riverside county state of california $6,785,000 …cdiacdocs.sto.ca.gov/2012-1048.pdf ·...

NEW ISSUE - BOOK-ENTRY-ONLY NO RATING

(See “CONCLUDING INFORMATION - No Rating on the Bonds” herein)

In the opinion of Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel, subject, however, to certain qualifications described herein, under existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (“Code”). In the further opinion of Bond Counsel, interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum taxes imposed on individuals and corporations, although Bond Counsel observes that such interest is included as an adjustment in the calculation of federal corporate alternative minimum taxable income and may therefore affect a corporation’s alternative minimum tax liabilities. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income taxation. Bond Counsel expresses no other opinion regarding or concerning any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “LEGAL MATTERS - Tax Matters.”

RIVERSIDE COUNTY STATE OF CALIFORNIA

$6,785,000 COMMUNITY FACILITIES DISTRICT NO. 2002-1

OF THE TEMECULA VALLEY UNIFIED SCHOOL DISTRICT (IMPROVEMENT AREA NO. 1)

SERIES 2012 SPECIAL TAX REFUNDING BONDS Dated: Date of Delivery Due: September 1 as shown on the inside front cover page.

The above-captioned “Series 2012 Special Tax Refunding Bonds” (the “Bonds”) are being issued under the Mello-Roos Community Facilities Act of 1982 (the “Act”), the Resolution of Issuance (as defined herein) and a Fiscal Agent Agreement, dated as of August 1, 2012 (the “Fiscal Agent Agreement”), by and between Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (the “District”) and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”), and are payable from certain proceeds of special taxes levied on property within Improvement Area No. 1 of the District according to the rate and method of apportionment of special tax of the District approved by the qualified electors within Improvement Area No. 1 of the District (“Improvement Area No. 1”) and by the Board of Education of the Temecula Valley Unified School District (the “School District”) acting as the legislative body of the District and certain other funds as described herein.

The Bonds are being issued to (i) provide funds for the refinancing of outstanding indebtedness of the District, (ii) fund a reserve fund for the Bonds, and (iii) pay the costs of issuing the Bonds. See “THE FINANCING PLAN - Estimated Uses of Funds” herein.

Interest on the Bonds is payable on March 1 and September 1 of each year, commencing March 1, 2013. The Bonds will be issued in denominations of $5,000 or integral multiples thereof. The Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds as described herein under “APPENDIX G - DTC AND THE BOOK-ENTRY-ONLY SYSTEM.”

The Bonds are subject to optional redemption, mandatory sinking fund redemption and special mandatory redemption from prepaid special taxes as described herein. See “THE BONDS - Redemption” herein

A DETAILED MATURITY SCHEDULE IS SET FORTH ON THE INSIDE FRONT COVER PAGE HEREOF

THE PRINCIPAL AND REDEMPTION PREMIUM, IF ANY, OF THE BONDS AND THE INTEREST THEREON ARE NOT AN INDEBTEDNESS OF THE STATE OF CALIFORNIA (THE “STATE”) OR ANY OF ITS POLITICAL SUBDIVISIONS, AND NEITHER THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN), THE SCHOOL DISTRICT, THE STATE, NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE ON THE BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN), THE SCHOOL DISTRICT, OR THE STATE, OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. OTHER THAN THE NET TAXES OF IMPROVEMENT AREA NO. 1 OF THE DISTRICT, AS DEFINED HEREIN, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT A GENERAL OBLIGATION OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT, PAYABLE SOLELY FROM THE NET TAXES OF IMPROVEMENT AREA NO. 1 OF THE DISTRICT AND AMOUNTS PLEDGED UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED HEREIN.

This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision with respect to the Bonds. Investment in the Bonds involves risks which may not be appropriate for some investors. See “RISK FACTORS” herein for a discussion of special risk factors that should be considered in evaluating the investment quality of the Bonds.

The Bonds are offered when, as and if issued and delivered to the Underwriter, subject to the approval as to their legality by Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel to the District. Certain legal matters will be passed upon for the District by Bowie, Arneson, Wiles & Giannone, Counsel to the District and by McFarlin & Anderson LLP, Laguna Hills, California, Disclosure Counsel, and for the Underwriter by its Counsel, Nossaman LLP, Irvine, California. It is anticipated that the Bonds will be available for delivery in book-entry form through the facilities of DTC on or about August 14, 2012.

The date of the Official Statement is July 26, 2012.



SERIES 2012 SPECIAL TAX REFUNDING BONDS

MATURITY SCHEDULE

$5,435,000 Serial Bonds

(Base CUSIP®† 87970H)

Maturity Date Principal Interest Reoffering

September 1 Amount Rate Yield CUSIP®†

2013 $220,000 1.000% 1.125% JZ9

2014 240,000 2.000 1.750 KA2

2015 245,000 2.000 2.000 KB0

2016 245,000 3.000 2.375 KC8

2017 255,000 3.000 2.750 KD6

2018 260,000 3.000 3.100 KE4

2019 270,000 3.125 3.375 KF1

2020 275,000 3.375 3.600 KG9

2021 285,000 3.500 3.750 KH7

2022 295,000 3.750 3.900 KJ3

2023 310,000 4.000 4.000 KK0

2024 320,000 4.000 4.120 KL8

2025 335,000 4.000 4.220 KM6

2026 345,000 4.125 4.320 KN4

2027 360,000 4.250 4.420 KP9

2028 375,000 4.250 4.500 KQ7

2029 390,000 4.375 4.550 KR5

2030 410,000 5.000 4.600* KS3

$1,350,000 5.00% Term Bond maturing September 1, 2033, Yield 4.75%* CUSIP®† KT1

* Priced to the September 1, 2022 optional call date

† CUSIP® A registered trademark of the American Bankers Association. CUSIP® data herein is provided by Standard & Poor’s CUSIP® Service Bureau. This data in 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, the Financial Advisor nor the Underwriter takes any responsibility for the accuracy of such numbers.

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the Bonds.

Estimates and Forecasts. This Official Statement contains statements which, to the extent they are not recitations of historical fact, 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. In this respect, such forward-looking statements are generally identified by the use of words “estimate,” “project,” “plan,” “budget,” “anticipate,” “expect,” “intend,” or “believe” or the negative thereof or other variations thereon or comparable terminology.

The achievement of certain results or other expectations contained in such forward-looking statements involves known or unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be significantly different than those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, uncertainties relating to economic conditions, the effect of changes in the amounts and timing of receipt of revenues, the availability and sufficiency of Net Taxes, change in circumstances adversely affecting the projected use of proceeds, and risks involving pertinent court decisions. The District 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 such statements are based change. Potential investors are cautioned that such statements are only predictions and that actual events or results may differ materially. In evaluating such statements, potential investors should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward-looking statements.

Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the District, the School District, the Financial Advisor or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and if given or made, such other information or representation must not be relied upon as having been authorized by the District, the School District, the Financial Advisor or the Underwriter. 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 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

Involvement of Underwriter. The Underwriter has provided the following statement for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a 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.

The information and expressions of opinions 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 District or the School District or any other entity described or referenced herein since the date hereof. All summaries of the documents referred to in this Official Statement are made subject to the provisions of such documents, respectively, and do not purport to be complete statements of any or all of such provisions.

Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the 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 Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside front cover page hereof and said public offering prices may be changed from time to time by the Underwriter.

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

TEMECULA VALLEY UNIFIED SCHOOL DISTRICT

BOARD OF EDUCATION

Bob Brown, President Dr. Kristi Rutz-Robbins, Clerk Dr. Allen Pulsipher, Member

Vincent O’Neal, Member Richard Shafer, Member

______________________________________________

ADMINISTRATION

Timothy Ritter, District Superintendent Lori Ordway-Peck, Assistant Superintendent of Business Support Services

Jodi McClay, Assistant Superintendent of Educational Support Services Bill Behrens, Ed. D., Assistant Superintendent of Human Resources Development

________________________________________

PROFESSIONAL SERVICES

Bond Counsel Bowie, Arneson, Wiles & Giannone

Newport Beach, California

Disclosure Counsel McFarlin & Anderson LLP

Laguna Hills, California

Financial Advisor Harrell & Company Advisors, LLC

Orange, California

Special Tax Consultant Special District Financing & Administration

Escondido, California

Fiscal Agent U.S. Bank National Association

Los Angeles, California

Underwriter’s Counsel Nossaman LLP

Irvine, California

Verifications Grant Thornton LLP

Minneapolis, Minnesota

TABLE OF CONTENTS

INTRODUCTION ...................................................... 1 The District ................................................................ 1 The School District .................................................... 2 Purpose ...................................................................... 2 Security and Sources of Payment .............................. 2 Property Values .......................................................... 3 Tax Matters ................................................................ 3 Special Risks .............................................................. 3 Professionals Involved in the Offering ...................... 4 Offering of the Bonds ................................................ 4 Information Concerning this Official Statement ........ 4

THE BONDS ............................................................... 5 Authority for Issuance ............................................... 5 General Provisions ..................................................... 5 No Additional Bonds ................................................. 6 Redemption ................................................................ 6 Debt Service Schedule ............................................... 9

THE FINANCING PLAN ........................................ 10 The Refunding Program........................................... 10 Estimated Uses of Funds.......................................... 10

SECURITY FOR THE BONDS .............................. 11 General ..................................................................... 11 Special Taxes ........................................................... 12 Proceeds of Foreclosure Sales ................................. 12 Special Tax Fund ..................................................... 13 Bond Fund ............................................................... 14 Reserve Fund ........................................................... 14 Special Taxes and the Teeter Plan ............................ 15

THE DISTRICT – IMPROVEMENT AREA NO. 1 ....................................................................... 15 General ..................................................................... 15 Assessed Values ....................................................... 16 Estimated Assessed Value-to-Lien Ratios ................ 18 Special Tax Rates ..................................................... 21 Lender-Owned Special Tax Obligations .................. 23 Effective Tax Rates .................................................. 24 Delinquencies .......................................................... 25 Projected Special Tax Levy ..................................... 26 Direct and Overlapping Debt ................................... 27

RISK FACTORS ....................................................... 28 General ..................................................................... 28 Risks of Real Estate Secured Investments

Generally ............................................................... 28 Risks Related to Current Real Estate Market

Conditions ............................................................. 28 Property Values ........................................................ 28 Other Possible Claims Upon the Value of Taxable

Property ................................................................. 30 Economic Uncertainty ............................................. 31 Disclosure to Future Purchasers............................... 31 Adjustable Rate and Non-Conventional

Mortgages ............................................................. 31 Hazardous Substances ............................................. 31

Levy and Collection of the Special Tax ................... 32 Exempt Property ...................................................... 33 Depletion of Reserve Fund ...................................... 33 Direct and Overlapping Indebtedness ...................... 34 Bankruptcy and Foreclosure Delays ........................ 34 Payment of Special Tax Not a Personal Obligation

of the Property Owners ......................................... 36 Factors Affecting Parcel Values and Aggregate

Value ..................................................................... 36 No Acceleration Provisions ..................................... 36 Limited Obligation of the District to Pay Debt

Service .................................................................. 36 District Formation ................................................... 37 Proposition 218 ........................................................ 37 Impact of FDIC Interests and Other Federal

Agencies ............................................................... 38 IRS Audits of Bond Issues ....................................... 40 Ballot Initiatives and Legislative Measures ............. 40 Limited Secondary Market ...................................... 40 Limitations on Remedies ......................................... 40

LEGAL MATTERS .................................................. 41 Legal Opinion .......................................................... 41 Tax Matters .............................................................. 41 Absence of Litigation .............................................. 43

CONCLUDING INFORMATION .......................... 43 No General Obligation of School District or

District .................................................................. 43 No Rating on the Bonds .......................................... 43 Underwriting ........................................................... 43 Verifications of Mathematical Computations .......... 43 The Financial Advisor ............................................. 44 Continuing Disclosure ............................................. 44 Execution ................................................................. 44

APPENDIX A - RATE AND METHOD OF APPORTIONMENT OF THE SPECIAL TAX

APPENDIX B - SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT

APPENDIX C - GENERAL INFORMATION ABOUT THE TEMECULA VALLEY UNIFIED SCHOOL DISTRICT AND THE CITY OF TEMECULA

APPENDIX D - FORM OF CONTINUING DISCLOSURE CERTIFICATE

APPENDIX E - PROPOSED FORM OF OPINION OF BOND COUNSEL

APPENDIX F - PARCEL LISTING

APPENDIX G - DTC AND THE BOOK-ENTRY-ONLY SYSTEM

TEMECULA VALLEY Unified School District

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1

OFFICIAL STATEMENT



SERIES 2012 SPECIAL TAX REFUNDING BONDS

This Official Statement, including the cover page and appendices hereto, is provided to furnish information regarding the sale of Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (Improvement Area No. 1) Series 2012 Special Tax Refunding Bonds (the “Bonds”) in the aggregate principal amount of $6,785,000.

INTRODUCTION This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement.

The District

The Mello-Roos Community Facilities Act of 1982, as amended, constituting Sections 53311, et seq. of the Government Code of the State (the “Act”), was enacted by the California Legislature to provide an alternative method of financing certain public facilities, improvements and services. The Act authorizes local governmental entities to establish community facilities districts as legally constituted governmental entities within defined boundaries, with the legislative body of the local applicable governmental entity acting on behalf of a community facilities district. Subject to approval by at least a two-thirds vote of the votes cast by qualified electors within a district or with respect to an improvement area within a district and compliance with the provisions of the Act, the legislative body may issue bonds for the community facilities district or with respect to an improvement area within a district established by it and may levy and collect a special tax within such district or improvement area to repay such bonds. In accordance with such provisions, qualified electors within Improvement Area No. 1 of the District were entitled to cast one vote for each acre, or portion of an acre, of land they owned within Improvement Area No. 1 of the District. The property owners within Improvement Area No. 1 of the District at the time of the election cast more than two-thirds of votes at the election held on October 1, 2001 in favor of the levy of the Special Taxes and the authorization of bonds in a principal amount not to exceed $8,500,000 with respect to Improvement Area No. 1 of the District (“Improvement Area No. 1”).

On October 1, 2002, the Board of Education (the “Board”) of the Temecula Valley Unified School District (the “School District”) established Community Facilities District No. 2002-1 (the “District”) by the adoption of Resolution No. 2002-03/16 and the Improvement Areas therein, including Improvement Area No. 1. See “THE DISTRICT - IMPROVEMENT AREA NO. 1” herein. Within the District, the Board established four separate improvement areas with a separate rate and method of apportionment of Special Tax and bond authorization for each improvement area (see “APPENDIX A - RATE AND METHOD OF APPORTIONMENT OF THE SPECIAL TAX” herein). The Bonds are secured by and payable from proceeds of special taxes levied in Improvement Area No. 1 only.

2

The District is primarily within the master planned community known as Rancho Bella Vista, and is located generally northeast of the junction of Highway 79 and Murrieta Hot Springs Road in an unincorporated area of Riverside County. The entire Community Facilities District No. 2002-1 consists of four separate improvement areas and was originally formed to be developed with 1,995 homes as follows: Improvement Area No. 1 - 581 homes; Improvement Area No. 2 - 686 homes; Improvement Area No. 3 - 464 homes; and Improvement Area No. 4 - 264 homes.

Improvement Area No. 1. Improvement Area No. 1 consists of approximately 248 gross acres located in an unincorporated area of Riverside County developed with 451 single-family homes as part of the Rancho Bella Vista master planned community and 130 single-family homes in a separate subdivision known as “Avondale.” See “THE DISTRICT - IMPROVEMENT AREA NO. 1” herein.

The School District

The School District was originally established as the Temecula Valley Union School District, providing educational services to grades K-8. In 1989, the School District took over administration of the two high schools within its boundaries previously served by the Elsinore Union High School District. The School District encompasses approximately 148 square miles in the City of Temecula, surrounding cities and unincorporated Riverside County. The School District includes 17 elementary schools, four charter schools, one K-8 home school, six middle schools, three comprehensive high schools, one continuation high school, one independent study high school and one adult study school. For Fiscal Year 2012/13, the School District’s estimated enrollment is 27,143, excluding charter school enrollment.

Purpose

The Bonds are being issued to current refund the District’s outstanding Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (Improvement Area No. 1) 2003 Special Tax Bonds (the “2003 Bonds”), to fund a reserve fund for the Bonds and to pay the costs of issuance of the Bonds. See “THE FINANCING PLAN” herein.

Security and Sources of Payment

The Bonds are issued pursuant to the Act, the Resolution of Issuance, as defined herein, and a Fiscal Agent Agreement, dated as of August 1, 2012 (the “Fiscal Agent Agreement”), by and between the District and U.S. Bank National Association, Los Angeles, California as fiscal agent (the “Fiscal Agent”). See “THE BONDS - Authority for Issuance” herein.

The Bonds are secured by and payable from a first pledge of all the Net Taxes of Improvement Area No. 1 received by the District (the “Net Taxes”). Net Taxes are defined as all special taxes (“Special Taxes”) collected within Improvement Area No. 1 of the District and net proceeds from the sale of property pursuant to foreclosure actions resulting from the delinquency of such Special Taxes less the Administrative Expense Requirement. See “SECURITY FOR THE BONDS - General” herein. The Bonds are also secured by amounts on deposit in the Reserve Fund as described in “SECURITY FOR THE BONDS - Reserve Fund.”

The District has covenanted in the Fiscal Agent Agreement, so long as any Bonds are outstanding, to annually levy the Special Taxes against all land within Improvement Area No. 1 of the District that is taxable under the Act and pursuant to the rate and method of apportionment of Special Taxes (the “Rate and Method”) (see “APPENDIX A - RATE AND METHOD OF APPORTIONMENT OF THE SPECIAL TAX”) in accordance with the proceedings for the authorization and issuance of the Bonds (“Taxable Property”) in amounts which will be sufficient to pay interest on and principal of the Bonds as such becomes due and payable, to replenish the Reserve Fund as necessary, to pay Administrative Expenses, subject to any maximum on the amount of Special Taxes that may be levied in any year, and to make provision for the collection of the Special Taxes. See “SECURITY FOR THE BONDS - Special Taxes” herein.

3

The District has covenanted to cause foreclosure proceedings to be commenced and diligently pursued against certain parcels with delinquent installments of Special Taxes. For a more detailed description of the foreclosure covenant see “SECURITY FOR THE BONDS - Proceeds of Foreclosure Sales.”

THE PRINCIPAL OF AND REDEMPTION PREMIUM, IF ANY, AND INTEREST ON THE BONDS ARE NOT AN INDEBTEDNESS OF THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS, AND NEITHER THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN), THE SCHOOL DISTRICT, THE STATE, NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE ON THE BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN), THE SCHOOL DISTRICT, OR THE STATE, OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. OTHER THAN THE NET TAXES OF IMPROVEMENT AREA NO. 1, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT A GENERAL OBLIGATION OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT, PAYABLE SOLELY FROM THE NET TAXES OF IMPROVEMENT AREA NO. 1 AND AMOUNTS PLEDGED UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED HEREIN.

Pursuant to the Act, all lands owned by a public entity within Improvement Area No. 1 are exempt from the levy of the Special Tax, unless the public entity acquires the property after recordation of the Notice of Special Tax Lien, in which case the public entity will be obligated to pay the Special Tax, subject to certain limitations. The Rate and Method exempts from the Special Tax all property owned by the State, the federal government and local governments, as well as certain other properties, subject to certain limitations. See “THE DISTRICT - IMPROVEMENT AREA NO. 1 - Special Tax Rates” and “RISK FACTORS - Exempt Property.”

Property Values

The School District has relied on the assessed valuations of the County Assessor used for the purposes of general taxes for the valuations for all of the property within Improvement Area No. 1 of the District presented in this Official Statement. See “RISK FACTORS” and “THE DISTRICT - IMPROVEMENT AREA NO. 1 - Assessed Values.”

Tax Matters

In the opinion of Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel to the District, subject, however, to certain qualifications described herein, under existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (“Code”) and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum taxes imposed on individuals and corporations, although Bond Counsel observes that such interest is included as an adjustment in the calculation of federal corporate alternative minimum taxable income and may therefore affect a corporation’s alternative minimum tax liabilities. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “LEGAL MATTERS - Tax Matters” and “APPENDIX E - PROPOSED FORM OF OPINION OF BOND COUNSEL” herein.

Special Risks

See the section of this Official Statement entitled “RISK FACTORS” for a discussion of special factors which should be considered, in addition to the other materials set forth herein, in considering the investment quality of the Bonds.

4

Professionals Involved in the Offering

U.S. Bank National Association, Los Angeles, California, will serve as the paying agent, registrar, authentication and transfer agent for the Bonds and perform the functions required of it under the Fiscal Agent Agreement for the payment of the principal of and interest on the Bonds. U.S. Bank National Association will also serve as Escrow Agent with respect to the 2003 Bonds. Bowie, Arneson, Wiles & Giannone, Newport Beach, California, will act as Bond Counsel and McFarlin & Anderson LLP, Laguna Hills, California will act as Disclosure Counsel. Harrell & Company Advisors, LLC, Orange, California, Financial Advisor, advised the District as to the financial structure and certain other financial matters relating to the Bonds. Certain matters will be passed upon for the District by Bowie, Arneson, Wiles & Giannone, Newport Beach, California and for the Underwriter by its Counsel, Nossaman LLP, Irvine, California. Special District Financing & Administration, Escondido, California, acts as Special Tax Consultant to the District. Grant Thornton LLP, Minneapolis, Minnesota will verify the mathematical accuracy of certain computations. Payment of the fees of Bond Counsel, Disclosure Counsel, Underwriter’s Counsel and the Financial Advisor is contingent on the sale and delivery of the Bonds.

Offering of the Bonds

The Bonds are offered, when, as and if issued, subject to the approval as to their legality by Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel. It is anticipated that the Bonds, in book-entry form, will be available for delivery on or about August 14, 2012, through the facilities of The Depository Trust Company.

Information Concerning this Official Statement

This Official Statement speaks only as of its date. The information set forth herein has been obtained by the District, with the assistance of Harrell & Company Advisors, LLC (the “Financial Advisor”), from sources which are believed to be reliable and such information is believed to be accurate and complete, but such information is not guaranteed as to accuracy or completeness, nor has it been independently verified and is not to be construed as a representation by the Financial Advisor, Bond Counsel, Underwriter’s Counsel or Disclosure Counsel. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended as such and are not to be construed as representations of fact. The information and expressions of opinion herein are subject to change without notice and the delivery of this Official Statement shall not, under any circumstances, create any implication that there has been no change in the information or opinions set forth herein or in the affairs of the District or the School District since the date hereof.

Availability of Legal Documents. The summaries and references contained herein with respect to the Fiscal Agent Agreement, the Bonds and other statutes or documents do not purport to be comprehensive or definitive and are qualified by reference to each such document or statute, and references to the Bonds are qualified in their entirety by reference to the form thereof included in the Fiscal Agent Agreement. Capitalized terms used herein and not defined shall have the meaning set forth in the Fiscal Agent Agreement. Copies of the documents described herein may be obtained after delivery of the Bonds from the District at Temecula Valley Unified School District, 31350 Rancho Vista Road, Temecula, California 92592, Attention: Assistant Superintendent of Business Support Services, telephone (951) 506-7940 upon request and payment of a charge for copying, mailing and handling.

5

THE BONDS Authority for Issuance

The Bonds are issued pursuant to the Act, the Fiscal Agent Agreement and Resolution No. 2012-13/1 adopted on July 17, 2012 by the Board, acting as the legislative body of the District (the “Resolution of Issuance”).

The District and Improvement Area No. 1 were established and bonded indebtedness was authorized pursuant to provisions of the Act. In accordance with such provisions, qualified electors within Improvement Area No. 1 were entitled to cast one vote for each acre, or portion of an acre, of land they owned within Improvement Area No. 1. The property owners within the Improvement Area No. 1 of the District at the time of the election cast all 432 votes at the election held on October 1, 2002 in favor of the levy of the Special Taxes and the authorization of bonds in a maximum amount of $8,500,000 with respect to Improvement Area No. 1.

General Provisions

The Bonds will be originally dated as of their date of delivery, and will bear interest at the rates per annum set forth on the inside front cover page hereof, payable semiannually on each March 1 and September 1, commencing on March 1, 2013 (each, an “Interest Payment Date”), and will mature in the amounts and on the dates set forth on the inside front cover page hereof. The Bonds will be issued in fully registered form without coupons in denominations of $5,000 and any integral multiple thereof. Interest on the Bonds will be calculated on the basis of a 360-day year comprised of twelve 30-day months.

The Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and any premiums due upon the redemption thereof shall be payable upon presentation thereof at the Principal Corporate Trust Office of the Fiscal Agent.

Interest on any Bond shall be payable from the Interest Payment Date next preceding the date of authentication, 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 (defined as the 15th day of the calendar month preceding an Interest Payment Date whether or not such day is a Business Day) but prior to the immediately succeeding Interest Payment Date, in which event interest will be payable from such Interest Payment Date, or (iii) the date of authentication is prior to the close of business on the first Record Date, in which event interest will be payable from the Dated Date; provided, however, that if at the time of authentication of a Bond, interest is in default, interest on that Bond shall be payable from the last date on which the interest has been paid or made available for payment, or if no interest has been paid or made available for payment, interest shall be payable from the Dated Date.

Subject to the book-entry-only system described below, interest on any Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Fiscal Agent mailed on the Interest Payment Date to such Owner by first class mail at his or her address as it appears on the Bond Register as of the Record Date; provided that, in the case of an Owner of $1,000,000 or more in aggregate principal amount of the Bonds, upon the Fiscal Agent’s receipt of written request of such Owner prior to the Record Date accompanied by wire transfer instructions, such interest shall be paid on the Interest Payment Date in immediately available funds by wire transfer to an account in the United States.

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Book-Entry-Only System. 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. Interest on and principal of the Bonds will be payable when due by wire of the Fiscal Agent to DTC which will in turn remit such interest and principal to DTC Participants (as defined herein), which will in turn remit such interest and principal to Beneficial Owners (as defined herein) of the Bonds (see “APPENDIX G - DTC AND THE BOOK-ENTRY-ONLY SYSTEM” herein). As long as DTC is the registered owner of the Bonds and DTC’s book-entry method is used for the Bonds, the Fiscal Agent will send any notices to Bondowners only to DTC.

Discontinuance of Book-Entry-Only System. DTC may discontinue providing its services as securities 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 securities depository is not obtained, Bonds are required to be printed and delivered as described in the Fiscal Agent Agreement. The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, the Bonds will be printed and delivered as described in the Fiscal Agent Agreement and described above under the caption “General Provisions.”

Transfer or Exchange of Bonds. Subject to the book-entry-only system, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Corporate Trust Office of the Fiscal Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Fiscal Agent and duly executed by the Owner or his or her duly authorized attorney. Bonds may be exchanged at the Principal Corporate Trust Office of the Fiscal Agent for a like aggregate principal amount and maturity of Bonds of other authorized denominations. The Fiscal Agent may charge the Owner any tax or other governmental charge required with respect to such transfer or exchange. The cost of printing the Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer or exchange thereof shall be paid by the District. Whenever any Bonds shall be surrendered for registration of transfer or exchange, the District shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond, for a like aggregate principal amount and maturity; provided, that the Fiscal Agent shall not be required to register transfers or make exchanges of (i) Bonds for a period of 15 days next preceding the date established by the Fiscal Agent for selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption.

No Additional Bonds

The District has covenanted in the Fiscal Agent Agreement to not issue any additional bonds, notes or other similar evidences of indebtedness payable in whole or in part out of Net Taxes of Improvement Area No. 1 of the District except (i) bonds issued to fully or partially refund the Outstanding Bonds, or (ii) subordinate bonds, notes or other evidences of indebtedness.

Redemption

Optional Redemption. The Bonds may be redeemed prior to maturity at the option of the District on any date on or after September 1, 2022, in whole, or in part from such maturities as are selected by the District in writing, and by lot within a maturity, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date of redemption, without premium.

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Special Mandatory Redemption from Prepaid Special Taxes. The Bonds are subject to special mandatory redemption prior to their stated maturities, on any Interest Payment Date for which timely notice can be given, in whole or in part from such maturities as are selected by the District in writing, and by lot within a maturity, in integral multiples of $5,000, from monies on deposit in the Prepayment Account of the Special Tax Fund that are transferred to the Mandatory Redemption Account, at the redemption prices set forth below, which are expressed as a percentage of the principal amount thereof, together with accrued interest to the date fixed for redemption, as follows:

Redemption Dates Redemption Prices Any Interest Payment Date through and including March 1, 2020 103% September 1, 2020 and March 1, 2021 102% September 1, 2021 and March 1, 2022 101% September 1, 2022 and any Interest Payment Date thereafter 100%

Prepaid Special Taxes collected by the District within Improvement Area No. 1 (net of any costs of collection) (“Prepaid Special Taxes”) shall be transferred, no later than 10 days after receipt thereof, to the Fiscal Agent and the District shall direct the Fiscal Agent to deposit the Prepaid Special Taxes in the Prepayment Account of the Special Tax Fund. The Prepaid Special Taxes shall be held in trust in the Prepayment Account for the benefit of the Bonds and shall be transferred by the Fiscal Agent to the Mandatory Redemption Account of the Redemption Fund to call Bonds on the next Interest Payment Date for which timely notice can be given.

Mandatory Sinking Fund Redemption. The Bonds maturing September 1, 2033 (the “Term Bonds”) are subject to mandatory redemption in part commencing September 1, 2031 and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from mandatory sinking payments, as follows:

SCHEDULE OF MANDATORY SINKING PAYMENTS TERM BONDS MATURING SEPTEMBER 1, 2033

September 1 Year

Principal Amount

2031 $425,000

2032 450,000

2033 (maturity) 475,000

Selection of Bonds for Redemption. If less than all of the Outstanding Bonds are to be redeemed, the District shall select Bonds to be redeemed proportionally among maturities so as to maintain approximately level debt service as directed in writing to the Fiscal Agent. If less than all of the Outstanding Bonds are to be redeemed the portion of any such Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or a multiple thereof, and, in selecting portions of such Bonds for redemption, the Fiscal Agent shall treat such Bond as representing that number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000.

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Purchase In Lieu of Redemption. In lieu of, or partially in lieu of, any redemption, monies deposited in the Redemption Fund may be used to purchase the Outstanding Bonds that were to be redeemed with such funds. Purchases of Outstanding Bonds may be made by the District prior to the selection of Bonds for redemption by the Fiscal Agent, 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, and, in the case of funds in the Optional Redemption Account or the Mandatory Redemption Account, and the applicable premium to be paid in connection with the proposed redemption.

Notice of Redemption. When the Fiscal Agent shall receive notice from the District to redeem Bonds, or when the Fiscal Agent is required to redeem Bonds, the Fiscal Agent shall give notice, in the name of the District of the redemption of such Bonds. At least 30 days but no more than 60 days prior to the redemption date, the Fiscal Agent shall mail by first class mail a copy of such notice, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond of notice of such redemption shall not be a condition precedent thereto, and neither failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the redemption of such Bond, or the cessation of interest on the redemption date. A certificate by the Fiscal Agent that notice of such redemption has been given shall be conclusive as against all parties, and it shall not be open to any Owner to show that he or she failed to receive notice of such redemption. Such notice shall state that, on the date fixed for redemption, there shall become due and payable on each 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.

In addition, the notice of redemption shall be sent at least 30 days before the redemption date to the Securities Depository and, upon written request of the District, to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds and to the National Information Service or at the request of the District, any other information services that disseminate notice of redemption of obligations such as the Bonds.

Any redemption notice may specify that redemption of the Bonds designated for redemption on the specified date will be subject to the receipt by the District and/or the Fiscal Agent, as applicable, of monies sufficient to cause such redemption, and neither the District nor the Fiscal Agent will have any liability to the Owners of any Bonds, or any other party, as a result of the District’s failure to redeem the Bonds designated for redemption as a result of insufficient monies therefor.

Any notice of redemption may be cancelled and annulled if for any reason funds are not, or will not, be available on the date fixed for redemption for the payment in full of the Bonds then called for redemption. Such cancellation and annulment is not a default under the Fiscal Agent Agreement. The District will not have any liability to the Owners, or any other party, as a result of the District’s failure to redeem the Bonds designated for redemption as a result of insufficient monies therefore.

Additionally, the District may rescind any optional redemption of the Bonds, and notice thereof, for any reason on any date prior to the date fixed for such redemption by causing written notice of the rescission to be given to the Owners of the Bonds so called for redemption. Notice of rescission of redemption shall be given in the same manner in which notice of redemption was originally given. The actual receipt by the Owner of any Bond of notice of such rescission shall not be a condition precedent to rescission, and failure to receive such notice or any defect in such notice shall not affect the validity of the rescission. Neither the District nor the Fiscal Agent will have any liability to the Owners of any Bonds, or any other party, as a result of the District’s decision to rescind redemption of any Bonds pursuant to the provisions of this subsection.

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Effect of Redemption. Notice of redemption having been duly given 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, from and after the redemption date, the Bonds or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds or portions thereof shall cease to bear further interest and no Owner of any of the Bonds or portions thereof so designated for redemption shall be entitled to any of the benefits of the 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.

Debt Service Schedule

The following table presents the annual debt service on the Bonds, assuming that there are no optional or special mandatory redemptions.

Year Total

Ending Debt

September 1 Principal Interest Service

2013 $ 220,000.00 $ 274,987.47 $ 494,987.47

2014 240,000.00 260,387.50 500,387.50

2015 245,000.00 255,587.50 500,587.50

2016 245,000.00 250,687.50 495,687.50

2017 255,000.00 243,337.50 498,337.50

2018 260,000.00 235,687.50 495,687.50

2019 270,000.00 227,887.50 497,887.50

2020 275,000.00 219,450.00 494,450.00

2021 285,000.00 210,168.76 495,168.76

2022 295,000.00 200,193.76 495,193.76

2023 310,000.00 189,131.26 499,131.26

2024 320,000.00 176,731.26 496,731.26

2025 335,000.00 163,931.26 498,931.26

2026 345,000.00 150,531.26 495,531.26

2027 360,000.00 136,300.00 496,300.00

2028 375,000.00 121,000.00 496,000.00

2029 390,000.00 105,062.50 495,062.50

2030 410,000.00 88,000.00 498,000.00

2031 425,000.00 67,500.00 492,500.00

2032 450,000.00 46,250.00 496,250.00

2033 475,000.00 23,750.00 498,750.00

Total $6,785,000.00 $3,646,562.53 $10,431,562.53

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THE FINANCING PLAN The Refunding Program

The District issued the 2003 Bonds in the principal amount of $7,615,000 in order to finance certain school and other public facilities of the School District of benefit to the District. On the Delivery Date of the Bonds, $6,620,000 of the 2003 Bonds remain outstanding.

On the Delivery Date, a portion of the proceeds of the Bonds, together with certain other funds on deposit with the fiscal agent for the 2003 Bonds (the “2003 Fiscal Agent”), will be deposited in trust with U.S. Bank National Association, acting as the Escrow Agent. Pursuant to an escrow agreement between the District and the Escrow Agent (the “Escrow Agreement”), the District will deposit proceeds of the Bonds with the Escrow Agent in an amount sufficient, together with other funds deposited therewith, to pay the principal and interest on the 2003 Bonds due on September 1, 2012 and the redemption price of the 2003 Bonds pursuant to an optional redemption of the 2003 Bonds on September 1, 2012. All of the outstanding 2003 Bonds will be paid and prepaid in full on September 1, 2012. The lien of the 2003 Bonds, including, without limitation, the pledge of the Net Taxes to repay the 2003 Bonds, will be discharged, terminated and of no further force and effect upon the deposit with the Escrow Agent of the amounts required pursuant to the Escrow Agreement (see “CONCLUDING INFORMATION - Verifications of Mathematical Computations.”)

Estimated Uses of Funds

Under the provisions of the Fiscal Agent Agreement, the Fiscal Agent will receive the proceeds from the sale of the Bonds and other District funds and will apply them as follows:

Sources: Principal Amount of Bonds $6,785,000.00 Net Original Issue Discount (12,884.20) Funds on Deposit with the Fiscal Agent for the 2003 Bonds 906,139.33 Total Sources $7,678,255.13

Uses: Escrow Fund $6,946,710.63 Costs of Issuance Fund (1) 139,359.50 Reserve Fund (2) 500,587.50 Underwriter’s Discount 91,597.50 Total Uses $7,678,255.13 _________________________________________

(1) Expenses include fees of Bond Counsel, the Financial Advisor, Disclosure Counsel, the Fiscal Agent, the Escrow Agent, and the Verification Agent, costs of printing the Official Statement, and other costs of delivery of the Bonds.

(2) Equal to the initial Reserve Requirement with respect to the Bonds.

