state of california county of los angeles …cdiacdocs.sto.ca.gov/2013-0550.pdfdated: date of...

Dated: February 21, 2013

NEW ISSUE — BOOK-ENTRY ONLY

RATED: S&P: BBB+(See “LEGAL MATTERS—Rating” herein)

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on the 2013 Bonds described herein is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the 2013 Bonds is exempt from State of California personal income tax. See “LEGAL MATTERS—Tax Exemption” herein.

Dated: Date of Delivery Due: September 1, as shown on the inside front cover hereof

The Sulphur Springs Union School District Community Facilities District No. 2002-1 Special Tax Bonds, Series 2013A (the “2013 Bonds”) are being issued by the Sulphur Springs Union School District Community Facilities District No. 2002-1 (the “District”), which was established by the Sulphur Springs Union School District (the “School District”), pursuant to a Fiscal Agent Agreement, dated as of June 1, 2012 (the “Original Fiscal Agent Agreement”), by and between the District and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”), as supplemented by a First Supplemental Fiscal Agent Agreement, by and between the District and the Fiscal Agent, dated as of March 1, 2013 (the “First Supplement,” and, together with the Original Fiscal Agent Agreement, the “Fiscal Agent Agreement”) and will be secured as described herein. The 2013 Bonds are being issued to (i) refund all of the District’s outstanding Subordinate Special Tax Bonds, Series 2008A issued in the original aggregate principal amount of $4,195,000, and currently outstanding in the aggregate principal amount of $4,155,000 (the “Subordinate 2008 Bonds”), (ii) fund a reserve account for the 2013 Bonds which, when combined with the amount in the reserve account funded with respect to the 2012 Bonds, equals the Reserve Requirement, and (iii) pay the costs of issuance of the 2013 Bonds. See “THE REFUNDING PLAN” herein. The Subordinate 2008 Bonds were originally issued primarily to refinance certain facilities of the School District.

The 2013 Bonds will be issued in denominations of $5,000 or any integral multiple thereof, shall mature on September 1 in each of the years and in the amounts, and shall bear interest as shown on the inside front cover hereof. Interest on the 2013 Bonds shall be payable on each March 1 and September 1, commencing September 1, 2013 (the “Interest Payment Dates”) to the Owner thereof as of the Record Date immediately preceding each such Interest Payment Date, by check mailed on such Interest Payment Date or by wire transfer to an account in the United States of America made upon instructions of any Owner of $1,000,000 or more in aggregate principal amount of 2013 Bonds. The 2013 Bonds, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the 2013 Bonds. Individual purchases of the 2013 Bonds will be made in book-entry form only. Principal of and interest and premium, if any, on the 2013 Bonds will be payable by DTC through the DTC participants. See “THE 2013 BONDS—Book-Entry System” and APPENDIX F—“INFORMATION CONCERNING DTC AND ITS BOOK-ENTRY ONLY SYSTEM” herein. Purchasers of the 2013 Bonds will not receive physical delivery of the 2013 Bonds purchased by them.

The 2013 Bonds are subject to optional redemption and special mandatory redemption prior to maturity as set forth herein. See “THE 2013 BONDS—Redemption” herein.

The 2013 Bonds are limited obligations of the District payable solely from the Net Taxes (as defined herein) to be levied on and collected from the owners of the taxable land within the District and from certain other funds pledged under the Fiscal Agent Agreement, all as further described herein. The Special Taxes are to be levied according to a Rate and Method of Apportionment of Special Tax approved by the qualified electors within the District on July 24, 2002.

The 2013 Bonds are payable on a parity with the District’s Special Tax Refunding Bonds, Series 2012A, originally issued in the aggregate amount of $16,410,000 and currently outstanding in the aggregate principal amount of $16,410,000 (the “2012 Bonds”) and any Parity Bonds (as defined herein) issued by the District in the future. See “THE 2013 BONDS — Issuance of Parity Bonds.”

NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT, THE SCHOOL DISTRICT, THE CITY, THE COUNTY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2013 BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE 2013 BONDS. THE 2013 BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE SCHOOL DISTRICT NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED HEREIN.

SEE THE SECTION OF THIS OFFICIAL STATEMENT ENTITLED “SPECIAL RISK FACTORS” FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED, IN ADDITION TO THE OTHER MATTERS SET FORTH HEREIN, IN CONSIDERING THE INVESTMENT QUALITY OF THE 2013 BONDS.

This cover page contains certain information for quick reference only. It is not a complete summary of the 2013 Bonds. Investors should read the entire Official Statement to obtain information essential to the making of an informed investment decision.

MATURITY SCHEDULE

(see inside cover page)

The 2013 Bonds are offered when, as and if issued, subject to approval as to their legality by Stradling Yocca Carlson & Rauth, San Francisco,

California, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the District by Parker & Covert LLP, Tustin, California, acting as counsel to the School District and the District, by Stradling Yocca Carlson & Rauth, San Francisco, California, Disclosure Counsel to the District with respect to the issuance of the 2013 Bonds, and for the Underwriter by its counsel, Nossaman LLP, Irvine, California. It is anticipated that the 2013 Bonds will be available for delivery on or about March 12, 2013.

STATE OF CALIFORNIA COUNTY OF LOS ANGELES

$4,335,000SULPHUR SPRINGS UNION SCHOOL DISTRICT COMMUNITY FACILITIES DISTRICT NO. 2002-1

SPECIAL TAX REFUNDING BONDS, SERIES 2013A

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Typewritten Text

2013-0550

MATURITY SCHEDULE

SULPHUR SPRINGS UNION SCHOOL DISTRICT COMMUNITY FACILITIES DISTRICT NO. 2002-1

SPECIAL TAX REFUNDING BONDS, SERIES 2013A

$1,925,000 Serial Bonds

Maturity Date (September 1)

Principal Amount Interest Rate Yield Price CUSIP No.®†

2013 $ 50,000 2.000% 0.750% 100.584 865483BT7 2014 70,000 2.000 1.000 101.454 865483BU4 2015 75,000 2.000 1.410 101.426 865483BV2 2016 80,000 2.000 1.760 100.804 865483BW0 2017 90,000 2.000 2.050 99.787 865483BX8 2018 100,000 2.125 2.330 98.952 865483BY6 2019 105,000 2.375 2.590 98.726 865483BZ3 2020 115,000 2.500 2.850 97.659 865483CA7 2021 120,000 2.750 3.090 97.482 865483CB5 2022 130,000 3.125 3.320 98.425 865483CC3 2023 135,000 3.375 3.550 98.480 865483CD1 2024 145,000 3.500 3.680 98.327 865483CE9 2025 165,000 3.500 3.770 97.332 865483CF6 2026 175,000 3.750 3.860 98.852 865483CG4 2027 180,000 3.750 3.960 97.702 865483CH2 2028 190,000 3.875 4.010 98.453 865483CJ8

$2,410,000 Term Bonds

$1,080,000 4.125% Term Bonds due September 1, 2033 Yield: 4.280% Price: 97.899 CUSIP No. ®† 865483CK5 $1,330,000 4.375% Term Bonds due September 1, 2038 Yield: 4.580% Price: 96.935 CUSIP No. ®† 865483CL3

† CUSIP® is a registered trademark of the American Bankers Association. Copyright© 2013 Standard & Poor’s, a Division of

the McGraw Hill Companies, Inc. CUSIP® data herein is provided by Standard & Poor’s CUSIP Service Bureau. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service Bureau. CUSIP® numbers are provided for convenience of reference only. Neither the District nor the Underwriter takes any responsibility for the accuracy of such numbers.

SULPHUR SPRINGS UNION SCHOOL DISTRICT

Board of Trustees

Denis DeFigueiredo, President Dr. Kerry Clegg, Clerk

Michael Hogan, Member Lori MacDonald, Member

Shelley Weinstein, Member

School District Staff

Dr. Robert Nolet, Superintendent Lynn David, Assistant Superintendent, Business Services

Kathy Harris, Assistant Superintendent, Instructional Services

SPECIAL SERVICES

Special Counsel To District

Parker & Covert LLP Tustin, California

Bond and Disclosure Counsel

Stradling Yocca Carlson & Rauth San Francisco, California

Fiscal Agent

U.S. Bank National Association Los Angeles, California

Underwriter

Piper Jaffray & Co. El Segundo, California

Underwriter’s Counsel

Nossaman LLP Irvine, California

Financial Advisor

Keygent LLC El Segundo, California

Special Tax Consultant

Dolinka Group, LLC Irvine, California

Verification Agent

Causey, Demgen & Moore Denver, Colorado

All information for investors regarding Sulphur Springs Union School District, the District and the 2013 Bonds is contained in this Official Statement. While the School District maintains an internet website for various purposes, none of the information on that website is intended to assist investors in making any investment decision or to provide any continuing information with respect to the 2013 Bonds or any other bonds or obligations of the School District. No dealer, broker, salesperson or other person has been authorized by the School District to provide any information or to make any representations other than as contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by the School District. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the 2013 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers of 2013 Bonds. Statements contained in this Official Statement that involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts.

The information set forth herein has been obtained from Sulphur Springs Union School District and certain other sources. Such information is believed to be reliable but is not guaranteed as to its accuracy or completeness. The information set forth in this Official Statement which has been obtained from third party sources is believed to be reliable but is not guaranteed as to accuracy or completeness by the School District or the District. The information and expressions of opinion herein are subject to change without notice; and neither 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 affairs of the School District or the District or any matters expressed herein since the date hereof. All summaries contained herein of the Fiscal Agent Agreement or other documents are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions.

The information in APPENDIX F—“INFORMATION CONCERNING DTC AND ITS BOOK-ENTRY ONLY SYSTEM” attached hereto has been furnished by The Depository Trust Company, and no representation has been made by the District or the School District or the Underwriter as to the accuracy or completeness of such information.

The Underwriter has provided the following sentence for inclusion in this Official Statement:

The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS IN

THIS OFFICIAL STATEMENT

Certain statements included or incorporated by reference in this Official Statement constitute “Forward-Looking Statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used, such as “plan,” “expect,” “estimate,” “budget” and other similar words and include, but are not limited to, statements that describe possible future development of property within the District.

The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. While the District has agreed to provide certain on-going financial and operating data for a limited period of time (see “CONTINUING DISCLOSURE” and Appendix E hereto), it does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which statements are based change.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2013 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE 2013 BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENTS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE FRONT COVER PAGE HEREOF, AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

THE 2013 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE 2013 BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

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TABLE OF CONTENTS

Page Page

INTRODUCTION ..................................................... 1 General .................................................................. 1 Use of Proceeds ..................................................... 1 Security for the 2013 Bonds .................................. 2 The District ............................................................ 2 The Special Tax ..................................................... 2 Foreclosure Covenant ............................................ 3 Limited Obligations ............................................... 3 Tax Matters ........................................................... 3 Professionals Involved in the Offering .................. 3 Bond Owners’ Risks .............................................. 3 Continuing Disclosure ........................................... 4 Further Information ............................................... 4 Forward Looking Statements ................................ 4

THE REFUNDING PLAN ........................................ 5 Verification of Mathematical Computations ......... 5

ESTIMATED SOURCES AND USES OF FUNDS ...................................................................... 5 THE 2013 BONDS .................................................... 6

Description of the 2013 Bonds .............................. 6 Redemption ........................................................... 6 The Fiscal Agent ................................................... 8 Book-Entry System ............................................... 8 Transfers and Exchange ........................................ 9 Issuance of Parity Bonds ....................................... 9 Debt Service Schedule ......................................... 11

SECURITY FOR THE 2013 BONDS ..................... 11 General ................................................................ 11 The Special Taxes ............................................... 12 Special Tax Fund ................................................. 12 Reserve Account .................................................. 14 Rate and Method of Apportionment of Special

Taxes ............................................................... 14 Covenant for Superior Court Foreclosure ............ 15 No Obligation of the School District Upon

Delinquency .................................................... 16 THE DISTRICT ...................................................... 16

Direct and Overlapping Debt ............................... 16 Overlapping Direct Assessments ......................... 18 Estimated Fiscal Year 2012-13 Tax Rates ........... 21 Assessed Value-to-Lien Ratios ............................ 22

Delinquency History ............................................ 27 Top Taxpayers ..................................................... 28

THE SCHOOL DISTRICT...................................... 28 SPECIAL RISK FACTORS .................................... 29

Risks of Real Estate Secured Investments Generally ......................................................... 29

Risks Related to Current Market Conditions ....... 30 Economic Uncertainty ......................................... 30 Disclosure to Future Homebuyers ....................... 30 Parity Taxes and Special Assessments ................ 30 Assessed Value; Land Value ............................... 31 Insufficiency of Special Taxes ............................ 31 Tax Delinquencies ............................................... 31 Uncertainties in Land Development – General .... 32 Future Land Use Regulations and Growth

Control Initiatives ............................................ 32 Natural Disasters ................................................. 33 Hazardous Substances ......................................... 33 Bankruptcy and Foreclosure ................................ 33 FDIC/Federal Government Interests in Parcels ... 34 Billing of Special Taxes ...................................... 35 Collection of Special Taxes ................................. 36 Maximum Special Tax Rates ............................... 36 Exempt Properties ............................................... 36 Payment of Special Taxes is not a Personal

Obligation of the Property Owners ................. 37 Proposition 218 .................................................... 37 Ballot Initiatives .................................................. 38 No Acceleration ................................................... 38 Loss of Tax Exemption ....................................... 38 Limitations on Remedies ..................................... 39 Limited Secondary Market .................................. 39

CONTINUING DISCLOSURE ............................... 39 LEGAL MATTERS ................................................ 40

Underwriting ....................................................... 40 Legal Opinion ...................................................... 41 Tax Exemption .................................................... 41 Rating .................................................................. 43 No Litigation ....................................................... 43 Additional Information ........................................ 43

APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES ................................... A-1 APPENDIX B THE COUNTY OF LOS ANGELES AND THE NEARBY COMMUNITY OF THE

CITY OF SANTA CLARITA ....................................................................................................... B-1 APPENDIX C SUMMARY OF FISCAL AGENT AGREEMENT ..................................................................... C-1 APPENDIX D FORM OF BOND COUNSEL OPINION .................................................................................... D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT ........................................................ E-1 APPENDIX F INFORMATION CONCERNING DTC AND ITS BOOK-ENTRY ONLY SYSTEM ............... F-1

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CFD No. 2002‐1

SULPHUR SPRINGS UNION SCHOOL DISTRICTCommunity Facilities District No. 2002-1Special Tax Refunding Bonds, Series 2012A (Fair Oaks Ranch)

Flown May 18, 2012 (Marshall LaPlante Photography); boundaries shown are approximate

[THIS PAGE INTENTIONALLY LEFT BLANK]

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OFFICIAL STATEMENT

$4,335,000 SULPHUR SPRINGS UNION SCHOOL DISTRICT COMMUNITY FACILITIES DISTRICT NO. 2002-1

SPECIAL TAX BONDS, SERIES 2013A

INTRODUCTION

General

This Official Statement, including the cover page, the inside cover page and the Appendices hereto, is provided to furnish certain information in connection with the issuance and sale by the Sulphur Springs Union School District Community Facilities District No. 2002-1 (the “District”) of its Special Tax Refunding Bonds, Series 2013A (the “2013 Bonds”) in the aggregate principal amount of $4,335,000. The 2013 Bonds will be issued pursuant to the provisions of a Fiscal Agent Agreement, dated as of June 1, 2012 (the “Original Fiscal Agent Agreement”), by and between the District and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”), as supplemented by a First Supplemental Fiscal Agent Agreement, by and between the District and the Fiscal Agent, dated as of March 1, 2013 (the “First Supplement,” and, together with the Original Fiscal Agent Agreement, the “Fiscal Agent Agreement”) and pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the “Act”).

The Act was enacted by the California Legislature to provide an alternate method of financing certain public facilities and services, especially in developing areas. Once duly established, a community facilities district is a legally constituted governmental entity established for the purpose of financing specific facilities and services within defined boundaries. Subject to approval by a two-thirds vote of the qualified electors within a community facilities district and compliance with the provisions of the Act, a community facilities district may issue bonds and levy and collect special taxes to repay its bonds.

The 2013 Bonds will be issued in denominations of $5,000 each or any integral multiple thereof and will be dated and bear interest from the date of their deliver, at the rates set forth on the inside cover page hereof. See “THE 2013 BONDS.” The 2013 Bonds, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the 2013 Bonds. Individual purchases of the 2013 Bonds will be made in book-entry form only. Principal of and interest and premium, if any, on the 2013 Bonds will be payable by DTC through the DTC participants. See “THE 2013 BONDS—Book-Entry System” and APPENDIX F—“INFORMATION CONCERNING DTC AND ITS BOOK-ENTRY ONLY SYSTEM.” Purchasers of the 2013 Bonds will not receive physical delivery of the 2013 Bonds purchased by them.

The 2013 Bonds are subject to optional redemption and special mandatory redemption prior to maturity as set forth herein. See “THE 2013 BONDS—Redemption” herein.

Use of Proceeds

The 2013 Bonds are being issued to (i) refund all of the District’s outstanding Subordinate Special Tax Bonds, Series 2008A issued in the original aggregate principal amount of $4,195,000, and currently outstanding in the aggregate principal amount of $4,155,000 (the “Subordinate 2008 Bonds”), (ii) fund a reserve account for the 2013 Bonds which, when combined with the amount in the reserve account funded with respect to the 2012 Bonds (defined below), equals the Reserve Requirement (defined herein), and (iii) pay the

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costs of issuance of the 2013 Bonds. See “THE REFUNDING PLAN” herein. The Subordinate 2008 Bonds were originally issued primarily to refinance certain facilities of the School District.

Security for the 2013 Bonds

The 2013 Bonds are secured by the pledge of Net Taxes and the other amounts in the Special Tax Fund (other than amounts in the Administrative Expense Account of the Special Tax Fund) on a parity with the District’s Special Tax Refunding Bonds, Series 2012A, originally issued in the aggregate amount of $16,410,000 and currently outstanding in the aggregate principal amount of $16,410,000 (the “2012 Bonds”) and any Parity Bonds (as defined herein) issued by the District in the future. See “THE 2013 BONDS—Issuance of Parity Bonds.” The 2012 Bonds and the 2013 Bonds are sometimes referred to in this Official Statement, collectively, as the “Bonds.” Net Taxes is defined as Gross Taxes (exclusive of any penalties and interest accruing with respect to delinquent Special Tax installments) minus an amount equal to the Administrative Expense Requirement. Gross Taxes means the amount of all special taxes (the “Special Taxes” or the “Special Tax”) received by the District, together with the proceeds collected from the sale of property pursuant to the foreclosure provision of the Fiscal agent Agreement for the delinquency of such Special Taxes remaining after the payment of all the costs related to such foreclosure actions, including, but not limited to, all legal fees and expenses, court costs, consultant and title insurance fees and expenses. See “SECURITY FOR THE 2013 BONDS—General.”

The District has established a Reserve Account pursuant to the Fiscal Agent Agreement. The Reserve Account will be funded from $58,378.04 of 2013 Bond proceeds and $1,601,628.09 of other moneys on deposit in the Reserve Account so that the Reserve Account balance will total $1,660,006.13 on the date of issuance of the 2013 Bonds. The Reserve Requirement as of any date of calculation will be an amount equal to the lowest of (1) 10% of the principal amount of the Bonds and each issue of Parity Bonds, or (2) Maximum Annual Debt Service, or (3) 125% of the average Annual Debt Service of the Outstanding Bonds and Parity Bonds. See “SECURITY FOR THE 2013 BONDS—Reserve Account.”

Under the Fiscal Agent Agreement, additional bonds may be issued secured on a parity with the 2012 Bonds and the 2013 Bonds if certain conditions are met. See “THE 2013 BONDS—Issuance of Parity Bonds” herein.

The District

The District consists of approximately 156.87 taxable acres constituting Phase II and Phase III of a three-phased development known as the Fair Oaks Ranch. At buildout, it is anticipated that the District will contain 1,238 residential dwelling units. As of May 1, 2012, the District contained 1,096 residential dwelling units which will be classified as “Developed Property” for Fiscal Year 2012-13 under the Rate and Method (defined below), and an additional 142 parcels will be classified as “Undeveloped Property” for Fiscal Year 2012-13 under the Rate and Method (defined below), assuming no further development within the District. See “THE DISTRICT” for further information regarding the District.

The Special Tax

On July 24, 2002, at an election held pursuant to the Act, the landowner who comprised the qualified elector of the District authorized the District to incur bonded indebtedness in an aggregate amount not to exceed $35,000,000, approved a Rate and Method of Apportionment of Special Tax (the “Rate and Method”) to be levied within and for the District to pay the principal of and interest on, the authorized bonded indebtedness, and approved an appropriations limit for the District equal to the maximum amount of bonded indebtedness authorized to be incurred for the District. See APPENDIX A—“RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES.”

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Foreclosure Covenant

The District has covenanted for the benefit of the owners of the Bonds that, under certain circumstances described herein, the District will commence judicial foreclosure proceedings with respect to delinquent Special Taxes on property within the District, and will diligently pursue such proceedings to completion. See “SECURITY FOR THE 2013 BONDS—The Special Taxes” and “SECURITY FOR THE 2013 BONDS—Covenant for Superior Court Foreclosure.” In addition, see “THE DISTRICT—Direct and Overlapping Debt” for a discussion of additional debt payable on a parity with the Bonds.

Limited Obligations

NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT, THE SCHOOL DISTRICT, THE COUNTY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2013 BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE 2013 BONDS. THE 2013 BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE SCHOOL DISTRICT NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED HEREIN.

See the section of this Official Statement entitled “SPECIAL RISK FACTORS” for a discussion of certain risk factors which should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the 2013 Bonds.

Tax Matters

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel, based on existing statutes, regulations, rulings and judicial decisions and assuming compliance with certain covenants and requirements described herein, interest (and original issue discount) on the 2013 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. It is the further opinion of Bond Counsel that interest (and original issue discount) on the 2013 Bonds is exempt from State of California personal income tax. See “LEGAL MATTERS—Tax Exemption” herein.

Professionals Involved in the Offering

U.S. Bank National Association will act as Fiscal Agent under the Fiscal Agent Agreement as the escrow agent under the 2013 Escrow Agreement relating to the defeasance of the Subordinate 2008 Bonds. Piper Jaffray & Co., El Segundo, California, is the Underwriter of the 2013 Bonds. Certain proceedings in connection with the issuance and delivery of the 2013 Bonds are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel and Disclosure Counsel. See APPENDIX D—“FORM OF BOND COUNSEL OPINION.” Keygent LLC is acting as Financial Advisor and dissemination agent to the School District in connection with the 2013 Bonds. Dolinka Group, LLC, Irvine, California, is acting as the Special Tax Consultant to the District. Certain legal matters will be passed upon for the District by Parker & Covert LLP, Tustin, California and for the Underwriter by its counsel, Nossaman LLP, Irvine, California. Other professional services have been performed by Causey, Demgen & Moore, Denver, Colorado, as the Verification Agent.

Bond Owners’ Risks

Certain events could affect the timely repayment of the principal of and interest on the 2013 Bonds when due. See the section of this Official Statement entitled “SPECIAL RISK FACTORS” for a discussion of

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certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the 2013 Bonds. The purchase of the 2013 Bonds involves significant investment risks, and the 2013 Bonds may not be suitable investments for many investors. See “SPECIAL RISK FACTORS” herein.

Continuing Disclosure

The District has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (“EMMA”) system for purposes of Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission certain annual financial information and operating data. The District has further agreed to provide notice of certain material events. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5). See “CONTINUING DISCLOSURE” herein and APPENDIX E—“FORM OF CONTINUING DISCLOSURE AGREEMENT” hereto for a description of the specific nature of the annual reports to be filed by the District and notices of material events to be provided by the District. See “CONTINUING DISCLOSURE.”

Further Information

This Official Statement speaks only as of its date, and the information contained herein is subject to change.

Brief descriptions of the 2013 Bonds, the security for the 2013 Bonds, special risk factors, the District, the School District, the Developer (as hereinafter defined) and other information are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. The descriptions herein of the 2013 Bonds, the Fiscal Agent Agreement, resolutions and other documents are qualified in their entirety by reference to the forms thereof and the information with respect thereto included in the 2013 Bonds, the Fiscal Agent Agreement, such resolutions and other documents. All such descriptions are further qualified in their entirety by reference to laws and to principles of equity relating to or affecting generally the enforcement of creditors’ rights. For definitions of certain capitalized terms used herein and not otherwise defined, and a description of certain terms relating to the 2013 Bonds, see APPENDIX C—“SUMMARY OF FISCAL AGENT AGREEMENT” hereto.

Copies of such documents may be obtained from the office of the Superintendent of the School District.

Forward Looking Statements

Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget” or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the captions “THE DISTRICT.”

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT.

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THE REFUNDING PLAN

A portion of the proceeds from the sale of the 2013 Bonds will be used, along with other funds held under the Fiscal Agent Agreement, by and between the District and U.S. Bank National Association, as Fiscal Agent (the “Subordinate 2008 Fiscal Agent”), dated as of January 1, 2008 (the “Subordinate 2008 Fiscal Agent Agreement”), to defease the Subordinate 2008 Bonds. The District will enter into a 2013 Escrow Agreement with regard to the Subordinate 2008 Bonds (the “Escrow Agreement”), dated as of March 1, 2013, by and between the District and U.S. Bank National Association, as 2013 Escrow Agent (the “Escrow Agent”). An irrevocable escrow fund will be established under the 2013 Escrow Agreement (the “2013 Escrow Fund”). The moneys deposited with the 2013 Escrow Agent will be sufficient to defease the Subordinate 2008 Bonds and redeem the Subordinate 2008 Bonds on March 15, 2013. Moneys on deposit in the 2013 Escrow Fund will be held uninvested in cash. The amounts in the 2013 Escrow Fund will be held by the 2013 Escrow Agent for the benefit of the owners of the Subordinate 2008 Bonds and will be applied to redeem the Subordinate 2008 Bonds which remain outstanding, in whole, on March 15, 2013 at a redemption price equal to 103% of the principal amount of the Subordinate 2008 Bonds to be redeemed, together with accrued interest to the redemption date. Upon the establishment of the 2013 Escrow Fund as described above, the Subordinate 2008 Bonds will be discharged under the Subordinate 2008 Fiscal Agent Agreement and the owners of the Subordinate 2008 Bonds will have no rights thereunder except to be paid the principal, interest and redemption price due on the Subordinate 2008 Bonds from amounts in the 2013 Escrow Fund. Amounts on deposit in the 2013 Escrow Fund are not available to pay debt service on the 2013 Bonds.

Verification of Mathematical Computations

Upon delivery of the 2013 Bonds, Causey, Demgen & Moore, Denver, Colorado, will deliver a report verifying the mathematical accuracy of certain computations concerning the adequacy of the amounts deposited in the 2013 Escrow Fund to pay the principal, redemption price and accrued interest on the Subordinate 2008 Bonds due on March 15, 2013.

ESTIMATED SOURCES AND USES OF FUNDS

The estimated sources and used of funds in connection with the issuance of the 2013 Bonds and certain funds held under the Subordinate 2008 Fiscal Agent Agreement, is set forth below:

Sources of Funds

Principal Amount of the 2013 Bonds $ 4,335,000.00 Moneys held under the Subordinate 2008 Fiscal Agent Agreement 474,783.18 Less: Net Original Issue Discount (88,736.20) Less: Underwriter’s Discount (54,187.50) Total Sources $ 4,666,859.48 Uses of Funds

Deposit to 2013 Escrow Fund $ 4,398,858.13 Deposit to Reserve Account 58,378.04 Deposit to Costs of Issuance Fund(1) 209,623.31 Total Uses $ 4,666,859.48

(1) Includes fees for Bond Counsel, Disclosure Counsel, Special Counsel, Financial Advisor, Special Tax Consultant,

Verification Agent, Rating Agency, 2013 Escrow Agent, costs of printing the Official Statement, and other costs of issuance of the 2013 Bonds.

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THE 2013 BONDS

Description of the 2013 Bonds

The 2013 Bonds will be issued as fully registered bonds, in denominations of $5,000 each or any integral multiple thereof within a single maturity and will be dated and bear interest from the date of their delivery (the “Dated Date”), at the rates set forth on the inside cover page hereof. The 2013 Bonds will be issued in fully registered form, without coupons.

Interest on the 2013 Bonds will be paid in lawful money of the United States of America semiannually on March 1 and September 1 of each year (each, an “Interest Payment Date”), commencing on September 1, 2013. Interest on the 2013 Bonds will be calculated on the basis of a 360-day year comprised of twelve 30-day months. Interest on the 2013 Bonds shall be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) such date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such 2013 Bond, in which event interest shall be payable from the dated date of such 2013 Bond; provided, however, that if at the time of authentication of such 2013 Bond, interest is in default, interest on that 2013 Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on that 2013 Bond, interest on that 2013 Bond shall be payable from its dated date.

The 2013 Bonds will mature on September 1 in the principal amounts and years as shown on the inside cover page hereof and are subject to optional redemption and special mandatory redemption as shown below.

Redemption

Optional Redemption. Subject to the limitations set forth below, the 2013 Bonds may be redeemed prior to maturity, at the option of the District from any source of funds, on any Interest Payment Date through March 1, 2023 and any date thereafter, in whole, or in part in the order of maturity selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption:

Redemption Dates Redemption Prices

September 1, 2013 through September 1, 2020 103%March 1, 2021 and September 1, 2021 102March 1, 2022 and September 1, 2022 101March 1, 2023 and any date thereafter 100

In the event the District elects to redeem 2013 Bonds as provided above, the District shall give

Written Request of the District to the Fiscal Agent of its election to so redeem, the redemption date and the principal amount of the 2013 Bonds to be redeemed. The notice to the Fiscal Agent shall be given at least 60 but no more than 90 days prior to the redemption date, or such shorter period as shall be acceptable to the Fiscal Agent.

