certain, (ii) might (or might not) provide for some form of stranded cost recovery, (iii) may (or may not) provide protection of the federal tax exemption of the interest on bonds previously issued by municipalities and other political subdivisions for electric generation, transmission and distribution facilities that are used in wholesale or retail competition, but may prohibit future tax-exempt financing of some or all of such facilities, (iv) may, under certain circumstances, adversely affect the tax exemption of interest on bonds previously issued for such purposes or require payment by utilities owned by municipalities and other political subdivisions of federal income tax on a portion of their utility income, and (v) may contain provisions, among others, relating to customer protection, transmission reliability and access, environmental matters, and the development and/or utilization of certain renewable energy resources. City Utilities is not able to predict the final form of any such legislation which might be enacted into law, nor what effect any such new law (if enacted) will have on City Utilities or the Public Utility System or on the exclusion from federal gross income of interest on indebtedness of City Utilities. Changes in the Natural Gas Distribution Industry As with the electrical utility industry, the natural gas distribution industry has undergone and is undergoing fundamental changes in the federal regulation of such industry, particularly in the area of distribution access. These changes are expected to increase competition in the natural gas distribution utility industry. City Utilities cannot determine what effect such increased competition will have on the business and affairs of City Utilities and its revenues.

SUMMARY OF CERTAIN LEGAL DOCUMENTS

The Lease The following is a brief summary of certain provisions contained in the Lease and is not to be considered a full statement pertaining thereto. This summary is qualified by reference to and is subject to the Lease. A copy of the Lease is available from the Financial Advisor. Term. The final Lease Payment is due on December 1, 2021. The term of the Lease commences as of the date of its delivery and shall terminate upon (i) the payment by City Utilities of all Lease Payments to be paid under the Lease, or (ii) the prepayment of all remaining principal components of Lease Payments thereunder and accrued interest thereon to the date of prepayment. See "THE CERTIFICATES – Prepayment." Lease Payments to be Unconditional. The Lease provides that, subject to the provisions described under "Source of Payments," the obligation of City Utilities to make payment of the Lease Payments shall be absolute and unconditional under any and all circumstances and shall be paid without notice or demand and without any abatement, reduction, diminution, setoff, defense, counterclaim or recoupment whatsoever.

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Source of Payments. City Utilities' obligation to pay the Lease Payments and other payments under the Lease shall be a special obligation payable solely from Available Revenues, whenever the same may become available whether prior to or after an Event of Default. Under no circumstances shall City Utilities be required to advance any moneys derived from any source of income other than Available Revenues and the Projects, nor shall any other funds or property of City Utilities or the City be liable for the payment of Lease Payments. See "SECURITY" for a discussion of the subordination of the Lease Payments to Revenue Bonds and the Senior Lease and a discussion of Parity Leases. Prepayment. If funds remain in the Acquisition Fund upon completion of the acquisition, construction and installation of the Projects, City Utilities shall prepay part of the unpaid principal components of Lease Payments to the extent of such remaining funds (rounded down to the nearest multiple of $5,000) on the first date a Lease Payment is due occurring more than 45 days after such completion at a Prepayment Price equal to 100% of the portion of the principal components being prepaid. On or after December 1, 2015, City Utilities may prepay on any date all or part of the unpaid principal component of Lease Payments at the prepayment price equal to 100% of the portion of the principal components of Lease Payments being prepaid. If any substantial part of the Projects is damaged, destroyed or condemned and its repair or replacement is impracticable in the reasonable judgment of City Utilities, City Utilities shall prepay all of the unpaid principal components of Lease Payments on the first date a Lease Payment is due occurring more than 45 days after City Utilities determines its repair or replacement is impracticable at a prepayment price equal to 100% of the unpaid principal components. If any prepayment made on a date other than a date on which a Lease Payment is due, City Utilities shall also pay any accrued interest on said prepaid principal component of Lease Payments to the date on which prepayment is made. In the event of prepayment in part, the partial prepayment shall be applied by City Utilities against the principal components of Lease Payments selected by City Utilities. Purchase of Trustee's Interest in a Project or Projects. At the request of City Utilities, City Utilities may purchase the Trustee's interest in any or all of the Projects and terminate the Trustee's interest in the Project or Projects purchased in the following manner:

(i) City Utilities may purchase the Trustee's interest in all of the Projects at the end of the term of the Lease, upon payment in full of Lease Payments to be paid thereunder; or

(ii) City Utilities may purchase the Trustee's interest in any Project if a substantial portion of that Project is damaged, destroyed or condemned upon payment in full of all of the principal components of Lease Payments and accrued interest thereon to the prepayment date if required by the Lease attributable to that Project; or

(iii) City Utilities may purchase the Trustee's interest in any Project or Projects upon payment

in full, or provision for payment in full as described below, of all of the principal components of Lease Payments attributable to the Project or Projects being purchased and accrued interest on the outstanding principal components of those Lease Payments to the prepayment date.

Provision for payment in full shall be deemed to have occurred within the meaning of subparagraph (iii) above if provision for such payment has been made by depositing with a bank, acceptable to the Trustee, located in the State of Missouri and having full trust powers, at or prior to any Prepayment Date, in trust for and irrevocably appropriated thereto, moneys and/or direct obligations of, or obligations the timely payment of the principal of or interest on which are fully and unconditionally guaranteed by, the United States of America which, together with the interest to be earned on any such obligations, mature in such amounts and at such times as will assure the availability of sufficient moneys for the timely payment of the Prepayment Price and accrued interest on the outstanding principal components of Lease Payments being prepaid to the Prepayment Date. Any moneys and obligations which at any time shall be deposited with such a bank by or on behalf of City Utilities for the purpose of prepaying under this paragraph shall be and are assigned, transferred and set over to such bank in trust for the Trustee, its successors or assigns, and such moneys shall be and are irrevocably appropriated to the payment and

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discharge of City Utilities' obligation under the Lease to make the Lease Payments being prepaid. All moneys deposited with such bank shall be deemed to be deposited in accordance with and subject to all of the provisions contained in the Lease. The payment or prepayment of the Lease Payments being prepaid shall continue as an obligation of City Utilities, but shall be payable solely from said moneys and obligations so deposited. Limitation on Revenue Bonds and Additional Parity Leases. City Utilities shall not issue or incur lease obligations that have rights to payment from Revenues which are superior to City Utilities' obligation to make Lease Payments under the Lease. The City may issue Revenue Bonds which have rights to payment from Revenues that are superior to the payment from Revenues to payment of Lease Payments, and City Utilities may enter into Parity Leases if City Utilities has delivered to the Trustee the following:

(1) A certificate of City Utilities' chief financial officer to the effect that the Net Revenues Available for Debt Service and Lease Payments for the fiscal year immediately preceding the incurrence of the obligations shall have been equal to at least 100% of the maximum annual amount required to be paid out of Net Revenues Available for Debt Service and Lease Payments in any fiscal year on account of both principal (at maturity or upon mandatory redemption) and interest becoming due with respect to all such bonds and lease obligations of City Utilities, including such payments respecting such proposed bonds or Parity Leases. In determining the Net Revenues Available for Debt Service and Lease Payments for the purpose of this subparagraph, City Utilities may adjust the Net Revenues Available for Debt Service and Lease Payments by adding thereto, in the event City Utilities shall have made any increase in rates for the use and services of the Public Utility System and such increase shall not have been in effect during all of the fiscal year immediately preceding the incurrence of those additional obligations, the amount, as estimated by City Utilities, of the additional Net Revenues Available for Debt Service and Lease Payments which would have resulted from the operation of the Public Utility System during said preceding fiscal year had such rate increase been in effect for the entire period; or

(2) A certificate of City Utilities' chief financial officer to the effect that the estimated Net Revenues Available for Debt Service and Lease Payments for the fiscal year immediately following the fiscal year in which the improvements to the Public Utility System, the cost of which is being financed by such obligations are to be placed in commercial operation, shall be equal to at least 100% of the maximum annual amount required to be paid out of Net Revenues Available for Debt Service and Lease Payments in any fiscal year on account of both principal (at maturity or upon mandatory redemption) and interest becoming due with respect to all such bonds and lease obligations of City Utilities, including such payments respecting such proposed bonds or Parity Leases. In determining the amount of estimated Net Revenues Available for Debt Service and Lease Payments for the purpose of this subparagraph, City Utilities may take into account any estimated increase in Net Revenues Available for Debt Service and Lease Payments resulting from any increase in rates for the use and services of the Public Utility System which, in the opinion of City Utilities, are economically feasible, and reasonably considered necessary based on projected operations of the Public Utility System.

City Utilities may issue or incur revenue bonds or lease obligations that are payable only from Available Revenues and are junior and subordinate to City Utilities' obligation to make Lease Payments under the Lease and to pay any Parity Lease Payments so that if at any time City Utilities is in default in paying any Lease Payment or any Parity Lease Payments, City Utilities will make no payments of either principal of or interest on said junior and subordinate revenue bonds or any subordinate lease obligations until said default or defaults be cured. Rate Covenant. (a) City Utilities will fix, establish, maintain and collect such rates and charges for the services furnished by or through the Public Utility System, subject to approval of such rates, fees and charges by the City Council of the City as required by the City's Charter, as (i) will produce Revenues sufficient to pay the costs of the operation and maintenance of the Public Utility System, all lease obligations and the principal of and interest on all revenue bonds payable from Revenues, in each case as and when the same become due, and to provide reasonable and adequate reserves to make all lease obligations and the principal of and interest on all revenue bonds payable from Revenues and for the protection and benefit of the Public Utility System, and (ii) will enable City Utilities to have in the then current

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fiscal year Net Revenues Available for Debt Service and Lease Payments which will be not less than 100% of the amount required to be paid by City Utilities in that fiscal year on account of both principal components and interest components of all lease obligations and the debt service on all revenue bonds payable from Revenues at the time outstanding. (b) On or before August 1 in each year, City Utilities shall complete a review of its financial condition for the purpose of estimating whether the Revenues will be sufficient to meet all requirements as specified in subparagraph (a). If City Utilities determines that the Revenues may not be sufficient to provide such payments and meet such other requirements, it shall forthwith make a study for the purpose of making a schedule of rates, fees and charges for the Public Utility System which will cause sufficient Revenues to be collected in the following fiscal year as will provide funds for all the payments and other requirements as specified in Subsection (a) for such following fiscal year and will cause additional Revenues to be collected in such following and later fiscal years sufficient to restore the amount of such deficiency at the earliest practicable time. If, in any fiscal year, the Revenues collected shall not have been sufficient to provide all of the payments and meet all other requirements as specified in subparagraph (a), City Utilities shall as promptly as permitted by law establish and place in effect rates, fees and charges that will cause sufficient revenues and income to be collected, subject to approval of such rates, fees and charges by the City Council of the City as required by the City's Charter. (c) City Utilities shall do all things lawfully within its power to obtain and maintain approval by the City Council of the City of the rates, fees and charges and to exhaust all available reviews and appeals in the event such rates, fees and charges are not approved. (d) Except as provided by the Charter of the City, as now in effect or as hereinafter amended, or by other applicable law, City Utilities will not furnish or supply power, energy, water or any other service or commodity free of charge to any person, firm or corporation, public or private, and City Utilities will promptly enforce the payment of any and all accounts owing to City Utilities by reason of the ownership and operation of the Public Utility System, to the extent directed by sound business practice. (e) The failure in any fiscal year to comply with the covenants described in subparagraph (a) shall not constitute an Event of default under the Lease, if City Utilities shall comply with subparagraphs (b) and (c). Consulting Engineer. City Utilities shall employ an independent engineer or engineering firm or corporation having a favorable reputation for skill and experience in the construction, planning or operation of public utilities for the purpose of performing and carrying out the duties imposed on the Consulting Engineer by the Lease. City Utilities will cause each Consulting Engineer to make, at least once in every three years, an examination of and report on the condition and operations of that portion of the Public Utility System and City Utilities' water system. Such report will include recommendations as to any changes in such operations deemed desirable. Such report shall also make reference to any unusual or extraordinary items of maintenance and repair and any extensions or improvements that might be needed in the ensuing three-year period. In addition, during each intervening year, an annual report on the above subject matter shall be prepared by City Utilities' internal staff. Title to the Projects. City Utilities has or shall obtain from the vendor title to the Projects subject to the Trustee's rights under the Lease; provided that, upon the occurrence of an Event of Default under the Lease and the giving of written notice by the Trustee to City Utilities of its intent to exercise any of the remedies under the Lease, as more fully described below under "Events of Default and Remedies," City Utilities will surrender possession of the Projects affected by the exercise of those remedies to the Trustee and title to those Projects will immediately vest in the Trustee without any further act or deed of the Trustee or City Utilities. Security Interest. To secure the payment of all of City Utilities obligations under the Lease, City Utilities grants to the Trustee a security interest in City Utilities' interest in the Projects and all additions, attachments, accessions and substitutions therefor and any proceeds therefrom. If City Utilities purchases a Project pursuant to the Lease (see "Purchase of Trustee's Interest in a Project or Projects"), the security interest in that Project will terminate and the remaining Lease Payments will no longer be secured by that Project. See "SECURITY – The Projects." Maintenance and Repair. City Utilities will agree that it will, at its own expense during the term of the Lease, maintain, preserve, restore and keep the Projects in good repair, working order and condition, and that it will from time to time make all repairs, replacements and improvements necessary to keep the Projects in such condition except when

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the Projects are in the possession of the Trustee, any purchaser from the Trustee or sublessee acquiring an interest pursuant to the exercise of remedies upon the occurrence of an Event of Default. Removal, Disposition and Substitution. City Utilities shall have the right, provided that no Event of Default nor any event which with notice or lapse of time, or both, would become such an Event of Default, exists under the Lease, to remove from the Projects and sell or otherwise dispose of any component of the Projects. The components so acquired by City Utilities to replace such removed components shall be deemed a part of the Projects. City Utilities' rights to remove from the Projects such components of property is intended only to permit City Utilities to maintain efficient municipal services by the removal of such components no longer suitable to City Utilities' use of the Projects for any of the reasons set forth in this paragraph and such right is not to be construed to permit a removal under any other circumstances and specifically is not to be construed to permit City Utilities to make a wholesale removal of such components. Notwithstanding anything contained in the Lease to the contrary, City Utilities shall not make any disposition of any component of the Projects that would cause City Utilities' obligation hereunder to become a private activity bond within the meaning of the Code. Payment of Taxes; Utilities. So long as the Projects are in the possession of City Utilities under the Lease, City Utilities will pay or cause to be paid all taxes, assessments and other governmental charges, if any, that may be levied, assessed or charged upon the Projects or any part thereof, promptly as and when the same shall become due and payable; provided, however, that City Utilities shall not be required to pay any such tax, assessment or charge if the validity thereof shall concurrently be contested in good faith by appropriate proceedings, and if City Utilities shall set aside reserves deemed by the Trustee and City Utilities to be adequate with respect thereto and provided further, that City Utilities, upon the commencement of any proceedings to foreclose the lien of any such tax, assessment or charge, will forthwith pay or cause to be paid such tax, assessment or charge. So long as the Projects are in the possession of City Utilities under the Lease, City Utilities shall also pay all utility and other charges incurred in the use and maintenance of the Projects. Insurance. City Utilities, at its expense, shall keep the Projects insured, or shall cause the Projects to be insured, during the term of the Lease (except when the Projects are in the possession of the Trustee, any purchaser from the Trustee or any sublessee) against fire, extended coverage, perils, and vandalism and malicious mischief perils. City Utilities may self-insure or retain the level of loss deemed prudent by it. City Utilities shall maintain comprehensive public liability insurance to cover the Projects for combined coverage for bodily injury and property damage subject to the level of self–insured retention deemed prudent by City Utilities. Insurance policies shall specify City Utilities as named and insured and the Trustee shall be named as an additional insured and shall provide that such insurance may not be cancelled or altered so as to affect the interest of the Trustee without at least 30 days prior written notice to the Trustee. Application of Net Proceeds of Insurance and Condemnation. Any net proceeds of any insurance relating to the damage to or destruction of any part of the Projects and any net proceeds of any condemnation proceedings pertaining to the Projects shall be applied by City Utilities to the repair or replacement of the damaged, destroyed or condemned part of the Projects with City Utilities making up any deficiency in the net proceeds for the repair or replacement cost or, if such repair or replacement for any Project is in the reasonable judgment of City Utilities impracticable, may be applied to the prepayment of Lease Payments due under the Lease attributable to that Project in accordance with the prepayment provisions thereof and the purchase of the Trustee's interest in that Project pursuant to the Lease. City Utilities shall be obligated to continue to make Lease Payments required by the Lease notwithstanding damage to or destruction of all or a portion of the Projects. Financial Reports. Within 180 days after the close of each fiscal year of City Utilities, City Utilities will furnish, or cause to be furnished to the Trustee, detailed certified reports of audit, based on an examination sufficiently complete, prepared in accordance with accounting principles applicable to City Utilities by an independent certified public accountant, covering the operations of City Utilities. Events of Default and Remedies. The following constitute "Events of Default" under the Lease: (a) failure by City Utilities to pay any Lease Payment when due; or (b) failure by City Utilities to make any other payment required under the Lease within 15 days of the time specified for payment in the Lease; or (c) failure by City Utilities to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in the preceding clause (a) or (b), for a period of 30 days after written notice to City Utilities by the Trustee, specifying such failure and requesting that it be remedied, provided, however, that the Trustee may, upon written request of City

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Utilities prior to the expiration of such 30-day period, consent to an extension of such time for a cure to be effected if corrective action has been instituted and is being diligently pursued and will, in the judgment of the Trustee, be diligently pursued until the default is corrected; or (d) any statement, representation or warranty made by City Utilities in or pursuant to the Lease or its execution, delivery or performance is false, incorrect, misleading or breached in any material respect on the date when made; or (e) City Utilities shall (i) apply for, or consent, due to financial difficulties, to the appointment of a receiver, trustee, custodian or liquidator of City Utilities or of all or a substantial part of the assets of City Utilities, (ii) be unable, fail or admit in writing its inability generally to pay its debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) have an order of relief entered against it under applicable federal bankruptcy law, or (v) file a voluntary petition in bankruptcy or a petition or an answer seeking reorganization or an arrangement with creditors or taking advantage of any insolvency law or any answer admitting the material allegations of a petition filed against City Utilities in any bankruptcy, reorganization or insolvency proceeding; or (f) an order, judgment or decree shall be entered by any court of competent jurisdiction, approving a petition or appointing a receiver, trustee, custodian or liquidator of City Utilities or of all or a substantial part of the assets of City Utilities, in each case without its application, approval or consent, and such order, judgment or decree shall continue unstayed and in effect for any period of 60 consecutive days. During the existence of any Event of Default, the Trustee shall have the right at its option to take any one or any combination, except to the extent limited under the Lease (see also "The Declaration of Trust – Defaults and Remedies" and "The Declaration of Trust – Rights of MBIA Insurance Corporation to Consents, Direct Remedies, Etc."), of the following remedial actions: (i) terminate the Lease; (ii) with or without terminating the Lease, request that City Utilities (and City Utilities agrees

that it will), at City Utilities' expense, forfeit possession of any or all of the Projects; (iii) with or without terminating the Lease, declare the outstanding and unpaid principal

components of Lease Payments under the Lease immediately due and payable with accrued interest thereon being due to the date of payment;

(iv) with or without terminating the Lease, sell any or all of the Projects, holding City Utilities

liable for the difference between all amounts due under the Lease and the net proceeds of such sale and the exercise of any other remedies under the Lease (after payment of all fees, costs and expenses including without limitation attorneys' fees and expenses);

(v) sublease any or all of the Projects for the account of City Utilities, holding City Utilities

liable for all Lease Payments and other payments due to the effective date of such subleasing and holding City Utilities liable annually for the difference between all amounts payable by City Utilities under the Lease to the end of the then current fiscal period of City Utilities and the net proceeds of the rentals and other amounts paid by the sublessee pursuant to such sublease (after payment of fees, costs and expenses of subleasing the property and exercising any other remedies, including without limitation attorneys' fees and expenses);

(vi) request the Trustee to withdraw funds from the Acquisition Fund pursuant to the Lease to

be applied as a prepayment of the principal components of Lease Payments under the Lease; and (vii) take whatever action at law or in equity which may appear necessary or desirable to collect

the principal components of Lease Payments then outstanding and unpaid and accrued interest thereon to the date of payment, or to enforce performance and observance of any obligation, agreement or covenant of City Utilities under the Lease.