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SECURITY FOR THE BONDS General

The Bonds are secured by and payable from a first pledge of all of the Net Taxes of Improvement Area No. 1 of the District, subject to the provisions of the Fiscal Agent Agreement. Net Taxes of Improvement Area No. 1 are defined as Gross Taxes (defined as all Special Taxes collected within Improvement Area No. 1 of the District and net proceeds from the sale of property pursuant to foreclosure actions resulting from the delinquency of such Special Taxes) less the Administrative Expense Requirement. The Administrative Expense Requirement means an amount up to $25,000 annually for the payment of Administrative Expenses. Administrative Expenses include administrative costs with respect to the calculation and collection of the Special Taxes and any other costs related to the Bonds, costs and legal expenses of foreclosure actions to the extent not recovered pursuant to statutory authorization or costs otherwise incurred by the District with respect to Improvement Area No. 1 in order to carry out the authorized purposes of the Bonds. Subject to the limitations contained in the Rate and Method, the District has covenanted in the Fiscal Agent Agreement to annually levy the Special Taxes in accordance with the Rate and Method described below, which amount, if timely paid, is sufficient to pay the principal of and interest on the Bonds, to replenish the Reserve Fund, if necessary, to fund Administrative Expenses and to pay the cost of additional school facilities. The Bonds are further secured by a first pledge on all monies deposited in the Bond Fund, the Redemption Fund and the Reserve Fund, and, until disbursed as provided in the Fiscal Agent Agreement, the Special Tax Fund. The Net Taxes of Improvement Area No. 1 and all monies deposited into said funds (until disbursed as provided in the Fiscal Agent Agreement) are pledged to the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or until monies or Federal Securities (as defined in the Fiscal Agent Agreement) have been set aside irrevocably for that purpose.

Notwithstanding anything to the contrary in the Fiscal Agent Agreement, Net Taxes deposited in the Administrative Expense Fund and the Rebate Fund shall no longer be considered pledged to the Bonds and the Administrative Expense Fund and the Rebate Fund established under the Fiscal Agent Agreement shall not be construed as trust funds held for the benefit of the Owners of the Bonds. The facilities acquired or constructed with the proceeds of the 2003 Bonds are not in any way pledged to pay the debt service on the Bonds, and any proceeds of condemnation, destruction or other disposition of such facilities are not pledged to pay the debt service on the Bonds and are free and clear of any lien or obligation imposed under the Fiscal Agent Agreement.

THE PRINCIPAL OF AND REDEMPTION PREMIUM, IF ANY, AND INTEREST ON THE BONDS ARE NOT AN INDEBTEDNESS OF THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS, AND NEITHER THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN), THE SCHOOL DISTRICT, THE STATE, NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE ON THE BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN), THE SCHOOL DISTRICT, OR THE STATE, OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. OTHER THAN THE NET TAXES OF IMPROVEMENT AREA NO. 1 AS DEFINED HEREIN, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT A GENERAL OBLIGATION OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT, PAYABLE SOLELY FROM THE NET TAXES OF IMPROVEMENT AREA NO. 1 AND AMOUNTS PLEDGED UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED HEREIN.

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Special Taxes

The Special Taxes are levied and collected according to the Rate and Method set forth in “APPENDIX A - RATE AND METHOD OF APPORTIONMENT OF THE SPECIAL TAX.” The Special Taxes are to be levied by the Board acting as the legislative body of the District each Fiscal Year on all Taxable Property within Improvement Area No. 1 of the District in accordance with the Rate and Method.

The Special Taxes are required to be collected by the County of Riverside Tax Collector in the same manner and at the same time as regular ad valorem property taxes are collected by the County Tax Collector. The Fiscal Agent Agreement requires the Special Taxes to be transferred by the District to the Fiscal Agent for deposit in the Special Tax Fund. However, the District has instructed the County of Riverside to remit the Special Taxes directly to the Fiscal Agent.

Although the Special Taxes, when levied, will constitute a lien on parcels subject to taxation, it does not constitute a personal indebtedness of the owners of property. There is no assurance that the owners of real property will be financially able to pay the annual Special Tax or that they will pay such tax even if financially able to do so. See “RISK FACTORS” herein.

Proceeds of Foreclosure Sales

Pursuant to the Act, in the event of any delinquency in the payment of the Special Tax, the District may order the institution of a superior court action to foreclose the lien therefore within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale. Such judicial foreclosure action is not mandatory and will be pursued only as provided in the following paragraphs.

The District has covenanted for the benefit of the owners of the Bonds that, not later than August 1 of each Fiscal Year, the District will compare the amount of Special Taxes theretofore levied in Improvement Area No. 1 of the District to the amount of Special Taxes theretofore collected by the County as of such date, and:

A. Individual Delinquencies. If the District determines that (i) any single parcel within Improvement Area No. 1 is subject to a Special Tax delinquency in the aggregate amount of $3,000 or more, or (ii) any owner owns one or more parcels subject to a Special Tax delinquency in an aggregate amount of $5,000 or more, then the District will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings shall be commenced by the District within 120 days of such determination, to the extent permissible under applicable law and shall thereafter diligently pursue such proceedings.

B. Aggregate Delinquencies. If the District determines that the total amount of delinquent Special Tax for the prior Fiscal Year for Improvement Area No. 1 exceeds 5% of the total Special Taxes due and payable for the prior Fiscal Year, the District will notify or cause to be notified all property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency) within 45 days of such determination, and (if the delinquency remains uncured) shall commence foreclosure proceedings within 120 days of such determination against each parcel of land in Improvement Area No. 1 with a Special Tax delinquency, to the extent permissible under applicable law and shall thereafter diligently pursue such proceedings.

The net proceeds received following a judicial foreclosure sale of land within Improvement Area No. 1 of the District resulting from a property owner’s failure to pay the Special Taxes when due are included within the Net Taxes pledged to the payment of principal of and interest on the Bonds under the Fiscal Agent Agreement.

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The District is expressly authorized to include costs and attorneys’ fees related to foreclosure of delinquent Special Taxes as Administrative Expenses pursuant to the Fiscal Agent Agreement.

It should be noted that any foreclosure proceedings commenced as described above, could be stayed by the commencement of bankruptcy proceedings by or against the owner of the property being foreclosed. See “RISK FACTORS - Bankruptcy and Foreclosure Delays.”

No assurances can be given that a judicial foreclosure action, once commenced, will be completed or that it will be completed in a timely manner. See “RISK FACTORS - Bankruptcy and Foreclosure Delays.” If a judgment of foreclosure and order of sale is obtained, the judgment creditor (the District) must cause a Notice of Levy to be issued. Under current law, a judgment debtor (property owner) has 120 days (or in some cases a shorter period) from the date of service of the Notice of Levy and 20 days from the subsequent notice of sale in which to redeem the property to be sold. If a judgment debtor fails to so redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such action, a foreclosure sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made. The constitutionality of the current law, which repeals the former one-year redemption period, has not been tested; and there can be no assurance that, if tested, such law will be upheld. Any parcel subject to foreclosure sale must be sold at the minimum bid price unless a lesser minimum bid price is authorized by the Owners of 75% of the principal amount of Bonds Outstanding.

No assurances can be given that the real property subject to sale or foreclosure will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the School District or the District to purchase or otherwise acquire any lot or parcel of property offered for sale or subject to foreclosure if there is no other purchaser at such sale. The Act does specify that the Special Taxes will have the same lien priority in the case of delinquency as for ad valorem property taxes and special assessments.

If the Reserve Fund is depleted and delinquencies in the payment of Special Taxes exist, there could be a default or delay in payments to the Owners pending prosecution of foreclosure proceedings and receipt by the District of foreclosure sale proceeds, if any.

Special Tax Fund

There is established pursuant to the Fiscal Agent Agreement, as a separate account to be held by the Fiscal Agent, a Special Tax Fund. The District is required to transfer to the Fiscal Agent for deposit into the Special Tax Fund (exclusive of Prepaid Special Taxes received which shall be deposited into the Prepayment Account of the Special Tax Fund), no later than 10 days after receipt thereof, all Special Taxes and other amounts constituting Gross Taxes collected by the District within Improvement Area No. 1. Monies in the Special Tax Fund will be held by the Fiscal Agent for the benefit of the Owners of the Bonds and, pending any disbursement, will be subject to a lien in favor of the Owners of the Bonds. The District has instructed the County to remit the Special Taxes directly to the Fiscal Agent.

The Fiscal Agent will withdraw from the Special Tax Fund and transfer: (i) to the Administrative Expense Fund, an amount up to a maximum of $25,000 per year (the “Administrative Expense Requirement”) for Administrative Expenses, (ii) to the Interest Account of the Bond Fund an amount such that the balance in the Interest Account, one Business Day prior to each Interest Payment Date shall equal the installment of interest due on the Bonds on said Interest Payment Date, (iii) to the Principal Account of the Bond Fund an amount up to the amount needed to make the principal payment due on the Bonds during the current Bond Year, (iv) to the Reserve Fund the amount, if any, necessary to replenish the Reserve Fund to the Reserve Requirement, (v) to the extent there are additional Administrative Expenses of the District, to the Administrative Expense Fund in the amount set forth by the District in writing, and (vi) at the end of the Bond Year, any remaining funds in the Special Tax Fund which are not required to cure a delinquency in the payment of principal and interest on the Bonds, to restore the Reserve Fund to

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the Reserve Requirement, or to pay current or pending Administrative Expenses, to the District for any lawful purpose under the District proceedings free and clear of the lien of the Fiscal Agent Agreement. See “APPENDIX B - SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT.”

Bond Fund

There is established pursuant to the Fiscal Agent Agreement, as a separate fund to be held by the Fiscal Agent, the Bond Fund (in which there is established an Interest Account and a Principal Account). The Bond Fund is used to disperse payments of principal of and interest on the Bonds to the Owners on each respective Interest Payment Date. Monies in the Interest Account are allocated to the payment of interest due on the Bonds on each Interest Payment Date, and monies in the Principal Account are allocated to the repayment of principal on the Bonds on the corresponding Interest Payment Date. Upon final maturity of the Bonds and the payment of all principal of and interest on the Bonds, any monies remaining in the Bond Fund shall be transferred to the Special Tax Fund.

Reserve Fund

In order to further secure the payment of principal of and interest on the Bonds, the Fiscal Agent Agreement provides that, from the proceeds of the sale of the Bonds, an amount will be deposited into the Reserve Fund equal to the Reserve Requirement. The Reserve Requirement is defined in the Fiscal Agent Agreement to mean, as of the date of any calculation, an amount equal to the least of (a) 10% of the original principal amount of the Bonds, (b) Maximum Annual Debt Service, or (c) 125% of average Annual Debt Service. The Reserve Requirement is initially equal to $500,587.50.

Except as provided in the next paragraph with respect to certain investment earnings, monies in the Reserve Fund shall be used solely for the purpose of (i) making transfers to the Bond Fund or the Redemption Fund to pay the principal of, including Mandatory Sinking Payments, and interest on Bonds when due to the extent that monies in the Interest Account and the Principal Account of the Bond Fund or monies in the Sinking Fund Redemption Account of the Redemption Fund are insufficient therefore, (ii) making any required transfer to the Rebate Fund upon written direction from the District, (iii) making any transfers to the Bond Fund or Mandatory Redemption Account of the Redemption Fund in connection with prepayments of the Special Taxes, (iv) paying the principal and interest due on the Bonds in the final Bond Year, and (v) application to the defeasance of the Bonds. If the amounts in the Interest Account or the Principal Account of the Bond Fund and the Sinking Fund Redemption Account of the Redemption Fund are insufficient to pay the principal of, including Mandatory Sinking Payments, or interest on the Bonds when due, the Fiscal Agent shall, one Business Day prior to an Interest Payment Date, withdraw from the Reserve Fund for deposit in the Interest Account and the Principal Account of the Bond Fund, or the Sinking Fund Redemption Account of the Redemption Fund, monies necessary for such purpose. Following any transfer to the Interest Account or the Principal Account of the Bond Fund, or the Sinking Fund Redemption Account of the Redemption Fund, the Fiscal Agent shall notify the District of the amount needed to replenish the Reserve Fund to the Reserve Requirement and the District shall include such amount as is required at that time to correct such deficiency in the next Special Tax levy to the extent of the permitted maximum Special Tax rates.

Monies in the Reserve Fund in excess of the Reserve Requirement (exclusive of Excess Investment Earnings) shall be withdrawn on each March 1 and transferred to the Interest Account of the Bond Fund, and any remaining excess shall be transferred to the Principal Account of the Bond Fund, or to the Sinking Fund Redemption Account of the Redemption Fund to the extent required to make any principal payment or Mandatory Sinking Payments on the next following September 1. The Fiscal Agent shall transfer Excess Investment Earnings from Reserve Fund earnings upon written direction of the District.

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Special Taxes and the Teeter Plan

The County has adopted a Teeter Plan as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, under which a tax distribution procedure is implemented and secured roll taxes are distributed to taxing agencies within the County on the basis of the tax levy, rather than on the basis of actual tax collections. By policy, the County does not include assessments, reassessments and special taxes of the District in its Teeter program.

THE DISTRICT – IMPROVEMENT AREA NO. 1 The information set forth herein has been included because it is considered relevant to an informed evaluation of Improvement Area No. 1 of the District and the security for the Bonds.

The owners of property within Improvement Area No. 1 of the District will not be personally liable for payments of the Special Taxes to be applied to pay the principal of and interest on the Bonds. Accordingly, no property owner’s financial statements have been included in this Official Statement.

Investors must recognize the uncertainties with respect to the assessed values of the parcels within Improvement Area No. 1. The Bonds are secured by certain proceeds of the Special Taxes levied on such parcels and are not a personal indebtedness of the property owners. See “RISK FACTORS” herein.

General

The District is primarily within the master planned community known as Rancho Bella Vista, and is located generally northeast of the junction of Highway 79 and Murrieta Hot Springs Road in an unincorporated area of Riverside County. The entire Community Facilities District No. 2002-1 consists of four separate improvement areas and was originally formed to be developed with 1,995 homes. The development as described herein relates only to Improvement Area No. 1 and Bonds are secured and payable only from certain proceeds of the Special Taxes levied in Improvement Area No. 1.

There are 581 homes developed in Improvement Area No. 1. Property in Improvement Area No. 1 of the District is located in two non-contiguous areas. The first area has been developed as “Monterra Ranch,” “Miranda Ranch” and “Belcerro Ranch” by Richmond American Homes of California, Inc. and as “San Lucas” and “San Marino” by Centex Homes. This area includes 451 homes within the Rancho Bella Vista development. The second area has been developed by Richmond American as “Avondale” with 130 homes. All homes were built between 2002 and 2003, with the exception of the Avondale neighborhood, which was built between 2004 and 2005. According to the ownership data reported by the County as of July 1, 2012, all units were owner-occupied as of July 1, 2012, except for 12 units shown as being owned by lenders. See “Lender-Owned Special Tax Obligations” and “APPENDIX F - PARCEL LISTING” herein for more detailed ownership information.

Directly adjacent to the Rancho Bella Vista development, the School District constructed a new elementary school (Alamos Elementary School) and a new middle school (Bella Vista Middle School) in 2004.

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The home sizes and number of homes in each of the neighborhoods in Improvement Area No. 1 are shown in Table No. 1.

TABLE NO. 1 COMMUNITY FACILITIES DISTRICT NO. 2002-1


Neighborhood # of Units Square Footages

Monterra Ranch 68 2,761 - 3,468

Miranda Ranch 76 1,956 - 2,330

Belcerro Ranch 85 2,538 - 3,213

San Lucas 112 1,752 - 2,180

San Marino 110 2,188 - 2,706

Avondale 130 2,811 - 3,468

581

Source: Special District Financing & Administration.

The number of building permits issued by year are shown in Table No. 2.



BUILDING PERMITS ISSUED BY YEAR

# of

Building Permit Date Units

March 2, 2001 - March 1, 2002 3

March 2, 2002 - March 1, 2003 403

March 2, 2003 - March 1, 2004 45

March 2, 2004 - March 1, 2005 76

March 2, 2005 - March 1, 2006 53

March 2, 2006 - March 1, 2007 1

Total 581


Assessed Values

For all property in Improvement Area No. 1 of the District, the County-determined assessed valuation is provided as an estimate for purposes of valuation. The County-determined assessed valuation is derived from the Fiscal Year 2012/13 County Assessor’s assessed valuation of land and improvements. The County’s assessed valuation of land and improvements is based on the base year assessed value (which may or may not be reflective of the fair market value of the land and improvements) increased by a

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maximum of 2% a year each year thereafter, as allowed under Article XIIIA of the Constitution of the State of California. Values may also be decreased if inflation is negative (for example, the inflation factor for Fiscal Year 2010/11 was -0.237%). See “RISK FACTORS - Property Values - Article XIIIA” and “- Reduction in Inflationary Rate.” Therefore, the assessor’s value typically does not accurately reflect the fair market value of the land and improvements which may be higher or lower than the County Assessor’s value. Further, due to timing, the Assessor’s value may not reflect the most recent sale price of a parcel. The fair market value can only be established through the sale of the property or an appraisal of the property within Improvement Area No. 1 of the District. The School District has not undertaken to obtain an appraisal of the property within Improvement Area No. 1 of the District.

Proposition 8 Reductions. Proposition 8 provides for the assessment of real property at the lesser of its originally determined (base year) full cash value compounded annually by the inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to damage, destruction, obsolescence or other factors causing a decline in market value. Reductions based on Proposition 8 do not establish new base year values, and the property may be reassessed as of the following lien date up to the lower of the then-current fair market value or the factored base year value.

Since 2008/09, the County Assessor has made numerous adjustments to assessed values of property within Improvement Area No. 1 where no change in ownership had occurred, some resulting in decreases in value for particular properties and some resulting in increases in value for particular properties. For example, based on a comparison using July 1, 2008 and July 1, 2009 ownership data provided by Riverside County, more than 80% of the homes in Improvement Area No. 1 with no change in ownership saw a decrease in value between 2008/09 and 2009/10, with an average decline of approximately $89,000 (26% of the existing value of such homes). In the following year, based on a comparison using July 1, 2009 and July 1, 2010 ownership data provided by Riverside County, 57% of homes with no change in ownership saw a decrease in value, with an average decline of approximately $14,000 (5% of existing value of such homes), but approximately 20% of homes with no change in ownership saw an average increase in value from the prior year of approximately $13,000.

In Fiscal Year 2011/12, based on a comparison using July 1, 2010 and July 1, 2011 ownership data provided by Riverside County approximately 34% of homes in Improvement Area No. 1 with no change in ownership had values reduced by an average $8,000 by the County Assessor while 37% of homes with no change in ownership had values increased by an average $17,000 in that year. In Fiscal Year 2012/13, based on a comparison using July 1, 2011 and July 1, 2012 ownership data provided by Riverside County and the preliminary tax roll, approximately 70% of homes in Improvement Area No. 1 with no change in ownership had values reduced by an average $10,500 by the County Assessor and over 11% of homes with no change in ownership had values increased by an average $21,000 in that year.

The District cannot guarantee that further reductions in assessed value will not occur in future years. See “RISK FACTORS - Property Values - Proposition 8 Adjustments.” While the assessed value may be reduced by the County Assessor as a result of Proposition 8, the assessed value has no bearing on the calculation of the Special Taxes, only on the calculation of ad valorem taxes.

Investors must recognize the uncertainties with respect to the assessed values of the parcels within the District, since the Bonds are secured by the proceeds of Special Taxes levied on such parcels. See “RISK FACTORS” herein.

Historical Assessed Value. Table No. 3 presents the historical assessed value of the District (see “RISK FACTORS - Property Values” herein). The total assessed value of property in Improvement Area No. 1 of the District declined between Fiscal Year 2007/08 and Fiscal Year 2010/11 as a result of Proposition 8 adjustments made by the County Assessor, as described above, or home sales at lower prices than existing assessed values. Further the inflation rate applied to assessed value in Fiscal Year 2010/11 was a negative factor. See “APPENDIX F - PARCEL LISTING” herein for more detailed property value information.

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HISTORICAL ASSESSED VALUES

Fiscal Year Assessed Value % Increase (Decrease)

2005/06 $164,471,448

2006/07 206,529,650 25.6%

2007/08 234,279,890 13.4

2008/09 202,455,427 (13.6)

2009/10 149,615,301 (26.1)

2010/11 145,118,662 (3.0)

2011/12 148,239,341 2.2

2012/13 (1) 145,450,188 (1.9)

Source: County of Riverside, as compiled by Special District Financing & Administration. ____________________________________________

(1) Riverside County Assessor’s preliminary tax roll for 2012/13.

Estimated Assessed Value-to-Lien Ratios

Value-to-lien ratios are derived by dividing the Fiscal Year 2012/13 County assessor’s assessed valuation amount of land plus improvements, if any, by the principal amount of the Bonds. For example, a 3:1 ratio means that the assessed value is three times the aggregate principal amount of the Bonds, without taking into account overlapping debt and other liens.

According to the County Assessor’s Office, the aggregate assessed valuation of land and improvements of property within Improvement Area No. 1 of the District for Fiscal Year 2012/13 is $145,450,188. Based on a principal amount of Bonds of $6,785,000, the aggregate value-to-lien ratio is 21.4 to 1. The ratio excludes overlapping assessment and other liens on property in Improvement Area No. 1 of the District. See “Direct and Overlapping Debt” herein.

The Eastern Municipal Water District (“EMWD”) has formed its Community Facilities District No. 2002-04 (“CFD 2002-04”) that includes parcels within Improvement Area No. 1. EMWD sold special tax bonds for its Improvement Area 1 of CFD 2002-04 which is coterminous with the 451 parcels in the Rancho Bella Vista development. The amount of EMWD CFD 2002-04 Improvement Area 1 special tax bonds to be outstanding on September 1, 2012 is $3,050,000. EMWD also sold special tax bonds for its Improvement Area 3 of CFD 2002-04 which is coterminous with the Avondale development. The amount of EMWD CFD 2002-04 Improvement Area 3 special tax bonds to be outstanding on September 1, 2012 is $735,000. When the CFD 2002-04 bonds are added to the par amount of Bonds in the amount of $6,785,000, the estimated value-to-lien ratio is 13.8 to 1. EMWD has covenanted not to issue any additional bonds for Improvement Area 1. See “Direct and Overlapping Debt.” No assurance can be given that the aggregate value-to-lien ratio or that any of the individual parcels’ value-to-lien ratios can or will be maintained during the period of time that the Bonds are outstanding. The District has no control over the amount of additional indebtedness that may be issued in the future by other public agencies, the payment of which, through the levy of a tax or an assessment, is on a parity with the Special Taxes. The District may not issue additional bonds payable on parity with the Bonds from the Net Taxes of Improvement Area No. 1 except to refund, in part or in whole, the Bonds.

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Table No. 4 presents the Fiscal Year 2012/13 assessed value and Special Tax levy, and estimated value-to-lien ratios including EMWD CFD 2002-04 Improvement Area 1 and Improvement Area 3 bonded indebtedness but excluding any other overlapping debt. Table No. 5 presents a summary of this information by category.



SPECIAL TAXES BY AREA AND ESTIMATED ASSESSED VALUE-TO-LIEN RATIOS

Fiscal Year EMWD CFD Estimated

No. Fiscal Year 2012/13 CFD NO. 2002-1 2002-04 Total Value-to-

of 2012/13 Assessed Value (1) Special Tax Bonded Bonded Bonded Lien

Zone Parcels Land Improvements Total Levy Indebtedness (2) Indebtedness (3) Indebtedness Ratio

Rancho Bella Vista 451 $28,030,717 $ 78,665,079 $106,695,796 $466,077 $4,908,709 $3,050,000 $ 7,958,708 13.4 :1

Avondale 130 8,306,466 30,447,926 38,754,392 178,152 1,876,291 735,000 2,611,292 14.8 :1

Total 581 $36,337,183 $109,113,005 $145,450,188 $644,229 $6,785,000 $3,785,000 $10,570,000 13.8 :1

Source: Special District Financing & Administration. _________________________________________

(1) Riverside County Assessor’s Roll as of January 1, 2012. (2) To be issued. (3) To be outstanding as of September 1, 2012.

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ESTIMATED ASSESSED VALUE-TO-LIEN RATIO CATEGORIES

Combined Projected Fiscal

Fiscal Year 2012/13 Combined Estimated Assessed Year 2012/13 Percentage

Value-to-Lien Number of Taxable Property Overlapping Value-to-Lien Special Tax Share of

Category Parcels Assessed Value (1) Liens (2) Ratios Levy Special Tax

15.0:1 and above 85 $ 25,836,655 $ 1,676,242 15.4 :1 $ 111,211 17.3%

10.0:1 to 14.99:1 496 119,613,533 8,893,759 13.4 :1 533,018 82.7

Total 581 $145,450,188 $10,570,000 13.8 :1 $644,229 100.0%

Source: Special District Financing & Administration, Financial Advisor, County of Riverside Assessor’s Office. _________________________________________

(1) Riverside County Assessor’s Roll dated January 1, 2012. (2) Represents the Bonds and the EMWD CFD 2002-04 Improvement Area 1 and Improvement Area 3 Bonds to be outstanding as of September 1, 2012.

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Special Tax Rates

The following summarizes certain provisions of the Rate and Method. See “APPENDIX A - RATE AND METHOD OF APPORTIONMENT OF THE SPECIAL TAX.”

The Rate and Method provides the means by which the Board of Education may annually levy the Special Taxes within Improvement Area No. 1 up to the applicable Maximum Special Tax to pay for school facilities. The Board shall levy the Annual Maximum Special Tax - Developed Property on each Assessor’s Parcel which is classified as Developed Property. There is currently no Undeveloped Property within Improvement Area No. 1 of the District.

“Developed Property” means Assessor Parcels for which a building permit has been issued by the applicable agency on or before the March 1 prior to each Fiscal Year which is not Exempt Property and for which the Annual Maximum Special Tax - Developed Property obligation has not been fully prepaid and/or permanently satisfied. Assessor Parcels for which a building permit has been issued by the applicable agency on or before March 1 shall be designated as Developed Property and subject to the levy of the Annual Maximum Special Tax - Developed Property in the following Fiscal Year.

“Annual Maximum Special Tax - Developed Property” means the maximum Special Tax which may be annually levied on an Assessor’s Parcel that has been classified as Developed Property. The Annual Maximum Special Tax - Developed Property for a Dwelling Unit is not subject change. See Table No. 6 for Fiscal Year 2012/13 Special Tax by category.

“Special Tax Requirement” is defined as that amount required in any Fiscal Year, after taking into consideration Available Funds pursuant to the Fiscal Agent Agreement to:

Pay annual debt service on all then outstanding Bonds,

Pay periodic costs on the Bonds including, but not limited to, credit enhancement and rebate payments on the Bonds,

Pay Administrative Expenses,

Pay any amounts required to replenish any reserve fund related to all then-outstanding Bonds, and

Pay for pay-as-you-go School Facilities with a useful life of five years or longer the benefit of which inures to the benefit of the properties within Improvement Area No. 1.

As indicated above, the Special Taxes are levied at the Annual Maximum Special Tax – Developed Property, which is the maximum Special Tax on Developed Property which the District may levy under the Rate and Method. A portion of the Special Tax Requirement is utilized for acquisition and/or construction of School Facilities. In the event the District were to levy Special Taxes on Developed Property at less than the Annual Maximum Special Tax, pursuant to Section 53321 of the Act and the resolution of intention of the District under no circumstances (and notwithstanding the amount of the Annual Maximum Special Tax) will the Special Tax levied against any parcel within Improvement Area No. 1 of the District be increased as a consequence of delinquency or default by the owner of any other parcel or parcels within Improvement Area No. 1 of the District by more than 10%.

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Prepayment of Special Taxes. An assessor parcel classified as Developed Property which is subject to the Annual Maximum Special Tax - Developed Property may prepay the entire outstanding Special Tax obligation at any time. The prepayment formula per dwelling unit is defined to include the present value of taxes, prepayment fees and redemption premium on the Bonds, if applicable. After the issuance of the Bonds the present value of the Special Tax is calculated as the lesser of 6.5% or the weighted average interest rate on the Bonds. The remaining Fiscal Years, or the term for the present value calculation, is calculated by subtracting the number of years, including the present fiscal year, the assessor parcel has been subject to the Annual Maximum Special Tax - Developed Property from 35. Prepayments must be received prior to June 1 to be effective in the following Fiscal Year. In addition, any property owner prepaying his or her Annual Maximum Special Tax - Developed Property must also pay the present Fiscal Year levy and all delinquent special taxes, interest and penalties owing on the Assessor Parcel to the County of Riverside on which prepayment is being made, if any.

Maximum Term of the Special Tax. The Annual Maximum Special Tax – Developed Property shall be levied for a period not to exceed either (i) 35 years for each Dwelling Unit classified as Developed Property or (ii) until all Bonds have been retired and all School Facility requirements met as determined by the Board in its sole discretion, whichever is earlier. Properties were first classified as Developed Property as of March 1, 2002 and were subject to the Special Tax beginning in Fiscal Year 2002/03. See Table No. 2 for a summary of taxable parcels by year.


OF THE TEMECULA VALLEY UNIFIED SCHOOL DISTRICT (IMPROVEMENT AREA NO. 1) SPECIAL TAX BY CATEGORY

Special Tax # of Total Special Tax

Dwelling Unit Size By Category Parcels By Category

Less than 2,000 square feet $ 827.64 78 $ 64,555.92

2,000 to 2,249 square feet 907.48 134 121,602.32

2,250 to 2,499 square feet 957.12 31 29,670.72

2,500 to 2,749 square feet 1,079.06 76 82,008.56

2,750 to 2,999 square feet 1,165.38 51 59,434.38

3,000 to 3,249 square feet 1,279.76 99 126,696.24

3,250 to 3,499 square feet 1,430.82 111 158,821.02

3,500 square feet or greater 1,440.08 1 1,440.08

581 $644,229.24


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Lender-Owned Special Tax Obligations

According to the ownership data reported by the County of Riverside as of July 1, 2012, all homes in Improvement Area No. 1 of the District were owned by individuals except as set forth in Table No. 7 below. No property tax owner in Improvement Area No. 1 of the District is responsible for more than 0.47% of the Special Tax levy in Fiscal Year 2012/13.



LENDER-OWNED SPECIAL TAX OBLIGATIONS

Fiscal Year

# of 2012/13

Owner Homes Special Tax Levy % of Total

Bank of America 3 $ 3,014.88 0.47%

DG Real Estate Solutions 1 907.48 0.14

Federal Home Loan Mortgage Corp. (1) 1 1,279.76 0.20

Gallery Equity 2 2,710.58 0.42

Preeminent Inv Corp 2 2,861.64 0.44

US Bank 2 2,187.24 0.34

Yolo Financial Group 1 1,430.82 0.22

12 $14,392.40 2.23%

Source: Special District Financing & Administration, Riverside County Assessor. ____________________________________________

(1) See “RISK FACTORS - Impact of FDIC Interests and Other Federal Agencies” for a discussion on the ability of the District to foreclose on and collect Special Taxes on property owned by governmental agencies.

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Effective Tax Rates

Table No. 8 below sets forth Fiscal Year 2011/12 effective tax rates for representative single family residential units in three representative neighborhoods of Improvement Area No. 1 of the District. Properties in Improvement Area No. 1 of the District are overlapped by EMWD CFD 2002-04, and may also be part of certain maintenance districts. Table No. 8 sets forth the ad valorem taxes, Special Taxes, other special taxes and special assessments applicable to a typical home in Fiscal Year 2011/12.



FISCAL YEAR 2011/12 EFFECTIVE TAX RATES

Avondale Belcerro San Lucas

APN 957-540-007 964-270-006 964-251-002

Square Footage 3,269 2,538 1,752

Year Purchased 2010 2005 2010

Assessed Value (1) $292,082.00 $248,000.00 $207,000.00

Homeowner’s Exemption (7,000.00) (7,000.00) (7,000.00)

Net Assessed Value $285,082.00 $241,000.00 $200,000.00

Ad Valorem Tax Rate 1.02897% 1.02897% 1.02897%

Ad Valorem Taxes $ 2,933.40 $ 2,479.82 $ 2,057.94

Special Assessments:

CFD No. 2002-1 (IA 1) $ 1,430.82 $ 1,079.06 $ 827.64

EMWD CFD No. 2002-04 (IA 1) - 642.74 562.42

EMWD CFD No. 2002-04 (IA 3) 611.06 - -

Flood Control Stormwater 4.02 3.12 2.40

City of Temecula Trash/Recycling 223.04 - -

City of Temecula CSD Parks/Lighting 74.44 - -

City of Temecula Street Lights 25.68 - -

City of Temecula Landscape 70.00 - -

CSA#103 Street Lights - 50.98 50.98

CSA#152 NPDES - 33.10 33.10

Valleywide Reg Facilities LMD 88-1 - 5.54 5.54

Valleywide LMD French Valley - 229.74 229.74

MWD Standby East 6.94 6.94 6.94

EMWD Standby - Combined 40.00 40.00 40.00

Total $ 5,419.40 $ 4,571.04 $ 3,816.70

Effective Tax Rate 1.90% 1.90% 1.91%

Source: Financial Advisor. ____________________________________________

(1) As determined by the County Assessor as of January 1, 2011.

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Delinquencies

The following table illustrates historical Special Tax delinquencies for Fiscal Year 2007/08 through 2011/12 for property located in Improvement Area No. 1 of the District and their status as of June 29, 2012.



SPECIAL TAX DELINQUENCY HISTORY

% Parcels Special Amount Parcels Delinquent in % Delinquent Delinquent

Levy Tax Delinquent Delinquent Fiscal Year Delinquent as of as of as of Year Levy as of June 30 as of June 30 of Levy June 29, 2012 June 29, 2012 June 29, 2012

2007/08 $644,229.24 $91,603.09 96 14.22% $ 0.00 0.00% 0 2008/09 644,229.24 45,578.70 50 7.07 5,505.33 0.85 7 2009/10 644,229.24 32,088.37 33 4.98 4,658.82 0.72 5 2010/11 644,229.24 10,432.83 12 1.62 907.48 0.14 1 2011/12 644,229.24 12,119.39 (1) 11 (1) 1.88 (1) 12,119.39 1.88 11

Source: County of Riverside, as compiled by Special District Financing & Administration. ____________________________________________

(1) As of June 29, 2012.

The District has covenanted to commence foreclosure proceedings when Special Tax delinquencies exceed prescribed limitations. Subject to certain limitations, the District will commence foreclosure proceedings against any parcel with a delinquency exceeding $3,000. See “SECURITY FOR THE BONDS - Proceeds of Foreclosure Sales.”

School District/Community Facilities District Special Tax Delinquencies. The School District has formed a number of community facilities districts which have issued special tax bonds. In recent years, the special tax delinquency rates as of June 30 of each fiscal year increased above historical delinquency rates, but over time, most of the delinquencies have been cured. With respect to any community facilities districts for which bonds have been issued, letters notifying property owners of the delinquent special taxes are sent out each year and foreclosure counsel has been engaged to pursue collections. Delinquency rates in some community facilities districts have exceeded a 5% delinquency threshold as of June 30 of the applicable fiscal year, but none of the community facilities districts have been required to draw on the respective reserve funds to meet debt service requirements, including the District.

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Projected Special Tax Levy

Table No. 10 shows the Annual Maximum Special Taxes that may be levied in all future years on Developed Property, and compares the Net Taxes with Maximum Annual Debt Service on the Bonds.



PROJECTED SPECIAL TAXES FROM DEVELOPED PROPERTY AND DEBT SERVICE COVERAGE

Annual Maximum Special Taxes $644,229

Administrative Expense Requirement (25,000)

Net Taxes $619,229

Maximum Annual Debt Service $505,588

Coverage (1) 1.24

Source: Special District Financing & Administration and Financial Advisor. ____________________________________________

(1) See “THE DISTRICT - IMPROVEMENT AREA NO. 1 - Special Tax Rates” regarding the limitations on the levy of Special Taxes in the event the District were to levy Special Taxes on Developed Property at less than the Annual Maximum Special Tax.

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Direct and Overlapping Debt

Overlapping local agencies provide public services within Improvement Area No. 1, and such agencies have issued general obligation bonds and other types of indebtedness. Direct and overlapping bonded indebtedness is shown in the following table. Eastern Municipal Water District formed CFD No. 2002-04 in October 2003 and issued $3,785,000 in special tax bonds. CFD 2002-04 overlays the boundaries of Improvement Area No. 1 of the District.



DIRECT AND OVERLAPPING DEBT

2011/12 Local Secured Assessed Valuation: $148,239,341

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 6/1/12

Metropolitan Water District (1) 0.008% $ 16,393

Temecula Valley Unified School District (1) 0.903 254,031

Temecula Valley Unified School District Community Facilities District No. 2002-1, IA 1 100. 6,620,000 (2)

Eastern Municipal Water District Community Facilities District No. 2002-04, I.A. 1 100. 3,130,000

Eastern Municipal Water District Community Facilities District No. 2002-04, I.A. 3 100. 755,000

TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $10,775,424

OVERLAPPING GENERAL FUND DEBT:

Riverside County General Fund Obligations 0.102% $ 668,873

Riverside County Pension Obligations 0.102 364,691

Riverside County Board of Education Certificates of Participation 0.102 5,156

Mt. San Jacinto Community College District General Fund Obligations 0.270 32,265

City of Temecula Certificates of Participation 0.387 103,120

Valley-wide Recreation and Park District Certificates of Participation 0.871 2,657

TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $ 1,176,762

Less: Riverside County supported obligations 13,373

TOTAL NET OVERLAPPING GENERAL FUND DEBT $ 1,163,389

GROSS COMBINED TOTAL DEBT $11,952,186 (3)

NET COMBINED TOTAL DEBT $11,938,813

(1) General Obligation Bonds.