Mandatory Sinking Fund Redemption. The 2013 Bonds maturing on September 1, 2033 will be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Principal Account, on September 1, 2029, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall

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be selected by the Fiscal Agent by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:

Term Bonds Maturing September 1, 2033

Sinking Fund Redemption Date September 1, Sinking Fund Payments

2029 $200,000 2030 205,000 2031 215,000 2032 225,000 2033 (maturity) 235,000

The 2013 Bonds maturing on September 1, 2038 will be called before maturity and redeemed, from

the Sinking Fund Payments that have been deposited into the Principal Account, on September 1, 2034, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Fiscal Agent by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:

Term Bonds Maturing September 1, 2038

Sinking Fund Redemption Date September 1, Sinking Fund Payments

2034 $245,000 2035 255,000 2036 265,000 2037 275,000 2038 (maturity) 290,000

Mandatory Redemption from Special Tax Prepayments. The 2013 Bonds are subject to mandatory

redemption, in whole or in part and on a pro rata basis among maturities, on any Interest Payment Date from and to the extent of any prepayment of Special Taxes at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption:

Redemption Dates Redemption Prices

September 1, 2013 through September 1, 2020 103% March 1, 2021 and September 1, 2021 102 March 1, 2022 and September 1, 2022 101 March 1, 2023 and any Interest Payment Date thereafter 100

In connection with such redemption, the District may also apply amounts in the Reserve Account

which will be in excess of the Reserve Requirement as a result of such Special Tax prepayment to redeem 2013 Bonds as set forth above.

Notice of Redemption. When 2013 Bonds are due for redemption under the Fiscal Agent Agreement, the Fiscal Agent shall give notice, in the name of the District, of the redemption of such 2013 Bonds; provided, however, that a notice of a redemption shall be conditioned on there being on deposit on the redemption date sufficient money to pay the redemption price of the 2013 Bonds to be redeemed. Such notice of redemption shall (a) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the 2013 Bonds selected for redemption, except that where all of the 2013 Bonds of a maturity are subject to

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redemption, or all the 2013 Bonds of one maturity, are to be redeemed, the bond numbers of such issue need not be specified; (b) state the date fixed for redemption and surrender of the 2013 Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the 2013 Bonds are to be redeemed; (e) in the case of 2013 Bonds to be redeemed only in part, state the portion of such 2013 Bond which is to be redeemed; (f) state the date of issue of the 2013 Bonds as originally issued; (g) state the rate of interest borne by each 2013 Bond being redeemed; and (h) state any other descriptive information needed to identify accurately the 2013 Bonds being redeemed as shall be specified by the Fiscal Agent. Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each 2013 Bond, or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least 30 days but no more than 60 days prior to the redemption date, the Fiscal Agent shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the 2013 Bond Register. The actual receipt by the Owner of any 2013 Bond or the original purchaser of any 2013 Bond of notice of such redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such 2013 Bonds, or the cessation of interest on the redemption date.

Effect of Notice of Redemption. Notice of redemption having been duly given, as provided in the Fiscal Agent Agreement, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption:

(1) The 2013 Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in the Fiscal Agent Agreement, anything in the Fiscal Agent Agreement or in the 2013 Bonds to the contrary notwithstanding;

(2) Upon presentation and surrender thereof at the office of the Fiscal Agent, the redemption price of such 2013 Bonds shall be paid to the Owners thereof;

(3) As of the redemption date the 2013 Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such 2013 Bonds, or portions thereof, shall cease to bear further interest; and

(4) As of the date fixed for redemption no Owner of any of the 2013 Bonds, or portions thereof so designated for redemption shall be entitled to any of the benefits of this Fiscal Agent Agreement, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available.

The Fiscal Agent

U.S. Bank National Association has been appointed as the Fiscal Agent for all of the 2013 Bonds under the Fiscal Agent Agreement. For a further description of the rights and obligations of the Fiscal Agent pursuant to the Fiscal Agent Agreement, see APPENDIX C—“SUMMARY OF FISCAL AGENT AGREEMENT” hereto.

Book-Entry System

The Depository Trust Company, New York, New York (“DTC”), will act as securities depository for the 2013 Bonds. The 2013 Bonds will be registered in the name of Cede & Co. (DTC’s partnership nominee), and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC. Ultimate purchasers of 2013 Bonds will not receive physical certificates representing their interest in the 2013 Bonds. So long as the 2013 Bonds are registered in the name of Cede & Co., as nominee of DTC, references herein to the Owners shall mean Cede & Co., and shall not mean the ultimate purchasers of the 2013 Bonds. Payments of the principal of, premium, if any, and

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interest on the 2013 Bonds will be made directly to DTC, or its nominee, Cede & Co., by the Fiscal Agent, so long as DTC or Cede & Co. is the registered owner of the 2013 Bonds. Disbursements of such payments to DTC’s Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC’s Participants and Indirect Participants. See APPENDIX F—“INFORMATION CONCERNING DTC AND ITS BOOK-ENTRY ONLY SYSTEM.”

Transfers and Exchange

So long as the 2013 Bonds remain in book-entry form, transfer and exchange of any of the 2013 Bonds will be accomplished in accordance with the provisions of such book-entry system. In the event of termination of such book-entry system with respect to the 2013 Bonds, the 2013 Bonds may be transferred and exchanged in accordance with the terms of the Fiscal Agent Agreement. See APPENDIX C—“SUMMARY OF FISCAL AGENT AGREEMENT” and APPENDIX F—“INFORMATION CONCERNING DTC AND ITS BOOK-ENTRY ONLY SYSTEM.”

Issuance of Parity Bonds

The District may at any time after the issuance and delivery of the 2013 Bonds issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expense Account and the Lease Payment Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the outstanding 2012 Bonds and the 2013 Bonds and any other Parity Bonds theretofore issued under the Fiscal Agent Agreement or under any Supplemental Fiscal Agent Agreement. Parity Bonds may be issued subject to additional specific conditions provided in the Fiscal Agent Agreement.

One such condition requires a certificate from one or more Special Tax Consultants which, when taken together, certify that:

(i) the amount of Special Taxes that may be levied by the District pursuant to the Act and the applicable resolutions and ordinances of the District in each subsequent Fiscal Year on then existing Developed Property (as defined in the Rate and Method of Apportionment of Special Taxes then in effect in the District) will produce Net Taxes (assuming no Special Tax delinquencies) of at least 1.10 times the corresponding Annual Debt Service for each remaining Bond Year on all Outstanding Bonds theretofore issued and the Parity Bonds proposed to be issued, and

(ii) the value of all parcels of real property in the District subject to the levy of the Special Tax and not delinquent in the payment of any Special Taxes due and owing, as determined based on an appraisal performed on a basis generally consistent with the appraisal conducted in connection with the issuance of the Bonds or based on assessed value, is at least ten times the sum of:

(a) the aggregate principal amount of all Bonds and Parity Bonds then Outstanding, plus

(b) the aggregate principal amount of the series of Parity Bonds proposed to be issued, plus

(c) the aggregate principal amount of any fixed assessment liens on the parcels in the District subject to the levy of Special Taxes, plus

(d) a portion of the aggregate principal amount of any and all other community facilities district bonds then outstanding and payable at least partially from special taxes to be levied on parcels of property within the District (the “Other CFD Bonds”) equal to

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the aggregate principal amount of the Other CFD Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other CFD Bonds on parcels of property within the District, and the denominator of which is the total amount of special taxes levied for the Other CFD Bonds on all parcels of property which are subject to the levy of such special taxes are levied to pay the Other CFD Bonds (such fraction to be determined based upon the maximum special taxes which could be levied in the year in which maximum annual debt service on the Other CFD Bonds occurs), based upon information which is available for the then current Fiscal Year.

However, if the Parity Bonds proposed to be issued are being issued to refund other outstanding 2012 Bonds, 2013 Bonds or Parity Bonds, the conditions precedent described above may be satisfied with a certificate of an Independent Financial Consultant certifying that in each Bond Year the Annual Debt Service on the 2012 Bonds, 2013 Bonds and Parity Bonds to remain Outstanding following the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the 2012 Bonds, 2013 Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds. See APPENDIX C—“SUMMARY OF FISCAL AGENT AGREEMENT—DEFEASANCE AND PARITY BONDS―Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness” herein.

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Debt Service Schedule

The following is the debt service schedule for the 2013 Bonds, assuming no redemptions.

DEBT SERVICE SCHEDULE – THE 2013 BONDS

Year Ending (September 1) Principal Interest Annual Debt Service

2013 $ 50,000 $ 75,568.82 $ 125,568.82 2014 70,000 159,975.00 229,975.00 2015 75,000 158,575.00 233,575.00 2016 80,000 157,075.00 237,075.00 2017 90,000 155,475.00 245,475.00 2018 100,000 153,675.00 253,675.00 2019 105,000 151,550.00 256,550.00 2020 115,000 149,056.26 264,056.26 2021 120,000 146,181.26 266,181.26 2022 130,000 142,881.26 272,881.26 2023 135,000 138,818.76 273,818.76 2024 145,000 134,262.50 279,262.50 2025 165,000 129,187.50 294,187.50 2026 175,000 123,412.50 298,412.50 2027 180,000 116,850.00 296,850.00 2028 190,000 110,100.00 300,100.00 2029 200,000 102,737.50 302,737.50 2030 205,000 94,487.50 299,487.50 2031 215,000 86,031.26 301,031.26 2032 225,000 77,162.50 302,162.50 2033 235,000 67,881.26 302,881.26 2034 245,000 58,187.50 303,187.50 2035 255,000 47,468.76 302,468.76 2036 265,000 36,312.50 301,312.50 2037 275,000 24,718.76 299,718.76 2038 290,000 12,687.50 302,687.50 Totals $4,335,000 $ 2,810,318.90 $7,145,318.90

SECURITY FOR THE 2013 BONDS

General

NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT, THE SCHOOL DISTRICT, THE COUNTY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2013 BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE 2013 BONDS. THE 2013 BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE SCHOOL DISTRICT NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED HEREIN.

The 2013 Bonds are secured by a pledge of Net Taxes and the other amounts in the Special Tax Fund (other than amounts in the Administrative Expense Account of the Special Tax Fund). Net Taxes is defined as Gross Taxes (exclusive of any penalties and interest accruing with respect to delinquent Special Tax installments) minus an amount equal to the Administrative Expense Requirement. Gross Taxes means the

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amount of all special taxes (the “Special Taxes” or the “Special Tax”) received by the District, together with the proceeds collected from the sale of property pursuant to the foreclosure provision of the Fiscal Agent Agreement for the delinquency of such Special Taxes remaining after the payment of all the costs related to such foreclosure actions, including, but not limited to, all legal fees and expenses, court costs, consultant and title insurance fees and expenses.

In the event that delinquencies occur in the receipt of the Special Taxes within the District in any fiscal year, the District may increase its Special Tax levy in the following fiscal year up to the maximum amount permitted under the Rate and Method. Under no circumstances, however, will Special Taxes levied against any parcel used for private residential purposes be increased by more than 10 percent as a consequence of delinquency or default by the owner of any other parcel or parcels within the District. Although the Special Tax levy may be increased, Special Taxes resulting from the increase may not be available to cure any delinquencies for a period of one year or more. In addition, an increase in the Special Tax levy may adversely affect the ability or willingness of property owners to pay their Special Taxes. See “—Rate and Method of Apportionment of Special Taxes” below and APPENDIX A—“RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES” hereto for a description of the District’s procedures for levying Special Taxes, and “SPECIAL RISK FACTORS—Insufficiency of Special Taxes.”

OWNERSHIP OF THE 2013 BONDS IS SUBJECT TO A SIGNIFICANT DEGREE OF RISK. POTENTIAL INVESTORS ARE ADVISED TO CAREFULLY READ THE SECTION OF THIS OFFICIAL STATEMENT ENTITLED “SPECIAL RISK FACTORS.”

The Special Taxes

The Special Taxes are to be apportioned, levied and collected according to the Rate and Method for the District. See APPENDIX A—“RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES” hereto.

Beginning in Fiscal Year 2012-13 and so long as any 2012 Bonds, 2013 Bonds or Parity Bonds issued under the Fiscal Agent Agreement are Outstanding, the District has covenanted to levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund and available for such purpose, to pay (1) the principal of and interest on the 2012 Bonds, 2013 Bonds and any Parity Bonds when due, (2) the Administrative Expenses, and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement. Subject to the maximum special tax rates, the Rate and Method is formulated to result in the levy each year of an amount of such payment of principal, premium, if any, and interest, replenishment of the Reserve Account and related administrative expenses; however, see “SPECIAL RISK FACTORS” for a discussion of certain factors affecting the actual timely collection of such Special Tax levies.

Special Tax Fund

Pursuant to the Fiscal Agent Agreement, there is established a “Community Facilities District No. 2002-1 Special Tax Fund” (the “Special Tax Fund”) to be held and maintained by the Fiscal Agent. In the Special Tax Fund there is further established and created an Interest Account, a Principal Account, a Redemption Account, a Reserve Account and an Administrative Expense Account.

The amounts on deposit in the foregoing funds and accounts will be held by the Fiscal Agent in trust and the Fiscal Agent will invest and disburse the amounts in such funds and accounts in accordance with the provisions of the Fiscal Agent Agreement and will disburse investment earnings thereon in accordance with the provisions of the Fiscal Agent Agreement.

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The District will, on each date on which it receives Special Taxes, transfer the Special Taxes to the Fiscal Agent for deposit in the Special Tax Fund in accordance with the terms of the Fiscal Agent Agreement to be held in trust. The Fiscal Agent will first deposit into the Administrative Expense Account of the Special Tax Fund an amount equal to the Administrative Expense Requirement and shall then transfer the amounts on deposit in the Special Tax Fund on the dates and in the amounts set forth in the Fiscal Agent Agreement, in the following order of priority, to:

1. The Interest Account of the Special Tax Fund;

2. The Principal Account of the Special Tax Fund;

3. The Redemption Account of the Special Tax Fund;

4. The Reserve Account of the Special Tax Fund;

5. The Administrative Expense Account of the Special Tax Fund;

6. The Rebate Fund; and

7. The Surplus Fund.

Administrative Expense Account. The Fiscal Agent will transfer from the Special Tax Fund and deposit in the Administrative Expense Account of the Special Tax Fund from time to time amounts necessary to make timely payment of Administrative Expenses, which will be disbursed by the Fiscal Agent upon the Written Request of the District.

Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the 2012 Bonds, 2013 Bonds and any Parity Bonds until maturity, other than principal due upon redemption, will be paid by the Fiscal Agent from the Principal Account and the Interest Account of the Special Tax Fund, respectively. At least five Business Days prior to each March 1 and September 1, the Fiscal Agent will make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the 2012 Bonds, 2013 Bonds, any Parity Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account:

1. To the Interest Account, an amount such that the balance in the Interest Account five Business Days prior to each Interest Payment Date will be equal to the installment of interest due on the 2012 Bonds, 2013 Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the 2012 Bonds, 2013 Bonds and any Parity Bonds as the same become due.

2. To the Principal Account, an amount such that the balance in the Principal Account five Business Days prior to September 1 of each year, commencing September 1, 2013 shall at least equal the principal payment due on the 2012 Bonds, 2013 Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account will be used for the payment of the principal of such 2012 Bonds, 2013 Bonds and any Parity Bonds as the same become due at maturity.

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Reserve Account

Moneys in the Reserve Account will be used solely for the purpose of paying the principal of and interest on any 2012 Bonds, 2013 Bonds and Parity Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of or interest on any 2012 Bonds, 2013 Bonds and Parity Bonds when due, the Fiscal Agent will withdraw from the Reserve Account for deposit in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund, as applicable, moneys necessary for such purposes.

Whenever moneys are withdrawn from the Reserve Account, after making the required transfers under the Fiscal Agent Agreement, the Fiscal Agent will transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the District elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund will be deemed available for transfer to the Reserve Account only if the Fiscal Agent determines that such amounts will not be needed to make the deposits required to be made to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund. If amounts in the Special Tax Fund or otherwise transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement, then the District will include the amount necessary to fully restore the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates.

Anything to the contrary in the Fiscal Agent Agreement notwithstanding, the District may, at any time on or after the date of issuance of Parity Bonds, substitute an Alternate Reserve Account Security for cash in the Reserve Account.

Rate and Method of Apportionment of Special Taxes

The following is a summary of certain provisions of the Rate and Method. This summary does not purport to be comprehensive and reference should be made to the Rate and Method attached hereto as Appendix A. All capitalized terms not defined in this section have the meanings set forth in the Rate and Method.

For each Fiscal Year (i) each Assessor’s Parcel will be classified as Exempt Property or Taxable Property, (ii) each Assessor’s Parcel of Taxable Property will be classified as Developed Property or Undeveloped Property, (iii) each Assessor’s Parcel will be assigned to a Zone, (iv) each Assessor’s Parcel of Developed Property will further be classified as a Detached Unit or Attached Unit, and (v) each Assessor’s Parcel of Developed Property classified as a Detached Unit will further be classified according to its Building Square Footage.

Each Fiscal Year Annual Special Taxes will be levied on each Assessor’s Parcel of Developed Property at the applicable Assigned Annual Special Tax rate. Annual Special Taxes collected will be used to satisfy the Minimum Annual Special Tax Requirement for the District. If additional Annual Special Taxes are required to satisfy the Minimum Annual Special Tax Requirement, then Annual Special Taxes shall be levied Proportionately on each Assessor’s Parcel of Undeveloped Property up to the applicable Assigned Annual Special Tax to satisfy such Minimum Annual Special Tax Requirement. If additional Annual Special Taxes are still required to satisfy the Minimum Annual Special Tax Requirement, then the Annual Special Taxes on each Assessor’s Parcel of Developed Property whose Maximum Special Tax is the Backup Annual Special Tax will be increased Proportionately up to the Backup Annual Special Tax to satisfy the Minimum Annual Special Tax Requirement.

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The maximum Special Taxes that may be levied on Developed Property within the District are at least 110% of maximum annual debt service on the 2012 Bonds and the 2013 Bonds. Notwithstanding that the maximum Special Taxes that may be levied in the District exceeds debt service due on the 2012 Bonds and the 2013 Bonds, the Special Taxes collected could be inadequate to make timely payment of debt service either because of nonpayment or because property becomes exempt from taxation as permitted in the Rate and Method. In the event of significant delinquencies in the District causing a depletion of all amounts on deposit in the Reserve Account, there would not be sufficient Special Taxes to pay the full amount of annual debt service on the 2012 Bonds and the 2013 Bonds until the delinquent Special Taxes were collected through foreclosure action or otherwise. See “SPECIAL RISK FACTORS—Bankruptcy and Foreclosure” for a discussion of potential delays in foreclosure actions.

Pursuant to the Rate and Method and the Act, under no circumstances may the Special Tax levied against any parcel used for private residential purposes be increased as a consequence of delinquency or default by owner of any other parcel or parcels within the District by more than 10% in any fiscal year. Thus, the District may not be able to increase Special Tax levies in future fiscal years by enough to make up for delinquencies for prior fiscal years. This would result in draws on the Reserve Account, and if delinquencies continue and in the aggregate exceed the Reserve Account balance, defaults would occur in the payment of principal and interest on the 2012 Bonds and the 2013 Bonds.

Covenant for Superior Court Foreclosure

In the event of a delinquency in the payment of any installment of Special Taxes, the District is authorized by the Act to order institution of an action in the Superior Courts of the State to foreclose any lien therefor. In such action, the real property subject to the Special Taxes may be sold at a judicial foreclosure sale. The ability of the District to foreclose the lien of delinquent unpaid Special Taxes may be limited in certain instances and may require prior consent of the property owner in the event the property is owned by or in receivership of the Federal Deposit Insurance Corporation (the “FDIC”) or other similar federal agencies. See “SPECIAL RISK FACTORS—Bankruptcy and Foreclosure” and “SPECIAL RISK FACTORS—Tax Delinquencies.” Such judicial foreclosure proceedings are not mandatory. However, in the Fiscal Agent Agreement, the District has covenanted for the benefit of the Owners of the Bonds and any Parity Bonds that it (i) will commence judicial foreclosure proceedings against all parcels owned by a property owner where the aggregate delinquent Special Taxes on such parcels is greater than $5,000 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due and (ii) will commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided, however, that the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account of the Special Tax Fund is at least equal to the Reserve Requirement and such delinquencies will not cause moneys in the Reserve Account to be withdrawn. The District may, but is not obligated to, advance funds from any source of legally available funds in order to maintain the Reserve Account of the Special Tax Fund at the Reserve Requirement.

There could be a default or a delay in payments to the owners of the 2013 Bonds pending prosecution of foreclosure proceedings and receipt by the District of foreclosure sale proceeds, if any, and subsequent transfer of those proceeds to the School District. However, up to the maximum amount permitted under the applicable Rate and Method, the District may adjust the Special Taxes levied on all property within the District to provide the amount required to pay debt service on the 2013 Bonds, subject to the following limitation. Pursuant to Government Code Section 53321(d), the Special Tax for public facilities levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within the District by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. See “SECURITY FOR THE 2013 BONDS—The Special Taxes” and

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APPENDIX A—“RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES.” See “SPECIAL RISK FACTORS—Bankruptcy and Foreclosure.”

No Obligation of the School District Upon Delinquency

The School District is under no obligation to transfer any funds of the School District into the Special Tax Fund or any other funds or accounts under the Fiscal Agent Agreement for the payment of the principal of or interest on the 2013 Bonds if a delinquency occurs in the payment of any Special Taxes. See “SECURITY FOR THE 2013 BONDS—Covenant for Superior Court Foreclosure” for a discussion of the District’s obligation to foreclose Special Tax liens upon delinquencies.

THE DISTRICT

On June 19, 2002, the Board adopted a Resolution of Intention to form a community facilities district under the Act, to levy a special tax and to incur bonded indebtedness for the purpose of financing the improvements. After conducting a noticed public hearing, on July 24, 2002, the Board adopted the Resolution of Formation, which established the District and set forth the Rate and Method of Apportionment for the levy and collection of Special Taxes.

On July 24, 2002, an election was held within the District in which the sole landowner eligible to vote unanimously approved the incurrence of bonded indebtedness in an amount not to exceed $35,000,000 and the levy of the Special Tax.

Under the authorization approved by the eligible voters within the District, an additional $14,545,000 of bonds may be issued by the District. The District expects to issue bonds in the future whose proceeds will be used to finance certain school facilities outside the boundaries of the District. Such bonds, when issued, will be secured by Special Taxes levied on taxable parcels within the District. The School District expects that the Special Tax levied for purposes of financing school facilities will be greater in amount than the Special Tax levied for purposes of financing non-school facilities.

The District consists of approximately 156.87 taxable acres constituting Phase II and Phase III of a three-phased development known as the Fair Oaks Ranch. At buildout, it is anticipated that the District will contain 1,238 residential dwelling units. As of May 1, 2012, the District contained 1,096 residential dwelling units which will be classified as “Developed Property” for Fiscal Year 2012-13 under the Rate and Method, and an additional 142 parcels will be classified as “Undeveloped Property” for Fiscal Year 2012-13 under the Rate and Method, assuming no further development with the District. The Developed Property includes 33 parcels of Developed Property for which, as of January 1, 2012, no assessed value has been assigned by the County of Los Angeles (the “County”) Assessor in respect of improvements to the property. However, of the 33 parcels of Developed Property which had not been assigned improvement values for Fiscal Year 2012-13, 30 parcels have been issued Certificates of Occupancy as of January 1, 2013, indicating completion of a residential structure on such parcels. See “—Assessed Value-to-Lien Ratios” below.

Fair Oaks Ranch is the first master planned community built by the Developer in the east Santa Clarita Valley. Formerly known as Provence, this project totals 884.5 total gross acres (340 acres of residential, 30 acres of schools and parks, 27 acres of commercial and 487 acres of open space). The project was originally approved for 3,978 units with many high-density projects, but this total has been downsized. At buildout, Fair Oaks Ranch is projected to be comprised of 1,144 single family homes, 334 detached condominiums and 153 attached condominiums.

Direct and Overlapping Debt

The District is included within the boundaries of numerous overlapping local agencies providing governmental services. Some of these local agencies have outstanding bonds, and/or the authority to issue

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bonds, payable from taxes or assessments. The existing and authorized indebtedness payable from taxes and assessments that may be levied upon the property within the District is shown in Table 1 below. In addition to current debt, new community facilities districts and/or special assessment districts could be formed in the future encompassing all or a portion of the property within the District without the approval of the District or the School District and such districts or the agencies that formed them could issue more bonds and levy additional special taxes or assessments.

The Table below reflects all property in the District, including all Developed Property, all Undeveloped Property and five parcels which are exempt from the Special Tax. As illustrated in the following tables, the Fiscal Year 2012-13 assessed value of the property subject to the Special Tax is $424,112,676, and the projected value-to-lien (including the 2012 Bonds, the 2013 Bonds and all other overlapping general obligation, special tax and assessment bonds within the District (approximately $26,434,661.11, inclusive of the 2012 Bonds and the 2013 Bonds)) is approximately 16.04-to-1. However, such value-to-lien ratio is for the entire District. The ratios of the value of individual lots within the District to their respective shares of the principal amount of the 2012 Bonds, 2013 Bonds and other overlapping debt varies substantially. See Table 3 herein. The data in Table 1 is as of January 1, 2013 and includes the Subordinate 2008 Bonds but not the 2013 Bonds, and also includes direct and overlapping debt for the entire District, including five parcels exempt from Special Taxes.

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TABLE 1 SULPHUR SPRINGS UNION SCHOOL DISTRICT COMMUNITY FACILITIES DISTRICT NO. 2002-1

DIRECT AND OVERLAPPING DEBT AS OF JANUARY 1, 2013

I. Assessed Value 2012-2013 Secured Roll Assessed Value $ 426,735,859 II. Secured Property Taxes Description on Tax Bill Type Total Parcels Total Levy % Applicable Parcels Levy Combined Ad Valorem Tax Charges AVALL 2,345,189 $ 12,543,097,637 0.04148% 1,245 $ 5,203,035.93 County of Los Angeles Change of Ownership Penalty PENALTY 3,909 1,489,073 0.02478% 1 369.00 County of Los Angeles Flood Control 1982BA 2,125,350 110,350,863 0.00908% 333 10,019.83 County of Los Angeles Hazard Abatement ABATEMENT 25,148 2,999,818 0.00141% 1 42.44 County of Los Angeles Landscape Lighting District No. 4, Zone 65

LLMD 1,075 502,573 100.00000% 1,075 502,573.25

County of Los Angeles Landscape Lighting District No. 4, Zone 65B

LLMD 711 135,737 100.00000% 711 135,737.01

County of Los Angeles Library Assessments SPTXLIBRARY 406,404 11,627,218 0.30610% 1,244 35,590.84 County of Los Angeles Mosquito Abatement District VECTOR 1,103,845 8,681,276 0.11107% 1,244 9,641.96 County of Los Angeles Regional Park & Open Space District

1915 4,961 80,675,717 0.02745% 1,243 22,142.06

County of Los Angeles Returned Check Charges NSF 4,961 264,478 0.05672% 3 150.00 County of Los Angeles Sewer Maintenance SWR/WTR 518,484 34,116,531 0.04396% 337 14,996.50 County of Los Angeles Solid Waste Service Charge TRASH 239,406 1,181,767 0.32256% 1,086 3.811.86 County of Los Angeles Trauma and Emergency Services PARAMED 2,168,304 270,009,953 0.04190% 1,063 113,124.04 Los Angeles County Fire Department Special Tax FIRE 875,347 74,394,684 0.09422% 1,245 70,094.96 Los Angeles County Sanitation District No. 32 SWR/WTR 69,101 22,643,669 1.00108% 1,089 226,680.30 Sulphur Springs Union School District CFD No. 2002-1 CFD 1,302 1,996,971 100.00000% 1,096 1,996,971.08 2011-2012 TOTAL PROPERTY TAX LIABILITY $ 8,344,981.06 TOTAL PROPERTY TAX LIABILITY AS A PERCENTAGE OF 2011-2012 ASSESSED VALUATION 1.96% III. Land Secured Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels Amount County of Los Angeles Regional Park & Open Space District

1915 $ 686,835,000 $ 142,870,000 0.02745% 1,243 $ 39,218

Sulphur Springs Union School District CFD No. 2002-1 CFD 20,455,000 20,565,000 100.00000% 1,096 20,565,000 TOTAL LAND SECURED BOND INDEBTEDNESS (1) $ 20,604,218 TOTAL OUTSTANDING LAND SECURED BOND INDEBTEDNESS (3) $ 20,604,218 IV. General Obligation Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels Amount Castaic Lake Water Agency GOB 1976 GOB $ 18,600,000 $ 0 1.34639% 1,245 $ 0 Santa Clarita Community College District GOB 2001 GOB 82,105,069 62,269,095 1.32646% 1,245 825,974 Santa Clarita Community College District GOB 2006 GOB 114,997,270 110,525,601 1.32646% 1,245 1,466,077 Sulphur Springs Union School District GOB 1991 GOB 20,199,725 4,767,402 7.50680% 1,245 357,879 William S. Hart Union High School District GOB 2001 GOB 157,996,106 110,548,487 1.32628% 1,245 1,466,180 William S. Hart Union High School District GOB 2008 GOB 115,742,500 115,742,500 1.32628% 1,245 1,535,067 TOTAL GENERAL OBLIGATION BOND INDEBTEDNESS (2) $ 5,651,177 TOTAL OUTSTANDING GENERAL OBLIGATION BOND INDEBTEDNESS $ 5,651,177 TOTAL OF ALL OUTSTANDING AND OVERLAPPING BONDED DEBT (2) $ 26,255,394.58 VALUE TO ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT 16.25:1 (1) Additional bonded indebtedness or available bond authorization may exist but are not shown because a tax was not levied for the referenced

fiscal year. (2) Represents direct and overlapping debt on all parcels in the District and includes the Subordinate 2008 Bonds but does not include the 2013

Bonds. For information on direct and overlapping debt and assessed value-to-lien ratios on Developed Property within the District, see Table 3.

Source: National Tax Data, LLC.