In addition, to the extent permitted by law, City Utilities will remain liable for all covenants and indemnities under the Lease and for all legal fees and other fees, costs and expenses, including court costs, incurred by the Trustee with respect to the enforcement of any of the remedies listed above or any other remedy available to the Trustee. The source of City Utilities' liability upon the occurrence of an Event of Default and under the Lease shall be limited to Available Revenues and the Projects. The Trustee's recovery shall be limited to payment of all unpaid

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principal components of the Lease Payments and interest accruing thereon to the date of satisfaction of such payments as well as other costs and expenses set forth in the Lease. The Declaration of Trust The following is a brief summary of certain provisions contained in the Declaration of Trust and is not to be considered a full statement pertaining thereto. This summary is qualified by reference to and is subject to the Declaration of Trust. A copy of the Declaration of Trust is available from the Financial Advisor. Trustee. The Trustee is appointed pursuant to the Declaration of Trust to prepare, execute and deliver the Certificates, and to act as a depository of amounts held thereunder. The Trustee is required to make deposits into and withdrawals from funds held under the Declaration of Trust in accordance with the applicable provisions of the Declaration of Trust. Upon the occurrence of an Event of Default under the Lease, the Trustee shall be entitled to exercise the remedies provided in the Lease. Creation of Trust Fund and Certain Accounts. All Lease Payments are to be immediately deposited by the Trustee in the Rental Payment Account established within the Trust Fund created under the Declaration of Trust. Such account is required to be maintained by the Trustee until the Lease Payments are paid in full pursuant to the Lease. The Trustee shall use and withdraw amounts from the Rental Payment Account, on each Payment Date, to pay the principal and interest due with respect to the Certificates on such Payment Date. Application of the Prepayment Account. Moneys to be used for prepayment of the Certificates pursuant to the Declaration of Trust shall be deposited by the Trustee in the Prepayment Account established within the Trust Fund created under the Declaration of Trust. The Prepayment Account may include proceeds of insurance or condemnation and all other moneys derived from the lease, sale, sublease or other disposition of the Projects and such other amounts as may be paid to the Trustee in respect of the Projects. Moneys shall be set aside in the Prepayment Account solely for the purpose of prepaying all or part of the Certificates in advance of their maturity and shall be applied to the payment of principal and interest with respect to the Certificates to be prepaid upon presentation and surrender of such Certificates. Investment. All moneys held by the Trustee in any of the Accounts under the Trust Fund shall be held uninvested. Defaults and Remedies. Upon the occurrence of an Event of Default by City Utilities under the Lease, and during the continuance of such Event of Default, the Trustee or, as provided for in the Declaration of Trust, the Owners of the Certificates shall be entitled to exercise the remedies provided for in the Lease. Upon the occurrence of an Event of Default by City Utilities under the Lease, the Trustee may take any one or combination, except to the extent limited under the Declaration of Trust (see "Rights of MBIA Insurance Corporation to Consent, Direct Remedies, Etc."), of the following remedial actions:

1. terminate the Lease;

2. with or without terminating the Lease, request City Utilities (and City Utilities agrees that it will), at City Utilities' expense, forfeit possession of the Projects;

3. with or without terminating the Lease, declare the outstanding and unpaid principal component of

Lease Payments under the Lease, immediately due and payable with accrued interest thereon being due to the date of payment;

4. with or without terminating the Lease, sell its interest in the Projects;

5. sublease the Projects for the account of City Utilities; and

6. take whatever action at law or in equity which may appear necessary or desirable to collect the

principal component of Lease Payments then outstanding and unpaid and accrued interest thereon

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to the date of payment, or to enforce performance and observance of any obligation, agreement or covenant of City Utilities under the Lease.

The Trustee may appoint a liquidating trustee for the purpose of causing the Projects to be sold at public or private sale. The liquidating trustee so appointed shall be a federally or state-chartered bank or trust company, and the Trustee is authorized in its sole discretion to appoint itself as liquidating trustee. Such liquidating trustee may appoint such receivers and agents as it deems necessary or desirable for purposes of performing the duties contemplated in the Declaration of Trust. Any proceeds from such sale of the Projects shall be paid to the Prepayment Account of the Trust Fund and shall be used to prepay the Certificates after deduction of the reasonable fees, costs and expenses of any liquidating trustee and its receivers and agents and any amounts which may be due the Trustee under the Declaration of Trust or the Lease. No Owner shall have any right to institute any suit, action or proceeding for the enforcement of the Declaration of Trust or for the execution of any trust or any other remedy under the Declaration of Trust, unless (i) an Event of Default has occurred and is continuing and such Owner shall have given to the Trustee written notice thereof; (ii) the Owners of not less than a majority in aggregate principal amount of Outstanding Certificates shall have made written request of the Trustee to do so, after the right to exercise such powers or rights of action, as the case may be, shall have accrued and shall have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers granted, or to institute such action, suit or proceeding in its or their name; (iii) such Owner(s) has or have offered the Trustee security and indemnification in a manner satisfactory to it for any liability and expense it might incur in carrying out the aforementioned request; and (iv) the Trustee shall thereafter fail or refuse to exercise the powers granted to it under the Declaration of Trust or to institute the requested action, suit or proceeding. Such notification, request and offer of indemnity are declared in every such case, at the option of the Trustee, to be conditions precedent to the execution of the powers and trusts of the Declaration of Trust, and to the initiation of any action or cause of action for the enforcement of the Declaration of Trust. The Trustee may not, however, as condition precedent to the execution of the powers and trusts under the Declaration of Trust, request indemnification for liability arising out of the Trustee's negligent or willful misconduct or negligent failure to act. No Owner shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of the Declaration of Trust except in the manner provided in the Declaration of Trust. Nothing contained in the Declaration of Trust, however, shall affect or impair the right of an Owner to enforce the payment of the principal of and interest on any Certificate or the obligation of the Trustee to pay such principal and interest at the time, place, from the source and in the manner provided in the Declaration of Trust. Amendments. The Trustee may, with the consent of MBIA, but without the consent of or notice to any Owner, amend the Declaration of Trust or other instruments evidencing the existence of a lien as shall not be inconsistent with the terms and provisions of the Declaration of Trust for any one of the following purposes: (a) to cure any ambiguity, inconsistency or formal defect or omission in the Declaration of Trust; (b) to grant to or confer upon the Trustee for the benefit of the Owners any additional rights,

remedies, powers or authority that may lawfully be granted to or conferred upon the Owners or the Trustee or either of them;

(c) to subject to the lien and pledge of the Declaration of Trust additional revenues; (d) to add to the covenants and agreements of the Trustee contained in the Declaration of Trust other

covenants and agreements thereafter to be observed for the protection of the Owner, or to surrender or limit any right, power or authority reserved or conferred upon the Trustee under the Declaration of Trust; and

(e) to evidence any succession with City Utilities or the Trustee and the assumption by such

successors of the requirements, covenants and the agreements of City Utilities or the Trustee in the Declaration of Trust, the Lease or the Certificates.

Exclusive of the aforementioned types of amendment, no amendment to the Declaration of Trust shall be executed by the Trustee without the consent of MBIA and all of the Owners of Certificates then Outstanding.

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Defeasance. If the whole amount of the principal of and the interest and prepayment premium, if any, on the Certificates shall be paid, or provision shall have been made for the payment of the same by the deposit with the Trustee of either (1) moneys sufficient to make such payment or (2) noncallable Government Obligations, maturing as to principal and interest in such amounts and at such times as will ensure the availability of sufficient moneys to make such payment (provided, however, that (a) if any Certificates are to be prepaid, City Utilities has irrevocably exercised its option to prepay the Lease Payments under the Lease, (b) if the Certificates are not to be paid in full within 90 days of such deposit, there shall be filed with the Trustee a verification report of a nationally recognized independent certified accounting firm that the moneys or Government Obligations escrowed are sufficient to ensure the availability of sufficient moneys to make such payments when due and an opinion of nationally recognized counsel in the area of municipal securities to the effect that so providing for the payment of any Certificates will not cause the interest on the Certificates to be includable in gross income for purposes of federal income taxation, and (c) all administrative expenses shall have been paid or provided for), then the right and interest of the Trustee under the Declaration of Trust and in the Projects shall thereupon cease, terminate and become void; and, upon the exercise by City Utilities of its prepayment option under the Lease, the Trustee shall assign and transfer to City Utilities all of its interest in the Projects. Notwithstanding anything in the Declaration of Trust to the contrary, in the event that the principal and/or interest due on the Certificates shall be paid by MBIA pursuant to the MBIA Policy, the Certificates shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by City Utilities, and all covenants, agreements and other obligations under the Declaration of Trust shall continue to exist and shall run to the benefit of MBIA, and MBIA shall be subrogated to the rights of such registered Owners. Removal, Resignation and Replacement of the Trustee. At any time the Owners of a majority of the principal amount of the Certificates Outstanding may remove the Trustee by giving written notice of such removal to the Trustee and City Utilities, and thereupon the Owners of a majority of the principal amount of the Certificates Outstanding shall appoint a successor Trustee by an instrument in writing. delivered to the Trustee and City Utilities. If the Trustee shall cease to be eligible in accordance with the Declaration of Trust, or shall become incapable of acting, or shall be adjudged as bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the property or affairs for the purpose of rehabilitation, conservation or liquidation, then any Owner may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. The Trustee may at any time resign, effective in accordance with the Declaration of Trust, by giving written notice of such resignation to City Utilities and MBIA and by giving the Owners notice by first-class mail of such resignation at their addresses listed on the registration books kept by the Trustee. Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. City Utilities may appoint a successor Trustee, but if no successor Trustee shall have been appointed and have accepted appointment within 45 days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Owner (on behalf of himself and all other Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Rights of MBIA Insurance Corporation to Consent, Direct Remedies, Etc. Any provision of the Declaration of Trust expressly recognizing or granting rights in or to MBIA may not be amended in any manner which affects the rights of MBIA thereunder without the prior written consent of MBIA. Anything in the Declaration of Trust to the contrary notwithstanding, unless otherwise described in this Section, MBIA's consent shall be required for the following purposes: (i) execution and delivery of any supplemental Declaration of Trust or any amendment, supplement or change to or modification of the Declaration of Trust, (ii) removal of the Trustee or Paying Agent and selection and appointment of any successor trustee or paying agent and (iii) initiation or approval of any action not described in (i) or (ii) above which requires consent of Owners. Anything in the Declaration of Trust to the contrary notwithstanding, upon the occurrence and continuance of any Event of Default under the Lease, MBIA shall be entitled to control and direct the enforcement of all rights and remedies granted to the Owners or the Trustee for the benefit of the Owners under the Declaration of Trust or the

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Lease, including, without limitation: (i) the right to accelerate payment of the outstanding principal component of the Lease Payments as described in the Declaration of Trust, and (ii) the right to annul any declaration of acceleration, and MBIA shall also be entitled to approve all waivers of Events of Default. Upon the occurrence of an Event of Default under the Lease, the Trustee may, with the consent of MBIA, and shall, at the written direction of MBIA or a majority in aggregate principal amount of Outstanding Certificates with the consent of MBIA, by written notice to City Utilities and MBIA, declare the outstanding principal components of the Lease Payments and the interest thereon accrued to the date of payment to be immediately due and payable.

TAX MATTERS Opinion of Special Tax Counsel Federal and Missouri Tax Exemptions. In the opinion of Gilmore & Bell, P.C., Kansas City, Missouri, Special Tax Counsel for City Utilities, under existing law, the interest components of Lease Payments paid by City Utilities under the Lease and distributed to the registered owners of the Certificates (including any original issue discount properly allocable to an owner thereof) are not includable in gross income for federal and Missouri income tax purposes and are not items of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. It should be noted, however, that for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest components of Lease Payments are taken into account in determining adjusted current earnings. The opinions described in this paragraph are subject to the condition that City Utilities comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the execution and delivery of the Certificates in order that the interest components of Lease Payments not be includable in gross income for federal and Missouri income tax purposes. City Utilities has covenanted to comply with each such requirement. Failure to comply with such requirements may cause the inclusion of the interest components of the Certificates in gross income for federal and Missouri income tax purposes retroactive to the date of the execution and delivery of the Certificates. The Certificates are not "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code (relating to financial institution deductibility of interest expense). The proposed form of such opinion is set forth as APPENDIX C hereto. No Other Opinions. Special Tax Counsel expresses no opinion regarding other federal or State tax consequences arising with respect to the Certificates. Original Issue Discount In the opinion of Special Tax Counsel, subject to the conditions set forth above, the original issue discount in the selling price of each Certificate purchased in the original offering at a price less than the par amount thereof (hereinafter referred to as the "OID Certificates"), to the extent properly allocable to each registered owner of such Certificate, is excludable from gross income for federal income tax purposes with respect to such registered owner. Original issue discount is the excess of the stated payment price at maturity of an OID Certificate over the initial offering price to the public (excluding underwriters and intermediaries) at which price a substantial amount of the OID Certificates were sold. Under Section 1288 of the Code, original issue discount on tax-exempt obligations accrues on a compound basis. For an owner who acquires an OID Certificate in this offering, the amount of original issue discount that accrues during any accrual period generally equals (i) the issue price of such OID Certificate plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity on such OID Certificate (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest component of Lease Payments payable to the owner of such OID Certificate during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excluded from gross income for federal income tax purposes, and will increase the owner’s tax basis in such OID Certificate. Owners of OID Certificates should consult with their individual tax advisors to determine whether the application of the original issue discount federal regulations will require them to include, for state and local income tax purposes, an amount of interest on the OID Certificates as income even though no corresponding cash interest payment is actually received during the tax year.

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Original Issue Premium The Series 2006A Certificates maturing in the years 2007 through 2019 were initially offered at prices in excess of the principal amount thereof. Under the Code, the excess of the cost basis of a Certificate over the principal amount of the Certificate (other than for a Certificate holder who holds a Certificate as inventory, stock in trade, or for sale to customers in the ordinary course of business) is generally characterized as "certificate premium." For federal income tax purposes, certificate premium is amortized over the term of the Certificates. A holder of a Series 2006A Certificate maturing in the years 2007 through 2019 will therefore be required to decrease such Certificate holder's basis in that Certificate by the amount of amortizable certificate premium attributable to each taxable year such Certificate holder holds such Certificate. The amount of amortizable certificate premium attributable to each taxable year is determinable on an actuarial basis at a constant interest rate compounded on each interest payment date. The certificate premium is not deductible for federal income tax purposes. Owners of those Certificates should consult their own tax advisors with respect to the precise determination for federal income tax purposes of the treatment of certificate premium upon sale, redemption or other disposition of those Certificates. Other Tax Consequences Prospective purchasers of the Certificates should be aware that (i) Section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Certificates, except with respect to certain financial institutions (within the meaning of Section 265(b)(5) of the Code), (ii) with respect to insurance companies subject to the tax imposed by Section Xl of the Code, Section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15 percent of the sum of certain items, including interest on the Certificates; (iii) interest on the Certificates earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by Section 884 of the Code; (iv) passive investment income, including interest on the Certificates, may be subject to federal income taxation under Section 1375 of the Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year, if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income; and (v) Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining gross income, receipts or accruals of interest on the Certificates. Special Tax Counsel expresses no opinion regarding these tax consequences. These categories of Certificate Owners should consult their own tax advisors as to the applicability of these consequences.

LEGAL MATTERS

Certain legal matters respecting the Lease and the Lease Payments will be passed upon by Gilmore & Bell, P.C., Kansas City, Missouri, Special Tax Counsel for City Utilities. Special Tax Counsel for the City Utilities will render an opinion substantially in the form attached hereto as APPENDIX C. Certain legal matters will be passed upon for City Utilities by its General Counsel.

FINANCIAL ADVISOR

Public Financial Management, Inc. has acted as Financial Advisor to City Utilities in connection with the sale of the Lease. The Financial Advisor has assisted in the preparation of this Official Statement and in other matters relating to the sale of the Lease. The Financial Advisor did not bid on the Lease nor was it a member of a bidding syndicate. The fees of the Financial Advisor are contingent upon the delivery and funding of the Lease.

UNDERWRITING

The Certificates are being purchased for reoffering by the Underwriter, A.G. Edwards & Sons, Inc., St. Louis, Missouri. The Underwriter has agreed to purchase the Certificates for a purchase price of $64,480,001.70 (which reflects a net original issue premium of $2,350,028.25 and an underwriter's discount of $830,026.55), for reoffering to the public at the initial public offering prices set forth on the inside front cover page hereof.

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RATINGS

Moody's Investors Service, Inc., Standard & Poor's Ratings Services and Fitch Ratings, Inc. have assigned ratings of "Aaa," "AAA" and "AAA," respectively, to the Certificates based upon the assumption that the Financial Guaranty Insurance Policy will be issued by MBIA Insurance Corporation upon delivery of the Certificates. In addition, Moody's Investors Service, Inc., Standard & Poor's Ratings Services and Fitch Ratings, Inc. have assigned ratings of "A1," "AA-" and "AA," respectively, to the Certificates without taking into account the benefit of the Financial Guaranty Insurance Policy. Those ratings reflect only the view of those rating agencies and an explanation of the significance of such ratings may be obtained from them. There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, if in the judgment of the agency originally establishing that rating, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse affect on the market price of the Certificates.

CONTINUING DISCLOSURE In accordance with the requirements of Rule 15c2-12 (the "Rule") promulgated by the Securities and Exchange Commission, City Utilities will enter into a Continuing Disclosure Undertaking under which it will agree as follows: (i) Within 180 days after the close of each fiscal year beginning with the fiscal year ending September 30, 2006, City Utilities shall furnish to MBIA Insurance Corporation and each Nationally Recognized Municipal Securities Information Repository (a "NRMSIR") an Annual Report, which shall include City Utilities' audited financial statements, and such financial information and operating data regarding City Utilities set forth in the tables contained in the portion of Appendix A captioned "CITY UTILITIES." (ii) In a timely manner, City Utilities shall furnish to each NRMSIR or to the Municipal Securities Rulemaking Board ("MSRB") notice of the occurrence of any of the following events with respect to the Certificates, if such even is material: a. Principal and interest payment delinquencies; b. Non-payment related defaults; c. Modifications to rights of Certificateholders; d. Optional, contingent or unscheduled prepayments; e. Defeasances; f. Rating changes. g. Adverse tax opinions or events affecting the tax-exempt status of the Certificates; h. Unscheduled draws on debt service reserves reflecting financial difficulties; i. Unscheduled draws on credit enhancements reflecting financial difficulties; j. Substitution of credit or liquidity providers, or their failure to perform; and k. Release, substitution, or sale of property securing repayment of the Certificate. City Utilities may amend the Continuing Disclosure Undertaking, provided that City Utilities receives an opinion of counsel with federal securities law expertise to the effect that the Continuing Disclosure Undertaking, as so amended, is in compliance with the Rule and all current amendments thereto and interpretations thereof that are applicable to the Continuing Disclosure Undertaking.

NO LITIGATION City Utilities has represented that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, or by any court or public body, pending or, to the knowledge of City Utilities, threatened against or affecting City Utilities wherein an unfavorable decision, ruling or finding would, in any way adversely affect the validity or enforceability of the Lease.

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MISCELLANEOUS All references to the Certificates, the Lease, the Declaration of Trust, the Continuing Disclosure Undertaking, the Acquisition Fund Agreement, the Escrow Agreement and other documents mentioned herein and in the accompanying Appendices, including any summaries thereof, are qualified in their entirety by reference to such documents. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the registered owners of the Certificates. The information in the foregoing pages is presented for the guidance or prospective purchasers of the Certificates. The information has been compiled from official and other sources and, while not guaranteed, is believed to be correct. So far as any statements made in this Official Statement and the Appendices attached hereto involve matters of opinion or of estimates, whether or not so expressly stated, they are set forth as such and not as representations of facts, and no representation is made that any of the estimates will be realized. The attached Appendices are an integral part of the Official Statement and must be read in their entirety together with all of the foregoing information.

APPROVAL OF OFFICIAL STATEMENT

The preparation of this Official Statement and its distribution has been approved by the Board of Public Utilities as of the date on the cover page hereof. This Official Statement is submitted in connection with the sale of the Lease and may not be reproduced or used as a whole or in part for any other purpose. This Official Statement does not constitute a contract between City Utilities and the Trustee or the owners of the Certificates. CITY UTILITIES OF SPRINGFIELD, MISSOURI By: /s/ Jim Shuler Associate General Manager – Finance/Chief Financial Officer


APPENDIX A

INFORMATION REGARDING CITY UTILITIES AND THE CITY OF SPRINGFIELD, MISSOURI

(i)

TABLE OF CONTENTS

Page

CITY UTILITIES.........................................................................................................................................................................A-1General...................................................................................................................................................................................A-1Management and Organization...........................................................................................................................................A-1Billing.....................................................................................................................................................................................A-3Rates and Charges ................................................................................................................................................................A-3Human Resources .................................................................................................................................................................A-3Accounting Practices............................................................................................................................................................A-3The Public Utility System ...................................................................................................................................................A-4The Water Utility................................................................................................................................................................A-10

CITY OF SPRINGFIELD.........................................................................................................................................................A-10Size and Location...............................................................................................................................................................A-11Government and Organization of Springfield.................................................................................................................A-12Municipal Services and Utilities.......................................................................................................................................A-12Transportation and Communication Facilities................................................................................................................A-12Educational Institutions and Facilities .............................................................................................................................A-13Medical and Health Facilities ...........................................................................................................................................A-13Recreational and Cultural Facilities .................................................................................................................................A-13

ECONOMIC INFORMATION CONCERNING SPRINGFIELD .....................................................................................A-13Commerce, Industry and Employment............................................................................................................................A-13

APPENDIX A

INFORMATION REGARDING CITY UTILITIESAND THE CITY OF SPRINGFIELD, MISSOURI

CITY UTILITIES

General

The Board of Public Utilities (the "Board") of the City of Springfield, Missouri (the "City"), which operates under the name of City Utilities of Springfield, Missouri ("City Utilities") was created by Article XVI of the City's Charter. City Utilities is a municipally owned utility, which is a component unit of the City. City Utilities is comprised of the “Public Utility" (which includes the electric, natural gas and transportation departments and certain other minor services and is referred to in this Official Statement as the "Public Utility System") and a water utility (the "Water Utility"). The ordinance authorizing certain City Utilities revenue bonds provides for the possible future financial consolidation of the Public Utility and Water Utility. However, there are currently no plans for such a consolidation.