(2) Excludes refunding Mello-Roos Act bonds to be sold.

(3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.

Ratios to 2011/12 Assessed Valuation:

Direct Debt ($6,620,000) ............................................................................... 4.47%

Total Direct and Overlapping Tax and Assessment Debt ................................ 7.27%

Gross Combined Total Debt ............................................................................ 8.06%

Net Combined Total Debt ................................................................................ 8.05%

STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/11: $0

__________________________________ Source: California Municipal Statistics, Inc.

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RISK FACTORS General

BEFORE PURCHASING ANY OF THE BONDS, ALL PROSPECTIVE INVESTORS AND THEIR PROFESSIONAL ADVISORS SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE FOLLOWING RISK FACTORS, WHICH ARE NOT MEANT TO BE AN EXHAUSTIVE LISTING OF ALL RISKS ASSOCIATED WITH THE PURCHASE OF THE BONDS. MOREOVER, THE ORDER OF PRESENTATION OF THE RISK FACTORS DOES NOT NECESSARILY REFLECT THE ORDER OF THEIR IMPORTANCE.

The purchase of the Bonds involves investment risk. If a risk factor materializes to a sufficient degree, it could delay or prevent payment of principal of and/or interest on the Bonds. Such risk factors include, but are not limited to, the matters described below.

Risks of Real Estate Secured Investments Generally

Bondowners 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 in the event of sale or foreclosure; (ii) changes in real estate tax rate and other operating expenses, governmental rules (including, without limitation, laws relating to hazardous materials) and fiscal policies, (iii) natural disasters (including, without limitation, earthquakes, liquefaction, landslides, fires and floods), which may result in uninsured losses and (iv) increased delinquencies due to rising mortgage costs and other factors.

Property within Improvement Area No. 1 of the District has been affected by the decline in market value along with the rest of the State.

Risks Related to Current Real Estate 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. Since 2006, home developers, appraisers and market absorption consultants have reported weakening new home market conditions as demonstrated by: (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 home 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. One or more of these factors may negatively impact home values in the Improvement Area No. 1 of the District and may affect the willingness or ability of taxpayers to pay their Special Tax payment prior to delinquency.

Property Values

The value of the taxable land within Improvement Area No. 1 of the District is a critical factor in determining the investment quality of the Bonds. If there is a delinquency or default in the payment of the Special Tax, the District’s only remedy is to commence foreclosure proceedings on the taxable property in an attempt to obtain funds to pay the delinquent Special Tax. Further, reductions in assessed value indicating a decline in market value (as described below) may affect the willingness or ability of taxpayers to pay their Special Tax payment prior to delinquency.

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Assessed Value. The District has relied on the 2012/13 assessed valuations of the County Assessor used for the purposes of general taxes for the valuations for all of the property within Improvement Area No. 1 of the District presented in this Official Statement.

Article XIIIA. Pursuant to the California voter initiative process, on June 6, 1978, California voters approved Proposition 13 which added Article XIIIA to the California Constitution. This amendment imposed certain limitations on taxes that may be levied against real property to 1% of the full cash value of the property, adjusted annually for inflation at a rate not exceeding 2% annually. Full cash value is determined as of the 1975/76 assessment year, upon change in ownership (acquisition) or when newly constructed. Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by substantial damage, destruction or other factors, and to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster and in other special circumstances.

Reduction in Inflationary Rate. The annual inflationary adjustment, while limited to 2%, is determined annually and may not exceed the percentage change in the California Consumer Price Index (CCPI). For each fiscal year since Article XIIIA has become effective (the 1978/79 Fiscal Year), the annual increase for inflation has been at least 2% except in seven fiscal years as shown below:

Tax Roll Percentage

1981/82 1.000%

1995/96 1.190

1996/97 1.110

1998/99 1.853

2004/05 1.867

2010/11 (0.237)

2011/12 0.753

Proposition 8 Adjustments. Proposition 8, approved in 1978, provides for the assessment of real property at the lesser of its originally determined (base year) full cash value compounded annually by the inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to damage, destruction, obsolescence or other factors causing a decline in market value. Reductions based on Proposition 8 do not establish new base year values, and the property may be reassessed as of the following lien date up to the lower of the then-current fair market value or the factored base year value. While the assessed value may be reduced by the County Assessor as a result of Proposition 8, the assessed value has no bearing on the calculation of the Special Taxes, only on the calculation of ad valorem taxes.

The District cannot guarantee that further reductions in assessed value will not occur in future years. See “THE DISTRICT - IMPROVEMENT AREA NO. 1 - Assessed Values - Proposition 8 Reductions.”

Value-to-Lien. Value-to-lien ratios have traditionally been used in land-secured bond issues as a measure of the “collateral” supporting the willingness of property owners to pay their special taxes and assessments (and, in effect, their general property taxes as well). The value-to-lien ratio is mathematically a fraction, the numerator of which is the value of the property (usually a market value as determined by an appraiser) and the denominator of which is the “lien” of the assessments or special taxes. A value-to-lien ratio should not, however, be viewed as a guarantee of credit-worthiness. Land values are more volatile in the early stages of a development, and are especially sensitive to economic cycles. A downturn of the economy may depress land values and hence the value-to-lien ratios, by increasing risk to investors and lenders. No assurance can be given that the current estimated value-to-lien ratios in Improvement Area No. 1 of the District will be maintained as set forth herein. See “THE DISTRICT - IMPROVEMENT AREA NO. 1 - Estimated Assessed Value-To-Lien Ratios.” Further, the value-to-lien ratio cited for a bond issue is an average, and does not include private debt, such as a

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mortgage. Individual parcels in a community facilities district may fall above or below the average, sometimes even below a 1:1 ratio. (With a ratio below 1:1, the land is worth less than the debt on it.) Although judicial foreclosure proceedings can be initiated rapidly, the process can take several years to complete, and the bankruptcy courts may impede the foreclosure action. Finally, local agencies may form overlapping community facilities districts or assessment districts. They typically do not coordinate their bond issuances. Debt issuance by another entity can dilute value-to-lien ratios. See “THE DISTRICT - IMPROVEMENT AREA NO. 1 - Direct and Overlapping Debt.”

Prospective purchasers of the Bonds should not assume that the land could be sold for its original sales price or its fair market value at a foreclosure sale for delinquent Special Taxes. In particular, the values of individual properties in Improvement Area No. 1 of the District will vary in some cases significantly. The actual value of the land is subject to future events. The future value of the land can be expected to fluctuate due to many different, not fully predictable, real estate related investment risk factors, including, but not limited to: general tax law changes related to real estate, changes in competition, general area employment base changes, population changes, changes in real estate related interest rates affecting general purchasing power, advertising, changes in allowed zoning uses and density, natural disasters such as floods, earthquakes, fires and landslides, and similar factors.

Other Possible Claims Upon the Value of Taxable Property

While the Special Taxes are secured by the Taxable Property as defined in the Rate and Method, the security only extends to the value of such Taxable Property that is not subject to priority and parity liens and similar claims.

There are presently taxes or assessments which are an obligation of the parcels of Taxable Property. See “THE DISTRICT - IMPROVEMENT AREA NO. 1 - Direct and Overlapping Debt.” Additional amounts of general obligation bonds may be issued, the tax for which, if and when issued, may become an obligation of one or more of the parcels of Taxable Property. Further, other governmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing the Bonds.

In general, as long as the Special Tax is collected on the County tax roll, the Special Tax and all other taxes, assessments and charges also collected on the tax roll are on a parity, that is, are of equal priority. Questions of priority become significant when collection of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale. In the event of proceedings to foreclose for delinquency of Special Taxes securing the Bonds, the Special Tax will be subordinate only to existing prior governmental liens, if any. Otherwise, in the event of such foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes, assessments and charges and will share the proceeds of such foreclosure proceedings on a pro rata basis. Although the Special Taxes will generally have priority over non-governmental liens on a parcel of Taxable Property, regardless of whether the non-governmental liens were in existence at the time of the levy of the Special Tax or not, this result may not apply in the case of bankruptcy.

While governmental taxes, assessments and charges are a common claim against the value of a parcel of Taxable Property, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value that may be realized to pay the Special Tax is a claim with regard to a hazardous substance. See “Hazardous Substances” herein.

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Economic Uncertainty

The Bonds are being issued at a time of economic uncertainty and volatility. According to the California Employment Development Department, unemployment rates are approximately 8.0% for the City of Temecula as of April 2012 (not seasonally adjusted), as compared to 9.0% as of April 2011, and 11.8% as of April 2012 (not seasonally adjusted) for Riverside County as compared to 13.1% as of April 2011. 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 Bonds.

Disclosure to Future Purchasers

The District recorded a Notice of the Special Tax Lien in the Office of the County Recorder October 10, 2002 as Document No. 2002-566713. 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 parcel of land or a home in Improvement Area No. 1 of the District or the 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.

Adjustable Rate and Non-Conventional Mortgages

Between 2002 and 2007 many persons financed the purchase of new homes using loans with little or no down payment and with adjustable interest rates that start low and are subject to being reset at higher rates on a specified date or upon the occurrence of specified conditions. Many of these loans allow the borrower to pay interest only for an initial period, in some cases up to 10 years. Homeowners in Improvement Area No. 1 of the District who purchased their homes with adjustable rate and non-conventional loans with no or low down payments may experience difficulty in making their loan payments due to automatic mortgage rate increases and rising interest rates. This could result in an increase in the Special Tax delinquency rate in Improvement Area No. 1 of the District and draws on the Reserve Fund. If there were significant delinquencies in Special Tax collections in Improvement Area No. 1 of the District, and the Reserve Fund was fully depleted, there could be a default in the payment of principal of and interest on the Bonds. As mortgage loan defaults increase, bankruptcy filing by such homeowners are also likely to increase. Bankruptcy filings by homeowners with delinquent Special Taxes would delay the commencement and completion of foreclosure proceedings to collect delinquent Special Taxes. See “Bankruptcy and Foreclosure Delays” below. The District has not undertaken to determine the number of homes currently pending or in foreclosure, if any, or the number of homes that have been foreclosed on in Improvement Area No. 1 of the District, if any.

Hazardous Substances

While governmental taxes, assessments, and charges are a common claim against the value of a taxed parcel, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value that may be realized to pay the Special Tax is a claim with regard to hazardous substances. In general, the owners and operators of parcels within Improvement Area No. 1 of the District may be required by law to remedy conditions of the parcels related to the releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation,

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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 State laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substances condition of a property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any parcel within Improvement Area No. 1 of the District be affected by a hazardous substance, would be to reduce the marketability and value of the parcel by the costs of remedying the condition, because the owner (or operator) is obligated to remedy the condition. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the financial and legal ability of a property owner with respect to the affected parcel or other parcels, as well as the value of the property that is realizable upon a delinquency and foreclosure.

The assessed values within Improvement Area No. 1 of the District do not take into account the possible reduction in marketability and value of any of the parcels of Taxable Property by reason of the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the parcel. The District has not independently verified and is not aware that the owner (or operator) has such a current liability with respect to any of the parcels of Taxable Property, except as expressly noted. However, it is possible that such liabilities do currently exist and that the District is not aware of them.

Further, it is possible that liabilities may arise in the future with respect to any of the parcels of Taxable Property resulting from the existence, currently, on the parcel of a substance presently 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 existence, currently, 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 of handling or disposing of it. All of these possibilities could significantly affect the value of a Taxable Property that is realizable upon a delinquency.

Levy and Collection of the Special Tax

The principal source of payment of principal of and interest on the Bonds is the proceeds of the annual levy and collection of the Special Tax against property within Improvement Area No. 1 of the District. The annual levy of the Special Tax is subject to the maximum tax rates authorized. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the Bonds. Other funds which might be available include funds derived from the payment of delinquent Special Taxes and funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent.

The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular taxed parcels and the amount of the levy of the Special Tax against such parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of such parcels and the proportionate share of debt service on the Bonds, and certainly not a direct relationship.

The Special Tax levied in any particular tax year on a taxed parcel is based upon the application of the Rate and Method. The following are some of the factors which might cause the levy of the Special Tax on any particular taxed parcel to vary from the Special Tax that might otherwise be expected:

(1) Reduction in the number of taxed parcels, for such reasons as acquisition of taxed parcels by a government and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining taxed parcels.

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(2) Failure of the owners of taxed parcels to pay the Special Tax and delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent parcels.

The Fiscal Agent Agreement provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described herein and in the Act, is to be subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem property taxes. Pursuant to these procedures, if taxes are unpaid for a period of five years or more, the property is subject to sale by the County.

In the event that sales or foreclosures of property are necessary, there could be a delay in payments to Owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the District of the proceeds of sale if the Reserve Fund is depleted. See “SECURITY FOR THE BONDS - Proceeds of Foreclosure Sales.”

Exempt Property

Certain properties are exempt from the Special Tax in accordance with the Rate and Method (see “THE DISTRICT - IMPROVEMENT AREA NO. 1 - Special Tax Rates” herein). In addition, the Act provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that 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 Tax, will continue to be subject to the Special Tax. It is possible that property acquired by a public entity following a tax sale or foreclosure based upon failure to pay taxes could become exempt from the Special Tax. In addition, although 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, the constitutionality and operation of these provisions of the Act have not been tested, meaning that such property could become exempt from the Special Tax. In the event that additional property is dedicated to the School District or other public entities, this additional property might become exempt from the Special Tax.

The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax.

Depletion of Reserve Fund

The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement, which will initially be set at $500,587.50. Funds in the Reserve Fund may be used to pay principal of and interest on the Bonds in the event the proceeds of the levy and collection of the Special Tax against property within Improvement Area No. 1 of the District are insufficient. If funds in the Reserve Fund for the Bonds are depleted, the funds can be replenished from the proceeds of the levy and collection of the Special Tax that are in excess of the amount required to pay all prior amounts pursuant to the Fiscal Agent Agreement (principal of and interest on the Bonds and the Administrative Expense Requirement). However, no replenishment from the proceeds of a Special Tax levy can occur as long as the proceeds that are collected from the levy of the Special Tax against property within Improvement Area No. 1 of the District at the maximum tax rates, together with other available funds, remains insufficient to pay all such amounts. Thus it is possible that the Reserve Fund could be depleted and not be replenished by the levy of the Special Tax.

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Direct and Overlapping Indebtedness

The ability or willingness of an owner of land within Improvement Area No. 1 of the District to pay Special Taxes could be affected by the existence of other taxes and assessments imposed upon the property in Improvement Area No. 1 of the District. Presently, the sum of the direct and overlapping debt applicable to the property in Improvement Area No. 1 of the District is as detailed under the caption “THE DISTRICT - IMPROVEMENT AREA NO. 1 - Direct and Overlapping Debt.” In addition, the other public agencies whose boundaries overlap those of Improvement Area No. 1 of the District have, and could, impose additional taxes or assessment liens on the property within Improvement Area No. 1 of the District in certain cases without the consent of the owners of the land within Improvement Area No. 1 of the District in order to finance public improvements or services to be located or provided inside of or outside of such area. The lien created on the property within Improvement Area No. 1 of the District through the levy of such additional taxes or assessments may be on a parity with the lien of the Special Taxes.

The imposition of additional liens on a parity with the Special Taxes may reduce the ability or willingness of the landowners to pay the Special Taxes and increases the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes or the principal of and interest on the Bonds when due.

Bankruptcy and Foreclosure Delays

The payment of the Special Tax and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax, as discussed in “SECURITY FOR THE BONDS,” may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure. In addition, the prosecution of a judicial foreclosure may be delayed due to congested local court calendars or procedural delays. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel’s approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases.

Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or of a partner or other equity owner of a property owner could result in a stay of enforcement of the lien for the Special Taxes, a delay in prosecuting superior court foreclosure proceedings or adversely affect the ability or willingness of a property owner to pay the Special Taxes and could result in the possibility of delinquent Special Tax installments not being paid in full. In addition, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the Special Tax, or any such delay or non-payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent Special Taxes not being paid in full. Moreover, amounts received upon foreclosure sales may not be sufficient to fully discharge delinquent installments. As a result, sufficient monies would not be available in the Reserve Fund for transfer to the Bond Fund to make up shortfalls resulting from delinquent payments of the Special Tax and thereby to pay principal of and interest on the Bonds on a timely basis.

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. The court upheld the priority of unpaid taxes imposed after the filing of the bankruptcy petition as “administrative expenses” of the bankruptcy estate, payable after all secured creditors. As a

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result, the secured creditor was to foreclose on the property and retain all of 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 have to be paid, assuming that the debtor has 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 the Special Taxes levied after the filing of a petition in bankruptcy. Glasply is controlling precedent for bankruptcy courts in the State. If the Glasply precedent was applied to the levy of the Special Tax, the amount of Special Tax received from parcels whose owners declare bankruptcy could be reduced.

It should also be noted that on October 22, 1994, Congress enacted 11 U.S. C. Section 362(b)(18), which added a new exception to the automatic stay for ad valorem property taxes imposed by a political subdivision after the filing of a bankruptcy petition. Pursuant to this new provision of law, 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. 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.

In addition, potential investors should be aware that judicial foreclosure proceedings are not summary remedies and can be subject to significant procedural and other delays caused by crowded court calendars and other factors beyond control of the District or the School District. Potential investors should assume that, under current conditions, it is estimated that a judicial foreclosure of the lien of Special Taxes will take up to two or three years from initiation to the lien foreclosure sale. At a Special Tax lien foreclosure sale, each parcel will be sold for not less than the “minimum bid amount” which is equal to the sum of all delinquent Special Tax installments, penalties and interest thereon, costs of collection (including reasonable attorneys’ fees), post-judgment interest and costs of sale. Each parcel is sold at foreclosure for the amounts secured by the Special Tax lien on such parcel and multiple parcels may not be aggregated in a single “bulk” foreclosure sale. If any parcel fails to obtain a “minimum bid,” the District may, but is not obligated to, seek superior court approval to sell such parcel at an amount less than the minimum bid. Such superior court approval requires the consent of the owners of 75% of the aggregate principal amount of the Outstanding Bonds.

Other laws generally affecting creditors’ rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of such military service to redeem property sold to enforce the collection of a tax or assessment, and a limitation on the interest rate on the delinquent tax or assessment to persons in the military service if the court concludes the ability to pay such taxes or assessments is materially affected by reason of such service.

Delays and uncertainties in the Special Tax lien foreclosure process create significant risks for Owners. High rates of special tax payment delinquencies which continue during the pendency of protracted Special Tax lien foreclosure proceedings, could result in the rapid, total depletion of the Reserve Fund prior to replenishment from the resale of property upon foreclosure. In that event, there could be a default in payment of the principal of, and interest on, the Bonds.

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Payment of Special Tax Not a Personal Obligation of the Property Owners

An owner of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation only against the parcels of Taxable Property. If the value of the parcels of Taxable Property is not sufficient, taking into account other obligations also payable thereby, to fully secure the Special Tax, the property owner may elect not to pay ad valorem taxes, Special Taxes, other special taxes or assessments, and the District has no recourse against the owner.

Factors Affecting Parcel Values and Aggregate Value

Geologic, Topographic and Climatic Conditions. The value of the Taxable Property in Improvement Area No. 1 of the District in the future can be adversely affected by a variety of additional factors, particularly those which may affect infrastructure and other public improvements and private improvements on the parcels of Taxable Property and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes, liquefaction and volcanic eruptions, topographic conditions such as earth movements, landslides and floods and climatic conditions such as wildfires, droughts and tornadoes. It can be expected that one or more of such conditions may occur and may result in damage to improvements of varying seriousness, that the damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances, the value of the Taxable Property may well depreciate or disappear.

Seismic Conditions. The District, like most areas of California, may be subject to unpredictable seismic activity. The occurrence of seismic activity in the District could result in substantial damage to properties in Improvement Area No. 1 of the District, which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their Special Taxes.

Climatic Conditions. The District may be subject to unpredictable climatic conditions, such as flood, droughts and destructive storms. The occurrence of climatic activity of this type in the District could result in substantial damage to properties in Improvement Area No. 1 of the District, which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their Special Taxes.

Legal Requirements. Other events which may affect the value of a parcel of Taxable Property in Improvement Area No. 1 of the District include changes in the law or application of the law.

No Acceleration Provisions

The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Fiscal Agent Agreement. Pursuant to the Fiscal Agent Agreement, an Owner is given the right for the equal benefit and protection of all Owners similarly situated to pursue certain remedies described under “APPENDIX B - SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT.”

Limited Obligation of the District to Pay Debt Service

The District and the School District have no obligation to pay principal of and interest on the Bonds in the event Special Tax collections are delinquent, other than from amounts, if any, on deposit in the Reserve Fund, funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent, nor is the District or the School District obligated to advance funds to pay such debt service on the Bonds.

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District Formation

California voters approved an amendment (“Article XIIIA”) to the California Constitution on June 6, 1978. Section 4 of Article XIIIA, requires a vote of two-thirds of the qualified electorate to impose “special taxes,” or any additional ad valorem, sales or transaction taxes on real property. At an election held pursuant to the Act, more than two-thirds of the qualified electors within Improvement Area No. 1 of the District, consisting of the landowners within the boundaries of Improvement Area No. 1 of the District, authorized the District to incur bonded indebtedness to finance facilities and approved the Rate and Method. The Supreme Court of the State has not yet decided whether landowner elections (as opposed to resident elections) satisfy requirements of Section 4 of Article XIIIA, nor has the Supreme Court decided whether the special taxes of a community facilities district constitute a “special tax” for purposes of Article XIIIA.

Section 53341 of the Act requires that any action or proceeding to attack, review, set aside, void or annul the levy of a special tax or an increase in a special tax pursuant to the Act shall be commenced within 30 days after the special tax is approved by the voters. No such action has been filed with respect to the Special Taxes.

Proposition 218

Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies such as the District. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash flow problems in the payment of outstanding obligations such as the Bonds.

Proposition 218 - Voter Approval for Local Government Taxes - Limitation on Fees, Assessments, and Charges - Initiative Constitutional Amendment (“Proposition 218”), added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges. Proposition 218 states that all taxes imposed by local governments shall be deemed to be either general taxes or special taxes. No local government may impose, extend or increase any general tax unless and until such tax is submitted to the electorate and approved by a majority vote. No local government may impose, extend or increase any special tax unless and until such tax is submitted to the electorate and approved by a two-thirds vote.

Proposition 218 also provides that no tax, assessment, fee or charge shall be assessed by any agency upon any parcel of property or upon any person as an incident of property ownership except: (i) the ad valorem property tax imposed pursuant to Article XIII and Article XIIIA of the California Constitution, (ii) any special tax receiving a two-thirds vote pursuant to the California Constitution, and (iii) assessments, fees and charges for property related services as provided in Proposition 218. Proposition 218 then goes on to add voter requirements for assessments and fees and charges imposed as an incident of property ownership, other than fees and charges for sewer, water, and refuse collection services. In addition, all assessments and fees and charges imposed as an incident of property ownership, including sewer, water, and refuse collection services, are subjected to various additional procedures, such as hearings and stricter and more individualized benefit requirements and findings.

Proposition 218 also provides that the constitutional initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local taxes, assessments, fees and charges. This provision with respect to the initiative power is not limited to taxes imposed on or after November 6, 1996, the effective date of Proposition 218. However, on July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code 5854, which states:

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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.

As a result, although no court has yet considered the relationship between Section 5854 and Article XIIIC, it is likely that Proposition 218 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 Bonds.

The Special Taxes and the issuance of the Bonds were each authorized by not less than a two-thirds vote of the landowners within the District who constituted the qualified electors of the District at the time of such voted authorization. The Special Taxes levied against the parcels within the District and the authority to issue bonds were authorized subsequent to the passage of Proposition 218.

The District has covenanted in the Fiscal Agent Agreement that it shall not initiate or otherwise approve proceedings to modify the Rate and Method, including the maximum Special Tax rates, if such modification would adversely affect the security for the Bonds. The District has further covenanted that in the event an ordinance is adopted by initiative pursuant to Section 3 of Article XIIIC of the California Constitution, which purports to reduce or otherwise alter the maximum authorized Special Tax rates, it will, to the extent of available Improvement Area No. 1 funds therefore, commence and pursue reasonable legal actions seeking to preserve its ability to comply with its covenant contained in the preceding sentence.

Like its antecedents, Proposition 218 is likely to undergo both judicial and legislative scrutiny before its impact on the District and its obligations can be determined. Certain provisions of Proposition 218 may be examined by the courts for their constitutionality under both State and federal constitutional law. The District is not able to predict the outcome of any such examination.

The foregoing discussion of Proposition 218 should not be considered an exhaustive or authoritative treatment of the issues. The District does not expect to be in a position to control the consideration or disposition of these issues and cannot predict the timing or outcome of any judicial or legislative activity in this regard. Interim rulings, final decisions, legislative proposals and legislative enactments may all affect the impact of Proposition 218 on the Bonds as well as the market for the Bonds. Legislative and court calendar delays and other factors may prolong any uncertainty regarding the effects of Proposition 218.

Impact of FDIC Interests and Other Federal Agencies

The ability of the District to collect interest and penalties specified by State law and to foreclose against properties having delinquent Special Tax installments may be limited in certain respects with regard to properties in which the Federal Deposit Insurance Corporation (the “FDIC”), the Drug Enforcement Agency, the Internal Revenue Service the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”) or other similar federal governmental agencies has or obtains an interest. The FDIC would obtain such an interest by taking over a financial institution which has made a loan which is secured by property within Improvement Area No. 1 of the District.

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Mortgage Interests. The supremacy clause of the United States Constitution reads as follows: “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, any Thing in the Constitution or Laws of any State to the contrary notwithstanding.”

The foregoing is generally interpreted to mean that, unless the United States Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within the District 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 the United States 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. In Rust v. Johnson, 597 F.2d 174 (9th Cir. 1979), the United States Court of Appeal, Ninth Circuit (the “Ninth Circuit”), held that FNMA is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. It is possible a court would reach a similar conclusion with respect to the mortgage interest of Freddie Mac.

Based on the ownership data reported by the Riverside County Assessor as of July 1, 2012, the District is aware of one parcel in Improvement Area No. 1 of the District owned by Freddie Mac (see “THE DISTRICT - IMPROVEMENT AREA NO. 1 - Lender-Owned Special Tax Obligations” herein). The District has not otherwise undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes within Improvement Area No. 1 of the District, and therefore expresses no view concerning the extent to which the risks described above will materialize while the Bonds are outstanding.

FDIC. Specifically, with respect to the FDIC, the FDIC has adopted a policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) which provides that the FDIC intends to pay valid real property taxes, interest and penalties, in accordance with state law, on property which at the time of the tax levy is owned by a financial institution in an FDIC receivership, unless abandonment of the FDIC interest is determined to be appropriate. However, the Policy Statement is unclear as to whether the FDIC considers special taxes such as the Special Taxes to be “real property taxes” which it intends to pay. Furthermore, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, it will not permit its lien to be foreclosed by a taxing authority without its specific consent, and that it will not pay or recognize liens for any penalties, fines, or similar claims imposed for the non-payment of taxes.

The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency on a parcel within Improvement Area No. 1 of the District in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would likely reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, a default in payment on the Bonds.

The District expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. Based on ownership information from County Assessor’s records as of July 1, 2012, there is no indication that the FDIC owned any property in Improvement Area No. 1 of the District.

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The various legal opinions to be delivered concurrently with the delivery of the 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.

IRS Audits of Bond Issues

The Internal Revenue Service has initiated an expanded program for the auditing of bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds or securities).

Ballot Initiatives and Legislative Measures

Proposition 218 was adopted pursuant to a measure qualified for the ballot pursuant to California’s constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the State Legislature. The adoption of any such initiative or enactment of legislation might place limitations on the ability of the State, the School District or local districts to increase revenues or to increase appropriations or on the ability of a property owner to complete the development of the property.

Limited Secondary Market

There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the District has committed to provide certain statutorily-required financial and operating information, there can be no assurance that such information will be available to Owners on a timely basis. The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, the absence of credit rating for the Bonds or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.

Limitations on Remedies

Remedies available to the Owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of the Bonds. See “Other Possible Claims Upon the Value of Taxable Property,” “No Acceleration Provisions” and “Impact of FDIC Interests and Other Federal Agencies” herein.

Bond Counsel has limited its opinion as to the enforceability of the Bonds and 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 creditors’ rights, by equitable principles and by the exercise of judicial discretion. 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 owners of the Bonds.

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LEGAL MATTERS Legal Opinion

The validity of the Bonds and certain other legal matters are subject to the approving opinion of Bowie, Arneson, Wiles & Giannone, Bond Counsel to the District. A complete copy of the proposed form of Bond Counsel opinion is contained in “APPENDIX E.” Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the District by McFarlin & Anderson LLP, Laguna Hills, California, as Disclosure Counsel. Payment of the fees and expenses of Bond Counsel and Disclosure Counsel is contingent upon the sale and delivery of the Bonds.

Tax Matters

Opinion of Bond Counsel. In the opinion of Bowie, Arneson, Wiles & Giannone, Newport Beach, California, as Bond Counsel, subject, however, to certain qualifications described herein, under existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). In the further opinion of Bond Counsel interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum taxes imposed on individuals and corporations, although Bond Counsel observes that such interest is included as an adjustment in the calculation of federal corporate alternative minimum taxable income and may therefore affect a corporation’s alternative minimum tax liabilities.

The opinions of Bond Counsel set forth in the preceding paragraph are subject to the condition that the District complies with all requirements of the Code, that must be satisfied subsequent to the issuance of the Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The District has covenanted to comply with each such requirement.

Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. The Fiscal Agent Agreement and other related documents refer to certain requirements, covenants and procedures which may be changed and certain actions that may be taken, upon the advice or with an opinion of nationally recognized bond counsel. No opinion is expressed by Bond Counsel as to the effect on any Bond or interest thereon if any such change is made or action is taken upon the advice or approval of counsel other than Bond Counsel. Bond Counsel expresses no other opinion regarding or concerning any other tax consequences related to the ownership or disposition of the accrual or receipt of interest on the Bonds.

In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income taxation.

Owners of the Bonds should be aware that the ownership or disposition of, or the accrual or receipt of interest on the Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding or concerning any other tax consequences related to the ownership or disposition of the accrual or receipt of interest on the Bonds other than as expressly set forth above.

See “APPENDIX E” for the proposed form of the opinion of Bond Counsel.

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Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend any of the District, the School District, as applicable, or the Owners regarding the tax-exempt status of the Bonds in the event of an audit examination by the Internal Revenue Service. Under current procedures, parties other than the District or the School District, as applicable, including the Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt Bonds is difficult, obtaining an independent review of Internal Revenue Service positions with which the District legitimately disagrees may not be practicable. Any action of the Internal Revenue Service, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of Bonds presenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may cause the District, School District or the Owners to incur significant expense.

Original Issue Discount; Premium Bonds. To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Bonds is in the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of the Bonds with original issue discount, including the treatment of purchasers who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public.

The Bonds purchased, whether at original issuance or otherwise, for an amount greater than their principal amount payable at maturity (or, in some cases, at their earliest call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, a purchaser’s basis in a Premium Bond, and under Treasury Regulations, the amount of tax-exempt interest received, will be reduced by the amount of amortizable bond premium property allocable to such purchaser. Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption. Future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Owners of the Bonds from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation as to which Bond Counsel expresses no opinion.

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IRS Audit of Tax-Exempt Bond Issues. The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds).

Absence of Litigation

No litigation is pending or threatened concerning the validity of the Bonds. There is no action, suit or proceeding known by the District or the School District to be pending at the present time restraining or enjoining the delivery of the Bonds or in any way contesting or affecting the validity of the Bonds or any proceedings of the District or the School District taken with respect to the execution thereof. A no litigation certificate executed by the School District on behalf of the District will be delivered to the Underwriter simultaneously with the delivery of the Bonds.

CONCLUDING INFORMATION

No General Obligation of School District or District

The Bonds are not general obligations of the School District or the District, but are limited obligations of the District payable solely from the Net Taxes and certain amounts held under the Fiscal Agent Agreement. Any tax for the payment of the Bonds shall be limited to the Net Taxes to be collected within Improvement Area No. 1 of the District.

No Rating on the Bonds

The District has not made, and does not contemplate making, application to any rating agency for a rating on the Bonds.

Underwriting

The Bonds were sold to Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus (the “Underwriter”). The Underwriter is offering the Bonds at the prices set forth on the inside front cover page hereof. The initial offering prices may be changed from time to time and concessions from the offering prices may be allowed to dealers, banks and others. The Underwriter has purchased the Bonds at a price equal to $6,680,518.30, which amount represents the principal amount of the Bonds, less a net original issue discount of $12,884.20, and less an Underwriter’s discount of $91,597.50. The Underwriter will pay certain of its expenses relating to the offering.

Verifications of Mathematical Computations

Grant Thornton LLP will verify from the information provided to them the mathematical accuracy as of the date of the closing on the Bonds of (1) the computations contained in the provided schedules to determine that the cash deposits listed in the schedules prepared by the Financial Advisor, to be held in escrow, will be sufficient to pay, when due, the principal, redemption premium and interest requirements of the 2003 Bonds, and (2) the computation of yield on the Bonds contained in the provided schedules used by Bond Counsel in its determination that the interest with respect to the Bonds is exempt from federal taxation. Grant Thornton LLP will express no opinion on the assumptions provided to them, nor as to the exemption from taxation of the interest with respect to the Bonds.

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The Financial Advisor

The material contained in this Official Statement was prepared by the District with the assistance of the Financial Advisor, who advised the District as to the financial structure and certain other financial matters relating to the Bonds. The information set forth herein has been obtained from sources which are believed to be reliable, but such information is not guaranteed by the Financial Advisor as to accuracy or completeness, nor has it been independently verified. Fees paid to the Financial Advisor are contingent upon the sale and delivery of the Bonds.

Continuing Disclosure

The District will covenant in a Continuing Disclosure Certificate, in substantially the form attached hereto as “APPENDIX D,” for the benefit of the Owners of the Bonds, to provide annually certain financial information and operating data relating to the Bonds, and the District, and to provide notice of the occurrence of certain enumerated events all as set forth in more detail in “APPENDIX D.” The annual financial information and operating data are to be provided by the District not later than February 15 each year, commencing February 15, 2013. The District has a previous undertaking under Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”) with respect to the 2003 Bonds. In the previous five years, the District, the School District and other community facilities districts formed by the School District have complied timely with all their previous undertakings under the Rule, except that the School District’s annual audited financial statements for the year ended June 30, 2010 and the School District’s budget for Fiscal Year 2010/11 were provided by a link to the School District’s website. As of May 4, 2011, the June 30, 2010 audited financial statements and Fiscal Year 2010/11 budget had been posted on the Electronic Municipal Market Access website of the Municipal Securities Rulemaking Board and the District has provided such material as required by the Rule since that date.

Execution

The execution of this Official Statement by the District has been duly authorized by the Board of Education of the School District acting as the legislative body of the District.

COMMUNITY FACILITIES DISTRICT NO. 2002-1 OF THE TEMECULA VALLEY UNIFIED SCHOOL DISTRICT

By: /s/ Timothy Ritter Superintendent, Temecula Valley Unified School District on behalf of Community Facilities District No. 2002-1 of the Temecula Valley Unified School District

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APPENDIX A RATE AND METHOD OF APPORTIONMENT OF THE

SPECIAL TAX

TEMECULA VALLEY UNIFIED SCHOOL DISTRICT COMMUNITY FACILITIES DISTRICT NO. 2002-1

(IMPROVEMENT AREA NO. 1)

The Board of Education (“Board”) of the Temecula Valley Unified School District (“School District”), acting as the Legislative Body of Improvement Area 1 (the “Improvement Area”) of Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (“CFD” or “District”), shall levy and collect special taxes (“Special Taxes”) applicable to each Assessor’s Parcel (as defined below) located within the boundaries of the Improvement Area.

The Special Taxes will be levied as herein specified. All property located within the boundaries of the CFD shall be taxed, to the extent and in the manner herein set forth, unless exempted by law or as herein provided.

Section 1. Definitions

The following terms shall, unless otherwise defined herein, have the meaning(s) set forth below:

“Acre(s)” applies only to Undeveloped Property and means the acreage of an Assessor’s Parcel as set forth on the most current Riverside County assessor’s map if such acreage is shown thereon. If such acreage is not shown on such map, the acreage shall be the acreage information shown upon any recorded subdivision map, parcel map, record of survey, or other recorded document describing the property. If none of the above information is available, or is in conflict, the determination of the acreage shall be made by the School District on behalf of the District.

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

“Actual Average Annual Maximum Special Tax per Dwelling Unit” means the total Annual Maximum Special Tax – Developed Property revenue for all Dwelling Units for which Certificates of Compliance have been and are being requested for a Special Tax Area divided by the total number of Dwelling Units for which Certificates of Compliance have been and are being requested in the Special Tax Area.

“Administrative Expense” means any actual or estimated ordinary and necessary expense incurred by the School District on behalf of the CFD related to the determination, tracking, levy and collection of Special Taxes including, but not limited to, the expenses of collecting delinquencies, the administration of Bonds, the appropriate allocation of salaries and benefits of any School District employee whose duties are directly related to the administration of the CFD, and costs otherwise incurred in order to carry out the authorized purposes of the CFD.