Overlapping Direct Assessments

The properties within the District are also subject to the following direct assessments:

County Library Assessments: This pay-as-you-go assessment is used to fund library services and materials and increases each year by the greater of 2.00% or the Consumer Price Index of the State of California. The Fiscal Year 2012-13 assessment is $28.61 per parcel.

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County Mosquito Abatement District: This pay-as-you-go assessment is used for disease surveillance and pest control and changes annually based on the amount needed to pay for vector control programs in each district. Voter approval is required for an assessment rate of more than $20.00 per parcel. The assessment for Fiscal Year 2012-13 is $7.74 per parcel.

County Solid Waste Service Charge: This assessment is fixed at $3.51 per parcel of developed property unless there is a public vote to increase the assessment. There is no charge on undeveloped parcels. This pay-as-you-go assessment is used primarily to fund two programs, the Residential Recycling Educational Program and the Commercial and Industrial Outreach Program. These programs are designed to increase community participation with recycling and to offer technical assistance to multi-family residences to start recycling programs. This assessment also funds the Smart Gardening Program, which teaches residents how to utilize organic materials as nutrient rich fertilizer, and the Household Hazardous Waste Program, which conducts events throughout the County to collect and properly dispose of household waste, both hazardous and electronic.

County Sanitation District No. 32 Sewer Charge: This pay-as-you-go assessment is used to fund sewage service and is determined by the County Sanitation District each year based on the costs for providing the service. The Fiscal Year 2012-13 rates are shown below.

Land Use Category Special Tax Rate

Single Family Home $231.00/Parcel Duplex $346.50/Parcel Triplex $519.75/Parcel

Fourplex $693.00/Parcel Five Units or More $138.60/Unit

Condominium $173.25/Unit

Landscape Lighting District #4, Zone 65A: This pay-as-you-go assessment is currently $467.51 per parcel. The assessment is used to pay for the ongoing cost of landscaping and maintaining the landscaping of the project in the area of the assessment.

Landscape Lighting District #4, Zone 65B: This pay-as-you-go assessment is currently $190.91 per parcel. The assessment is used to pay for the ongoing cost of landscaping and maintaining the landscaping of the project in the area of the assessment.

County Sewer Maintenance: This pay-as-you-go assessment funds the ongoing maintenance and repair of existing sewer facilities and the construction of relief sewer facilities within the boundaries of the District. The Fiscal Year 2012-13 assessment for those affected properties within the boundaries of the District is $44.50 per parcel.

Trauma and Emergency Services: This pay-as-you-go assessment provides funding to help maintain and enhance pre-hospital and hospital care services provided in both public and private trauma centers, acute care hospitals, other health care facilities, and trauma access through air transport for injuries and conditions such as those related to car accidents, drowning, heart attack, stroke, or exposure to a bioterrorist or chemical attack. The Fiscal Year 2012-13 assessment is $0.0423997 per square foot of property improvement including, but not limited to, living quarters, storage facilities, facilities used by business, non-profit, or religious organizations, etc.

County Regional Park and Open Space District: This assessment is based on the debt service due on bonds issued in 1992 through Proposition A. In 1996 voters approved an increase in the rate to $33.69 per acre beginning in Fiscal Year 1997-98. The assessment is fixed and will be levied until the Fiscal Year 2019-20 unless there is a voter-approved proposition to increase or extend the assessment. This assessment is used for park improvements and community centers. The assessment is based on a parcel’s size, use, and square feet of

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improvements, and is determined by adding the flat rate for each land use category to a per acre charge of $33.69 per acre, as shown in the table below. For example, a single family residential unit with a parcel size of one (1) acre will have a flat rate charge of $14.46 per unit and a total direct assessment of $48.14. All parcels may only be charged up to 2.5 acres. For example, an undeveloped parcel with six (6) acres will be charged the same amount as an undeveloped parcel with 2.5 acres.

Land Use Category Flat Rate (Parcel size * $33.69/acre)

Total Special Tax for one (1) acre

Single Family Residential (SFR) $14.46/Unit $33.69/acre $48.14 Condominiums $14.46/Unit $33.69/acre $44.55 Undeveloped $0.00 $33.69/acre $33.69

County Fire Department Special Tax: Voters approved the special tax in Calendar Year 1997. The maximum rates approved in Calendar Year 1997 were $48.00 for a single family home, $60.63 + $.0063 per square foot for multiple family residential, and $58.10 + $.0392 per square foot for commercial/industrial property. The Los Angeles County Fire Department assessment increases each year by the greater of 2.00% or the Consumer Price Index of the State of California. This pay-as-you-go assessment pays for essential fire suppression and emergency medical services. The Fiscal Year 2012-13 assessments are provided in the table below.

Land Use Category Special Tax Rate

Single Family Residential (SFR) Mobile Home in Park

$62.26 $31.13

Multiple Family Residential Non-Residential

High Rise Special Use

$78.65 + $.0080 per sq. ft. over 1,555 sq. ft. $75.35 + $.0508 per sq. ft. over 1,555 sq. ft.(1)

$91.73 + $.0620 per sq. ft. over 1,555 sq. ft.(1)

$114.67 + $.0774 per sq. ft. over 1,555 sq. ft.(1)

Vacant Land – 2 acres or less $15.57 Vacant Land – more than 2 acres and less than or equal to 10 acres $20.54

Vacant Land – more than 10 acres and less than or equal to 50 acres $41.11

Vacant Land – more than 50 acres $62.26 (1) Capped at 100,000 square feet per parcel.

County of Los Angeles Flood Control District: This pay-as-you-go assessment is for the maintenance and operation of flood control facilities throughout the County. The assessment is calculated by dividing the product of $28.85, the acreage of the parcel, and a runoff factor, which is based on the zone, land use, and property classification of said parcel, by 0.0637. For those affected properties within the boundaries of the District, the median tax rate amount in Fiscal Year 2012-13 is $28.14.

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Estimated Fiscal Year 2012-13 Tax Rates

The following table sets forth the estimated Fiscal Year 2012-13 tax rates for a single family detached unit containing 2,774 building square feet. However, the total effective tax rate for Developed Property within the District will vary. See Table 2B for the effective tax rate ranges within the District.

TABLE 2A COMMUNITY FACILITIES DISTRICT NO. 2002-1

OF THE SULPHUR SPRINGS UNION SCHOOL DISTRICT ESTIMATED FISCAL YEAR 2012-13 TAX RATES

(SINGLE FAMILY DETACHED UNIT 2,774 BUILDING SQUARE FEET)

Assessed Valuations and Property Taxes Percent of Total Assessed Value Amount

Assessed Value(1) $429,000 Less: Homeowner’s Exemption 7,000 Net Assessed Value(2) $422,000 Ad Valorem Property Taxes

General Purposes 1.00000% $ 4,220.00 Ad Valorem Tax Overrides Special Water 0.070600 297.93 Community College 0.030799 129.97 High Schools 0.039479 166.60 Elementary Schools 0.096724 408.17 Total Ad Valorem Property Taxes 1.237602% $ 5,222.68 Assessments, Special Taxes and Parcel Charges(3)

County of Los Angeles Library Assessments $ 28.61 County of Los Angeles Mosquito Abatement District 7.74 CFD No. 2002-1 of the Sulphur Springs Union School District 1,887.00 County of Los Angeles Solid Waste Service Charge 3.51 County of Los Angeles Sanitation District No. 32 231.00 County of Los Angeles Lighting and Landscape Area District #4, Zone 65 467.51 County of Los Angeles Lighting and Landscape Area District #4, Zone 65B 190.91 County of Los Angeles Trauma and Emergency Services 117.70 County of Los Angeles Regional Park & Open Space District 18.16 Los Angeles County Fire Department Special Tax 62.26 Total Assessments, Special Taxes and Parcel Charges $ 3,014.40 Total Property Taxes $ 8,237.08 Total Effective Tax Rate 1.92% (1) Fiscal Year 2012-13 assessed valuation for a single family detached unit containing 2,432 building square feet, selected to

represent the median effective tax rate for a single family detached unit within the District. (2) Net Assessed Value reflects estimated total assessed value for the parcel net of homeowner’s exemption. (3) All charges and special assessments are based on a lot size of less than one acre. Source: Dolinka Group, LLC, County Assessor’s Office.

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The following Table 2B sets forth the stratification of total effective tax rates ratios of the parcels within the District based on Fiscal Year 2012-13 assessed values, taxes and assessments and projected Fiscal Year 2013-14 Special Taxes within the District.

TABLE 2B SULPHUR SPRINGS UNION SCHOOL DISTRICT COMMUNITY FACILITIES DISTRICT NO. 2002-1

EFFECTIVE TAX RATE

Effective Tax Rate Category

Number of Parcels(1)

Fiscal Year 2012-13 Special

Tax Levy(1)

Total Fiscal Year

2012-13 Taxes Total Assessed

Values(2)

Average Effective Tax Rate

Greater than 2.00% 179 $ 454,174 $1,450,078 $ 65,417,590 2.22% 1.80% to 2.00% 805 1,444,319 6,256,619 327,926,696 1.91 Less than 1.80% 112 98,478 513,834 29,475,524 1.74 Total(3) 1,096 $1,996,971 $8,220,531 $ 422,819,810 1.94% (1) Includes all Developed Property as of May 1, 2012, as confirmed by Dolinka Group, LLC, with the County of Los Angeles.

Excludes parcels classified as Exempt Property or Undeveloped Property. (2) Source: Los Angeles County Assessor’s Roll dated January 1, 2012. Includes 33 parcels of Developed Property which have

not been assigned improvement values by the County of Los Angeles Assessor’s Office as of January 1, 2012. Of the 33 parcels of Developed Property which have not been assigned improvement values, 30 parcels have been issued Certificates of Occupancy, indicating completion of a residential structure on such parcels.

(3) Totals may not sum due to rounding. Source: Dolinka Group, LLC, National Tax Data, County of Los Angeles Assessor’s Office.

Assessed Value-to-Lien Ratios

The District has not engaged an independent appraiser to provide an opinion concerning the values of the parcels within the District that comprise the Taxable Property. However, the District has determined the assessed values of those parcels, as shown on the Fiscal Year 2012-13 County Assessor’s roll (based on a January 1, 2012 lien date). The aggregate assessed value of the Taxable Property within the District are shown on the Fiscal Year 2012-13 County Assessor’s roll is $424,112,676, including $422,819,810 for property classified as Developed Property as of May 1, 2012 for the Fiscal Year 2012-13 Special Tax levy. The aggregate assessed value of the Taxable Property within the District as shown on the Fiscal Year 2011-12 County Assessor’s roll was $440,682,694. The Fiscal Year 2012-13 assessed value of the Taxable Property within the District of $424,112,676 represents an approximately 3.8% decline in assessed value from Fiscal Year 2011-12.

The value of the property within the District is significant to an evaluation of the 2013 Bonds because, in the event of a delinquency in the payment of Special Taxes, the District may foreclose only against delinquent parcels. Likewise, the ratio of the value of a parcel to its “share” of the applicable 2013 Bonds is important because it provides an indication of the extent of the relative burden imposed on each parcel by the Special Tax. As indicated above, the aggregate assessed value of the Taxable Property within the District as shown on the Fiscal Year 2012-13 County Assessor’s roll is $424,112,676. The ratio of that value to the $20,745,000 total principal amount of the 2012 Bonds and the 2013 Bonds and all other overlapping general obligation, special tax and assessment bonds within the District (approximately $26,434,661.11, inclusive of the 2012 Bonds and the 2013 Bonds) is approximately 16.04-to-1.

Moreover, the District does not expect to levy Special Taxes on Undeveloped Property within the District. Taking the 2012 Bonds and the 2013 Bonds and the direct and overlapping debt into account, the ratio of the aggregate assessed value of the Developed Property within the District ($422,819,810.00) to the total principal amount of all direct and overlapping general obligation, special tax and assessment bonds on the

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Developed Property within the District (approximately $26,415,486.77, inclusive of the 2012 Bonds and the 2013 Bonds) is approximately 16.00-to-1.

The District contains 33 parcels of Developed Property for which, as of May 1, 2012, no assessed value has been assigned by the County Assessor in respect of improvements to the property. Of these 33 parcels, 30 parcels have received a certificate of occupancy as of January 1, 2013, indicating the final completion of a residential structure on the property. See Table 3 herein.

Additionally, Table 3 below sets forth the stratification of value-to-liens of the parcels within the District based on Fiscal Year 2012-13 assessed value and such parcels’ respective shares of the principal amount of the 2012 Bonds and the 2013 Bonds and other direct and overlapping debt within the District (allocated to each parcel based upon its respective share of the total projected Special Tax levy for Fiscal Year 2012-13) and the ratio of the assessed value to its share of the 2012 Bonds, 2013 Bonds and other direct and overlapping debt. Table 4 provides a breakdown of the respective value-to-lien within the District by tax class.

Each of the aforesaid value-to-lien ratios is for the entire District. However, the ratios of the value of individual lots within the District to their respective shares of the principal amount of the 2012 Bonds and the 2013 Bonds can be expected to vary substantially depending upon the status of development and selling price thereof. See Table 3 below. The apportionment of existing land secured debt other than the 2012 Bonds and the 2013 Bonds is a function of the rate and method of apportionment attributable to each of those community facilities districts.

Assessed values do not necessarily represent market values. Article XIIIA of the California Constitution (Proposition 13) defines “full cash value” to mean “the County assessor’s valuation of real property as shown on the 1975/76 roll under ‘full cash value’, or, thereafter, the appraised value of real property when purchased or newly constructed or when a change in ownership has occurred after the 1975 assessment,” subject to exemptions in certain circumstances of property transfer or reconstruction. The “full cash value” is subject to annual adjustment to reflect increases, not to exceed 2% for any year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors. Because of the general limitation to 2% per year in increases in full cash value of properties which remain in the same ownership, the County tax roll does not reflect values uniformly proportional to actual market values. Moreover, as a result of declines in the market value of properties in recent years, assessed valuations of many properties in the County have declined in the recent years. As a result of the foregoing, there can be no assurance that the assessed valuations of the properties within the District accurately reflect their respective market values, and the future fair market values of those properties may be lower than their current assessed valuations.

No assurance can be given that, should a delinquent parcel be foreclosed and sold for the amount of the delinquency, any bid will be received for such parcel, or if a bid is received that such bid will be sufficient to pay such delinquent Special Taxes.

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DEVELOPED PROPERTY – FISCAL YEAR 2012-13 ASSESSED VALUES AND VALUE-TO-LIEN RATIOS

Value-to-Lien Category

Number of Parcels (1) Assessed Values

Combined Overlapping

Liens (2)

Combined Value-to-Lien

Ratio

Fiscal Year 2012-13 Special

Tax Levy (1)

Percentage Share of

Special Tax

20:1 and above 98 $ 29,349,067.00 $ 1,377,233.63 21.31:1 $ 94,641.30 4.74% 15:1 to 20:1 712 275,322,944.00 15,811,279.83 17.41:1 1,166,641.24 58.42 10:1 to 15:1 249 117,017,545.00 8,336,125.45 14.04:1 651,446.40 32.62 5:1 to 10:1 4 679,299.00 85,511.84 7.94:1 7,346.88 0.37 5:1 and below(3) 33 450,955.00 805,335.52 0.56:1 76,895.26 3.85 Total (4) 1,096 $422,819,810.00 $26,415,486.27 16.01:1 $1,996,971.08 100.00% (1) Includes all parcels classified as Developed Property as of May 1, 2012, as confirmed by Dolinka Group, LLC, with the

County of Los Angeles. Excludes parcels not levied by the District in Fiscal Year 2012-13. (2) Source: Detailed Direct and Overlapping Debt Report, National Tax Data, Inc. See “Direct and Overlapping Debt” below

for a description of overlapping liens; the combined overlapping liens include the 2013 Bonds, the 2012 Bonds, and all other applicable overlapping and general obligation bond indebtedness.

(3) The 33 parcels within value-to-lien category “5:1 and below” are classified as Developed Property but have not been assigned improvement values by the County Assessor’s Office as of January 1, 2012. Of these 33 parcels, 30 have been issued Certificates of Occupancy, indicating the final completion of a residential structure on the property.

(4) Totals may not sum due to rounding. Source: Dolinka Group, LLC, National Tax Data, County of Los Angeles Assessor’s Office.

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ASSESSED VALUES AND VALUE-TO-LIEN BY TAX CLASS

Other Debt (3)

Tax Class (Land Use) (1)

Number of Units/ Parcels

Number of Developed Properties

with no Improvement

Value (2)

Number of Developed Properties

with no Improvement Value with a Certificate of Occupancy(2)

Total Assessed Value (2)

Overlapping Debt

General Obligation Debt

Principal Amount of 2012

Bonds

Principal Amount of 2013 Bonds Total Lien

Value-to-Lien(4)

Zone 1

Tax Class 1 (< 2,000) 36 0 0 $ 12,010,096.00 $ 1,114.08 $ 160,022.81 $ 346,905.69 $ 91,641.45 $ 599,684.03 20.03:1 Tax Class 2 (2,000 - 2,200) 80 0 0 28,227,106.00 2,477.85 376,098.65 881,488.61 232,861.25 1,492,926.36 18.91:1 Tax Class 3 (2,201 - 2,400) 166 0 0 57,641,347.00 5,174.35 768,014.71 1,943,836.61 513,499.80 3,230,525.47 17.84:1 Tax Class 4 (> 2,400) 52 0 0 19,534,470.00 1,649.75 260,277.75 645,370.52 170,486.36 1,077,784.38 18.12:1 Tax Class 5 (Attached) 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 NA Subtotal Zone 1 (5) 334 0 0 $ 117,413,019.00 $ 10,416.03 $ 1,564,413.91 $ 3,817,601.43 $ 1,008,488.86 $ 6,400,920.24 18.34:1

Zone 2

Tax Class 1 (< 2,000) 15 3 2 $ 5,,011,588.00 $ 466.75 $ 66,774.52 $ 165,128.74 $ 43,621.76 $ 275,991.76 18.16:1 Tax Class 2 (2,100 - 2,350) 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 NA Tax Class 3 (2,201 - 2,400) 64 7 6 25,976,432.00 1,983.39 346,110.61 903,934.73 238,790.80 1,490,819.53 17.42:1 Tax Class 4 (> 2,400) 88 3 3 38,701,150.00 2,889.99 515,655.06 1,364,556.05 360,472.30 2,243,573.40 17.25:1 Tax Class 5 (Attached) 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 NA Undeveloped Property 95 0 0 411,058.00 1,129.87 5,476.95 0.00 0.00 6,606.81 62.22:1 Subtotal Zone 2 (5) 262 13 11 $ 70,100,228.00 $ 6,470.00 $ 934,017.14 $ 2,433,619.51 $ 642,884.86 $ 4,016,991.50 17.45:1

Zone 3

Tax Class 1 (< 2,500) 21 3 3 $ 8,056,070.00 $ 902.39 $ 107,339.27 $ 346,879.06 $ 91,634.41 $ 546,755.15 14.73:1 Tax Class 2 (2,500 - 2,750) 51 0 0 22,024,783.00 1,798.92 293,458.74 895,552.77 236,576.55 1,427,386.98 15.43:1 Tax Class 3 (2,751 - 3,000) 73 0 0 32,951,980.00 2,578.81 439,052.98 1,357,909.61 358,716.52 2,158,257.93 15.27:1 Tax Class 4 (3,001 - 3,250) 90 0 0 42,298,499.00 3,232.46 563,586.23 1,830,110.46 483,456.97 2,880,386.11 14.69:1 Tax Class 5 (3,251 - 3,500) 75 0 0 36,040,901.00 2,724.32 480,209.84 1,589,693.49 419,946.45 2,492,574.10 14.46:1 Tax Class 6 (>3,750) 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 NA Tax Class 7 (Attached) 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 NA Undeveloped Property 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 NA Subtotal Zone 3 (5) 310 3 3 $ 141,372,233.00 $ 11,236.90 $ 1,883,647.06 $ 6,020,145.40 $ 1,590,330.91 $ 9,505,360.27 14.87:1

(continued on following page)

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ASSESSED VALUES AND VALUE TO BURDEN BY TAX CLASS (continued)

Other Debt (3)

Tax Class (Land Use) (1)

Number of Units/ Parcels

Number of Developed

Properties with no

Improvement Value (2)

Number of Developed

Properties with no

Improvement Value with a Certificate of Occupancy(2)

Total Assessed Value (2)

Overlapping Debt

General Obligation Debt

Principal Amount of the 2012 Bonds

Principal Amount of the Bonds Total Lien

Value-to-Lien(4)

Zone 4

Tax Class 1 (< 2,500) 2 2 2 $ 48,624.00 $ 20.97 $ 647.87 $ 34,358.45 $ 9,076.41 $ 44,103.70 1.10:1 Tax Class 2 (2,500 - 2,750) 2 1 1 551,501.00 81.03 7,348.21 39,206.42 10,357.09 56,992.75 9.68:1 Tax Class 3 (2,751 - 3,000) 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 NA Tax Class 4 (3,001 - 3,250) 49 8 7 23,872,104.00 2,033.60 318,072.49 1,222,665.59 322,989.36 1,865,761.04 12.79:1 Tax Class 5 (3,251 - 3,500) 26 0 0 16,206,430.00 1,106.18 215,934.87 626,624.55 165,534.27 1,009,199.88 16.06:1 Tax Class 6 (3,501 - 3,750) 21 3 3 11,335,505.00 761.58 151,034.54 583,552.00 155,155.87 889,503.99 12.74:1 Tax Class 7 (> 3,750) 25 3 3 13,372,998.00 1,217.24 178,182.15 772,430.63 204,051.60 1,155,881.61 11.57:1 Tax Class 8 (Attached) 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 NA Undeveloped Property 54 0 0 881,808.00 818.79 11,749.23 0.00 0.00 12,568.02 70.16:1 Subtotal Zone 4 (5) 179 17 16 $ 66,268,970.00 $ 6,039.40 $ 882,969.36 $ 3,278,837.63 $ 866,164.60 $ 5,034,011.00 13.16:1

Zone 5

Tax Class 1 (Detached) 0 0 0 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 NA Tax Class A (Attached) 153 0 0 28,958,226.00 4,611.19 385,840.11 859,796.04 227,130.76 1,477,378.10 19.60:1 Subtotal Zone 5 (5) 153 0 0 $ 28,958,226.00 $ 4,611.19 $ 385,840.11 $ 859,796.04 $ 227,130.76 $ 1,477,378.10 19.60:1 Developed Property 1,096 33 3 $ 422,819,810.00 $ 36,824.86 $ 5,633,661.41 $ 16,410,000.00 $ 4,335,000.00 $ 26,415,486.27 16.01:1 Undeveloped Property 142 0 0 1,292,866.00 1,948.66 17,226.18 0.00 0.00 19,174.83 67.43:1

Total (5) 1,238 33 30 $ 424,112,676.00 $ 38,773.52 $ 5,650,887.59 $ 16,410,000.00 $ 4,335,000.00 $ 26,434,661.11 16.04:1 (1) Property classification based on building permit issuance as of May 1, 2012. (2) Includes 33 parcels of Developed Property which have not been assigned improvement values by the County of Los Angeles Assessor's Office as of January 1, 2012. Of the 33 parcels of Developed Property which have not

been assigned improvement values, 30 parcels have been issued Certificates of Occupancy, indicating the final completion of a residential structure on the property. (3) Source: Detailed Direct and Overlapping Debt Report, National Tax Data, Inc. (4) Average value to lien per lot; actual value to lien per lot may vary. (5) Totals may not sum due to rounding. Source: Dolinka Group, LLC, National Tax Data, County of Los Angeles Assessor’s Office.

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Delinquency History

The following table is a summary of Special Tax levies, collections and delinquency rates in the District for Fiscal Years 2005-06 through 2012-13.


SPECIAL TAX COLLECTIONS AND DELINQUENCIES FISCAL YEARS 2005-06 THROUGH 2012-13

Subject Fiscal Year Ending June 30 As of October 31, 2012

Fiscal Year

Amount Levied

Number of

Parcels Levied

Amount Collected

Amount Delinquent

Number of Parcels

Delinquent Percent

Delinquent

Remaining Amount

Delinquent

Remaining Percent

Delinquent

2005-06 $1,394,915.94 620 $1,352,923.48 $ 41,992.46 43 3.01% $ 1,970.66 0.14% 2006-07 1,472,565.96 779 1,411,679.64 60,886.32 51 4.13 2,010.08 0.14 2007-08 1,399,496.86 957 1,255,521.78 143,975.08 107 10.29 9,940.57 0.71 2008-09 1,417,695.94 891 1,324,336.20 93,359.74 75 6.59 6,958.50 0.49 2009-10 1,465,079.86 899 1,402,599.63 62,480.23 50 4.26 9,282.42 0.63 2010-11 1,717,810.32 1,005 1,679,408.32 38,402.00 27 2.24 18,905.81 1.10 2011-12 1,858,163.30 1,052 1,803,034.75 55,128.55 44 2.97 42,713.48 2.30 2012-13(1) 998,485.54 1,096 968,906.54 29,579.00(2) 35 2.96 N/A N/A (1) Includes the first installment only, which became delinquent December 10, 2012. The total Fiscal Year 2012-13 Special

Tax levy is $1,996,971.08. (2) Delinquency data as of January 30, 2013. Source: Dolinka Group, LLC, County Tax Collector’s Office.

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Top Taxpayers

Special Taxes for Fiscal Year 2012-13 were levied on 1,096 parcels classified as Developed Property. Table 6 below lists the largest property taxpayers within the District measured by the percentage of the Fiscal Year 2012-13 Special Tax levy.


FISCAL YEAR 2012-13 TOP SPECIAL TAXPAYERS

Owner Name (1) Number of

Parcels Fiscal Year 2012-13

Special Taxes(2) Percent of

Special Taxes(2)

Pardee Construction Co 17(3) $ 46,443.62 2.33% Dubose Acquisition Partners II Ltd 7 15,632.36 0.78 Dermenjian Armen & Tina 2 3,688.66 0.18 Individual Homeowners (4) 1,070 1,931,206.44 96.71 Total (5) 1,096 $1,996,971.08 100.00% (1) Ownership information is based on data obtained from DataQuick as of October 2012. (2) The total Fiscal Year 2012-13 Special Tax Levy is $1,996,971.08. (3) None of these parcels have been assigned improvement values by the County of Los Angeles Assessor's Office as of

January 1, 2012. Of the 17 parcels, 14 parcels have been issued Certificates of Occupancy, indicating the final completion of a residential structure on the property.

(4) Includes three taxpayers who own two parcels each and 16 parcels owned by banks, trusts, or property holding companies for which the aggregate Fiscal Year 2012-13 Special Tax levy is less than the Fiscal Year 2012-13 Special Tax levy for parcels within Tax Class 7 of Zone 4, $3,481.44.

(5) Totals may not sum due to rounding. Source: Dolinka Group, LLC, County Assessor’s Office.

THE SCHOOL DISTRICT

The Sulphur Springs Union School District (the “School District”) is a school district organized under the laws of the State. The District covers approximately 75 square miles in northern Los Angeles County (the “County”) in the eastern section of the Santa Clarita Valley (the “Santa Clarita Valley”). The School District was originally formed in 1897. The School District consists of nine elementary schools which includes grades Kindergarten through sixth. The School District serves a portion of the City of Santa Clarita, as well as certain unincorporated areas of the County, including a major portion of the community of Canyon Country and part of the community of Newhall.

The Santa Clarita Valley is emerging as a regional center for north Los Angeles County. The Santa Clarita Valley lies approximately 35 miles northwest of the Los Angeles Civic Center. The Santa Clarita Valley is surrounded by Santa Susanna, San Gabriel and Sierra Pelona Mountain Ranges forming an inverted triangle which separates it from the San Fernando Valley to the south, San Joaquin Valley to the north, Mojave Desert to the east and the Pacific Ocean to the west. The Santa Clara River and its tributaries flow over 490,000 acres of mountains and canyons from the Santa Clarita Valley.

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Administration. The School District is governed by a five-member Board of Trustees (the “Board”), each member of which is elected at large to a four-year term. Elections for positions to the Board are held every four years. Current members of the Board, together with their office and the date their term expires, are listed below:

Board Member Office Term Expires

Denis DeFigueiredo President November 2015 Dr. Kerry Clegg Clerk November 2013 Michael Hogan Member November 2013

Lori MacDonald Member November 2013 Shelley Weinstein Member November 2015

The Superintendent of the School District is responsible for administering the affairs of the School

District in accordance with the policies of the Board. The School District also employs an Assistant Superintendent, Business Services.

Brief biographies follow:

Dr. Robert Nolet, Superintendent. Dr. Nolet has served as Superintendent of the School District since 1981. Prior to becoming Superintendent, he served as the School District’s Business Manager. He received his Doctorate in Education from the University of Southern California and his Master’s degree in School Administration from Cal Lutheran.

Lynn David, Assistant Superintendent, Business Services. Ms. David was appointed as the District’s Assistant Superintendent of Business Services beginning July 1, 2012. Prior to becoming Assistant Superintendent of Business Services, she served as a Principal, Categorical Programs Administrator, and Assistant Principal in the District. Ms. David completed USC’s School Business Management Certification Program and is a CASBO Certified CBO. She received two master’s degrees from California State University San Bernardino; one in School Administration and one in Elementary Education.

SPECIAL RISK FACTORS

The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the 2013 Bonds. This discussion does not purport to be comprehensive or definitive. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the 2013 Bond. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District.

Risks of Real Estate Secured Investments Generally

The Owners of the 2013 Bonds will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property or buildings and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses; (iv) adverse changes in local market conditions; and (v) increased delinquencies due to rising mortgage costs and other factors.

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Risks Related to Current Market Conditions

The housing market in southern California experienced significant price appreciation and accelerating demand from approximately 2002 to 2006 but subsequently the housing market weakened substantially, with changes from the prior pattern of price appreciation and a slowdown in demand for new housing and declining prices. Since 2006, home developers, appraisers and market absorption consultants have reported weak new home market conditions due to factors including but not limited to the following: (i) lower demand for new homes; (ii) significant increase in cancellation rates for homes under contract; (iii) the exit of speculators from the new home market; (iv) increasing mortgage defaults and foreclosures, (v) a growing supply of new and existing homes available for purchase; (vi) increase in competition for new homes orders; (vii) prospective home buyers having a more difficult time selling their existing homes in the more competitive environment; (viii) reduced sales prices and/or higher incentives required to stimulate new home orders or to induce home buyers not to cancel purchase contracts, (ix) more stringent credit qualification requirements by home loan providers and (x) increased unemployment levels. Any such factors may affect the willingness or ability of taxpayers to pay their Special Tax payment prior to delinquency.