The Water Utility became a part of City Utilities following the acquisition by the City in 1957 of the properties of the Springfield City Water Company. The electric, natural gas, and transportation systems werepurchased by the City from the Federal Light and Traction Company of New York in 1945.

Management and Organization

The Board is comprised of eleven members nominated and appointed by a majority vote of the City Council acting as a committee of the whole. These members serve for terms of three years each for no more than two consecutive terms and without compensation for their services. The City Manager is an ex-officio member of the Board, but has no vote. The Board is responsible for all basic policy decisions relating to City Utilities including budgetary matters, bidding, construction and rates and fees for services. The City Charter requires the Board to prepareand submit an annual operating budget showing estimated revenues and expenses for approval by the City Council.

The Board, in addition to its responsibility for control over any and all City-owned public utilities located inside and outside the corporate limits of the City, is empowered to enforce the performance of all contracts and work, and has charge and custody of all of the property, assets, books and records belonging to City Utilities. The Board does not have the authority to sell any of the utility systems without a vote of approval by the City's electorate.

The table below lists the members of the Board of Public Utilities, their occupations and term:

Board Member Occupation Expiration Date

Ronald Reynaud, Chairman State Farm Insurance 12/1/07Virginia Fry,* Vice Chairman Blackwell Sanders, et al. 12/1/06Fred Marty, Secretary Missouri State University 12/1/08Phil Wannenmacher,* Asst. Secretary Liberty Investment Services 12/1/06Geoffrey Butler Butler, Rosenbury & Partners 12/1/06Mark McNay* Southern Missouri Containers 12/1/08Lisa Officer* McCullough, Officer & Co. 12/1/08Patrick Platter* Neale & Newman 12/1/08Ronald Ponds Social Security Administration 12/1/06Debbie Shantz John Q. Hammons Hotels 12/1/06Don Thomson Community Blood Center 12/1/07

*Eligible for reappointment of one additional three-year term

The senior management staff of City Utilities includes the following persons:

John Twitty, General Manager and Chief Executive Officer. Mr. Twitty has over 22 years experience in the utility industry. He previously served as General Manger at Rolla Municipal Utilities before coming to City Utilities

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in 1991. He received a Bachelor of Science degree in Education from the University of Missouri. Mr. Twitty is Chair-Elect of the American Public Power Association, and is active in the Springfield Business and Development Corporation, the Partnership Industrial Center, Public Power Incorporated, and Southeast Rotary.

Bill Burks, Associate General Manager - Chief Operations Officer. Mr. Burks joined City Utilities in 1978. He is responsible for the effective operation of the Electric, Management Services, Natural Gas,Telecommunications, Transit, and Water System areas. He holds a Bachelor of Science degree in Electrical Technology from Missouri State University which was formerly known as Southwest Missouri State University and a Master of Business Administration degree from Drury University. He is actively involved in United Way, Rotary, Leadership Springfield, and Leadership Missouri.

Jim Shuler, Associate General Manager - Chief Financial Officer. Mr. Shuler joined City Utilities in 1978.He is responsible for the effective operation of the Finance, Treasury, Forecasting, Financial Reporting &Compliance, Financial Technology, Disbursements, and Risk & Security Management areas of City Utilities. He received a Bachelor of Science degree from Missouri State University in Management and Accounting. He is a Certified Public Accountant. He is a member of the Missouri Society of Certified Public Accountants and the American Institute of Certified Public Accountants.

Andy Dalton, JD, General Counsel. Mr. Dalton has served as General Counsel to City Utilities since 1995.Mr. Dalton graduated from Washington and Lee University in 1955 with a Bachelor of Science degree in Political Science and received his Juris Doctor degree from the University of Missouri in 1958. He was engaged in private legal practice in the City of Springfield for over 30 years before joining City Utilities. He was chairman and member of the Board of Public Utilities from 1983 to 1988 and served as chairman and member of the Missouri Conservation Commission from 1989 to 1995.

Karl Plumpe, Associate General Manger – Economic Development. Mr. Plumpe has worked at City Utilities since 1982. He is responsible for the Utility’s economic development efforts, including the Partnership Industrial Centers, East and West. He graduated in 1974 from Bowling Green University with a Bachelor of Science degree in Finance and Economics and received his Master of Business Administration degree from Cleveland State University in 1978.

Robin House, Associate General Manager-Administration. Mrs. House joined City Utilities in 1977. She is responsible for the Utility's Customer Services, Information Technology, Marketing/Communications, Utility Benchmarking and Records Management, and Human Resources functions. She received a Bachelor of Science degree in Business Administration from Sterling College (Kansas). She currently serves as Chair of the Affordable Housing Action Board and is an alumni of Leadership Springfield and Leadership Missouri.

Brenda Putman, Associate General Manager - Chief Internal Auditor. Mrs. Putman joined City Utilities in 1988. She is responsible for Internal Auditing which provides independent, objective assurance, and consulting services to City Utilities in order to improve the effectiveness of its risk management, control, and governance processes. She received her Bachelor of Science degree in Accounting and Computer Information Systems from Missouri State University and a Master of Business Administration degree from University of Missouri-St Louis.She is a Certified Internal Auditor, Certified Information Systems Auditor, and Certified Public Accountant and also holds a Certification in Control Self-Assessment. She is active in several local organizations including the Girl Scouts Board of Directors and on an international level she is a member of the Institute of Internal Auditors' Advanced Technology Committee.

Scott Miller, Associate General Manager – Electric Supply. Mr. Miller has over 19 years of experience in the utility industry and is responsible for Electric Generation, Power Supply, Fuels and activities with The Energy Authority. He had 16 years experience with the Dayton Power & Light Company before coming to work at City Utilities in 2002. He has a Bachelor of Science degree in Mechanical Engineering from the University of Texas at Austin and a Masters of Business Administration from Wright State University. He is on the Executive Committee of the Missouri Public Utility Alliance, American Public Power Association's Engineering & Operation's Committee and a representative of the Southwest Power Resource Association. He is actively involved in Rotary, Leadership Springfield Board, and other community activities.

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Wade Stinson, PE, Associate General Manager - Operations. Mr. Stinson has over 27 years experience in the utility industry. He previously served as Vice President, Construction & Maintenance at Memphis (TN) Light, Gas & Water before joining City Utilities in June, 2005. He is responsible for the effective operation of theDistribution, Telecommunications/Operations Technology, SpringNet, Management Services, Operations Analysis, and Transit areas. Mr. Stinson received a Bachelor of Science degree in Civil Engineering from the University of Mississippi. He is a licensed Professional Engineer and a member of the National Society of ProfessionalEngineers. He serves on the Board of Directors of the American Public Gas Association and as Chairman of the American Public Gas Association Research Foundation.

Billing

City Utilities renders monthly bills to its customers based on commodity usage for the previous monthly period. Bills are mailed two to three days after meter reading and are due and payable within 20 days of mailing.

Rates and Charges

City Utilities' rates are established by the Board of Public Utilities and approved by the City Council, which may hold a public hearing on the proposed rates and charges. No federal, state or other local governmental bodies have jurisdiction over the fixing of such rates and charges. The City Council also approves the Board's budget, selects the auditor of City Utilities, calls the elections on propositions to issue bonds of the utilities and authorizes, issues, sells and delivers such bonds.

The adequacy of rates is determined as a part of the annual update to City Utilities' five-year long-range plan,with required rate adjustments submitted to the City Council as needed. A schedule of current utility rates may be obtained from City Utilities.

Human Resources

As of September 30, 2005, City Utilities employed 1,014 persons (of which 52 are considered temporary employees). Of this total, 94 are employed directly in the Water Utility and approximately 63 of these employees are represented by the Laborers International Union of North America (Local 676) and by the International Brotherhood of Electrical Workers (Local 753). The other 868 employees are employed by other departments of City Utilities, including the electric, natural gas, and public transportation departments. Of these, 461 were operating employees and represented by the International Brotherhood of Electrical Workers (Local 753) and 72 were represented by theAmalgamated Transit Workers Union (Division 691). Each of the current labor agreements with IBEW (Local 753), Amalgamated Transit Workers Union (Division 691), and Laborers International Union of North America (Local 676) extends through April 2, 2009. City Utilities believes that its relations with its employees are satisfactory.

City Utilities has adopted the Missouri Local Government Employees Retirement System (LAGERS) for allof its employees. City Utilities is required by state statute to contribute at an actuarially determined rate; as of September 30, 2005, the rate is 20.6% of the annual covered payroll. The costs of the plan to City Utilities for the years ended September 30, 2004 and 2005 were $10,855,000 and $11,523,000, respectively.

Accounting Practices

City Utilities maintains separate accounting records for the Water Utility and the Public Utility. The City Charter provides that the Board of Public Utilities shall follow in all respects the accounting procedures established for private utilities by the Public Service Commission of Missouri or by the Federal Power Commission (now the Federal Energy Regulatory Commission). All costs within a department are charged to the department and generaladministration expenses are allocated between the departments.

All of the departments are responsible for the preparation of their respective budgets. Thereafter, the finance department consolidates the various departmental budgets into one budget for City Utilities. The budget is then reviewed by the Board following a public hearing. Before September 1, the budget is sent to City Council who also holds a public hearing before approving the budget.

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City Utilities provides monthly financial statements to City Council. The Charter requires the City Council to make an annual audit of the operations of City Utilities. KPMG LLP, Kansas City, Missouri, prepared the annual audit for the fiscal year ending September 30, 2005.

The Public Utility System

Obligations to Purchase Electric Power and Energy. City Utilities has an agreement with the Grand River Dam Authority to purchase electric power and energy over a 15–year period that began July 1, 1992. City Utilitiespurchases at least $526,000 of electric power each month at rates specified in the agreement. The rate paid per kilowatt-hour for all scheduled energy is subject to power cost adjustments computed every six months and is limited to a maximum annual adjustment of 5%. City Utilities has received notice from Grand River Dam Authority of its intent to cancel the contract at the end of the contract term (June 30, 2007).

City Utilities has a power sales agreement with the Southwestern Power Administration, effective through June 30, 2015. Each month, City Utilities must purchase peaking capacity of at least $136,000 per year, plus transmission service. Additionally, City Utilities must purchase a minimum monthly amount of peaking energy of approximately $30,000. The peaking rate is adjusted through a purchase power adder component. Banking energy can be transferred between Southwestern Power Administration and City Utilities and is recorded as a liability based on the previous 12–month net coal generation fuel costs. Due to proposed market rules to be implemented by the Southwest Power Pool, management of City Utilities currently anticipates that this banking arrangement will no longer be used beyond 2006.

City Utilities has an agreement with Kansas City Power & Light for the purchase of 51 megawatts of electric capacity and energy through May 31, 2013. Per the terms of the contract, City Utilities pays $357,000 per month through May 31, 2006, and $319,000 per month thereafter for capacity and actual cost for energy. The energy provided is unit contingent from Kansas City Power & Light’s Montrose Station.

City Utilities currently has two coal contracts. City Utilities has a three-year contract with Arch Coal Company for 900,000 tons per year for the years 2006 through 2008 from its Black Thunder Mine located in the Powder River Basin in Wyoming at a cost of $7.335 million per year subject to variance payments for sulfur and Btu in the fuel delivered. City Utilities also has a contract with Kennecott Energy for 1,000,000 tons per year from its Antelope mine, also in the Powder River Basin, for 1,000,000 tons per year at costs of $8.36 million and $8.57 million for 2006 and 2007, respectively, subject to variance payments for sulfur and Btu in the fuel delivered.

Electric Department. The electric department serves approximately 102,000 customers in the City ofSpringfield, Missouri and the adjacent area of Greene County, Missouri. During the fiscal year ended September 30, 2005, total retail electric sales to customers were 2,957,480 megawatt-hours and the maximum hourly peak load was 760 megawatts.

The electric department has an installed generating capacity of 821 megawatts consisting of six coal or natural gas -fired steam turbine generators, four natural gas or oil-fired combination turbines, two natural combustion turbines and one oil-fired combustion turbine, as follows:

Gross Rating Description Year Installed

23 MWJames River Power Station:Westinghouse Turbine-generator (coal-natural gas ) 1957

23MW Westinghouse Turbine-generator (coal-natural gas) 195744 MW Westinghouse Turbine-generator (coal-natural gas) 196060 MW Allis Chalmers Turbine-generator (coal-natural gas) 1964

105 MW General Electric Turbine-generator (coal-natural gas) 197075MW* General Electric Combustion Turbine (natural gas-oil) 198980 MW* General Electric Combustion Turbine (natural gas-oil) 1992

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Gross Rating Description Year Installed

12 MWMain Street Natural Gas Turbine:General Electric Combustion Turbine (oil) 1968

195 MWSouthwest Power Station:Westinghouse Turbine-generator (coal –natural gas) 1976

52 MW* Turbo-Power Marine Combustion Turbine (natural gas -oil) 198352 MW* Turbo-Power Marine Combustion Turbine (natural gas -oil) 1983

McCartney Power Station:50 MW* Pratt-Whitney Combustion Turbine (natural gas) 200250 MW* Pratt-Whitney Combustion Turbine (natural gas) 2002

___________________*Rating is for the specific conditions of installed altitude and 99 degrees Fahrenheit.

The James River Power Station began generation in 1957. None of its units are scheduled for retirement.

The Southwest Power Station began operation in 1976. The site is suitable for future addition of units to an estimated capacity of 1,000 megawatts exclusive of combustion turbines.

City Utilities has studied the effects of the Clean Air Act Amendment of 1990 on all City Utilities generating units. Measures to meet all standards have been planned and are currently in the process of implementation.

City Utilities' electrical transmission and distribution system consists of over 1,923 miles of lines and 40substations.

The following table summarizes the customer mix of the electrical transmission and distribution system as of September 30, 2005.

Electrical Customers

Category

AverageNumber of Customers

% ofCustomers

% of Annualmegawatt-hours

% of Annual Revenue

Residential 87,732 86.6% 32.1% 38.0%Commercial 13,301 13.1% 48.6% 46.1%Industrial 272 0.3% 17.8% 14.4%Interdepartmental n/a n/a 1.5% 1.5%TOTAL 101,305 100.0% 100.0% 100.0%

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The following table presents annual energy statistics for the Public Utility System for the last five fiscal years:

Electric Energy Statistics(In megawatt-hours)

Year Ended September 30 2001 2002 2003 2004 2005

Gross Generated (Combined Plants) 3,139,202 2,976,674 3,239,120 3,211,994 3,214,499 Less Station Auxiliaries 235,443 231,330 253,927 256,116 256,409 Net Generated 2,903,759 2,745,344 2,985,193 2,955,878 2,958,090 Purchases SWPA Peaking 59,000 61,500 61,220 58,780 61,500

- SWPA Supplemental Peaking 67,560 73,702 21,416 66,798 90,408- SWPA Bank and Standby (Net) 66,143 (23,664) 13,198 31,435 (11,767)- GRDA Total 356,938 275,956 375,165 342,010 378,900 - Other Suppliers 213,483 436,554 470,236 373,697 462,955

Net Generated and Purchased 3,666,883 3,569,392 3,926,428 3,828,598 3,940,086 Non-Revenue Street Lighting 16,789 17,656 18,750 19,126 19,610 Other City Usage 22,359 24,108 25,791 25,578 25,176 Total Non-Revenue 39,148 41,764 44,541 44,704 44,786 Sales Residential 860,245 866,187 897,338 869,289 965,034 Commercial and Industrial 1,864,749 1,874,326 1,894,544 1,918,553 1,992,446 Interdepartmental 37,946 38,328 41,774 43,230 46,445 Total Sales to Customers 2,762,940 2,778,841 2,833,656 2,831,072 3,003,925 For Resale 731,927 631,242 946,120 812,369 741,141 Total Sales 3,494,867 3,410,083 3,779,776 3,643,441 3,745,066 Accounted For 3,534,015 3,451,847 3,824,317 3,688,145 3,789,852 Unaccounted For 132,868 117,545 102,111 140,453 150,234 Percent Unaccounted For Energy 3.62% 3.29% 2.60% 3.67% 3.81%

The following table sets forth the Summary of Operations for the electric department of the Public Utility for the past three fiscal years:

Electric Department Summary of Operations(in $000's)

Year Ended September 30

OperatingRevenues

OperatingExpenses

OperatingIncome(1)

2005 $195,665 $176,044 $19,6212004 163,477 149,440 14,0372003 159,961 150,971 8,990

(1) Operating income does not include interest income nor does it reflect debt service interest, both of which are not allocated between departments. See " Summary of the Public Utility System's Operations" herein.

Natural Gas Department The natural gas department serves the City of Springfield and the adjacent area of Greene County, Missouri. During the fiscal year ended September 30, 2005, the natural gas department served 80,489 customers who used 11,173,000 Dekatherms.

Natural gas for resale is purchased from various suppliers through short-term and long-term agreements at market sensitive pricing. The natural gas is currently delivered through Williams Gas Pipelines Central.

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City Utilities' customers are served through a distribution system of 1,266 miles of main divided into 82 districts and served by 204 regulator stations.

The following table sets forth the Summary of Operations for the natural gas department for the past three fiscal years:

Natural Gas Department Summary of Operations(in $000's)


OperatingRevenues

OperatingExpenses

OperatingIncome (Loss)(1)

2005 $108,595 $109,321 $(726)2004 87,934 89,326 (1,392)2003 89,247 89,239 8

(1) Operating income does not include interest income nor does it reflect debt service, both of which are not allocated between departments. See "Summary of the Public Utility System's Operations" herein.

Transportation Department. The transportation department provides motor bus service within the City of Springfield. The service covers approximately 175 miles of regular routes on 14 lines plus a special service for dis abled persons. The Department operates 23 buses, with an average age of 3 years.

For a number of years the transportation department has been experiencing an operating deficit brought on by increased operating expenses. Projections indicate that the deficit will continue to increase over the next several years.While the deficit is supported by the electric and natural gas departments, it is the policy of the Board to continue the operation of the transportation department to serve the residents of the City.

The following table sets forth the Summary of Operations for the transportation department of Public Utility for the past three fiscal years:

Transportation Department Summary of Operations(in $000's)


OperatingRevenues

Other Operating Expenses

Operating Income Loss(1)

2005 $660 $7,034 $(6,374)2004 621 6,480 (5,859)2003 593 6,502 (5,909)

(1) Operating income does not include interest income nor does it reflect debt service interest, both of which are not allocated between departments. See " Summary of the Public Utility System's Operations" herein.

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Future Plans. The following table summarizes actual or estimated requirements and resources by fiscal year. This table does not include potential new power generation resources, possible new power purchase contracts, or changes due to a new demand conservation program. These items are discussed below.

New Power Capacity Resources

City Utilities is working with consultant firm Black and Veatch to determine the most cost-effective power capacity solution to satisfy Springfield’s future power needs. It is anticipated that a recommendation will be made to the

City Utilities is working with a consultant, Black and Veatch, to determine the most cost-effective power capacity solution to satisfy City Utilities' future power needs. Management of City Utilities expects to make a recommendation to its Board in early 2006. This recommendation may propose the building of a coal-fired base-load plant, the construction of a natural gas combined-cycle facility, a simple-cycle gas turbine, a power purchase contract (which may require the construction of transmission resources) or some combination of these options. The option selected by City Utilities may require significant capital investment and funding by the issuance of revenue bonds or other funding resources, which could exceed $500 million according to current estimates. As to payment from revenues of the Public Utility System, Lease Payments under the Lease will be subordinate to any such revenue bonds.

To help offset future resource requirements, City Utilities has begun an energy management andconservation program. The consulting firm of Frontier Associates LLC will assist City Utilities in evaluating cost-effective programs to manage demand for electricity, natural gas, and water. At this time, the future impact of these programs is not known. Operating revenues will fund this program.