“Annual Maximum Special Taxes” means the Annual Maximum Special Tax – Developed Property and the Annual Maximum Special Tax – Undeveloped Property which may be levied annually as described herein.

“Annual Maximum Special Tax - Developed Property” means the maximum Special Tax which may be annually levied on an Assessor’s Parcel that has been classified as Developed Property. The Annual Maximum Special Tax - Developed Property for a Dwelling Unit is not subject to the Index.

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“Annual Maximum Special Tax - Undeveloped Property” means the maximum Special Tax which may be annually levied on an Assessor’s Parcel that has been classified as Undeveloped Property as described in Section 3(B).

“Assessor’s Parcel” means a parcel of land as designated on an official map of the County Assessor and for which a discrete identifying parcel number has been assigned.

“Available Funds” means the following sources in those Fiscal Years in which the levy of Special Taxes on Undeveloped Property is required to satisfy the Special Tax Requirement. These sources are (i) earnings from investment of funds in the reserve fund in excess of the reserve requirement and (ii) Special Taxes and the proceeds of collections of delinquent Special Taxes through foreclosure proceedings or otherwise not required to fund Administrative Expenses, replenish the reserve fund or pay past due debt service.

“Board” means the Board of Education of the School District.

“Bonds” means bonds or equivalent securities authorized and issued or to be issued on behalf of the CFD, including but not limited to, certificates of participation or leases issued and sold by or on behalf of the CFD or which are to be funded by proceeds of Special Taxes of the CFD, or to which all or a portion of the Special Taxes have been pledged to finance School Facilities.

“Building Square Footage” means for any Assessor’s Parcel of Residential Property the square footage of each Dwelling Unit determined by calculating the habitable space of the improvement (exclusive of garages, carports, overhangs or patios). For purposes of this determination, the District may rely on the square footage as identified on the building permit(s) issued by the applicable issuing agency. The Building Square Footage will be based upon the building permit(s) issued for each Dwelling Unit prior to it being classified as Occupied Residential Property, and shall not change as a result of additions or modifications made after such classification as Occupied Residential Property.

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

“Certificate of Compliance” means the document prepared by the County or other public agency and signed off by the School District to allow for the issuance of a building permit pursuant to Education Code 17620 or any successor section thereto.

“Community Facilities District No. 2002–1 Special Tax Areas Map” means that map so designated and included as Exhibit “A” hereto.

“County” means the County of Riverside.

“Developed Property” means Assessor Parcels for which a building permit has been issued by the applicable agency on or before the March 1 prior to each Fiscal Year which is not Exempt Property and for which the Annual Maximum Special Tax - Developed Property obligation has not been fully prepaid and/or permanently satisfied. Assessor Parcels for which a building permit has been issued by the applicable agency on or before March 1 shall be designated as Developed Property and subject to the levy of the Annual Maximum Special Tax - Developed Property in the following Fiscal Year. If a building permit has been issued for which the improvements to be constructed by the building permit together with previously issued building permits, if applicable, does not constitute the ultimate development of the entire Assessor’s Parcel, as reasonably determined by the School District, the remaining undeveloped portion of the Assessor’s Parcel will be classified as Undeveloped Property and will be subject to the levy of the Annual Maximum Special Tax - Undeveloped Property as herein provided.

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“Dwelling Unit” means one residential unit or any configuration, including, but not limited to, a single family attached or detached dwelling unit, condominium, an apartment unit, mobile home, or otherwise, but excludes therefrom hotels and motels.

“Exempt Property” means all Assessor Parcels which are exempt from the Special Tax pursuant to law or Section 8, hereof.

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

“Index” means the annual percentage change in the statewide cost index employed by the State Allocation Board, or comparable index designated by the District if the Index ceases to be published for the preceding calendar year. The first increase shall occur March 1, 2002. The increase in the Index to be in effect for Fiscal Year 2002/03 shall be based upon the last available data as of March 1, 2002.

“Land Use Classification” means the land use classifications listed in Table 1.

“Mitigation Payment” means, for all property within Tract 28753, an amount per Dwelling Unit of $10,660 in 2001 dollars, escalated per the Index effective each March 1, commencing March 1, 2002. Mitigation Payment means, for all property within Tract 26828 an amount equal to the then current School District “Level II” fee calculated pursuant to Government Code Section 65995 et seq. or any successor section thereto, times 1.5 (i.e. 150%) per square foot per Dwelling Unit. In the event the School District no longer has adopted or has in force a Level II fee, the amount per square foot shall be equal to the School District’s last adopted Level II fee, as adjusted annually per the Index from the last date adopted and adjusted annually thereafter per the Index; or the then current School District’s Level I fee, calculated pursuant to Government Code Section 65995 et seq., or any successor section thereto, whichever is higher.

“Non-Residential Property” means all Developed Property within the Improvement Area for which a Certificate of Compliance is requested or has been issued for the purpose of constructing commercial, industrial or any other non-residential use.

“Occupied Residential Property” means all Assessor’s Parcels of Residential Property which have closed escrow to an end user (homeowner).

“One-Time Special Taxes” means: (1) the Special Tax which may be levied at the time of recordation of a final map as to the One-Time Special Tax - Undeveloped Property; (2) the Special Tax which may be levied at the time of Bond issuance as to the One-Time Special Tax – Developed Property – Facilities Funding Shortfall; (3) the Special Tax which may be levied at the time of issuance of a Certificate of Compliance, which includes: (a) the One-Time Special Tax – Developed Property – Mitigation Payment Index; (b) the One-Time Special Tax – Developed Property – Mitigation Payment Differential; (c) the One-Time Special Tax – Developed Property – Square Footage Shortfall; and, (d) the One-Time Special Tax – Developed Property – Second Dwelling Unit.

“Owner” means the Rancho Bella Vista, LLC, a limited liability company or their successors, or assigns.

“Required Average Annual Maximum Special Tax per Dwelling Unit” means the average annual required amount per Dwelling Unit for each Special Tax Area as shown on the Community Facilities District No. 2002-1 Special Tax Areas Map of $864.60 for Area 11A, $988.86 for Area 17B, $908.82 for Area 16A, $1,195.19 for Area 16C, $1,315.05 for Area 16D and $1,291.01 for Tract 26828, subject to adjustment pursuant to Section 4-A below.

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“Residential Property” means all Developed Property within the Improvement Area for which a Certificate of Compliance is requested or has been issued for the purpose of constructing one or more Dwelling Units.

“School District” means the Temecula Valley Unified School District.

“School Facilities” means the design, planning, acquisition, installation, construction and/or financing of interim and permanent facilities, including, but not limited to, classrooms, multi-purpose, administration and auxiliary space at a school, central support and administrative facilities and special education facilities, together with furniture, equipment and technology, needed by the School District in order to serve the project students, in addition to all land or interests in land required for the construction of such on-site or off-site facilities and all land or interests in land required to be provided by the School District as mitigation of impacts associated with the development of such School Facilities all with a useful life of five years or longer.

“Second Dwelling Unit” means a Dwelling Unit that is determined by the criteria of the County from time to time to be classified as a second dwelling unit. The current requirements are 1) the unit is a detached secondary building, and 2) the unit is larger than 1/50th of the entire parcel, and 3) the unit has its own cooking facilities.

“Special Tax” or “Special Taxes” means the special tax to be levied in each Fiscal Year on each Assessor Parcel of Developed Property and Undeveloped Property pursuant to Section 3, and the One-Time Special Taxes collected pursuant to Section 4, if any, of this Rate and Method of Apportionment.

“Special Tax Area” means the geographical areas as shown on the Special Tax Areas Map included as Exhibit “A”.

“Special Tax Requirement” means the total amount required in any Fiscal Year, pursuant to the CFD Bond documents to: (1) Pay annual debt service on all then outstanding Bonds, (2) Pay periodic costs on the Bonds including, but not limited to, credit enhancement and rebate payments on the Bonds, (3) Pay Administrative Expenses, (4) Pay any amounts required to replenish any reserve fund related to all then-outstanding Bonds, and (5) Pay for pay-as-you-go School Facilities with a useful life of five years or longer the benefit of which inures to the benefit of the properties within the Improvement Area, less (6) Available Funds. The addition of any of the amounts added pursuant to item (5) is only to the extent that it does not increase or cause the levy of the Annual Maximum Special Tax - Undeveloped Property.

“Taxable Property” means all Assessor Parcels, except Exempt Property, that are subject to the levy of the Special Taxes.

“Undeveloped Property” means all Assessor Parcels that are not classified as Developed Property or Exempt Property.

Section 2. Assignment to Land Use Classifications

The District shall annually classify all Assessor Parcels within the boundaries of the Improvement Area as Developed Property, Undeveloped Property or Exempt Property. Such classification shall be made on or before July 1 of each year. All Developed Property shall be assigned to one of the applicable designated Land Use Classifications listed in Table 1 and taxed as set forth in Table 2. For purposes of this determination, the District may rely on the Building Square Footage as identified on the building permit(s) issued by the applicable issuing agency. Undeveloped Property shall be taxed as set forth in Section 3(B) below.

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Table 1 Land Use Classifications for Developed Property

Land Use Classification

Description

Type of Development Building Square Footage

1 Residential Dwelling Unit Less than 2,000 square feet

2 Residential Dwelling Unit 2,000 to 2,249 square feet






8 Residential Dwelling Unit 3,500 square feet or greater

Section 3. Annual Maximum Special Taxes

A. Annual Maximum Special Tax - Developed Property

The Annual Maximum Special Tax - Developed Property for each Assessor Parcel classified as Developed Property shall be the amount determined by reference to Table 2 as applicable.

Table 2 Annual Maximum Special Tax - Developed Property

Fiscal Year 2001/02 per Land Use Classification

Land Use Classification

Annual Maximum Special Tax – Developed Property Fiscal Year 2001-02

1 $827.64 per Dwelling Unit



4 $1,079.06 per Dwelling Unit





B. Annual Maximum Special Tax - Undeveloped Property

The Annual Maximum Special Tax - Undeveloped Property for each Assessor Parcel classified as Undeveloped Property shall be $8,860.00 per Acre.

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Section 4. One-Time Special Taxes

The purpose, method of calculating, and timing of payment of the One-Time Special Taxes are as described below.

A. One-Time Special Tax - Undeveloped Property

Summary: The purpose of the One-Time Special Tax - Undeveloped Property is to guard against the loss of projected Dwelling Units in Special Tax Areas with a Prepayment Land Use Classification as identified on Table 3 of 4 through 7 prior to the issuance of Bonds and in all Special Tax Areas after the issuance of Bonds. In addition, the One-Time Special Tax – Undeveloped Property guards against the loss of revenue from a gain in the number of Dwelling Units in Special Tax Areas with a Prepayment Land Use Classification as identified in Table 3 of 1 through 3. The calculation is done by the District administrator prior to or at the recording of each final map. Payment of the applicable One-Time Special Tax – Undeveloped Property is due at the recording of the final map but no later than the first Certificate of Compliance issued for property within the final map, if conditions described below so warrant.

All of the future development within the Improvement Area has been divided into six Special Tax Areas. These Special Tax Areas are as shown on the Special Tax Areas Map. Each Special Tax Area has been assigned a number of Dwelling Units as shown in Table 3. At the recordation of each final subdivision or parcel map the area encompassed by the final map is compared by the District administrator to the Special Tax Areas Map and the information in Table 3. If the number of Dwelling Units for the Special Tax Area indicated on the final map is less than that shown in Table 3 prior to the issuance of Bonds, a One-Time Special Tax - Undeveloped Property for those Special Tax Areas identified with a Prepayment Land Use Classification – DU Loss in Table 3 below of 4, 5, 6, 7, or 8 is due for each Dwelling Unit lost (i.e. less than the designated number of Dwelling Units). If the number of Dwelling Units for the Special Tax Area indicated on the final map is less than that shown in Table 3 after the issuance of Bonds, a One-Time Special Tax - Undeveloped Property is due for each Dwelling Unit lost (i.e. less than the designated number of Dwelling Units).

The payment of the One-Time Special Tax – Undeveloped Property per Dwelling Unit lost is due to the District by the owner of the property within such final map at the time of the recording of the final map. Should the final map record without the obligation being paid, the outstanding obligation is not forgiven and must be paid prior to the issuance of the first, or any additional, Certificates of Compliance being issued for the owner of the property within such final map area.

Table 3 Assigned Dwelling Units per Special Tax Area

Tentative Tract Map Phasing

Special Tax Area Number of Assigned Dwelling Units

Prepayment Land Use Class

DU Loss DU Gain

28753 Area 11A 108 2 1

28753 Area 17B 114 4 1

28753 Area 16A 76 3 1

28753 Area 16C 85 6 4

28753 Area 16D 68 7 5

26828 Total Area 130 7 5

Total 581

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The amount of the One-Time Special Tax - Undeveloped Property which is due per Dwelling Unit lost prior to the issuance of Bonds for those Special Tax Areas with a Prepayment Land Use Classification – DU Loss of 4, 5, 6, 7, or 8 is calculated by the District administrator by inserting the difference between the Annual Maximum Special Tax – Developed Property for the Prepayment Land Use Class – DU Loss and $1,090.69 into the prepayment formula set forth in Section 7. The amount of the One-Time Special Tax - Undeveloped Property which is due per Dwelling Unit lost after the issuance of Bonds is calculated by inserting the Annual Maximum Special Tax – Developed Property for the Prepayment Land Use Class – DU Loss per Special Tax Area as shown above in Table 3 into the prepayment formula set forth in Section 7. The amount of the One-Time Special Tax - Undeveloped Property which is due per Dwelling Unit gained after the issuance of Bonds for those Special Tax Areas with a Prepayment Land Use Classification – DU Gain of 1, 2, or 3 is calculated by inserting the difference between the Annual Maximum Special Tax – Developed Property for the Prepayment Land Use Class and $1,090.69 into the prepayment formula set forth in Section 7. When the amount of Dwelling Units shown on the final map is equal to the number shown in Table 3 above, no One-Time Special Tax - Undeveloped Property is due per Dwelling Unit. The District administrator shall have the authority and shall adjust the number of Dwelling Units in the appropriate Land Use Classification in Table 4 and update the definition of Required Average Annual Maximum Special Tax per Dwelling Unit due to any adjustment in the total number of Dwelling Units from that shown in Table 3 or, on a one-time basis immediately prior to the issuance on Bonds, due to a change in the mix of Dwelling Units among Land Use Classifications within a Special Tax Area, as provided in a written certification from the majority property owner within the Special Tax Area.

If the boundaries of any final map are not the same as the designated expected boundaries of a Special Tax Area as shown on the Special Tax Areas Map, the final map shall be evaluated by the District administrator in the context of the tentative map of which it is a part to determine whether the number of Dwelling Units contained in the final map may lead to an overall loss of Dwelling Units in that Special Tax Area as compared to Table 3. Should it appear that such a loss is likely, no Certificates of Compliance shall be issued for any Dwelling Units contained in the last final map that is recorded within the Special Tax Area until the One-Time Special Tax – Undeveloped Property is paid in full as described above.

After the sale of Bonds, the One-Time Special Tax – Undeveloped Property funds received by the CFD and due to a loss of Dwelling Units, less redemption premium and prepayment calculation fees shall be used to redeem the Bonds pursuant to the terms of the applicable Bond documents.

B. One-Time Special Tax - Developed Property – Facilities Funding Shortfall

Summary: The purpose of the One-Time Special Tax – Developed Property – Facilities Funding Shortfall is to insure the receipt per Dwelling Unit of the $10,660 in facilities dollars. The One-Time Special Tax – Developed Property – Facilities Funding Shortfall is calculated by the District administrator at the time Bonds are issued. If conditions described below so warrant, the One-Time Special Tax – Developed Property – Facilities Funding Shortfall is due to the District from the Owner concurrent with the closing of the issuance of Bonds.

The Special Tax Rates within the CFD have been established to fund a minimum facilities requirement in the amount of $10,660.00 per Dwelling Unit on average. At the time Bonds are issued the One-Time Special Tax – Developed Property – Facilities Funding Shortfall shall be calculated to determine that the required facilities dollars threshold of $10,660 has been reached. If it is not reached, a One-Time Special Tax – Developed Property – Facilities Funding Shortfall shall be calculated by the District administrator and is due from the Owner per Dwelling Unit as determined at the time of the sale of bonds concurrent with the closing of the issuance of Bonds. The number of Dwelling Units determined at the time of the sale of Bonds may be adjusted from that shown on Table 3 as described herein. The One-Time Special Tax – Developed Property – Facilities Funding Shortfall is due to the District on all Dwelling Units within the Improvement Area, including, those with Certificates of Compliance and those without

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Certificates of Compliance as of the date of the Bond sale. If the Owner, as defined, does not pay the One-Time Special Tax – Developed Property – Facilities Funding Shortfall the burden of payment will be prorated by the District administrator by the Dwelling Units shown in Table 3, as adjusted, and due from the then Undeveloped Property owner(s) in each Special Tax Area. Until payment is received for all Undeveloped Property with common ownership no additional Certificates of Compliance shall be issued for the property owned by such Undeveloped Property owner.

The calculation of the One-Time Special Tax – Developed Property – Facilities Funding Shortfall is determined by taking the amount of funds deposited in the school facilities funding account as detailed in the Bond documents and dividing such amount by the total number of Dwelling Units shown in Table 3, as adjusted if required. Should the result of this division result in a figure less than $10,660, the difference, up to $10,660, shall be multiplied by the total number of Dwelling Units shown in Table 3, as adjusted if required.

C. One-Time Special Tax – Developed Property – Mitigation Payment Index

Summary: The purpose of the One-Time Special Tax – Developed Property – Mitigation Payment Index is to collect the indexing of the Mitigation Payment for Tract 28753. The One-Time Special Tax – Developed Property – Mitigation Payment Index is calculated annually by the District administrator as early as possible before March 1 starting March 1, 2002. The difference in the escalated Mitigation Payment for Dwelling Units within Tract 28753 and $10,660 is transmitted to the School District prior to March 1st of each year. This difference is collected by the School District at the issuance of a Certificate of Compliance for each Dwelling Unit.

The Special Tax rates within the Improvement Area have been established to fund a minimum facilities requirement in the amount of $10,660.00 per Dwelling Unit on average. This facilities requirement has been escalated per the Mitigation Agreement to March 2001. Each March 1st, starting March 1, 2002, the Mitigation Payment is subject to the Index. The difference in the then-current Mitigation Payment and $10,660 is the One-Time Special Tax – Developed Property – Mitigation Payment Index per Dwelling Unit. The One-Time Special Tax – Developed Property – Mitigation Payment Index per Dwelling Unit is due prior to the issuance of each Certificate of Compliance by the party requesting the Certificate of Compliance.

D. One-Time Special Tax – Developed Property – Mitigation Payment Differential

Summary: The purpose of the One-Time Special Tax – Developed Property – Mitigation Payment Differential is to collect the difference between the then-current Mitigation Payment and $10,660 for Tract 26828. The One-Time Special Tax – Developed Property – Mitigation Payment Differential is calculated and collected by the School District at the issuance of each Certificate of Compliance for Dwelling Units with Tract 26828.

The Special Tax rates within the Improvement Area have been established to fund a minimum facilities requirement in the amount of $10,660.00 per Dwelling Unit on average. The Mitigation Payment for Tract 26828 is the then current School District “Level II” fee as calculated pursuant to Government Code Section 65995 et seq., or any successor section thereto, times 1.5 (i.e. 150%) per square foot per Dwelling Unit. In the event the School District no longer has adopted or has in force a Level II fee, the amount per square foot shall be equal to the School District’s last adopted Level II fee as adjusted per the Index from the last date adopted and adjusted annually thereafter or the then current School District’s Level I fee, whichever is higher. The One-Time Special Tax – Developed Property – Mitigation Payment Differential per Dwelling Unit is the amount by which the Mitigation Payment applicable to Tract 26828 exceeds $10,660 and is due prior to the issuance of each Certificate of Compliance by the party requesting the Certificate of Compliance.

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E. One-Time Special Tax – Developed Property – Square Footage Shortfall

Summary: The purpose of the One-Time Special Tax – Developed Property – Square Footage Shortfall is to insure that the Annual Special Tax - Developed Property revenue meets the Required Average Annual Maximum Special Tax per Dwelling Unit per Special Tax Area. The School District shall track the issuance of Certificates of Compliance by Land Use Classification for each Special Tax Area. Should the number of Certificates of Compliance proposed to be issued, plus those previously issued, exceed the number shown in Table 4 below per Special Tax Area per Land Use Classification, the School District shall immediately contact the District administrator. The District administrator will calculate the amount of the One-Time Special Tax – Developed Property – Square Footage Shortfall as described below which amount shall be paid to the District prior to the issuance of the requested Certificates of Compliance.

The possible refund of any excess payments of the One-Time Special Tax – Developed Property – Square Footage Shortfall as described below shall be calculated by the District administrator on an annual basis or at build out of a Special Tax Area if requested by the developer of such Special Tax Area.

All of the future development within the Improvement Area has been divided into six Special Tax Areas and each Special Tax Area has been assigned a number of Dwelling Units and corresponding Land Use Classifications as shown on the Special Tax Areas Map attached hereto as Exhibit “A” and shown in Table 4 below (as potentially adjusted pursuant to Section 4(A) above). Should modifications be required pursuant to Section 4A above, corresponding modifications will be made by the District administrator to the definition of Required Average Annual Maximum Special Tax per Dwelling Unit. At the issuance of each Certificate of Compliance, or group of Certificates of Compliance, per Special Tax Area, each building permit will be assigned by the District administrator into its appropriate Land Use Classification. These Land Use Classifications will be tallied so that the total number of Dwelling Units per Land Use Classification per Special Tax Area is accumulated. At the time that the number of permits would, with the issuance of the Certificates of Compliance requested, equal or exceed the number of Dwelling Units assigned to a Land Use Classification per Special Tax Area, the Actual Average Annual Maximum Special Tax per Dwelling Unit shall be calculated by the District administrator. Should the Actual Average Annual Maximum Special Tax per Dwelling Unit per Special Tax Area, with the issuance of the proposed permits, be less than the Required Average Annual Maximum Special Tax per Dwelling Unit per Special Tax Area, the One-Time Special Tax – Developed Property – Square Footage Shortfall is due by the party requesting such Certificate of Compliance.

The amount of the One-Time Special Tax - Developed Property – Square Footage Shortfall which is due prior to the issuance of the requested Certificates of Compliance is the difference between the Required Average Annual Maximum Special Tax per Dwelling Unit for the Special Tax Area and the Actual Average Annual Maximum Special Tax per Dwelling Unit for the Special Tax Area. This amount is multiplied times the total number of building permits which have been issued and are proposed to be issued for the Special Tax Area with such result being inserted for the term “Annual Maximum Special Tax – Developed Property” in Section 7 of the prepayment formula. Any additional calculations of the One-Time Special Tax – Developed Property Square-Footage Shortfall after its initial calculation shall be reduced by the balance in the appropriate sub-account of the One-Time Special Tax fund, if any, as described below.

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Table 4 Assigned Dwelling Units per Land Use Classification

Land Use Class-

ification

Number of Dwelling Units

Area 11A

Area 17B

Area 16A

Area 16C

Area 16D

Tract 26828

Total

1 58 2 18 78

2 50 57 27 134

3 31 31

4 55 21 76

5 26 16 44 86

6 38 24 43 105

7 28 43 71

8 0

Total 108 114 76 85 68 130 581

All One-Time Special Tax – Developed Property – Square Footage Shortfall funds received by the CFD, less prepayment calculation fees, shall be deposited into one of six sub-accounts corresponding to the six identified Special Tax Areas under a One-Time Special Tax fund. All interest earnings in a sub-account of the One-Time Special Tax fund shall be retained in such sub-account.

When the final Certificates of Compliance are requested for all the remaining property proposed to be developed in a Special Tax Area, the final calculation of the Actual Average Annual Maximum Special Tax per Dwelling Unit shall be performed by the District administrator. The Board, on the advice of the District administrator, shall then determine the disposition of the funds in the corresponding subaccount of the One-Time Special Tax fund, if any, in accordance with the following procedure:

If the Actual Average Annual Maximum Special Tax per Dwelling Unit for the Special Tax Area is equal to or greater than the Required Average Annual Maximum Special Tax per Dwelling Unit for the Special Tax Area, the balance, if any, in the corresponding subaccount of the One-Time Special Tax fund shall be refunded to the payer(s) in the proportion to prior payments made upon written request of the payer(s) to the School District. In no event shall the request for payment be made in excess of twelve months past the date the last Certificate of Compliance is issued within the Special Tax Area. After the twelve month period these funds will be retained by the District.

If for a given Special Tax Area, the Actual Average Annual Maximum Special Tax per Dwelling Unit is less than the Required Average Annual Maximum Special Tax per Dwelling Unit for the Special Tax Area, the amount of such difference shall be multiplied by the total number of Dwelling Units with the result being inserted for the term “Annual Maximum Special Tax – Developed Property” in Section 7 of the prepayment formula. If the amount determined in the preceding sentence, is less than the balance, if any, in the corresponding sub-account of the One-Time Special Tax fund, the amount of such difference shall be refunded to the payer(s) in proportion to prior payments made upon written request of the payer(s) to the School District. In no event shall the request for payment be made in excess of twelve months past the date the last Certificate of Compliance is issued within the Special Tax Area.

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F. One-Time Special Tax – Developed Property - Second Dwelling Unit

Summary: The purpose of the One-Time Special Tax – Developed Property – Second Dwelling Unit is to collect the mitigation payment as set forth in the “Agreement for Mitigation of School Facility Impacts Between Temecula Valley Unified School District and Pacific Bay Homes” dated December 6, 1996. The determination and collection of such amount is to be made by the District at the time of the request for the issuance of a Certificate of Compliance for a Second Dwelling Unit.

If at any time a building permit is requested for a Dwelling Unit which can be further defined as a Second Dwelling Unit or a Second Dwelling Unit is included on the main building permit, a one-time payment is due from the party requesting the Certificate of Compliance at the time of building permit issuance equal to $7,687.00. The One-Time Special Tax – Developed Property - Second Dwelling Unit rate of $7,687.00 will annually increase per the Index.

Section 5. Levy of the Special Tax

Commencing in Fiscal Year 2002-03, the Board shall levy the Annual Maximum Special Tax - Developed Property on each Assessor’s Parcel which is classified as Developed Property. If additional monies are needed to satisfy the Special Tax Requirement, after taking into account monies to be levied on Developed Property pursuant to the preceding sentence, the Board shall then levy such difference proportionately on each Assessor’s Parcel which is classified as Undeveloped Property up to 100% of the Annual Maximum Special Tax – Undeveloped Property for such Undeveloped Property.

Section 6. Partial Prepayment of the Annual Maximum Special Tax - Developed Property

A property owner may make a one-time election to prepay a portion of the Annual Maximum Special Tax - Developed Property on an Assessor Parcel for which a Building Permit is requested by notifying the School District in writing of such intention no less than seven (7) business days prior to such Assessor Parcel obtaining a Certificate of Compliance. The written notification shall include such owner’s intent to partially prepay the Annual Maximum Special Tax - Developed Property, the date the Assessor Parcel is expected to request a Certificate of Compliance, a copy of the final map, the acres of each lot, the lot number(s) and Assessor Parcel Number(s) for which partial prepay is requested, the Building Square Footage of the Dwelling Unit(s) and the percentage by which the Annual Maximum Special Tax - Developed Property shall be prepaid. If partial prepayment is requested on a limited number of Assessor Parcels of a group which will be requesting Certificates of Compliance, the above required information must be supplied on all Assessor Parcels which will be requesting Certificates of Compliance. The partial prepayment formula per dwelling unit is defined as follows:

Partial Prepayment Formula per Dwelling Unit: PP = (PVT x PCT) + F + RP

The variables can be described as: PP, meaning the partial prepayment amount per Dwelling Unit. PVT, meaning the present value of the current Annual Maximum Special Tax – Developed Property using a 6.50% interest rate, prior to the issuance of Bonds, and a term of 35 years. After the issuance of Bonds the interest rate used to calculate the present value will be based on the lesser of 6.5% or the Weighted Average Interest Rate on the Bonds. PCT, meaning the partial prepayment percent. F, meaning all prepayment fees, and RP, meaning redemption premium on the Bonds, if applicable. The partial prepayment percent shall be indicated in the notification described above. The meaning of the remainder of the terms are as defined in Section 7.

The District administrator shall provide the owner with a statement of the amount required per Dwelling Unit for the partial prepayment of the Annual Maximum Special Tax - Developed Property within ten (10) business days of the request and may charge a reasonable fee for providing this service. The payment of the partial prepayment of the Annual Maximum Special Tax - Developed Property is due prior to the issuance of the Certificate of Compliance for the Assessor Parcel.

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Notwithstanding the foregoing, no partial prepayment shall be allowed in the month of June or at all unless the amount of the Annual Maximum Special Tax - Developed Property that may be levied on all Taxable Property within the CFD both prior to and after the proposed partial prepayment is at least 1.1 times the annual debt service on the then-outstanding Bonds.

Section 7. Prepayment of the Annual Maximum Special Tax - Developed Property

An Assessor Parcel classified as Developed Property which is subject to the Annual Maximum Special Tax - Developed Property may prepay the entire outstanding Special Tax obligation at any time. The prepayment formula per Dwelling Unit is defined as follows:

Prepayment Formula: P = PVT + F + RP

The variables are described as: P, meaning the prepayment amount, PVT, meaning the present value of taxes, F, meaning all prepayment fees, and RP, meaning redemption premium on the Bonds if applicable. The PVT or present value of taxes means the present value of the Annual Maximum Special Tax - Developed Property applicable to the Assessor Parcel in each remaining Fiscal Year that such Special Taxes may be levied subsequent to the Fiscal Year in which the calculation is made. The present value of the Annual Maximum Special Tax - Developed Property is calculated by using an interest rate of 6.5% prior to the issuance of Bonds. After the issuance of Bonds the interest rate used to calculate the present value will be based on the lesser of 6.5% or the Weighted Average Interest Rate on the Bonds. The remaining Fiscal Years, or the term for the present value calculation, is calculated by subtracting the number of years, including the present Fiscal Year, the Assessor Parcel has been subject to the Annual Maximum Special Tax - Developed Property from thirty-five (35). The current year’s Special Taxes must be paid directly to the County and will not be accepted by the School District with the prepayment.

Prepayment fees or F means the fees of the School District, the fiscal agent and any consultants retained by the School District in connection with the prepayment calculations and redemption of the Bonds.

Redemption premium on the Bonds or RP means a prepayment premium as set forth in the Bond issuance documents for a mandatory redemption of the Bonds as of the prepayment date.

Bonds shall be redeemed in a manner such that the yield on the Bonds outstanding after the completion of the prepayment is as close as possible to the original yield on all of the Bonds.

Prepayments must be received prior to June 1 to be effective in the following Fiscal Year. In addition, any property owner prepaying his or her Annual Maximum Special Tax - Developed Property must also pay the present Fiscal Year levy and all delinquent special taxes, interest and penalties owing on the Assessor Parcel to the County of Riverside on which prepayment is being made, if any.

Section 8. Limitations

The CFD shall not levy any Special Taxes on properties conveyed or irrevocably dedicated to a public agency, land which is in the public right-of-way, unmanned utility easements which make utilization for other than the purpose set forth in the easement impractical, common areas, homeowners association property, private streets, school, parks, and open space lots provided that such properties within the Improvement Area classified as Exempt Property do not exceed 109.19 Acres. Except as set forth above, the Board shall not levy any Special Taxes on properties which are owned by the State of California, Federal or other local governments, except as otherwise provided in Sections 53317.3 and 53317.5 of the Act. Nonresidential Property shall not be subject to the levy of Special Taxes but are subject to applicable statutory fees.

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Section 9. Manner of Collection

The Annual Maximum Special Taxes will be collected in the same manner and at the same time as ordinary ad valorem real property taxes. The Annual Maximum Special Taxes shall be subject to the same penalties, procedures, sale and lien priority in any case of delinquency as provided for with ad valorem taxes. The collection of the Annual Maximum Special Taxes shall otherwise be subject to the provisions of the Act. The Board reserves the power to provide for alternative means of collection of Special Taxes as permitted by the Act.

Section 10. Term of the Special Taxes

The Annual Maximum Special Tax – Developed Property shall be levied for a period not to exceed either (i) thirty-five (35) years for each Dwelling Unit classified as Developed Property or (ii) until all Bonds have been retired and all School Facility requirements met as determined by the Board in its sole discretion, whichever is earlier.

Section 11. Review/Appeals Panel

The Board shall establish, as part of the proceedings and administration of CFD No. 2002-1, a Review/Appeals Panel. Any landowner who feels that the amount of the Special Tax, as to their Assessor’s Parcel, is in error may file a notice with the Review/Appeals Panel appealing the amount of the levy. The Review/Appeals Panel shall interpret this Rate and Method of Apportionment of the Special Taxes and make determinations relative to the annual administration of the Special Taxes and any landowner appeals, as herein specified. The time period used for calculating any refund shall be limited to the three (3) years proceeding the appeal.

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APPENDIX B

SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT

COMMUNITY FACILITIES DISTRICT NO. 2002-1 OF THE TEMECULA VALLEY UNIFIED SCHOOL DISTRICT

(IMPROVEMENT AREA NO. 1) SERIES 2012 SPECIAL TAX REFUNDING BONDS

The following is a brief summary of certain provisions of the Fiscal Agent Agreement relating to the above-referenced Series 2012 Special Tax Refunding Bonds. This summary is not intended to be definitive and is qualified in its entirety by reference to such Fiscal Agent Agreement for the complete terms of the Fiscal Agent Agreement. Copies of the Fiscal Agent Agreement are available upon request from the Temecula Valley Unified School District. DEFINITIONS The following are summaries of definitions of certain terms used in this Summary. All capitalized terms not defined in the Fiscal Agent Agreement or elsewhere in the Official Statement have the meaning(s) set forth in the Fiscal Agent Agreement. “2003 Agreement” means the fiscal agent agreement for the Prior Bonds. “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Section 53311, et seq., of the Government Code of the State. “Administrative Expense Fund” means the fund of that name established under and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Administrative Expense Requirement” means the amount of $25,000 as set forth in the Fiscal Agent Agreement. “Administrative Expenses” means the administrative costs with respect to the calculation and collection of the Special Taxes and any other costs related to the Bonds, and the refunding of the Prior Bonds, including the fees and expenses of the Fiscal Agent and any persons, parties, consultants or attorneys employed pursuant to the Fiscal Agent Agreement, costs and legal expenses of foreclosure actions undertaken pursuant to the terms of the Fiscal Agent Agreement to the extent not recovered pursuant to statutory authorization, or costs otherwise incurred by the District in order to carry out the authorized purposes of the Bonds, including statutory disclosure for the District and continuing disclosure obligations, rebate compliance, reporting requirements for Special Taxes of the District and “Administrative Expenses” as defined in the Rate and Method. “Annual Debt Service” means, with respect to any Outstanding Bonds, for each Bond Year, the sum of (a) the interest payable on such Bonds in such Bond Year, and (b) the principal amount of the Outstanding Bonds scheduled to be paid in such Bond Year. “Authorized Investments” means, subject to the Fiscal Agent Agreement, any of the following investments, if and to the extent the same are at the time legal for investment of the School District’s funds (with the Fiscal Agent entitled to rely upon the investment direction of the District as a determination that such investment is a legal investment):

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(a) United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest, and which have a maximum term to maturity not to exceed three years. (b) Obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, and which have a maximum term to maturity not to exceed three years, including:

‒‒ Export-Import Bank ‒‒ Farm Credit System Financial Assistance Corporation

‒‒ Rural Economic Community Development Administration (formerly the Farmers Home Administration)

‒‒ General Services Administration ‒‒ U.S. Maritime Administration ‒‒ Small Business Administration ‒‒ Government National Mortgage Association (GNMA) ‒‒ U.S. Department of Housing & Urban Development (PHA’s) ‒‒ Federal Housing Administration ‒‒ Federal Financing Bank. (c) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America, and which have a maximum term to maturity not to exceed three years: ‒‒ Senior debt obligations rated “Aaa” by Moody’s and “AAA” by Standard &

Poor’s issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC)

‒‒ Obligations of the Resolution Funding Corporation (REFCORP) ‒‒ Senior debt obligations of the Federal Home Loan Bank System. (d) Registered state warrants or treasury notes or bonds of the State, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the State or by a department, board, agency, or authority of the State, which are rated in one of the two highest short-term or long-term rating categories by Moody’s or Standard & Poor’s. (e) Registered bonds, notes, warrants or other evidences of indebtedness of any local agency of the State, including bonds payable solely out of revenues from a revenue-producing property owned, controlled, or operated by the local agency, where the interest on such local agency obligation is exempt from Federal and State income taxes and which are rated in one of the two highest short-term or long-term rating categories by Moody’s or Standard & Poor’s. (f) Deposit accounts, time certificates of deposit or negotiable certificates of deposit issued by a state or nationally chartered bank or trust company, which may include the Fiscal Agent or its affiliates, or a state or federal savings and loan association; provided, that the certificates of deposit shall be one or more of the following:

(1) Continuously and fully insured by the Federal Deposit Insurance Corporation.