Economic Uncertainty

The 2013 Bonds are being issued at a time of economic uncertainty and volatility. Unemployment rates are approximately 11.8% for the County as of February 2012 (not seasonally adjusted) as compared to approximately 12.6% for calendar year 2010 (not seasonally adjusted) and decreased to approximately 10.9% (not seasonally adjusted) for the State as of February 2012 as compared to approximately 12.4% for calendar year 2010 (not seasonally adjusted). The District cannot predict how long these conditions will last or whether to what extent they may affect the ability of homeowners to pay Special Taxes or the marketability of the 2013 Bonds.

Disclosure to Future Homebuyers

The willingness or ability of an owner of a parcel to pay the Special Tax, even if the value of the parcel is sufficient, may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and the risk of such a levy, and, at the time of such a levy, has the ability to pay it as well as pay other expenses and obligations. The District has caused a Notice of Special Tax lien to be recorded in the Office of the Recorder for the County against each parcel. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within the District or lending of money thereon.

The Act requires the subdivider (or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.

Parity Taxes and Special Assessments

The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies and is coequal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. The Special Taxes have priority over all

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existing and future private liens imposed on the property. The District, however, has no control over the ability of other entities and districts to issue indebtedness secured by special taxes or assessments payable from all or a portion of the property within the District. In addition, the landowners within the District may, without the consent or knowledge of the District, petition other public agencies to issue public indebtedness secured by special taxes or assessments. Any such special taxes or assessments may have a lien on such property on a parity with the Special Taxes. The properties within the District are currently within Community Facilities District No. 98-1 of the William S. Hart Union High School District and the Developer has agreed in the Mitigation Agreement to prepay special taxes relating to such community facilities district prior to the issuance of a building permit for each dwelling unit. See “THE DISTRICT—Direct and Overlapping Debt.”

Assessed Value; Land Value

The value of the land within the District is an important factor in determining the investment quality of the 2013 Bonds. If a property owner is delinquent in the payment of Special Taxes, the District’s only remedy is to commence foreclosure proceedings in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy, physical events such as earthquakes or floods, stricter land use regulations, delays in development or other events will adversely impact the security underlying the Special Taxes. See “THE DISTRICT—Assessed Value-to-Lien Ratios” for a discussion of the assessed value within the District.

Insufficiency of Special Taxes

Under the Rate and Method, the annual amount of Special Tax to be levied on each taxable parcel in the District will be based primarily on whether such parcel is developed or not and, for detached developed property on the square footage, and for undeveloped property on the acreage of the Assessor’s Parcel. See APPENDIX A—“RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES” and “SECURITY FOR THE 2013 BONDS—Rate and Method of Apportionment of Special Taxes.” Accordingly, to the extent property is not developed, collection of the Special Taxes will be dependent on the willingness and ability of the owners of undeveloped property to pay such Special Taxes when due. However, the District does not expect to levy Special Taxes on Undeveloped Property. See “THE DISTRICT—Special Tax Coverage.”

The Act provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by a gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. However, Table 12 of the Rate and Method expressly sets forth the minimum taxable acreage by Zone within the District. In addition, the Act provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts. MOREOVER, IF A SUBSTANTIAL PORTION OF LAND WITHIN THE DISTRICT BECAME EXEMPT FROM THE SPECIAL TAX BECAUSE OF PUBLIC OWNERSHIP, OR OTHERWISE, THE MAXIMUM SPECIAL TAX WHICH COULD BE LEVIED UPON THE REMAINING ACREAGE MIGHT NOT BE SUFFICIENT TO PAY PRINCIPAL OF AND INTEREST ON THE 2013 BONDS WHEN DUE AND A DEFAULT COULD OCCUR WITH RESPECT TO THE PAYMENT OF SUCH PRINCIPAL AND INTEREST.

Furthermore, Administrative Expenses of up to $30,474.86 for Fiscal Year 2012-13, and escalating by 2% each subsequent Fiscal Year, are paid by the District prior to the payment of debt service on the 2013 Bonds.

Tax Delinquencies

Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the 2013 Bonds are derived, will be billed to the properties within the District on

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the regular property tax bills sent to owners of such properties. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Special Tax installment payments cannot be made to the County Tax Collector separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and Special Tax installment payments in the future.

See “SECURITY FOR THE 2013 BONDS—Covenant for Superior Court Foreclosure” for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Fiscal Agent Agreement, in the event of delinquency in the payment of Special Tax installments.

Uncertainties in Land Development – General

At buildout, it is anticipated that the District will contain 1,238 residential dwelling units. As of May 1, 2012, the District contained 1,096 residential dwelling units classified as “Developed Property” for Fiscal Year 2012-13 under the Rate and Method, and an additional 142 parcels classified as “Undeveloped Property” for Fiscal Year 2012-13 under the Rate and Method. Since land without completed buildings is generally less valuable than land containing completed buildings, the vacant land will provide less security for the 2013 Bonds should it be necessary for the District to commence enforcement proceedings with respect to such land as a result of the non-payment of the Special Taxes. In short, the successful development of the land within the District is important to the ultimate security for, and the payment of principal of and interest on, the 2013 Bonds.

There are many reasons why a project may not be developed in the manner and within the time frame and budget originally planned. For example, a project might be adversely affected by opposition to it, unfavorable economic conditions, an inability of the landowner to obtain financing, fluctuations in the local real estate market, fluctuations in interest rates, unexpected increases in development costs, changes in federal, state or local governmental policies relating to the ownership and development of real estate, and the appearance of previously unknown environmental considerations or material changes in known environmental considerations. Some of these factors are discussed below as individual risk factors.

Future Land Use Regulations and Growth Control Initiatives

In recent years, citizens of a number of local communities in Southern California, including citizens of the County of Riverside, the County of Orange and the County of San Diego, have placed measures on the ballot designed to control the rate of future growth in those areas. It is possible that future initiatives could be enacted and become applicable to the development within the District (the “Development”) and could, if applied retroactively, negatively impact the ability of the Developer to complete the proposed Development. 2013 Bondowners should assume that any event that impacts the ability to develop land in the District could cause the land values within the District to decrease and could affect the willingness and ability of the owners of land within the District to pay the Special Taxes when due. See “THE DISTRICT—Assessed Value-to-Lien Ratios.”

In evaluating the investment quality of the 2013 Bonds, investors should assume that the possible enactment of more restrictive land use regulations by the County, or by voter initiative presents a substantial risk to the timely construction and completion of development, except with respect to units for which building permits have already been issued and substantial work and liabilities have been incurred in good faith reliance thereon prior to the date of adoption of any such land use regulations.

The failure to complete the Development as planned, or substantial delays in the completion of the Development, due to litigation or other causes may reduce the value of the property within the District, and will increase the amount of Special Taxes to be paid by the owners of undeveloped property and may affect the willingness and ability of the owners of land within the District to pay the Special Taxes when due.

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Natural Disasters

The District, like all California communities, may be subject to unpredictable seismic activity, fires due to the vegetation and topography, or flooding in the event of significant rainfall. The occurrence of seismic activity, fires or flooding in or around the District could result in substantial damage to properties in the District, which, in turn, could substantially reduce the value of such properties. Moreover, the District is located in an area known to be at high risk for wild fires. In addition, droughts and high winds can exacerbate the fire danger to the District, and fires can spread with frightening speed. As a result of the occurrence of such a natural disaster event such as an earthquake, flooding or wild fire, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due, and the reserve fund for the 2013 Bonds may become depleted. In addition, the value of land in the District could be diminished in the aftermath of such natural events, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.

Hazardous Substances

A serious risk in terms of the potential reduction in the value of a parcel within the District is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel within the District may be required by law to remedy conditions of such parcel relating to release or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well known and widely applicable of these laws, but California laws with regard to hazardous substances are also similarly stringent. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of the property whether or not the owner or operator had anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the parcels within the District be affected by a hazardous substance, will be to reduce the marketability and value of such parcel by the costs of remedying the condition, because the prospective purchaser, upon becoming the owner, will become obligated to remedy the condition just as the seller is.

Further it is possible that liabilities may arise in the future with respect to any of the parcels resulting from the current existence on the parcel of a substance currently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the current existence on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method in which it is handled. All of these possibilities could significantly affect the value of a parcel within the District that is realizable upon a delinquency.

Neither the School District nor the District has knowledge of any hazardous substances being located on the property within the District.

Bankruptcy and Foreclosure

The payment of property owners’ taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings, may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure. See “SECURITY FOR THE 2013 BONDS—Covenant for Superior Court Foreclosure.” In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays.

The various legal opinions to be delivered concurrently with the delivery of the 2013 Bonds (including Bond Counsel’s approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally.

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In addition, bankruptcy of a property owner (or a property owner’s partner or equity owner) would likely result in a delay in procuring Superior Court foreclosure proceedings unless the bankruptcy court consented to permit such foreclosure action to proceed. Such delay would increase the likelihood of a delay or default in payment of the principal of, and interest on, the 2013 Bonds and the possibility of delinquent tax installments not being paid in full.

Under 11 U.S.C. Section 362(b)(18), in the event of a bankruptcy petition filed on or after October 22, 1994, the lien for ad valorem taxes in subsequent fiscal years will attach even if the property is part of the bankruptcy estate. 2013 Bondowners should be aware that the potential effect of 11 U.S.C. Section 362(b)(18) on the Special Taxes depends upon whether a court were to determine that the Special Taxes should be treated like ad valorem taxes for this purpose.

On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. Although the court upheld the priority of unpaid taxes imposed before the bankruptcy petition, unpaid taxes imposed after the filing of the bankruptcy petition were declared to be “administrative expenses” of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclose on the property and retain all the proceeds of the sale except the amount of the pre-petition taxes.

According to the court’s ruling, as administrative expenses, post petition taxes would be paid, assuming that the debtor had sufficient assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise), it would at that time become subject to current ad valorem taxes.

The Act provides that the Special Taxes are secured by a continuing lien which is subject to the same lien priority in the case of delinquency as ad valorem taxes. No case law exists with respect to how a bankruptcy court would treat the lien for Special Taxes levied after the filing of a petition in bankruptcy. Glasply is controlling precedent on bankruptcy courts in the State. If the Glasply precedent was applied to the levy of the Special Taxes, the amount of Special Taxes received from parcels whose owners declare bankruptcy could be reduced.

Moreover, the ability of the District to commence and prosecute enforcement proceedings may be limited by bankruptcy, insolvency and other laws generally affecting creditors’ rights (such as the Soldiers’ and Sailors’ Relief Act of 1940) and by the laws of the State relating to judicial foreclosure.

FDIC/Federal Government Interests in Parcels

The ability of the District to collect interest and penalties specified by the Act and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to parcels in which the Federal Deposit Insurance Corporation (the “FDIC”), or other federal government entities such as Fannie Mae or Freddie Mac, has or obtains an interest.

In the case of FDIC, in the event that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the Resolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, the

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Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the non payment of taxes.

The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings brought against Orange County in United States Bankruptcy Court and in Federal District Court. The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross-appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre-receivership liens based upon delinquent property tax.

The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure sale would prevent or delay the foreclosure sale.

In the case of Fannie Mae and Freddie Mac, in the event a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or a private deed of trust secured by a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution “this Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the Constitution or Laws of any State to the contrary notwithstanding.” In the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of taxable property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.

Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest. For a discussion of risks associated with taxable parcels within the District becoming owned by the federal government, federal government entities or federal government sponsored entities, see “—Insufficiency of Special Taxes.”

The District’s remedies may also be limited in the case of delinquent Special Taxes with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement Administration) have or obtain an interest.

Billing of Special Taxes

A special tax formula can result in a substantially heavier property tax burden being imposed upon properties within a community facilities district than elsewhere in a city or county, and this in turn, along with various other factors, can lead to problems in the collection of the special tax. In some community facilities districts, taxpayers have refused to pay the special tax and have commenced litigation challenging the special tax, the community facilities district and the bonds issued by the district.

Under provisions of the Act, the Special Taxes are billed to the properties within the District which were entered on the Assessment Roll of the County Assessor by January 1 of the previous Fiscal Year on the

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regular property tax bills sent to owners of such properties. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Ordinarily, these Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and installment payments of Special Taxes in the future. See “SECURITY FOR THE 2013 BONDS—Covenant for Superior Court Foreclosure,” for a discussion of the provisions which apply, and procedures which the District is obligated to follow, in the event of delinquency in the payment of installments of Special Taxes.

Collection of Special Taxes

In order to pay debt service on the 2013 Bonds, it is necessary that the Special Tax levied against land within the District be paid in a timely manner. The District has covenanted in the Fiscal Agent Agreement under certain conditions to institute foreclosure proceedings against property with delinquent Special Taxes in order to obtain funds to pay debt service on the 2013 Bonds. If foreclosure proceedings were instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Taxes to protect its security interest. In the event such superior court foreclosure is necessary, there could be a delay in principal and interest payments to the owners of the 2013 Bonds pending prosecution of the foreclosure proceedings and receipt of the proceeds of the foreclosure sale, if any. No assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Taxes installment. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not specify the obligations of the District with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale if there is no other purchaser at such sale. See “SECURITY FOR THE 2013 BONDS—Covenant for Superior Court Foreclosure.”

Maximum Special Tax Rates

Within the limits of each Rate and Method, the District may adjust the Special Taxes levied on all property within the District to provide the amount required each year to pay annual debt service and to replenish the Reserve Account to an amount equal to the Reserve Requirement. However, the amount of Special Taxes that may be levied against particular categories of property is subject to the maximum tax rates set forth in the applicable Rate and Method. In the event of significant Special Tax delinquencies, there is no assurance that the maximum tax rates would be sufficient to meet debt service obligations on the 2013 Bonds. Moreover, pursuant to Government Code Section 53321(d), the Special Tax for public facilities levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within the District by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. See “SECURITY FOR THE 2013 BONDS—The Special Taxes” and APPENDIX A—“RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES.”

Exempt Properties

So long as certain conditions are met, each Rate and Method provides that the District shall not levy a Special Tax on Property classified as Exempt Property. Under the Rate and Method, the Board will not classify an Assessor’s Parcel as Exempt Property if such classification would reduce the Acreage of Taxable Property of a respective Zone to less than the Minimum Taxable Acreage. Assessor’s Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of Taxable Property in such Zone to less than the Minimum Taxable Acreage will continue to be classified as Developed Property or Undeveloped Property, as applicable, and will continue to be subject to Special Taxes accordingly.

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In addition, the Act provides that properties or entities of the State, federal or local government are exempt from the Special Taxes; provided, however, the property within the District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Taxes, will continue to be subject to the Special Taxes. The Act further provides that if property subject to the Special Taxes is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Taxes with respect to that property is to be treated as if it were a special assessment. The constitutionality and operation of these provisions of the Act have not been tested. In particular, insofar as the Act requires payment of the Special Taxes by a federal entity acquiring property within the District, it may be unconstitutional.

If for any reason property within the District becomes exempt from taxation by reason of its status under the Rate and Method, or by reason of its ownership by a nontaxable entity such as the federal government or another public agency, subject to the limitation of the maximum authorized rates, the Special Taxes will be reallocated to the remaining taxable properties within the District. This would result in the owners of such property paying a greater amount of the Special Taxes and could have an adverse impact upon the timely payment of the Special Taxes.

Payment of Special Taxes is not a Personal Obligation of the Property Owners

An owner of a taxable parcel is not personally obligated to pay Special Taxes. Rather, Special Taxes are an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully Special Taxes, the District has no recourse against the property owner.

Proposition 218

An initiative measure commonly referred to as the “Right to Vote on Taxes Act” (the “Initiative”) was approved by the voters of the State of California at the November 5, 1996 general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the “Title and Summary” of the Initiative prepared by the California Attorney General, the Initiative limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” The provisions of the Initiative have not yet been interpreted by the courts, although several lawsuits have been filed requesting the courts to interpret various aspects of the Initiative. The Initiative could potentially impact the Special Taxes available to the District to pay the principal of and interest on the 2012 Bonds, the 2013 Bonds and any Parity Bonds as described below.

Among other things, Section 3 of Article XIII states that “. . . the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854, which states that:

“Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution.”

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Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the 2012 Bonds, the 2013 Bonds or any Parity Bonds.

It may be possible, however, for voters or the Board of Trustees acting as the legislative body of the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the 2013 Bonds and any Parity Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the 2013 Bonds and any Parity Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to the maximum extent that the law permits it to do so, the District has covenanted that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on parcels within the District to an amount that is less than 110% of the sum of Administrative Expenses and gross debt service on all 2013 Bonds and Parity Bonds to remain outstanding after the reduction is approved. In connection with the foregoing covenant, the District has made a legislative finding and determination that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the 2013 Bonds and Parity Bonds. The District also has covenanted that, in the event an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants.

The interpretation and application of the Initiative will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See “SPECIAL RISK FACTORS—Limitations on Remedies.”

Ballot Initiatives

Articles XIIIC and XIIID were adopted pursuant to measures qualified for the ballot pursuant to California’s constitutional initiative process. On March 6, 1995, in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, the City, or local districts to increase revenues or to increase appropriations or on the ability of the landowners within the District to complete the remaining proposed development.

No Acceleration

The 2013 Bonds do not contain a provision allowing for their acceleration in the event of a payment default or other default under the terms of the 2013 Bonds or the Fiscal Agent Agreement or upon any adverse change in the tax status of interest on the 2013 Bonds. There is no provision in the Act or the Fiscal Agent Agreement for acceleration of the Special Taxes in the event of a payment default by an owner of a parcel within the District. Pursuant to the Fiscal Agent Agreement, a 2013 Bond Owner is given the right for the equal benefit and protection of all 2013 Bond Owners to pursue certain remedies described in APPENDIX C—“SUMMARY OF FISCAL AGENT AGREEMENT.”

Loss of Tax Exemption

As discussed under the caption “LEGAL MATTERS—Tax Exemption,” in order to maintain the exclusion from gross income for federal income tax purposes of the interest on the 2013 Bonds, the District has covenanted in the Fiscal Agent Agreement not to take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the 2013

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Bonds under Section 103 of the Internal Revenue Code of 1986, as amended. Interest on the 2013 Bonds could become includable in gross income for purposes of Federal income taxation retroactive to the date the 2013 Bonds were issued, as a result of acts or omissions of the School District or the District in violation of the Code. Should such an event of taxability occur, the 2013 Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional redemption provisions of the Fiscal Agent Agreement. Moreover, legislation affecting the exclusion of interest on the 2013 Bonds from gross income may be considered by the United States Congress and the State legislature. Federal and state court proceedings and the outcome of such proceedings could also affect the exclusion of interest on the 2013 Bonds from gross income. No assurance can be given that legislation enacted or proposed, or actions by a court, after the date of issuance of the 2013 Bonds will not have an adverse effect on the tax exemption of interest on the 2013 Bonds or the market value of the 2013 Bonds. See “LEGAL MATTERS — Tax Exemption.”

Limitations on Remedies

Remedies available to the 2013 Bond Owners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the 2013 Bonds or to preserve the tax-exempt status of the 2013 Bonds. Bond Counsel has limited its opinion as to the enforceability of the 2013 Bonds and of the Fiscal Agent Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affecting generally the enforcement of creditor’s rights, by equitable principles and by the exercise of judicial discretion. Additionally, the 2013 Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the Fiscal Agent Agreement. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the 2013 Bond Owners.

Enforceability of the rights and remedies of the 2013 Bond Owners, and the obligations incurred by the District, may become subject to the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditor’s rights generally, now or hereafter in effect, equity principles which may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the powers delegated to it by the Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on remedies against joint powers authorities in the State. See “SPECIAL RISK FACTORS—Bankruptcy and Foreclosure.”

Limited Secondary Market

As stated herein, investment in the 2013 Bonds poses certain economic risks which may not be appropriate for certain investors, and only persons with substantial financial resources who understand the risk of investment in the 2013 Bonds should consider such investment. There can be no guarantee that there will be a secondary market for purchase or sale of the 2013 Bonds or, if a secondary market exists, that the 2013 Bonds can or could be sold for any particular price.

CONTINUING DISCLOSURE

Pursuant to a Continuing Disclosure Agreement, by and between the District and Keygent LLC, as dissemination agent (the “Continuing Disclosure Agreement”), the District will agree to provide, or cause to be provided, certain annual financial information and operating data concerning the District (the “Annual Report”) and to provide notices of the occurrence of certain enumerated events (the “Listed Events”). The Annual Report will be filed by the Fiscal Agent as the Dissemination Agent with the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board (“EMMA”). Notices of Listed Events will be filed by the Dissemination Agent with EMMA. The specific nature of the information to be included in the Annual Reports and the notices of Listed Events is set forth in APPENDIX E—“FORM OF CONTINUING DISCLOSURE AGREEMENT.” This agreement will be entered into in order to assist the

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Underwriter in complying with SEC Rule 15c2-12(b)(5) (the “Rule”). The Annual Reports are to be filed by the District no later than February 15th of each year, beginning February 15, 2014.

The District has previously entered into an undertaking pursuant to the Rule with respect to the 2002 Bonds, the Subordinate 2008 Bonds and the 2012 Bonds, and the School District has entered into various undertakings with respect to the Rule. In May 2006, the School District executed and delivered its 2006 Certificates of Participation (the “2006 Certificates”). In January 2008, the School District executed and delivered its 2008 Refunding Certificates of Participation (the “2008 Certificates”). In Fiscal Year 2009-10, the School District did not timely file its audited financial statements as required with respect to the 2008 Certificates and 2006 Certificates. In fiscal years 2006-07 and 2007-08, complete annual reports for the District were filed less than a week late, and in fiscal year 2008-09, the School District’s audited financial statements were filed less than a week late. Other than as described in this Official Statement, neither the School District nor the District has failed to comply in all material respects with such undertakings in the last five years.

It should be noted that the District is required to file certain financial statements with the Annual Reports. This requirement has been included in the agreement solely to satisfy the provisions of the Rule. The inclusion of this information does not mean that the 2013 Bonds are secured by any resources or property of the District other than as described hereinabove. See “SECURITY FOR THE 2013 BONDS” and “SPECIAL RISK FACTORS.” It should also be noted that the list of significant events which the District has agreed to report includes three items which have absolutely no application whatsoever to the 2013 Bonds. These items have been included in the list solely to satisfy the requirements of the Rule. Thus, any implication from the inclusion of these items in the list to the contrary notwithstanding, there are no credit enhancements applicable to the 2013 Bonds and there are no credit or liquidity providers with respect to the 2013 Bonds.

Notwithstanding any provision of the Fiscal Agent Agreement, failure of the District to comply with the Continuing Disclosure Agreement shall not be considered an event of default under the Fiscal Agent Agreement. However, any holder of the 2013 Bonds may take such action as is necessary and appropriate, including seeking mandate or a judgment for specific performance, to cause the District to comply with its obligations with respect to the Continuing Disclosure Agreement.

LEGAL MATTERS

Underwriting

The 2013 Bonds are being purchased by Piper Jaffray & Co. (the “Underwriter”). The Underwriter has agreed to purchase the 2013 Bonds at a price of $4,192.076.30 (being $4,335,000.00 aggregate principal amount thereof, less Underwriter’s discount of $54,187.50 and less net original issue discount of $88,736.20). The purchase agreement relating to the 2013 Bonds provides that the Underwriter will purchase all of the 2013 Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in such purchase agreement, the approval of certain legal matters by counsel and certain other conditions.

The Underwriter may offer and sell the 2013 Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.

The Underwriter and Pershing LLC, a subsidiary of The Bank of New York Mellon Corporation, entered into an agreement (the “Agreement”) which enables Pershing LLC to distribute certain new issue municipal securities underwritten by or allocated to Piper Jaffray & Co., including the 2013 Bonds. Under the Agreement, Piper Jaffray & Co. will share with Pershing LLC a portion of the fee or commission paid to Piper Jaffray & Co.

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The Underwriter has entered into a distribution agreement (the “Distribution Agreement”) with Charles Schwab & Co., Inc. (“CS&Co.”) for the retail distribution of certain securities offerings at the original issue prices. Pursuant to the Distribution Agreement, CS&Co. will purchase 2013 Bonds from the Underwriter at the original issue price less a negotiated portion of the selling concession applicable to any 2013 Bonds that CS&Co. sells.

Legal Opinion

The legal opinion of Stradling Yocca Carlson & Rauth, San Francisco, California, approving the validity of the 2013 Bonds, in substantially the form set forth in Appendix F hereto, will be made available to purchasers of the 2013 Bonds at the time of original delivery. A copy of the legal opinion for the 2013 Bonds will be provided with each definitive bond. Bond Counsel has not undertaken on behalf of the Owners or the Beneficial Owners of the 2013 Bonds to review the Official Statement and assumes no responsibility to such Owners and Beneficial Owners for the accuracy of the information contained herein. Certain legal matters will be passed upon for the District by Parker & Covert LLP, Tustin, California, and for the School District and the District by Stradling Yocca Carlson & Rauth, San Francisco, California, Disclosure Counsel to the School District with respect to the issuance of the 2013 Bonds. Although it is serving as Bond Counsel and Disclosure Counsel to the District in connection with the issuance and sale of the 2013 Bonds, Bond Counsel represents the Underwriter in connection with other financings and matters unrelated to the 2013 Bonds.

Tax Exemption

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on the 2013 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the 2013 Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the 2013 Bonds may be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of such corporations.

The difference between the issue price of a 2013 Bond (the first price at which a substantial amount of the 2013 Bonds of the same maturity is to be sold to the public) and the stated redemption price at maturity with respect to such 2013 Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a 2013 Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the 2013 Bond Owner will increase the 2013 Bond Owner’s basis in the 2013 Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of a 2013 Bond is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax.

Bond Counsel’s opinion as to the exclusion from gross income of interest (and original issue discount) on the 2013 Bonds is based upon certain representations of fact and certifications made by the School District and others and is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the 2013 Bonds to assure that interest (and original issue discount) on the 2013 Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the 2013 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the 2013 Bonds. The District has covenanted to comply with all such requirements.

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The amount by which a 2013 Bond Owner’s original basis for determining loss on sale or exchange of a 2013 Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable 2013 Bond premium, which must be amortized under Section 171 of the Code; such amortizable 2013 Bond premium reduces the 2013 Bond Owner’s basis in the applicable 2013 Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of 2013 Bond premium may result in a 2013 Bond Owner realizing a taxable gain when a 2013 Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the 2013 Bond to the Owner. Purchasers of the 2013 Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable 2013 Bond premium.

The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2013 Bonds will be selected for audit by the IRS. It is also possible that the market value of the 2013 Bonds might be affected as a result of such an audit of the 2013 Bonds (or by an audit of other similar bonds). It is also possible that the market value of the 2013 Bonds might be affected as a result of such an audit of the 2013 Bonds (or by an audit of similar bonds). No assurance can be given that, in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the execution and delivery of the 2013 Bonds to the extent that it adversely affects the exclusion from gross income of interest on the 2013 Bonds or their market value.

Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the Closing Date. Bond Counsel has not undertaken to determine, or to inform any person, Whether any such actions or events are taken or do occur. The Fiscal Agent Agreement and the Tax Certificate relating to the 2013 Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the 2013 Bonds for federal income tax purposes with respect to any 2013 Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation.

SUBSEQUENT TO THE ISSUANCE OF THE 2013 BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE 2013 BONDS OR THE MARKET VALUE OF THE 2013 BONDS. LEGISLATIVE CHANGES HAVE BEEN PROPOSED IN CONGRESS, WHICH, IF ENACTED, WOULD RESULT IN ADDITIONAL FEDERAL INCOME TAX BEING IMPOSED ON CERTAIN OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE 2013 BONDS. THE INTRODUCTION OR ENACTMENT OF ANY OF SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE 2013 BONDS. NO ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO THE ISSUANCE OF THE 2013 BONDS, SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE 2013 BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE 2013 BONDS.

Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the 2013 Bonds is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the ownership of the 2013 Bonds and the accrual or receipt of interest (and original issue discount) with respect to the 2013 Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the 2013 Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the 2013 Bonds.

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A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix D.

Rating

Standard & Poor’s Ratings Services (“S&P”), a Standard & Poor’s Financial Services LLC business, has assigned its long-term rating of “BBB+” to the 2013 Bonds. Such rating reflects only the views of the rating agency, and any explanation of the significance of such rating must be obtained from the rating agency. There is no assurance that such rating will continue for any given period of time, or that it will not be revised downward or withdrawn entirely by the rating agency if in the judgment of the rating agency circumstances so warrant. An explanation of the significance of such rating may be obtained from Standard & Poor’s Corporation, 55 Water Street, 45th Floor, New York, New York 10041. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the 2013 Bonds. The District cannot predict the timing or impact of future actions by the rating agency.

No Litigation

A certificate of the District to the effect that no litigation is pending or threatened concerning the validity of the 2013 Bonds will be furnished to the Underwriter at the time of the original delivery of the 2013 Bonds. Neither the School District nor the District are aware of any litigation pending or threatened which questions the existence of the District or the School District or contests the authority of the District to levy and collect the Special Taxes or to issue the 2013 Bonds.

Additional Information

All of the preceding summaries of the Fiscal Agent Agreement, other applicable legislation, agreements and other documents are made subject to the provisions of such documents and do not purport to be complete documents of any or all of such provisions. Reference is hereby made to such documents on file with the School District for further information in connection therewith.

This Official Statement does not constitute a contract with the purchasers of the 2013 Bonds.

Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized.

The Board of Trustees of the Sulphur Springs Union School District has duly authorized the Superintendent to execute and deliver this Official Statement on behalf of the District.