The Energy Tax Incentive Act of 2005 authorizes up to $800 million of clean renewable energy obligations to be issued by qualified issuers to finance certain renewable energy projects, with that $800 million to be allocated among qualified issuers for qualified projects. City Utilities intends to seek an allocation for clean renewable energy obligations to refinance the Landfill Project and, if City Utilities receives all or part of the requested allocation for that purpose, it intends to prepay Series B Lease Payments from the proceeds of those obligations. If such obligations are incurred in the form of a Parity Lease, that Parity Lease, as to payment from revenues of the Public

ELECTRIC SYSTEM DEMAND AND RESOURCES MW (net)Demands Resources

PlusFirm Sales

FirmPurchases

Year

Actualor

ForecastWeather

Adjusted(2)

Cityof

Malden

Cityof

Nixa

PlusReserveRqmt.

TotalRqmt.

ExistingInternalCapacity

SouthwestPower

Admin.

GrandRiverDam

Authority

KansasCity

Power&

LightTotal

Resources

NetFirm

Surplus(Deficit)

1994 515 532 5 9 101 630 664 50 60 774 1441995 575 575 5 13 101 694 664 50 60 774 801996 573 604 5 14 101 693 664 50 60 774 811997 594 629 5 15 101 715 664 50 60 774 591998 630 635 5 18 101 754 664 50 60 774 201999 664 643 5 21 82 772 680 50 60 790 182000 670 667 5 23 82 780 685 50 60 795 152001 663 684 5 24 88 780 685 50 60 51 846 662002 656 691 5 25 100 786 785 50 60 51 946 1602003 691 702 5 27 100 823 785 50 60 51 946 1232004 670 711 5 26 100 801 785 50 60 51 946 1452005(1) 744 5 31 100 880 785 50 60 51 946 662006(1) 762 33 100 895 788(3) 50 60 51 949 542007(1) 781 35 100 916 788 50 51 889 (27)(5)

2008(1) 799 37 100 936 788 50 51 889 (47)(5)

2009(1) 819 39 100 958 798(4) 50 51 899 (59)(5)

2010(1) 838 41 100 979 798 50 51 899 (80)(5)

________________(1) Forecast.(2) Actual demands are weather adjusted to a 99-degree day.(3) Increase is due to expected operation of the Landfill Project.(4) Increase is due to a planned turbine/generator upgrade.(5) Forecasted deficits are assumed to be met through market purchases from combined cycle units.

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Utility System, will be payable on a parity basis with Lease Payments under the Lease. If such obligations are issued as revenue bonds, Lease Payments under the Lease, as to payment from revenues of the Public Utility System, will be subordinate to any such revenue bonds.

In 2005, the Clean Air Interstate Rule (CAIR) and Clean Air Mercury Rule (CAMR) were finalized by the Environmental Protection Agency with compliance required by 2009 for nitrogen oxide, and 2010 for sulfur dioxide and mercury emissions. To comply with these rules, management of City Utilities anticipates significant capital investments will be required for the installation of emissions control equipment. City Utilities’ 2006 Long Range Plan reflects these expenditures, which under that plan exceed $44 million in years 2007 through 2010 and are to be financed with bond or capital lease proceeds. If financed with Parity Leases, those Parity Leases, as to payment from revenues of the Public Utility System, will be payable on a parity basis with Lease Payments under the Lease.If financed with revenue bonds, Lease Payments under the Lease, as to payment from revenues of the Public Utility System, will be subordinate to any such revenue bonds.

Revenue bonds, Parity Leases and subordinate leases may be incurred for the foregoing purposes as well as other purposes as described in this Official Statement under "SECURITY – Revenue Bonds, Senior Leases and Parity Leases" and "SECURITY – Limitations on Additional Revenue Bonds and Parity Leases."

Summary of the Public Utility System's Operations. The following table sets forth a summary of financial operations of the electric, natural gas, transportation departments, and other services, i.e., the Public Utility System, for the past three fiscal years. Such information has been derived from the audited financial statements of City Utilities and should be read in conjunction with those financial statements, including the notes thereto, contained in AppendixB to this Official Statement.

Summary of the Public Utility System's Financial Operations(in $000's)

Year Ended Sept. 30

OperatingRevenues(1)

OperatingExpenses(2)

Other Income/ Deductions

(Net) Net Income

2005 $314,336 $302,505 $1,946 $13,7772004 260,797 257,329 4,752 8,2202003 257,357 253,827 4,319 7,849

(1) Operating revenues include rent and sales tax discount but do not include revenue for electric, natural gas, transportation, and other services furnished to the City. Section 16.15 of the City's Charter provides that the Board of Public Utilities shall continue to furnish without charge adequate lighting for all streets, alleys or public ways deemed necessary by the Council to be lighted and may, without charge, at the request of the Council, furnish electricity, natural gas and heat to all City-owned buildings and grounds as needed on the same conditions (other than payment) under which such services are available to private users.

(2) These expenses include the monthly payments made by the Board of Public Utilities to the general revenue funds of the City in lieu of taxes previously paid on the utility properties before the acquisition thereof by the City. Section 16.15 of the City's Charter provides for such payments in the amount of 3% of the gross operating revenues of the electric department, and 4% of the gross operating revenues of the natural gas department and transportation department. No change in such payments can be made unless authorized by a majority of the votes cast on the proposition at an election held in the City.

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The following table sets forth other operating statistics for the Public Utility System for the past two fiscal years:

Public Utility System Operating Statistics

SalesFiscal Year

Ended 9/30/05Fiscal Year

Ended 9/30/04

Electric-Megawatt-Hours 3,745,066 3,643,441

Natural Gas-Dekatherms 11,974,091 11,857,754

Revenue Bus Passengers Carried 1,470,356 1,352,024

Number of Customers

Electric 102,353 99,960

Natural Gas 80,489 79,141

Electric:

Annual Electric Bill - Residential (Average per Household) $660.10 $587.18

Kilowatt-Hours Used - Residential (Average per Household) 11,000 10,152

Revenue per Kilowatt-Hour - Residential $0.0600 $0.0578

Natural Gas:

Annual Natural Gas Bill - Residential (Average per Household) $694.96 $628.42

Dekatherms Used - Residential (Average per Household) 75 80

Revenue per Dekatherm – Residential $9.25 $7.89

Miscellaneous Statistics

Maximum Hourly Peak Demand (Electric)-Megawatts 760 705

Maximum Day Purchase (Natural Gas)-Dekatherms 106,518 106,694

Electric Line-Miles 1,923 1,887

Natural Gas Main-Miles 1,266 1,243

Number of Street Lights 19,087 18,672

The Water Utility

The Water Utility is operated by City Utilities separately from the Public Utility System. Water Utility revenues are not included in Available Revenues and are not available to pay the Lease Payments.

The Water Utility serves customers in Springfield and the adjacent area of Greene County, Missouri. The total existing service area encompasses approximately 150 square miles. The Water Utility presently serves a total of 77,521 water customers. The following table sets forth a summary of the operations of the Water Utility for the past two fiscal years. This information has been derived from the audited financial statements of City Utilities and should be read in conjunction with those financial statements, including the notes thereto, contained in Appendix B to this Official Statement. The Water Utility makes payments to the City in the amount of 4% of the gross operating revenues.

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Summary of Water Utility Operations

Fiscal YearEnded 9/30/05

Fiscal YearEnded 9/30/04

Operating Revenues (in 000's)

Water $30,080 $27,274

Total Operating Revenue $30,080 $27,274

Sales

Water-Thousand Gallons 9,992,904 9,306,350

Number of Customers

Water 77,521 76,133

Annual Water Bill – Residential (Average per household) $247.58 $225.03

Thousand Gallons Used – Residential (Average per household) 72 67

Revenue per Thousand Gallons- Residential $3.44 $3.36

Miscellaneous Statistics

Maximum Day Pumpage (Water) – Thousand Gallons 51,791 42,720

Total Annual Pumpage (Water) Thousand Gallons 12,258,562 11,664,696

Water Main-Miles 1,143 1,126

In 2003, City Utilities issued $35,520,000 principal amount of Water Utility revenue bonds payable from the revenues of the Water Utility, of which $32,130,000 remains outstanding as of September 30, 2005. See the financial statements, included in this Official Statement as Appendix B. Additional revenue bonds payable from the Water Utility may be issued by the City, under existing Missouri statutes, only if the bonds to be issued are approved by a majority of the voters voting at a special bond election.

Consolidation. The ordinance authorizing the issuance of certain City Utilities Water Utility bonds provides for the possible future financial consolidation of the Water Utility and the Public Utility System upon the satisfaction of certain conditions. In the event such conditions are satisfied and the Water Utility and the Public Utility System are consolidated, Water Utility revenue bonds will become Revenue Bonds within the meaning of the Lease, the payment of which will be senior and superior to the payment of the Lease Payments under the Lease. However, there are currently not any plans or considerations for such a consolidation.

CITY OF SPRINGFIELD

Size and Location

Springfield contains approximately 74 square miles of area and is located in Greene County in the southwest portion of the State of Missouri. For 2005, the standard metropolitan statistical area for Springfield (the "SpringfieldMSA") included Greene, Christian, Webster, Polk and Dallas Counties with a total population of 390,986, an increase of 6 percent from 2000. Springfield is the county seat of Greene County (the "County") and is located approximately 174 miles south-southeast of Kansas City and 220 miles southwest of St. Louis. Springfield is located at the junction of Interstate 44, U.S. Highways 65, 60 and 160, and State Routes 13. Springfield is the third largest metropolitan area in the state of Missouri and the third largest city. Springfield is a major center for trade and commerce in the southwest portion of the State. The population of Springfield in the 2000 census was 151,580 and in 2005 Springfield’s estimated population dipped slightly to 150,704. Over the last several decades, Springfield has sustained a steady population growth rate as shown by the following chart:

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Year Population Year Population

1900 23,267 1960 95,8671910 35,201 1970 120,0961920 39,631 1980 133,1161930 57,527 1990 140,4941940 61,238 2000 151,5801950 66,731 2005 150,704

Government and Organization of Springfield

Springfield was incorporated on February 18, 1838, under the laws of the State. The current Charter was adopted by its citizens on March 17, 1953, in accordance with Article VI, Section 19 of the Missouri Constitution.Springfield operates under a Council-Manager form of municipal government. The City Council consists of eight elected members and an elected Mayor. The Mayor of Springfield is elected at-large for a term of two years and cannot serve more than four consecutive terms. There are four zone councilmen and four general councilmen, all of which are elected to four-year terms. Every two years, on the municipal election day, two zone councilmen and two generalcouncilmen must stand for re-election. A councilmen is required to be a qualified voter of Springfield and a resident thereof for two years immediately prior to his or her election.

As the legislative body, the City Council is responsible for enacting all ordinances, resolutions and regulations governing Springfield and appointing the members of various boards created under the Charter.

The administrative operations of Springfield are under the direct control of a City Manager, appointed by theCity Council, who is responsible for enforcement of the laws and ordinances of Springfield and the supervision of all offices and departments created by the Council.

Municipal Services and Utilities

Springfield provides a full range of municipal services associated with municipalities, including police and fire protection, public works operations, enforcement of building and sanitary codes, planning and zoning activities, health and welfare services, parks and recreation facilities, an art museum, and general administrative services.Springfield operates and maintains the sanitary sewer system, the refuse disposal landfill, the Springfield-BransonRegional Airport, municipal parks and golf courses and has budgetary oversight over City Utilities.

Some of the major City facilities include its City Hall and an adjacent municipal office building, theSpringfield-Greene County health building, police headquarters building, eleven municipal fire stations, parkheadquarters building, central garage, human resources building, the municipal courts building, southeast lift station, traffic signal building and fire station, northwest and southwest sewerage disposal plants, airport terminal and general aviation terminal.

Transportation and Communication Facilities

The Springfield-Branson Regional Airport is one of the fastest growing regional airports in the U.S. and the process to build a new terminal building is underway. The Springfield-Branson Regional Airport provides service with six major airlines. The airlines represented are American Connection, American Eagle, Northwest Airlink, Delta Connection, Allegiant Air and United Express. The airport terminal provides complete airline ticketing facilities, automated baggage handling, travel agency, restaurant, gift shop, visitor information center, major car rental agencies, lounges, and meeting facilities for business travelers and the public. Located on approximately 2,800 acres at the northwest edge of the City, the Springfield-Branson Regional Airport is a major regional hub. The 250,000 square foot terminal building offers ten gates for aircraft boarding. Known as the destination airport for Branson and the Ozark Mountain Country, Springfield-Branson Regional Airport offers nonstop flights to 12 destinations and one-stop flights to many domestic and foreign cities. The Springfield-Branson Regional Airport has served over 700,000 passengers during the first ten months of 2005.

Springfield is served by the Burlington Northern Santa Fe and Union Pacific rail systems. It is the regional headquarters for the Burlington Northern Santa Fe. Regular motor carrier service is provided daily. Springfield is a

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major freight break point center for Roadway Express, Inc., on east to west freight movements. Local telephoneservice is provided by SBC (now AT&T) and McLeod USA. Springfield is the location of and is served by four commercial television stations, a public television station, eleven commercial broadcast radio stations and a public radio station.

Educational Institutions and Facilities

The Springfield R-12 School District is the City’s public school system with the highest state classification ("accredited"). The District operates 54 schools (38 elementary schools, nine middle schools and five high schoolsand two alternative schools). Springfield also has several parochial schools. Missouri State University (formerly Southwest Missouri State University) is located in Springfield, as are Drury University, Baptist Bible Graduate School of Theology, Evangel University, Central Bible College, Ozarks Technical Community College, Forest Institute of Professional Psychology, Assemblies of God Graduate School of Theology, St. John’s School of Nursing, Cox College of Nursing and Health Science, Vatterott Education Center, Springfield College, Webster University and Bryan Career College.

Medical and Health Facilities

Four acute-care hospitals are located within the City: St. Johns Regional Health Center, the second largest private hospital in the State of Missouri, Lester E. Cox Medical Centers North and South, Lakeland Regional Hospital and Doctors Hospital of Springfield. These facilities collectively provide over 2,000 patient beds. The City is also home to the U.S. Medical Center for Federal Prisoners.

Recreational and Cultural Facilities

Springfield offers a variety of cultural activities, including the Springfield Symphony, the Springfield Regional Opera, the Springfield Little Theatre, the Springfield Ballet, the Springfield Art Museum, the Juanita K. Hammons Hall for the Performing Arts, Mid-America Singers, Stained Glass Theatre, Children’s Choirs of Southwest Missouri, Springfield Area Arts Council, Springfield Visual Arts Alliance and numerous events sponsored by Missouri State University and area colleges and universities. Springfield is approximately 50 miles north of Branson, Missouri, which has many music theaters, shows and events.

ECONOMIC INFORMATION CONCERNING SPRINGFIELD

Commerce, Industry and Employment

Springfield has developed into a diversified industrial, educational and service center. Springfield has a diversified economy with no single dominant industry. Overall, the economic makeup is stable and unemployment in the area is traditionally below the national average.

The following tables set forth certain statistics provided by the Missouri Division of Employment Security relating to employment for Greene County and Springfield:

For Greene County

Average for Year Total Labor Force Employed Unemployed Unemployment Rate

2005 * 139,254 133,319 5,935 4.3%2003 136,952 130,914 6,038 4.4%2002 135,232 129,294 5,938 4.4%2001 133,740 128,762 4,978 3.7%2000 132,851 129,274 3,577 2.7%

* Through September 2005

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Springfield MSA Labor Force

Average for Year Labor Force Employed Unemployed Unemployment Rate

2005 * 212,796 203,486 9,310 4.4%2003 209,370 199,815 9,555 4.6%2002 205,667 196,284 9,383 4.6%2001 202,134 194,275 7,859 3.9%2000 199,200 193,613 5,587 2.8%

* Through September 2005

Building Permits

The following table shows the number of building permits and total valuation of these permits issued within the City over the last five fiscal years. These numbers reflect permits issued either for new construction or for major renovation.

Fiscal Number of Permits Value of PermitsYear Residential Nonresidential Residential Nonresidential Total Value

2004-05 2,129 150 $317,938,662 $132,082,104 $450,020,7662003-04 2,269 153 301,174,242 93,391,934 394,566,1762002-03 2,163 119 416,521,962 105,267,727 521,789,6892001-02 1,426 141 235,966,002 71,375,514 307,341,5162000-01 1,203 110 169,367,678 144,427,036 313,794,714

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APPENDIX B

AUDITED FINANCIAL STATEMENTS OF THE BOARD OF PUBLIC UTILITIES OF THE

CITY OF SPRINGFIELD, MISSOURI


CITY UTILITIES OF SPRINGFIELD, MISSOURI (A Component Unit of the City of Springfield, Missouri)

Basic Financial Statements and Supplementary Information

September 30, 2005 and 2004

(With Independent Auditors’ Report Thereon)


Table of Contents

Independent Auditors’ Report 1

Management’s Discussion and Analysis 3

Basic Financial Statements:

Balance Sheets 16

Statements of Revenues, Expenses, and Changes in Net Assets 18

Statements of Cash Flows 19

Notes to Financial Statements 20

Required Supplementary Information

I Schedule of Missouri Local Government Employees Retirement System Funding Progress 41

Supplementary Information

II Combining Schedule of Revenues, Expenses, and Changes in Net Assets for the Year Ended September 30, 2005 42

III Combining Schedule of Revenues, Expenses, and Changes in Net Assets for the Year Ended September 30, 2004 43

Independent Auditors’ Report

The Honorable Mayor and Members of the City Council of the City of Springfield, Missouri:

We have audited the accompanying balance sheets of the Public Utility, the Water Utility, and the total business-type activities of City Utilities of Springfield, Missouri (City Utilities), a component unit of the City of Springfield, Missouri, as of September 30, 2005 and 2004, and the related statements of revenues, expenses, and changes in net assets and of cash flows for the years then ended. These financial statements are the responsibility of City Utilities’ management. Our responsibility is to express opinions on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards,issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of City Utilities’ internal control over financial reporting. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Public Utility, the Water Utility, and the total business-type activities of City Utilities as of September 30, 2005 and 2004, and the changes in their financial position and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued a report dated November 18, 2005 on our consideration of City Utilities’ internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audits.

KPMG LLPSuite 1000

1000 Walnut StreetKansas City, MO 64106-2162

KPMG LLP, a U.S. limited liability partnership, is the U.S.member firm of KPMG International, a Swiss cooperative.

2

Management’s discussion and analysis on pages 3 through 15 and the Schedule of Missouri Local Government Employees Retirement System Funding Progress on page 41 are not required parts of the basic financial statements, but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary combining schedules of revenues, expenses, and changes in net assets for the years ended September 30, 2005 and 2004 are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

Kansas City, Missouri November 18, 2005


Management’s Discussion and Analysis


3 (Continued)

City Utilities of Springfield, Missouri (City Utilities or the Utility) is a municipally owned utility, which is a component of the City of Springfield, Missouri (the City). This discussion and analysis of the financial performance of City Utilities provides an overview of City Utilities’ financial activities for the fiscal years ended September 30, 2005 and 2004. This analysis should be read in conjunction with the financial statements and notes thereto.

City Utilities is comprised of the Public Utility (including electric, natural gas, transportation, and telecommunications) and the Water Utility. At September 30, 2005, City Utilities served approximately 102,000 electric, 80,000 natural gas, and 78,000 water customers in the Springfield metropolitan area. This represents growth of approximately 2.0 percent for fiscal year 2005, which remains consistent with prior growth trends.

FINANCIAL HIGHLIGHTS

Fiscal year 2005 Fiscal year 2004

• Net assets (equity) $767 million $750 million

• Change in net assets (net income) $17.8 million $10.2 million

• Capital improvements $33 million $40 million

• Savings from natural gas hedging program $59,000 $333,000

• Peak demand:

Electric—maximum hourly peak demand 760 megawatts* 705 megawatts

Natural gas—maximum daily throughput peak 88,061 dekatherms 95,250 dekatherms

Water—maximum daily pumpage 51.8 million gallons 45.7 million gallons

• Credit rating:

Public Utility AA AA

Water Utility AA AA

* New system peak demand




4 (Continued)

Significant ItemsFiscal year 2005 Fiscal year 2004

• A 3% water rate increase was effective December • A 3% water rate increase was effective December2004. The fourth of five approved water rate 2003. The third of five approved water rate increases. increases.

• New coal purchase agreement entered into with • A 3% electric rate increase was effectiveKennecott Coal Sales Company effective October 2003.October 18, 2004.

• The final payment of $4.9 million principal and • New rail transportation agreement with BNSF interest for the 1996 Natural Gas Pipeline

Railway Company resulting in higher rates Lease/Purchase was paid three years early,beginning January 2005. saving $452,000.

• An outside consultant conducted a depreciation study • The $9.4 million final payment for the Public and recommended depreciation rate changes Utility 1994 James River Gas Turbines lease were adopted. was paid as scheduled.