(2) Continuously and fully secured by securities described in clause (a) or (b) above which shall have a market value, as determined on a marked-to-market basis calculated at least weekly, and exclusive of accrued interest, or not less than 102 percent of the principal amount of the certificates of deposit.

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(g) Commercial paper of “prime” quality of the highest ranking or of the highest letter and numerical rating as provided by Moody’s and Standard & Poor’s, at the time of purchase, which commercial paper is limited to issuing corporations that are organized and operating within the United States of America and that have total assets in excess of $500,000,000 and that have an “A” or higher rating for the issuer’s debentures, other than commercial paper, by Moody’s and Standard & Poor’s, provided that purchases of eligible commercial paper may not exceed 180 days’ maturity nor represent more than 10% of the outstanding commercial paper of an issuing corporation. Purchases of commercial paper may not exceed 20% of the net proceeds of the Bonds. (h) A repurchase agreement with a state or nationally chartered bank or trust company or a national banking association or government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York the long term debt of which is rated at least “AA” by Standard & Poor’s or “Aa1” by Moody’s, provided that all of the following conditions are satisfied:

(1) the agreement is secured by any one or more of the securities described in clause (a) above of this definition of Authorized Investments (“Underlying Securities”);

(2) the Underlying Securities are required by the repurchase agreement to be

held by a bank, trust company, or primary dealer having a combined capital and surplus of at least $100,000,000 and which is independent of the issuer of the repurchase agreement (“Holder of Collateral”) and the Underlying Securities have been transferred to the Holder of Collateral in accordance with applicable state and federal laws (other than by means of entries on the transferor’s books);

(3) the Underlying Securities are maintained at a market value, as determined on

a marked-to-market basis calculated at least weekly, of not less than 103 percent of the amount so invested and at such levels and additional conditions not otherwise in conflict with the terms above as would be acceptable to Standard & Poor’s and Moody’s so as to maintain, respectively, an “AA” or “Aa1” rating in an “AA” or “Aa1” rated structured financing (with a market value approach); and

(4) the agreement provides that if during its term the provider’s rating by Moody’s and Standard & Poor’s is withdrawn or suspended or falls below “A-” by Standard & Poor’s or “A3” by Moody’s, as appropriate, the provider must within 10 days of receipt of direction from the Fiscal Agent, repurchase all collateral and terminate the agreement, with no penalty or premium to the District or Fiscal Agent. (i) Investment agreements with a domestic or foreign bank or corporation (other than a life or property casualty insurance company) the long-term debt of which, or, in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of the guarantor is rated at least “AA” by S&P and “Aa” by Moody’s; provided that, by the terms of the investment agreement:

(1) Interest payments are to be made to the Fiscal Agent at times and in amounts as necessary to pay debt service on the Bonds.

(2) The invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days’ prior notice; the District and the Fiscal Agent hereby agree to give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid.

(3) The investment agreement shall state that it is the unconditional and general

obligation of, and is not subordinated to any other obligation of, the provider thereof or, if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments

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thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors.

(4) The District and the Fiscal Agent receives the opinion of domestic counsel (which opinion shall be addressed to the District) that such investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and of foreign counsel (if applicable).

(5) The investment agreement shall provide that if during its term

(A) the provider’s rating by either S&P or Moody’s falls below “AA-” or “Aa3,” respectively, the provider shall, at its option, within 10 days of receipt of publication of such downgrade, either (i) collateralize the investment agreement by delivering or transferring in accordance with applicable state and federal laws (other than by means of entries on the provider’s books) to the District, the Fiscal Agent or a third party acting solely as agent therefore (“Holder of the Collateral”) collateral free and clear of any third-party liens or claims the market value of which collateral is maintained at levels and upon such conditions as would be acceptable to S&P and Moody’s to maintain an “A” rating in an “A” rated structured financing (with a market value approach); or (ii) repay the principal of and accrued but unpaid interest on the investment; and

(B) the provider’s rating by either S&P or Moody’s is withdrawn or suspended or falls below “A-” or “A3,” respectively, the provider must, at the direction of the District or the Fiscal Agent, within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the District or Fiscal Agent.

(6) The investment agreement shall state and an opinion of counsel shall be rendered, in the event collateral is required to be pledged by the provider under the terms of the investment agreement, at the time such collateral is delivered, that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession).

(7) The investment agreement must provide that if during its term

(A) the provider shall default in its payment obligations, the provider’s obligations under the investment agreement shall, at the direction of the District or the Fiscal Agent, be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the District or Fiscal Agent, as appropriate; and

(B) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the provider’s obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the District or Fiscal Agent, as appropriate. (j) A taxable or tax exempt government money market portfolio mutual fund restricted to obligations with either maturities of one year or less or a dollar weighted average maturity of 120 days or less, and either issued, guaranteed or collateralized as to payment of principal and interest by the full faith and credit of the United States of America or rated in one of the three highest categories by Moody’s or Standard & Poor’s. Such money market funds may include funds for which the Fiscal Agent, its affiliates or subsidiaries provide investment advisory or other management services. (k) The Local Agency Investment Fund referred to in Section 16429.1 of the Government Code of the State to the extent the Fiscal Agent may deposit and withdraw funds directly.

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“Authorized Representatives” or “District Representatives” means an officer or employee of the School District authorized to provide written directives on behalf of the District, which shall include the School District’s Superintendent, Assistant Superintendent of Business Support Services, and such other persons as shall be designated in writing by the Superintendent of the Assistant Superintendent of Business Support Services. “Board” means the Board of Education of the Temecula Valley Unified School District. “Bond” or “Bonds” means the Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (Improvement Area No. 1) Series 2012 Special Tax Refunding Bonds issued pursuant to the terms of the Fiscal Agent Agreement and any Supplements. “Bond Counsel” means a firm of nationally recognized bond attorneys, initially Bowie, Arneson, Wiles & Giannone. “Bond Fund” means the fund of that name established under and held by the Fiscal Agent pursuant the Fiscal Agent Agreement. “Bond Register” means the books which the Fiscal Agent shall keep or cause to be kept on which the registration and transfer of the Bonds shall be recorded. “Bond Year” means each twelve month period extending from September 2 in one calendar year to September 1 of the succeeding calendar year, except in the case of the initial Bond Year which shall be the period from the Delivery Date to September 1, 2012, both dates inclusive. “Bondowner(s)” or “Owner(s)” means the person or persons in whose name or names any Bond is registered. “Business Day” means a day which is not a Saturday or a Sunday or a day on which banks in Los Angeles, California and New York, New York are not required or permitted to be closed. “Code” means the Internal Revenue Code of 1986, as amended, and any successor provisions thereto. “Community Facilities District Policy” means that policy adopted by the School District on June 20, 2000, pursuant to the Act, as such policy may be amended from time to time. “Continuing Disclosure Certificate” shall mean that certain Continuing Disclosure Certificate provided by the School District on behalf of the District, dated the Delivery Date, as originally executed and as it may be amended from time to time in accordance with the terms of the Fiscal Agent Agreement. “Costs of Issuance” means items of expense payable or reimbursable directly or indirectly by the District or School District and related to the authorization, sale and issuance of the Bonds, which items of expense shall include, but not be limited to, printing costs, cost of reproducing and binding documents, closing costs, appraisal costs, filing and recording fees, fees and expenses of counsel to the District or School District, initial fees and expenses of the Fiscal Agent and the Escrow Agent, including its first annual administration fee and fees of its counsel, expenses incurred by the District and the School District in connection with the issuance of the Bonds, legal fees and charges, including Bond Counsel, Disclosure Counsel, verification agent fees, financial consultants’ fees, charges for execution, transportation and safekeeping of the Bonds and other costs, charges and fees in connection with the foregoing. “Costs of Issuance Fund” means the fund of that name established under and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement.

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“Dated Date” or “Delivery Date” means August 14, 2012, the date the Bonds are delivered. “Depository” means any depository which holds Bonds pursuant to the terms of the Fiscal Agent Agreement, initially, with respect to the Bonds, DTC. “Disclosure Counsel” means a firm of nationally recognized disclosure counsel, initially McFarlin & Anderson LLP. “Dissemination Agent” means Special District Financing & Administration, or any successor dissemination agent appointed by the District pursuant to the Continuing Disclosure Certificate. “District” or “CFD No. 2002-1” means Community Facilities District No. 2002-1 of the Temecula Valley Unified School District. “DTC” means The Depository Trust Company, 55 Water Street, 25th Floor, New York, New York, 10041-0099, Attn: Call Notification Department, Fax: (212) 855-5004. “Election” means the election defined in the Fiscal Agent Agreement. “Escrow Agent” means U. S. Bank National Association, and any successor thereto duly appointed and serving pursuant to the terms of the Escrow Agreement. “Escrow Agreement” means the agreement providing for the redemption and defeasance of the Prior Bonds, dated as of the Delivery Date, executed by and between the District and U.S. Bank National Association, as Escrow Agent. “Escrow Fund” means that certain escrow fund established pursuant to the Escrow Agreement. “Excess Investment Earnings” shall mean an amount equal to the sum of: (i) the excess of:

(A) the aggregate amount earned from the Delivery Date on all Nonpurpose Investments in which Gross Proceeds are invested (other than amounts attributable to an excess described in this subparagraph (i)), over

(B) the amount that would have been earned if the yield on such Nonpurpose Investments (other than amounts attributable to an excess described in this subparagraph (i)) had been equal to the Yield on the Bonds,

plus

(ii) any income attributable to the excess described in paragraph (i). In determining the amount of Excess Investment Earnings, there shall be excluded any amount earned on any fund or account which is used primarily to achieve a proper matching of revenues and annual debt service on the Bonds during each Bond Year and which is depleted at least once a year except for a reasonable carryover amount not in excess of the greater of one year’s earnings on such fund or account or one-twelfth (1/12) of annual debt service on the Bonds, as well as amounts earned on said earnings. The District intends that the Bond Fund, including the Principal Account and the Interest Account established therein, the Special Tax Fund and the Redemption Fund will be the type of funds described in the preceding sentence.

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“Federal Securities” means either of the following which are non-callable and which at the time of investment are legal investments under the laws of the State for funds held by the Fiscal Agent:

(i) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the United States Department of the Treasury) and obligations, the payment of principal of and interest on which are directly or indirectly guaranteed by the United States of America, including, without limitation, such of the foregoing which are commonly referred to as “stripped” obligations and coupons; or

(ii) any of the following obligations of the following agencies of the United States of America: (i) direct obligations of the Export-Import Bank, (ii) certificates of beneficial ownership issued by the Farmers Home Administration or its successor agency, (iii) participation certificates issued by the General Services Administration, (iv) mortgage-backed bonds or pass-through obligations issued and guaranteed by the Government National Mortgage Association, (v) project notes issued by the United States Department of Housing and Urban Development, and (vi) public housing notes and bonds guaranteed by the United States of America. “Fiscal Agent” means U.S. Bank National Association, and its successors and assigns or any and other fiscal agent which may be appointed pursuant to the Fiscal Agent Agreement. “Fiscal Agent Agreement” means the Fiscal Agent Agreement, as amended or supplemented pursuant to the terms thereof. “Fiscal Year” means the period from July 1 to June 30 in any year. “Gross Proceeds” means any proceeds of the Bonds and any funds (other than proceeds of the Bonds) that are part of a reserve or replacement fund for the Bonds within the meaning of Section 1.148-8T(d) of the Regulations. “Gross Taxes” means the amount of all Special Taxes collected within Improvement Area No. 1 of the District and net proceeds from the sale of property collected pursuant to the foreclosure provisions of the Fiscal Agent Agreement for the delinquency of the Special Taxes. “Improvement Area No. 1” means Improvement Area No. 1 of Community Facilities District No. 2002-1 of the Temecula Valley Unified School District. “Independent Financial Consultant” means a consultant or firm of such consultants generally recognized to be qualified in the field of implementation and administration of community facilities districts, or the financial consulting field, appointed and paid by the District and who, or each of whom:

(1) is independent of the District and the School District or any of the property owners within the District;

(2) does not have any substantial interest, direct or indirect, with the District or any of

the property owners within the District; and (3) is not connected with the District as a member, officer or employee of the District or

with any of the property owners within the District, but who may be regularly retained to make annual or other reports to the District or the School District.

“Interest Account” means the account of that name established under and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement.

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“Interest Payment Date” means March 1 and September 1 of each year during which Bonds are Outstanding, commencing March 1, 2013. “Legislative Body” means the Board of the School District, acting as the legislative body of the District. “Mandatory Redemption Account” means the account of that name established under and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Mandatory Sinking Payments” means the amounts to be applied to the redemption of the Bonds in accordance with the schedule set forth in the Fiscal Agent Agreement and any subsequent schedule set forth in any Supplement. “Maximum Annual Debt Service” means the maximum sum obtained for any remaining Bond Year prior to the final maturity on the Bonds by totaling the following for each Bond Year:

(1) the principal amount of all Outstanding Bonds maturing and payable in such Bond Year at maturity; and

(2) the interest payable on the aggregate principal amount of Bonds Outstanding in such Bond Year assuming the Bonds are retired as scheduled. “Moody’s” means Moody’s Investors Services and its successors. “National Information Service” means the Electronic Municipal Market Access (EMMA) system of the Municipal Securities Rulemaking Board (MSRB), 1900 Duke Street, Suite 600, Alexandria, Virginia 22314, or such other electronic system designated by the MSRB or the Securities and Exchange Commission, or as may be designated by the District in a certificate delivered to the Fiscal Agent. “Net Taxes” means the amount of all Gross Taxes minus the Administrative Expense Requirement. “Nonpurpose Investments” means any security, investment, obligation, annuity, investment-type property, specified private activity bond or any other type of investment property defined in Section 148 of the Code in which Gross Proceeds are invested (other than tax-exempt securities which are described in Section 103(a) of the Code) and which is not acquired to carry out the governmental purpose of the Bonds. “Optional Redemption Account” means the account of that name established under and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Ordinance” means Ordinance No. 2002-03/3 adopted by the Legislative Body of the District on February 4, 2003. “Outstanding” means all Bonds theretofore issued by the District, except:

(1) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation;

(2) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds

shall have been authenticated and delivered by the Fiscal Agent pursuant to the Fiscal Agent Agreement; and

(3) Bonds paid and discharged pursuant to the Fiscal Agent Agreement.

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“Participating Underwriter” shall have the meaning(s) ascribed thereto in the Continuing Disclosure Certificate. “Prepaid Special Taxes” means all Special Taxes prepaid to the District pursuant to the Resolution of Formation, less related Administrative Expenses. “Prepayment Account” means the account of that name established under and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Principal Account” means the account of that name established under and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Principal Corporate Trust Office” means the corporate trust office of the Fiscal Agent, which, at the date of execution of the Fiscal Agent Agreement, is located at 633 West Fifth Street, 24th Floor, Los Angeles, California 90071 Attention: Corporate Trust Services, or such other offices as the Fiscal Agent may designate from time to time; provided, however that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term shall mean the office or agency of the Fiscal Agent at which, at any particular time, its corporate trust agency business shall be conducted. “Prior Bonds” means the Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (Improvement Area No. 1) 2003 Special Tax Bonds, delivered on August 21, 2003, issued in the initial par amount of $7,615,000, and presently outstanding in the aggregate principal amount of $6,620,000. “Prior Fiscal Agent” means the current fiscal agent under the 2003 Agreement, U.S. Bank National Association. “Purchase Price” for the purpose of computation of the Yield of the Bonds, has the same meaning as the term “issue price” in Sections 1273 (b) and 1274 of the Code, and, in general, means the initial offering price to the public (not including bond houses and brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of the Bonds are sold or, if the Bonds are privately placed, the price paid by the original purchaser or the acquisition cost of the original purchaser. The term “Purchase Price,” for the purpose of computation of the Yield of Nonpurpose Investments, means the fair market value of the Nonpurpose Investments on the date of use of Gross Proceeds for acquisition thereof, or, if later, on the date that Investment Property (as defined in Section 148(b)(2) and (3) of the Code) constituting a Nonpurpose Investment becomes a Nonpurpose Investment of the Bonds, as the case may be. “Rate and Method” means the “Rate and Method of Apportionment of the Special Tax – Temecula Valley Unified School District, Community Facilities District No. 2002-1 (Improvement Area No. 1)” adopted by the Resolution of Formation and approved by the qualified electors at the Election, to be levied and collected with Improvement Area No. 1 pursuant to the Ordinance. “Rebate Fund” means the fund of that name established under and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Record Date” means the 15th day of the calendar month preceding an Interest Payment Date whether or not such day is a Business Day. “Redemption Fund” means the fund of that name established under and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement.

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“Regulations” means any temporary, proposed or final regulations of the United States Department of Treasury with respect to obligations issued pursuant to Section 103 and Sections 141 to 150 of the Code. “Representation Letter” means such letter in the form prescribed by the Depository in order to qualify for the Depository’s book-entry system. “Reserve Fund” means the fund of that name established under and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Reserve Requirement” means with respect to the Bonds an amount, as of any date of calculation, equal to the least of (i) 10% of the original principal amount of the Bonds, (ii) Maximum Annual Debt Service, or (iii) 125% of average Annual Debt Service on the Bonds. “Resolution of Formation” or “Formation Resolution” has the meaning set forth in the Fiscal Agent Agreement. “Responsible Officer” of the Fiscal Agent means and includes the president, every senior vice president, every vice president, every assistant vice president, every trust officer or any other authorized officer of the Fiscal Agent at its Principal Corporate Trust Office. “School District” means the Temecula Valley Unified School District. “School Facilities” means the facilities as defined in the Bond Authorization Resolution, authorized to be designed, constructed, acquired, or installed by the District. “Securities Depositories” means DTC and in accordance with then-current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the District may designate in a certificate delivered to the Fiscal Agent. “Special Tax Fund” means the fund of that name established under and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Special Taxes” means the special taxes levied by the Board within Improvement Area No. 1 of the District pursuant to the Act, the Resolution of Formation, the Election and the Ordinance. “Standard & Poor’s” or “S&P” means Standard & Poor’s Ratings Group and its successors. “State” means the State of California. “Supplement” means any supplemental agreement amending or supplementing the Fiscal Agent Agreement. “Tax Certificate” means the certificate of that name to be executed by an authorized representative of the District on the Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. “Term Bond” mean the Bond maturing on September 1, 2033. “Underwriter” means Stifel Nicolaus & Company, Incorporated dba Stone & Youngberg, a Division of Stifel Nicolaus. “Yield” means that yield which, when used in computing the present worth of all payments of principal and interest (or other payments in the case of Nonpurpose Investments which require payments in a

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form not characterized as principal and interest) on a Nonpurpose Investment or on the Bonds produces an amount equal to the Purchase Price of such Nonpurpose Investment or the Bonds, as the case may be, all computed as prescribed in the applicable Regulations. ISSUANCE OF THE BONDS The Bonds are issued pursuant to the Act, the Resolution of Issuance and the Fiscal Agent Agreement in the amounts and maturities set forth in the Fiscal Agent Agreement (See “INTRODUCTION”). Limited Obligation The Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Net Taxes and amounts in certain funds and accounts created pursuant to the Fiscal Agent Agreement as specified therein. The Net Taxes are pledged for the payment of the Bonds pursuant to the terms of the Fiscal Agent Agreement. The Bonds and interest thereon are not payable from the general fund of the District or the School District. Except with respect to the Net Taxes, neither the credit nor the taxing power of the District or the School District is pledged for the payment of the Bonds or interest thereon, and no Owner of the Bonds may compel the exercise of the taxing power by the District or the School District or the forfeiture of any of their property. The principal of and interest on the Bonds and premiums upon the redemption of any thereof are not a debt of the District (except to the limited extent set forth in the Fiscal Agent Agreement) or the School District, the State nor any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge, charge, lien or encumbrance, upon any property or income, receipts or revenues of the District or the School District, except the Net Taxes and amounts held in certain funds and accounts created under the terms of the Fiscal Agent Agreement, which are pledged for the payment of the Bonds and interest thereon. Neither the members of the Legislative Body nor the Board nor any persons executing the Bonds are liable personally for the Bonds by reason of their issuance. Pursuant to the Act and the Fiscal Agent Agreement, the Bonds shall be equally payable from the Net Taxes without priority for number, date of the Bonds, date of sale, date of execution or date of delivery, and the payment of the interest on and principal of the Bonds and any premiums upon the redemption thereof shall be exclusively paid from the Net Taxes and amounts held in certain funds and accounts created thereunder as specified therein. All of the Net Taxes are hereby set aside for the payment of the Bonds, and such Net Taxes and any interest earned on the Net Taxes shall constitute a trust fund for the payment of the interest on and principal of the Bonds and so long as any of the Bonds or interest thereon are unpaid the Net Taxes and interest thereon shall not be used for any other purpose, except as permitted by the Fiscal Agent Agreement or any Supplement, and shall be held in trust for the benefit of the Bondowners and shall be applied pursuant to the Fiscal Agent Agreement, or any Supplement to the Fiscal Agent Agreement as modified pursuant to provisions therein. Notwithstanding any provision contained in the Fiscal Agent Agreement to the contrary, Net Taxes deposited in the Administrative Expense Fund and the Rebate Fund shall no longer be considered to be pledged to the Bonds, and the Administrative Expense Fund, the Rebate Fund and the Escrow Fund shall not be construed as trust funds held for the benefit of the Bondowners. In the event that the Fiscal Agent lacks sufficient amounts to make timely payment of principal and interest and premium upon redemption, if any, on the Bonds when due, such principal of and interest and premium on the Bonds shall be paid from available amounts held under the Fiscal Agent Agreement by the Fiscal Agent in the Bond Fund, Reserve Fund, Redemption Fund, and after disbursement thereunder, the Special Tax Fund (including all accounts of the foregoing funds) (but not including those amounts deposited in the Escrow Fund, Administrative Expense Fund and the Rebate Fund) in accordance with such terms without preference or priority of interest over principal or principal over interest, or of any installment of principal or

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interest over any other installment of principal or interest, ratably to the aggregate amount of such principal and interest. Nothing in the Fiscal Agent Agreement or any Supplement shall preclude the redemption of any Bonds subject to call and redemption prior to maturity, and payment of the Bonds from proceeds of refunding bonds issued under the Act as the same now exists or is hereafter amended, or under any other law of the State (See “SECURITY FOR THE BONDS – General”). Funds and Accounts The Fiscal Agent Agreement specifies funds and accounts to be maintained by the Fiscal Agent, as follows: Special Tax Fund - The Special Taxes and other amounts constituting Gross Taxes collected by the District within Improvement Area No. 1 at any time (exclusive of Prepaid Special Taxes received which shall be deposited into the Prepayment Account of the Special Tax Fund), shall be transferred no later than 10 days after receipt thereof to the Fiscal Agent and shall be held in trust in the Special Tax Fund (exclusive of the Administrative Expense Requirement) for the benefit of the Bondowners and shall, exclusive of the Prepaid Special Taxes, be transferred or applied to the funds and accounts in the priority set forth below and at the times and in the amounts and in accordance with the following and the terms of the Fiscal Agent Agreement: (a) to pay up to the Administrative Expense Requirement of $25,000 (paid through the Administrative Expense Fund), (b) interest on the Bonds (paid through the Interest Account of the Bond Fund), (c) principal payments due on the Bonds during the current Bond Year (payable from the Principal Account of the Bond Fund), (d) Mandatory Sinking Payments due on the Bonds during the current Bond Year (paid through the Sinking Fund Redemption Account of the Redemption Fund), (e) if, necessary, provide funds to replenish the Reserve Fund to the Reserve Requirement, and (f) provided all the amounts due in the current Bond Year are funded as described in (b)-(e) above, to the extent there are additional Administrative Expenses, to the Administrative Expense Fund in the amount specified in writing by the District required to bring the balance therein to the amount needed to pay such expenses. Any remaining Special Taxes and other amounts constituting Gross Taxes shall remain in the Special Tax Fund until the end of the Bond Year. Any remaining funds in the Special Tax Fund, which are not required to cure a delinquency in the payment of principal and interest on the Bonds (including payment of Mandatory Sinking Payments due during the current Bond Year), to restore the Reserve Fund to the Reserve Requirement, or to pay current or pending Administrative Expenses as provided for in the Fiscal Agent Agreement, shall, without further action by any party, be transferred by the Fiscal Agent to the District free and clear of any lien thereon for the purposes permitted by the District proceedings. Any funds which are required to cure any such delinquency shall be retained in the Special Tax Fund and expended or transferred, at the earliest possible date, for such purpose. (See “SECURITY FOR THE BONDS – Special Tax Fund”). Prepayment Account of the Special Tax Fund - Prepaid Special Taxes collected by the District within Improvement Area No. 1 (net of any costs of collection) shall be transferred, no later than 10 days after receipt thereof, to the Fiscal Agent and the District shall direct the Fiscal Agent to deposit the Prepaid Special Taxes in the Prepayment Account of the Special Tax Fund. The Prepaid Special Taxes shall be held in the Prepayment Account for the benefit of the Bondowners and shall be transferred by the Fiscal Agent to the Mandatory Redemption Account of the Redemption Fund to call Bonds on the next date for which notice can be given in accordance with the special mandatory redemption provisions as set forth in the Fiscal Agent Agreement. Administrative Expense Fund - Upon receipt of Gross Taxes and the written direction of the District, the Fiscal Agent shall first transfer from the Special Tax Fund to the Administrative Expense Fund the amount that the District has determined, and of which the District has notified the Fiscal Agent in writing prior to such transfer date, will be necessary to bring the balance in the Administrative Expense Fund to equal the amount specified by the District as necessary to meet Administrative Expenses until the collection of Special Taxes in

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the next Fiscal Year, subject to the maximum annual limit of the Administrative Expense Requirement of $25,000. Additional Administrative Expenses may be funded from additional deposits to the Administrative Expense Fund in accordance with the Fiscal Agent Agreement. Bond Fund - The Bond Fund (in which there is established an Interest Account and a Principal Account) is used to disperse payments of principal and interest to the Bondowners on each respective Interest Payment Date. Monies in the Interest Account are allocated to the payment of interest due on each Interest Payment Date and monies in the Principal Account are allocated to the repayment of principal on the Bonds on the corresponding Interest Payment Date (See “SECURITY FOR THE BONDS – Bond Fund”). Reserve Fund - There shall be maintained in the Reserve Fund an amount equal to the Reserve Requirement. Notwithstanding the foregoing, in the event of a redemption or partial defeasance of the Bonds, the Reserve Requirement shall in connection therewith be re-determined by the District and communicated to the Fiscal Agent in writing and any funds in excess of such re-determined Reserve Requirement shall be utilized as set forth in the Fiscal Agent Agreement. If Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment, a proportionate amount in the Reserve Fund (determined on the basis of the principal of Bonds to be redeemed and the original principal of the Bonds, but not in excess of the amount of funds available as a result of the re-determination of the Reserve Requirement) will be applied to the redemption of the Bonds as provided in the Fiscal Agent Agreement. Monies in the Reserve Fund shall be used solely for the purpose of (i) making transfers to the Bond Fund or Redemption Fund to pay the principal of, including Mandatory Sinking Payments, and interest on Bonds when due to the extent that monies in the Interest Account and the Principal Account of the Bond Fund or monies in the Sinking Fund Redemption Account are insufficient therefor; (ii) making any required transfer to the Rebate Fund pursuant to the Fiscal Agent Agreement upon written direction from the District, (iii) making any transfers to the Bond Fund or Redemption Fund in connection with prepayments of the Special Taxes; (iv) paying the principal and interest due on Bonds in the final Bond Year, and (v) application to the defeasance of Bonds in accordance with the Fiscal Agent Agreement. If the amounts in the Interest Account or the Principal Account of the Bond Fund and the Sinking Fund Redemption Account of the Redemption Fund are insufficient to pay the principal of, including Mandatory Sinking Payments, or interest on the Bonds when due, the Fiscal Agent shall, one Business Day prior to an Interest Payment Date, withdraw from the Reserve Fund for deposit in the Interest Account and the Principal Account of the Bond Fund, or the Sinking Fund Redemption Account of the Redemption Fund, monies necessary for such purpose. Following any transfer to the Interest Account or the Principal Account of the Bond Fund, or the Sinking Fund Redemption Account of the Redemption Fund, the Fiscal Agent shall notify the District of the amount needed to replenish the Reserve Fund to the Reserve Requirement and the District shall include such amount as is required at that time to correct such deficiency in the next Special Tax levy to the extent of the permitted maximum Special Tax rates. Monies in the Reserve Fund in excess of the Reserve Requirement (exclusive of Excess Investment Earnings) shall be withdrawn on each March 1 and transferred to the Interest Account of the Bond Fund, and any remaining excess shall be transferred to the Principal Account of the Bond Fund, or to the Sinking Fund Redemption Account of the Redemption Fund to the extent required to make any principal payment or Mandatory Sinking Payments on the next following September 1. The Fiscal Agent shall transfer Excess Investment Earnings from Reserve Fund earnings upon written direction of the District pursuant to the Fiscal Agent Agreement. Monies in the Reserve Fund shall be invested in accordance with the Fiscal Agent Agreement. (See “SECURITY FOR THE BONDS – Reserve Fund”). Redemption Fund - The Redemption Fund includes an Optional Redemption Account, Sinking Fund Redemption Account and Mandatory Redemption Account. Each of the redemption accounts is used for the temporary retention of monies allocated to the redemption of Bonds corresponding to that account. Monies in each such account shall be applied solely for such redemption purpose (See “THE BONDS - Redemption”).

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Rebate Fund - The Rebate Fund is established by the Fiscal Agent Agreement for the receipt and payment of arbitrage earnings to the United States government as required under the terms of the Fiscal Agent Agreement and the Tax Certificate. Investments - The Fiscal Agent shall maintain separate books and records regarding the investment of monies in any of the funds, accounts or subaccounts established pursuant to the Fiscal Agent Agreement. Authorized Investments shall be deemed at all times to be a part of such funds, accounts or subaccounts. Any loss resulting from such Authorized Investments shall be charged to such funds, accounts or subaccount. Subject to limitations set forth as to each of the funds or accounts set forth in the Fiscal Agent Agreement, the limitations as to maturities set forth in the Fiscal Agent Agreement and any additional limitations or requirements established by the District and consistent with the foregoing, the Fiscal Agent shall invest the amounts on deposit in all funds, accounts or subaccount in Authorized Investments as directed in writing by the District, subject to the restrictions set forth in the Fiscal Agent Agreement. Redemption of Bonds The Bonds are subject to optional redemption, mandatory sinking fund redemption, and special mandatory redemption from Prepaid Special Taxes in accordance with the terms of the Fiscal Agent Agreement (See “THE BONDS - Redemption”). Covenants So long as any of the Bonds issued pursuant to the Fiscal Agent Agreement are Outstanding and unpaid, the District makes the following covenants with the Owners under the provisions of the Act and the Fiscal Agent Agreement and any Supplement (to be performed by the District or its proper officers, agents or employees), which covenants are necessary, convenient and desirable to secure the Bonds; provided, however, that said covenants do not require the District to expend any funds or monies other than the Net Taxes or any monies deposited in the funds and accounts created under the Fiscal Agent Agreement and legally available therefor. Covenant 1. Punctual Payment. The District will duly and punctually pay, or cause to be paid, the principal of and interest on every Bond issued under the Fiscal Agent Agreement, together with the premium thereon, if any be payable, on the date, at the place and in the manner mentioned in the Bonds and in accordance with the Fiscal Agent Agreement and any Supplement to the extent Net Taxes are available therefor, and that the payments into the Bond Fund and the Reserve Fund will be made, all in strict conformity with the terms of the 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 any Supplement and of the Bonds issued thereunder, and that time of such payment and performance is of the essence of the District’s contract with the Bondowners. Covenant 2. Levy and Collection of Special Taxes. Subject to the maximum Special Tax rates, the District will comply with all requirements of the Act so as to assure the timely collection of the Special Taxes, including without limitation, the enforcement of delinquent Special Taxes. The District shall fix and levy the amount of Special Taxes within Improvement Area No. 1 required for the payment of principal of and interest on Outstanding Bonds becoming due and payable during the ensuing year including any necessary replenishment or expenditure of the Reserve Fund for the Bonds, an amount equal to the Administrative Expense Requirement and any additional amounts necessary for expenses incurred in connection with administration or enforcement of delinquent Special Taxes. On or before each June 1, commencing June 1, 2013, the Fiscal Agent shall provide a written notice to the District stating the amounts then on deposit in the various funds and accounts established by the Fiscal Agent Agreement. The receipt of such notice by the District shall in no way affect the obligations of the District under the following paragraphs. Upon receipt of a copy of such notice, the District shall communicate

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with the Riverside County Treasurer-Tax Collector or other appropriate official of the County of Riverside to ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year. The District shall retain an Independent Financial Consultant to assist in the levy of the Special Taxes each Fiscal Year, commencing Fiscal Year 2012-2013, in accordance with the Ordinance, such that the computation of the levy is complete before the final date on which the Riverside County Treasurer-Tax Collector will accept the transmission of the Special Tax amounts for the parcels within Improvement Area No. 1 for inclusion on the next secured tax roll. Upon the completion of the computation of the amounts of the levy, and approval by the Legislative Body, the District shall prepare or cause to be prepared, and shall transmit to the Riverside County Treasurer-Tax Collector, such data as the Riverside County Treasurer-Tax Collector requires to include the levy of the Special Taxes on the next secured tax roll. The Special Taxes shall be payable and collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property; provided, the Legislative Body may provide for direct collection of the Special Taxes in certain circumstances. In order to determine if there are delinquencies with respect to the payment of the Special Taxes, no later than March 1 and July 1 in every year (each a “reconciliation date”) commencing March 1, 2013, the District shall reconcile or cause to be reconciled the amount of Special Taxes levied to the amount of Special Taxes theretofore reported by the County as paid and received. No later than 45 days after the reconciliation date, commencing on the first reconciliation date in 2013, the District shall send or cause to be sent a notice of delinquency to all property owners reported to be delinquent in the payment of the Special Taxes as of the reconciliation date. The fees and expenses of the Independent Financial Consultant retained by the District to assist in computing the levy of the Special Taxes under the Fiscal Agent Agreement and any reconciliation of amounts levied to amounts received, as well as the costs and expenses of the District related to Improvement Area No. 1 (including a charge for District staff time) in conducting its duties under the Fiscal Agent Agreement, shall be an Administrative Expense thereunder. Covenant 3. Commence Foreclosure Proceedings. Not later than August 1 of each Fiscal Year, the District will compare the amount of Special Taxes theretofore levied in Improvement Area No. 1 to the amount of Special Taxes theretofore received by the District within Improvement Area No. 1, and: (A) Individual Delinquencies. If the District determines that (i) any single parcel within Improvement Area No. 1 of the District is subject to a Special Tax delinquency in the aggregate amount of $3,000 or more or (ii) any owner owns one or more parcels subject to a Special Tax delinquency in an aggregate amount of $5,000 or more, then the District shall send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings shall be commenced by the District within 120 days of such determination to the extent permissible under applicable law and shall thereafter diligently pursue such proceedings. (B) Aggregate Delinquencies. If the District determines that (i) the total amount of delinquent Special Taxes for the prior Fiscal Year for Improvement Area No. 1 of the District exceeds 5% of the total Special Taxes due and payable for the prior Fiscal Year, the District shall notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency) within 45 days of such determination, and (if the delinquency remains uncured)

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shall commence foreclosure proceedings within 120 days of such determination against each parcel of land within Improvement Area No. 1 with a Special Tax delinquency to the extent permissible under applicable law and shall thereafter diligently pursue such proceedings.. Covenant 4. Against Encumbrances. The District will not encumber, pledge or place any charge or lien upon any of the Net Taxes or other amounts pledged to the Bonds superior to, or on a parity with, the pledge and lien herein created for the benefit of the Bonds, except as permitted by the Fiscal Agent Agreement and as to bonds issued to refund the Bonds. Covenant 5. Modification of Maximum Authorized Special Tax. The District covenants it shall not initiate or otherwise approve proceedings to modify the Rate and Method, including the maximum Special Tax rates, if such modification would adversely affect the security for the Bonds. The District further covenants that in the event an ordinance is adopted by initiative pursuant to Section 3 of Article XIIIC of the California Constitution, which purports to reduce or otherwise alter the maximum authorized Special Tax rates, it will, to the extent of available Improvement Area No. 1 funds therefore, commence and pursue reasonable legal actions seeking to preserve its ability to comply with its covenant contained in the preceding sentence. Covenant 6. Protection of Security and Rights of Owners. The District will preserve and protect the security of the District and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the delivery of any of the Bonds by the District, the Bonds shall be incontestable by the District. Covenant 7. Reserved. Covenant 8. Books and Accounts. The District will keep, or cause to be kept, proper books of records and accounts, separate from all other records and accounts of the Bonds, in which complete and correct entries shall be made of all transactions relating to the Bonds, the levy of the Special Tax and the deposits to the Special Tax Fund including the Prepayment Account. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent or of the Owners of not less than 10% of the principal amount of the Bonds then Outstanding or their representatives authorized in writing. Covenant 9. Tax Covenant. The District covenants and represents that until the last Bonds shall have been fully paid or redeemed, the District will comply with all requirements of the Tax Certificate, the Code and all applicable Regulations, such that the interest on the Bonds will remain excluded from gross income for federal income tax purposes. Covenant 10. Additional Tax Covenants. The District covenants, without limiting the generality of Covenant 9, that: (a) the District will make no use of the proceeds of the Bonds, or the School Facilities financed or refinanced with the proceeds of the Prior Bonds, which at any time will cause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code and applicable Regulations; (b) the District will ensure that the payment of principal and interest on the Bonds shall not be directly or indirectly guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof) and no portion of the monies contained in any of the funds or accounts created herein shall be (i) used in making loans guaranteed by the United States (or any agency or instrumentality thereof); (ii) invested directly or indirectly in deposits or accounts insured by the Federal Deposit Insurance Corporation, National Credit Union Administration or any other similar federally chartered corporation; (iii) otherwise invested directly or indirectly in obligations guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof); except (a) investment of amounts held in the Reserve Fund, or other reserve funds satisfying Section 148(d) of the Code; (b) investment of amounts held in the Special Tax Fund,

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Bond Fund and other bona fide debt service funds; (c) for investments in obligations issued by the United States Treasury; (d) for investments in obligations guaranteed by the Federal National Mortgage Association, Government National Mortgage Association or Federal Home Loan Mortgage Corporation; or, (e) investments permitted under Regulations issued pursuant to Section 149(b)(3)(B) of the Code. (c) the District will ensure that no portion of the monies contained in any of the funds or accounts created under the Fiscal Agent Agreement, or any part of the School Facilities, shall be used so as to cause any of the Bonds to meet the “private activity bond” tests of Section 141 of the Code and any Regulations issued thereunder; (d) the District agrees that there shall be paid from time to time all amounts required to be rebated to the United States pursuant to Section 148(f) of the Code and the applicable Regulations and the Fiscal Agent Agreement and any further documents executed in connection with the Bonds. This covenant shall survive payment in full or defeasance of the Bonds. The District specifically covenants to pay or cause to be paid to the United States at the times and in the amounts determined above the amounts required to be so paid by the Fiscal Agent Agreement and further documents executed in connection with the Bonds, the Code and the Regulations; (e) the District (i) shall neither invest Gross Proceeds nor cause Gross Proceeds to be invested in Nonpurpose Investments if the Yield on such Nonpurpose Investments would be less than the Yield that would have resulted in an arm’s length transaction; (ii) will not sell or otherwise dispose of or cause to be sold or otherwise disposed of Nonpurpose Investments if such sale or disposition would result in a smaller profit or larger loss than would have resulted from a sale at fair market value arrived at in an arm’s length transaction; and (iii) shall keep a detailed accounting of all transactions contemplated under the Fiscal Agent Agreement or in any way relating to the receipt or disbursement of any of the Gross Proceeds of the Bonds for a period of six years after the later of the date of payment of all Excess Investment Earnings to the United States or the date the District disburses the last of the Gross Proceeds of the Bonds; and (f) notwithstanding any provision of the Fiscal Agent Agreement, if the District shall provide to the Fiscal Agent an opinion of Bond Counsel that any specified action required under the Fiscal Agent Agreement is no longer required or that some further or different action is required to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds, the Fiscal Agent may conclusively rely on such opinion in complying with the requirements of the Fiscal Agent Agreement, and the covenants thereunder shall be deemed to be modified to that extent notwithstanding the provisions of the Fiscal Agent Agreement. Covenant 11. 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 obligations and covenants under the Fiscal Agent Agreement and any Supplement, and for the better assuring and confirming unto the Owners of the rights and benefits provided in the Fiscal Agent Agreement and in any Supplement. Covenant 12. Additional Opinion(s). The District will not make any change in requirements or procedures or take any action, as to which change or action the Fiscal Agent Agreement or related documents require an opinion of Bond Counsel, unless it obtains an opinion of Bond Counsel to the effect that (a) interest on the Bonds was excluded from gross income for federal income tax purposes from their date of issuance until the date of such change, assuming compliance with the covenants in the Fiscal Agent Agreement as they were in effect prior to the change (except that such opinion need not be given as to any interest for which a similar opinion has previously been given and remains in effect subsequent to such change), and (b) assuming continued compliance by the District with the covenants as changed, interest on the Bonds is excluded from gross income for purposes of federal income taxation.