By: /s/ Dr. Robert Nolet Superintendent of Sulphur Springs Union School District on behalf of the Sulphur Springs Union School District Community Facilities District No. 2002-1

A-1

APPENDIX A

RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES

RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 2002-1

OF SULPHUR SPRINGS UNION SCHOOL DISTRICT

The following sets forth the Rate and Method of Apportionment for the levy and collection of Special Taxes of Sulphur Springs Union School District (“School District”) of Community Facilities District No. 2002-1 (“CFD No. 2002-1”). An Annual Special Tax shall be levied on and collected in CFD No. 2002-1 each Fiscal Year, in an amount determined through the application of the Rate and Method of Apportionment described below. All of the real property in CFD No. 2002-1, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent, and in the manner herein provided.

SECTION A DEFINITIONS

The terms hereinafter set forth have the following meanings:

“Acreage” means the land area of an Assessor’s Parcel as shown on an Assessor’s Parcel Map or as calculated from the applicable Assessor’s Parcel Map by the Board.

“Act” means the Mello-Roos Communities Facilities Act of 1982 as amended, being Chapter 2.5, Division 2 of Title 5 of the Government Code of the State of California.

“Administrative Expenses” means any ordinary and necessary expense incurred by the School District on behalf of CFD No. 2002-1 related to the determination of the amount of the levy of Special Taxes, the collection of Special Taxes including the expenses of collecting delinquencies, the administration of Bonds, the payment of salaries and benefits of any School District employee whose duties are directly related to the administration of CFD No. 2002-1, and costs otherwise incurred in order to carry out the authorized purposes of CFD No. 2002-1.

“Annual Special Tax” means the Special Tax actually levied in any Fiscal Year on any Assessor’s Parcel.

“Assessor’s Parcel” means a lot or parcel of land designated on an Assessor’s Parcel Map with an assigned Assessor’s Parcel Number within the boundaries of CFD No. 2002-1.

“Assessor’s Parcel Map” means an official map of the Assessor of the County designating parcels by Assessor’s Parcel Number.

“Assessor’s Parcel Number” means that number assigned to an Assessor’s Parcel by the County for purposes of identification.

“Assigned Annual Special Tax” means the Special Tax of that name described in Section D below.

“Attached Unit” means a Unit that is located or shall be located within a building in which each of the individual Units has or shall have at least one common wall with another Unit.

“Backup Annual Special Tax” means the Special Tax of that name described in Section E below.

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“Board” means the Board of Education of Sulphur Springs Union School District, or its designee, acting as the Legislative Body of CFD No. 2002-1.

“Bonds” means any obligation to repay a sum of money, including obligations in the form of bonds, notes, certificates of participation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals or long-term contracts, or any refunding thereof, to which Special Taxes have been pledged.

“Building Permit” means a permit for the construction of one or more Units. For purposes of this definition, “Building Permit” shall not include permits for construction or installation of commercial/industrial structures, parking structures, retaining walls, utility improvements, or other such improvements not intended for human habitation.

“Building Square Footage” or “BSF” means the square footage of assessable internal living space of a Unit, exclusive of any carports, walkways, garages, overhangs, patios, enclosed patios, detached accessory structure, or other structures not used as living space, as determined by reference to the Building Permit for such Unit.

“Calendar Year” means the period commencing January 1 of any year and ending the following December 31.

“County” means the County of Los Angeles.

“Detached Unit” means a Unit which is not an Attached Unit.

“Developed Property” means all Assessor’s Parcels of Taxable Property for which Building Permits were issued on or before May 1 of the prior Fiscal Year, provided that such Assessor’s Parcels were created on or before January 1 of the prior Fiscal Year and that each such Assessor’s Parcel is associated with a Lot, as determined reasonably by the Board.

“Exempt Property” means all Assessor’s Parcels designated as being exempt from Special Taxes in Section J.

“Final Map” means a final tract map, parcel map, lot line adjustment, or functionally equivalent map or instrument that creates building sites, recorded in the County Office of the Recorder.

“Fiscal Year” means the period commencing on July 1 of any year and ending the following June 30.

“Gross Prepayment Amount” means any amount determined by reference to Section G below.

“Lot” means an individual legal lot created by a Final Map for which a Building Permit could be issued.

“Maximum Special Tax” means the maximum Special Tax, determined in accordance with Section C, that can be levied by CFD No. 2002-1 in any Fiscal Year on any Assessor’s Parcel.

“Minimum Annual Special Tax Requirement” means the amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all outstanding Bonds due in the Calendar Year that commences in such Fiscal Year, (ii) Administrative Expenses of CFD No. 2002-1, (iii) the costs associated with the release of funds from an escrow account, and (iv) any amount required to establish or replenish any reserve funds established in association with the Bonds, (v) an amount of $300,000 per Fiscal Year for Fiscal Years 2003-04 through 2007-08, less (vi) any amount available to pay debt service or other periodic costs on the Bonds pursuant to any applicable bond indenture, fiscal agent agreement, or trust agreement.

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“Minimum Taxable Acreage” means, for a Zone, the applicable Acreage listed in Table 12.

“Partial Prepayment Amount” means the amount required to prepay a portion of the Annual Special Tax obligation for an Assessor’s Parcel as described in Section H.

“Prepayment Amount” means the amount required to prepay the Annual Special Tax obligation in full for an Assessor’s Parcel as described in Section G.

“Proportionately” means that the ratio of the actual Annual Special Tax levy to the applicable Special Tax is equal for all applicable Assessor’s Parcels.

“Special Tax” means any of the special taxes authorized to be levied by CFD No. 2002-1 pursuant to the Act.

“Taxable Property” means all Assessor’s Parcels within CFD No. 2002-1 which are not Exempt Property.

“Undeveloped Property” means all Assessor’s Parcels of Taxable Property which are not Developed Property.

“Unit” means each separate residential dwelling unit which comprises an independent facility capable of conveyance or use separate from adjacent residential dwelling units.

“Zone 1” means all property located within the area identified as Zone 1 in Exhibit A to this Rate and Method of Apportionment.





SECTION B CLASSIFICATION OF ASSESSOR’S PARCELS

For each Fiscal Year, beginning with Fiscal Year 2002-03, (i) each Assessor’s Parcel shall be classified as Exempt Property or Taxable Property; (ii) each Assessor’s Parcel of Taxable Property shall be classified as Developed Property or Undeveloped Property; and (iii) each Assessor’s Parcel shall be assigned to a Zone in accordance with Exhibit A; (iv) each Assessor’s Parcel of Developed Property shall further be classified as a Detached Unit or Attached Unit; and (v) each Assessor’s Parcel of Developed Property classified as a Detached Unit shall further be classified according to its Building Square Footage.

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SECTION C MAXIMUM SPECIAL TAXES

1. Developed Property

The Maximum Special Tax for each Assessor’s Parcel classified as Developed Property in any Fiscal Year shall be the amount determined by the greater of (i) the application of the Assigned Annual Special Tax or (ii) the application of the Backup Annual Special Tax.

2. Undeveloped Property

The Maximum Special Tax for each Assessor’s Parcel classified as Undeveloped Property in any Fiscal Year shall be the amount determined by the application of the Assigned Annual Special Tax.

SECTION D ASSIGNED ANNUAL SPECIAL TAXES

1. Developed Property

The Assigned Annual Special Tax applicable to an Assessor’s Parcel of Developed Property in Fiscal Year 2002-03 shall be determined by reference to Tables 1 through 5.

TABLE 1

FISCAL YEAR 2002-03 ASSIGNED ANNUAL SPECIAL TAX RATES – ZONE 1

Unit Type BSF Assigned Annual Special Tax Rates

Detached < 2,000 BSF $962.00 per Unit

Detached 2,000 — 2,200 BSF $1,100.00 per Unit


Detached > 2,400 BSF $1,239.00 per Unit

Attached NA $561.00 per Unit

TABLE 2

FISCAL YEAR 2002-03

ASSIGNED ANNUAL SPECIAL TAX RATES – ZONE 2


Detached < 2,000 BSF $1,099.00 per Unit





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TABLE 3

FISCAL YEAR 2002-03 ASSIGNED ANNUAL SPECIAL TAX RATES – ZONE 3










TABLE 4

FISCAL YEAR 2002-03






Detached 3.001 — 3,250 BSF $2,303.00 per Unit





TABLE 5

FISCAL YEAR 2002-03


Unit Type BSF Assigned Annual Special

Tax Rates

Detached NA $962.00 per Unit


Each Fiscal Year, commencing Fiscal Year 2003-04, the Assigned Annual Special Tax for each Assessor’s Parcel of Developed Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.

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2. Undeveloped Property

The Assigned Annual Special Tax applicable to an Assessor’s Parcel of Undeveloped Property in Fiscal Year 2002-03 shall be determined by reference to Table 6.

TABLE 6

FISCAL YEAR 2002-03 ASSIGNED ANNUAL SPECIAL TAX RATES

Zone Assigned Annual Special Tax Rates

Zone 1 $13,702.00 per acre of Acreage





Each Fiscal Year, commencing Fiscal Year 2003-04, the Assigned Annual Special Tax for each Assessor’s Parcel of Undeveloped Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.

SECTION E BACKUP ANNUAL SPECIAL TAXES

Each Fiscal Year, each Assessor’s Parcel of Developed Property shall be subject to a Backup Annual Special Tax. In each Fiscal Year, the Backup Annual Special Tax rate for Developed Property shall be the rate per Lot calculated according to the following formula:

Z x A B = ---------------------

L

The terms have the following meanings:

B = Backup Annual Special Tax per Lot for the applicable Fiscal Year Z = Assigned Annual Special Tax per acre of Acreage of Undeveloped Property

of the applicable Zone for the applicable Fiscal Year A = Acreage of Taxable Property of Developed Property expected to exist in the

applicable Final Map at build-out, as determined by the Board pursuant to Section J

L = Lots in the Final Map

Notwithstanding the foregoing, if all or any portion of the Final Map(s) described in the preceding paragraph is subsequently changed or modified, then the Backup Annual Special Tax for each Assessor’s Parcel of Developed Property in such Final Map area that is changed or modified shall be a rate per square foot of Acreage calculated as follows:

1. Determine the total Backup Annual Special Taxes anticipated to apply to the changed or modified Final Map area prior to the change or modification.

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2. The result of paragraph 1 above shall be divided by the Acreage of Taxable Property of Developed Property which is ultimately expected to exist in such changed or modified Final Map area, as reasonably determined by the Board.

3. The result of paragraph 2 above shall be divided by 43,560. The result is the Backup Annual Special Tax per square foot of Acreage which shall be applicable to Assessor’s Parcels of Developed Property in such changed or modified Final Map area for all remaining Fiscal Years in which the Special Tax may be levied.

SECTION F METHOD OF APPORTIONMENT OF THE ANNUAL SPECIAL TAX

Commencing Fiscal Year 2002-03 and for each subsequent Fiscal Year, the Board shall levy Annual Special Taxes in Zone 1, Zone 2, Zone 3, Zone 4, and Zone 5 as follows:

Step One: The Board shall levy an Annual Special Tax on each Assessor’s Parcel of Developed Property in Zone 1, Zone 2, Zone 3, Zone 4, and Zone 5 in an amount equal to the Assigned Annual Special Tax applicable to each such Assessor’s Parcel.

Step Two: If the sum of the amounts collected in step one is insufficient to satisfy the Minimum Annual Special Tax Requirement, then the Board shall additionally levy an Annual Special Tax Proportionately on each Assessor’s Parcel of Undeveloped Property in Zone 1, Zone 2, Zone 3, Zone 4, and Zone 5 up to the Assigned Annual Special Tax applicable to each such Assessor’s Parcel to satisfy the Minimum Annual Special Tax Requirement.

Step Three: If the sum of the amounts collected in steps one and two is insufficient to satisfy the Minimum Annual Special Tax Requirement, then the Annual Special Tax on each Assessor’s Parcel of Developed Property in Zone 1, Zone 2, Zone 3, Zone 4, and Zone 5 whose Maximum Special Tax is the Backup Annual Special Tax shall be increased Proportionately from the Assigned Annual Special Tax up to the Backup Annual Special Tax to satisfy the Minimum Annual Special Tax Requirement.

SECTION G PREPAYMENT OF ANNUAL SPECIAL TAXES

The Annual Special Tax obligation of an Assessor’s Parcel of Developed Property or an Assessor’s Parcel of Undeveloped Property for which a Building Permit has been issued may be prepaid in full, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor’s Parcel at the time the Annual Special Tax obligation would be prepaid. The Prepayment Amount for an Assessor’s Parcel eligible for prepayment shall be determined as described below.

1. Prior to Issuance of Bonds

Prior to the issuance of Bonds, the Prepayment Amount for each Assessor’s Parcel of Developed Property and each Assessor’s Parcel of Undeveloped Property for which a Building Permit has been issued shall be the applicable Gross Prepayment Amount. The Gross Prepayment Amount for the period from May 1, 2001, to April 30, 2002, shall be determined by reference to Tables 7 through 11.

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TABLE 7

GROSS PREPAYMENT AMOUNTS PRIOR TO ISSUANCE OF BONDS – ZONE 1

MAY 1, 2001 TO APRIL 30, 2002

Unit Type BSF Gross Prepayment

Amounts





Attached NA $6,282.00 per Unit

TABLE 8

GROSS PREPAYMENT AMOUNTS

PRIOR TO ISSUANCE OF BONDS – ZONE 2 MAY 1, 2001 TO APRIL 30, 2002


Amounts






TABLE 9

GROSS PREPAYMENT AMOUNTS

PRIOR TO ISSUANCE OF BONDS – ZONE 3 MAY 1, 2001 TO APRIL 30, 2002


Amounts





Detached 3.251 — 3,500 BSF $23,693.00 per Unit

Detached 3.501 — 3,750 BSF 524,622.00 per Unit



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TABLE 10

GROSS PREPAYMENT AMOUNTS PRIOR TO ISSUANCE OF BONDS – ZONE 4

MAY 1, 2001 TO APRIL 30, 2002


Amounts









TABLE 11

FISCAL YEAR 2002-03



Amounts

Detached NA $10,772.00 per Unit

Detached NA $6,282.00 per Unit

On each May 1, commencing May 1, 2002, the Gross Prepayment Amount for each Unit shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.

2. Subsequent to Issuance of Bonds

Subsequent to the issuance of Bonds, the Prepayment Amount for each applicable Assessor’s Parcel shall be calculated according to the following formula (capitalized terms defined below):

Bond Redemption Amount plus Redemption Premium plus Defeasance plus Administrative Fee less Reserve Fund Credit equals Prepayment Amount

As of the date of prepayment, the Prepayment Amount shall be calculated as follows:

1. For Assessor’s Parcels of Developed Property, compute the sum of the Assigned Annual Special Taxes and the Backup Annual Special Taxes applicable to the Assessor’s Parcel. For Assessor’s Parcels of Undeveloped Property, compute the sum of the Assigned Annual Special Taxes and the Backup Annual Special Taxes applicable to the Assessor’s Parcel as

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though it was already designated as Developed Property, based upon the Building Permit issued for that Assessor’s Parcel.

2. For each Assessor’s Parcel of Developed Property or Undeveloped Property to be prepaid, (a) divide the sum of the Assigned Annual Special Taxes computed pursuant to paragraph 1 for such Assessor’s Parcel by the sum of the estimated Assigned Annual Special Taxes applicable to all Assessor’s Parcels of Developed Property at build-out, as reasonably determined by the Board, and (b) divide the sum of Backup Annual Special Tax computed pursuant to paragraph 1 for such Assessor’s Parcel by the sum of the estimated Backup Annual Special Taxes applicable to all Assessor’s Parcels of Developed Property at build-out, as reasonably determined by the Board.

3. The amount determined pursuant to Section G.1. shall be (a) increased by the portion of the Bonds allocable to costs of issuance, reserve fund deposits, and capitalized interest with respect to the applicable Assessor’s Parcel and (b) reduced by the amount of regularly retired principal which is allocable to the applicable Assessor’s Parcel, as determined by the Board. The result is the “Outstanding Gross Prepayment Amount.” In no event shall any Annual Special Taxes determined to have been used to make a regularly scheduled principal payment on the Bonds be adjusted for any increase in any cost index or other basis subsequent to the date of the applicable principal payment.

4. Multiply the larger quotient computed pursuant to paragraph 2(a) or 2(b) by the face value of all outstanding Bonds. If the product is greater than the Outstanding Gross Prepayment Amount, then the product shall be the “Bond Redemption Amount.” If the product is less than the Outstanding Gross Prepayment Amount, then the Outstanding Gross Prepayment Amount shall be the “Bond Redemption Amount.”

5. Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on the outstanding Bonds to be redeemed with the proceeds of the Bond Redemption Amount. This product is the “Redemption Premium.”

6. Compute the amount needed to pay interest on the Bond Redemption Amount, the Redemption Premium, and the Reserve Fund Credit (see step 10) to be redeemed with the proceeds of the Prepayment Amount until the earliest call date for the outstanding Bonds.

7 Estimate the amount of interest earnings to be derived from the reinvestment of the Bond Redemption Amount plus the Redemption Premium until the earliest call date for the outstanding Bonds.

8. Subtract the amount computed pursuant to paragraph 7 from the amount computed pursuant to paragraph 6. This difference is the “Defeasance.”

9. Estimate the administrative fees and expenses associated with the prepayment, including the costs of computation of the Prepayment Amount, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption. This amount is the “Administrative Fee.”

10. Calculate the “Reserve Fund Credit” as the lesser of: (a) the expected reduction in the applicable reserve requirements, if any, associated with the redemption of outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirements in effect after the redemption of outstanding Bonds as a result of the prepayment from the balance in the applicable reserve funds on the prepayment date. Notwithstanding the foregoing, if the reserve fund requirement is satisfied by a surety bond or other instrument at

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the time of the prepayment, then no Reserve Fund Credit shall be given. Notwithstanding the foregoing, the Reserve Fund Credit shall in no event be less than 0.

11. The Prepayment Amount is equal to the sum of the Bond Redemption Amount, the Redemption Premium, the Defeasance, and the Administrative Fee, less the Reserve Fund Credit.

With respect to an Annual Special Tax obligation that is prepaid pursuant to this Section G, the Board shall indicate in the records of CFD No. 2002-1 that there has been a prepayment of the Annual Special Tax obligation and shall cause a suitable notice to be recorded in compliance with the Act within thirty (30) days of receipt of such prepayment to indicate the prepayment of the Annual Special Tax obligation and the release of the Annual Special Tax lien on such Assessor’s Parcel, and the obligation of such Assessor’s Parcel to pay such Annual Special Taxes shall cease.

Notwithstanding the foregoing, no prepayment will be allowed unless the amount of Annual Special Taxes that may be levied on Taxable Property, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year, as reasonably determined by the Board.

SECTION H PARTIAL PREPAYMENT OF ANNUAL SPECIAL TAXES

The Annual Special Tax obligation of an Assessor’s Parcel, as calculated in Section H.2. below, may be partially prepaid at the times and under the conditions set forth in this section, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor’s Parcel at the time the Annual Special Tax obligation would be prepaid.

1. Partial Prepayment Times and Conditions

Prior to the issuance of the first Building Permit for the construction of a production Unit on a Lot within a Final Map area, the owner of no less than all the Taxable Property within such Final Map area may elect in writing to the Board to prepay a portion of the Annual Special Tax obligations for all the Assessor’s Parcels within such Final Map area, as calculated in Section H.2. below. The partial prepayment of each Annual Special Tax obligation shall be collected prior to the issuance of the first Building Permit with respect to each Assessor’s Parcel.

2. Partial Prepayment Amount

The Partial Prepayment Amount shall be calculated according to the following formula:

PP = PG x F

The terms have the following meanings:

PP = the Partial Prepayment Amount PG = the Prepayment Amount calculated according to Section G F = the percent by which the owner of the Assessor’s Parcel is partially prepaying the

Annual Special Tax obligation.

3. Partial Prepayment Procedures and Limitations

With respect to any Assessor’s Parcel that is partially prepaid, the Board shall indicate in the records of CFD No. 2002-1 that there has been a partial prepayment of the Annual Special Tax obligation and

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shall cause a suitable notice to be recorded in compliance with the Act within thirty (30) days of receipt of such partial prepayment of the Annual Special Tax obligation, to indicate the partial prepayment of the Annual Special Tax obligation and the partial release of the Annual Special Tax lien on such Assessor’s Parcel, and the obligation of such Assessor’s Parcel to pay such prepaid portion of the Annual Special Tax shall cease.

Notwithstanding the foregoing, no partial prepayment will be allowed unless the amount of Annual Special Taxes that may be levied on Taxable Property after such partial prepayment, net of Administrative Expenses, shall be at least 1.l times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year.

SECTION I TERMINATION OF SPECIAL TAX

Annual Special Taxes shall be levied for a period of thirty (30) Fiscal Years after the last series of Bonds has been issued, as determined by the Board, provided that Annual Special Taxes shall not be levied after Fiscal Year 2039-40.

SECTION J EXEMPTIONS

The Board shall classify as Exempt Property (i) Assessor’s Parcels owned by the State of California, Federal or other local governments, (ii) Assessor’s Parcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) Assessor’s Parcels used exclusively by a homeowners’ association, (iv) Assessor’s Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, (v) Assessor’s Parcels developed or expected to be developed exclusively for non-residential use, as reasonably determined by the Board, and (vi) any other Assessor’s Parcels at the reasonable discretion of the Board, provided that no such classification would reduce the Acreage of Taxable Property in such Zone to less than the Minimum Taxable Acreage as set forth in Table 12. Notwithstanding the above, the Board shall not classify an Assessor’s Parcel as Exempt Property if such classification would reduce the Acreage of Taxable Property in such Zone to less than the Minimum Taxable Acreage as set forth in Table 12. Assessor’s Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of Taxable Property in such Zone to less than the Minimum Taxable Acreage will continue to be classified as Developed Property or Undeveloped Property, as applicable, and will continue to be subject to Special Taxes accordingly.

TABLE 12

MINIMUM TAXABLE ACREAGE

Zone Minimum Taxable Acreage

Zone 1 28.65

Zone 2 31.89

Zone 3 43.05

Zone 4 30.02

Zone 5 7.65

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SECTION K APPEALS

Any property owner claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Board not later than twelve months after having paid the first installment of the Special Tax that is disputed. A representative(s) of CFD No. 2002-1 shall promptly review the appeal, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Tax, and rule on the appeal. If the representative’s decision requires that the Special Tax for an Assessor’s Parcel be modified or changed in favor of the property owner, a cash refund shall not be made (except for the last year of levy), but an adjustment shall be made to the Annual Special Tax on that Assessor’s Parcel in the subsequent Fiscal Year(s).

SECTION L MANNER OF COLLECTION

The Annual Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2002-1 may collect Annual Special Taxes at a different time or in a different manner if necessary to meet its financial obligations.

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APPENDIX B

THE COUNTY OF LOS ANGELES AND THE NEARBY COMMUNITY OF THE CITY OF SANTA CLARITA

The District is located in an unincorporated area of the County of Los Angeles (the “County’) adjacent to the City of Santa Clarita (the “City”). The following information relating to the County and the City is supplied solely for purposes of information. Neither the County nor the City is obligated in any manner to pay principal of or interest on the 2013 Bonds or to cure any delinquency or default on the 2013 Bonds. The 2013 Bonds are payable solely from the sources described in the Official Statement.

General Background

The City of Santa Clarita (the “City”) is located in the Santa Clarita Valley (the “Valley”), which is comprised of the communities of Canyon Country, Newhall, Saugus, and Valencia, all located in Los Angeles County (the “County”). Santa Clarita is the fourth largest city in Los Angeles County and twenty-fourth largest city in the state of California. Incorporated in 1987, the city operates under a City Council/City Manager form of government. Santa Clarita is famous for being the home of Six Flags Magic Mountain and the California Institute of the Arts.

Geography and Climate

Santa Clarita Valley is located 35 miles northwest of Los Angeles and 40 miles east of the Pacific Ocean. It covers 150 square miles and forms an inverted triangle with the San Gabriel and Santa Susana mountain ranges, separating it from the San Fernando Valley and the Los Angeles Basin on the south, and the San Joaquin Valley, Mojave Desert and Angeles National Forest to the north. The Santa Clara River and its tributaries drain over 490,000 acres of mountains and canyons forming Santa Clarita Valley.

The City of Santa Clarita covers approximately 42 square miles and is located 40 miles from Los Angeles International Airport, 25 miles from the Burbank Airport; and 50 to 60 miles from the ports of Los Angeles and Long Beach, respectively. The City is accessible via Highway 126, the Golden State and the Antelope Valley Freeways. Two Metrolink stations serve rail passengers from the San Fernando Valley and Downtown Los Angeles.

In general, the climate in the City is sunny, warm and dry in the summer and semi-moist and mild in the winters. The annual rainfall of 15 to 18 inches occurs primarily between November and March.

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Population

The following table shows the population of the City, County and State from 2000 through 2012.

CITY OF SANTA CLARITA, LOS ANGELES COUNTY, STATE OF CALIFORNIA Population

Year City of Santa Clarita Los Angeles County State of California

2000 151,131 9,519,330 33,873,086 2001 153,479 9,590,080 34,256,789 2002 157,536 9,679,212 34,725,516 2003 161,744 9,756,914 35,163,609 2004 163,396 9,806,944 35,570,847 2005 165,431 9,816,153 35,869,173 2006 165,243 9,798,609 36,116,202 2007 173,979 9,780,808 36,399,676 2008 174,355 9,785,474 36,704,375 2009 175,103 9,801,096 36,966,713 2010 176,056 9,822,121 37,223,900 2011 176,779 9,847,712 37,427,946 2012 177,445 9,884,632 37,678,563

Source: California State Department of Finance, as of January 1.

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Employment

The following table summarizes the labor force, employment and unemployment figures over the past five years for the City, the County, the State and the nation as a whole.

CITY OF SANTA CLARITA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA AND UNITED STATES

Average Annual Civilian Labor Force, Employment and Unemployment

Year and Area Labor Force Employment (1) Unemployment (2) Unemployment

Rate (%) (3)

2007 City of Santa Clarita 90,900 88,200 2,800 3.0% Los Angeles County 4,872,500 4,625,600 246,900 5.1 State of California 17,921,000 16,960,700 960,300 5.4 United States 153,124,000 146,047,000 7,078,000 4.6

2008

City of Santa Clarita 91,100 87,000 4,100 4.5% Los Angeles County 4,934,800 4,565,500 369,300 7.5 State of California 18,203,100 16,890,000 1,313,100 7.2 United States 154,287,000 145,362,000 8,924,000 5.8

2009


2010 City of Santa Clarita 88,700 81,800 6,900 7.8% Los Angeles County 4,910,500 4,291,400 619,100 12.7 State of California 18,316,400 16,051,500 2,264,900 12.4 United States 153,889,000 139,064,000 14,825,000 9.6

2011


(1) Includes persons involved in labor-management trade disputes. (2) Includes all persons without jobs who are actively seeking work. (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded

figures in this table. Source: California Employment Development Department and U.S. Department of Labor, Bureau of Labor Statistics.

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Industry

The District and City of Santa Clarita are included in the Los Angeles-Long Beach-Glendale Metropolitan Statistical Area. The distribution of employment in the Los Angeles-Long Beach-Glendale area is presented in the following table for calendar years 2008 through 2012(1). These figures are multi-county-wide statistics and may not necessarily accurately reflect employment trends within the District or City of Santa Clarita.

INDUSTRY BY EMPLOYMENT Los Angeles-Long Beach-Glendale Metropolitan Statistical Area

2008-2012(1)

2008 2009 2010 2011 2012(1)

Total Farm 6,900 6,200 6,200 5,500 4,800 Total Nonfarm 4,070,700 3,824,100 3,773,100 3,794,100 3,922,900 Mining and Logging 4,400 4,100 4,100 4,000 4,000 Construction 145,200 117,300 104,500 103,500 111,000 Manufacturing:

Durable Goods 243,200 217,500 207,000 202,800 196,200 Nondurable Goods 191,200 171,600 166,200 162,600 159,000

Service Providing: Wholesale Trade 223,700 204,500 203,300 207,200 210,000 Retail Trade 416,500 387,000 386,000 390,900 418,900 Transportation, Warehousing & Utilities 163,100 151,200 150,600 149,900 153,800 Information 210,300 191,200 191,500 195,600 208,500 Financial Activities 235,700 216,000 209,500 209,400 220,300 Professional & Business Services 582,600 529,800 527,500 540,400 567,600 Education & Health Services 503,400 514,600 522,000 534,800 560,200 Leisure & Hospitality 401,600 385,600 384,800 392,800 415,200 Other Services 146,100 137,900 136,700 135,000 133,400 Government 603,700 595,800 579,600 565,200 564,800

Total (all industries) 4,077,600 3,830,300 3,779,300 3,799,600 3,927,700 (1) Preliminary, as of December 2012. Source: State of California Employment Development Department.

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Largest Employers

Major employers within the City and immediate vicinity are listed as follows:

CITY OF SANTA CLARITA Area Major Employers

Company Product/Service Employees

William S. Hart Union High School District Public Junior High and High School District

2,988

Six Flags Magic Mountain Entertainment / Theme Park 2,230 Sangus Union School District Public Elementary School District 1,900 Princess Cruises Vacation Cruise Line Services 1,625 College of the Canyons Community College 1,603 U.S. Postal Service Government 1,564 Henry Mayo Newhall Memorial Hospital Hospital 1,356 Newhall School District Public Elementary School District 854 Quest Diagnostics Healthcare 850 The Master’s College Private University 841 Woodward HRT Manufacturer: Aerospace 740 City of Santa Clarita Government 633 Wal-Mart Retailer 592 California Institute of the Arts Private University 525 Pharmavite Manufacturer: Dietary/Herbal

Supplements 480

Aerospace Dynamics International Manufacturer: Aerospace Structural Components

470

I.T.T. Aerospace Controls Manufacturer: Aerospace 420 Arvato Digital Business Services 400 Contractors Wardrobe Manufacturer: Home Improvement

Products 400

Source: City of Santa Clarita.

Ad Valorem Property Taxation

City taxes are assessed and collected by Los Angeles County at the same time and on the same rolls as are County, school and special district taxes.