• New EPA emission standards resulted in certain capital • Settlement of disputed Kansas ad valorem tax assets at the Southwest Power Station electric generation charged by natural gas producers from 1983 – 1988facility being identified as impaired assets. FASB 144 resulted in a refund of $3.6 million.required current year recognition of the $3.6 millionimpairment loss. • The sale of surplus Clean Air Act SO2 allowances

resulted in a gain of $2.6 million for the Public• Completed study of the feasibility of a peak shaving Utility.

facility to meet the increasing demand for natural gas.• Customer occupancy of SpringNet® Underground

• A joint venture between City Utilities and the City began October 2003 with 13 customers leasingof Springfield was implemented to develop a space during 2004 in this highly secure,landfill gas to energy project. underground, data center/co-location facility.

• Performed substantial maintenance on James River • The Seminole substation and associated 69-kilovoltPower Station Unit 5 and replaced the coal mills. line was completed during 2004 at a total cost of

$4.0 million.• Continued to evaluate the need for additional electric

capacity and energy for our customers. In 2005, $1 • Substantial work was performed at the James Rivermillion was spent on this initiative. and Southwest Power Stations to improve operating

efficiency.• Capital expenditures of $871,000 were made on the

multi-year construction of a raw water pipeline from • Final settlement of a Water Utility claim previouslyFellows Lake to the Blackman Water Treatment Plant. estimated at $1.8 million was negotiated for $2.0

million.• Expended $773,000 on the development of a graphic

work design system. This is a multi-year initiative.

• Began efforts to replace the Purchasing andInventory system. This implementation spansmultiple years at a projected cost of $2.2 million. In2005, $1.2 million was expended.




5 (Continued)

FINANCIAL STATEMENTS

This report contains three basic financial statements and related notes. The Statements of Revenues, Expenses, and Changes in Net Assets present City Utilities’ results of operations and changes in net assets for the fiscal years ended September 30, 2005 and 2004. The Balance Sheets present City Utilities’ financial condition, assets, liabilities, and net assets at September 30, 2005 and 2004. The Statements of Cash Flows present City Utilities’ sources and uses of cash and cash equivalents for the fiscal years ended September 30, 2005 and 2004. The Notesto Financial Statements are an integral part of the basic financial statements and contain information on accounting principles and other matters necessary for a more complete understanding of City Utilities’ financial position.

DISCUSSION AND ANALYSIS

Major Projects

Major projects in 2005 include the initial study and design of the Natural Gas Peak Shaving facility, a joint venture with the City of Springfield for a landfill gas to energy project, and the partial construction of a raw water pipeline between Fellows Lake and Blackman Water Treatment Plant. Initial phases of the development of a graphic work design system and the replacement of the Purchasing and Inventory systems began. Also in 2005, City Utilities implemented changes resulting from an external depreciation study conducted by an outside consultant. Major projects in 2004 included debt prepayment, completion of construction on the Seminole substation and associated 69-kilovolt line, and improvements to the James River and Southwest Power Stations.




6 (Continued)

751

514

251

296

City Utilities’ Net Assets (Equity)

September 30, 2005, 2004, and 2003

(In thousands)

Public Utility Water Utility Total2005 2004 2005 2004 2005 2004

Assets:Net utility plant $ 540,090 539,819 164,102 162,255 704,192 702,074 Current and other assets 199,796 191,612 21,476 21,065 221,272 212,677

Total assets 739,886 731,431 185,578 183,320 925,464 914,

Less liabilities:Long-term debt outstanding 67,160 73,245 32,130 33,935 99,290 107,180 Other liabilities 56,486 55,723 2,358 2,334 58,844 58,057

Total liabilities 123,646 128,968 34,488 36,269 158,134 165,237

Net assets $ 616,240 602,463 151,090 147,051 767,330 749,


Assets:Net utility plant $ 539,819 531,807 162,255 159,905 702,074 691,712 Current and other assets 191,612 207,713 21,065 24,826 212,677 232,539

Total assets 731,431 739,520 183,320 184,731 914,751 924,

Less liabilities:Long-term debt outstanding 73,245 93,305 33,935 35,520 107,180 128,825 Other liabilities 55,723 51,971 2,334 4,159 58,057 56,130


Net assets $ 602,463 594,244 147,051 145,052 749,514 739,

Fiscal Year 2005

As the demand for natural gas in Springfield continues to grow, the need to provide adequate supply becomes more critical. In 2005, City Utilities expended $65,000 to study the feasibility of a natural gas peak shaving facility to provide the additional supply to meet the forecasted peak day demand, allowing City Utilities to defer the purchase of additional pipeline capacity. This study determined that a peak shaving facility is the most economical solution to meet growing needs and will be funded with a lease financing in 2006.

In 2005, the City of Springfield and City Utilities agreed to a joint venture to develop a landfill gas to energy project at the City of Springfield’s Noble Hill Landfill. The project includes an Electric Generation System (EGS) and a Gas Collection and Condensate Treatment System (GCCTS). City Utilities will construct and own the EGS. Total direct costs to City Utilities to bring this project to operation in 2006 are estimated at $7 million. Annual costs to operate the facility and maintain the collection system are estimated at $700,000 in the first full year of operation. Expenditures in 2005 amounted to $1.7 million.




7 (Continued)

Maintenance and Operations expenditures at the power stations ensure reliable, ongoing operation of various systems. In 2005, City Utilities spent $910,000 to overhaul the James River Power Station Unit 5 turbine/generator, which also included the cleaning and inspection of the boiler and precipitator. Additionally, while the unit was offline, $1.5 million was spent to install rebuilt coal mills completing the final phase to convert all coal units to burn 100 percent Powder River Basin coal.

City Utilities continued to evaluate the need for additional electric capacity and energy for our customers. At the request of the Board, the Mayor of Springfield and Presiding Commission of Greene County appointed a Power Supply Community Task Force made up of 17 individuals representing various aspects of the community. The Task Force studied the issues, drawing in industry and academic experts to discuss the different options. Numerous public and committee meetings were held. In August 2005, the Task Force presented their findings. They recommended building a local coal facility and establishing an aggressive energy management and conservation program. City Utilities also solicited proposals for future power supply. Evaluation of the proposals and the development of the recommended energy conservation program are ongoing. In 2005, $1 million was spent on future power supply initiatives including legal and consulting fees associated with obtaining the air permit from the Missouri Department of Natural Resources.

Capital expenditures of $871,000 were spent on the construction of a raw water pipeline from Fellows Lake to the Blackman Water Treatment Plant (BWTP). This multi-year project will ultimately consist of 11 miles of 48-inch water main and is required to ensure adequate delivery of maximum day water supply to BWTP for treatment. Phasing of the pipeline construction has been scheduled in a manner that allows material purchases and construction costs to match the available funding with the entire pipeline to be completed by 2010.

Capital expenditures for SpringNet included $1.7 million for network expansion. As an example, SpringNet now provides all high schools and middle schools in the Springfield Public School District with Internet service.

In 2005, $773,000 was expended on efforts to implement a graphic work design system. This multi-year initiative will allow standardization of electric, natural gas, and water construction designs and provide for automation of construction material lists and cost estimates. Additionally, the Utility began the implementation of a new Purchasing and Inventory system. This implementation will expand multiple years with total projected costs of $2.2 million. In 2005, $1.2 million was expended.

City Utilities uses a group-rate method for depreciating assets, which is consistent within the utility industry. This method assigns a depreciation rate that is applied to the asset’s cost in order to calculate depreciation. In 2005, City Utilities engaged an outside consultant to perform a depreciation study. This external review resulted in both the adoption of recommended new depreciation rates and a modification to the Utility’s capitalization policy. The new depreciation rates were adopted effective October 2004 reducing depreciation expense by $3.5 million for fiscal year 2005. Additionally, the capitalization policy threshold increased from $1,000 to $5,000.

Fiscal Year 2004

City Utilities entered into a lease purchase agreement with Stifel Financial Corporation in 1996 for a natural gas transmission pipeline. This agreement was for $5.8 million and was scheduled to mature November 2006. To take advantage of market conditions, the balance on this lease principal totaling $4.9 million was paid in November 2003, three years early, saving the Utility approximately $452,000 in interest payments.




8 (Continued)

A new Seminole substation and associated 69-kilovolt line were completed at a total project cost of $4.0 million. This project upgraded the electrical capabilities in a service area that has experienced significant growth.

To adapt the James River Power Station to low sulfur Powder River Basin (PRB) coal, the Unit 3 coal pulverizers were replaced at a cost of $2.0 million. Project expenditures were $300,000 for 2003 and $1.7 million in 2004 to complete the project.

After purchasing used coal pulverizers for James River Power Station Unit 5, the mills were rebuilt in 2004 at a cost of $1.7 million. Purchasing and rebuilding used equipment reduced the 2005 mill replacement budget $1.0 million. When installed, the project completes the Station’s conversion to PRB coal.

Also at the James River Power Station, a detailed inspection revealed that the Unit 3 precipitator required repair work due to corrosion and age. The project, which began in 2003, was completed in 2004, with expenditures of $200,000 for 2003 and $500,000 for 2004. This allows the precipitator to maintain environmental compliance reliably. Other 2004 major projects at the James River Power Station included retubing Unit 5 condensers for $904,000.

City Utilities performed major maintenance during a scheduled outage at the Southwest Power Station. This maintenance, which totaled $2.3 million, included replacing the forced draft fan variable speed drives, as well as general unit maintenance.

City Utilities’ telecommunications department provides external services to the Springfield business community under the trademark name “SpringNet.” SpringNet Underground is a highly secure, climate-controlled underground facility, which provides a desirable environment for data center operations and co-location customers nationally. Customer occupancy of SpringNet Underground began on October 1, 2003. With capital expenditures of $4.1 million in fiscal 2003, the initial phase was essentially complete. During 2004, $1.6 million was expended to purchase and install the necessary facilities to continue offering advanced telecommunications services.

Operating Results—Revenues

Summer and winter weather patterns can have a significant impact on operating results. Warmer than normal winter weather resulted in reduced demand for natural gas. However, electric sales volumes were higher due to a warmer than normal summer in 2005.




9 (Continued)

Operating Revenues

September 30, 2005, 2004, and 2003

(In thousands)


Operating revenue:Electric $ 195,665 163,477 — — 195,665 163,477 Natural gas 108,595 87,934 — — 108,595 87,934 Transportation 661 621 — — 661 621 Other services 9,415 8,765 — — 9,415 8,765 Water Utility — — 30,080 27,274 30,080 27,274

Total operating revenues $ 314,336 260,797 30,080 27,274 344,416 288,071


Operating revenue:Electric $ 163,477 159,961 — — 163,477 159,961 Natural gas 87,934 89,247 — — 87,934 89,247 Transportation 621 593 — — 621 593 Other services 8,765 7,556 — — 8,765 7,556 Water Utility — — 27,274 26,791 27,274 26,791

Total operating revenues $ 260,797 257,357 27,274 26,791 288,071 284,148

Fiscal Year 2005

Electric revenue is comprised of sales to City Utilities’ customers (system sales) and sales to other utilities (off-system sales.) For fiscal year 2005, cooling degree-days were 47 percent higher than 2004, and 27 percent higher than normal, resulting in a six percent increase in Electric unit sales. Energy demand in June, July, August, and September set new peaks for the individual months. A record high for a single month’s consumption was set in August at 377,000 megawatt hours. Revenue from retail sales, net of the adjustment for under/over recovery of fuels costs, increased $13.6 million, or ten percent from last fiscal year. Electric off-system unit sales declined nine percent from last fiscal year, however; a higher average sales price for these sales resulted in off-system revenue of $27.9 million, an increase of 18 percent, or $4.2 million. In 2005, the margin on off-system sales was $11.6 million.

Natural gas sales are reflective of the winter heating season and the cost of natural gas. With heating degree days 5% lower than last year and 13 percent lower than normal, the demand for natural gas fell. Unit sales for natural gas declined three percent as compared to 2004. The decline in unit sales was more than offset by the effects of the fuels component in natural gas pricing. Consequently, revenue from natural gas retail sales increased $12.2 million.




10 (Continued)

Revenues for the Water Utility continue to benefit from the program of rate increases approved by the City Council. Additionally, water unit sales increased seven percent in 2005 due to the warmer summer weather, and shortfall of precipitation during the summer months. Revenues from water retail sales increased 10 percent, or $2.5 million.

For fiscal year 2005, SpringNet’s external sales grew by 38 percent. SpringNet signed 188 new contracts during the year.

Fiscal Year 2004

In spite of the milder summer weather during 2004, with cooling degree days down 12%, system sales of 2,788,000 megawatt hours were virtually the same as in 2003. A three percent electric rate increase in October 2003, combined with an increased fuel cost recovery factor, resulted in revenues from system sales increasing nine percent, or $10.8 million. Off-system sales declined 13 percent, or 125,000 megawatt hours, in 2004. However, higher prices offset much of the volume decline. Off-system sales for 2004 were $23.6 million, down $825,000, or three percent. In 2004, the margin on off-system sales was $8.9 million.

As a result of the warmer winter weather in 2004, with heating degree days down 13 percent, dekatherm sales declined 7 percent, from 12.4 million dekatherms in 2003 to 11.5 million in 2004. This decrease was offset by higher natural gas prices. As a result, revenues declined $4.6 million, or five percent.

Revenues for the Water Utility benefited from the program of rate increases approved by City Council. While unit sales volumes were down 3%, when combined with a 3% rate increase, revenues increased $426,000, or 2%.

Operating Results—Operating Expenses

City Utilities’ electric generation includes base load availability of 450 megawatts from six coal-fired steam turbines and peak load availability of 370 megawatts from seven combustion turbines. Supplementing this internal generating capacity, the Utility has contracted a total of 161 megawatts through Kansas City Power and Light, Grand River Dam Authority, and Southwest Power Administration. In addition, owner-membership in The Energy Authority (TEA) continues to prove beneficial for City Utilities’ customers. This mix of generation resources allows City Utilities to maintain low prices, provide optimum reliability to customers, and to take advantage of off-system sales opportunities as market conditions allow. City Utilities generated approximately 75 percent and purchased 25 percent of its power needs in 2005 as compared to generating 77 percent and purchasing 23 percent in 2004.

Beginning in fiscal 2003, City Utilities implemented a hedging program for natural gas purchases through the use of financial instruments. In the three years since its inception, this program has saved customers over $1 million: $59,000 in 2005, $333,000 in 2004, and $665,000 in 2003, helping to mitigate higher natural gas costs for City Utilities’ customers.

City Utilities pays a percentage of its operating revenues into the general revenue fund of the City, as required by City Charter. These Payments in Lieu of Taxes (PILOT) are made to the City at a rate of three percent of electric revenue and four percent of natural gas and transit revenue for the period. Additionally, the Water Utility made payments to the City at a rate of four percent.




11 (Continued)

Operating Expenses

September 30, 2005, 2004, and 2003

(In thousands)


Operating expense:Electric $ 176,044 149,441 — — 176,044 149,441 Natural gas 109,321 89,326 — — 109,321 89,326 Transportation 7,035 6,480 — — 7,035 6,480 Other services 9,903 9,352 — — 9,903 9,352 Water Utility — — 25,195 24,765 25,195 24,765

Total operating expense $ 302,303 254,599 25,195 24,765 327,498 279,364


Operating expense:Electric $ 149,441 150,971 — — 149,441 150,971 Natural gas 89,326 89,238 — — 89,326 89,238 Transportation 6,480 6,503 — — 6,480 6,503 Other services 9,352 7,004 — — 9,352 7,004 Water Utility — — 24,765 24,007 24,765 24,007

Total operating expense $ 254,599 253,716 24,765 24,007 279,364 277,723

Fiscal Year 2005

The rising cost of fuel contributed to an increase in Electric operating expenses. In 2005, the Utility entered into a new coal contract that resulted in a seven percent increase in the cost per ton of coal received. Additionally, substantially impacting cost was the new rail transportation rates resulting in higher prices beginning in January 2005. The new delivery rates increased freight costs for coal approximately 42 percent. Also, the rapid escalation in natural gas costs, which is used as a generation fuel, increased from $2.1 million in 2004 to $6.7 million in 2005 and represented 11.7 percent of generation fuels expenditures as compared to 4.7 percent in 2004. A three percent increase in sales volumes, coupled with the impact of new related coal contracts, increased City Utilities’ electric production and purchased power costs by $21.4 million, or 31 percent, over last year.

Depreciation expense for the Electric area decreased $2.5 million primarily due to the implementation of new depreciation rates as a result of an outside consultant’s depreciation study mentioned previously.

When the Southwest Power Station converted to low sulfur coal in 1997, the use of the plant’s scrubbers was discontinued. Emission standards issued by the EPA during 2005 made it clear that these assets would not be used. Accordingly, management recognized an impairment charge for the loss in value. In 2005, an impairment loss of $3.6 million was recognized, resulting in an increase to Electric operating expenses.




12 (Continued)

Rising fuel costs also contributed to an increase in Natural Gas operating expenses. Purchased natural gas costs are a function of the market price and the volume of natural gas purchased. In 2005, natural gas purchases increased three percent, coupled with a significant increase in the market price for natural gas. Purchased natural gas costs of $85.9 million represented an increase of $20.2 million, or 31 percent, over last year’s cost.

Fiscal Year 2004

In 2004, electric production and purchased power declined 98,000 megawatt hours, or two percent from 2003. While total volume of purchased power declined, the mix of lower cost hydropower from SWPA increased 61,000 megawatt hours, or 64%. The total cost of production and purchased power dropped $2 million, or three percent.

Maintenance expenses increased from $21.7 million in 2003 to $25.5 million in 2004, primarily the result of maintenance projects at the James River and Southwest Power Stations.

City Utilities sold surplus Clean Air Act SO2 allowances for $2.6 million. This is reported as a reduction to operating expenses.

Warmer winter weather in 2004 caused natural gas purchases to drop 10 percent; however, higher prices negated this volume reduction and natural gas costs increased slightly from $65.0 million in 2003 to $65.7 million in 2004.

Change in Net Assets

Results of operations continued to show significant improvement. Net assets continued to grow and both the Public Utility and the Water Utility maintain AA credit ratings from FitchRatings and Standard & Poor rating agencies, demonstrating strong financial positions. With credit ratings of AA, both utilities are well positioned for the future.




13 (Continued)

Change in Net Assets (Equity)

September 30, 2005, 2004, and 2003

(In thousands)


Operating revenues $ 314,336 260,797 30,080 27,274 344,416 288,071 Less operating expenses 302,303 254,599 25,195 24,765 327,498 279,364

Operating income 12,033 6,198 4,885 2,509 16,918 8,707

Nonoperating revenues and expenses:Interest income 4,879 4,511 925 940 5,804 5,451 Net change in fair market value

of investments (2,134) (902) (350) (155) (2,484) (1,057)Interest expense, net (3,184) (3,436) (1,247) (1,248) (4,431) (4,684)Other items, net 2,183 1,848 (174) (47) 2,009 1,801

Total nonoperatingrevenues and expenses 1,744 2,021 (846) (510) 898 1,511

Change in net assets 13,777 8,219 4,039 1,999 17,816 10,218

Net assets (equity)Beginning of year 602,463 594,244 147,051 145,052 749,514 739,296

End of year $ 616,240 602,463 151,090 147,051 767,330 749,514


Operating revenues $ 260,797 257,357 27,274 26,791 288,071 284,148 Less operating expenses 254,599 253,716 24,765 24,007 279,364 277,723


Nonoperating revenues and expenses:Interest income 4,511 5,840 940 1,183 5,451 7,023 Net change in fair market value

of investments (902) (2,255) (155) (552) (1,057) (2,807)Interest expense, net (3,436) (4,413) (1,248) (1,858) (4,684) (6,271)Other items, net 1,848 2,171 (47) 94 1,801 2,265

Total nonoperatingrevenues and expenses 2,021 1,343 (510) (1,133) 1,511 210

Change in net assetsbefore special items 8,219 4,984 1,999 1,651 10,218 6,635

Special-items insurance settlement — 2,866 — — — 2,866


Net assets (equity)Beginning of year 594,244 586,394 145,052 143,401 739,296 729,795

End of year $ 602,463 594,244 147,051 145,052 749,514 739,296




14 (Continued)

Fiscal Year 2005

Operating income increased $8.2 million over last year. The electric system reported $19.6 million operating income, a $5.6 million increase over operating results reported last year. In addition, the Water Utility reported $4.9 million operating income for the year, a $2.4 million increase over the prior year. Offsetting the improvement in operations, the market value adjustment negatively impacted net income. The market value adjustment of City Utilities’ portfolio of fixed income investments was significantly impacted by changes in market interest rates. In 2005, the adjustment resulted in a $2.5 million decrease to change in net assets, as compared to a $1.1 million decrease last year.