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Covenant 13. Tender of Bonds. The District will not, in collecting the Special Taxes or in processing any such judicial foreclosure proceedings, exercise any authority which it has pursuant to Sections 53340, 53344.1, 53344.2, 53356.1 and 53356.5 of the California Government Code in any manner which would be inconsistent with the interests of the Owners and, in particular, will not permit the tender of Bonds in full or partial payment of Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the District having insufficient Net Taxes to pay the principal of and interest on the Bonds remaining Outstanding following such tender. Covenant 14. Additional Bonds or Obligations for Refunding Purposes Only. The District shall not issue any additional bonds, notes or other similar evidences of indebtedness payable, in whole or in part, out of Net Taxes except: (i) bonds issued to fully or partially refund the Outstanding Bonds; or (ii) subordinate bonds, notes or other similar evidences of indebtedness. Continuing Disclosure Covenant. The District covenants and agrees that it will comply with and carry out all of its obligations under the Continuing Disclosure Certificate. Notwithstanding any other provision of the Fiscal Agent Agreement, failure of the District to comply with its obligations under the Continuing Disclosure Certificate shall not be considered an event of default under the Fiscal Agent Agreement, and the sole remedy, in the event of any failure of the District to comply with the Continuing Disclosure Certificate, shall be an action to compel performance thereof. The Fiscal Agent shall, at the written request of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Bonds and upon receipt of reasonable indemnification acceptable to it, or any Bondowner or Beneficial Owner may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Covenant. For purposes of this Section, “Beneficial Owners” means 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 tax purposes. Amendment to Fiscal Agent Agreement The District may from time to time, and at any time, without notice to or consent of any of the Owners, adopt Supplements for any of the following purposes: (a) to cure any ambiguity, to correct or supplement any provision of 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 Supplement, provided that such action shall not have a material adverse effect on the interests of the Bondowners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in the Fiscal Agent Agreement which are not contrary to or inconsistent with the Fiscal Agent Agreement as theretofore in effect; (c) to modify, alter, amend or supplement the Fiscal Agent Agreement in any other respect which is not materially adverse to the Bondowners including, but not limited to, providing for the rating or insuring of the Bonds; or Exclusive of amendments supplemental to the Fiscal Agent Agreement described above, the Owners of not less than 60% in aggregate principal amount of the Bonds then Outstanding shall have the right to consent to and approve the adoption by the District of such amendments or orders supplemental to the Fiscal Agent Agreement 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

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permit, or be construed as permitting, (a) an extension of the maturity date of the principal of, or the payment date of interest on, any Bonds, (b) a reduction in the principal amount of, or redemption premium on, any Bonds or the rate of interest thereon, (c) a preference or priority of any Bonds over any other Bonds, or (d) a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to such Supplement, without, in the case of (a) or (b), the consent of the affected Owner, or, in the case of (c) or (d), the consent of the Owners of all Bonds then Outstanding. Fiscal Agent The Fiscal Agent is appointed and takes authorized actions under the terms of the Fiscal Agent Agreement. The initial Fiscal Agent may be removed or replaced by the District upon 30 days’ prior written notice (except during the continuance of an event of default, as further discussed below) or may, upon 60 days’ prior written notice, resign in favor of a successor Fiscal Agent. The Fiscal Agent Agreement provides for certain minimum qualifications of the Fiscal Agent and provides for notice and procedures in the event a successor Fiscal Agent is required or appointed. The duties of the Fiscal Agent are specified within the Fiscal Agent Agreement and include mailing interest payments to the Owners, selecting Bonds for redemption pursuant to the terms of the Fiscal Agent Agreement, giving notice of redemption and meetings of the Owners, maintaining the Bond Register and maintaining and administering the funds and accounts established pursuant to the Fiscal Agent Agreement. The Fiscal Agent also performs all other acts authorized or directed of the Fiscal Agent pursuant to the terms of the Fiscal Agent Agreement. The Fiscal Agent Agreement provides that the recitals of fact and all promises, covenants and agreements contained therein and in the Bonds are to 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 or the Bonds. The Fiscal Agent Agreement provides for certain protections from liability of the Fiscal Agent except for its own negligence or willful misconduct, as further specified in the Fiscal Agent Agreement. Events of Default, Remedies Events of Default. Any one or more of the following events shall constitute an “event of default”: (a) default in the due and punctual payment of the principal on any Bond when and as the same shall become due and payable, at maturity as therein expressed; (b) default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; or (c) default by the District in the observance of any of the other agreements, conditions or covenants on its part in the Fiscal Agent Agreement or in the Bonds contained, and the continuation of such default for a period of 30 days after the District shall have been given notice in writing of such default by the Fiscal Agent, provided that if within 30 days the District has commenced curing of the default and diligently pursues elimination thereof, such period shall be extended to permit such default to be eliminated; provided that, any noncompliance with the terms of the Continuing Disclosure Covenant under the Fiscal Agent Agreement (and set forth above) shall not be an event of default under the terms of the Fiscal Agent Agreement. 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:

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(a) by mandamus or other suit or proceeding at law or in equity to enforce his or her 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; (b) by suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (c) upon the happening of an event of default (as defined in the Fiscal Agent Agreement), by a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. Nothing in the Fiscal Agent Agreement, or in the 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 to the respective Owners of the Bonds at the respective dates of maturity, as provided in the Fiscal Agent Agreement, out of the Net Taxes 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 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. 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 pursuant to the Fiscal Agent Agreement or now or hereafter existing, 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. Application of Net Taxes After Default. If an Event of Default shall occur and be continuing, all Net Taxes and any other funds thereafter received by the Fiscal Agent under any of the provisions of the Fiscal Agent Agreement shall be applied by the Fiscal Agent as follows and in the following order: (a) to the payment of any expenses necessary in the opinion of the Fiscal Agent to protect the interests of the Owners of the Bonds and payment of reasonable fees, charges and expenses of the Fiscal Agent (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Fiscal Agent Agreement; (b) to the payment of the principal of and interest then due with respect to the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of the Fiscal Agent Agreement, as follows: First: To the payment to the Owners entitled thereto of all installments of interest then due in the order of the maturity of such installments and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the Owners entitled thereto, without any discrimination or preference; and

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Second: To the payment to the Owners entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at maturity or by call for redemption, with interest on the overdue principal at the rate borne by the respective Bonds on the date of maturity or redemption, and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the Owners entitled thereto, without any discrimination or preference. Any remaining funds shall be transferred by the Fiscal Agent to the Special Tax Fund. Limitation on Bondowners’ Right to Sue. Except as expressly provided for under the Fiscal Agent Agreement, no Owner of any Bonds shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under the Fiscal Agent Agreement, the Act or any other applicable law with respect to such Bonds, unless (a) such Owner shall have given to the Fiscal Agent written notice of the occurrence of an Event of Default, (b) the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Fiscal Agent to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name, (c) such Owner or said Owners shall have tendered to the Fiscal Agent indemnity against the costs, expenses and liabilities to be incurred in compliance with such request, and (d) the Fiscal Agent shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and such tender of indemnity shall have been made to, the Fiscal Agent. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy under the Fiscal Agent Agreement or under law; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of the Fiscal Agent Agreement or the rights of any other Owners of Bonds, or to enforce any right under the Bonds, the Fiscal Agent Agreement, the Act or other applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of the Fiscal Agent Agreement. Defeasance Any Outstanding Bond(s) shall be deemed to have been paid within the meaning expressed in the Fiscal Agent Agreement if such Bond is paid in any one or more of the following ways: (a) by paying or causing to be paid the principal of and interest and any premium due on such Bond, as and when the same become due and payable; (b) by depositing with the Fiscal Agent, or a designated bank or trust company as escrow holder, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund, the Bond Fund the Redemption Fund and the Reserve Fund and available for such purpose, is fully sufficient to pay the principal of and interest on such Bond as and when the same shall become due and payable; or (c) by depositing with the Fiscal Agent, or a designated bank or trust company as escrow holder, in trust, direct, noncallable Federal Securities, in such amount as certified by a nationally recognized certified public accountant which will, together with the interest to accrue thereon and monies then on deposit in the Special Tax Fund, the Bond Fund, the Redemption Fund and the Reserve Fund available for such purpose, together with the interest to accrue thereon, be fully sufficient to pay and discharge the principal of and interest and any premium on such Bond as and when the same shall become due and payable;

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then, notwithstanding that any such Bond shall not have been surrendered for payment, all obligations of the District under the Fiscal Agent Agreement, and any Supplement, with respect to such Bond shall cease and terminate, except for the obligation of the Fiscal Agent to pay or cause to be paid to the Owners of any such Bonds not so surrendered and paid, all sums due thereon and except for the covenants of the District contained and identified in the Fiscal Agent Agreement. Miscellaneous Unclaimed Monies. Anything in the Fiscal Agent Agreement to the contrary notwithstanding, to the extent permitted by law and subject to the applicable escheat laws of the State, any money held by the Fiscal Agent in trust for the payment and discharge of any of the Bonds which remains unclaimed for two years after the date when such Bonds have become due and payable, if such money was held by the Fiscal Agent at such date, or for two years after the date of deposit of such money if deposited with the Fiscal Agent after the date when such monies 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 thereafter only to the District for the payment of such Bonds. The Fiscal Agent shall give notice to the District of the amount of any unclaimed monies that are available for transfer to the District. However, before being required to make any such payment to the District, the Fiscal Agent shall, at the expense of the District, cause to be mailed to the registered owners of such Bonds, at their addresses as they appear on the Bond Register, 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.

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APPENDIX C GENERAL INFORMATION ABOUT THE

TEMECULA VALLEY UNIFIED SCHOOL DISTRICT AND THE CITY OF TEMECULA

The following information concerning the Temecula Valley Unified School District and the City of Temecula is presented as general background data. The Bonds are payable solely from unpaid Special Taxes and other funds as described in the Official Statement. The Bonds are not an obligation of the School District, and the taxing power of the School District is not pledged to the payment of the Bonds (except to the limited extent described herein).

General Information

Temecula Valley Unified School District, a political subdivision of the State of California, was organized in 1914 and comprises approximately 148 square miles of territory in the southwest portion of Riverside County, California. The School District includes the incorporated City of Temecula and also includes portions of unincorporated territory in Riverside County.

The Board of Education of the Temecula Valley Unified School District is composed of five members elected at large from within the boundaries of the School District to four year terms in alternate slates of three and two. The Board and the administrative staff manage and control the affairs of the School District.

Temecula Valley Unified School District administers 17 elementary schools, three charter schools, one K-8 home school, six middle schools, three comprehensive high schools, one continuation high school, one independent study high school and one adult study school. For Fiscal Year 2011/12, the School District’s estimated enrollment was 28,511, including charter school enrollment. Total student average daily attendance for the Fiscal Year 2012/13 school year is expected to be approximately 27,143. School District teaching staff includes approximately 1,251.2 certificated professional, and approximately 752.9 classified support staff. The School District’s collective bargaining units are the California School Employees Association (CSEA) which represents all classified personnel and the Temecula Valley Educators Association (TVEA) which represents all certificated personnel. The contract with CSEA covers the period of July 1, 2010 through June 30, 2013. The contract with TVEA covers the period of July 1, 2011 through June 30, 2013. The District’s adopted Budget for Fiscal Year 2012/13 is $198.1 million.

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Enrollment

The following table shows the School District enrollment since 2007/08 and projected enrollment over the next year.

TEMECULA VALLEY UNIFIED SCHOOL DISTRICT STUDENT ENROLLMENT (EXCLUDING CHARTER SCHOOLS)

CBEDS Fiscal Year Enrollment Change

2007/08 28,602 2.6% 2008/09 28,522 (0.3%) 2009/10 29,063 1.9% 2010/11 29,083 0.1% 2011/12 28,511 (1.9%) 2012/13 (projected) 28,137 (1.3%)

Retirement Programs

The School District contributes to the School Employer Pool California Public Employees’ Retirement System (CalPERS) and to the California State Teachers’ Retirement System (STRS), both multiple-employer public employee retirement systems that act as a common investment and administrative agent for participating public entities within the State of California.

All full-time and part-time classified personnel are eligible to participate in the CalPERS and all certificated personnel are eligible to participate in STRS. Benefits for employees vary based upon compensation and age at retirement. CalPERS and STRS also provide death and disability benefits.

Active plan members contribution rates are 7% and 8% of monthly earnings for CalPERS and STRS, respectively. The School District is required to contribute remaining amounts necessary to fund the benefits for its members using the actuarial basis recommended by CalPERS or STRS, as applicable. The CalPERS contribution for 2011/12 was 17.923% of covered payroll, and the STRS contribution for 2011/12 was 8.25% of covered payroll.

Other Post Employment Benefits

The School District has a nominal amount of other post employment retirement benefits. At the beginning of the 2011/12 school year, there are total of three different post employment programs that have been offered over the past several years. The duration and details of each one is separate. For 2011/12 the District paid $1.53 million in post employment benefits.

Risk Management

The District is a member of the Riverside Schools’ Insurance Authority (RSIA); the Riverside Schools Risk Management Authority (RSRMA); the Self-Insured Schools of California III (SISC III); and the Joint Educational Transit of Riverside County (JET) joint powers authorities (JPA’s). The District pays an annual amount to each entity for its health, workers’ compensation, property/liability coverage and other services. Coverage is comparable with insurance maintained by similar school districts. For the 2012/13 school year, the District will become self-insured for Workers’ Compensation.

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Assessed Valuation

Property taxes are levied for each fiscal year on taxable real and personal property which is situated in the School District as of the preceding January 1. For assessment and collection purposes, property is classified either as “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.”

Set forth in the table below are gross assessed valuations for secured and unsecured property within the School District for the last six years.

TEMECULA VALLEY UNIFIED SCHOOL DISTRICT GROSS ASSESSED VALUE OF ALL TAXABLE PROPERTY

Fiscal Year Total Secured Unsecured Total

2006/07 $16,127,522,044 $ 510,313,742 $16,637,835,786

2007/08 18,310,851,322 728,921,077 19,039,772,399

2008/09 17,882,816,697 1,066,438,344 18,949,255,041

2009/10 15,576,591,232 899,782,375 16,476,373,607

2010/11 15,449,272,485 875,022,353 16,324,294,838

2011/12 15,541,717,764 837,589,403 16,379,307,167

2012/13 (1) 15,550,076,849 868,615,804 16,418,692,653

Source: Riverside County Auditor-Controller. __________________________________________

(1) Riverside County Assessor’s preliminary tax roll as of July 1, 2012.

Long-Term Debt

As of June 30, 2012, the School District had outstanding long-term debt which included General Obligation Bonds in the aggregate principal amount of $28,135,000 and various other obligations, including retirement incentives, totaling $5,416,574. In addition to the Bonds, the School District has issued special tax bonds secured by special taxes levied within other community facilities districts established by the School District. Other than the Bonds to be issued, the District has not issued additional long-term debt since June 30, 2012.

Fund Balance

As of June 30, 2011 the School District had a General Fund fund balance of $29.45 million. The fund balance includes an unassigned amount of $6.15 million, or 3% of General Fund expenditures for 2010/11. The School District expects to end Fiscal Year 2011/12 with a General Fund fund balance of approximately $23.86 million, or 11.2% of General Fund expenditures for 2011/12.

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CITY OF TEMECULA

The following information is provided for background purposes only. The City of Temecula has no liability whatsoever with respect to the Bonds or the Fiscal Agent Agreement.

The City of Temecula (the “City”) encompasses approximately 30 square miles in southwestern Riverside County accessible along the I-15/I-215 freeway corridor. The City is a master-planned community located 85 miles southeast from Los Angeles, 42 miles south of Riverside, and 60 miles north of San Diego. The City maintains 39 city parks and recreation areas covering 309 acres, two community centers, a senior center, and three skate parks. It is situated in the Temecula Valley, an area of Southern California noted for its vineyards and wineries.

City Government

Temecula incorporated as a general law city on December 1, 1989. Temecula has a Council-Manager form of government and is represented by five members of the City Council who are elected at-large to serve a four-year term. The Mayor is selected annually by the members of the City Council.

Population

The following table provides a comparison of population growth for Temecula, surrounding cities and Riverside County between 2008 and 2012.

CHANGE IN POPULATION TEMECULA, SURROUNDING CITIES AND RIVERSIDE COUNTY

2008 - 2012

TEMECULA SURROUNDING CITIES RIVERSIDE COUNTY

Percentage Percentage Percentage

Year Population Change Population Change Population Change

2008 95,332 150,223 2,102,741

2009 97,741 2.5% 152,614 1.6% 2,140,626 1.8%

2010 99,757 2.1% 154,514 1.2% 2,179,692 1.8%

2011 101,657 1.9% 156,962 1.6% 2,217,778 1.7%

2012 103,092 1.4% 158,009 0.7% 2,227,577 0.4%

% Increase Between

2008 - 2012 8.1% 5.2% 5.9%

Source: State of California, Department of Finance, “E-4 Population Estimates for Cities, Counties and the State, 2001-2010, with 2000 & 2010 Census Counts” Sacramento, California, August 2011, “E-5 Population and Housing Estimates for Cities, Counties, and the State, 2011 and 2012, with 2010 Benchmark” Sacramento, California, May 2012 and “January 2012 Tables of City Population Ranked by Size, Numeric and Percent Change” Sacramento, California, May 2012.

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Surrounding cities include Lake Elsinore and Murrieta.

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Per Capita Income

Per capita income information for the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (MSA), the State of California and the United States are summarized in the following table.

PER CAPITA INCOME RIVERSIDE-SAN BERNARDINO-ONTARIO MSA,

CALIFORNIA AND UNITED STATES 2006 - 2010

Riverside-

Year San Bernardino-Ontario MSA State of California United States

2006 $29,330 $41,518 $37,725

2007 30,252 43,211 39,506

2008 30,539 44,003 40,947

2009 29,035 41,301 38,846

2010 29,409 42,514 39,937

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

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Employment

As of April 2012, the civilian labor force for the City was approximately 37,600 of whom 34,500 were employed. The unadjusted unemployment rate as of April 2012 was 8.0% for the City as compared to 11.8% for the County. Civilian labor force, employment and unemployment statistics for the City, County, the State and the nation, for the years 2007 through 2011 are shown in the following table:

CITY OF TEMECULA CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT

ANNUAL AVERAGES

Year

Civilian Labor Force

Employment

Unemployment

Unemployment Rate

2007

City of Temecula 37,100 35,600 1,500 4.0

Riverside County 903,400 848,900 54,500 6.0

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 Temecula 37,200 35,00 2,100 5.7


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

City of Temecula 36,700 33,300 3,400 9.2


California 18,208,300 16,144,500 2,063,900 11.3

United States 154,142,000 139,877,000 14,265,000 9.3

2010

City of Temecula 37,300 33,600 3,700 10.0


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

City of Temecula 37,500 34,000 3,500 9.3


California 18,384,900 16,226,600 2,158,300 11.7

United States 153,617,000 139,869,000 13,747,000 8.9

Source: California State Employment Development Department and United States Bureau of Labor Statistics.

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Temecula is located in the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (MSA). As of April 2012, six major job categories constitute 80.0% of the work force. They are government (19.8%), service producing (17.9%), educational and health services (12.3%), professional and business services (11.3%), leisure and hospitality (11.1%), and manufacturing (7.6%). The distribution of employment in the Riverside-San Bernardino-Ontario MSA is presented in the following table.

RIVERSIDE-SAN BERNARDINO-ONTARIO MSA WAGE AND SALARY WORKERS BY INDUSTRY (1)

(in thousands)

Industry 2008 2009 2010 2011 2012

Government 234.6 235.3 241.7 233.4 228.3

Other Services 42.4 37.4 38.8 39.4 38.6

Leisure and Hospitality 134.6 127.5 125.2 125.1 128.6

Educational and Health Services 133.6 134.6 134.1 138.6 142.0

Professional and Business Services 137.5 126.9 121.6 124.8 131.0

Financial Activities 46.7 43.4 41.3 40.0 38.4

Information 15.1 14.8 15.9 14.9 14.7

Transportation, Warehousing and Utilities 70.4 66.5 65.1 68.0 67.7

Service Producing

Retail Trade 169.2 154.4 153.8 155.1 154.3

Wholesale Trade 55.2 48.8 48.7 48.9 51.8

Manufacturing

Nondurable Goods 34.9 31.1 30.0 29.2 30.8

Durable Goods 74.9 59.1 55.0 55.9 56.9

Goods Producing

Construction 94.0 68.9 60.5 58.4 55.8

Mining and Logging 1.2 1.2 1.0 1.0 1.0

Total Nonfarm 1,244.3 1,149.9 1,132.7 1,132.7 1,139.9

Farm 17.3 16.0 15.4 15.4 15.5

Total (all industries) 1,261.6 1,165.9 1,148.1 1,148.1 1,155.4

Source: State of California Employment Development Department, Labor Market Information Division, “Industry Employment & Labor Force - by month, March 2011 Benchmark.”

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(1) Annually, as of April.

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The principal employers operating within the City as of June 30, 2011 are as follows:

CITY OF TEMECULA PRINCIPAL EMPLOYERS

Number Percentage of

of Total

Name of Company Employees Employment

Abbott Laboratories (formerly known as Guidant Corporation) 2,938 4.59%

Temecula Valley Unified School District 2,749 4.29%

Professional Hospital Supply 1,100 1.72%

International Rectifier 700 1.09%

Costco Wholesale Corporation 373 0.58%

Macy’s 300 0.47%

EMD Millipore (formerly known as Chemi-Con International) 272 0.42%

Norm Reeves Auto Group/DCH 260 0.41%

Southwest Traders 233 0.36%

Milgard Manufacturing 210 0.33%

Source: City of Temecula Comprehensive Annual Financial Report.

Commercial Activity

The following table summarizes the volume of retail sales and taxable transactions for the City for 2006 through 2010 (the most recent year for which statistics are available).

CITY OF TEMECULA TOTAL TAXABLE TRANSACTIONS

(in thousands) 2006 - 2010

Retail and Retail and Total Taxable

Food Services Food Services Transactions Issued Sales

Year ($000’s) % Change Permits ($000’s) % Change Permits

2006 $2,326,560 1,638 $2,704,675 3,078

2007 2,223,047 (4.5%) 1,596 2,583,938 (4.5%) 3,136

2008 1,870,877 (15.8%) 1,664 2,307,072 (10.7%) 3,166

2009 1,544,319 (17.5%) 1,943 2,055,847 (10.9%) 2,891

2010 1,626,792 5.3% 2,051 2,180,304 6.1% 3,039

Source: California State Board of Equalization, “Taxable Sales in California.”

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APPENDIX D

FORM OF CONTINUING DISCLOSURE CERTIFICATE

This CONTINUING DISCLOSURE CERTIFICATE (the “Disclosure Certificate”) is executed and delivered by Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (the “District” and the “School District,” respectively) and acknowledged by Special District Financing & Administration, LLC, in its capacity as dissemination agent (the “Dissemination Agent”), in connection with the issuance of $6,785,000 Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (Improvement Area No. 1) Series 2012 Special Tax Refunding Bonds (the “Bonds”). The Bonds are being issued pursuant to a Resolution Authorizing Issuance of Bonds, adopted by the Board of Education of the Temecula Valley Unified School District (the “School District”), as the Legislative Body of the District, on July 17, 2012, and a Fiscal Agent Agreement (the “Fiscal Agent Agreement”), dated as of August 1, 2012, by and between the District and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”). The District hereby covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5).

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 Certificate 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 District pursuant to, and described

in, Sections 3 and 4 of this Disclosure Certificate. “Disclosure Representative” shall mean the Assistant Superintendent of Business Support Services of

the District, or his or her designee(s), or such other officer(s) or employee(s) as the District shall designate in writing to the Fiscal Agent from time to time.

“Dissemination Agent” shall mean Special District Financing & Administration, LLC or any successor Dissemination Agent designated in writing by the District and which has filed with the District and the Fiscal Agent a written acceptance of such designation.

“District” shall mean Community Facilities District No. 2002-1 of the Temecula Valley Unified School District.

“EMMA System” shall mean the Electronic Municipal Market Access system of the MSRB (as

defined below) or such other electronic system designated by the MSRB or the Securities and Exchange Commission (the “S.E.C.”) for compliance with S.E.C. Rule 15c2-12(b).

“Improvement Area No. 1” shall mean Improvement Area No. 1 of Community Facilities District No.

2002-1 of the Temecula Valley Unified School District. “Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. “MSRB” shall mean the Municipal Securities Rulemaking Board and any successor entity designated

under the Rule as the repository for filings made pursuant to the Rule.

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“Official Statement” shall mean the Official Statement, dated July 26, 2012, prepared and distributed in connection with the initial sale of the Bonds.

“Participating Underwriter” shall mean Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus, the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds.

“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.

Section 3. Provision of Annual Reports. (a) The District shall provide, or shall cause the Dissemination Agent to provide to the

MSRB through the EMMA System in an electronic format and accompanied by identifying information as prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate not later than seven and one half months after the June 30 end of the District’s fiscal year (which currently would be February 15) commencing with the report for the 2011-12 Fiscal Year.

(b) Not later than five days prior to said date, the District shall provide the Annual

Report to the Dissemination Agent (if other than U.S. Bank National Association). 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 Certificate; provided that the audited financial statements, which may consist of the audited financial statements of the School District (hereinafter the “Audited Financial Statements”) may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if not available by that date. If the District’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). If the Dissemination Agent has not received a copy of the Annual Report on or before five days prior to February 15 in any year, the Dissemination Agent shall notify the District of such failure to receive the Annual Report. The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent and the Fiscal 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 District and shall have no duty or obligation to review such Annual Report.

(c) If the District is unable to provide to the MSRB through the EMMA System an Annual Report by the date required in subsection (a), the District shall send a notice to the MSRB through the EMMA System in substantially the form attached as Exhibit A.

(d) The Dissemination Agent shall:

(i) Determine each year prior to the date for providing the Annual Report

the electronic filing requirements of the MSRB for the Annual Report; and

(ii) If the Dissemination Agent is other than the District, to the extent it can

confirm the same, file a report with the District and the Fiscal Agent certifying that the Annual Report has been provided to the MSRB through the EMMA System pursuant to this Disclosure Certificate.

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Section 4. Content of Annual Reports. The District’s Annual Report shall contain or incorporate by reference the following:

(a) Audited Financial Statements prepared in accordance with generally accepted accounting principles as promulgated to apply to government entities from time to time by the Governmental Accounting Standards Board. If the Audited Financial Statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the Audited Financial Statements shall be filed in the same manner as the Annual Report when they become available.

(b) The following information regarding the Bonds:

(i) Principal amount of the Bonds and any parity bonds and/or refunding bonds outstanding as of a date within 90 days of the date of the Annual Report;

(ii) Balance in Prepayment Account of Special Tax Fund as of a date within 90

days of the date of the Annual Report;

(iii) Balance in Bond Fund as of a date within 90 days of the date of the Annual Report;

(iv) Balance in Reserve Fund and statement of Reserve Requirement as of a

date within 90 days of the date of the Annual Report;

(v) Balance in any other Fund or Account relating to the Bonds not referenced in clauses (ii) through (iv) above as of a date within 90 days of the date of the Annual Report;

(vi) Information regarding the annual special taxes levied in Improvement

Area No. 1 of the District, amount collected, delinquent amounts and percent delinquent for the most recently completed Fiscal Year;

(vii) Status of foreclosure proceedings of parcels, if any, within Improvement

Area No. 1 of the District and summary of results of foreclosure sales, if available;

(viii) Total assessed value (per the Riverside County Assessor’s records) of all

parcels currently subject to the Special Tax within Improvement Area No. 1 of the District, showing the total assessed valuation for all land and the total assessed valuation for all improvements within Improvement Area No. 1 of the District and distinguishing between the assessed value of improved and unimproved parcels. Parcels are considered improved if there is an assessed value for the improvements in the Assessor’s records;

(ix) The total dollar amount of delinquencies in Improvement Area No. 1 of

the District as of the August 1 preceding the date of the Annual Report and, in the event that the total delinquencies within Improvement Area No.

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1 of the District as of such August 1 or such more recent date as determined by the District exceed 5% of the Special Tax for the previous year, delinquency information for each parcel, including the amounts of delinquencies, length of delinquency and status of any foreclosure of each such parcel;

(x) The number of parcels which prepaid, the aggregate amount of

prepayments of the Special Tax with respect to Improvement Area No. 1 of the District for the prior Fiscal Year and the amount of Bonds prepaid;

(xi) Any changes to the Rate and Method of Apportionment for Improvement

Area No. 1 of the District set forth in Appendix A to the Official Statement; and

(xii) A copy of the annual information required to be filed by the District with

the California Debt and Investment Advisory Commission under the Act and relating generally to outstanding District bond amounts relating to Improvement Area No. 1, fund balances, assessed values, special tax delinquencies and foreclosure information.

(c) In addition to any of the information expressly required to be provided under paragraphs (a)

and (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 (ix), in the light of the circumstances under which they were made, not misleading for purposes of applicable federal securities laws.

Any or all of the items listed above may be included by specific reference to other documents,

including official statements of debt issues of the District or related public entities, which have been submitted to the MSRB through the EMMA System or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The District shall clearly identify each such other document so included by reference.

Section 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, in a timely manner, not in excess of ten business days after the occurrence of the event, notice of any of the following events with respect to the Bonds, as applicable:

(i) Principal and interest payment delinquencies;

(ii) Non-payment related defaults, if material; (iii) Unscheduled draws on debt service reserves reflecting financial

difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial

difficulties; (v) Substitution of credit or liquidity providers, or their failure to perform;

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(vi) Adverse tax opinions, 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 security, or other material events affecting the tax status of the security;

(vii) Modifications to rights of security holders, if material; (viii) Bond calls, if material, and tender offers; (ix) Defeasances; (x) Release, substitution, or sale of property securing repayment of the

securities, if material;

(xi) Rating changes; (xii) Bankruptcy, insolvency, receivership or similar event of the obligated

person;(1)

(xiii) 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 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 terms, if material; and

(xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if material.

(b) The Dissemination Agent shall, within three business days of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the District promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (e). For purposes of this Disclosure Certificate, “actual knowledge” of the occurrence of the Listed Events described under clauses (ii), (iii), (vi), (x), (xi), (xii), (xiii) and (xiv) above shall mean actual knowledge by an officer at the principal office of the Dissemination Agent. The Dissemination Agent shall have no responsibility for determining the materiality of any of the Listed Events.

(1) For the purposes of the event identified in subparagraph (xii), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District.

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(c) As soon as practicable so as to provide notice not in excess of ten business days after the occurrence of the Listed Event, the District shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (e). The District shall provide the Dissemination Agent with a form of notice of such event in a format suitable for reporting to the MSRB through the EMMA System.

(d) If the District determines that a Listed Event subject to a materiality requirements

referenced in clauses (a) (ii), (vii), (viii), (x), (xiii) or (xiv) would not be material under applicable federal securities law, the District shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (e).

(e) If the Dissemination Agent has been instructed by the District to report the

occurrence of a Listed Event and has received a notice of the occurrence in a format suitable for filing with the MSRB, the Dissemination Agent shall file a notice of such occurrence with the MSRB through the EMMA System and shall provide a copy of such notice to the Participating Underwriter.

Section 6. Termination of Reporting Obligation. All of the District’s obligations hereunder shall

terminate upon the earliest to occur of (i) the legal defeasance of the Bonds, (ii) prior redemption of the Bonds, (iii) payment in full of all the Bonds or (iv) upon the delivery to the Dissemination Agent of an opinion of nationally recognized bond counsel to the effect that continuing disclosure is no longer required. If such determination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

Section 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist in carrying out its obligations under this Disclosure Certificate and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing at least thirty days’ prior written notice to the District. The initial Dissemination Agent shall be Special District Financing & Administration, LLC. If at any time there is no designated Dissemination Agent appointed by the District, or if the Dissemination Agent so appointed is unwilling or unable to perform the duties of Dissemination Agent hereunder, the District shall be the Dissemination Agent and undertake or assume its obligations hereunder.

The Dissemination Agent shall be paid compensation by the District for its services provided

hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the District from time to time and for 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 District hereunder and shall not be deemed to be acting in any fiduciary capacity for the District, owners or Beneficial Owners or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any direction from the District or an opinion of nationally recognized bond counsel.

Section 8. Amendment Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it

may only be made in connection with a change in circumstances that arises from a change in legal

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requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the

opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by owners of the Bonds in

the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of owners, or (ii) does not, in the opinion of Bond Counsel, materially impair the interests of the Owners or Beneficial Owners of the Bonds.

If the annual financial information or operating data to be provided in the Annual Report is amended

pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information 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. The comparison shall include a 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 statements or information in order to provide information to investors to enable them to evaluate the ability of the District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB in the same manner as for a Listed Event under Section 5(c).

The District shall not amend this Disclosure Certificate in a manner which affects the rights and obligations of the Dissemination Agent without receiving the written approval of the then acting Dissemination Agent.

Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate 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 Certificate. If the District 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 Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include such in any future Annual Report or notice of occurrence of a Listed Event.

Section 10. Default. In the event of a failure of the District to comply with any provision of this

Disclosure Certificate 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 District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure

D-8

Certificate shall be an action to compel performance. Neither the Fiscal Agent nor the Dissemination Agent shall have any liability to the owners of the Bonds or any other party for monetary damages or financial liability of any kind whatsoever relating to or arising from this Disclosure Certificate.