State law exempts $7,000 of the full cash value of an owner-occupied dwelling, but this exemption does not result in any loss of revenue to Local agencies, since the State reimburses local agencies for the value of the exemptions.

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The following table represents the most recent six year history of assessed valuation in the City, including State-reimbursed exemptions:

CITY OF SANTA CLARITA Assessed Valuation

Fiscal Year Local Secured Utility Unsecured Total Before Rdv.

Increment Total After

Rdv. Increment

2007-08 $20,694,757,455 $8,243,171 $790,596,511 $21,493,597,137 $21,144,884,059 2008-09 21,537,566,198 1,846,171 871,039,834 22,410,452,203 22,034,643,776 2009-10 20,313,270,595 4,015,175 944,836,476 21,262,122,246 20,876,094,503 2010-11 20,222,555,302 4,015,175 887,372,458 21,113,942,935 20,743,401,940 2011-12 20,317,662,651 3,696,751 847,579,230 21,168,938,632 20,818,874,782 2012-13 20,111,075,454 3,696,751 870,669,758 20,985,441,963 20,636,280,201

Source: California Municipal Statistics, Inc.

Largest Taxpayers

The following table lists the major taxpayers in the City in terms of their 2012-13 assessed valuation.

CITY OF SANTA CLARITA Largest Property Taxpayers

2012-2013

Property Owner Type of Use Fiscal Year 2012-13 Assessed Valuation

Percent of Total Value(1)

Valencia Town Center Venture LP Shopping Center $ 350,682,083 1.74% VTC Business Center LLC Office Building 138,800,026 0.69 Rreef America REIT II Corp. DD Apartments 70,987,026 0.35 DSEA River Oaks LLC Shopping Center 56,408,923 0.28 ERP Operating LP Apartments 55,868,091 0.28 Mann Biomedical Park LLC Industrial 54,804,930 0.27 EQR Essex Place Financing LP Apartments 53,481,160 0.27 Town Center Apartments Inc. Apartments 53,360,471 0.27 CPF Promenade LLC Shopping Center 47,540,000 0.24 IMT Capital Valencia LLC Apartments 46,794,800 0.23 Noble I Valencia LLC Hotel 46,139,606 0.23 Wal Mart Real Estate Commercial 45,925,668 0.23 Westcreek Properties Ltd. Apartments 45,020,704 0.22 Massachusetts Mutual Life Insurance Company Office Building 44,147,604 0.22 Bridgeport Marketplace LLC Shopping Center 43,564,063 0.22 BRE FMCA LLC Apartments 41,653,562 0.21 Teachers Insurance and Annuity Assn. of America

Commercial 41,310,000 0.21

Arden Realty LP Office Building 41,146,680 0.20 Lexington Lion Clarita LP Industrial 38,846,505 0.19 EQR Valencia LLC Apartments 36,334,217 0.18 $1,352,816,119 6.73% (1) 2012-13 Local Secured Assessed Valuation: $20,111,075,454 Source: California Municipal Statistics, Inc.

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Tax Levies, Collections and Delinquencies

Taxes are levied by the Board of Supervisors of Los Angeles County for each fiscal year on taxable real and personal property situated in the City. For assessment and collection purposes, property is classified as either “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State-assessed property and real property having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.”

Property taxes on the secured roll are due in two installments, on November 1st and February 1st of the fiscal year. If unpaid, such taxes become delinquent on December 10th and April 10th, respectively, and a ten percent penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent has a delinquency certificate recorded after June 30th of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty of 1½% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County Tax Collector.

Property taxes on the unsecured roll are due as of January 1st and become delinquent, if unpaid, on August 31st. A ten percent penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 1½% per month begins to accrue beginning November 1st of the fiscal year. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Recorder’s Office in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee.

Beginning in 1978/79, Proposition 13 and its implementing legislation provided for each county to levy (except for levies to support prior voter-approved indebtedness) and collect all property taxes, and prescribed how levies on county-wide property values are to be shared with local taxing entities within each county. The secured tax charges and year-end delinquencies for fiscal years 2006-07 through 2011-12 are reflected on the following table:

CITY OF SANTA CLARITA Secured Tax Charges and Delinquencies

Year Secured Tax Charge(1) Amount Delinquent

June 30 Percent Delinquent

June 30

2006-07 $10,038,932.07 $382,488.74 3.81% 2007-08 11,469,029.61 578,693.27 5.05 2008-09 11,925,284.73 563,681.00 4.73 2009-10 11,282,079.57 390,408.50 3.46 2010-11 11,254,345.92 272,317.61 2.42 2011-12 11,347,441.07 238,579.48 2.10

(1) 1% General Fund apportionment. Taxing District No. 1. Excludes redevelopment agency impounds. Source: California Municipal Statistics, Inc./City of Santa Clarita.

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Commercial Activity and Sales Tax

A summary of historic taxable sales within the City of Santa Clarita for years 2006 through 2010 and for the first three quarters of 2011 is shown in the following table.

TAXABLE SALES

City of Santa Clarita 2006-2011(1)

(Dollars in Thousands)

Year Retail

Permits

Retail Stores Taxable

Transactions Total Permits

Total Outlets Taxable

Transactions

2006 3,128 $2,401,919 6,409 $2,857,875 2007 3,068 2,394,449 6,381 2,868,199 2008 3,216 2,162,984 6,456 2,648,654 2009 3,966 1,901,065 5,823 2,326,235 2010 4,198 2,005,679 6,025 2,403,176 2011(1) 4,145 1,580,309 5,934 1,887,393

(1) Figures are through the third quarter of 2011. Note: In 2009, retail permits expanded to include permits for food services. Source: “Taxable Sales in California (Sales & Use Tax),” California Board of Equalization.

The following tables show total taxable transactions and sales tax revenues within the County for years 2006 through 2010 and for the first three quarters of 2011.

TAXABLE SALES County of Los Angeles

2006-2011(1) (Dollars in Thousands)

Year Retail

Permits

Retail Stores Taxable

Transactions Total Permits

Total Outlets Taxable

Transactions

2006 142,512 $95,554,193 295,701 $136,162,552 2007 142,380 96,095,711 290,344 137,820,418 2008 146,999 89,810,309 289,802 131,881,744 2009 175,461 78,444,115 264,928 112,744,722 2010 182,491 82,175,416 271,293 116,942,334 2011(1) 179,872 65,134,523 266,868 92,914,538

(1) Figures are through the third quarter of 2011. Note: In 2009, retail permits expanded to include permits for food services. Source: “Taxable Sales in California (Sales & Use Tax),” California Board of Equalization.

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Construction Activity

The following table shows building permit valuations and new housing units in the City for 2007 through 2011.

CITY OF SANTA CLARITA Building Permit Valuation and New Housing Units

2007 2008 2009 2010 2011 Residential Single Family $ 64,463,955 $ 44,067,070 $ 30,609,390 $ 40,284,702 $ 33,706,010 Multi-Family 5,357,311 5,090,107 5,109,574 3,558,952 0 Alteration/Additions 14,994,116 8,453,816 8,454,964 5,668,537 4,659,244 Total $ 84,815,382 $ 57,610,993 $ 44,173,928 $ 49,512,191 $ 38,365,254 Non-Residential New Commercial $ 42,032,870 $ 70,315,708 $ 5,000,000 $ 3,052,534 $ 7,876,634 New Industry 0 8,628,000 0 0 7,500,000 Other(1) 13,290,805 5,572,403 1,067,850 1,981,632 64,119,078 Alteration/Additions 38,178,336 18,300,071 34,123,145 35,483,912 29,218,352 Total $ 93,502,011 $ 53,586,140 $ 40,190,995 $ 40,518,078 $108,714,064 Total All Industry $ 178,317,393 $ 150,829,919 $ 84,364,923 $ 90,030,269 $147,079,318 New Housing Units Single Family Units 199 111 75 98 81 Multi-Family Units 31 31 30 20 0 Total 233 142 105 118 81 (1) Includes churches and religious building, hospitals and institutional buildings, schools and educational buildings, residential

garages, public works and utilities buildings and non-residential alterations and additions. Source: Construction Industry Research Board.

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Personal Income

Per capita personal income in the County grew by 42.5% from 2000 to 2011. The following table summarizes per capital personal income for the County, the State of California and the United States for 2000 to 2011.

PER CAPITAL PERSONAL INCOME Los Angeles County, State of California, and United States of America

2000-2011

Year(1) Los Angeles

County % Annual Change

State of California

% Annual Change

United States of America

% Annual Change

2000 $29,865 -- $33,398 -- $30,318 -- 2001 31,495 5.5% 33,890 1.5% 31,145 2.7% 2002 32,041 1.7 34,045 0.5 31,462 1.0 2003 32,961 2.9 34,977 2.7 32,271 2.6 2004 34,481 4.6 36,904 5.5 33,881 5.0 2005 36,498 5.8 38,767 5.0 35,424 4.6 2006 39,610 8.5 41,567 7.2 37,698 6.4 2007 41,273 4.2 43,240 4.0 39,461 4.7 2008 42,881 3.9 43,853 1.4 40,674 3.1 2009 40,111 (6.5) 42,395 (3.3) 38,637 (5.0) 2010 41,025 2.3 42,514 0.3 39,791 3.0 2011 42,564 3.8 44,481 4.6 41,560 4.4

Note: Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S.

Bureau of the Census. Estimates for 2005-2011 reflect county population estimates available as of December 2012. All dollar estimates are in current dollars (not adjusted for inflation).

Source: U.S. Department of Commerce, Bureau of Economic Analysis.

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APPENDIX C

SUMMARY OF FISCAL AGENT AGREEMENT

The following is a summary of certain provisions of the Fiscal Agent Agreement, and is supplemental to the summary of other provisions of such document described elsewhere in this Official Statement. This summary does not purport to be comprehensive or definitive, and reference should be made to such document for full and complete statement of its provisions. All capitalized terms used but not otherwise defined in this Appendix shall have the meanings assigned to such terms in the Fiscal Agent Agreement.

DEFINITIONS

Definitions. Unless the context requires, the following terms shall have the following meanings:

“Act” means the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311 et seq. of the California Government Code.

“Administrative Expense Account” means the account by such name in the Special Tax Fund created and established pursuant to the Fiscal Agent Agreement.

“Administrative Expense Requirement” means for any Fiscal Year, an amount equal to $30,474.86 for Fiscal Year 2012-13, escalating by 2% per each Fiscal Year thereafter.

“Administrative Expenses” means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys’ fees and other costs related thereto, the fees and expenses of the Fiscal Agent, any fees for credit enhancement for the Bonds or any Parity Bonds which are not otherwise paid as Costs of Issuance, any costs related to the District’s compliance with State and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by the School District staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of the District under the Fiscal Agent Agreement.

“Annual Debt Service” means the principal amount of any Outstanding Bonds or Parity Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds or Parity Bonds in such Bond Year, if the Bonds and any Parity Bonds are retired as scheduled.

“Authorized Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein:

(1) Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America (“Direct Obligations”).

(2) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself):

U.S. Export-Import Bank (“Eximbank”) Direct obligations or fully guaranteed certificates of beneficial ownership

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Farmers Home Administration (“FmHA”) Certificates of beneficial ownership

Federal Financing Bank

Federal Housing Administration Debentures (“FHA”)

General Services Administration Participation certificates

Government National Mortgage Association (“GNMA” or “Ginnie Mae”) GNMA-guaranteed mortgage-backed bonds GNMA-guaranteed pass-through obligations

U.S. Maritime Administration Guaranteed Title XI financing

U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds New Communities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds

(3) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself:

Federal Home Loan Bank System Senior debt obligations

Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”) Participation certificates Senior debt obligations

Federal National Mortgage Association (“FNMA” or “Fannie Mae”) Mortgage-backed securities and senior debt obligations

Student Loan Marketing Association (“SLMA” or “Sallie Mae”) Senior debt obligations

Resolution Funding Corp. (“REFCORP”) obligations

Farm Credit System CM. - Consolidated system-wide bonds and notes

(4) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and having a rating by Standard & Poor’s of AAAm-G, AAAm or AAm, and, if rated by Moody’s, rated Aaa, Aal or Aa2 (including those of the Fiscal Agent and its affiliates).

(5) Certificates of deposit secured at all times by collateral described in (1) and/or (2) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks.

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The collateral must be held by a third party and the Bondholders must have a perfected first security interest in the collateral.

(6) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC or which are with a bank rated AA or better by Standard & Poor’s and Aa or better by Moody’s (including those of the Fiscal Agent and its affiliates).

(7) Investment Agreements with any corporation, including banking or financial institutions, provided that

(a) the long-term debt of the provider of any such investment agreement is rated, at the time of investment, at least “AA” and “Aa” by the Rating Agency (without regard to gradations of plus or minus within such category), and

(b) any such investment agreement is collateralized with United States Treasury or agency obligations which at least equal 102% of the principal amount invested thereunder, and

(c) any such agreement shall include a provision to the effect that, in the event the long-term debt rating of the provider of such agreement is downgraded below “AA-” or below “Aa” by the applicable Rating Agency, the District has the right to withdraw or cause the Fiscal Agent to withdraw all funds invested in such agreement and thereafter to invest such funds pursuant to the Fiscal Agent Agreement.

(8) Commercial paper rated, at the time of purchase, “Prime - 1” by Moody’s and “A-1” or better by Standard & Poor’s.

(9) Bonds or notes issued by any state or municipality which are rated by Moody’s and Standard & Poor’s in one of the two highest rating categories assigned by such agencies.

(10) Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured or unguaranteed obligation rating of “Prime - 1” or “A3” or better by Moody’s and “A-1” or “A” or better by Standard & Poor’s.

(11) Repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs or FHLMCs with any registered broker/dealer subject to the Securities Investors’ Protection Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated “P-1” or “A3” or better by Moody’s, and “A-1” or “A-” by Standard & Poor’s; provided:

(a) a master repurchase agreement or specific written repurchase agreement governs the transaction; and

(b) the securities are held free and clear of any lien by the Fiscal Agent or an independent third party acting solely as agent (“Agent”) for the Fiscal Agent, and such third party is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million, or (iii) a bank approved in writing for such purpose by Financial Guaranty Insurance Company, and the Fiscal Agent shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Fiscal Agent; and

(c) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. in such securities is created for the benefit of the Fiscal Agent; and

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(d) the repurchase agreement has a term of 180 days or less, and the Fiscal Agent or the Agent will value the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two business days of such valuation; and

(e) the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103%.

(12) Local Agency Investment Fund (“LAIF”) of the State of California.

(13) Any other investment which the District is permitted by law to make.

“Authorized Representative of the District” means the Superintendent, Assistant Superintendent, or any other person or persons designated by the Board of Trustees of the School District and authorized to act on behalf of the School District by a written certificate signed on behalf of the School District by the President of the Board of Trustees and containing the specimen signature of each such person.

“Bond Counsel” means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia.

“Bond Register” means the books which the Fiscal Agent shall keep or cause to be kept on which the registration and transfer of the 2012 Bonds and any Parity Bonds shall be recorded.

“Bondowner” or “Owner” means the person or persons in whose name or names any Bond or Parity Bond is registered.

“Bonds” means, collectively, the Series 2012 Bonds and the Series 2013 Bonds.

“Bond Year” means the twelve month period commencing on September 2 of each year and ending on September 1 of the following year, except that the first Bond Year for the Bonds or an issue of Parity Bonds shall begin on the Delivery Date and end of the first September 1 which is not more than 12 months after the Delivery Date.

“Business Day” means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Fiscal Agent is located, are not required or authorized to remain closed.

“Certificate of the Superintendent” means a written certificate or warrant request executed by the Superintendent or Assistant Superintendent, or their written designee.

“Code” means the Internal Revenue Code of 1986, as amended, and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it.

“Costs of Issuance” means the costs and expenses incurred in connection with the issuance and sale of the Bonds or any Parity Bonds, including the acceptance and initial annual fees and expenses of the Fiscal Agent and its counsel, legal fees and expenses, costs of printing the Bonds and Parity Bonds and the preliminary and final official statements for the Bonds, Parity Bonds, fees of financial consultants and all other related fees and expenses, Bonds, as set forth in a Certificate of the Superintendent.

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“Costs of Issuance Fund” means the fund by such name established pursuant to the Fiscal Agent Agreement.

“Defeasance Securities” means any of the following:

(a) Cash

(b) United States Treasury Certificates, Notes and Bonds (including State and Local Government Series -- “SLGS”)

(c) Direct obligations of the U.S. Treasury which have been stripped by the U.S. Treasury itself, e.g., CATS, TIGRS and similar securities.

(d) The interest component of Resolution Funding Corp. strips which have been stripped by request to the Federal Reserve Bank of New York and are in book-entry form.

(e) Pre-refunded municipal bonds rated “Aaa” by Moody’s and “AAA” by Standard & Poor’s.

(f) Obligations issued by the following agencies which are backed by the full faith and credit of the United States:

U.S. Export-Import Bank - direct obligations or fully guaranteed certificates of beneficial ownership

Farmers Home Administration - certificates of beneficial ownership Federal Financing Bank

General Services Administration - participation certificates U.S. Maritime Administration - guaranteed Title XI financing

U.S. Department of Housing and Urban Development (HUD) - Project Notes, Local Authority Bonds, New Communities Debentures - U.S. government guaranteed debentures, U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds.

“Delivery Date” means, with respect to the Bonds and each issue of Parity Bonds, the date on which the bonds of such issue were issued and delivered to the initial purchasers thereof.

“Depository” shall mean The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Bonds, or any other securities depository acting as Depository under the Fiscal Agent Agreement.

“District” means Sulphur Springs Union School District Community Facilities District No. 2002-1 established pursuant to the Act and the Resolution of Formation.

“Escrow Agent” means U.S. Bank National Association, as escrow agent with respect to the defeasance of the 2002 Bonds under the provisions of the Escrow Agreement.

“Escrow Agreement” means that certain Escrow Agreement dated as of June 1, 2012 by and between the District and the Escrow Agent.

“Escrow Fund” means the fund by that name established under the Escrow Agreement.

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“Fiscal Agent” means U.S. Bank National Association, a national banking association duly organized and existing under and by virtue of the laws of the United States of America, at its principal corporate trust office in Los Angeles, California, and its successors or assigns, or any other bank or trust company which may at any time be substituted in its place as provided in the Fiscal Agent Agreement and any successor thereto.

“Fiscal Agent Agreement” means the Fiscal Agent Agreement, by and between the District and the Fiscal Agent, dated as of June 1, 2012, together with any Supplemental Fiscal Agent Agreement approved pursuant to the Fiscal Agent Agreement.

“Fiscal Year” means the period beginning on July 1 of each year and ending on the next following June 30.

“Gross Taxes” means the amount of all Special Taxes received by the District, together with the proceeds collected from the sale of property pursuant to the foreclosure provisions of the Fiscal Agent Agreement for the delinquency of such Special Taxes remaining after the payment of all the costs related to such foreclosure actions, including, but not limited to, all legal fees and expenses, court costs, consultant and title insurance fees and expenses.

“Independent Financial Consultant” means a financial consultant or special tax consultant or firm of either such consultants generally recognized to be well qualified in the financial consulting or special tax consulting field, appointed and paid by the District, who, or each of whom:

(1) is, in fact, independent and not under the domination of the District;

(2) does not have any substantial interest, direct or indirect, in the District; and

(3) is not connected with the District as a member, officer or employee of the District, but who may be regularly retained to make annual or other reports to the District.

“Interest Account” means the account by such name created and established in the Special Tax Fund pursuant to the Fiscal Agent Agreement.

“Interest Payment Date” means each March 1 and September 1, commencing September 1, 2012; provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next succeeding such date.

“Investment Agreement” means one or more agreements for the investment of funds of the District complying with the criteria therefor as set forth in Subsection (7) of the definition of Authorized Investments in the Fiscal Agent Agreement.

“Maximum Annual Debt Service” means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds and any Parity Bonds by adding the following for each Bond Year:

(1) the principal amount of all Outstanding Bonds and Parity Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and

(2) the interest payable on the aggregate principal amount of all Bonds and Parity Bonds Outstanding in such Bond Year if the Bonds and Parity Bonds are retired as scheduled.

“Moody’s” means Moody’s Investors Service, its successors and assigns.

“Net Taxes” means Gross Taxes (exclusive of any penalties and interest accruing with respect to delinquent Special Tax installments) minus an amount equal to the Administrative Expense Requirement.

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“Nominee” shall mean the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to the Fiscal Agent Agreement.

“Outstanding” or “Outstanding Bonds and Parity Bonds” means all Bonds and Parity Bonds theretofore issued by the District, except:

(1) Bonds and Parity Bonds theretofore cancelled or surrendered for cancellation in accordance with the Fiscal Agent Agreement;

(2) Bonds and Parity Bonds for payment or redemption of which monies shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds or Parity Bonds), provided that, if such Bonds or Parity Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in the Fiscal Agent Agreement or any applicable Supplemental Fiscal Agent Agreement for Parity Bonds; and

(3) Bonds and Parity Bonds which have been surrendered to the Fiscal Agent for transfer or exchange pursuant to the Fiscal Agent Agreement or for which a replacement has been issued pursuant to the Fiscal Agent Agreement.

“Parity Bonds” means all bonds, notes or other similar evidences of indebtedness issued after the date of the Fiscal Agent Agreement, payable out of the Gross Taxes and which, as provided in the Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement, rank on a parity with the Bonds.

“Participants” shall mean those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds or Parity Bonds as securities depository.

“Person” means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities.

“Principal Account” means the account by such name in the Special Tax Fund created and established pursuant to the Fiscal Agent Agreement.

“Principal Office of the Fiscal Agent” means the corporate trust office of the Fiscal Agent located in Los Angeles, California or such other office or offices as the Fiscal Agent may designate from time to time, or the office of any successor Fiscal Agent where it principally conducts its business of serving as Fiscal Agent under indentures pursuant to which municipal or governmental obligations are issued.

“Rating Agency” means Moody’s and Standard & Poor’s, or both, as the context requires.

“Rebate Fund” means the fund by such name created and established pursuant to the Fiscal Agent Agreement.

“Record Date” means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day.

“Redemption Account” means the account by such name created and established in the Special Tax Fund pursuant to the Fiscal Agent Agreement.

“Regulations” means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code.

“Representation Letter” shall mean the Blanket Letter of Representations from the District to the Depository as described in the Fiscal Agent Agreement.

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“Reserve Account” means the account by such name created and established in the Special Tax Fund pursuant to the Fiscal Agent Agreement.

“Reserve Requirement” means, as of any date of calculation, an amount equal to the lowest of (1) 10% of the initial principal amount of the Bonds and each issue of Parity Bonds, if any, or (2) Maximum Annual Debt Service, or (3) 125% of the average Annual Debt Service of the Outstanding Bonds and Parity Bonds.

“Resolution of Formation” means Resolution No. R-02-28 adopted by the Board of Trustees of the School District on July 24, 2002, pursuant to which the School District formed the District.

“School District” means the Sulphur Springs Union School District.

“Series 2012 Bonds” means the District’s 2012 Special Tax Refunding Bonds issued on June 14, 2012 in the aggregate principal amount of $16,410,000.

“Series 2013 Bonds” means the District’s 2013 Special Tax Refunding Bonds issued in the aggregate principal amount of $4,335,000.00.

“Six-Month Period” means the period of time beginning on the Delivery Date of each issue of Bonds or Parity Bonds, as applicable, and ending six consecutive months thereafter, and each six-month period thereafter until the latest maturity date of the Bonds and the Parity Bonds (and any obligations that refund an issue of the Bonds or Parity Bonds).

“Special Taxes” means the taxes authorized to be levied by the District in accordance with the Resolution of Formation, the Act and the voter approval obtained at the July 24, 2002 election in the District and any additional special taxes authorized to be levied by the District from time to time which are pledged by the District to the repayment of the Bonds and any Parity Bonds.

“Special Tax Fund” means the fund by such name created and established pursuant to the Fiscal Agent Agreement.

“Standard & Poor’s” means Standard & Poor’s, a division of McGraw-Hill, its successors and assigns.

“Subordinate 2008 Bonds” shall mean the Sulphur Springs Union School District Community Facilities District No. 2002-1 Subordinate Special Tax Refunding Bonds, Series 2008A issued pursuant to the Subordinate 2008 Fiscal Agent Agreement in the original aggregate principal amount of $4,195,000.

“Subordinate 2008 Fiscal Agent Agreement” means that certain Fiscal Agent Agreement, by and between the District and the Subordinate 2008 Fiscal Agent, dated as of January 1, 2008, as it may be amended or supplemented from time to time.

“Subordinate 2008 Fiscal Agent” means U.S. Bank National Association, and any successor thereto under the Subordinate 2008 Fiscal Agent Agreement.

“Supplemental Fiscal Agent Agreement” means any supplemental fiscal agent agreement amending or supplementing the Fiscal Agent Agreement.

“Surplus Fund” means the fund by such name created and established pursuant to the Fiscal Agent Agreement.

“Tax Certificate” means the certificate by that name to be executed by the District on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code.

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“2002 Bonds” means the District’s Special Tax Bonds, Series 2002A issued pursuant to the 2002 Fiscal Agent Agreement in the original aggregate principal amount of $16,260,000.

“2002 Fiscal Agent” State Street Bank and Trust Company of California, N.A., predecessor-in-interest to U.S. Bank National Association, and Fiscal Agent under the 2002 Fiscal Agent Agreement.

“2002 Fiscal Agent Agreement” means that certain Fiscal Agent Agreement, by and between the District and the 2002 Fiscal Agent, dated as of September 1, 2002.

“2012 Bonds” means the District’s $16,410,000 Special Tax Refunding Bonds, Series 2012A, issued pursuant to the Fiscal Agent Agreement.

“2013 Escrow Agent” means U.S. Bank National Association, as escrow agent with respect to the defeasance of the Subordinate 2008 Bonds under the provisions of the 2013 Escrow Agreement.

“2013 Escrow Agreement” means that certain Escrow Agreement dated as of March 1, 2013 by and between the District and the 2013 Escrow Agent.

“2013 Escrow Fund” means the fund by that name established under the 2013 Escrow Agreement.

“Underwriter” means the institution or institutions, if any, with whom the District enters into a purchase contract for the sale of the Bonds or an issue of Parity Bonds.

“Written Request of the District” means a request in writing executed by the Superintendent, Assistant Superintendent, Business Services, or written designee, on behalf of the District.

CREATION OF FUNDS AND APPLICATION OF REVENUES AND GROSS TAXES

Creation of Funds; Application of Proceeds. The following funds and accounts are created and established and will be maintained by the Fiscal Agent:

The Community Facilities District No. 2002-1 Special Tax Fund (the “Special Tax Fund”) (in which there shall be established and created an Interest Account, a Principal Account, a Redemption Account, a Reserve Account and an Administrative Expense Account).

The Community Facilities District No. 2002-1 Surplus Fund (the “Surplus Fund”).

The Community Facilities District No. 2002-1 Costs of Issuance Fund (the “Costs of Issuance Fund”).

The Community Facilities District No. 2002-1 Rebate Fund (the “Rebate Fund”).

The amounts on deposit in the foregoing funds and accounts shall be held by the Fiscal Agent in trust and the Fiscal Agent shall invest and disburse the amounts in such funds and accounts in accordance with the provisions of the Fiscal Agent Agreement and shall disburse investment earnings thereon in accordance with the provisions of the Fiscal Agent Agreement. Except as required to be segregated into funds and accounts as described in the Fiscal Agent Agreement, money held by the Fiscal Agent in trust under the Fiscal Agent Agreement need not be segregated from other funds except to the extent required by law.

In connection with the issuance of any Parity Bonds, the Fiscal Agent, at the Written Request of the District, may create new funds, accounts or subaccounts, or may create additional accounts and subaccounts within any of the foregoing funds and accounts for the purpose of separately accounting for the proceeds of the Bonds and any Parity Bonds.

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Deposits to and Disbursements from Special Tax Fund. The District shall, on each date on which it receives Special Taxes from the Treasurer-Tax Collector of the County of Los Angeles, transfer the Special Taxes to the Fiscal Agent for deposit in the Special Tax Fund in accordance with the terms of the Fiscal Agent Agreement to be held in trust. The Fiscal Agent shall first deposit into the Administrative Expense Account of the Special Tax Fund an amount equal to the Administrative Expense Requirement and shall then transfer the amounts on deposit in the Special Tax Fund on the dates and in the amounts set forth below, in the following order of priority, to:

The Interest Account of the Special Tax Fund;

The Principal Account of the Special Tax Fund;

The Redemption Account of the Special Tax Fund;

The Reserve Account of the Special Tax Fund;

The Administrative Expense Account of the Special Tax Fund;

The Rebate Fund; and

The Surplus Fund.

At the maturity of all of the Bonds and Parity Bonds and, after all principal and interest then due on the Bonds and Parity Bonds then Outstanding has been paid or provided for and any amounts owed to the Fiscal Agent have been paid in full, moneys in the Special Tax Fund and any accounts therein shall be transferred to the District and may be used by the District for any lawful purpose.

Administrative Expense Account of the Special Tax Fund. The Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Administrative Expense Account of the Special Tax Fund from time to time, in accordance with the provisions of the Fiscal Agent Agreement described above, amounts necessary to make timely payment of Administrative Expenses, which shall be disbursed by the Fiscal Agent upon the Written Request of the District. Moneys in the Administrative Expense Account of the Special Tax Fund may be invested in any Authorized Investments as directed by an Authorized Representative of the District.

Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds and any Parity Bonds until maturity, other than principal due upon redemption, shall be paid by the Fiscal Agent from the Principal Account and the Interest Account of the Special Tax Fund, respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds and any Parity Bonds will be made when due, after making the transfer to the Administrative Expense Account in the amount of the Administrative Expense Requirement, at least five Business Days prior to each March 1 and September 1, the Fiscal Agent shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds, any Parity Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account:

To the Interest Account, an amount such that the balance in the Interest Account five Business Days prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds and any Parity Bonds as the same become due.