Fiscal Year 2004

Operating income increased $2.3 million over 2003. The electric system reported $14.0 million in operating income, a $5.0 million increase. The Utility sold excess Clean Air Act SO2 allowances for $2.6 million, when coupled with the containment of costs, resulted in the Electric area reporting the improved operating results for the year. The Water Utility reported $2.5 million of operating income for fiscal year 2004, a slight decline as compared to $2.8 million for 2004. In total, interest income decreased $1.6 million when compared to the prior year as a result of lower fund balances and lower interest rates.

Receipts and Disbursements Compared to Budget

Receipts and Disbursements Compared to Budget

September 30, 2005, 2004, and 2003

(In thousands)

2005 2004Receipts Disbursements Receipts Disbursements

Budget $ 354,378 374,790 331,020 371,9Actual 350,714 353,924 322,390 339,6

Variance $ (3,664) (20,866) (8,630) (32,3

2004 2003Receipts Disbursements Receipts Disbursements

Budget $ 331,020 371,945 321,767 366,9Actual 322,390 339,610 318,309 338,2

Variance $ (8,630) (32,335) (3,458) (28,7

4510

35)

9368

25)




15

Fiscal Year 2005

The variance in receipts, as compared to budget, is attributable to several factors. Revenue from sales was over budget by $16.0 million. The budget does not include an estimate for the change in market value of the investment portfolio with the negative adjustment of $2.5 million. The change in receivables and other balance sheet accounts was $5.5 million under budget and adjustments for both the electric and natural gas fuel recovery were $6.0 million under budget. Additionally, the receipts from risk management assets were under budget by $1.8 million.

For disbursements, non-capital expenditures were under budget by $5.0 million and capital expenditures were under by $8.6 million. Additionally, the budget assumes an expenditure of $9.6 million for trade guarantees; this payment was not required. As an offset, expenditures for fuels exceeded budget by $10.7 million.

Fiscal Year 2004

Electric and natural gas revenues were $6.7 million less than anticipated. Though not planned in the budget, Clean Air Act SO2 allowances were sold for $2.6 million. The budget does not include an estimate for the change in market value of the investment portfolio with the negative adjustment of $1.1 million in 2004 adding to the variance. Additionally, interest income was $667,000 less than anticipated in the budget and receipts from risk management assets were under budget by $1.5 million.

Three areas contributed to disbursements being under budget. Operating expenses, primarily natural gas and purchased power, were under budget by $11.7 million. City Utilities made $40 million in capital improvements with $50.6 million budgeted for such improvements. Also, the annual budget anticipates $9.6 million for trade guarantees in the event of a TEA default. This guarantee payment was not necessary.

Significant Future Items

City Utilities is continuing to finalize options to provide base load power generation to meet future needs. Such a project may well require considerable debt financing and additional electric rate increases. While no power supply decisions or commitments have been made at this time, it is likely that a decision will be made during fiscal year 2006.

A three percent water rate increase has been approved effective December 2005 (the fifth of five approved water rate increases).

A two percent natural gas rate increase has been approved effective April 2006.

(A Component Unit of the City of Springfield, Missouri)

Balance Sheets


(In thousands)

2005 2004Public Water Public Water

Assets Utility Utility Total Utility Utility Total

Capital assets:Land $ 25,315 11,341 36,656 25,301 11,341 36,642 Electric 656,318 — 656,318 639,338 — 639,338 Natural gas 143,258 — 143,258 139,934 — 139,934 Transportation 3,062 — 3,062 3,150 — 3,150 Water — 202,291 202,291 — 197,275 197,275 Customer service 12,683 — 12,683 11,964 — 11,964 Telecommunications 39,414 — 39,414 37,228 — 37,228 Common 49,389 — 49,389 51,955 — 51,955

Total 929,439 213,632 1,143,071 908,870 208,616 1,117,486

Less accumulated depreciation (412,723) (52,135) (464,858) (387,038) (48,624) (435,662)

Net total 516,716 161,497 678,213 521,832 159,992 681,824

Construction work-in-progress 23,374 2,605 25,979 17,987 2,263 20,250

Net capital assets 540,090 164,102 704,192 539,819 162,255 702,074

Investments:Funds for bonded indebtedness 14,889 14,157 29,046 14,414 13,813 28,227 Designated improvement account 78,697 — 78,697 82,948 — 82,948

Prepaid pension asset 10,294 — 10,294 11,721 — 11,721 Price risk management assets 1,339 — 1,339 — — — Other noncurrent assets 7,025 2,056 9,081 6,900 2,161 9,061

Current assets:Cash and cash equivalents 7,763 — 7,763 12,300 — 12,300 Short-term investments 11,845 3,823 15,668 7,308 3,601 10,909

Total cash, cashequivalents, andshort-term investments 19,608 3,823 23,431 19,608 3,601 23,209

Accounts receivable:Customers, less allowance for

doubtful accounts of $208 in2005 and $180 in 2004 17,144 — 17,144 12,630 — 12,630

Unbilled revenue 10,060 1,440 11,500 7,890 1,490 9,380 Other 3,114 — 3,114 5,527 — 5,527

Electric fuel and purchasednatural gas adjustment 5,457 — 5,457 — — —

Inventories:Materials and supplies 14,564 — 14,564 14,279 — 14,279 Coal 2,676 — 2,676 3,563 — 3,563 Natural gas stored underground 14,301 — 14,301 11,409 — 11,409

Unexpired insurance 628 — 628 723 — 723

Total current assets 87,552 5,263 92,815 75,629 5,091 80,720

Total assets $ 739,886 185,578 925,464 731,431 183,320 914,751

See accompanying notes to financial statements.

CITY UTILITIES OF SPRINGFIELD, MISSOURI

16

2005 2004Public Water Public Water

Liabilities and Net Assets Utility Utility Total Utility Utility Total

Net assets:Invested in capital assets, net of

related debt $ 472,848 130,307 603,155 466,296 126,521 592,817 Restricted for debt 14,889 14,157 29,046 14,414 13,813 28,227 Unrestricted 128,503 6,626 135,129 121,753 6,717 128,470

Total net assets 616,240 151,090 767,330 602,463 147,051 749,514

Long-term obligations:Long-term obligations 60,870 30,285 91,155 67,160 32,130 99,290 Unamortized debt premium,

net of debt discount 82 1,665 1,747 277 1,798 2,075

Total long-term obligations 60,952 31,950 92,902 67,437 33,928 101,365

Other noncurrent liabilities:Vacation and sick leave 18,565 — 18,565 18,042 — 18,042 Other 3,168 172 3,340 2,100 — 2,100

Total other noncurrentliabilities 21,733 172 21,905 20,142 — 20,142

Current liabilities:Current maturities of long-term

obligations 6,290 1,845 8,135 6,085 1,805 7,890 Accounts payable:

Trade 9,311 — 9,311 9,218 — 9,218 Other 3,055 — 3,055 2,525 — 2,525

Customer deposits 2,948 — 2,948 2,703 — 2,703 Accruals:

Interest 974 521 1,495 1,003 536 1,539 Salaries and wages 1,130 — 1,130 1,644 — 1,644

Due to City of Springfield, Missouriin lieu of taxes 910 — 910 721 — 721

Electric fuel and purchasednatural gas adjustment — — — 7,982 — 7,982

Other 16,343 — 16,343 9,508 — 9,508

Total current liabilities 40,961 2,366 43,327 41,389 2,341 43,730


Total liabilities and net assets $ 739,886 185,578 925,464 731,431 183,320 914,751

17

CITY UTILITIES OF SPRINGFIELD, MISSOURI(A Component Unit of the City of Springfield, Missouri)

Statements of Revenues, Expenses, and Changes in Net Assets

Years ended September 30, 2005 and 2004

(In thousands)

2005 2004Public Water Public WaterUtility Utility Total Utility Utility Total

Operating revenues:Services $ 305,697 27,330 333,027 253,165 24,735 277,900 Other 8,639 2,750 11,389 7,632 2,539 10,171

Total operating revenues 314,336 30,080 344,416 260,797 27,274 288,071

Operating expenses:Production fuel and purchased power 90,701 — 90,701 69,289 — 69,289 Natural gas purchased for resale 85,871 — 85,871 65,674 — 65,674 Other production 9,637 5,122 14,759 10,023 4,485 14,508 Distribution and transmission 14,567 2,806 17,373 13,636 2,797 16,433 Bus and garage operations 4,212 — 4,212 3,789 — 3,789 Other services 4,842 — 4,842 4,563 — 4,563 Customer accounts 7,382 2,884 10,266 7,055 2,804 9,859 Administrative and general 22,983 4,950 27,933 22,072 5,282 27,354 Maintenance 20,871 3,566 24,437 21,645 3,901 25,546 Depreciation and amortization 28,433 4,664 33,097 31,235 4,402 35,637 Impairment of capital assets 3,601 — 3,601 — — — Payments in lieu of taxes 9,405 1,203 10,608 8,348 1,094 9,442 Gain on other activities (202) — (202) (2,730) — (2,730)

Total operating expenses 302,303 25,195 327,498 254,599 24,765 279,364


Nonoperating revenues (expenses):Interest income 4,879 925 5,804 4,511 940 5,451 Net decrease in fair value of investments (2,134) (350) (2,484) (902) (155) (1,057) Interest expense, net (3,184) (1,247) (4,431) (3,436) (1,248) (4,684) Operation of recreational facilities, net (259) — (259) (283) — (283) Amortization of debt-related costs 60 (1) 59 42 (1) 41 Other, net 2,382 (173) 2,209 2,089 (46) 2,043

Total nonoperating revenue (expenses), net 1,744 (846) 898 2,021 (510) 1,511


Net assets:Beginning of year 602,463 147,051 749,514 594,244 145,052 739,296

End of year $ 616,240 151,090 767,330 602,463 147,051 749,514


18


Statements of Cash Flows

Years ended September 30, 2005 and 2004

(In thousands)


Cash flows from operating activities:Receipts from customers $ 279,269 30,066 309,335 253,645 27,348 280,993 Payments to suppliers (184,016) (16,031) (200,047) (150,686) (16,054) (166,740) Payments to employees (48,165) (3,704) (51,869) (46,863) (3,701) (50,564) Payments in lieu of taxes (9,187) (1,203) (10,390) (8,370) (1,094) (9,464) Claims paid (265) (50) (315) (320) (2,100) (2,420)

Net cash provided by operating activities 37,636 9,078 46,714 47,406 4,399 51,805

Cash flows from noncapital financing activities:Interfund transfers 13 (13) — (4,187) 4,187 —

Net cash provided by (used in) noncapital financing activities 13 (13) — (4,187) 4,187 —

Cash flows from capital and related financing activities:Capital grants and contributions 3,365 983 4,348 2,120 401 2,521 Purchases of capital assets, net of removal (38,290) (6,927) (45,217) (43,618) (6,303) (49,921) Repayment of long-term obligations (6,085) (1,805) (7,890) (20,060) (1,585) (21,645) Interest paid (3,379) (1,287) (4,666) (4,040) (1,197) (5,237)

Net cash used in capital and related financing activities (44,389) (9,036) (53,425) (65,598) (8,684) (74,282)

Cash flows from investing activities:Sale and maturities of investment securities 21,735 — 21,735 66,155 — 66,155 Purchase of investment securities (24,996) (554) (25,550) (46,773) (787) (47,560) Interest received 5,701 554 6,255 5,895 787 6,682 Distribution from (equity investment in)

Electric Power Alliance, net (237) — (237) 162 — 162 Distribution from (equity investment in)

Partnership Industrial Center, net — (29) (29) 55 98 153

Net cash provided by (used in)investing activities 2,203 (29) 2,174 25,494 98 25,592

Net increase (decrease) in cash and cash equivalents (4,537) — (4,537) 3,115 — 3,115

Cash and cash equivalents at beginning of year 12,300 — 12,300 9,185 — 9,185

Cash and cash equivalents at end of year $ 7,763 — 7,763 12,300 — 12,300

Reconciliation of operating income to net cash provided byoperating activities:

Operating income $ 12,033 4,885 16,918 6,198 2,509 8,707 Adjustments to reconcile operating income to net cash

provided by operating activities:Depreciation and amortization expense 28,433 4,664 33,097 31,235 4,402 35,637 Impairment of fixed assets 3,601 — 3,601 — — — Auto depreciation included in vehicle expense 1,949 378 2,327 1,556 294 1,850 Common depreciation charged to Water Utility 920 (920) — 1,089 (1,089) — Miscellaneous income 1,915 (151) 1,764 1,543 (47) 1,496 Operation of recreational facilities (259) — (259) (283) — (283) Change in assets and liabilities:

Accounts receivable (2,101) — (2,101) (2,269) — (2,269) Unbilled revenues (2,170) 50 (2,120) (478) 130 (348) Recoverable fuel costs (13,439) — (13,439) 2,577 — 2,577 Price risk management assets (1,339) — (1,339) 537 — 537 Inventories (2,290) — (2,290) 1,679 — 1,679 Prepaid insurance 95 — 95 46 — 46 Other noncurrent assets (83) — (83) 979 — 979 Prepaid pension assets 1,427 — 1,427 1,427 — 1,427 Accounts payable 679 — 679 (833) — (833) Customer deposits 245 — 245 347 — 347 Accrued liabilities 6,455 — 6,455 2,004 — 2,004 Other noncurrent liabilities 1,565 172 1,737 52 (1,800) (1,748)

Net cash provided by operating activities $ 37,636 9,078 46,714 47,406 4,399 51,805

Noncash capital financing activities:Capital assets acquired through contributions

from developers $ 528 1,838 2,366 864 1,458 2,322 Noncash investing activities:

Decrease in fair value of investments (2,134) (350) (2,484) (902) (155) (1,057)


19


Notes to Financial Statements


20 (Continued)

(1) Summary of Significant Accounting Policies

Reporting Entity

City Utilities of Springfield, Missouri (City Utilities) is a municipally owned utility, which is a component unit of the City of Springfield, Missouri (the City), as provided for in the City Charter. City Utilities is comprised of the Public Utility (including the electric, natural gas, transportation, and telecommunications departments) and the Water Utility. As permitted by Section 16.1 of the City Charter, City Utilities provides certain telecommunications services to the medical, education, utility, and government communities in the Springfield metropolitan area. As of September 30, 2005, City Utilities served 102,000 electric customers, 80,000 natural gas customers, and 78,000 water customers in the Springfield metropolitan area.

For financial reporting purposes, City Utilities includes all funds (Public Utility and Water Utility) that are controlled by the board of public utilities, as determined on the basis of financial interdependency, selection of management, ability to influence operations, and budget adoption. No other funds or entities met any of these criteria.

Basis of Accounting

City Utilities consists of two enterprise funds: Public Utility and Water Utility. As required in Section 16.11 of the City Charter, City Utilities follows, in all significant respects, accounting policies and procedures established for investor-owned natural gas and electric utilities by the Federal Energy Regulatory Commission (FERC), and for investor-owned water utilities by the National Association of Regulatory Utility Commissioners. City Utilities utilizes the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded as incurred. Revenue billing collections and all other cash transactions are made by the Public Utility on behalf of the Water Utility. At month-end, a settlement is determined and reflected in the Water Utility’s short-term investment balance.

The financial statements have been prepared in conformity with the pronouncements of the Governmental Accounting Standards Board (GASB), including GASB Statement No. 14, The Financial Reporting Entity,which defines City Utilities as a component unit of the City. Accordingly, the financial statements of City Utilities are included in the comprehensive annual financial report of the City. City Utilities has elected to apply all Financial Accounting Standards Board (FASB) Statements and Interpretations except for those that conflict with GASB pronouncements in accordance with GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting.

City Utilities applies the provisions of FASB No. 71, Accounting for the Effects of Certain Types of Regulation. In accordance with FASB No. 71, regulatory assets and liabilities are recorded in the balance sheets. Regulatory assets are the deferral of costs expected to be recovered in future customer rates and regulatory liabilities represent current recovery of expected future costs. If City Utilities was required to terminate the application of FASB No. 71, it would have to record the amounts of all regulatory assets and liabilities in the statements of revenues, expenses, and changes in net assets.




21 (Continued)

Net Assets

Net assets are classified into three components—invested in capital assets, net of related debt; restricted for debt; and unrestricted. These classifications are defined as follows:

Invested in capital assets, net of related debt—consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any debt that is attributable to those assets.

Restricted for debt—consists of assets that have constraints placed upon their use through external constraints imposed either by creditors (such as through debt covenants) or through laws, regulations, or constraints imposed by law through constitutional provisions or enabling legislation, reduced by any liabilities to be paid from these assets. When an obligation is incurred for which both restricted and unrestricted net assets are available, it is City Utilities’ policy first to apply restricted resources in satisfying that obligation, followed by the utilization of unrestricted resources.

Unrestricted—consists of net assets that do not meet the definition of restricted for debt or invested in capital assets, net of related debt.

Revenues

Revenue is recognized as services are rendered and includes an estimate for electricity, natural gas, and water delivered but unbilled at the end of each reporting period.

Operating revenues include revenues from the provision and delivery of services to customers. Operating expenses consist of costs incurred through the provision and delivery of electricity, natural gas, transportation, other services, and water to customers, net of proceeds received from the sale of surplus clean air allowances. Operating revenues reported in the statements of revenues, expenses, and changes in net assets are shown net of discounts and estimated allowances for bad debts.

City Utilities recognizes inter-utility and intra-utility sales between funds. The Public Utility recognized inter-utility sales revenue for the years ended September 30, 2005 and 2004 of $14,258,000 and $9,653,000, respectively. The Water Utility recognized inter-utility sales revenue for the years ended September 30, 2005 and 2004 of $63,000 and $56,000, respectively. The net effect on operating income related to the recognition of inter-utility sales was an increase of $2,465,000 for the Public Utility and a decrease of $2,465,000 for the Water Utility for the year ended September 30, 2005, and an increase of $2,304,000 for the Public Utility and a decrease of $2,304,000 for the Water Utility for the year ended September 30, 2004.

Capital Assets

The cost of additions and betterments of the utility plant is capitalized. Cost includes material, labor, vehicle and equipment usage, related overhead items, capitalized interest, and certain administrative and general expenses. Contributions in aid of construction (capital grants and contributions) are recorded as reductions to the property accounts.

Expenses for maintenance and renewals of items not considered to be units of property are charged to operating expense as incurred. When units of depreciable property are retired, the original cost and removal cost, less salvage, are charged to accumulated depreciation.




22 (Continued)

Depreciation

Depreciation is provided over the estimated lives of the various classes of depreciable property by applying composite rates on a straight-line basis. The provisions for depreciation in 2005 and 2004 expressed as a percentage of the average depreciable cost of the utility plant were as follows:

2005 2004

Public Utility:Electric 3.0% 3.5% Gas 2.5% 2.9% Transportation 8.0% 6.5% Telecommunications 6.5% 6.9% Customer service 10.2% 13.6%Common 5.6% 6.1%

Water Utility 1.9% 1.7%

Effective October 1, 2004, City Utilities changed its depreciation rates based upon the results of a depreciation rate study performed by an outside consultant. The rate changes were accounted for as a change in estimate. The change reduced depreciation expense by $3,746,000 for the Public Utility and increased depreciation expense by $211,000 for the Water Utility, for a net reduction of $3,535,000 for the year ended September 30, 2005.

Investments

Investments are reported at fair value based on quoted market prices, plus accrued interest.

Inventories

Materials and supplies inventories and natural gas stored underground are stated at the lower of average cost or market. Coal inventory is stated at the lower of cost (last-in, first-out) or market.

Electric Fuel and Purchased Natural Gas Adjustments

General Ordinance Number 3243 requires City Utilities to adjust monthly customers’ electric and natural gas bills to compensate for changes in the cost of electric fuel, purchased power, and purchased natural gas to City Utilities. An under-recovery of $7,890,000 for electric fuel and an over-recovery of $2,007,000 for purchased natural gas adjustment clauses were recorded at September 30, 2005. An over-recovery of $3,545,000 for electric fuel and an over-recovery of $4,437,000 for purchased natural gas adjustment clauses were recorded at September 30, 2004.




23 (Continued)

Capitalization of Interest

Net interest costs related to acquiring or constructing certain utility plants are capitalized as a part of the cost of the related asset. City Utilities capitalizes interest on construction projects financed with revenue bonds, commercial paper, and renewal and replacement funds in accordance with Statement of Financial Accounting Standards (SFAS) No. 34 and SFAS No. 62. Information regarding capitalized interest is as follows (dollar amounts in thousands):

Public Utility Water Utility Total

Interest expense, gross $ 3,350 1,272 4,622Capitalized interest (166) (25) (191)

Interest expense, net $ 3,184 1,247 4,431

Average interest rate 4.5% 3.4%

2005

Public Utility Water Utility Total

Interest expense, gross $ 3,767 1,305 5,072Capitalized interest (331) (57) (388)

Interest expense, net $ 3,436 1,248 4,684

Average interest rate 4.8% 5.0%

2004

Budgeting

Section 16.8 of the City Charter requires City Utilities to prepare and submit an annual operating budget showing estimated revenues and expenses for approval by the City Council. The City Charter requires the budget to conform to the method of accounting used for financial reporting. Requests for expenses exceeding the original amount authorized must be submitted to the City Council for approval.