Section 11. Duties, Immunities and Liabilities of Dissemination Agent. Article VII of the Fiscal Agent Agreement is hereby made applicable to this Disclosure Certificate as if this Disclosure Certificate were (solely for this purpose) contained in the Fiscal Agent Agreement. The Dissemination Agent shall be entitled to the protections and limitations from liability afforded to the Fiscal Agent thereunder. The Dissemination Agent shall have only duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its 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 company succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the successor to the Dissemination Agent hereunder without the execution or filing of any paper or any further act, but should notify the District, in writing, of such occurrence. The obligations of the District 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 Fiscal Agent or Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate.

Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Fiscal 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. Notices. Any notice or communications to or among any of the parties to this Disclosure

Certificate shall be given to all of the following and may be given as follows: If to the District: Community Facilities District No. 2002-1 of the

Temecula Valley Unified School District 31350 Rancho Vista Road Temecula, California 92592 Telephone: (951) 676-2661 Telecopier: (951) 695-7121 Attention: Lori Ordway-Peck [email protected]

If to the Special District Financing & Administration, LLC Dissemination 437 West Grand Avenue Agent: Escondido, California 92025

Telephone: (760) 233-2633 Telecopier: (760) 233-2631 Attention: Ms. Hale-Carter

D-9

If to the U.S. Bank National Association Fiscal Agent: 633 West Fifth Street, 24th Floor

LM-CA-T24T Los Angeles, California 90071 Telephone: (213) 615-6005 Telecopier: (213) 615-6199 Attention: Temecula Valley USD CFD No. 2002-1

If to the Stifel, Nicolaus & Company, Incorporated, Participating dba Stone & Youngberg, a Division of Stifel Nicolaus Underwriter: One Ferry Building San Francisco, California 94111

Telecopier: (415) 445-2395 Attention: Municipal Research Department

Section 14. Future Determination of Obligated Persons. In the event the Securities and Exchange

Commission amends, clarifies or supplements the Rule in such a manner that requires any property owner within the District to be an “obligated person” as defined in the Rule, nothing contained herein shall be construed to require the District to meet the continuing disclosure requirements of the Rule with respect to such obligated person and nothing in this Disclosure Certificate shall be deemed to obligate the District to disclose information concerning any property owner within the District except as required as part of the information required to be disclosed by the District pursuant to Section 4 and Section 5 hereof.

D-10

Dated: August 1, 2012 TEMECULA VALLEY UNIFIED SCHOOL DISTRICT, on behalf of Community Facilities District No. 2002-1 of the Temecula Valley Unified School District

By: ______________________________________ Name: Title:

ACCEPTANCE OF DISSEMINATION AGENT: The undersigned hereby accepts the designation of Dissemination Agent and agrees to comply with the duties set forth in the foregoing Continuing Disclosure Certificate as Dissemination Agent SPECIAL DISTRICT FINANCING & ADMINISTRATION, LLC as Dissemination Agent By: ___________________________________ Authorized Signatory

[EXECUTION PAGE OF CONTINUING DISCLOSURE CERTIFICATE]

D-11

EXHIBIT A

NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Community Facilities District No. 2002-1 of the Temecula Valley Unified School

District (Improvement Area No. 1) Name of Bond Issue: Community Facilities District No. 2002-1 of the Temecula Valley Unified School

District (Improvement Area No. 1) Series 2012 Special Tax Refunding Bonds Date of Issuance: August 14, 2012

NOTICE IS HEREBY GIVEN that Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (the “Community Facilities District”) has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate, dated as of August 1, 2012, by the Community Facilities District. [The Community Facilities District anticipates that the Annual Report will be filed by ________________.] Dated: __________, 20__

Community Facilities District No. 2002-1 of the Temecula Valley Unified School District

cc: Special District Financing & Administration, LLC

U.S. Bank National Association, as Fiscal Agent

E-1

APPENDIX E

PROPOSED FORM OF OPINION OF BOND COUNSEL

Upon delivery of the Bonds, Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel to the Temecula Valley Unified School District, expects to render their final approving opinion with respect to the Bonds in substantially the following form:

Board of Education Temecula Valley Unified School District 31350 Rancho Vista Road Temecula, California 92592

Re: $6,785,000 Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (Improvement Area No. 1) Series 2012 Special Tax Refunding Bonds

Final Opinion of Bond Counsel ____ Ladies and Gentlemen: We have acted as Bond Counsel in connection with the issuance and sale by Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (“District”) of $6,785,000 aggregate principal amount of bonds designated “Community Facilities District No. 2002-1 of the Temecula Valley Unified School District (Improvement Area No. 1) Series 2012 Special Tax Refunding Bonds” (“Bonds”). The Bonds are issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California), Resolution No. 2012-13/1 adopted by the Board of Education of the Temecula Valley Unified School District (“School District”) acting in its capacity as the Legislative Body of the District on July 17, 2012, and the Fiscal Agent Agreement executed in connection therewith dated as of August 1, 2012, by and between the District and U.S. Bank National Association (“Fiscal Agent Agreement”). Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Fiscal Agent Agreement. As Bond Counsel, we have examined copies certified to us as being true and complete copies of the proceedings in connection with the formation of the District and the issuance of the Bonds (“District Proceedings”). We have also examined certificates and representations of fact made by public officials and officers of the District and the School District, the Underwriter and others as we have deemed necessary to render this opinion. Attention is called to the fact that we have not been requested to examine and have not examined any documents or information relating to the District or the School District other than the record of the District Proceedings hereinabove referred to, and no opinion is expressed as to any financial or other information, or the adequacy thereof which has been or may be supplied to any purchaser of the Bonds. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the District.

E-2

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any matters that come to our attention after the date hereof. Accordingly, this opinion speaks only as of its date and is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with the issuance thereof and we disclaim any obligation to update this letter. As to questions of fact material to our opinion, we have relied upon the representations of fact and certifications referred to above, and we have not undertaken by independent investigation to verify the authenticity or the accuracy of the factual matters represented, warranted or certified therein. Furthermore, we have assumed compliance with all covenants contained in the Fiscal Agent Agreement, the Tax Certificate and other documents related to the District Proceedings, including, without limitation, covenants compliance with which is necessary to assure that future actions or events will not cause the interest on the Bonds to be included in gross income for federal income tax purposes. Failure to comply with certain of such covenants may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of original issuance of the Bonds. In addition, we call attention to the fact that the rights and obligations under the Bonds, the Fiscal Agent Agreement and the Tax Certificate and other documents related to the District Proceedings are subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to creditors' rights and remedies, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against school districts in the State of California (“State”). We express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum, choice of venue, waiver or severability provisions contained in the foregoing documents. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto. The Fiscal Agent Agreement, the Tax Certificate and other documents related to the District Proceedings refer to certain requirements and procedures which may be changed and certain actions which may be taken or omitted under the circumstances and subject to terms and conditions set forth in such documents. No opinion is expressed herein as to the effect on any Bond or the interest thereon if any such change is made, or action is taken or omitted, upon the advice or approval of counsel other than ourselves. Based on and subject to the foregoing, and in reliance thereon, and our consideration of such questions of law as we have deemed relevant to the circumstances, we are of the following opinions: 1. The District has, and the District Proceedings show, full power and authority to issue the Bonds. The Bonds constitute legal, valid and binding obligations of the District, payable in accordance with their terms. The Bonds are limited obligations of the District payable solely from and secured by a pledge of the Net Taxes, and from other funds and accounts pursuant to the Fiscal Agent Agreement, and are not obligations of the School District, the State or any public agency thereof (other than the District). The District has the full right, power and authority to levy and pledge the Net Taxes to the Owners of the Bonds.

E-3

2. The Fiscal Agent Agreement has been duly and validly authorized, executed and delivered by, and constitutes a valid and binding obligation of, the District. 3. Interest on the Bonds (including any original issue discount properly allocable to the owner thereof) is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended, and is exempt from State personal income taxes. Interest on the Bonds is not a specific preference item for purposes of the federal alternative minimum taxes imposed on individuals and corporations, although it should be noted that, with respect to corporations, such interest will be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of such corporations. We express no opinion regarding other tax consequences related to the Bonds or to the accrual or receipt of the interest on the Bonds. We express no opinion as to any matter other than as expressly set forth above. Very truly yours,

- F-1

APPENDIX F PARCEL LISTING

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage

2012/13 Assessed Value (1)

2012/13

Special Tax

957530001 39531 NORTHGATE PKY ARDONA MARCOS N 2006 3,149 $ 314,000 $ 1,279.76

957530002 39519 NORTHGATE PKY REYES MARIO FALLORAN 2006 3,468 310,000 1,430.82

957530003 39507 NORTHGATE PKY OLSEN JAMES J 2006 3,149 312,000 1,279.76

957530004 39495 NORTHGATE PKY WOOD DAVID FARLEY 2009 3,269 299,000 1,430.82

957530005 39483 NORTHGATE PKY CRUMP TODD W 2006 3,269 299,000 1,430.82

957530006 39471 NORTHGATE PKY KOONCE WAYNE H 2006 3,269 315,000 1,430.82

957530007 39459 NORTHGATE PKY TOMMALIEH ALI 2012 3,269 295,000 1,430.82

957530008 39445 NORTHGATE PKY CLEMENS TYLER HAMPTON 2009 3,468 314,000 1,430.82

957530009 39433 NORTHGATE PKY CHAMMO IBRAHIM 2012 3,269 265,200 1,430.82

957530010 39421 NORTHGATE PKY LAGUER JUAN P 2008 3,269 299,000 1,430.82

957530011 39409 NORTHGATE PKY HAU CAU A 2011 3,269 314,000 1,430.82

957530012 39395 NORTHGATE PKY LAFOLLETTE GREG A 2006 3,149 299,000 1,279.76

957530013 39377 NORTHGATE PKY MANSIR HEIDI E 2006 3,468 331,000 1,430.82

957531001 30794 HIGHLAND VISTA CIR NEWTON ERIC 2010 2,811 261,000 1,165.38

957531002 30804 HIGHLAND VISTA CIR DIETRICH RICHARD 2006 3,269 301,000 1,430.82

957531003 30816 HIGHLAND VISTA CIR YOLO FINANCIAL GROU P 2012 3,468 274,278 1,430.82

957531004 30828 HIGHLAND VISTA CIR BIDI SARMAD S 2006 3,149 298,000 1,279.76

957531005 30840 HIGHLAND VISTA CIR MORRISON SYDNEY 2011 3,468 310,000 1,430.82

957531006 30852 HIGHLAND VISTA CIR FRASURE STEVEN EDWARD 2006 3,269 299,000 1,430.82

957531007 30864 HIGHLAND VISTA CIR LU DING LAN 2009 3,149 284,000 1,279.76

957531008 30865 HIGHLAND VISTA CIR BERRY JOAN R 2010 3,269 302,000 1,430.82

957531009 30847 HIGHLAND VISTA CIR COOLEY JAMES 2011 3,468 310,000 1,430.82

957531010 30835 HIGHLAND VISTA CIR TSAI WENDY YU 2011 3,149 297,000 1,279.76

957531011 30823 HIGHLAND VISTA CIR PEPES CONSTANTINE 2006 3,269 299,000 1,430.82

957531012 30811 HIGHLAND VISTA CIR LUMALU EDILBERTO V 2006 3,149 297,000 1,279.76

957531013 30799 HIGHLAND VISTA CIR CLAUSSEN MATTHEW H 2007 3,468 325,000 1,430.82

- F-2

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

957531014 30798 PARK VISTA CIR ANDERSON LESLIE L 2012 3,269 300,000 1,430.82

957531015 30810 PARK VISTA CIR MCCORMICK RHONDA E 2011 3,468 290,700 1,430.82

957531016 30822 PARK VISTA CIR STONER JONATHON K 2006 3,269 299,000 1,430.82

957531017 30834 PARK VISTA CIR CAPISTRANO HECTOR B 2006 3,149 285,000 1,279.76

957531018 30846 PARK VISTA CIR BURKE THOMAS EDWARD 2011 3,269 298,026 1,430.82

957531019 30858 PARK VISTA CIR FLORES HECTOR M 2011 3,468 290,700 1,430.82

957531020 30861 PARK VISTA CIR FERGUSON JOHN G 2009 3,149 290,000 1,279.76

957531021 30849 PARK VISTA CIR VENTRONI DAVID A 2008 3,468 310,000 1,430.82

957531022 30837 PARK VISTA CIR NGUYEN DAO X 2006 3,269 299,000 1,430.82

957531023 30825 PARK VISTA CIR LUK TRACY 2012 3,468 290,700 1,430.82

957531024 30813 PARK VISTA CIR VARGAS ENMANUEL NICOLAS 2006 3,149 300,000 1,279.76

957531025 30801 PARK VISTA CIR GUY DOUGLAS 2010 2,811 242,211 1,165.38

957531026 30802 TERRACE VIEW CIR ARCE ISABEL 2009 2,811 290,000 1,165.38

957531027 30814 TERRACE VIEW CIR EVANS JOSHUA 2010 3,269 315,000 1,430.82

957531028 30826 TERRACE VIEW CIR PADILLA ANTONIO 2006 3,149 299,000 1,279.76

957531029 30838 TERRACE VIEW CIR MEHR VORESH ARIZIAN 2009 3,269 301,000 1,430.82

957531030 30850 TERRACE VIEW CIR PETERSEN PHET P 2006 3,149 285,000 1,279.76

957531031 30862 TERRACE VIEW CIR LUCIO SERGIO 2009 3,468 314,000 1,430.82

957531032 30863 TERRACE VIEW CIR SAGUN NAPOLEON 2006 3,149 299,000 1,279.76

957531033 30851 TERRACE VIEW CIR ESPINO JUAN M 2006 3,269 299,000 1,430.82

957531034 30839 TERRACE VIEW CIR PATRICIO RODERICK MATEO 2006 3,468 311,000 1,430.82

957531035 30827 TERRACE VIEW CIR VELIA HYSEN 2006 3,269 300,000 1,430.82

957531036 30815 TERRACE VIEW CIR KNAEBLE MICHAEL LEE 2006 3,468 310,000 1,430.82

957531037 30803 TERRACE VIEW CIR KIM YOUM JA 2009 2,811 258,000 1,165.38

957540001 39600 PARKVIEW DR ROCKSTROH HOLDINGS 2012 3,468 310,000 1,430.82

957540002 39614 PARKVIEW DR JEAN GILES RONY 2008 3,149 286,000 1,279.76

957540003 39628 PARKVIEW DR WINGER CRAIG C 2010 3,269 289,115 1,430.82

957540004 39642 PARKVIEW DR NORRIS GROUP COMMUN ITY REINVEST MENT 2007 3,468 310,000 1,430.82

957540005 39656 PARKVIEW DR WU JULIA 2011 3,269 301,000 1,430.82

957540006 39670 PARKVIEW DR ANTHONY SHEREE LATRES 2007 3,149 299,000 1,279.76

- F-3

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

957540007 30752 HILLCREST DR WELDON LARRY JOE 2011 3,269 318,923 1,430.82

957540008 30762 HILLCREST DR REILLY JEFFREY D 2009 3,468 307,570 1,430.82

957540009 30772 HILLCREST DR JAMES JOSHUA R 2011 3,149 301,000 1,279.76

957540010 39673 MEADOW VIEW CIR AZIZIAN BERNADET M 2010 3,149 282,610 1,279.76

957540011 39659 MEADOW VIEW CIR MARTIN JOSEPH B 2007 3,269 300,000 1,430.82

957540012 39645 MEADOW VIEW CIR VENTURA JOSUE A 2007 3,468 311,000 1,430.82

957540013 39631 MEADOW VIEW CIR DELACRUZ BENJAMIN 2010 3,149 282,610 1,279.76

957540014 30771 GRAND VIEW CIR DURUSSEL REMY 2007 3,269 300,000 1,430.82

957540015 30763 GRAND VIEW CIR TINH VU HOANG 2007 3,468 310,000 1,430.82

957540016 30755 GRAND VIEW CIR VON KARMAN PROP 2011 3,149 297,000 1,279.76

957540017 30759 GRAND VIEW CIR SAN DIEGO URBAN PRO P 2010 3,269 299,000 1,430.82

957540018 30754 GRAND VIEW CIR PREEMINENT INV CORP 2009 3,468 302,444 1,430.82

957540019 30756 GRAND VIEW CIR BELL MARK C 2007 3,269 306,000 1,430.82

957540020 30764 GRAND VIEW CIR BRYANT MICHAEL H 2011 3,149 280,500 1,279.76

957540021 30770 GRAND VIEW CIR NGUYEN THUC H 2007 3,468 330,000 1,430.82

957540022 30784 GRAND VIEW CIR REED GARY L 2007 3,149 318,000 1,279.76

957540023 39603 MEADOW VIEW CIR DUNNE JOHN A 2007 3,468 310,000 1,430.82

957540024 39589 MEADOW VIEW CIR ALVARADO TAMMY MARIE 2007 3,269 300,000 1,430.82

957540025 39575 MEADOW VIEW CIR CADLINI CAROLYN L F AMILY TRUST 2007 3,468 316,000 1,430.82

957540026 39560 MEADOW VIEW CIR HAYEK ANDREA A 2010 3,149 298,025 1,279.76

957540027 39574 MEADOW VIEW CIR CARLILE STEVEN D 2007 2,811 264,000 1,165.38

957540028 39588 MEADOW VIEW CIR GRIFFITH MARIA A 2007 3,269 299,000 1,430.82

957540029 39602 MEADOW VIEW CIR YUN JONATHAN YUJUNG 2007 3,149 297,000 1,279.76

957540030 39616 MEADOW VIEW CIR PAULSEN BRIAN 2009 3,269 300,000 1,430.82

957540031 39630 MEADOW VIEW CIR HOBMAN PETER 2010 3,468 302,444 1,430.82

957540032 39644 MEADOW VIEW CIR JOHNS MICHAEL 2012 3,269 342,720 1,430.82

957540033 39658 MEADOW VIEW CIR BILLAN PHILLIP 2007 3,149 298,000 1,279.76

957540034 39672 MEADOW VIEW CIR LEDESMA SUSAN SANTOS 2007 3,468 310,000 1,430.82

957540035 39686 MEADOW VIEW CIR JADAV TINU D 2012 3,269 305,898 1,430.82

957540036 30817 HILLCREST DR COLLETTE MICHEL M 2008 2,811 276,000 1,165.38

- F-4

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

957540037 30807 HILLCREST DR TASHJIAN VAROUJAN 2010 3,269 271,687 1,430.82

957540038 30793 HILLCREST DR ROGERS LARRY B 2009 3,149 295,000 1,279.76

957540039 30779 HILLCREST DR MARINO ELEAZAR 2007 3,644 339,000 1,440.08

957541001 30757 HILLCREST DR RATLEDGE MARK A 2009 3,269 300,000 1,430.82

957541002 30745 HILLCREST DR LONG SUNSHINE 2012 3,468 310,000 1,430.82

957541003 30735 HILLCREST DR BRYFOGLE AMANDA LYNN 2008 3,269 299,000 1,430.82

957541004 30725 HILLCREST DR CHAVARRIA MARTIN 2008 3,269 300,000 1,430.82

957541005 30719 HILLCREST DR COWICK ROBERT C 2009 3,149 281,939 1,279.76

957541006 39677 PARKVIEW DR KUZMA THOMAS E 2011 3,468 311,000 1,430.82

957541007 39661 PARKVIEW DR WINDER JOHN J 2007 3,149 298,000 1,279.76

957541008 39649 PARKVIEW DR GIGLIOTTI OSVALDO 2007 3,269 300,000 1,430.82

957541009 39635 PARKVIEW DR UPTON MONIQUE 2010 3,149 246,055 1,279.76

957541010 39621 PARKVIEW DR GALLERY EQUITY 2012 3,468 283,560 1,430.82

957541011 39615 PARKVIEW DR TAPIA LUIS A 2006 3,269 301,000 1,430.82

957541012 39601 PARKVIEW DR GOODE WILLIAM M 2012 3,149 295,800 1,279.76

957550001 30723 EASTGATE PKY GARDNER DIRK WARREN 2009 3,269 300,000 1,430.82

957550002 30713 EASTGATE PKY FEDUNIW NEIL P 2005 3,468 313,000 1,430.82

957550004 30718 EASTGATE PKY SOLIS DAVID 2006 3,149 298,000 1,279.76

957550005 30728 EASTGATE PKY ALLEN MYRON 2006 3,468 271,000 1,430.82

957550006 30738 EASTGATE PKY CALDERA MICHAEL A 2011 3,149 297,000 1,279.76

957550007 30748 EASTGATE PKY SEARS HAL M 2010 3,269 238,365 1,430.82

957550008 30758 EASTGATE PKY HUYNH TUNG THANH 2005 3,468 310,000 1,430.82

957550009 30768 EASTGATE PKY FOSTER GRANT S 2008 3,149 297,000 1,279.76

957550010 30778 EASTGATE PKY TYLER ROD 2010 3,269 300,000 1,430.82

957550011 30788 EASTGATE PKY SHERMAN ALAN R 2005 3,468 312,000 1,430.82

957550013 30708 EASTGATE PKY GARCIA ALEJANDRO 2011 3,269 304,000 1,430.82

957551001 30810 EASTGATE PKY PIZZARO LEON S 2006 2,811 262,000 1,165.38

957551002 30820 EASTGATE PKY SLACK WALTER MARK 2006 3,468 330,000 1,430.82

957551003 30830 EASTGATE PKY TONE VASKA 2010 3,149 292,888 1,279.76

957551004 30840 EASTGATE PKY ROOS PAUL 2009 3,468 311,000 1,430.82

- F-5

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

957551005 30850 EASTGATE PKY ARANDA JOSE G 2010 3,269 300,000 1,430.82

957551006 30860 EASTGATE PKY MCINTOSH MAYNARD M 2006 3,149 298,000 1,279.76

957552001 30859 EASTGATE PKY LOPEZ JAIME 2011 3,269 300,000 1,430.82

957552002 30849 EASTGATE PKY NOYES JEREMY PAUL 2011 3,468 310,000 1,430.82

957552003 30839 EASTGATE PKY SALAS JOSE E 2010 3,149 297,000 1,279.76

957552004 30825 EASTGATE PKY WARBURTON RICHARD ALLEN 2010 3,269 228,624 1,430.82

957552005 30811 EASTGATE PKY FLORES ALVARO D 2006 3,149 297,000 1,279.76

957552006 30799 EASTGATE PKY BAKER BYRON D 2009 3,468 310,000 1,430.82

957552007 30787 EASTGATE PKY FARAH AMMAR 2011 3,269 295,800 1,430.82

957552008 30779 EASTGATE PKY OLSON JOHN M 2005 3,149 297,000 1,279.76

957552009 30773 EASTGATE PKY DAOUD RAMI B 2011 3,468 310,000 1,430.82

957552010 30763 EASTGATE PKY SOTOMAYOR JOE 2009 3,269 314,000 1,430.82

957552011 30757 EASTGATE PKY LOERA ERNEST 2012 3,149 309,000 1,279.76

957552012 30747 EASTGATE PKY POWELL REGINA R 2006 2,811 259,000 1,165.38

964250001 38326 WHISPER OAKS RD FULTON WALTER IANCHRISTOPH 2010 1,752 184,000 827.64

964250002 38336 WHISPER OAKS RD ANGRESS JASON T 2006 2,180 213,000 907.48

964250003 38346 WHISPER OAKS RD FISCHER JONATHAN LEE 2010 1,910 200,943 827.64

964250004 38356 WHISPER OAKS RD LAUK ERICH RICHARD 2004 2,180 213,000 907.48

964250006 31120 HIDDEN LAKE RD LITTLE BRADLEY ROBERT 2011 1,910 203,000 827.64

964250007 31130 HIDDEN LAKE RD TRAN SOAN A 2009 2,180 213,000 907.48

964250008 31140 HIDDEN LAKE RD BURROWS CHERI L 2007 2,005 222,000 907.48

964250009 38345 QUIET RUN CT WEDELL MICHAEL J 2004 1,910 203,000 827.64

964250010 38335 QUIET RUN CT MARTIN KEVIN M 2012 2,180 214,200 907.48

964250011 38325 QUIET RUN CT RODRIGUEZ BYRON B 2009 1,752 184,000 827.64

964250012 38315 QUIET RUN CT GALLEGOS STEFANIE DIAZ 2009 2,005 223,000 907.48

964250013 38320 QUIET RUN CT PAIZ WALTER 2006 2,180 213,000 907.48

964250014 38330 QUIET RUN CT BARTHELEMY NICOLAS M 2011 1,752 184,000 827.64

964250015 38340 QUIET RUN CT QIU HUAMING 2004 1,910 203,000 827.64

964250016 38350 QUIET RUN CT REYES ALEJANDRO 2009 2,180 213,000 907.48

964250017 38360 QUIET RUN CT UNG KIM KHOY 2010 1,910 203,000 827.64

- F-6

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964250018 38373 APPLEWOOD CT JUOLA GARY 2012 2,005 222,000 907.48

964250019 38363 APPLEWOOD CT GALVEZ ALEJANDRO 2009 2,180 213,000 907.48

964250020 38353 APPLEWOOD CT BOWKER SUZANNE M 2009 1,910 204,000 827.64

964250021 38343 APPLEWOOD CT BACCELLIA BRENT CAMERON 2011 2,180 211,038 907.48

964250022 38323 APPLEWOOD CT SADILE JOSE R 2009 1,752 189,000 827.64

964250023 38328 APPLEWOOD CT KAMOSS KEVIN 2004 2,180 216,000 907.48

964250024 38338 APPLEWOOD CT CROSS MARY J 2009 1,910 203,000 827.64

964250025 38348 APPLEWOOD CT IVERSON SANDRA L 2004 2,005 222,000 907.48

964250026 38358 APPLEWOOD CT JACKSON MICHAEL LEWIS 2006 1,910 203,000 827.64

964250027 38368 APPLEWOOD CT ASHTON JAY R 2004 1,752 184,000 827.64

964250028 38378 APPLEWOOD CT PIERATT MATTHEW W 2010 1,752 184,000 827.64

964250030 38332 CHESTNUT CIR RORABAUGH VICTOR J 2012 2,180 205,000 907.48

964250031 38342 CHESTNUT CIR MORALES CHRISTIAN T 2007 1,752 184,000 827.64

964250032 38352 CHESTNUT CIR SAVAGE STEVEN P 2010 1,910 203,000 827.64

964250033 38362 CHESTNUT CIR KARAN TINA M 2004 2,180 213,000 907.48

964250034 38372 CHESTNUT CIR MCHENRY GLENDA 2010 1,752 184,000 827.64

964250035 31240 HIDDEN LAKE RD PEARCE TONI M 2003 1,752 184,000 827.64

964250036 31250 HIDDEN LAKE RD WOOD TERRY A 2003 1,910 203,000 827.64

964250037 31260 HIDDEN LAKE RD PASQUALETTO COLIN 2004 2,005 222,000 907.48

964250038 38387 CHESTNUT CIR WHITMORE PETER D 2005 1,752 184,000 827.64

964250039 38377 CHESTNUT CIR BALTAZAR FROD D 2009 2,005 222,000 907.48

964250040 38367 CHESTNUT CIR GULLOTTA ANTHONY J 2011 2,180 204,000 907.48

964250041 38357 CHESTNUT CIR ANGEL JOSHUA M 2009 2,005 222,000 907.48

964250042 38347 CHESTNUT CIR GOH WEE PENG 2004 1,910 205,000 827.64

964250043 38337 CHESTNUT CIR KETCHER DEBRA R 2004 2,180 219,000 907.48

964250045 38379 FALCON CT AYERS HOGAN 2006 1,752 184,000 827.64

964250046 38369 FALCON CT BARKER JENNIFER A 2004 2,180 213,000 907.48

964250047 38359 FALCON CT WARD JOSEPH R 2009 2,005 222,000 907.48

964250048 38349 FALCON CT TANGLAO JOSELITO R 2004 1,910 216,000 827.64

964250049 38339 FALCON CT SAWYER MONICA A 2004 2,180 214,000 907.48

- F-7

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964251001 31097 ROSE CIR GUAJARDO ANTHONY 2010 2,005 220,425 907.48

964251002 31087 ROSE CIR MANGAYA RONALDO P 2004 1,752 184,000 827.64

964251003 31077 ROSE CIR WILSON MARK A 2006 2,180 213,000 907.48

964251004 31067 ROSE CIR JORDAN DARRICK T 2004 1,910 231,000 827.64

964251005 31057 ROSE CIR CARLTON JAMES E 2006 1,752 184,000 827.64

964251006 31047 ROSE CIR REZKALAH MONSSER 2004 1,910 217,000 827.64

964251007 31037 ROSE CIR DG REAL ESTATE SOLU TIONS 2004 2,180 223,000 907.48

964251008 31027 ROSE CIR MANIACI JESSICA 2010 1,752 184,000 827.64

964251009 31032 ROSE CIR LEONARD THOMAS FRANCIS 2012 2,180 235,000 907.48

964251010 31042 ROSE CIR JONES JINEANE 2011 2,005 209,100 907.48

964251011 31052 ROSE CIR CARTER JASON M 2004 1,910 203,000 827.64

964251012 31062 ROSE CIR DEARIE DAVID G 2004 2,180 213,000 907.48

964251013 31072 ROSE CIR UNDERHILL THOMAS BENJAMIN 2006 2,005 222,000 907.48

964251014 31082 ROSE CIR TAMAYO TOMAS M 2004 1,752 184,000 827.64

964251015 31092 ROSE CIR REMELIUS BRIAN F 2004 1,910 203,000 827.64

964251017 31025 HIDDEN LAKE RD WEINHAMMER FERDINAND R 2007 2,180 216,000 907.48

964251018 31020 HIDDEN LAKE RD SCHULTZ JOSEPH 2012 2,005 240,720 907.48

964251019 31040 HIDDEN LAKE RD YABUT MICHAEL P 2004 1,752 184,000 827.64

964251020 31050 HIDDEN LAKE RD RIGGS LARRY 2011 1,910 203,000 827.64

964251021 31060 HIDDEN LAKE RD MAFUA EPELI LILO 2007 1,752 184,000 827.64

964251022 31070 HIDDEN LAKE RD GUINA GREGORY C 2010 1,910 200,396 827.64

964251023 31080 HIDDEN LAKE RD WALDRON JACK D 2004 1,752 184,000 827.64

964251024 38371 WHISPER OAKS RD REEDY RANDY S 2006 2,180 229,000 907.48

964252001 31145 HIDDEN LAKE RD WHITTEMORE BRIAN J 2008 2,005 222,000 907.48

964252002 31135 HIDDEN LAKE RD BANK OF AMERICA 2012 1,752 184,000 827.64

964252003 31125 HIDDEN LAKE RD PADGETT GARY 2010 1,910 218,000 827.64

964252004 31115 HIDDEN LAKE RD HEFFERMAN JOSEPH 2006 1,752 184,000 827.64

964252005 31105 HIDDEN LAKE RD PINEDA BALTAZAR A 2007 2,180 213,000 907.48

964252006 31205 HIDDEN LAKE RD HSU TIEN KAI 2011 2,180 213,000 907.48

964252007 31195 HIDDEN LAKE RD KANKOWSKI HENRY M 2010 1,910 179,842 827.64

- F-8

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964252008 31185 HIDDEN LAKE RD ADKISON MICHELE 2004 1,752 184,000 827.64

964252009 31175 HIDDEN LAKE RD KWONG PAUL 2011 2,180 213,000 907.48

964252010 31165 HIDDEN LAKE RD LIU CHING 2012 1,910 197,500 827.64

964252011 31155 HIDDEN LAKE RD WILSON MICHAEL A 2004 1,752 184,000 827.64

964252012 31265 HIDDEN LAKES RD NGUYEN TUONG GIA 2007 1,752 184,000 827.64

964252013 31255 HIDDEN LAKE RD HADDAD HAYAT 2003 2,180 213,000 907.48

964252014 31245 HIDDEN LAKE RD MAYR STEVEN 2008 1,910 203,000 827.64

964252015 31235 HIDDEN LAKE RD ARRIETA CARLOS 2012 2,180 235,000 907.48

964252016 31225 HIDDEN LAKE RD DIAL BILLY 2012 1,752 180,000 827.64

964252017 31215 HIDDEN LAKE RD MASON LINDSAY JANE 2012 2,005 214,200 907.48

964260001 31298 COMPASS CIR LEDWITH KEVIN M 2003 2,005 239,000 907.48

964260002 31308 COMPASS CIR KELLY MICHAEL JOHN 2011 2,180 213,000 907.48

964260003 31318 COMPASS CIR ORTIZ RENE 2004 1,910 203,000 827.64

964260004 31328 COMPASS CIR GARCIA TIANI 2005 2,180 213,000 907.48

964260005 31338 COMPASS CIR WEISZ FRED 2003 1,910 203,000 827.64

964260006 31348 COMPASS CIR MENDO SAUL 2005 1,752 184,000 827.64

964260007 31358 COMPASS CIR WAMPLER MICHAEL HOGAN 2010 1,752 184,000 827.64

964260008 31368 COMPASS CIR VELASCO ABNER M 2003 1,910 203,000 827.64

964260009 31378 COMPASS CIR MERRYLEES CHRISTOPHER S 2008 1,752 184,000 827.64

964260010 31388 COMPASS CIR FLORES ALFRED K 2003 2,005 244,000 907.48

964260011 31393 COMPASS CIR WYMAN DANIEL E 2003 2,180 238,000 907.48

964260013 31488 WHITEFIELD CT NEVELS RICHARD 2011 2,761 231,000 1,165.38

964260014 31498 WHITEFIELD CT CHURCH MILFORD 2010 3,167 253,232 1,279.76

964260015 31508 WHITEFIELD CT BARAKAT HAITHAM 2004 2,761 230,000 1,165.38

964260016 31518 WHITEFIELD CT PALOMINO CARLOS 2010 3,468 255,283 1,430.82

964260017 31528 WHITEFIELD CT FEDERAL HOME LOAN M ORTGAGE CORP 2012 3,167 281,000 1,279.76

964260018 31538 WHITEFIELD CT YOUNG SAMUEL 2004 3,468 324,000 1,430.82

964260019 31548 WHITEFIELD CT WRAY RANDALL ALLEN 2004 3,167 296,000 1,279.76

964260020 31553 WHITEFIELD CT PIRSCHEL JESSE A 2011 3,468 328,000 1,430.82

964260021 31543 WHITEFIELD CT WAFAJOW DAUD 2010 3,167 256,918 1,279.76

- F-9

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964260022 31533 WHITEFIELD CT FULLER DANIEL W 2004 2,761 231,000 1,165.38

964260023 31523 WHITEFIELD CT PHAM HUNG NHUT 2004 3,468 325,000 1,430.82

964260024 31513 WHITEFIELD CT HADDAD HAYAT 2004 3,167 281,000 1,279.76

964260025 31503 WHITEFIELD CT SANDOVAL BRIAN S 2010 2,761 245,000 1,165.38

964260026 31493 WHITEFIELD CT TENNANT STEVEN J 2004 3,468 307,000 1,430.82

964260027 31483 WHITEFIELD CT APONTE NESTOR J 2010 3,167 240,929 1,279.76

964261001 38344 FALCON CT ALCALA MARIA 2007 1,752 184,000 827.64

964261002 38354 FALCON CT SANCHEZ ARMANDO 2004 2,180 213,000 907.48

964261003 38364 FALCON CT YOUNGBLOOD ROSSI 2005 1,910 216,000 827.64

964261004 38374 FALCON CT ODOMS KELLI C 2011 2,180 213,000 907.48

964261005 38384 FALCON CT DIAZ FREDDY 2010 2,005 222,000 907.48

964261006 38394 FALCON CT CELEBRADO ILDEFONSO O 2004 1,910 203,000 827.64

964261007 31290 HIDDEN LAKE RD RAYNER MARK THOMAS 2011 1,752 184,000 827.64

964261008 31300 HIDDEN LAKE RD ASHCRAFT JASON 2004 2,180 213,000 907.48

964261009 31310 HIDDEN LAKE RD GRAJCZYK GARY A 2009 1,910 203,000 827.64

964261010 31320 HIDDEN LAKE RD CERNERO JAMES 2003 2,180 213,000 907.48

964261011 31330 HIDDEN LAKE RD AMAICHIGH ROBERT T 2009 1,910 206,000 827.64

964270001 38859 AUTUMN WOODS RD NAPOLEON PHILLIP 2004 2,538 241,000 1,079.06

964270002 38849 AUTUMN WOODS RD FERDINAND CARL EDWARD 2004 2,888 242,000 1,165.38

964270003 38839 AUTUMN WOODS RD WILLIAMS SUSAN K 2004 2,538 241,000 1,079.06

964270004 38829 AUTUMN WOODS RD AMUNDSON DENNIS DUANE 2004 3,213 284,000 1,279.76

964270005 38819 AUTUMN WOODS RD SCHWARZ JOSHUA THOMAS 2011 2,888 240,000 1,165.38

964270006 38809 AUTUMN WOODS RD LA TOM 2006 2,538 241,000 1,079.06

964270007 38799 AUTUMN WOODS RD DAY STEVEN ROBERT 2010 3,213 318,579 1,279.76

964270008 38855 COBBLESTONE CIR KERT SAM 2003 2,538 242,000 1,079.06

964270009 38835 COBBLESTONE CIR ROBERTSON ROSARIO 2003 3,213 286,000 1,279.76

964270010 38815 COBBLESTONE CIR ORTA LUIS 2009 2,888 242,000 1,165.38

964270011 38805 COBBLESTONE CIR HIGA CAROLYN L 2003 3,213 286,000 1,279.76

964270012 38795 COBBLESTONE CIR SEGURA ALVARO 2003 2,538 241,000 1,079.06

964270013 38785 COBBLESTONE CIR PAYNE RALPH T 2003 3,213 286,000 1,279.76

- F-10

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964270014 38775 COBBLESTONE CIR MARTINEZ RUBEN M 2011 2,888 242,000 1,165.38