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To the Principal Account, an amount such that the balance in the Principal Account five Business Days prior to September 1 of each year, commencing September 1, 2012 shall at least equal the principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity.

After making the deposits to the Interest Account and the Principal Account of the Special Tax Fund described above and in accordance with the District’s election to call Bonds for optional redemption as set forth in the Fiscal Agent Agreement, or to call Parity Bonds for optional redemption as set forth in any Supplemental Fiscal Agent Agreement for Parity Bonds, the Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the interest, the principal and the premiums, if any, payable on the Bonds or Parity Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund (other than the Administrative Expense Account therein) may be applied to optionally redeem Bonds and Parity Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement.

Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and Parity Bonds and shall be applied on or after the redemption date to the payment of the principal of and premium, if any, on the Bonds or Parity Bonds to be redeemed upon presentation and surrender of such Bonds or Parity Bonds and in the case of an optional redemption to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account as set forth above may be used to purchase Outstanding Bonds or Parity Bonds in the manner provided in the Fiscal Agent Agreement. Purchases of Outstanding Bonds or Parity Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to the Fiscal Agent Agreement, or in the case of Parity Bonds the premium established in any Supplemental Fiscal Agent Agreement. Any accrued interest payable upon the purchase of Bonds or Parity Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date.

Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. The amounts in the Reserve Account shall be applied as follows:

Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of and interest on any Bonds and Parity Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor. If the amounts in the Interest Account or the Principal Account of the Special Tax Fund are insufficient to pay the principal of or interest on any Bonds and Parity Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required, the Fiscal Agent shall withdraw from the Reserve Account for deposit in the Interest Account, the Principal Account, the Redemption Account of the Special Tax Fund or the Rebate Fund, as applicable, moneys necessary for such purposes.

Whenever moneys are withdrawn from the Reserve Account, after making the required transfers to the Interest Account, the Principal Account and the Redemption Account of the Special Tax Fund described above, the Fiscal Agent shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the District elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Fiscal Agent determines that such amounts will not be needed to make the deposits required to be made to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund. If amounts in the Special Tax Fund or

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otherwise transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement, then the District shall include the amount necessary fully to restore the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates.

In connection with any optional redemption or mandatory redemption from Special Tax prepayments of the Bonds or any Parity Bonds in accordance with any Supplemental Fiscal Agent Agreement, or a partial defeasance of the Bonds or any Parity Bonds in accordance with the Fiscal Agent Agreement, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement. To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds or an issue of Parity Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds or an issue of Parity Bonds in the final Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the preceding provisions of this paragraph shall be withdrawn from the Reserve Account on the fifth Business Day before each March 1 and September 1 and transferred to the Interest Account of the Special Tax Fund.

Rebate Fund. The Fiscal Agent shall establish and maintain a special fund designated the “Rebate Fund.” There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Certificate, as specified in a Certificate of the Superintendent. All money at any time deposited in the Rebate Fund shall be held by the Fiscal Agent in trust, to the extent required to satisfy the Rebate Requirement, for payment to the United States of America. Notwithstanding defeasance of the Bonds pursuant to the Fiscal Agent Agreement or anything to the contrary contained in the Fiscal Agent Agreement, all amounts required to be deposited into or on deposit in the Rebate Fund shall be governed exclusively by the paragraphs described under this heading and by the Tax Certificate (which is incorporated in the Fiscal Agent Agreement by reference). The Fiscal Agent shall be deemed conclusively to have complied with such provisions if it follows the written directions of the District, and shall have no liability or responsibility to enforce compliance by the District with the terms of the Tax Certificate. The Fiscal Agent may conclusively rely upon the District’s determinations, calculations and certifications required by the Tax Certificate. The Fiscal Agent shall have no responsibility to independently make any calculation or determination or to review the District’s calculations.

Any funds remaining in the Rebate Fund after payment in full of all of the Bonds and after payment of any amounts described in under the heading “Rebate Fund,” shall be withdrawn by the Fiscal Agent and remitted to the District.

Surplus Fund. After making the transfers required to the Interest Account, the Principal Account, the Redemption Account, the Reserve Account and the Administrative Account of the Special Tax Fund and the Rebate Fund, as soon as practicable after each September 1, and in any event prior to each October 1, the Fiscal Agent shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund. Moneys deposited in the Surplus Fund shall be transferred by the Fiscal Agent in the following order of priority (i) to the Subordinate 2008 Fiscal Agent in the amount the Subordinate 2008 Fiscal Agent has notified the Fiscal Agent in writing is required in accordance with the Subordinate 2008 Fiscal Agent Agreement, (ii) to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund to pay the principal of, premium, if any, and interest on the Bonds and any Parity Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficient therefor, (iii) to the Reserve Account in order to replenish the Reserve Account to the Reserve Requirement, (iv) to the Administrative Expense Account of the Special Tax Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expense Account of the Special Tax Fund are insufficient to pay Administrative Expenses and (v) upon the Written Request of the District, any remaining moneys in the Surplus Fund may be disbursed to the District to be expended for any other lawful purpose of the District.

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The amounts in the Surplus Fund are not pledged to the repayment of the Bonds or the Parity Bonds. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds or Parity Bonds, upon the written direction of the District, the Fiscal Agent will segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested at the written direction of the District in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds or Parity Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a tax-exempt basis for federal income tax purposes.

Cost of Issuance Fund. The moneys in the Cost of Issuance Fund shall be applied exclusively to pay the Costs of Issuance. Amounts for Costs of Issuance shall be disbursed by the Fiscal Agent from the account in the Cost of Issuance Fund designated therefor in a requisition signed by an Authorized Representative of the District.

Upon receipt of a Certificate of the Superintendent that all or a specified portion of the amount remaining in the Cost of Issuance Fund is no longer needed to pay Costs of Issuance, the Fiscal Agent shall transfer all or such specified portion of the moneys remaining on deposit in the Cost of Issuance Fund to the Special Tax Fund, or to the Surplus Fund if requested in the Certificate and if there shall have been delivered to the Fiscal Agent with such Certificate an opinion of Bond Counsel to the effect that such transfer to the Surplus Fund will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a tax-exempt basis for federal income tax purposes. Upon transfer of the final amounts on deposit in the Cost of Issuance Fund, the fund shall be closed.

Investments. Moneys held in any of the funds and accounts under the Fiscal Agent Agreement shall be invested at the Written Request of the District in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such funds and accounts. Any loss resulting from such Authorized Investments shall be credited or charged to the fund or account from which such investment was made, and any investment earnings on a fund or account shall be applied as follows: (i) investment earnings on all amounts deposited in the Special Tax Fund (other than the Reserve Account), the Rebate Fund and Surplus Fund and each Account therein shall be deposited in those respective funds and accounts, and (ii) all other investment earnings shall be deposited in the Interest Account of the Special Tax Fund; provided, however, investment earnings in the Reserve Account shall be deposited in the Interest Account of the Special Tax Fund only to the extent moneys in such Reserve Account exceed the Reserve Requirement. Moneys in the funds and accounts held under the Fiscal Agent Agreement shall be invested by the Fiscal Agent at the Written Request of the District received at least 2 Business Days prior to the investment date, from time to time, in Authorized Investments subject to the following restrictions:

Moneys in the Interest Account, the Principal Account and the Redemption Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds and any Parity Bonds as the same become due.

One-half of the amount in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments which mature not later than two years from their date of purchase by the Fiscal Agent, and one-half of the amount in the Reserve Account may be invested only in Authorized Investments which mature not more than three years from the date of purchase by the Fiscal Agent; provided that such amounts may be invested in an Investment Agreement to the final maturity of the Bonds and any Parity Bonds so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with the Fiscal

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Agent Agreement; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds or an issue of Parity Bonds shall mature later than the respective final maturity date of the Bonds or the issue of Parity Bonds to which such amounts relate.

In the absence of Written Request of the District providing investment directions, the Fiscal Agent shall invest solely in Authorized Investments specified in clause (4) of the definition thereof.

The Fiscal Agent shall sell or present for redemption, any Authorized Investment whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such funds and accounts or from such funds and accounts. For the purpose of determining at any given time the balance in any such funds and accounts, any such investments constituting a part of such funds and accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at the market value thereof at least semiannually on or before each Interest Payment Date. In making any valuations under the Fiscal Agent Agreement, the Fiscal Agent may utilize such computerized securities pricing services as may be available to it, including, without limitation, those available through its regular accounting system, and conclusively rely thereon. Notwithstanding anything in the Fiscal Agent Agreement to the contrary, the Fiscal Agent shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of the Fiscal Agent Agreement.

The Fiscal Agent may sell, or present for redemption any Authorized Investment so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Authorized Investment is credited, and, subject to the provisions of the Fiscal Agent Agreement, the Fiscal Agent shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Fiscal Agent may commingle the funds and accounts established under the Fiscal Agent Agreement, but shall account for each separately.

The District acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the District or the School District the right to receive brokerage confirmations of securities transactions as they occur, the District will not receive such confirmations to the extent permitted by law. The Fiscal Agent shall furnish the District periodic cash transaction statements which include detail for all investment transactions made by the Fiscal Agent under the Fiscal Agent Agreement. The Fiscal Agent and its affiliates may act as sponsor, advisor, depository, principal or agent in the holding, acquisition or disposition of any investment.

COVENANTS AND WARRANTY

Warranty. The District shall preserve and protect the security pledged under the Fiscal Agent Agreement to the Bonds and any Parity Bonds against all claims and demands of all persons.

Covenants. So long as any of the Bonds or Parity Bonds issued under the Fiscal Agent Agreement are Outstanding and unpaid, the District makes the following covenants with the Bondowners under the provisions of the Act and the Fiscal Agent Agreement (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and Parity Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund:

Punctual Payment; Against Encumbrances. The District covenants that it will receive all Special Taxes in trust and will immediately deposit such amounts with the Fiscal Agent, and the District shall have no beneficial right or interest in the amounts so deposited except as provided by the Fiscal Agent Agreement. All such Special Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth in the Fiscal Agent Agreement, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the District.

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The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond and Parity Bond issued under the Fiscal Agent Agreement, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and the Parity Bonds and in accordance with the Fiscal Agent Agreement to the extent that Net Taxes are available therefor, and that the payments into the Funds and Accounts created under the Fiscal Agent Agreement will be made, all in strict conformity with the terms of the Bonds, any Parity Bonds, and the Fiscal Agent Agreement, and that it will faithfully observe and perform all of the conditions, covenants and requirements of the Fiscal Agent Agreement and all Supplemental Fiscal Agent Agreements and of the Bonds and any Parity Bonds issued under the Fiscal Agent Agreement.

The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Taxes except as provided in the Fiscal Agent Agreement, and will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds, other than Parity Bonds. Nothing in the Fiscal Agent Agreement shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Net Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds and the Parity Bonds.

Levy of Special Tax. Beginning in Fiscal Year 2012-2013 and so long as any Bonds or Parity Bonds issued under the Fiscal Agent Agreement are Outstanding, the legislative body of the District covenants to levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund and available for such purpose, to pay (1) the principal of and interest on the Bonds and any Parity Bonds when due, (2) the Administrative Expenses, (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement, and (4) all amounts required to be levied pursuant to the Subordinate 2008 Fiscal Agent Agreement.

Commence Foreclosure Proceedings. The District covenants for the benefit of the Owners of the Bonds and any Parity Bonds that it (i) will commence judicial foreclosure proceedings against all parcels owned by a property owner where the aggregate delinquent Special Taxes on such parcels is greater than $5,000 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due and (ii) will commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided, however, that the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account of the Special Tax Fund is at least equal to the Reserve Requirement and such delinquencies will not cause moneys in the Reserve Account to be withdrawn. The District may, but is not obligated to, advance funds from any source of legally available funds in order to maintain the Reserve Account of the Special Tax Fund at the Reserve Requirement.

The District covenants that it will deposit the proceeds of any foreclosure which constitute Gross Taxes in the Special Tax Fund.

Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Net Taxes or; other funds in the Special Tax Fund (other than the Administrative Expense Account), or which might impair the security of the Bonds or any Parity Bonds then Outstanding; provided that nothing in the Fiscal Agent Agreement contained shall require the District to make any such payments so long as the District in good faith shall contest the validity of any such claims.

Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of

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records and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent or of the Owners of the Bonds or Parity Bonds then Outstanding or their representatives authorized in writing.

Federal Tax Covenants. Notwithstanding any other provision of the Fiscal Agent Agreement, absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds and any Parity Bonds issued on a tax-exempt basis for federal income tax purposes will not be adversely affected for federal income tax purposes, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows:

(1) Private Activity. The District will take no action or refrain from taking any action or make any use of the proceeds of the Bonds or of any other moneys or property which would cause the Bonds and any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be “private activity bonds” within the meaning of Section 141 of the Code;

(2) Arbitrage. The District will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code;

(3) Federal Guaranty. The District will make no use of the proceeds of the Bonds or any Parity Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Code;

(4) Information Reporting. The District will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code;

(5) Hedge Bonds. The District will make no use of the proceeds of the Bonds or any Parity Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Bonds or any Parity Bonds to be considered “hedge bonds” within the meaning of Section 149(g) of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds and any applicable Parity Bonds;

(6) Miscellaneous. The District will take no action or refrain from taking any action inconsistent with the expectations stated in the Tax Certificate in connection with the Bonds and any issue of Parity Bonds and will comply with the covenants and requirements stated therein and incorporated by reference in the Fiscal Agent Agreement; and

(7) Other Tax Exempt Issues. The District will not use proceeds of other tax exempt securities to redeem any Bonds without first obtaining the written opinion of Bond Counsel that doing so will not impair the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds issued on a tax-exempt basis.

Reduction of Maximum Special Taxes. The District finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern California have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason, the District determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in the District below the levels provided in under the heading “Reduction of Maximum Special Taxes” would interfere with the timely retirement of the Bonds and any Parity Bonds. The District determines it to be necessary in order to preserve the security for the Bonds and any Parity Bonds to covenant, and, to the maximum extent that the law permits it to do so, the District does

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covenant, that it shall not initiate proceedings to reduce the maximum Special Tax rates for the District, unless, in connection therewith, (i) the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that, on the basis of the parcels of land and improvements existing in the District as of the July 1 preceding the reduction, the maximum amount of the Special Tax which may be levied on then existing Developed Property (as defined in the Rate and Method of Apportionment of Special Taxes then in effect in the District) in each Bond Year for any Bonds and Parity Bonds Outstanding will equal at least 110% of the sum on the estimated Administrative Expenses and gross debt service in that Bond Year on all Bonds and Parity Bonds to remain Outstanding after the reduction is approved and (ii) such reduction in the maximum Special Tax rates is permitted under the Subordinate 2008 Fiscal Agent Agreement if any Subordinate 2008 Bonds remain outstanding. The District finds that any reduction made under such conditions will not adversely affect the interests of the Owners of the Bonds and Parity Bonds. For purposes of estimating Administrative Expenses for the foregoing calculation, the Independent Financial Consultant shall compute the Administrative Expenses for the current Fiscal Year and escalate that amount by two percent (2%) in each subsequent Fiscal Year.

Covenants to Defend. The District covenants that in the event that any initiative is adopted by the qualified electors in the District which purports to reduce the maximum Special Tax below the levels specified under the heading “Reduction of Maximum Special Taxes” above or to limit the power of the District to levy the Special Taxes for the purposes set forth in the Fiscal Agent Agreement, it will commence and pursue legal action in order to preserve its ability to comply with such covenants.

Limitation on Right to Tender Bonds. The District covenants that it will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds or Parity Bonds to the District in full payment or partial payment of any Special Taxes.

Continuing Disclosure. The District covenants to comply with the term of the Continuing Disclosure Agreement executed by it with respect to the Bonds.

Further Assurances. The District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Fiscal Agent Agreement and for the better assuring and confirming unto the Owners of the Bonds and any Parity Bonds of the rights and benefits provided in the Fiscal Agent Agreement.

Opinions. In the event that an opinion is rendered by Bond Counsel as provided in the Fiscal Agent Agreement from a firm other than the firm which rendered the Bond Counsel opinion at closing, such subsequent opinion by Bond Counsel shall also include the conclusions set forth in the original Bond Counsel opinion relating to the exclusion of interest on the Bonds from gross income for federal income tax purposes.

AMENDMENTS TO FISCAL AGENT AGREEMENT

Supplemental Fiscal Agent Agreements or Orders Not Requiring Bondowner Consent. The District may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt Supplemental Fiscal Agent Agreements for any of the following purposes:

to cure any ambiguity, to correct or supplement any provisions in the Fiscal Agent Agreement which may be inconsistent with any other provision in the Fiscal Agent Agreement, or to make any other provision with respect to matters or questions arising under the Fiscal Agent Agreement or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Bondowners;

to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in the Fiscal Agent Agreement, other covenants, agreements, limitations and

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restrictions to be observed by the District which are not contrary to or inconsistent with the Fiscal Agent Agreement as theretofore in effect or which further secure Bond or Parity Bond payments;

to provide for the issuance of any Parity Bonds, and to provide the terms and conditions under which such Parity Bonds may be issued, subject to and in accordance with the provisions of the Fiscal Agent Agreement;

to modify, amend or supplement the Fiscal Agent Agreement in such manner as to permit the qualification of the Fiscal Agent Agreement under the Trust Indenture Act of 1939, as amended, or any similar federal statute in effect after the date of the Fiscal Agent Agreement, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds or any Parity Bonds then Outstanding; or

to modify, alter or amend the rate and method of apportionment of the Special Taxes in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the District to an amount which is less than that permitted under of the Fiscal Agent Agreement described under the heading “Reduction of Maximum Special Taxes”; or

to modify, alter, amend or supplement the Fiscal Agent Agreement in any other respect which is not materially adverse to the Bondowners.

Supplemental Fiscal Agent Agreements or Orders Requiring Bondowner Consent. Exclusive of the Supplemental Fiscal Agent Agreements described above, the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding shall have the right to consent to and approve the adoption by the District of such Supplemental Fiscal Agent Agreements as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Fiscal Agent Agreement; provided, however, that nothing in the Fiscal Agent Agreement shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond or Parity Bond, (b) a reduction in the principal amount of, or redemption premium on, any Bond or Parity Bond or the rate of interest thereon, (c) a preference or priority of any Bond or Parity Bond over any other Bond or Parity Bond, or (d) a reduction in the aggregate principal amount of the Bonds and Parity Bonds the Owners of which are required to consent to such Supplemental Fiscal Agent Agreement, without the consent of the Owners of all Bonds and Parity Bonds then Outstanding.

If at any time the District shall desire to adopt a Supplemental Fiscal Agent Agreement, which pursuant to the terms of the Fiscal Agent Agreement shall require the consent of the Bondowners, the District shall so notify the Fiscal Agent and shall deliver to the Fiscal Agent a copy of the proposed Supplemental Fiscal Agent Agreement. The Fiscal Agent shall, at the expense of the District, cause notice of the proposed Supplemental Fiscal Agent Agreement to be mailed, by first class mail, postage prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Fiscal Agent Agreement and shall state that a copy thereof is on file at the office of the Fiscal Agent for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such Supplemental Fiscal Agent Agreement when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding as required by the Fiscal Agent Agreement. Whenever at any time within one year after the date of the first mailing of such notice, the Fiscal Agent shall receive an instrument or instruments purporting to be executed by the Owners of a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Fiscal Agent Agreement described in such notice, and shall specifically consent to and approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as on file with the Fiscal Agent, such proposed Supplemental Fiscal Agent Agreement, when duly adopted by the District, shall thereafter become a part of the proceedings for the

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issuance of the Bonds and any Parity Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds and Parity Bonds have consented to the adoption of any Supplemental Fiscal Agent Agreement, Bonds or Parity Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination.

Upon the adoption of any Supplemental Fiscal Agent Agreement and the receipt of consent to any such Supplemental Fiscal Agent Agreement from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds in instances where such consent is required pursuant to the provisions of the Fiscal Agent Agreement, the Fiscal Agent Agreement shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under the Fiscal Agent Agreement of the District and all Owners of Outstanding Bonds and Parity Bonds shall thereafter be determined, exercised and enforced under the Fiscal Agent Agreement, subject in all respects to such modifications and amendments.

Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds. After the effective date of any action taken as provided in the Fiscal Agent Agreement, the District may determine that the Bonds or any Parity Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date and presentation of his Bond or Parity Bond for the purpose at the office of the Fiscal Agent or at such additional offices as the Fiscal Agent may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds or Parity Bonds. If the District shall so determine, new Bonds or Parity Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date such new Bonds or Parity Bonds shall be exchanged at the office of the Fiscal Agent or at such additional offices as the Fiscal Agent may select and designate for that purpose, without cost to each Owner of Outstanding Bonds or Parity Bonds, upon surrender of such Outstanding Bonds or Parity Bonds.

FISCAL AGENT

Fiscal Agent. U.S. Bank National Association, a national banking association shall be the Fiscal Agent for the Bonds and any Parity Bonds unless and until another Fiscal Agent is appointed by the District under the Fiscal Agent Agreement. The District may, at any time, provided that no Event of Default has occurred and is continuing, appoint a successor Fiscal Agent satisfying the requirements described under the heading “Removal of Fiscal Agent” below for the purpose of receiving all money which the District is required to deposit with the Fiscal Agent under the Fiscal Agent Agreement and to allocate, use and apply the same as provided in the Fiscal Agent Agreement.

The Fiscal Agent is authorized to and shall mail by first class mail, postage prepaid, or wire transfer in accordance with the Fiscal Agent Agreement, interest payments to the Bondowners, to select Bonds and Parity Bonds for redemption, and to maintain the Bond Register. The Fiscal Agent is authorized to pay the principal of and premium, if any, on the Bonds and Parity Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds and Parity Bonds presented to it for such purposes, to provide for the cancellation of Bonds and Parity Bonds all as provided in the Fiscal Agent Agreement, and to provide for the authentication of Bonds and Parity Bonds, and shall perform all other duties assigned to or imposed on it as provided in the Fiscal Agent Agreement; provided, however, that the Fiscal Agent undertakes to perform such duties and only such duties as are set forth in the Fiscal Agent Agreement, and no duties of the Fiscal Agent shall be implied under the Fiscal Agent Agreement. Discretionary rights of the Fiscal Agent under the Fiscal Agent Agreement shall not be construed as duties. The Fiscal Agent may execute any of the powers under the Fiscal Agent Agreement or perform any duties under the Fiscal Agent Agreement either directly or by or through agents or attorneys, and the Fiscal Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed

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by it with due care under the Fiscal Agent Agreement. The Fiscal Agent shall keep accurate records of all funds administered by it and all Bonds and Parity Bonds paid, discharged and cancelled by it. The Fiscal Agent may establish such funds and accounts as it deems necessary to perform its obligations under the Fiscal Agent Agreement.

The Fiscal Agent is authorized to redeem the Bonds and Parity Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Fiscal Agent shall cancel all Bonds and Parity Bonds upon payment thereof in accordance with the provisions of the Fiscal Agent Agreement described under the heading “Cancellation of Bonds and Parity Bonds.”

Removal of Fiscal Agent. Provided that no Event of Default has occurred and is continuing, the District may at any time at its sole discretion remove the Fiscal Agent initially appointed, and any successor thereto, by delivering to the Fiscal Agent a written notice of its decision to remove the Fiscal Agent and may appoint a successor or successors thereto; provided that any such successor, other than the Fiscal Agent, shall be a bank or trust company having (or if such bank or trust company is a member of a bank holding company system its bank holding company has) a combined capital (exclusive of borrowed capital) and surplus of at least $50,000,000, and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Fiscal Agent. If any bank or trust company appointed as a successor publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this paragraph the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any removal of the Fiscal Agent and appointment of a successor Fiscal Agent shall become effective only upon acceptance of appointment by the successor Fiscal Agent and notice being sent by the successor Fiscal Agent to the Bondowners of the successor Fiscal Agent’s identity and address.

Resignation of Fiscal Agent. The Fiscal Agent may at any time resign by giving written notice to the District and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books in the office of the Fiscal Agent. Upon receiving such notice of resignation, the District shall promptly appoint a successor Fiscal Agent satisfying the criteria in the Fiscal Agent Agreement by an instrument in writing. Any resignation or removal of the Fiscal Agent and appointment of a successor Fiscal Agent shall become effective only upon acceptance of appointment by the successor Fiscal Agent provided, however, that in the event the District does not appoint a successor Fiscal Agent within 30 days following receipt of such notice of resignation, the resigning Fiscal Agent may, at the expense of the District, petition the appropriate court having jurisdiction to appoint a successor Fiscal Agent.

Compensation and Liability of Fiscal Agent. The District shall from time to time, subject to any agreement between the District and the Fiscal Agent then in force, pay to the Fiscal Agent compensation for its services, reimburse the Fiscal Agent for all its advances and expenditures, including, but not limited to, advances to and reasonable fees and expenses of independent accountants and counsel and agents employed by it in the exercise and performance of its powers and duties under the Fiscal Agent Agreement. The District agrees to indemnify the Fiscal Agent, including its officers, directors, employees and agents for, and hold it harmless against, any loss, claim, liability or expense incurred which does not arise from its own negligence or willful misconduct, arising out of or in connection with the administration of the Fiscal Agent Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties under the Fiscal Agent Agreement. The Fiscal Agent shall not be liable for any error in judgment made in good faith by a reasonable officer, unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts. Whether or not therein expressly so provided, every provision of the Fiscal Agent Agreement relating to the conduct of or affecting the liability of or affording protection to the Fiscal Agent (acting in its capacity as Fiscal Agent or in its capacity as Dissemination Agent), its officers, directors, employees and agents, shall be subject to the provisions of the Fiscal Agent Agreement described under the heading “Compensation and Liability of Fiscal Agent.”

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The recitals of fact and all promises, covenants and agreements contained in the Fiscal Agent Agreement and in the Bonds and any Parity Bonds and any offering documents pertaining to the Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Fiscal Agent assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of the Fiscal Agent Agreement, the Bonds or any Parity Bonds, and shall incur no responsibility in respect thereof, other than in connection with its duties or obligations specifically set forth in the Fiscal Agent Agreement, in the Bonds and any Parity Bonds, or in the certificate of authentication assigned to or imposed upon the Fiscal Agent. The Fiscal Agent shall be under no responsibility or duty with respect to the issuance of the Bonds or any Parity Bonds for value.

The Fiscal Agent shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond, Parity Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Fiscal Agent may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered under the Fiscal Agent Agreement in good faith and in accordance therewith.

The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond or Parity Bond unless and until such Bond or Parity Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. The Fiscal Agent may become the owner or pledgee of Bonds, and may otherwise deal with the District with the same rights it would have if it were not the Fiscal Agent.

Whenever in the administration of its duties under the Fiscal Agent Agreement the Fiscal Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Fiscal Agent Agreement, such matter (unless other evidence in respect thereof be in the Fiscal Agent Agreement specifically prescribed) may, in the absence of bad faith on the part of the Fiscal Agent, be deemed to be conclusively proved and established by a written certificate of the District, and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the provisions of the Fiscal Agent Agreement upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.

The Fiscal Agent shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it under the Fiscal Agent Agreement, or as to the correctness of any amounts received, but its liability shall be limited to the proper accounting for such funds as it shall actually receive. No provision in the Fiscal Agent Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the Fiscal Agent Agreement, or in the exercise of its rights or powers.

All rights and indemnities of the Fiscal Agent pursuant to the Fiscal Agent Agreement shall survive the removal or resignation of the Fiscal Agent, the discharge of the Bonds, or the amendment or assignment of the Fiscal Agent Agreement.

Merger or Consolidation. Any company into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Fiscal Agent without the execution or filing of any paper or further act, anything in the Fiscal Agent Agreement to the contrary notwithstanding.

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EVENTS OF DEFAULT; REMEDIES

Events of Default. Any one or more of the following events shall constitute an “event of default”:

Default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond or Parity Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise;

Default in the due and punctual payment of the interest on any Bond or Parity Bond when and as the same shall become due and payable; or

Except as described above, default shall be made by the District in the observance of any of the agreements, conditions or covenants on its part contained in the Fiscal Agent Agreement, the Bonds or any Parity Bonds, and such default shall have continued for a period of 30 days after the District shall have been given notice in writing of such default by the Fiscal Agent or the Owners of 25% in aggregate principal amount of the Outstanding Bonds and Parity Bonds.

The District agrees to give notice to the Fiscal Agent immediately upon the occurrence of an event of default described in the first two paragraphs above and within 30 days of the District’s knowledge of an event of default described in the third paragraph above. The Fiscal Agent shall not be deemed to have knowledge of any event of default described in the third paragraph above unless a responsible officer shall have actual knowledge thereof or the Fiscal Agent shall have received written notice at its Principal Office.

Remedies of Owners. Following the occurrence of an event of default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated:

By mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in the Fiscal Agent Agreement;

By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or

By a suit in equity to require the District and its members, officers and employees to account as the fiscal agent of an express trust.

Nothing in described under the heading “Remedies of Owners” or in any other provision of the Fiscal Agent Agreement, the Bonds or any Parity Bonds shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds and any Parity Bonds to the respective Owners thereof at the respective dates of maturity, as provided in the Fiscal Agent Agreement, out of the Net Taxes and other amounts pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds or any Parity Bonds and in the Fiscal Agent Agreement.

A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Owners by the Act or by the Fiscal Agent Agreement may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners.

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If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the District and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken.

No remedy in the Fiscal Agent Agreement conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given under the Fiscal Agent Agreement or now or existing after the date of the Fiscal Agent Agreement, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law.

In case the moneys held by the Fiscal Agent after an event of default pursuant to the Fiscal Agent Agreement shall be insufficient to pay in full the whole amount so owing and unpaid upon the Outstanding Bonds and Parity Bonds, then all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest.

DEFEASANCE AND PARITY BONDS

Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond or Parity Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in the Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement, then the Owner of such Bond or Parity Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond or Parity Bond under the Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement relating to such Parity Bond shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds and Parity Bonds pursuant to the Fiscal Agent Agreement, the Fiscal Agent shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Fiscal Agent shall pay over or deliver to the District’s general fund all money or securities held by it pursuant to the Fiscal Agent Agreement which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds and Parity Bonds.