Cash and Cash Equivalents

City Utilities has securities pledged by Bank of America of Springfield, Missouri. These securities have a fair value of at least 102% of the amount of total deposits in excess of $100,000 in accordance with the City Charter, Section 19.13.

For purposes of the statements of cash flows, City Utilities considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Environmental Matters

City Utilities accrues environmental costs on an undiscounted basis when it is probable that a liability has been incurred and the liability can be reasonably estimated. Such accruals are adjusted as further information develops or circumstances change.




24 (Continued)

Vacation and Sick Leave

Under the terms of City Utilities’ personnel policy, employees are granted vacation and sick leave in varying amounts. In the event of termination, an employee is paid for accumulated vacation days. Employees may carry over, from year to year, a maximum of 40 earned vacation hours. Sick leave can be accumulated up to 1,200 hours. In the event of termination, an employee is paid for 60% of accumulated sick leave. The liability for accrued vacation and sick leave is presented as an other noncurrent liability in the accompanying balance sheets, representing the estimated amounts to be paid in future years to current employees for services rendered through such dates.

Management’s Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates.

Reclassifications

Certain prior year amounts in the basic financial statements have been reclassified where necessary to conform to the 2005 presentation.

(2) New Accounting Pronouncements

Deposit and Investment Risk Disclosures

During 2004, City Utilities adopted GASB Statement No. 40, Deposit and Investment Risk Disclosures.GASB No. 40 establishes and modifies disclosure requirements related to investment risks: credit risk (including custodial credit risk and concentrations of credit risk), interest rate risk, and foreign currency risk. This statement also establishes and modifies disclosure requirements for deposit risks: custodial credit risk and foreign currency risk. Disclosures required upon the adoption of this statement are included in Note 4 of the notes to financial statements.

Impairment of Capital Assets

In November 2003, the Governmental Accounting Standards Board issued its GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries.GASB No. 42 establishes accounting and financial reporting standards for impairment of capital assets. A capital asset is considered impaired when its service utility has declined significantly and unexpectedly. This Statement also clarifies and establishes accounting requirements for insurance recoveries. This Statement requires governments to report the effects of capital asset impairments in their financial statements when they occur rather than as a part of the ongoing depreciation expense for the capital asset or upon disposal of the capital asset. This statement is effective for financial statements issued for fiscal years beginning after December 15, 2004. City Utilities anticipates adopting GASB No. 42 in fiscal 2006.




25 (Continued)

(3) Capital Assets

Activity for the year ended September 30, 2005 is as follows (in thousands):

September 30, Transfers/ September 30,2004 Increases Decreases adjustments 2005

Public Utility:Nondepreciable assets:

Land $ 25,301 14 — — 25,315 Construction work in progress 17,987 33,387 — (28,000) 23,374

Depreciable assets:Electric 639,338 21,833 (5,227) 374 656,318 Natural gas 139,934 4,083 (639) (120) 143,258 Transportation 3,150 12 (79) (21) 3,062 Customer service 11,964 328 — 391 12,683 Telecommunication 37,228 2,270 (75) (9) 39,414 Common 51,955 1,015 (3,048) (533) 49,389

Total capital assets 926,857 62,942 (9,068) (27,918) 952,813

Less accumulated depreciation (387,038) (28,433) 6,639 (3,891) (412,723)

Net capital assets $ 539,819 34,509 (2,429) (31,809) 540,090

Water Utility:Nondepreciable assets:

Land $ 11,341 — — — 11,341 Construction work in progress 2,263 5,769 — (5,427) 2,605

Depreciable assets:Source of supply 46,435 1,108 (12) 7 47,538 Pumping 10,919 52 (6) — 10,965 Water treatment 17,202 206 (15) — 17,393 Water transmission and

distribution 117,171 4,104 (156) — 121,119 General 5,548 84 (267) (89) 5,276

Total capital assets 210,879 11,323 (456) (5,509) 216,237

Less accumulated depreciation (48,624) (4,664) 329 824 (52,135)

Net capital assets $ 162,255 6,659 (127) (4,685) 164,102

Total:Nondepreciable assets $ 56,892 39,170 — (33,427) 62,635 Depreciable assets 1,080,844 35,095 (9,524) — 1,106,415

Total capital assets 1,137,736 74,265 (9,524) (33,427) 1,169,050

Less accumulated depreciation (435,662) (33,097) 6,968 (3,067) (464,858)

Net capital assets $ 702,074 41,168 (2,556) (36,494) 704,192




26 (Continued)

Capital asset activity for the year ended September 30, 2004 is as follows (in thousands):

September 30, Transfers/ September 30,2003 Increases Decreases adjustments 2004

Public Utility:Nondepreciable assets:

Land $ 23,610 1,691 — — 25,301 Construction work in progress 26,424 52,033 — (60,470) 17,987

Depreciable assets:Electric 613,984 31,620 (6,214) (52) 639,338 Natural gas 135,922 4,731 (625) (94) 139,934 Transportation 3,114 60 (24) — 3,150 Customer service 12,005 (25) (16) — 11,964 Telecommunication 29,270 8,728 (770) — 37,228 Common 55,390 2,409 (5,961) 117 51,955


Less accumulated depreciation (367,912) (31,809) 13,552 (869) (387,038)


Water Utility:Nondepreciable assets:

Land $ 11,341 — — — 11,341 Construction work in progress 1,941 6,540 — (6,218) 2,263

Depreciable assets:Source of supply 46,632 82 (279) — 46,435 Pumping 10,896 23 — — 10,919 Water treatment 17,719 71 (588) — 17,202 Water transmission and

distribution 112,360 5,071 (260) — 117,171 General 5,448 359 (288) 29 5,548




Total:Nondepreciable assets $ 63,316 60,264 — (66,688) 56,892 Depreciable assets 1,042,740 53,129 (15,025) — 1,080,844

Total capital assets 1,106,056 113,393 (15,025) (66,688) 1,137,736






27 (Continued)

Emission standards issued by the Environmental Protection Agency (EPA) in 2005 have affected the future service utility of certain capital assets at one of City Utilities generation facilities. City Utilities assessed such assets for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Accordingly, in September 2005, City Utilities recognized an impairment loss of $3,601,000.

(4) Investments

City Utilities maintains cash and investment securities. The Public Utility and Water Utility bond ordinances permit investments only in direct obligations of the U.S. Government such as bills, notes, or bonds, and any other obligations guaranteed as to payment of principal and interest by the U.S. Government or any agency or instrumentality thereof. City Utilities is also authorized to invest in repurchase agreements for which the underlying securities must be U.S. Treasury notes, bonds, or bills. Funds in the form of cash on deposit are required to be insured by the Federal Deposit Insurance Corporation (FDIC) or collateralized by authorized investments held by the City Utilities’ agents in the City Utilities’ name.

City Utilities’ investment portfolio includes securities that are either insured or registered, or for which the securities are held by the City Utilities’ agents in City Utilities’ name.

For reporting purposes, pooled investments are allocated to the Public Utility and to the Water Utility. The Water Utility’s investments represent short-term investments and securities held as funds for bonded indebtedness, plus the allocation of accrued interest for these investments. The following represents City Utilities’ total cash and investments at September 30, 2005 and 2004 (in thousands):

2005 2004

U.S. Government $ 12,951 14,585 U.S. Government agencies 81,748 79,440 Mortgage-backed securities 27,677 27,010 Accrued interest 1,035 1,049

Total investments 123,411 122,084

Cash 7,763 12,300

Total cash and investments $ 131,174 134,384




28 (Continued)

Cash and investments are included in the following balance sheet accounts at September 30, 2005 and 2004 (in thousands):


Funds for bonded indebtedness $ 14,889 14,157 29,046 14,414 13,813 28,227 Designated improvement account 78,697 — 78,697 82,948 — 82,948 Cash and cash equivalents 7,763 — 7,763 12,300 — 12,300 Short-term investments 11,845 3,823 15,668 7,308 3,601 10,909

Total $ 113,194 17,980 131,174 116,970 17,414 134,384

As of September 30, 2005 and 2004, City Utilities had committed cash and investments as follows (in thousands):

September 30, 2005Public Utility Water Utility Total

Funds for bonded indebtedness $ 14,889 7,437 22,326 Designated funds—board authorized:

Electric Power Alliance guarantees 9,643 — 9,643SO2 allowance proceeds 8,506 — 8,506Disaster and contingency reserve funds 33,049 — 33,049 Funds designated for major projects

and other 27,499 6,720 34,219

Total restricted 93,586 14,157 107,743

Unrestricted 19,608 3,823 23,431

Total cash and investments $ 113,194 17,980 131,174

September 30, 2004Public Utility Water Utility Total

Funds for bonded indebtedness $ 14,414 9,850 24,264 Designated funds—board authorized:

Electric Power Alliance guarantees 9,643 — 9,643SO2 allowance proceeds 5,507 — 5,507Disaster and contingency reserve funds 32,229 — 32,229 Funds designated for major projects

and other 35,569 3,963 39,532

Total restricted 97,362 13,813 111,175

Unrestricted 19,608 3,601 23,209

Total cash and investments $ 116,970 17,414 134,384




29 (Continued)

Interest Rate Risk—Interest rate risk is the risk that the fair value of City Utilities’ investments will decrease as a result of increases in interest rates. As a means of limiting its exposure to interest rate risk, City Utilities’ investment policy prohibits investments that are highly sensitive to interest rate changes. As of September 30, 2005, City Utilities’ investment portfolio matures as follows (in thousands):

Investment maturities (in years)Fair Less Morevalue than 1 2 – 3 4 – 5 than 5

U.S. Government $ 12,951 — 4,061 — 8,890 U.S. Government agencies 81,748 2,259 13,876 15,253 50,360 Mortgage-backed securities 27,677 6,431 7,828 4,517 8,901 Accrued interest 1,035 1,035 — — —

Total investments 123,411 9,725 25,765 19,770 68,151

Cash 7,763 7,763 — — —

Total cash and investments $ 131,174 17,488 25,765 19,770 68,151

Credit Risk—Credit risk is the risk that City Utilities’ will not recover its investment due to the ability of the counterparty to fulfill their obligations. As a means of limiting credit risk, City Utilities’ investment policy prohibits investments not directly guaranteed by the United States Government or any agency thereof. As of September 30, 2005, City Utilities’ investments in U.S. Government agencies and mortgage-backed securities were all rated in the top rating category by Standard and Poor’s and Moody’s Investors Service.

Concentration of Credit Risk—Concentration of credit risk is the risk of loss attributed to the magnitude of City Utilities’ investment in a single issuer. As a means of limiting concentration of credit risk, City Utilities’ investment policy prohibits concentration of more than 40% in any one non-U.S. Government security. More than 5% of City Utilities’ investments are in Government National Mortgage Association mortgage-backed securities, Federal National Mortgage Association notes, Federal Home Loan Mortgage Corporation notes and mortgage-backed securities, and Federal Home Loan Bank notes. These investments are 20%, 23%, 34%, and 12%, respectively, of City Utilities’ total investments.

(5) Funds for Bonded Indebtedness

Electric, Natural Gas, and Transportation Utilities (the Public Utility)—Special Ordinance Number 24125, dated November 26, 2001, authorized the issuance of the Public Utility Revenue Bonds, Refunding Series 2001. The ordinance established certain account requirements that the Public Utility is obligated to fund out of its revenues after paying operating expenses.

Water Utility—Special Ordinance Number 24353, dated May 19, 2003, authorized the issuance of the Waterworks Refunding and Improvement Revenue Bonds, Series 2003. The ordinance also established certain account requirements that the Water Utility is obligated to fund out of its revenues after paying operating expenses.




30 (Continued)

With each series, the funding of the account requirements occurs within the Public Utility and within the Water Utility for the described purposes as listed below (in thousands):

September 30Account 2005 2004 Purpose

Public Utility revenue bonds,refunding series 2001:

Sinking fund $ 3,334 3,252 Fund for principal and interest requirementsReserve account 2,658 2,658 Fund for greatest subsequent year debt

service requirements

Maintenance and repairaccount 8,397 8,004 Fund for repair and maintenance expenses or, if

necessary, for payment of principal and interest

Emergency improvementaccount 500 500 Fund for operating emergencies or contingencies or,

if necessary, for payment of principal and interest

Total Public Utility 14,889 14,414

Waterworks refunding andimprovement revenue bonds,series 2003:

Sinking fund 1,290 1,288 Fund for principal and interest requirementsReserve fund 3,539 3,539 Fund for greatest subsequent year debt

service requirements

Maintenance and repairaccount 2,409 4,823 Fund for repair and maintenance expenses or, if

necessary, for payment of principal and interestEmergency improvement

account 200 200 Fund for operating emergencies or contingencies or,if necessary, for payment of principal and interest

Emergency improvementaccount—designated funds 6,719 3,963 Fund for capital additions or replacements

Total Water Utility 14,157 13,813

Total City Utilities $ 29,046 28,227

The funds in these accounts are invested in U.S. Government and U.S. Government agency obligations.




31 (Continued)

(6) Designated Improvement Account Investments

Rates enacted by City Ordinance Number 4125, dated June 4, 1990, established electric, natural gas, and water revenue adjustment schedules. The revenues generated will contribute to the funding of major capital projects relating to Clean Air Act Amendments of 1990 requirements and natural gas transmission and supply. Other designated funds include funds set aside for self-insurance reserves and long-range plan major project funding. A summary of the designated improvement account, which consists of U.S. Government obligations, U.S. Government agency obligations, and mortgage-backed securities, is as follows (in thousands):

September 302005 2004

Funds restricted for Clean Air Act SO2 allowance proceeds $ 8,506 5,507Other designated funds:

Reserve funds 45,462 56,313 Funds held for future improvements 24,729 21,128

Total $ 78,697 82,948

(7) Long-term Obligations

The following is a summary of long-term obligations outstanding (in thousands):


Public Utility Revenue Bonds, Refunding Series 2001; 3.50%to 5.00%; due March 1, 2002 to 2006 $ 5,675 11,170

Public Utility obligation under the February 1, 2001 financingagreement; 3.75% to 4.85%; due January 1, 2002 to 2016 8,485 9,075

Public Utility obligation under the June 1, 2001 financingagreement; 4.4% to 5.0%; due December 2001 to 2020 53,000 53,000

Total Public Utility 67,160 73,245

Waterworks Refunding and Improvement Revenue Bonds,Series 2003; 2.00% to 5.00%; due May 1, 2018 32,130 33,935

Total Water Utility 32,130 33,935

Total City Utilities 99,290 107,180

Current maturities of long-term obligations (8,135) (7,890)

Total long-term obligations outstanding, net ofcurrent maturities $ 91,155 99,290




32 (Continued)

The Public Utility Revenue Bonds, Refunding Series 2001 are collateralized by the revenues of the Public Utility. The Public Utility obligations under the financing agreements are subordinated to the Public Utility Revenue Bonds as to revenues. The Waterworks Refunding and Improvement Revenue Bonds, Series 2003 are collateralized by the revenues of the Water Utility.

Long-term debt activity for the year ended September 30, 2005 was as follows (in thousands):

Bonds and Bonds andobligations obligations

payable Par amount payableSeptember 30, of bonds Principal September 30, Amount due

2004 issued payments 2005 one year

Public Utility:Revenue bonds $ 11,170 — (5,495) 5,675 5,675 Other obligations 62,075 — (590) 61,485 615

Water Utility:Revenue bonds 33,935 — (1,805) 32,130 1,845

Total City Utilities $ 107,180 — (7,890) 99,290 8,135

Long-term debt activity for the year ended September 30, 2004 was as follows (in thousands):

Bonds and Bonds andobligations obligations

payable Par amount payableSeptember 30, of bonds Principal September 30, Amount due

2003 issued payments 2004 one year

Public Utility:Revenue bonds $ 16,515 — (5,345) 11,170 5,495 Other obligations 76,790 — (14,715) 62,075 590

Water Utility:Revenue bonds 35,520 — (1,585) 33,935 1,805

Total City Utilities $ 128,825 — (21,645) 107,180 7,890




33 (Continued)

Assets financed by the financing agreements are pledged as collateral for those agreements. The debt service to maturity on the outstanding bonds and obligations as of September 30, 2005 is summarized in the following table (in thousands):

Principal InterestPublic Water Public WaterUtility Utility Total Utility Utility Total

2006 $ 6,290 1,845 8,135 3,075 1,251 4,326 2007 640 1,885 2,525 2,907 1,214 4,121 2008 3,160 1,820 4,980 2,820 1,176 3,996 2009 3,295 2,385 5,680 2,670 1,085 3,755 2010 3,435 2,475 5,910 2,518 966 3,484 2011 – 2015 19,640 13,970 33,610 10,067 3,411 13,478 2016 – 2020 24,925 7,750 32,675 4,681 634 5,315 2021 5,775 — 5,775 144 — 144

Total $ 67,160 32,130 99,290 28,882 9,737 38,619

The Public Utility Revenue Bonds, Refunding Series 2001 are not callable. The Public Utility obligation under the February 1, 2001 financing agreement is callable on January 1, 2011 at par. The Public Utility obligation under the June 1, 2001 financing agreement is callable on December 1, 2009 at par. City Utilities’ long-term debt is publicly traded infrequently; therefore, a current market price is not readily available for these bonds and leases. The fair value of long-term debt is estimated based upon market prices for similar issues or on the current rates offered for instruments of the same remaining maturities. The estimated fair value of long-term debt at September 30, 2005 and 2004 is as follows (in thousands):


Public Utility $ 70,886 78,440 Water Utility 32,470 34,960


Certain of City Utilities’ long-term obligations contain restrictions that require the maintenance of coverage ratios as defined in the related agreements. City Utilities’ calculations of these ratios are performed in accordance with the long-term obligation agreements and are used solely to determine compliance with such covenants. City Utilities was in compliance with these covenants as of September 30, 2005.

(8) Defined Benefit Pension Plan

Plan Description

City Utilities participates in LAGERS, an agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for local government entities in Missouri. LAGERS is a defined benefit pension plan that provides retirement, disability, and death benefits to plan members and beneficiaries. LAGERS was created and is governed by state statute. As such, it is the system’s




34 (Continued)

responsibility to administer the law in accordance with the expressed intent of the general assembly. The plan is qualified under the Internal Revenue Code Section 401(a) and it is tax-exempt.

LAGERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to LAGERS, P.O. Box 1665, Jefferson City, Missouri 65102.

Funding Policy

City Utilities is required by state statute to contribute at an actuarially determined rate; the current rate is 20.6% of annual covered payroll. The contribution requirements of plan members are determined by the governing body of the political subdivision. The contribution provisions of City Utilities are established by state statute.

Annual Pension Cost

To reduce future fixed costs, two payments of $18 million and $3.4 million were made to LAGERS in November 1997 and September 1998, respectively. These payments reduced the past unfunded pension liability. The payments will be amortized to pension expense over 15 years. This was prudent and desirable, since the funds managed by the pension administrator can be invested in a broader range of securities than those invested by City Utilities. LAGERS’ investment performance had exceeded City Utilities’ by an average of 3% per year over the past 10 years. Giving effect to this payment in the actuarial studies that set the pension contribution rate will lower pension costs in future years, with savings currently estimated in excess of $1.5 million per year. City Utilities’ portion of the unfunded LAGERS pension obligation approximates $61,289,000 at September 30, 2005.

For the LAGERS fiscal year ended June 30, 2005 and 2004, City Utilities’ annual pension cost of $11,523,000 and $10,855,000, respectively, was equal to the required and actual contributions. The required contribution was determined as part of the February 28, 2003 and/or February 28, 2004 annual actuarial valuation using the entry age actuarial cost method. The actuarial assumptions included (a) a rate of return on the investment of present and future assets of 7.5% per year, compounded annually; (b) projected salary increases of 4.0% per year, compounded annually, attributable to inflation; (c) additional projected salary increases ranging from 0.0% to 4.2% per year, depending on age, attributable to seniority/merit; (d) preretirement mortality based on the 1983 Group Annuity Mortality table; and (e) postretirement mortality based on the 1971 Group Annuity Mortality table projected to 2000, set back one year for men and seven years for women. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a five-year period. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on an open basis. The amortization period at February 28, 2005 was 15 years.




35 (Continued)

Effective January 1, 1997, City Utilities adopted an early retirement plan, known as the Rule of 80, promulgated by the board of trustees of LAGERS.

The contributions of annual pension costs for 2003 through 2005 are as follows (in thousands):

Annual Percentage Netpension of APC pension

cost (APC) contributed obligation

Fiscal year ending June 30:2003 $ 10,393 100 % — 2004 10,855 100 % — 2005 11,523 100 % —

(9) Purchase Obligations

Obligations to Purchase Electric Power and Energy

Grand River Dam Authority

City Utilities has an agreement with the Grand River Dam Authority to purchase electric power and energy over a 15-year period through June 30, 2007. City Utilities purchases at least $526,000 of electric power each month at rates specified in the agreement. The rate paid per kilowatt hour for all scheduled energy is subject to power cost adjustments computed every six months and is limited to a maximum annual adjustment of 5%.