964270015 38765 COBBLESTONE CIR FOWLER DANIEL JAMES 2003 3,213 301,000 1,279.76

964270016 38750 COBBLESTONE CIR JENKINS BRYANT LYDELL 2003 3,213 289,000 1,279.76

964270017 38770 COBBLESTONE CIR LA CHUONG V 2003 2,888 242,000 1,165.38

964270018 38780 COBBLESTONE CIR CHEN CHIA WEI 2010 3,213 254,863 1,279.76

964270019 38790 COBBLESTONE CIR SMITH JAMES ALBERT 2004 2,538 260,000 1,079.06

964270020 38800 COBBLESTONE CIR SAAD JOSEPH M 2003 3,213 306,000 1,279.76

964270021 38810 COBBLESTONE CIR MASSEY RICKY L 2009 2,888 262,000 1,165.38

964270022 38820 COBBLESTONE CIR GHULOUM HIKMAT 2003 3,213 293,000 1,279.76

964270023 38830 COBBLESTONE CIR MATHES RICHARD E 2003 2,538 260,000 1,079.06

964270024 38840 COBBLESTONE CIR PRESTON JONATHAN 2005 3,213 303,000 1,279.76

964270025 38850 COBBLESTONE CIR CASALS ALLEN FRANCIS 2003 2,888 244,000 1,165.38

964270026 38860 COBBLESTONE CIR GHULOUM REMA 2010 3,213 235,802 1,279.76

964271001 38874 AUTUMN WOODS RD LU JIA JIH 2012 2,098 200,000 907.48

964271002 38884 AUTUMN WOODS RD ENDERLE RACHELLE R 2009 2,330 219,000 957.12

964271003 38894 AUTUMN WOODS RD EDWARDS TIMOTHY 2003 1,960 199,000 827.64

964271004 38904 AUTUMN WOODS RD DUNCAN EDGAR 2003 2,330 219,000 957.12

964271005 38914 AUTUMN WOODS RD ELLETT JOHN 2003 2,098 214,000 907.48

964271006 38924 AUTUMN WOODS RD GALLO CHRISTOPHER J 2011 1,956 199,000 827.64

964271007 38934 AUTUMN WOODS RD MARTINEZ VICTORINO 2012 2,098 214,000 907.48

964271008 38944 AUTUMN WOODS RD FALLA BRENT ARTHUR 2003 2,330 219,000 957.12

964271009 38954 AUTUMN WOODS RD HUYNH ALEXIS 2012 1,956 217,000 827.64

964271010 38964 AUTUMN WOODS RD JUAREZ ADALBERTO LEON 2003 2,330 219,000 957.12

964271012 31491 MAGNOLIA POINT DR HENRY NANCY C 2009 2,098 216,000 907.48

964271013 31481 MAGNOLIA POINT DR DEVINE SHANNA M 2011 2,330 219,000 957.12

964271014 31471 MAGNOLIA POINT DR BETLEJEWSKA KAROLINA ZOFIA 2004 1,956 199,000 827.64

964271015 31461 MAGNOLIA POINT DR SPRINGER SUSAN FLORA 2003 2,330 218,000 957.12

964271016 31451 MAGNOLIA POINT DR SCHOBERT RICARDO 2003 2,098 213,000 907.48

964271017 31441 MAGNOLIA POINT DR PEARSON MARY L 2006 2,330 218,000 957.12

964271018 31431 MAGNOLIA POINT DR MARTINEZ ANGEL R 2003 1,956 199,000 827.64

- F-11

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964271020 31421 MAGNOLIA POINT DR TRANSUNN PROP 2011 2,330 218,000 957.12

964271021 31411 MAGNOLIA POINT DR JARDON SERGIO E 2009 2,098 213,000 907.48

964271022 31401 MAGNOLIA POINT DR TRAN HIEN L 2004 1,956 199,000 827.64

964271023 31391 MAGNOLIA POINT DR GIL FLORA H 2004 2,098 220,000 907.48

964271024 31381 MAGNOLIA DR FRUMOSA ANTHONY 2004 2,330 221,000 957.12

964271025 31371 MAGNOLIA POINT DR STINSON CYNTHIA L 2004 2,098 214,000 907.48

964271026 38961 WANDERING LN VARGAS TINO M 2004 1,956 199,000 827.64

964271027 38951 WANDERING LN MCKAY ROBERT F 2004 2,330 219,000 957.12

964271028 38941 WANDERING LN WILLIAMS DAREK 2010 2,098 214,000 907.48

964271029 38931 WANDERING LN ELPEDES JUN M 2004 2,330 219,000 957.12

964272001 38939 AUTUMN WOODS RD CROOK MATTHEW 2009 2,330 219,000 957.12

964272002 38929 AUTUMN WOODS RD LEISTER PRESTON DONALD 2003 2,098 215,000 907.48

964272003 38919 AUTUMN WOODS RD PANDES VINCENT 2003 2,330 219,000 957.12

964272004 38909 AUTUMN WOODS RD ALDRETE JOSE 2003 1,956 200,000 827.64

964272005 38899 AUTUM WOODS RD MARTINEZ MIGUEL A TEJEDA 2011 2,330 219,000 957.12

964272006 38889 AUTUMN WOODS RD REYNA HENRY 2003 2,098 230,000 907.48

964272007 38879 AUTUMN WOODS RD HADDAD MAHA 2003 2,330 220,000 957.12

964272008 38927 CANYON BRIDGE CIR NAPUTI MICHAEL 2004 2,330 220,000 957.12

964272009 38917 CANYON BRIDGE CIR BACHAND VICTOR 2011 2,098 218,000 907.48

964272010 38907 CANYON BRIDGE CIR REED DUSTIN 2012 2,330 255,000 957.12

964272011 38877 CANYON BRIDGE CIR CORDOVA JOSE W 2009 2,098 224,000 907.48

964272012 38872 CANYON BRIDGE CIR ROBINSON DANNY BERNARD 2004 2,330 225,000 957.12

964272013 38882 CANYON BRIDGE CIR VILLANUEVA EDISON P 2004 2,098 215,000 907.48

964272014 38892 CANYON BRIDGE CIR ZONG HOWARD 2012 2,330 219,300 957.12

964272015 38902 CANYON BRIDGE CIR DIAZ DORA 2004 1,956 215,000 827.64

964272016 38912 CANYON BRIDGE CIR CHAPMAN ERIN RODNEY 2009 2,330 219,000 957.12

964272017 38922 CANYON BRIDGE CIR JIANG GE 2010 2,098 214,000 907.48

964272018 31446 MAGNOLIA POINT DR PICKARDT GARY P 2003 2,330 220,000 957.12

964272019 31456 MAGNOLIA POINT DR HENRY WILLIAM J 2010 1,956 200,000 827.64

964272020 31466 MAGNOLIA POINT DR SANMIGUEL ROBERT A 2011 2,098 216,000 907.48

- F-12

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964272021 38846 WANDERING LN YOUNGKEN RICHARD B 2004 2,098 215,000 907.48

964272022 38856 WANDERING LN RAMIREZ MARCO ANTONIO 2004 1,956 200,000 827.64

964272023 38866 WANDERING LN GARCIA MIGUEL ANGEL 2012 2,330 215,000 957.12

964272024 38876 WANDERING LN NAGLE JOHN W 2011 2,098 215,000 907.48

964272025 38886 WANDERING LN FIEREK CHRIS 2007 2,330 220,000 957.12

964272026 38896 WANDERING LN HOCSON DANTE RAVAGO 2004 2,098 215,000 907.48

964272027 38916 WANDERING LN MARKOWITZ TODD 2004 1,956 200,000 827.64

964272028 38926 WANDERING LN RIVERA CARTAGENA AXEL 2004 2,330 219,000 957.12

964272029 38936 WANDERING LN LARSON RONALD J 2010 2,098 218,000 907.48

964272030 38946 WANDERING LN SANCHEZ ISMAEL 2011 2,330 221,000 957.12

964272031 31396 MAGNOLIA POINT DR AUSTIN KELVIN 2004 2,330 219,000 957.12

964272032 31406 MAGNOLIA POINT DR BARGA SHAD NICHOLAS 2004 2,098 214,000 907.48

964272033 31416 MAGNOLIA POINT DR LARRYANDMARGEE 2006 2,330 219,000 957.12

964272034 31426 MAGNOLIA POINT DR WAROFF STEVEN RYAN 2004 1,956 200,000 827.64

964273001 38804 AUTUMN WOODS RD ANSARI MUHAMMAD I 2010 3,213 241,503 1,279.76

964273002 31468 CREEK SIDE CT ADAN HUGO CESAR 2004 3,213 286,000 1,279.76

964273003 31478 CREEK SIDE CT ABRAJANO RUENA 2004 2,888 241,000 1,165.38

964273004 31488 CREEK SIDE CT HYUN DANIEL 2004 3,213 285,000 1,279.76

964273005 31498 CREEK SIDE CT VALDEZ ISIDORO 2004 2,538 260,000 1,079.06

964273006 31483 CREEK SIDE CT BRASGA CASMIR R 2009 3,213 286,000 1,279.76

964273007 31473 CREEK SIDE CT STEFFENS JAMES M 2004 2,888 242,000 1,165.38

964273008 38854 AUTUMN WOODS RD ELPEDES JUN MIRANDO 2005 3,213 286,000 1,279.76

964274001 38921 WANDERING LN DAVIS SHEM MALAKU T 2004 1,956 200,000 827.64

964274002 38911 WANDERING LN EDWARDS STEVEN LEE 2004 2,098 215,000 907.48

964274003 38901 WANDERING LN WALLACE DOUGLAS R 2004 2,330 235,000 957.12

964280001 31241 OLD TRAIL CIR JOHNSON STEVEN V 2005 2,538 241,000 1,079.06

964280002 31231 OLD TRAIL CIR WALKER JASON D 2010 2,538 225,000 1,079.06

964280003 31221 OLD TRAIL CIR MINOCK BRIAN J 2011 2,888 238,420 1,165.38

964280004 31211 OLD TRAIL CIR PACIA JOHN RENE JAVIER 2004 3,213 285,000 1,279.76

964280005 31201 OLD TRAIL CIR AQUI JONATHAN L 2012 2,888 237,150 1,165.38

- F-13

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964280006 31191 OLD TRAIL CIR WRIGHT DAVID EDWARD 2004 2,538 256,000 1,079.06

964280007 31181 OLD TRAIL CIR FARRIS JOHNNY W 2012 3,213 305,898 1,279.76

964280008 31171 OLD TRAIL CIR MINSBERG MORRIS T 2004 2,888 257,000 1,165.38

964280009 31161 OLD TRAIL CIR JIMENEZ FRANCISCO 2009 3,213 286,000 1,279.76

964280010 31151 OLD TRAIL CIR PAK DAE SUN 2011 2,888 242,000 1,165.38

964280011 31141 OLD TRAIL CIR GABIOLA LOUIE PATAO 2004 2,538 246,000 1,079.06

964280012 31131 OLD TRAIL CIR MORALES JOSE L 2011 3,213 306,000 1,279.76

964280013 31136 OLD TRAIL CIR QUINTERO MAXIMO 2012 2,888 250,000 1,165.38

964280014 31146 OLD TRAIL CIR CHAPA FLORIENE R 2009 3,213 303,000 1,279.76

964280015 31156 OLD TRAIL CIR YOCHES VETO J 2009 2,888 240,000 1,165.38

964280016 31166 OLD TRAIL CIR RAMIREZ JUAN GERARDO 2004 2,538 256,000 1,079.06

964280017 31176 OLD TRAIL CIR ONEIL PATRICIA L 2005 3,213 284,000 1,279.76

964280018 31186 OLD TRAIL CIR LAIL ALEXANDER BLAKE 2004 2,888 239,000 1,165.38

964280019 31196 OLD TRAIL CIR MCDANIEL DAVID E 2004 3,213 284,000 1,279.76

964280020 31206 OLD TRAIL CIR HARVILLE DESHUN 2009 2,538 239,000 1,079.06

964280021 31216 OLD TRAIL CIR ADKINS SOO JUNG 2009 2,888 242,000 1,165.38

964280022 31226 OLD TRAIL CIR BONSANTE BOB 2010 3,213 255,891 1,279.76

964280023 31236 OLD TRAIL CIR CABARCAS ARMONDO 2010 2,538 227,600 1,079.06

964280024 31246 OLD TRAIL CIR QUINONEZ JAIME 2004 3,213 302,000 1,279.76

964280026 31239 BOULDER CT SANNIPOLI FRED 2009 2,538 260,000 1,079.06

964280027 31229 BOULDER CT FRANCIS CHRISTOPHER D 2004 3,213 286,000 1,279.76

964280028 31219 BOULDER CT FERNANDEZ PHILLIP E 2004 2,888 257,000 1,165.38

964280029 31209 BOULDER CT HE QICHI 2011 3,213 255,891 1,279.76

964280030 31204 BOULDER CT WALKER JAMES R 2004 2,888 242,000 1,165.38

964280031 31214 BOULDER CT ROST SCOTT A 2010 3,213 303,000 1,279.76

964280032 31224 BOULDER CT WILLIAMS DANIEL 2006 2,538 256,000 1,079.06

964280033 31234 BOULDER CT COVENANT DEV INC 2012 3,213 302,000 1,279.76

964280034 31244 BOULDER CT BENITEZ RODRIGO C 2004 2,888 245,000 1,165.38

964280035 31258 RED BRIDGE RD CHEN YUAN TING 2010 3,213 242,531 1,279.76

964280036 31268 RED BRIDGE RD WOJAHN ERIC ARTHUR 2010 2,888 263,000 1,165.38

- F-14

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964280037 31278 RED BRIDGE RD SCHRADER ROBERT W 2004 2,538 246,000 1,079.06

964280038 31288 RED BRIDGE RD PENSERGA GILBERTO P 2004 2,888 245,000 1,165.38

964280039 31298 RED BRIDGE RD ZHANG WEI 2011 3,213 275,417 1,279.76

964280040 31307 GATEHOUSE CT BACSAL CARLOS G 2004 3,213 286,000 1,279.76

964280041 31297 GATEHOUSE CT SCHULZE DOUGLAS DEAN 2009 2,888 242,000 1,165.38

964280042 31287 GATEHOUSE CT CABILING RUBEN G 2004 3,213 286,000 1,279.76

964280043 31877 GATEHOUSE CT BEAN MICHAEL E 2004 2,538 241,000 1,079.06

964280044 31267 GATEHOUSE CT JERRY PASCHA J 2004 3,213 286,000 1,279.76

964280045 31257 GATEHOUSE CT MILLER KENNETH 2010 2,888 247,000 1,165.38

964280046 31272 GATEHOUSE CT U S BANK NATL ASSN 2007 3,213 288,000 1,279.76

964280047 31282 GATEHOUSE CT WOOD STACY C 2010 2,888 244,000 1,165.38

964280048 31292 GATEHOUSE CT FERNANDEZ PAUL E 2004 2,538 246,000 1,079.06

964280049 31302 GATEHOUSE CT LOHREY ARY D 2004 3,213 288,000 1,279.76

964280050 31312 GATEHOUSE CT CORDERO DAVID 2006 2,888 246,000 1,165.38

964280051 31322 GATEHOUSE CT ELLETT JOHN 2008 2,538 245,000 1,079.06

964280052 31332 GATEHOUSE CT ANDERSON WILLIAM 2004 2,888 244,000 1,165.38

964281001 38942 LONE CIR SALGADO JUAN FIDEL AYALA 2010 1,956 200,000 827.64

964281002 38952 LONE CIR ELLISON MICHAEL T 2006 2,330 219,000 957.12

964281003 38962 LONE CIR NGUYEN JOHNNY TOAN 2004 2,098 215,000 907.48

964281004 38972 LONE CIR LU WEN CHANG 2012 1,956 195,257 827.64

964281005 38982 LONE CIR PERRY MARIA CHRISTINA 2004 2,098 218,000 907.48

964281006 38992 LONE CIR BRADSHAW SCOTT ALAN 2004 2,330 221,000 957.12

964281007 38997 LONE CIR MENDOZA DEBORAH J 2010 2,098 217,000 907.48

964281008 38987 LONE CIR LAMMATAO MANOLITO C 2004 1,956 203,000 827.64

964281009 38977 LONE CIR RAFFA MASSIMO 2012 2,098 229,500 907.48

964281010 38967 LONE CIR WHEATON RICHARD D 2011 1,956 199,000 827.64

964281011 38957 LONE CIR TOLEDO ANGEL J 2004 2,098 215,000 907.48

964281012 38947 LONE CIR JOCSON FEDERICO R 2004 2,330 221,000 957.12

964290001 31495 PEAR BLOSSOM RD CAD EDNA S 2012 2,761 249,900 1,165.38

964290002 31485 PEAR BLOSSOM RD ONEILL CHRISTOPHER 2010 3,468 256,307 1,430.82

- F-15

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964290003 31475 PEAR BLOSSOM RD CHIN DAVID S 2010 2,761 204,943 1,165.38

964290004 31465 PEAR BLOSSOM RD ALFARO MARCELINO V 2004 3,468 322,000 1,430.82

964290005 31455 PEAR BLOSSOM RD YANG LIN DING 2010 3,167 270,278 1,279.76

964290006 31445 PEAR BLOSSOM RD. TRICE PHILLIP C 2004 3,468 322,000 1,430.82

964290007 31435 PEAR BLOSSOM RD TOUKHI HAMID 2011 2,761 231,000 1,165.38

964290008 31425 PEAR BLOSSOM RD NOLAN RICHARD J 2004 3,468 327,000 1,430.82

964290009 31430 PEAR BLOSSOM RD NELSON BRICE K 2005 3,167 314,000 1,279.76

964290010 31440 PEAR BLOSSOM RD ROHRER MICHAEL B 2011 3,468 322,000 1,430.82

964290011 31450 PEAR BLOSSOM RD OLLISON FELTON S 2004 3,167 328,000 1,279.76

964290012 31460 PEAR BLOSSOM RD GORDON HELEN 2004 3,468 322,000 1,430.82

964290013 31470 PEAR BLOSSOM RD GALLERY EQUITY 2011 3,167 274,380 1,279.76

964290014 31480 PEAR BLOSSOM RD QUIGLEY DONALD J 2005 2,761 230,000 1,165.38

964290015 31490 PEAR BLOSSOM RD GAMBOA ESTEBAN 2009 3,468 324,000 1,430.82

964290016 31497 RIVER ROCK CT CERESINO GORDON 2009 3,167 314,000 1,279.76

964290017 31487 RIVER ROCK CT GHULOUM HIKMAT 2004 3,468 322,000 1,430.82

964290018 31477 RIVER ROCK CT SPENCER BRANDI 2011 2,761 230,000 1,165.38

964290019 31467 RIVER ROCK CT SMART ERROL A 2007 3,468 324,000 1,430.82

964290020 31472 RIVER ROCK CT KERR GAVIN 2005 3,167 328,000 1,279.76

964290021 31482 RIVER ROCK CT ALVARADO MARIO 2004 3,468 340,000 1,430.82

964290022 31492 RIVER ROCK CT RODRIGUEZ RENZO 2004 3,167 318,000 1,279.76

964290023 38673 STONE CANYON RD SCHMOTTLACH TRISTAN T 2004 3,468 339,000 1,430.82

964290024 38663 STONE CANYON RD ALVAREZ OSCAR 2005 3,167 329,000 1,279.76

964290025 38668 STONE CANYON RD ESHAK MARY 2006 3,468 324,000 1,430.82

964290026 38678 STONE CANYON RD PONCE CARLOS RUBEN & FAYE LOUIS E REV TRUST 2004 2,761 231,000 1,165.38

964290027 38688 STONE CANYON RD LAY GEORGE F 2004 3,167 313,000 1,279.76

964290029 31459 ORCHARD LN RICE CHARLES C 2003 2,761 232,000 1,165.38

964290030 31449 ORCHARD LN DOWDEN JOSHUA E 2002 3,167 328,000 1,279.76

964290031 31439 ORCHARD LN WELLIVER GORDON E 2004 3,468 339,000 1,430.82

964290032 31429 ORCHARD LN GHULOUM HIKMAT 2004 3,167 314,000 1,279.76

964290033 31419 ORCHARD LN DERAIN DONALD SUMEGUIN 2004 2,761 231,000 1,165.38

- F-16

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964290034 31409 ORCHARD LN KIPPER CORY ROBERT 2004 3,468 322,000 1,430.82

964290035 31399 ORCHARD LN LYNES STANLEY L 2004 3,167 328,000 1,279.76

964290036 31394 ORCHARD LN MARGERISON JOHN PAUL 2009 3,468 306,545 1,430.82

964290037 31404 ORCHARD LN SAWCHUK PATRICK W 2009 3,167 313,000 1,279.76

964290038 31414 ORCHARD LN HOBERG DALE C 2004 3,468 322,000 1,430.82

964290039 31424 ORCHARD LN NEELEY KENNETH R 2009 2,761 231,000 1,165.38

964290040 31444 ORCHARD LN LUNDGREN JAMES W 2009 3,468 324,000 1,430.82

964290041 31454 ORCHARD LN BANK OF AMERICA 2012 3,167 296,000 1,279.76

964290042 31464 ORCHARD LN ORR JOHN F 2009 2,761 231,000 1,165.38

964290043 31474 ORCHARD LN DOUGHTY MICHAEL 2005 3,468 322,000 1,430.82

964290044 31484 ORCHARD LN MUNSCH WILLIAM A 2003 3,167 296,000 1,279.76

964291001 38718 STONE CANYON RD PALMER THOMAS F 2010 3,468 267,117 1,430.82

964291002 38728 STONE CANYON RD BOCK MICHAEL DEAN 2004 2,761 231,000 1,165.38

964291003 38738 STONE CANYON RD LEWIS STEVEN 2012 3,167 298,000 1,279.76

964291004 38748 STONE CANYON RD BERESON ARNOLD 2004 3,468 308,000 1,430.82

964291006 38758 STONE CANYON RD STROMSOE MICHAEL S 2008 2,761 230,000 1,165.38

964291007 38768 STONE CANYON RD RIOS RALPH C 2003 3,468 337,000 1,430.82

964291008 38778 STONE CANYON RD CUYUGAN JUAN G 2003 3,167 282,000 1,279.76

964291009 31499 ORCHARD LN AJ BOYD CONST 2012 3,468 303,000 1,430.82

964291010 31489 ORCHARD LN DAVIS ARTHUR BRIAN 2005 3,167 281,000 1,279.76

964291011 38794 AUTUMN WOODS RD SANTOSCOY JOHN CHRIS 2003 3,468 310,000 1,430.82

964300001 38867 ROCKINGHORSE RD OGUNSANYA TRUST 2009 2,048 221,000 907.48

964300002 38857 ROCKINGHORSE RD TOMINAGA TOSHIKO 2006 2,579 216,000 1,079.06

964300003 38847 ROCKINGHORSE RD GOODWIN JEFFERY S 2010 1,752 184,000 827.64

964300004 38837 ROCKINGHORSE RD GARCIA HENRY A 2008 1,910 203,000 827.64

964300005 38827 ROCKINGHORSE RD LABRUYERE BEDOLLA MARCIA JO 2004 2,005 228,000 907.48

964300006 38822 ROCKINGHORSE RD WOOD JACQUELINE A 2008 2,180 221,000 907.48

964300007 38832 ROCKINGHORSE RD CHAN DENNY 2004 2,188 221,000 907.48

964300008 38842 ROCKINGHORSE RD GOMEZ OROZCO DAVID H 2010 2,204 221,000 907.48

964300009 38852 ROCKINGHORSE RD HESS JONATHAN L 2009 2,706 244,000 1,079.06

- F-17

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964300010 38862 ROCKINGHORSE RD FERNANDEZ JOSE A 2010 2,579 239,000 1,079.06

964300011 31568 SUMMERFIELD LN TELLEZ AARON 2010 2,579 220,950 1,079.06

964300012 31578 SUMMERFIELD LN LEONARDSON SCOTT 2011 2,706 265,000 1,079.06

964300013 31588 SUMMERFIELD LN SERNA ANTHONY PAUL 2010 2,188 222,000 907.48

964300014 31598 SUMMERFIELD LN KIRALY BRIAN A 2010 2,204 222,000 907.48

964301001 38882 ROCKINGHORSE RD SERNA ARTURO 2004 2,188 217,000 907.48

964301002 38892 ROCKINGHORSE RD CHEN JOHN JUN AN J 2004 2,579 238,000 1,079.06

964301003 38902 ROCKINGHORSE RD BANK OF AMERICA 2012 2,204 216,000 907.48

964301004 38912 ROCKINGHORSE RD VOSSOUGHI BEHNAM 2004 2,579 238,000 1,079.06

964301005 38922 ROCKINGHORSE RD VANA GUY WILLIAM 2004 2,188 217,000 907.48

964301006 38932 ROCKINGHORSE RD EUSTAQUIO ROBERT SALONGIA 2010 2,579 238,000 1,079.06

964301007 38942 ROCKINGHORSE RD HOWARTH JONATHON 2011 2,706 246,642 1,079.06

964301008 31536 WHITEDOVE LN MULHALL AARON PATRICK 2010 2,579 233,796 1,079.06

964301009 31546 WHITEDOVE LN CAMPOS ADRIAN 2009 2,188 217,000 907.48

964301010 31556 WHITEDOVE LN JAHAN SHAHWER 2006 2,204 216,000 907.48

964301011 31566 WHITEDOVE LN BAUZON JOEL 2004 2,579 238,000 1,079.06

964301012 38949 HICKORY HILL CT TERRIQUEZ PAULINO 2004 2,706 243,000 1,079.06

964301013 38939 HICKORY HILL CT KOLB R MICHAEL 2010 2,204 209,762 907.48

964301014 38929 HICKORY HILL CT GALBAN HERSON P 2004 2,188 217,000 907.48

964301015 38919 HICKORY HILL CT MORALES KRISTAN DENISE 2004 2,579 238,000 1,079.06

964301016 38909 HICKORY HILL CT LAKSANA MARTIN W 2010 2,188 215,811 907.48

964301017 38899 HICKORY HILL CT HYLAND JIMMIE 2004 2,204 216,000 907.48

964301018 38889 HICKORY HILL CT MURPHY LORI GAIL 2006 2,579 238,000 1,079.06

964301019 38884 HICKORY HILL CT SAALER LARRY D 2006 2,579 238,000 1,079.06

964301020 38894 HICKORY HILL CT HEATH JENNA L 2011 2,188 217,000 907.48

964301021 38904 HICKORY HILL CT DAVILA JORGE A 2004 2,204 216,000 907.48

964301022 38924 HICKORY HILL CT BURT TIMOTHY 2004 2,706 241,000 1,079.06

964301023 38934 HICKORY HILL CT STANLEY TRACY 2004 2,204 216,000 907.48

964301024 38944 HICKORY HILL CT BASSETT RON 2004 2,579 238,000 1,079.06

964301025 38954 HICKORY HILL CT SANTANA HECTOR E 2004 2,188 217,000 907.48

- F-18

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964301026 38964 HICKORY HILL CT WU JIA CHUANG 2012 2,706 249,900 1,079.06

964301027 38974 HICKORY HILL CT MOSQUERA RUTH 2011 2,579 238,249 1,079.06

964302001 38977 ROCKINGHORSE RD RODRIGUEZ DANIEL 2011 2,579 244,000 1,079.06

964302002 38967 ROCKINGHORSE RD CAINES GLEN 2006 2,188 217,000 907.48

964302003 38957 ROCKINGHORSE RD DIMAYUGA RHEA ANGELICA 2009 2,204 216,000 907.48

964302004 38947 ROCKINGHORSE RD PHAM DUC P 2004 2,579 238,000 1,079.06

964302005 38937 ROCKINGHORSE RD REESE AL J 2004 2,204 216,000 907.48

964302006 38927 ROCKINGHORSE RD RUBALCAVA MARCOS A 2005 2,579 238,000 1,079.06

964302007 38917 ROCKINGHORSE RD LARA TRAVIS D 2011 2,579 244,800 1,079.06

964302008 38907 ROCKINGHORSE RD NGUYEN TAM THANH 2004 2,204 216,000 907.48

964302009 38897 ROCKINGHORSE RD SAITO KAI 2009 2,188 219,000 907.48

964302010 38887 ROCKINGHORSE RD BOECHE STEPHEN H 2006 2,579 238,000 1,079.06

964302013 31571 WHITEDOVE LN RANGER CHRISTOPHER WILLIAM 2011 2,188 234,000 907.48

964302014 31561 WHITEDOVE LN MARRUJO MATHEW M 2010 2,579 238,000 1,079.06

964302015 31551 WHITEDOVE LN PONDIVIDA GLENN B 2009 2,204 216,000 907.48

964302016 31541 WHITEDOVE LN BREAZEALE ROYCE T 2004 2,188 217,000 907.48

964302017 31531 WHITEDOVE LN KUESTER KIMBERLY K 2004 2,579 238,000 1,079.06

964302018 31521 WHITEDOVE LN MORFIN MARECELA 2010 2,204 222,000 907.48

964310001 38961 RED POST CIR SHERRILL JULIANA L 2007 2,579 238,000 1,079.06

964310002 38951 RED POST CIR EASTER TRAVIS V 2011 2,188 219,000 907.48

964310003 38941 RED POST CIR MORALES SHEMONETTE C 2004 2,706 243,000 1,079.06

964310004 38931 RED POST CIR RAMOS PHILLIP 2004 2,579 253,000 1,079.06

964310005 38921 RED POST CIR ROJAS CARLOS JAIME 2011 2,204 216,000 907.48

964310006 38911 RED POST CIR EUGENIO GARNER 2004 2,188 219,000 907.48

964310007 38901 RED POST CIR FIGUEROA RAFAEL 2009 2,706 244,000 1,079.06

964310008 38891 RED POST CIR LOPEZ RUDY S 2010 2,188 235,000 907.48

964310009 38881 RED POST CIR MANIPON MANUEL A 2004 2,579 240,000 1,079.06

964310010 38896 RED POST CIR MOORE JOSHUA C 2004 2,204 220,000 907.48

964310011 38916 RED POST CIR VIRAY HECTOR G 2004 2,706 244,000 1,079.06

964310012 38926 RED POST CIR RIVERA REYNALDO L 2004 2,579 238,000 1,079.06

- F-19

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964310013 38936 RED POST CIR SALDIVAR RAUL 2006 2,188 217,000 907.48

964310014 38946 RED POST CIR LIANG YUANLING 2012 2,204 216,000 907.48

964310015 38956 RED POST CIR ALVAREZ CARLOS 2004 2,579 238,000 1,079.06

964310016 38966 RED POST CIR STOCKHOLM WILLIAM 2009 2,188 221,000 907.48

964310017 31743 SUMMERFIELD LN MILLER CHRISTOPHER 2010 2,579 237,906 1,079.06

964310018 31733 SUMMERFIELD LN NEELY DAVID 2004 2,188 217,000 907.48

964310019 31723 SUMMERFIELD LN KEYS SCOTT 2009 2,706 242,000 1,079.06

964310020 31713 SUMMERFIELD LN LEON VICOTR M 2003 2,579 238,000 1,079.06

964310021 31703 SUMMERFIELD LN MANGAYA ABNER P 2003 2,204 216,000 907.48

964310022 31683 SUMMERFIELD LN PASION DANILO 2003 2,188 222,000 907.48

964311001 31658 SUMMERFIELD LN CONN ERIC 2006 2,579 243,000 1,079.06

964311002 31678 SUMMERFIELD LN FAST ALEXANDER 2008 2,188 227,000 907.48

964311003 31688 SUMMERFIELD LN ALDERMAN ALEX J 2012 2,204 220,320 907.48

964311004 31698 SUMMERFIELD LN DIGRIGOLI MICHAEL 2004 2,706 266,000 1,079.06

964311005 31641 WHITEDOVE LN MARTINS MICHAEL T 2012 2,579 242,760 1,079.06

964311006 31631 WHITEDOVE LN HAGGERTY ANDREW 2006 2,188 222,000 907.48

964311008 31692 ARBOR CT MATTHYS PAUL A 2011 2,204 215,811 907.48

964311009 31702 ARBOR CT HALE BRIAN LANCE 2005 2,204 216,000 907.48

964311010 31712 ARBOR CT GOLTARA KEN S 2003 2,706 248,000 1,079.06

964311011 31717 ARBOR CT RUALO JOHN GABRIEL 2003 2,579 246,000 1,079.06

964311012 31707 ARBOR CT BELL ANDREW M 2012 2,706 250,000 1,079.06

964311013 31697 ARBOR CT PEREZ DELFIN C 2003 2,188 220,000 907.48

964311014 31687 ARBOR CT HERRING WILLIAM LEE 2003 2,579 238,000 1,079.06

964311015 31696 WHITEDOVE LN HUKILL WOODY G 2004 2,579 238,000 1,079.06

964311016 31706 WHITEDOVE LN HOLZER SHAWNEE L 2006 2,204 216,000 907.48

964311017 31716 WHITEDOVE LN SAMUELSON ROBYN 2008 2,188 219,000 907.48

964311018 31726 WHITEDOVE LN RICKERSON SHELBY 2009 2,579 238,000 1,079.06

964311019 31736 WHITEDOVE LN ASCENCIO JOSE A 2009 2,204 216,000 907.48

964311020 31746 WHITEDOVE LN BAUTISTA MARK 2011 2,706 250,000 1,079.06

964311021 31761 WHITEDOVE LN VINOPAL DALE V 2012 2,188 255,000 907.48

- F-20

Assessor Parcel

Number

Street Address

Owner Name

Assessed Value Base

Year (1)

Home Square Footage


2012/13

Special Tax

964311022 31751 WHITEDOVE LN CUNNINGHAM STEVE 2010 2,706 236,365 1,079.06

964311023 31741 WHITEDOVE LN HAGUE KELLIANNE K 2004 2,579 238,000 1,079.06

964311024 31731 WHITEDOVE LN CAO MING 2011 2,706 239,700 1,079.06

964311025 31721 WHITEDOVE LN BERNARD NATHANIEL DREW 2010 2,204 216,000 907.48

964311026 31711 WHITEDOVE LN SINCLAIR BERESFORD 2004 2,188 221,000 907.48

964311027 31701 WHITEDOVE LN CHASE BRANDON 2011 2,579 238,000 1,079.06

964311028 31691 WHITEDOVE LN RODRIGUEZ LASHUNNA 2011 2,204 216,000 907.48

964311029 31681 WHITEDOVE LN MEZA FRANCISCO J 2004 2,188 236,000 907.48

964311030 31671 WHITEDOVE LN RUIZ ERNESTO 2004 2,579 238,000 1,079.06

964311031 31661 WHITEDOVE LN GONSALVES THADDEUS 2011 2,706 231,226 1,079.06

964311032 31651 WHITEDOVE LN TILLEY PAUL T 2004 2,204 217,000 907.48

964312001 31611 WHITEDOVE LN PAVONE FRANK 2012 2,579 260,000 1,079.06

964312002 31601 WHITEDOVE LN DIAZ HENRY 2011 2,204 216,000 907.48

964312003 31591 WHITEDOVE LN PRINCIPE ROSAURO L 2004 2,188 219,000 907.48

964312004 31581 WHITEDOVE LN TRAMMELL ROBERT E 2004 2,706 243,000 1,079.06

$145,450,188 $644,229.24 ____________________________________________

(1) Represents the last year in which a change of ownership was recorded by the County of Riverside for the purpose of adjusting assessed value for inflation under Proposition 13. See “THE DISTRICT - IMPROVEMENT AREA NO. 1 - Assessed Values” and “RISK FACTORS - Property Values - Article XIIIA” herein. Because of the general limitation to 2% per year in increases in full cash value of properties which remain in the same ownership, Proposition 8 adjustments and negative inflation factors in some years, the County tax roll does not reflect values uniformly proportional to actual market values.

G-1

APPENDIX G DTC AND THE BOOK-ENTRY-ONLY SYSTEM

The following description of the Depository Trust Company (“DTC”), the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC 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.

Neither the issuer of the Bonds (the “Issuer”) nor the Fiscal Agent, or paying agent appointed with respect to the Bonds (the “Agent”) take any responsibility for the information contained in this Appendix.

No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities 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 Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC.

2. 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. The information contained on this Internet site is not incorporated herein by reference.

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3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“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 Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities 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 Securities 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 Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities 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.

5. 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 Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities 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.

6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Securities 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 Issuer or 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 Issuer, 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 Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and

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disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

10. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.