Any Outstanding Bond or Parity Bond shall be deemed to have been paid within the meaning expressed in the paragraph above if such Bond or Parity Bond is paid in any one or more of the following ways:

by paying or causing to be paid the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same become due and payable;

by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund (exclusive of the Administrative Expense Account) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable; or

by depositing with the Fiscal Agent or another escrow bank appointed by the District, in trust, noncallable Defeasance Securities, in which the District may lawfully invest its money, in such amount as will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund (exclusive of the Administrative Expense Account) and available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable;

then, at the election of the District, and notwithstanding that any Outstanding Bonds and Parity Bonds shall not have been surrendered for payment, all obligations of the District under the Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement with respect to such Bond or Parity Bond shall cease and terminate,

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except for the obligation of the Fiscal Agent to pay or cause to be paid to the Owners of any such Bond or Parity Bond not so surrendered and paid, all sums due thereon and except for the covenants of the District contained in the Fiscal Agent Agreement or any covenants in a Supplemental Fiscal Agent Agreement relating to compliance with the Code. Notice of such election shall be filed with the Fiscal Agent not less than ten days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Fiscal Agent. In connection with a defeasance under (b) or (c) above, there shall be provided to the District a verification report from an independent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Fiscal Agent or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all Outstanding Bonds and Parity Bonds to be defeased in accordance with the Fiscal Agent Agreement, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds or Parity Bonds being defeased have been legally defeased in accordance with the Fiscal Agent Agreement and any applicable Supplemental Fiscal Agent Agreement. If a forward supply contract is employed in connection with an advance refunding to be effected under (c) above, (i) such verification report shall expressly state that the adequacy of the amounts deposited with the bank under (c) above to accomplish the refunding relies solely on the initial escrowed investments and the maturity principal thereof and interest income thereon and does not assume performance under or compliance with the forward supply contract, and (ii) the applicable escrow agreement executed to effect an advance refunding in accordance with (c) above shall provide that, in the event of any discrepancy or difference between the terms of the forward supply contract and the escrow agreement, the terms of the escrow agreement shall be controlling.

Upon a defeasance, the Fiscal Agent, upon request of the District, shall release the rights of the Owners of such Bonds and Parity Bonds which have been defeased under the Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance under the Fiscal Agent Agreement of all Outstanding Bonds and Parity Bonds, the Fiscal Agent shall pay over or deliver to the District any funds held by the Fiscal Agent at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of, premium, if any, or interest on the Bonds and Parity Bonds when due. The Fiscal Agent shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds or Parity Bonds have been defeased, in the form directed by the District, stating that the defeasance has occurred.

Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness. The District may at any time after the issuance and delivery of the Bonds under the Fiscal Agent Agreement issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expense Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued under the Fiscal Agent Agreement or under any Supplemental Fiscal Agent Agreement. Parity Bonds may be issued subject to the following additional specific conditions, which are made conditions precedent to the issuance of any such Parity Bonds:

The District shall be in compliance with all covenants set forth in the Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement then in effect and a certificate of the District to that effect shall have been filed with the Fiscal Agent; provided, however, that Parity Bonds may be issued notwithstanding that the District is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds the District will be in compliance with all such covenants.

The issuance of such Parity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Fiscal Agent Agreement duly adopted by the District which shall specify the following:

(1) The purpose for which such Parity Bonds are to be issued and the fund or funds into which the proceeds thereof are to be deposited;

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(2) The authorized principal amount of such Parity Bonds;

(3) The date and the maturity date or dates of such Parity Bonds; provided that (i) each maturity date shall fall on an September 1, (ii) all such Parity Bonds of like maturity shall be identical in all respects, except as to number, and (iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates;

(4) The description of the Parity Bonds, the place of payment thereof and the procedure for execution and authentication;

(5) The denominations and method of numbering of such Parity Bonds;

(6) The amount and due date of each mandatory Sinking Fund Payment, if any, for such Parity Bonds;

(7) The amount, if any, to be deposited from the proceeds of such Parity Bonds in the Reserve Account of the Special Tax Fund to increase the amount therein to the Reserve Requirement;

(8) The form of such Parity Bonds; and

(9) Such other provisions as are necessary or appropriate and not inconsistent with the Fiscal Agent Agreement.

The District shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the Fiscal Agent (unless the Fiscal Agent shall accept any of such documents bearing a prior date):

(1) A certified copy of the Supplemental Fiscal Agent Agreement authorizing the issuance of such Parity Bonds;

(2) A Written Request of the District as to the delivery of such Parity Bonds;

(3) An opinion of Bond Counsel and/or general counsel to the District to the effect that (a) the District has the right and power under the Act to adopt the Fiscal Agent Agreement and the Supplemental Fiscal Agent Agreements relating to such Parity Bonds, and the Fiscal Agent Agreement and all such Supplemental Fiscal Agent Agreements have been duly and lawfully adopted by the District, are in full force and effect and are valid and binding upon the District and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights); (b) the Fiscal Agent Agreement creates the valid pledge which it purports to create of the Net Taxes and other amounts as provided in the Fiscal Agent Agreement, subject to the application thereof to the purposes and on the conditions permitted by the Fiscal Agent Agreement; and (c) such Parity Bonds are valid and binding limited obligations of the District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights) and the terms of `this Fiscal Agent Agreement and all Supplemental Fiscal Agent Agreements thereto and entitled to the benefits of the Fiscal Agent Agreement and all such Supplemental Fiscal Agent Agreements, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and the Fiscal Agent Agreement and all such Supplemental Fiscal Agent Agreements; and a further opinion of Bond Counsel to the effect that, assuming compliance by the District with certain tax covenants, the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds theretofore issued on a tax-exempt

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basis, or the exemption from State of California personal income taxation of interest on any Outstanding Bonds and Parity Bonds theretofore issued;

(4) A certificate of the District containing such statements as may be reasonably necessary to show compliance with the requirements of the Fiscal Agent Agreement;

(5) A certificate from one or more Independent Financial Consultants which, when taken together, certify that (i) the amount of the Special Taxes that may be levied by the District pursuant to the Act and the applicable resolutions and ordinances of the District in each subsequent Fiscal Year on then existing Developed Property (as defined in the Rate and Method of Apportionment of Special Taxes then in effect in the District) shall produce Net Taxes at least 1.10 times the Administrative Expense Requirement plus the corresponding Annual Debt Service for each remaining Bond Year on all Outstanding Bonds theretofore issued and the Parity Bonds proposed to be issued, and (ii) the value of all parcels of real property in the District subject to the levy of the Special Tax and not delinquent in the payment of any Special Taxes due and owing, as determined based on an appraisal performed on a basis generally consistent with the appraisal conducted in connection with the issuance of the Bonds or based on assessed value, is at least ten (10) times the sum of (a) the aggregate principal amount of all Bonds and Parity Bonds then Outstanding, plus (b) the aggregate principal amount of the series of Parity Bonds proposed to be issued, plus (c) the aggregate principal amount of any fixed assessment liens on the parcels in the District subject to the levy of Special Taxes, plus (d) a portion of the aggregate principal amount of any and all other community facilities district bonds then outstanding and payable at least partially from special taxes to be levied on parcels of property within the District (the “Other CFD Bonds”) equal to the aggregate principal amount of the Other CFD Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other CFD Bonds on parcels of property within the District, and the denominator of which is the total amount of special taxes levied for the Other CFD Bonds on all parcels of property which are subject to the levy of such special taxes are levied to pay the Other CFD Bonds (such fraction to be determined based upon the maximum special taxes which could be levied in the year in which maximum annual debt service on the Other CFD Bonds occurs), based upon information which is available for the then current Fiscal Year. For purposes of making the certifications required by this paragraph, the Independent Financial Consultants may rely on reports or certificates of such other persons as may be acceptable to the District, the School District, Bond Counsel and the Underwriter of the proposed Parity Bonds; however, if the Parity Bonds proposed to be issued are being issued to refund other outstanding Bonds or Parity Bonds, the condition precedent of described in this paragraph may be satisfied with a certificate of an Independent Financial Consultant certifying that in each Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding following the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds; and

(6) Such further documents, money and securities as are required by the provisions of the Fiscal Agent Agreement and the Supplemental Fiscal Agent Agreement providing for the issuance of such Parity Bonds.

In addition to the above requirements in the Fiscal Agent Agreement, Parity Bonds shall not be issued under the Fiscal Agent Agreement unless the requirements for such issuance set forth in the Subordinate 2008 Fiscal Agent Agreement shall have been satisfied; provided, however, that nothing in the Fiscal Agent Agreement shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Net Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds, the Parity Bonds and the Subordinate 2008 Bonds.

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MISCELLANEOUS

Cancellation of Bonds and Parity Bonds. All Bonds and Parity Bonds surrendered to the Fiscal Agent for payment upon maturity or for redemption shall be upon payment therefor, and any Bond or Parity Bond purchased by the District as authorized in the Fiscal Agent Agreement and delivered to the Fiscal Agent for such purpose shall be, cancelled forthwith and shall not be reissued. The Fiscal Agent shall destroy such Bonds and Parity Bonds, as provided by law, and, upon request of the District, furnish to the District a certificate of such destruction.

Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by the Fiscal Agent Agreement to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds or Parity Bonds shall be sufficient for the purposes of the Fiscal Agent Agreement (except as otherwise provided in the Fiscal Agent Agreement), if made in the following manner:

The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company or other eligible guarantor located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his Authority.

As to any Bond or Parity Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond or Parity Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond or Parity Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the District nor the Fiscal Agent shall be affected by any notice to the contrary.

Nothing contained in the Fiscal Agent Agreement shall be construed as limiting the Fiscal Agent or the District to such proof, it being intended that the Fiscal Agent or the District may accept any other evidence of the matters in the Fiscal Agent Agreement stated which the Fiscal Agent or the District may deem sufficient. Any request or consent of the Owner of any Bond or Parity Bond shall bind every future Owner of the same Bond or Parity Bond in respect of anything done or suffered to be done by the Fiscal Agent or the District in pursuance of such request or consent.

Unclaimed Moneys. To the extent permitted by law, anything in the Fiscal Agent Agreement to the contrary notwithstanding, any money held by the Fiscal Agent in trust for the payment and discharge of any of the Outstanding Bonds and Parity Bonds which remain unclaimed for a period ending at the earlier of two Business Days prior to the date such funds would escheat to the State or two years after the date when such Outstanding Bonds or Parity Bonds have become due and payable, if such money was held by the Fiscal Agent at such date, or for a period ending at the earlier of two Business Days prior to the date such funds would escheat to the State or two years after the date of deposit of such money if deposited with the Fiscal Agent after the date when such Outstanding Bonds or Parity Bonds become due and payable, shall be repaid by the Fiscal Agent to the District, as its absolute property and free from trust, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds or Parity Bonds; provided, however, that, before being required to make any such payment to the District, the Fiscal Agent at the written request of the District or the Fiscal Agent shall, at the expense of the District, cause to be mailed by first-class mail, postage prepaid, to the registered Owners of

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such Outstanding Bonds or Parity Bonds at their addresses as they appear on the registration books of the Fiscal Agent a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than 30 days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. The Fiscal Agent shall not be liable to the District or any Owner for interest on uninvested funds held by it for the payment and discharge of the principal, premium or interest on any of the Bonds to any Owner.

Provisions Constitute Contract. The provisions of the Fiscal Agent Agreement shall constitute a contract between the District and the Bondowners and the provisions of the Fiscal Agent Agreement shall be construed in accordance with the laws of the State of California.

In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Bondowners or the Fiscal Agent, then the District, the Fiscal Agent and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken.

After the issuance and delivery of the Bonds the Fiscal Agent Agreement shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in the Fiscal Agent Agreement, but to no greater extent and in no other manner.

Future Contracts. Nothing in the Fiscal Agent Agreement contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Gross Taxes which is subordinate to the pledge under the Fiscal Agent Agreement, or which is payable from the general fund of the District or from taxes or any source other than the Gross Taxes and other amounts pledged under the Fiscal Agent Agreement.

Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Fiscal Agent Agreement, and for the better assuring and confirming unto the Owners of the Bonds or any Parity Bonds the rights and benefits provided in the Fiscal Agent Agreement.

Severability. If any covenant, agreement or provision, or any portion thereof, contained in the Fiscal Agent Agreement, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of the Fiscal Agent Agreement and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and the Fiscal Agent Agreement, the Bonds and any Parity Bonds issued pursuant to the Fiscal Agent Agreement shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California.

Provisions of Original Fiscal Agent Agreement in Effect. Except as expressly modified herein, all of the provisions of the Original Fiscal Agent Agreement shall remain in full force and effect.

Partial Invalidity. If any section, paragraph, sentence, clause or phrase of the First Supplement shall for any reason be held illegal, invalid or unenforceable, such holding shall not affect the validity of the remaining portions of the First Supplement. The District hereby declares that it would have entered into the First Supplement and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the 2013 Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences. clauses, or phrases of the First Supplement may be held illegal, invalid or unenforceable.

Governing Law. The First Supplement shall be construed and governed in accordance with the laws of the State of California applicable to contracts made and performed in such state.

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APPENDIX D

FORM OF BOND COUNSEL OPINION

[Closing Date]

Board of Trustees of the Sulphur Springs Union School District, as the legislative body of Sulphur Springs Union School District Community Facilities District No. 2002-1 27000 Weyerhauser Way Canyon Country, CA 91351

Re: $4,335,000 Sulphur Springs Union School District Community Facilities District No. 2002-1 Special Tax Bonds, Refunding Series 2013A

Gentlemen:

We have examined the Constitution and laws of the State of California, a certified record of the proceedings of Sulphur Springs Union School District (the “School District”) taken in connection with the formation of Sulphur Springs Union School District Community Facilities District No. 2002-1 (the “District”) and the authorization and issuance of the District’s Special Tax Bonds, Refunding Series 2013A in the aggregate principal amount of $4,335,000 (the “Bonds”) and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the School District, the District, the initial purchaser of the Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us.

The Bonds have been issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California), a resolution adopted by the Board of Trustees of the School District, acting in its capacity as the legislative body of the School District, on January 23, 2013 (the “Resolution of Issuance”) and a Fiscal Agent Agreement by and between the District and U.S. Bank National Association, as Fiscal Agent (the “Fiscal Agent”), dated as of June 1, 2012 (the “Original Fiscal Agent Agreement”) , as supplemented by a First Supplemental Fiscal Agent Agreement, by and between the District and the Fiscal Agent, dated as of March 1, 2013 (the “First Supplement,” and, together with the Original Fiscal Agent Agreement, the “Fiscal Agent Agreement”). All capitalized terms not defined herein shall have the meanings set forth in the Fiscal Agent Agreement.

The Bonds are dated as of the date of hereof and mature on the dates and in the amounts set forth in the Fiscal Agent Agreement. The Bonds bear interest payable semiannually on each March 1 and September 1, commencing on September 1, 2013, at the rates per annum set forth in the Fiscal Agent Agreement. The Bonds are registered Bonds in the form set forth in the Fiscal Agent Agreement redeemable in the amounts, at the times and in the manner provided for in the Fiscal Agent Agreement.

Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that:

(1) The Bonds have been duly and validly authorized by the District and are legal, valid and binding limited obligations of the District, enforceable in accordance with their terms and the terms of the Fiscal Agent Agreement, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other similar laws affecting

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generally the enforcement of creditors’ rights, by equitable principles and by the exercise of judicial discretion; provided, however, we express no opinion as to the enforceability of the covenant of the District contained in the Fiscal Agent Agreement to levy Special Taxes for the payment of Administrative Expenses. The Bonds are limited obligations of the District but are not a debt of the School District, the County of Los Angeles, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, except for the Special Taxes, neither the faith and credit nor the taxing power of the District, the School District, the County of Los Angeles, the State of California, or any other political subdivision is pledged for the payment thereof. The execution and delivery of the Fiscal Agent Agreement has been duly authorized by the District, and the Fiscal Agent Agreement is valid and binding upon the District and is enforceable in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases, and by the limitations on legal remedies against public agencies in the State of California; provided, however, we express no opinion as to the enforceability of the covenant of the District contained in the Fiscal Agent Agreement to levy Special Taxes for the payment of Administrative Expenses or as to any provisions therein relating to indemnification, contribution, penalty, waiver, choice of law or choice of forum.

(2) The Fiscal Agent Agreement creates a valid pledge of, and the Bonds are secured by, the Net Taxes and the amounts on deposit in certain funds and accounts established under the Fiscal Agent Agreement, as and to the extent provided in the Fiscal Agent Agreement, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other similar laws affecting generally the enforcement of creditors’ rights, by equitable principles and by the exercise of judicial discretion.

(3) Under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest (and original issue discount) may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations.

(4) Interest on the Bonds is exempt from State of California personal income tax.

(5) The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond owner will increase the Bond owner’s basis in the applicable Bond. Original issue discount that accrues to the Bond owner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations (as described in paragraph 3 above), and is exempt from State of California personal income tax.

The opinions expressed in paragraphs (3) and (5) above as to the exclusion from gross income for federal income tax purposes of interest and original issue discount on the Bonds are subject to the condition that the School District and the District comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the Bonds to assure that such interest and original issue discount will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest and original issue discount on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of

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issuance of the Bonds. The School District and the District have covenanted to comply with all such requirements. Except as set forth in paragraphs (3), (4) and (5) above, we express no opinion as to any tax consequences related to the Bonds.

The opinions expressed herein are based upon an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities.

We call attention to the fact that the foregoing opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions or events are taken (or not taken) or do occur (or do not occur). The Fiscal Agent Agreement and the Tax Certificate executed by the District with respect to the Bonds as of the date hereof permit certain actions to be taken or omitted if a favorable opinion of Bond Counsel is provided with respect thereto. We express no opinion as to the effect on the exclusion from gross income of interest and original issue discount on the Bonds for federal income tax purposes on and after the date on which any such change occurs or action is taken upon the advice or approval of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation.

We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement relating to the Bonds or other offering material relating to the Bonds and expressly disclaim any duty to advise the owners of the Bonds with respect to matters contained in the Official Statement.

Respectfully submitted,

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APPENDIX E

FORM OF CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of March 1, 2013, is executed and delivered by Sulphur Springs Union School District Community Facilities District No. 2002-1 (the “Issuer” or “District”) and Keygent LLC, as dissemination agent, in connection with the issuance and delivery by the Issuer of its Special Tax Refunding Bonds, Series 2013A (the “Bonds”). The Bonds are being issued pursuant to that certain Fiscal Agent Agreement, by and between the Issuer and U.S. Bank National Association, as fiscal agent, dated as of June 1, 2012 (the “Original Fiscal Agent Agreement”), as supplemented by a First Supplemental Fiscal Agent Agreement, by and between the District and the Fiscal Agent, dated as of March 1, 2013 (the “First Supplement,” and, together with the Original Fiscal Agent Agreement, the “Fiscal Agent Agreement”). The Issuer covenants as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Issuer, for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule (as defined below).

SECTION 2. Definitions. In addition to the definitions set forth in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income purposes.

“Disclosure Representative” shall mean the Superintendent of the School District, the Assistant Superintendent, Business Services, or his or her designee, or such other officer or employee as the School District shall designate in writing to the Dissemination Agent from time to time.

“Dissemination Agent” shall mean, initially, Keygent LLC, or any successor Dissemination Agent designated in writing by the Issuer which has filed with the then current Dissemination Agent a written acceptance of such designation.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.

“Participating Underwriter” shall mean Piper Jaffray & Co.

“Repository” shall mean the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at http://emma.msrb.org/, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“Tax-exempt” shall mean that interest on the Bonds is excluded from gross income for federal income tax purposes, whether or not such interest is includable as an item of tax preferences or otherwise includable

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directly or indirectly for purposes of calculating any other tax liability, including any alternative minimum tax or environmental tax.

SECTION 3. Provision of Annual Reports.

(a) Not later than February 15 immediately following the end of the Issuer’s fiscal year, commencing February 15, 2014, the Issuer shall, provide or shall cause the Dissemination Agent to provide, to the Repository and the Participating Underwriter an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the Issuer may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report.

An Annual Report shall be provided at least annually notwithstanding any fiscal year longer than 12 calendar months. The Issuer’s fiscal year is currently effective from July 1 to the immediately succeeding June 30 of the following year. The Issuer will promptly notify the Repository or the Municipal Securities Rulemaking Board and the Dissemination Agent of a change in the fiscal year dates.

(b) In the event that the Dissemination Agent is an entity other than the Issuer, then the provisions of this Section 3(b) shall apply. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to the Repository, the Issuer shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to such date the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the Issuer to determine if the Issuer will be filing the Annual Report in compliance with subsection (a). The Issuer shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Issuer and shall have no duty or obligation to review such Annual Report.

(c) If the Issuer is the Dissemination Agent and the Issuer is unable to provide to the Repository an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the Municipal Securities Rulemaking Board, the Repository, if any, and the Participating Underwriter in substantially the form attached to this Disclosure Agreement as Exhibit A. If the Dissemination Agent is other than the Issuer and if the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repository by the date required in subsection (a), the Dissemination Agent shall send a notice to the Repository, in substantially the form attached as Exhibit A.

(d) The Disclosure Dissemination Agent shall upon receipt, promptly file each Annual Report received under Section 3(b) with the Repository.

SECTION 4. Content of Annual Reports. The initial Annual Report filed by February 15, 2014 shall consist of the Official Statement and the audited financial statements of the School District. Thereafter, the Issuer’s Annual Report shall contain or include by reference:

(a) Financial Statements. The audited financial statements of the School District for the most recent fiscal year of the Issuer then ended. If the audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the Issuer in a format similar to the audited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements of the School District shall be audited by such auditor as shall then be required or permitted by State law or the Fiscal Agent Agreement. Audited financial statements shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board;

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provided, however, that the Issuer may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the School District shall modify the basis upon which its financial statements are prepared, the Issuer shall provide a notice of such modification to the Repository, including a reference to the specific federal or state law or regulation specifically describing the legal requirements for the change in accounting basis.

(b) Financial and Operating Data. The Annual Report shall contain or incorporate by reference the following information:

(i) the principal amount of Bonds outstanding as of September 2 of each year;

(ii) the balance in each fund under the Fiscal Agent Agreement as of the September 2 preceding the filing of the Annual Report, including the Reserve Account and a statement of the Reserve Requirement;

(iii) a summary of the Special Taxes levied on Undeveloped Property and Developed Property (as defined in the Rate and Method of Apportionment of Special Tax) levied within the District, and an update of Tables 1 and 3 based on the assessed value of such land, as shown on the assessment roll of the Los Angeles County Assessor last equalized prior to the September 30 next preceding the Annual Report date, but only until all of the taxable property within the District is classified as “Developed Property” under the Rate and Method of Apportionment of the Special Tax for the District;

(iv) the number of building permits issued for property located in the District, until building permits have been issued for all lots in the District;

(v) any changes to the Rate and Method of Apportionment of the Special Tax approved or submitted to the electors for approval prior to the filing of the Annual Report;

(vi) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes;

(vii) the delinquency rate for the Special Taxes for the preceding fiscal year and the identity of any property owner whose delinquent Special Taxes represent more than 5% of the amount levied and the assessed value-to-lien ratios of such delinquent properties; and

(viii) any information not already included under (i) through (vii) above that the Issuer is required to file in its annual report to the California Debt and Investment Advisory Commission pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended.

In addition to any of the information expressly required to be provide under paragraphs (a) or (b) of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements set forth in clauses (i) to (viii), in the light of the circumstances under which they were made, not misleading.

(c) Any or all of the items listed in (a) or (b) above may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public entities, which have been submitted to the Repository or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Repository. The Issuer shall clearly identify each such other document so included by reference.

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SECTION 5. Reporting of Significant Events.

(a) The Issuer shall notify the Dissemination Agent not more than eight (8) Business Days after the following events, and the Dissemination Agent shall file a notice with the Repository not more than ten (10) Business Days after the following events:

1. principal and interest payment delinquencies;

2. unscheduled draws on debt service reserves reflecting financial difficulties;

3. unscheduled draws on credit enhancements reflecting financial difficulties;

4. substitution of credit or liquidity providers, or their failure to perform;

5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds;

6. defeasances;

7. tender offers;

8. bankruptcy, insolvency, receivership or similar proceedings; and

9. ratings changes.

(b) Additionally, the Issuer shall provide the Dissemination Agent, and the Dissemination Agent shall promptly file with the Repository, notice of the occurrence of any of the following events with respect to the Bonds, if material:

1. The consummation of a merger, consolidation or acquisition involving an obligated person or sale of all or substantially all of the assets of the obligated persons or their person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination; of a definitive agreement relating to any such actions, other than pursuant to its term;

2. appointment of a successor or additional fiscal agent or the change of the name of a fiscal agent;

3. non payment related defaults;

4. modifications to the rights of Bondholders;

5. Bond calls; and

6. release, substitution or sale of property securing repayment of the Bonds.

(c) The Issuer hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the Issuer and the Dissemination Agent shall not be responsible for determining whether the Issuer’s instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule.

SECTION 6. Termination of Reporting Obligation. The obligations of the Issuer and the Dissemination Agent under this Disclosure Agreement shall terminate upon the legal defeasance, prior

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redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5.

SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Keygent LLC. The Dissemination Agent may resign by providing (i) thirty days written notice to the Issuer, and (ii) upon appointment of a new Dissemination Agent hereunder.

SECTION 8. Amendment.

(a) This Disclosure Amendment may be amended, by written agreement of the parties, without the consent of the Owners, if all of the following conditions are satisfied: (1) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature or status of the Issuer or the type of business conducted thereby, (2) this Disclosure Agreement as so amended would have complied with the requirements of the Rule as of the date of this Disclosure Agreement, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, (3) the Issuer shall have delivered to the Dissemination Agent an opinion of a nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer and the Participating Underwriter, to the same effect as set forth in clause (2) above, (4) the Issuer shall have delivered to the Dissemination Agent an opinion of nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer, to the effect that the amendment does not materially impair the interests of the Owners or Beneficial Owners, or such amendment shall have been approved by the Owners in the same manner as an amendment to the Fiscal Agent Agreement, and (5) the Issuer shall have delivered copies of such opinion and amendment to the Repository and the Participating Underwriter.

(b) This Disclosure Agreement also may be amended by written agreement of the parties upon obtaining consent of Owners in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of the Owners of the Bonds; provided that the conditions set forth in Section 8(a)(1), (2) and (3) have been satisfied.

(c) To the extent any amendment to this Disclosure Agreement results in a change in the type of financial information or operating data provided pursuant to this Disclosure Agreement, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

(d) If an amendment is made to the basis on which financial statements are prepared, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information.

SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Issuer shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

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SECTION 10. Default. In the event of a failure of the Issuer or the Dissemination Agent to comply with any provision of this Disclosure Agreement, any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer and/or the Dissemination Agent to comply with their respective obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Issuer or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.

SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Issuer agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. Any Dissemination Agent other than the Issuer shall be paid (i) compensation by the Issuer for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to; and (ii) all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Issuer pursuant to this Disclosure Agreement. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Agreement. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Agreement.

The Dissemination Agent may file reports, notices and other information as required by this agreement electronically to the Repository. If the Issuer is equipped to receive such information electronically, the Dissemination Agent will include the Issuer in any simultaneous electronic dissemination of materials.

SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

SECTION 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

SECTION 14. Governing Law. This Disclosure Agreement shall be construed and governed in accordance with the laws of the State of California.

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SECTION 15. Notices. Notices shall be provided, as required hereunder, to the applicable addressees below:

District: Sulphur Springs Union School District 27000 Weyerhauser Way Canyon Country, CA 91351 Telephone: (661) 252-5131 Facsimile: (661) 252-3589 Attention: Superintendent

Dissemination Agent: Keygent LLC 999 N. Sepulveda Blvd., Suite 500 El Segundo, CA 90245 Telephone: (310) 322‐4222 Facsimile: (866) 518‐7656 Attention: Tony Hsieh

Participating Underwriter: Piper Jaffray & Co. 8880 Cal Center Drive Sacramento, CA 95826 Telephone: (916) 261-6520 Attention: Dennis McGuire

SECTION 16. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof.

SECTION 17. Merger. Any person succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act.


By: Superintendent of the Sulphur Springs Union School District on behalf of Sulphur Springs Union School District Community Facilities District No. 2002-1

KEYGENT LLC, as Dissemination Agent

By: Its: Authorized Officer

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EXHIBIT A

NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Sulphur Springs Union School District Community Facilities District No. 2002-1

Name of Bond Issue: Sulphur Springs Union School District Community Facilities District No. 2002-1 Special Tax Refunding Bonds, Series 2013A

Date of Issuance: March 12, 2013

NOTICE IS HEREBY GIVEN that Sulphur Springs Union School District Community Facilities District No. 2002-1 (the “Issuer”) has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement, dated as of March 1, 2013. [The Issuer anticipates that the Annual Report will be filed by ________.]

Dated: __________

__________________________________, as Dissemination Agent

cc: Sulphur Springs Union School District

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APPENDIX F

INFORMATION CONCERNING DTC AND ITS BOOK-ENTRY ONLY SYSTEM

The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the 2013 Bonds, payment of principal, premium, if any, accreted value and interest on the 2013 Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the 2013 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC to the District which the District believes to be reliable, but the District and the Underwriter do not and cannot make any independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued 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 Bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited through the facilities of DTC.

DTC, the world’s largest securities 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 3.5 million issues of U.S. and non-U.S. equity issues, 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 is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. 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 a Standard & Poor’s rating of “AA+.” 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.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“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 Bonds 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 Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds 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 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual

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Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds 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 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds 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.

Redemption notices shall be sent to DTC. If less than all of the Bonds 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 redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the Bonds 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 the District or the Fiscal Agent, on payable 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, the Fiscal Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Fiscal Agent, 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.

A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Fiscal Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Fiscal Agent. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Fiscal Agent’s DTC account.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.

The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC.

THE FISCAL AGENT, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.