Southwestern Power Administration

City Utilities has a purchased power agreement with the Southwestern Power Administration (SWPA) effective through June 30, 2015. City Utilities must purchase at least $136,000 peaking capacity per month, plus transmission service. Additionally, City Utilities must purchase a minimum monthly amount of peaking energy of approximately $30,000. The peaking rate is adjusted through a purchased power adder component. Banking energy can be transferred between SWPA and City Utilities and is recorded as a liability, which is adjusted annually on June 30 based on the previous 12-month coal generation fuel costs.

Kansas City Power & Light

City Utilities has a purchased power agreement with Kansas City Power & Light Company (KCPL) that runs through May 31, 2013. Under this agreement, City Utilities purchases 17 megawatts of capacity from three of KCPL’s Montrose Power Station turbines (51 megawatts total). The capacity charge is $84 per kilowatt per year through May 31, 2006, which equals $357,000 per month; thereafter, the annual capacity charge drops to $75 per kilowatt for the remainder of the contract, which equals $319,000 per month. The contract provides that KCPL will furnish City Utilities with 380,000 kilowatt hours of electricity annually (using an 85% availability factor) with the energy charge based on the actual production costs of the Montrose units.




36 (Continued)

Obligations to Purchase Coal

Powder River Coal Company

On January 15, 2003, City Utilities entered into an agreement with Powder River Coal Company effective through December 31, 2005. City Utilities’ coal purchase obligation for orders made pursuant to this agreement for calendar year 2005 is $5,992,000. As of September 30, 2005, City Utilities had purchased $4,624,000 of coal for the contract period ending December 31, 2005.

Kennecott Coal Sales Company

On October 18, 2004, City Utilities entered into an agreement with Kennecott Coal Sales Company effective through December 31, 2007. Under the terms of the agreement, City Utilities’ coal purchase obligation is $8,060,000, $8,360,000, and $8,570,000 for calendar years 2005, 2006, and 2007, respectively. As of September 30, 2005, City Utilities had purchased $5,736,000 of coal for the contract period ending December 31, 2005.

Obligations to Purchase Rail Services

Burlington Northern Santa Fe Railway Co.

City Utilities has an agreement with Burlington Northern Santa Fe Railway Co. to purchase rail services to transport coal to both City Utilities’ power stations. City Utilities agreed to tender a minimum tonnage of 900,000 tons in calendar year 2005. As of September 30, 2005, City Utilities had tendered coal tonnage of 1,368,000 tons.

Obligations for Transportation and Storage Services of Natural Gas

City Utilities has signed agreements with Southern Star Central Gas Pipeline, Inc. (formerly Williams Gas Pipelines Central) and Centerpoint Energy Gas Transmission Company (formerly Reliant Energy Gas Transmission Company) for transportation and/or storage services of natural gas, with various terms expiring in 1 to 20 years.

(10) Equity Interest in The Energy Authority

City Utilities is an equity member of The Energy Authority (TEA), a power marketing joint venture based in Jacksonville, Florida and incorporated in Georgia. As of September 30, 2005, TEA was comprised of six municipal utilities with equity interests, including four large partners with ownership interests of 21.43% each. The large partners are JEA (formerly the Jacksonville Energy Authority) of Florida, the Municipal Energy Authority of Georgia (MEAG Power), The South Carolina Public Service Authority (a.k.a. Santee Cooper), and the Nebraska Public Power District. City Utilities and the Gainesville Regional Utilities (Florida) are medium equity partners with ownership interests of 7.14% each. As a member of TEA, City Utilities benefits from the risk management strategies maintained by TEA that seek to avoid financial losses by limiting financial exposure as a result of unexpected unit outages and volatile market prices. City Utilities also receives resource management services from TEA. City Utilities uses the equity method of accounting to record its investment in TEA.




37 (Continued)

To become an equity member, City Utilities was required to meet the following conditions:

Pay a membership fee of $867,000 that City Utilities recorded as a deferred expense and amortized over the 24-month period that the fee was refundable on a prorated basis. This membership fee was fully amortized as of July 2002.

City Utilities paid an initial capital contribution of $1 million, of which TEA subsequently returned $248,000, resulting in a net capital contribution of $752,000. Including the initial net capital contribution, City Utilities’ component share of TEA’s net activity through September 30, 2005 was $2,130,000.

In accordance with the membership agreement between City Utilities and its joint venture members, City Utilities has provided TEA with guarantees that result in a maximum exposure of $9,643,000 to secure power-marketing transactions. Prior to June 2004, this amount included a letter of credit supported by the advanced agreement cash deposit of $429,000. This letter of credit was refunded in June 2004 with a corresponding increase to guarantees provided by City Utilities to TEA. City Utilities’ guarantees are effective until its participation in the joint venture ends.

The following is a summary of the unaudited financial information of TEA for the 12-month periods ended September 30, 2005 and 2004 (in thousands):

2005 2004(Unaudited)

Statement of revenues, expenses, and changes in net assets:Revenues $ 1,274,443 743,557 Total energy costs and operating expenses 1,140,977 647,025

Operating revenues in excess of expenses $ 133,466 96,532

Increase in net assets $ 134,670 97,036

Balance sheet:Current assets $ 287,510 133,241 Noncurrent assets 7,574 18,155

Total assets $ 295,084 151,396

Liabilities and equity:Current liabilities $ 262,584 110,547 Noncurrent liabilities 2,572 14,334 Net assets (members’ equity) 29,928 26,515

Total equity and liabilities $ 295,084 151,396

TEA issues separate audited financial statements on a calendar-year basis.




38 (Continued)

(11) Related-Party Transactions

City Utilities is required by the City Charter to make certain payments and provide certain services to the City. The operations of the Public Utility reflect payments in lieu of taxes to the City.

City Utilities also provided services, such as energy for street lighting and other electric, natural gas, and water services, without charge to the City. The cost of providing such services was as follows (in thousands):


Public Utility $ 5,741 5,459Water Utility 2,447 2,398


City Utilities has a partnership agreement with the City, the Springfield Area Chamber of Commerce, and the Springfield Business and Industrial Development Corporation, a Missouri not-for-profit corporation, to govern the process of development, management, and selling of an industrial center in Springfield, Missouri. Under this agreement, City Utilities is responsible for utilities service consisting of natural gas, water, electricity, and fiber optic telecommunication. In addition, City Utilities will pay for site plan consulting services. At the request of the City Council of the City, City Utilities has also acquired the land for the industrial center. The agreement has delegated responsibility to the nine members of the partnership administrative council for control of the sale of individual parcels in the center. As City Utilities maintains only one board member and only one vote, City Utilities does not have effective control of operations. Thus, amounts expended for the industrial center are accounted for using the equity method and are recorded in other noncurrent assets. The net profits or net losses of the partnership are to be allocated based upon each partner’s percentage of the partnership’s capital accounts. At September 30, 2005, City Utilities had an ownership interest of 79% in the partnership. As of September 30, 2005, the Public Utility had incurred $5,599,000 for land and improvements, recognized losses of $832,000, and received distributions of $3,914,000, for a net equity balance of $853,000. The Water Utility had incurred $376,000 for improvements, recorded losses of $96,000, and received contributions of $268,000, for a net equity balance of $12,000.

The partnership has developed a second industrial park on the west side of Springfield, Missouri. City Utilities’ participation in the second industrial park will be in the same capacity as the first industrial park, with the exception that land acquisitions will be made by the Springfield Business and Industrial Development Corporation. As of September 30, 2005, the Public Utility had incurred $400,000 for land and improvements and recognized income of $22,000, for a net equity balance of $422,000. The Water Utility had incurred $345,000 for improvements and recognized income of $16,000, for a net equity balance of $361,000.




39 (Continued)

(12) Planned Construction

Anticipated expenditures for extending and improving City Utilities are estimated to be approximately $54,510,000 for the year ending September 30, 2006. These expenditures include $47,243,000 for Public Utility projects and $7,267,000 for Water Utility projects.

(13) Air Quality Standards

The Clean Air Act Amendments of 1990 (the Act) include requirements to reduce sulfur dioxide (SO2) and nitrogen dioxide (NOx) emissions from electric utility sources. The Act established a market-based compliance program that allows the selling and trading of SO2 allowances. An “allowance” is the authorization to emit one ton of sulfur dioxide in a given year. City Utilities is in full compliance with the emissions standards under the Act and, as a result, has generated excess allowances that could be marketed. Clean Air Act SO2 allowances totaling $2,650,000 were sold during the fiscal year ended September 30, 2004. No allowances were sold during the fiscal year that ended September 30, 2005.

In March 2005, the Environmental Protection Agency (EPA) promulgated new regulations that will further restrict emissions of power plant SO2 and NOx. The Clean Air Interstate Rule (CAIR) will require 28 eastern states, including Missouri, to reduce emissions by nearly 70% in two phases, beginning in 2009 and 2015 for NOx and 2010 and 2015 for SO2. In addition, the EPA’s new Clean Air Mercury Rule (CAMR) established a 70% reduction requirement for power plant emissions of this heavy metal. This rule was promulgated concurrently with CAIR and embodies a nationwide market-based compliance approach beginning in 2010. City Utilities is conducting a compliance study to determine the optimum strategy to meet these new regulatory requirements in a cost-effective manner. The industry expects the Missouri Department of Natural Resources to adopt these rules with few changes from the federal counterparts. If there were significant changes at the state level, City Utilities would perform a refined compliance study.

(14) Legal Proceedings

In the normal course of business, City Utilities is involved in various legal proceedings and is subject to audits by granting authorities from which it receives grant money. Legal liabilities recorded at September 30, 2005 reflect routine litigation.




40

(15) Water Storage

In October 1993, City Utilities entered into a contract with the federal government to utilize 7.63% (estimated at 50,000 acre-feet) of the usable storage space at Stockton Lake. The storage space is to be used in two stages: 25,000 acre-feet initially, and an additional 25,000 acre-feet when required by future demand. Payment on the first 25,000 acre-feet of approximately $4.8 million was made September 30, 1995. Payment on the second 25,000 acre-feet, which is estimated at $4.6 million and is payable in annual installments over a 30-year period, begins within 30 days after the first use of the additional storage or on January 1, 2016, whichever occurs first. City Utilities has the right to prepay the balance due at any time in whole or in part. City Utilities placed in service the water supply pipeline and intake structure in June of 1996. Upon the structures becoming operational, City Utilities accessed the initial 25,000 acre-feet of storage and began paying a percentage of the annual operations and maintenance expense of Stockton Lake.

Schedule ICITY UTILITIES OF SPRINGFIELD, MISSOURI(A Component Unit of the City of Springfield, Missouri)

Required Supplementary Information

Schedule of Missouri Local Government EmployeesRetirement System Funding Progress

September 30, 2005

(b) (b-a) ([b-a])/c(a) Entry age Unfunded (c) UAL as a

Actuarial Actuarial actuarial accrued (a/b) Annual percentagevaluation value of accrued liability Funded covered of covered

date assets liability (UAL) ratio payroll payroll

February 29, 2000 $ 88,323,000 128,148,000 39,825,000 69% $ 43,309,000 92% February 28, 2001 103,011,000 150,817,000 47,806,000 68% 46,402,000 103% February 28, 2002 108,984,000 159,976,000 50,992,000 68% 50,157,000 102% February 28, 2003 114,664,000 173,508,000 58,844,000 66% 54,095,000 109% February 29, 2004 111,581,000 175,865,000 64,284,000 63% 55,018,000 117% February 28, 2005 118,232,000 179,521,000 61,289,000 66% 55,532,000 110%

See accompanying independent auditors’ report.

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Schedule II


Combining Schedule of Revenues, Expenses, and Changes in Net Assets

Year ended September 30, 2005

(In thousands)

Public Utility TotalNatural Trans- Other Water City

Electric Gas portation Services Total Utility Utilities

Operating revenues $ 195,665 108,595 661 9,415 314,336 30,080 344,416

Operating expenses:Production fuel and purchased power 90,701 — — — 90,701 — 90,701 Natural gas purchased for resale — 85,871 — — 85,871 — 85,871 Other production 9,637 — — — 9,637 5,122 14,759 Distribution and transmission 9,200 5,367 — — 14,567 2,806 17,373 Bus and garage operations — — 4,212 — 4,212 — 4,212 Other services — — — 4,842 4,842 — 4,842 Customer accounts 4,183 3,199 — — 7,382 2,884 10,266 Administrative and general 14,794 4,300 1,404 2,485 22,983 4,950 27,933 Maintenance 17,778 2,109 984 — 20,871 3,566 24,437 Depreciation and amortization 20,903 4,545 409 2,576 28,433 4,664 33,097 Impairment of capital assets 3,601 — — — 3,601 — 3,601 Payments in lieu of taxes 5,449 3,930 26 — 9,405 1,203 10,608 Gain on other activities (202) — — — (202) — (202)

Total operating expenses 176,044 109,321 7,035 9,903 302,303 25,195 327,498

Operating income (loss) $ 19,621 (726) (6,374) (488) 12,033 4,885 16,918

Nonoperating revenues (expenses):Interest income 4,879 925 5,804 Net decrease in fair market value of

investments (2,134) (350) (2,484) Interest expense, net (3,184) (1,247) (4,431) Operation of recreational facilities, net (259) — (259) Amortization of debt-related costs 60 (1) 59 Other, net 2,382 (173) 2,209

Total nonoperatingrevenues (expenses), net 1,744 (846) 898

Change in net assets 13,777 4,039 17,816

Net assets:Beginning of year 602,463 147,051 749,514

End of year $ 616,240 151,090 767,330


42

Schedule III


Combining Schedule of Revenues, Expenses, and Changes in Net Assets

Year ended September 30, 2004

(In thousands)

Public Utility TotalNatural Trans- Other Water City

Electric Gas portation Services Total Utility Utilities

Operating revenues $ 163,477 87,934 621 8,765 260,797 27,274 288,071

Operating expenses:Production fuel and purchased power 69,289 — — — 69,289 — 69,289 Natural gas purchased for resale — 65,674 — — 65,674 — 65,674 Other production 10,023 — — — 10,023 4,485 14,508 Distribution and transmission 8,268 5,368 — — 13,636 2,797 16,433 Bus and garage operations — — 3,789 — 3,789 — 3,789 Other services — — — 4,563 4,563 — 4,563 Customer accounts 3,960 3,090 — 5 7,055 2,804 9,859 Administrative and general 13,852 4,511 1,269 2,440 22,072 5,282 27,354 Maintenance 18,492 2,143 1,010 — 21,645 3,901 25,546 Depreciation and amortization 23,390 5,113 388 2,344 31,235 4,402 35,637 Impairment of capital assets — — — — — — — Payments in lieu of taxes 4,897 3,427 24 — 8,348 1,094 9,442 Gain on other activities (2,730) — — — (2,730) — (2,730)

Total operating expenses 149,441 89,326 6,480 9,352 254,599 24,765 279,364

Operating income (loss) $ 14,036 (1,392) (5,859) (587) 6,198 2,509 8,707

Nonoperating revenues (expenses):Interest income 4,511 940 5,451 Net decrease in fair market value of

investments (902) (155) (1,057) Interest expense, net (3,436) (1,248) (4,684) Operation of recreational facilities, net (283) — (283) Amortization of debt-related costs 42 (1) 41 Other, net 2,089 (46) 2,043

Total nonoperatingrevenues (expenses), net 2,021 (510) 1,511

Change in net assets 8,219 1,999 10,218

Net assets:Beginning of year 594,244 145,052 739,296

End of year $ 602,463 147,051 749,514


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APPENDIX C

OPINION OF SPECIAL TAX COUNSEL February 9, 2006 Board of Public Utilities of the The Bank of New York Trust Company, N.A., City of Springfield, Missouri as trustee Springfield, Missouri St. Louis, Missouri A.G. Edwards & Sons, Inc. MBIA Insurance Corporation St. Louis, Missouri Armonk, New York Re: Certificates of Participation evidencing undivided fractional interests in Lease

Payments to be made by the Board of Public Utilities of the City of Springfield, Missouri pursuant to a Lease/Purchase Agreement dated as of February 9, 2006, between The Bank of New York Trust Company, N.A., as Trustee, as lessor, and the Board of Public Utilities of the City of Springfield, Missouri, as lessee

Ladies and Gentlemen: We have acted as special tax counsel in connection with the transaction involving the above-captioned Certificates of Participation (the "Certificates"), evidencing proportionate undivided fractional interests of the owners thereof in Lease Payments to be made by the Board of Public Utilities of the City of Springfield, Missouri ("City Utilities") pursuant to a Lease/Purchase Agreement dated as of February 9, 2006 (the "Lease"), between The Bank of New York Trust Company, as Trustee under the hereinafter-described Declaration of Trust (the "Trustee"), as lessor, and City Utilities, as lessee, and as such we have examined (a) the Lease, (b) the Declaration of Trust dated as of February 9, 2006 (the "Declaration of Trust"), executed by the Trustee, (c) the Acquisition Fund Trust Agreement dated as of February 9, 2006 (the "Acquisition Fund Agreement"), between City Utilities and UMB Bank, N.A., as trustee, (d) the Prepayment Fund Escrow Agreement dated as of February 9, 2006 (the "Escrow Agreement"), between City Utilities and UMB Bank, N.A., as escrow agent; (e) certifications of officers and officials of City Utilities and others, (f) the opinion of counsel to City Utilities, and (g) the form of the Certificates. All capitalized terms used in this opinion without definition have the respective meanings assigned to them in the Lease. Under the Lease, City Utilities has the use of and an option to purchase the Projects on certain conditions upon payment of the rentals and purchase price set forth therein. Lease Payments under the Lease are payable solely from Available Revenues. The Lease Payments (a) are subordinate (i) to any revenue bonds of the City of Springfield, Missouri (the "City"), now outstanding or hereafter issued that are secured by a pledge of the revenues of the Public Utility System and (ii) to the Senior Lease and (b) are on a parity with any Parity Leases. In rendering the opinions set forth herein, we have assumed, without undertaking to verify the same by independent investigation, (a) as to questions of fact, the accuracy of all representations of City Utilities and the Trustee set forth in the Lease and all certifications contained in certificates of officers of City Utilities and others examined by us, (b) the confirmation to original documents of all documents submitted to us as copies and the authenticity of such original documents and all documents submitted to us as originals, and (c) the compliance by City Utilities with the Lease, the Acquisition Fund Agreement and the Escrow Agreement.

We have not been engaged or undertaken to review the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Lease and we express no opinion herein relating thereto. We express no opinion as to the title to or the description of the Projects or as to the granting, perfection, priority or preservation of the security interest created under the Lease. Based upon the foregoing, we are of the opinion, as of the date hereof and under existing law, as follows:

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1. City Utilities is an administrative board of the City created pursuant to the Charter of the City to control and operate the Projects and the Public Utility System, and is validly existing under the constitution and the laws of the State of Missouri. 2. The City is a municipal corporation validly existing under the constitution and the laws of the State of Missouri. 3. City Utilities has full power and authority to execute and perform the Lease and to lease the Projects from the Trustee under the Lease. 4. The Lease has been duly authorized by City Utilities pursuant to law, has been properly executed and delivered by City Utilities and constitutes a valid and binding obligation of City Utilities, enforceable in accordance with its terms, except insofar as the enforcement thereof may be limited by any applicable bankruptcy, insolvency, moratorium, reorganization or other laws or equitable principles of general application, or of application to municipalities and political subdivisions such as the City or administrative boards such as City Utilities, affecting remedies or creditors' rights. 5. The Certificates evidence interests in the rights to receive Lease Payments under the Lease, which rights are enforceable against City Utilities subject to the terms of the Certificates, the Declaration of Trust and the Lease. 6. The interest portion of each Lease Payment paid by City Utilities under the Lease and distributed to the registered owners of the Certificates (including any original issue discount properly allocable to such registered owners) is excluded from gross income of such registered owners for federal and Missouri income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. It should be noted, however, that for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest portions are taken into account in determining adjusted current earnings. The opinions set forth in this paragraph are subject to the condition that City Utilities comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the execution and delivery of the Lease in order that interest portions of Lease Payments thereunder be, or continue to be, excluded from gross income for federal income tax purposes. City Utilities has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest portions of Lease Payments in gross income for federal income tax purposes retroactive to the date of execution and delivery of the Lease. City Utilities has not designated the Lease as a "qualified tax-exempt obligation" within the meaning of Section 265(b)(3) of the Code. We express no opinion regarding other federal and Missouri tax consequences arising with respect to the Certificates or the Lease. Very truly yours,

APPENDIX D

SPECIMEN MBIA POLICY


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